What’s the real issue?

Published on July 6, 2010 in Uncategorized. 3 Comments

Over the years, we’ve recognised something very important. We’ve recognised that when a business owner tells us about their challenge, we must work with them to translate that challenge into what it really means. Some business challenges are described in terms that are too broad to be useful. In some cases the business owner is completely focussed on the wrong task. Consider these common challenges:

  • I have a staff issue.
  • We’re constantly competing on price.

Let’s translate these issues into what they really mean. After some questioning ‘I have a staff issue’ becomes:

We hire great staff and we get really busy working to complete the jobs we have on. A few months later the work dries up and we just don’t have enough work to keep the staff on so we end up having to put them off. A few months after that the work comes in and we have to go and find new staff. We’re always training new staff when we’re already very busy.

So is this a staff issue? Not really. The business is able to get good staff and train them but they lose them because when they get busy their marketing suffers. If this business worked on a marketing approach that worked well and was consistent, the so called staff problem wouldn’t exist!

 ‘We’re constantly competing on price’ becomes:

We do get enquiries but generally by the time we get an enquiry the customer has already had three quotes. We don’t spend a lot on marketing so when we get an enquiry it’s like gold and we have to have a very high conversion rate. In order to keep our conversion rate high we have to keep the prices low.

So again, it’s not necessarily a competitor problem. It’s important for business owners to control what they can control rather than worry about external factors. In this case the enquiry rate needs to be increased so that they can afford to lose some quotes and preserve their profit margin. Their sales tactics needs to be addressed too. Being proactive about sales means that you bring people into a buying cycle before they start shopping around. While they will probably still shop around, you will get the opportunity to build a relationship with them and sell them on other things besides the price.

Talking through challenges makes a huge difference and while you should never expect a miraculous turn around on any issue, getting a different perspective on it and understanding the root cause of any problem is the first step in being successful.

You haven’t suffered enough

Published on May 26, 2010 in Uncategorized. 11 Comments

About a year ago I was at a BBQ with a group of friends and one of them announced he was going into business and wanted a few words of advice. For the sake of this article let’s call him John. A few of the people attending had run successful businesses and each one made the mistake of offering some advice on what he needed to do to succeed.

I say it was a mistake because everyone was met with the “my business will be different and that won’t happen to me” response. Then one of the guys gave up in frustration and before walking off said “best of luck mate you just haven’t suffered enough yet! Get back to me when you have and I will be happy to help”.

I realised he was spot on. Why is it that when people first go into business they are reluctant to take on any advice? And then once they are in the thick of the day to day of running a business they are then too busy to ask for help?

Last weekend I caught up with John and I asked him how the business was going. He was busy working 6 days and sometimes 7 days a week. Then the usual story of trying to do the books at night, chasing debtors, his employees were all hopeless, not enough “good” clients, not making enough money etc. etc.

I reminded him about the conversation from 12 months earlier and he did remember the comment about “not having suffered enough”. He says he is suffering from the long hours, stress and uncertainty and wishes he had taken on a lot of the advice given. Unfortunately he was now too busy and would like to chat again about how to improve his business “when he wasn’t so busy”.

I think that means that he still has some more suffering to go.

What John has to realise is that the difference between success and failure for him is some basic business knowledge. He just doesn’t know what he doesn’t know.

As Albert Einstein said, “We can’t solve problems by using the same kind of thinking that we used when we created them.”

But why are business owners in particular so hard to help?

Is it because people that go into business are born optimists? They dream of the big house, lots of money, spare time to play golf, being the boss and driving around the BMW company car. These dreams provide the motivation to go into business but from my experience they don’t provide any motivation for people to listen and take advice from those that have already been there and done that.

So what will motivate John to start learning and doing things differently?

Is it the cold hard facts of business failure in Australia?

I have often heard the fact that 80% of small businesses fail in the first 5 years so I went searching for some supporting statistics. I found a research paper from the Australian Bureau of Statistics (8165.0 – Counts of Australian Businesses, including Entries and Exits, Jun 2003 to Jun 2007) which said that things were nowhere near the 80% failure rate; it was only 42%.

Wow, I was so relieved to read that. Then I looked at some of the actual numbers. Over a four year period 777,106 businesses ‘exited’ (i.e. quit, went broke, some sold). This is an average of 3,736 businesses per week. That is a lot of shattered dreams.

What about the lack of financial success of many business owners?

The good news was that 58% of businesses survived the first four years. But are these businesses making money? I couldn’t find any statistics so I rang some accountants that I knew that had a lot of small businesses (<20 employees) as clients.

