Are Business Plans a Waste of Time?

As a business advisor it may seem strange that I should ask that question at all. Don’t all advisors/mentors/coaches stress the need to have a business plan and say things like, “fail to plan is a plan to fail”?

In my opinion it comes down to the type of business plan that is produced and the length of time it takes to produce it. Many business plans ARE a waste of time because they are too wordy, too “corporate”, don’t motivate staff and are not connected to the day-to-day operations of the business. I read an article recently on writing a business plan (unfortunately I can’t remember where) and it said that a business plan could take between 400 and 500 hours to produce. ARE YOU KIDDING! Who in small business ownership world has a spare 500 hours to produce a business plan, and probably one that no one will look at again for another year! Get real. That would be a HUGE waste of time.

What is of real value is the PLANNING PROCESS involved in putting a business plan together. It’s all about the journey, rather than the destination, in my opinion. I do encourage business owners to take some time (not 500 hours however) and examine where their business is at, what went right and wrong over the past 12 months (a SWOT analysis can help here), set some realistic goals for the next 12 months and think about the strategies, budget and tactics that will be required to achieve those goals. Then regularly review progress towards their goals using a combination of monthly reporting and quarterly themes that aligns people’s daily activities.

The output from this process need not be a 50 page document that is put on a shelf to gather dust, but a summary on a couple of pages that remains a living, working document on a constant basis. There are a million planning templates out there that you can use to base your own planning process off. Most unfortunately focus on the end document and tend to result in a long and dusty plan that fails to inspire. One model that I have used with success in several businesses is the 1-page plan (actually 2 if you use A4 instead of A3) developed by Verne Harnish of Gazelles.com.

It takes a bit of time and effort to develop the foundation part, but once you have done that, you can quickly update it on a quarterly and annual basis to provide a short but clear path to guide your business into the future. Here is the link to download a copy of Gazelle’s classic 1-page plan and then you can either go to their website to download a guide on completing it, buy his book, The Rockefeller Habits, that also explains it, or book a planning session with me to fast track you to success in 2012.

Andy Burrows

Business Advisor Phone 09 912-1901

Create the Right Environment in Your Company

An owner/manager is a motivator and hence you need to ensure that you, and any supervisors or managers reporting to you, are motivating your staff to come to work every day.

To generate job satisfaction and an environment that will stimulate and encourage your team to attend work you will need to assess and apply the following where possible;

1. Encourage internal promotion and select new recruits with care. Hire for attitude and cultural fit first, skills second.

2. Recognise and give regular feedback to your employees. Understand the importance of their work and show your appreciation.

3. Ensure people are paid fairly and competitively. Remember under-paying staff does de-motivate them and they should be rewarded accordingly.

4. Provide acceptable working conditions for all staff. Where possible implement new systems and technology and give your staff as many facilities as possible.

5. Always have regular meetings that identify work in progress. This can also be an ideal time to have group discussions and input for certain business activities or decisions.

6. Set and revisit objectives or targets. These must be clear, concise, measurable and regularly assessed to ensure that everyone is on track.

7. Measure individual staff member’s contribution.

8. Set high standards. These may require people to take an extra step or go out side of their boundaries, however this is what it is meant to do. You want your team to be able to take calculated risks and grow with your business.

9. Never make promises. You shouldn’t make promises if your intentions are otherwise. Offering rewards and then retracting them will make your staff angry and lack confidence in you.

10. Be honest with your staff. If you have bad news tell them as it is better coming from you instead of anyone else. Honesty also relates to good news. Praise them where you can.

11. You must set an example to your staff as if you imply a bad or unprofessional impression then they will assume that this is the standard the behaviour will be accepted.

12. Measure absenteeism and staff turnover. This will be clear indicator if staff are finding their positions difficult or unsatisfying and will present a pattern of what the company must do to ensure that the position is filled should staff leave.

Having a fair, diplomatic and structured environment will keep your employees active and enjoying their jobs. By simply applying the techniques above you will be able to have a more efficient and accepting work environment for your employees to attend to every day.

For help in building the right environment and culture in your company, Contact Me by email or visit my website for other articles and resources - click here: Business coaching

Andy Burrows - Business Advisor

Confessions of a Micro-Manager

I know that modern management books and HR people at seminars tell you that you should hand duties to your staff and let them get on with it. Great in theory, but I hear from a lot of business owners that it doesn’t work. “People never listen”, they say, or “They only do a half-arsed job and take twice as long as me”. So what is going wrong?

A common scenario is that the owner is handing over control of some relatively important jobs and not following up like they should, often because it was a job that they didn’t like anyway and were glad to get rid of it. It may not be a core production job (most owners like to keep those) but an equally important support job that is equally as critical to the success of the business. Maybe invoicing, for example. What often happens is the owner ABDICATES the job to another person rather than DELEGATING it. There is a big difference and it is around the process used and the control retained by the “delegator”.

Like many things in business, delegation is a process and involves several steps. Miss one or two and the process breaks down, the job doesn’t get done properly and the boss gets (more) stressed. So step one is to delegate properly, don’t abdicate.

