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- Mark Twain
All businesses have a transactional cycle to generate cash and create value:
Obviously here are a few systems and procedures throughout the transaction that are designed to ensure the quickest and most efficient path from sale to bank!
But in the long run, without sales, nothing else matters.
Managing the growth of sales is essential for a successful business and there are many aspects of the sales process that lead to success:
Marketing is an essential part of any successful business and, if done effectively, will increase sales, profits and the value of your business. So what comes first, your product or your marketing? The overwhelming answer is your marketing. Many businesses have struggled by developing great products for which there was no ready market. Goods and services will only sell if they meet a need in the marketplace or solve customers' problem. Many brilliant and innovative products fail to sell because business owners forgot to assess whether potential buyers were ready, willing and able to buy.
Marketing planning will help you determine:
Marketing takes in a range of issues relating to how you communicate with your customers, and encompasses branding, pricing and advertising.
It Doesn't Have To Be Complicated
Marketing plans can range from being large complex documents with an enormous amount of detailed market research to a simple two or three page memorandum. It is important to scale your plan according to the size and complexity of your business and products.
Typically, a marketing plan would include:
Your website is an expression of your brand and you should think about it as a virtual showroom for your business. Your web developer needs to understand your business and its culture so that your website can be built as an accurate reflection of your brand. Proper design and planning is essential. Apart from the content, design and functionality, you need to consider the quality and reliability of your host, the ease with which you can manage your own content and how much you can rely on your web developer.
Imagine if a customer walked into your business premises - what would you like them to experience, how would you greet them, what could they do whilst they are there, how are you going to extend their stay and what constitutes their "conversion" into a customer.
Does your website reflect the sort of experience that you want your customers to have when they visit you? Is it fun or serious? Is it clear or confusing? Is it informative or boring?
Your website is a dynamic tool and you should be able to track how people arrive at your site, which pages they visit and how long they stay on each page. You can easily keep the content fresh and use it as a means of maintaining a dialogue with your customers and potential customers.
Imagine now that you are a customer looking to transact with a business such as yours, selling goods or services that she needs right now. So what information would you have on your site that tells her in a flash that she's arrived at the right place? Your web customers want honest, quality information to faciltiate their decision to buy from you.
Most business owners don't optimise their websites and a quick review and audit of objectives, content and design can provide a much better web experience for your visitors.
But the website can also be function rich and provide incredibly targeted and cost effective marketing as well as providing a platform to carry on a dialogue with your customers. You can add newsletter sign-up, blogs, forums, secure zones, shopping carts, product galleries, video, podcasting - an array of tools to get your message across and keep the dialogue running.
At the very least, your site can work as a 24 hour, 7 day a week customer service manager, taking messages, recording leads, answering questions and providing a platform for your customers to interact with you and your products.
The term "Social Media" refers to a number of platforms that enable people of like minds to interact. The platforms that most people have heard of are Facebook and Twitter but you can also include YouTube, MySpace, Digg, Flickr etc etc etc...
These platforms are what the users make them and contain a huge range of content and discussions. Anyone is now able to write and publish an opinion, a review, a recommendation, a story, a blog, a picture or video and potentially reach hundreds, thousands or millions of interested viewers - not only on their computers at home but increasingly at work and on their mobiles.
So what does this mean for you the business owner?
It means that a social media strategy needs to form part of your marketing plan. You may decide that social media does not currently offer you a valuable return and that there is no point in engaging - but every business needs to take the time to understand social media and form a view of its potential impact on business - and remember, in the early 80's most businesses were convinced that their salestaff would not need mobile phones.
- Carl Rogers
Setting a strategy is setting your goals and objectives in line with your vision and mission.
Avoid The Hype
"Vision" and "Mission" are much hyped terms and even though you may not want to formalise and publish mission and vision statements, what they represent is essential to any successful business. "Vision" is what you want your business to be, and "Mission" is how you are going to realise that vision.
Know Your Goals
There are an infinite number of things you and your business can get up to, and setting your strategy enables you to focus your activities on your determined goals. Without strategic thinking and planning most businesses drift and never reach their full potential.
Strategy planning is not a one off process. It is used to decide on an action plan to get a business back on the path to optimal performance and also to determine whether strategic realignment is necessary in the event of changing circumstances. Changing circumstances may include changes in your personal circumstances, senior staff changes, changes in pricing, the law, market place or competition - indeed anything which can have an effect on the operation of your business.
