Mike Tombs's Blog

This blog provides information about tax, accounting and other issues affecting small owner-managed businesses in the UK. It is intended as a general source of information but you should not assume that everything applies to your specific circumstances. We are always happy to discuss providing tailor-made solutions to suit your individul needs. Visit www.tlaservices.co.uk to sign up for our free monthly Tax Tips and News newsletter.

Monthly Archives: October 2013

Estimating sales

It’s common practice for business owners to estimate sales by focussing on total revenues and using that to drive their business plan. But, if you think about it, that doesn’t make sense. Whether you succeed or fail, you will have no idea how or why it happened. You’re flying in the dark.

It takes a little more time, but your sales forecast should start from the bottom up and in as much detail as you can. You clearly need to know the sales price of your products and services, but you can also calculate an average sales value, based on historical data (revenue ÷ number of sales).

Look where your business is coming from and report it by market sector or sales channel (direct, distribution, internet, etc). Analyse the source of your new business in previous years. Where did your sales come from? Was it the result of advertising, telesales, direct mail, networking or online enquiries/SEO? The idea is to build up a map of where your business is coming from and then use historical data as the basis for your forecast.

You might expect established customers to maintain their sales levels – but how much of your business does that represent? If a high proportion of your sales are one-offs, you will be much more reliant on converting leads. So which ones worked best for you in the past? How well did they convert? You can use the conversion rate to help generate your forecast.

Start to build your forecast by looking at each market sector or channel. What unit sales did they produce in the past and is that a good basis for next year? If you are investing in marketing, you should be able to tell from historic data what each campaign cost and the return it generated. Now you can use your planned investment in marketing to generate a forecast for new sales.

It may take you a while, but you will end up with a much better understanding of your business and the factors which are driving it. And it means that when you compare your actual results with what you predicted, you’ll be able to see exactly where things exceeded or fell short of your expectations.

Without Wishing to Sound like the Special One…

The strangest thing has happened.

I’ve spent the last 18 months telling the world how different we are; how we’re more interested in helping your business to make money next year than in telling you how much you made last; how we are totally focused on your bottom line.

I now realise I was wrong.

It’s not just what we do that makes us different. It’s what we are. And it took me a while to realise that natural modesty can sometimes fog our attempts to say what we mean.

You see, the reason that TLA Business Services can make such a difference to your business is down to my experience. When you hire our services, you are not just getting your accounts done efficiently and getting the best advice on tax efficiency, business planning and so on. You are also getting direct access to my years of front-line business experience. And without wishing to sound like the Special One, that’s quite a bargain.

You see, I’ve shunned accountancy practices all my life. If I’d spent my years in a dusty office in a dusty accountancy firm, apart from the fact that I would have gone insane, I would know absolutely nothing about running a business. Most accountants leave university, join a practice as a trainee and work their way up the ladder. The closest they get to the shop floor is if they lose their way to the toilet. They can be passionate, but likely as not that passion is focused through a timesheet, on a ledger.

I too did my stint of university studies but not where most accountants go. I earned my MBA through Edinburgh’s Heriot-Watt – one of the UK’s top universities for business and industry; and I qualified as a Chartered Management Accountant.

The formal training for most accountants in practice is all about accounting regulations, basic tax, company law and auditing standards; generally everything to do with reporting results and ensuring compliance with the rules. The Chartered Institute of Management Accountants however focuses primarily on strategic planning, product costing, working capital control, investment appraisals and other areas which drive results rather than just calculate them.

That’s what turns me on and that’s what makes us different from most accounting practices. I chose to do my time in the cut and thrust of real business. I’ve worked at the sharp end, in the motor trade, in the steel industry, in engineering companies, mining operations and in manufacturing. I’ve worked at all levels from trainee grunt to chairman of an insurance company that grew to be the second largest short-term insurer in South Africa. I know what it’s like to face the day-to-day trials and tribulations of a small family business and how to make a real difference in a multinational corporation.

And that’s what makes TLA Business Services different. It’s not just what we do, but who we are and what value we bring to your business.