Until you feel VERY confident that a staff member is competent, check and re-check what they are doing until the process is as smooth as a machine running in a bath of oil. Then check some more. Have the staff member report back to you on a regular basis on what is happening, the roadblocks they are facing and the progress they are making towards activity and performance goals. That might be a DAILY reporting process for some tasks. Like President Ronald Regan said during the cold war, “Trust, but verify”.

Keep control of the cash. There are some areas of small business that I am loathe to encourage an owner to delegate. One is the control over the bank account. By delegating (read abdicating) control over the accounts payable function in particular, a business owner can lay themselves open to less than ethical employees taking advantage of the situation and starting to steal money. I remember being in a network group a few years ago and one of our members was a panelbeater. He employed an office lady to look after the accounts as it was an area that he didn’t like and had little interest in learning about. The office lady was actually the wife of a good friend of his. Not long after employing her, the panelbeater’s wife developed cancer and grew steadily worse. They had 2 young children who needed attention and this started to take an increasing amount of his attention, which was not unexpected in view of the situation. Unknown to the panelbeater was the fact that his office lady had a gambling problem and she started to siphon money out of the business to feed her habit. Remember, this was a family friend who on the face of it was saying she would look after the accounts so the panelbeater could tend to his gravely ill wife. The stealing was eventually uncovered after the business started to perform poorly and an audit was conducted, but tens of thousands of dollars had gone.

The moral of this tragic and true story. Trust no one! I am not saying that you need to retain all the day-to-day accounting function yourself, but don’t pass over control of this area until you have some strict policies and reporting functions in place. If you don’t understand about money matters, learn about the critical issues and find a good accountant to help you put good control measures in place.

It’s okay to micro-manage a bit. Wear your control freak label with pride.

Visit our website for more information here: Coaching in Business

Where's The Tomatoes?

Businesses with a website perform better.

So says the latest MYOB Business Monitor Report and has highlighted the fact that businesses with a website have consistently higher revenue performance, more work in their sales pipeline and are more optimistic about future prospects. A few other highlights that came out in the report include:

· 31% of businesses with a website have experienced a growth in revenue over the past 12 months, compared to 26% of businesses without a website experiencing a growth in revenue.

· 40% of businesses with a website have more work on, while 26% of businesses without a website have more work on.

· 54% of business with a website expect revenue growth in the next 12 months, while only 27% of businesses without a website expect revenue growth.

For the full report click here.

So what is your online strategy and if you have an online presence, especially an e-commerce one, is it effective?

Think of this analogy. You go to the produce super store. It is a flash affair and you can enter the store through a dozen different doors. It sells a HUGE range of fresh food items in all sorts of colours. Beautifully packaged and displayed next to all the awards that the store has won for its design and packaging. But where are the damn tomatoes! All you want is a kg of tomatoes and all you see are Tahitian mangoes, Chilean Red Globes, 15 sorts of lettuce and 10 varieties of potatoes. And to make matters worse the place is crowded. You can hardly move for fear of loosing your place in line, so you give up, don’t buy anything and leave.

Thankfully there is a more simple produce store next door. One door and a limited range of basic items that one needs every day. And guess what. They have tomatoes. They are easy to spot and just behind them are other sorts of tomatoes too. This place is less flashy, but it gives you what, and you buy.

The moral of the story is this. Websites don’t have to be flashy and complicated to work. In fact a basic, well thought out website with the right sort of content that your target buyers want will win out every time. Flashy websites that aim just to attract a big crowd on the off chance it has something that you want and get lucky, don’t tend to have a good return on investment. Focus on what sort of customer you want to attract to your website. Give them a good experience while they visit and make it easy for them to buy.

Of course you don’t need to go the whole way and have e-commerce functionality on your website to begin with. The important thing is to look at the MYOB report and understand how businesses with website are generally ahead of their competitors. The important thing is to “get in the game”. If you don’t have a website for your business, I strongly recommend that you consider talking to a good website company, plan how it fits into your overall marketing strategy and make a start. For help with your marketing strategy development and for a free planning and review session click this link:

Growth For Business

Andy Burrows - Business Advisor

Ten Things to Think About Before Going Global

Like any sound business plan, the first step is doing your research and taking a breath to think clearly. Here are ten factors to consider before taking the plunge and going international:

Point 1. PLAN at least a two-year lead time for world market penetration. It takes time and patience to build a successful export business, especially in Asia where relationships take longer to develop.

Point 2. DECIDE how much you can afford to invest in your international expansion efforts. Pick a figure based on a share of domestic profits and stay with that consistently.

Point 3. CHOOSE the appropriate model for entering the market. This may be a simple export model of manufacture in NZ and ship to an importer overseas, or maybe something else. Joint venture or a licensing arrangement may be more effective. Offshore manufacture in a third country may be required. Don’t assume it is a 1-size-fits-all strategy decision.