Strategic planning is all about grasping positive opportunities whilst minimising the risk of crises and changing circumstances.
Take Time Away To Think Creatively
Successful strategy planning is not something that generally occurs amongst the day to day operations of your business. You need to plan, set aside time, avoid distractions and include people from in and outside your business who may be able to provide a broad focus on the relevant issues.
Now Business Mastery has been involved in dozens of strategy planning sessions with businesses and use a variety of proven methods and techniques to stimulate discussion and achieve a successful result.
Many successful business owners believe that motivation is the single most important ingredient in the business "soup." Motivation implies movement and is the desire to move towards towards goals. Lack of motivation leads to business stagnation. To get your business moving you need to be motivated and stay stay motivated. All the theory, planning, techniques and knowledge are to no avail if you can't apply sustained motivation to "finish the job"
Motivation can be internal as well as external. Internal motivation is manifest in your desire to succeed, your self-belief and your level of self-esteem. Internal motivation can be fickle and especially in business when you are heading into the unknown, maintaining internal motivation can be difficult.
External motivation is, for many of us, necessary to achieve success. External motivation can be deadlines imposed by others, having to complete a task for others or having to provide for a family. External motivation can also be increased by engaging of a coach or mentor to whom you are accountable.
Sustained lack of motivation can eventually leading to business failure. With motivation most other business problems can be fixed but without motivation your business will begin to suffer, leading to more lack of motivation and eventual failure.
You can take action to improve and maintain your motivation and you will soon see the results of positive motivation on your business.
Most business consultants will insist that you must have a business plan and will explain that a business plan normally consists of a strategic plan, marketing plan, operational plan and a finance plan and it is usually quite a bulky document which takes time to write.
It's The Process
Our view is that planning is vital but business plans are moderately useful. Most business owners accrue the benefits in the planning process and not from the plan itself.
To achieve anything in life you need to map out the steps you need to take and esure you've got the proper resources for your journey.
Too many times developed and written plans invariably sit on a shelf and are only dusted off when someone asks you whether you have a business plan.
The written plan is a record of the issues you have considered, the decisions you have made and the projects you need to undertake to reach your goals. In our experience, many of those projects will have been completed prior to the final draft of the written plan.
We All Need to Plan
Many business owners say they don't need a plan, it's all in their head. They're wrong of course, they generally do have a plan but it's probably not as well defined or considered as it might be.
All businesses no matter how big or small will benefit from the planning process which consists of an examination of goals, direction, strategy, systems and resources.
Business owners may not constantly refer to their plans but they benefit enormously from this process. And if it is the process that's important then it is equally important to review your plan periodically and go through that process regularly to see if your strategy, plans and resources are still adequate or relevant.
- Alfred North Whitehead
The key to business mastery is identifying tasks that have to be done repeatedly, finding the most effective and efficient way to perform those tasks and establishing systems and procedures you can rely on to complete those tasks.
Systems and procedures that can be easily written down and communicated to others will ensure that tasks are carried out consistently and in a way that can be measured. Measurement is the means by which you can verify that tasks are being completed consistently and correctly in a timely manner.
Systemisation is also a major factor in separating "you" from your business and thereby facilitating growth and also making it more attractive to a potential purchaser.
Putting proper systems and procedures is place is an invaluable part of your business planning and part of your regular planning and strategic review should be to ensure that systems and procedures are optimised.
Balanced Scorecard is an effective management tool for tracking the health of a business in both financial and non-financial measures. The business is tracked over a manageable number of targets that relate to the most important aspects. These targets link to specific responsibilities of people within the organisation – their Key Performance Indicators.
At NOW Business Mastery, we integrate Balanced Scorecard into the whole process of Aspiration, Baseline, Construction and Delivery – it is what prevents strategising and planning from just being reports that only gather dust to being an ability to deliver real change to the business.
Within N-Gauge, which is what we call the process, we develop measures around:
The measures aren’t a standard checklist – the key is that they are developed specifically to focus on what is going to drive your organisation to greater success.
Staff "issues" can suck up a lot of a small business owner's time. Employment and HR is a area where appropriate systems and procedures can make a huge difference to the smooth running of your business.
Every business has its own culture and staffing requirements and time spent planning how you intend to recruit, induct, manage, review remunerate and motivate your employees will pay dividends in terms of reducing unwanted staff "issues."
You don't necessarily need massive files of written policies and procedures applicable to a multinational conglomerate, you need systems which reflect your culture, enhance your employees positive motivation towards your business and are simple to implement and manage.
Small businesses often need help with navigating Fair Work legislation and it is important to pay your staff either in accordance with the relevant new award or under a workplace agreement.
Most small business owners don't have the time to keep up to date with HR issues and employment law, so external help from time to time can be used to minimize problems with staff disrupting your working week.
As a business manager you have to manage your cash to meet your payment obligations as and when they fall due. Whereas payments to trade creditors can sometimes be delayed, wages and certain utilities generally have to be paid on the due dates.
With most businesses there is a monthly cash flow cycle: sales invoices are sent out, cash is received and bills are paid. All payments have to be managed within this cycle.
Receiving payment as soon possible is obviously desirable so invoices have to be sent out promptly - don't wait until the end of the month, send invoices out every few days.
Manage Cash Flow with A Bank Overdraft
A bank overdraft can be useful way of smoothing out the payments cycle within a month but if, even at the best point in your cycle you have a permanent overdraft amount then it might be wise to look at a cheaper source of credit from your bank and convert part of your overdraft facility to another type of loan with a lower interest rate. An overdraft should not be seen as a source of permanent funding but rather as a way of smoothing out your cash flow.
If your overdraft is increasing it probably means you are operation at a loss and you should be taking action now.
Get Paid on Time
Let your customers know what your payment terms are prior to your first transaction with them. If you are a COD business then credit terms are not an issue but if you have to extend credit, realize that you are in effect a "lender" to your customers. So you should have some credit control procedures in place to ensure you get paid.
Banks won't lend you even small amounts of money without application forms,references, statement of assets and liabilities etc., and yet some businesses lend thousands of dollars to customers for 60 or more days without any knowledge of their ability to pay. All businesses operating credit accounts should have a simple credit application form which also sets out the terms of trade.
Insist You Get Paid on Time
There should be regular procedures to contact customers who do not pay within the agreed time frame. These may consist of an initial phone call followed up by letters and if necessary a legal letter of demand.
Budget on the Back on an Envelope if Necessary
A cash flow budget is essential. It needn't be a complex document but it should map out your cash requirements over the foreseeable future (could be one month or one week if cash is really tight). The cash flow budget should be reviewed daily - it only takes 2 minutes.
Cash is King
Without sufficient cash your business will grind to a halt. Most business owners have experienced that feeling of panic when they look at their pile of payments, their bank balance and their receivables and wonder how ends are going to meet.
Without wanting to state the obvious, if you are not making sufficient profit on each sale, you will eventually run out of cash.
A Few More Cash Flow Tips
All business owners have to understand the basics of how the numbers work. You will only really be in control of your business when you are across the results and understand what they mean. You will also only be able to let the business run without you with regular, reliable and realistic reporting.
As a minimum you will need to have an appreciation of what your fixed costs are and what your break-even point is. Fixed costs are those expenses which remain the same irrespective of your sales. All fixed costs can be variable in the long term but would include rent, wages, equipment leasing etc. Your break-even sales is the amount of sales you need to generate to cover your fixed costs. Obviously, your other costs are variables and these will increase in line with your level of sales. After the variable costs are paid, your gross profit should be sufficient to cover your fixed costs.
As a general rule, businesses with a low level of fixed costs are more able to withstand market fluctuations in sales and are therefore less risky than businesses with relatively high fixed cost levels.
Even if you are the business and you work from home, you should calculate what your fixed operating costs are are work out how much you have to earn before you break even.
The level of sales required to cover fixed costs will depend on your gross profit percentage. The higher your gross profit percentage, obviously, the less sales are required to break even.
As a business owner, it is essential that you have a handle on these numbers. Find time to sit down at least once a month with the person responsible for preparing your accounts and go through them line by line, and investigate any items that look unusual or are materially different to previous periods.
Look for variations in you gross profit percentage and your net profit percentage to sales.
Raising new funds is a necessary activity to maintain and accelerate growth. These new funds may be input from the personal savings of Directors and through cash-flow of the business. Both sources limit expansion plans, even if available.
Debt funding is difficult on the back of the global financial crisis, as banks and other lenders are now reluctant to lend on business plans and business potential.
The other source is equity funding. This is an area where many business owners have little experience, but an area that can lead to a $20,000 fine, 5 years jail and/or the company wound up (and that’s before it gets really bad). Two main mechanisms for raising equity funds are:
Corporate Advisors operating under Class Order CO 02/273 can guide a business owner through this process.