Point 4. FOCUS on a narrow product or service offering. The same principal that is necessary to dominate a market niche in New Zealand is even more essential overseas. Don’t try to be all things to lots of people. Stick to one small segment and do it well. What is your USP?

Point 5. RESEARCH to identify your prime target markets. You want to find out where in the world your product will be in greatest demand. Try to look for an unsatisfied need or even better, a problem that needs fixing.

Point 6. ADAPT your product for export. This may be basic labeling requirements or more significant design changes. What regulatory and legislative requirements are there? Know this before you make an expensive mistake.

Point 7. FIND a good lawyer, a banker with international experience, a good accountant and wily transport specialist. Good advice is expensive, but bad advice is MORE expensive. I can help you put an export plan together that has the benefit of 25 years of export experience behind it. I don't have every answer, but if you make half the mistakes I made and learn from my experience, you can't go too far wrong!

Contact me via my website here: Mentoring and Coaching

Point 8. INSIST on clear terms, conditions and other financing options, in advance. Never sell on open account to a brand new customer, EVER.

Point 9. PROVIDE an awesome customer experience. Ensure this extends to well after the sale is made and keep the lines of communication open all the time, even if that means some very late nights on the phone.

Point 10. MAKE contact with your customer at the heart level as well as the head. Learn to embrace the culture of your customers and aim to incorporate a bit of it into your own life. Learn to enjoy these new experiences.

Icon Business Solutions website is here: Coaching in Business

Andy Burrows

Business Advisor - Email me here

Cash Flow: The Lifeblood of Your Business

The latest MYOB Business Monitor Survey for April showed that the leading concern for most of the 1000 owners they surveyed was around cashflow issues. With current estimates indicating that approximately 90 per cent of business failures are the result of poor cashflow, the level of concern is hardly a surprise. Don’t let your business be one of them.

Maintaining smooth cash flow requires juggling nearly every facet of a business, from staying on top of accounts receivable, to extending lines of credit, to managing inventory. The essence of successful cash flow management is regulating the money flowing in and out of your business, to reduce the amount of fixed capital that you need to support the given level of your business.

A lot of business owners we talk to often suggest that the way they want to increase cash flow is to increase sales. Strange as it may seem, this can kill a business faster than by doing nothing. The reason is that the business may be “cash negative” (consuming more cash than it generates) and so the extra sales generated need to be financed by additional borrowing or capital injection by the owners. This can drive the business into a worse position than it already was. It is essential that a Net Variable Cash Flow analysis is done on the business FIRST before additional sales are chased.

I can do this for you at no cost so either email me to make an appointment or contact me through the website here: Cashflow solutions

So, what can be done to turn a negative Net Variable Cash Flow situation into positive territory? Try these ideas to start:-

1. Organize your billing schedule

The faster your receivables turn over, the more capital you'll be able to spend on growing your business. Make sure you send bills out promptly each month and put in a system to flag any overdue accounts for immediate follow-up. Put in a documented credit management system and stick to it.

2. Stretch out your payables

Take the maximum amount of time allotted (often 60 or 90 days) to pay your suppliers. Think of these terms as an interest-free line of credit from your supplier. It gives you sufficient time to collect receivables without spending money on short term credit lines. Perhaps use the interest free period afforded by credit card companies and use your credit card for purchases. Just make sure you pay it all off on the due date!

3. Take advantage of early payment incentives

If your suppliers offer you a discount for paying early, take them up on it. Think of it this way: a 2% on a 30-day invoice is equal to a 24% annual return if the money was invested. If your suppliers don't offer this kind of incentive, ask for it; they may be willing to offer the discount in return for speeding up their receivables.

4. Balance your client base

Is there any opportunity to change some of your clients into a regular paying regime (retainer for a set number of ongoing services), rather than a project-by-project basis only? This may reduce profitability a little, but will help to smooth out cash flow. Institute a deposit system for larger projects where the client pays something up front and regular progress payments.

5. Check your pricing

When was the last time you raised your prices? Many small businesses hesitate to increase their rates because they're afraid they'll lose customers. However, customers actually expect their suppliers to institute small, regular price hikes. Also, check out your competition on a consistent basis. If they're charging higher prices, you should too.

6. Reduce your inventory

Liquidate older inventory by having a sale and turn that stock into cash. Once you have done that be careful of bulk offers by sales reps that can result in becoming over-stocked again. It is tempting to take advantage of a seemingly great offer by a persuasive sale rep, but how fast can you sell all that extra stock and what extra margin will you make?

Once some of the strategies listed above have been implemented and the business is stable and has a positive Net Variable Cash Flow, you can go out there and chase those extra sales, safe in the knowledge that the bank balance will be going up, not down.

You can find out more here: Coaching in business

Andy Burrows

Senior Advisor - Icon Business Solutions

Email: andyburrows@iconbusinesssolutions.com

Web: www.iconbusinessolutions.co.nz

Icon works with the owners of independent businesses to help them make more MONEY, build better TEAMS and allow the owner to spend MORE TIME where they want to.