I asked them what percentage of small business owners would be earning more money if they were putting in the same number of hours working for someone else. The responses were in the range of 50-60%. One accountant tells his clients that they should be earning what they could as an employee plus a premium of 50% for the risk and effort of running their own business – very few follow this advice.

What about making money when the business is sold?

When you tell people that 60% of business owners would make more money if they had jobs, one of the first responses is that that it is fine because they will make up for it when the business is sold.

I rang a number of business brokers and ask what percentage of people sell their business for the type of premium that would make up for all the years they earned less than they would of as an employee.

On average I was told up to 70% would get much less than they expected or need as retirement comes knocking. One very successful broker told me that he 90% of the businesses he sees aren’t even saleable. He gives advice on what people should do to improve the value of their business but by the time they have decided to sell, they are over it and don’t have the interest, desire or energy to reinvent the business.

So what is the greatest motivator for a business owner to change?

I am afraid that I have to say in the majority of cases it is a good old dose of pain and suffering. The greater the suffering, the more willing people are to start asking questions, listening , learning and then changing the business so it has a chance of succeeding.

I just hope that John makes the changes he needs too before he becomes a statistic.

What’s your strategy? Do you wait to experience ‘the pain’ or do you favour a strategy that involves learning in advance? Do you accept that your business has little value or doesn’t pay you enough or is now the time to do something about it.

Article by Andrew Vincent

Business advice and the quick fix

Published on April 28, 2010 in Uncategorized. 4 Comments

Someone asked me the other day if I could only give one sentence of advice to a business owner what would it be. It’s a tough one but the answer I gave was “Don’t undercapitalise and don’t apply quick fixes to your issues”.

Many business owners do both so I figured why not expand on this sentence this month. The biggest problem with undercapitalising as I see it is that business owners start to place arbitrary (and often unrealistic) targets in place. For example, a business owner might say “I have $30,000 left in the bank so by the 8th of September I need 10 new clients on board”. While targets are important this one may have no basis in realty. What happens if the 10 clients are not on board? It’s important to have a plan so that you can access capital for your business in cases where your goals are not met.

Start-up businesses are often advised to have 6-12 months running expenses on hand to fund new ventures. We would say that existing businesses who are planning new expansions, products, markets etc. should think the same. In business, nothing ever happens as quickly as you would like and the fact that your bank balance is going in the wrong direction does not change that.

On the second part of my one liner, I believe quick fixes are your enemy. As business owners, we get tempted to apply quick fixes when we’re running low on money and when we’ve ‘hit a brick wall’ i.e. what we’re trying to achieve has gotten too hard. In talking to business owners every hour of every day we’ve learned to listen for the language that people who are attracted to quick fixes use. It’s in the way they start a sentence; here are some examples: “All I need is to raise about $200,000 in private equity”; “I just need to find a top notch sales person”; “I only need to get about 30 more clients”.

The problem with these sentences are that the person has completely underestimated the difficulty of the problem so they can’t have committed to the solution. Only when you know how hard something is going to be to achieve can you commit to achieving it. Raising capital, finding top notch sales people and getting 30 clients are not easy things to do. Because this person thinks “all they need to do is….” they are prime candidates to give up easily when it doesn’t happen immediately. Three months later they’ll be saying ‘there’s no money out there’, ‘it’s hard to get good people’ and ‘advertising doesn’t work’. When they start to form these opinions, they’ll be reluctant to look for capital, hire people or advertise thereby putting their business in a pretty bad position.

Throughout the Your Business Success program there are key messages that we try to put across time and time again. For the next month, try to examine the language you use when you describe your issues and the solutions to those issues. It’s not easy but it can be a great insight into why those issues are present.

 

 

Your Business and the Achilles Heel.

Published on March 24, 2010 in Uncategorized. 0 Comments

About 3 weeks ago I hurt my ankle while out for a run. Actually truth be told I hurt it about 5 weeks ago but kept running on it until I couldn’t run anymore. I tried putting a bandage on it myself at home and rubbing some anti-inflammatory cream into it. That seemed to work until I tried to run again. Then I thought “I’ll stop running for a while and give my ankle a chance to recuperate properly” i.e. it will get better on its own. After 5 weeks I ended up at the Physio who sorted my ankle out in two sessions.

So what on earth am I telling you this for? Simple. Because having worked with hundreds of businesses we know that this is exactly what business owners do with their business issues. Typically whether in life or business here are the silly things we will do:

We become aware of problems forming but carry on as if they aren’t there. It’s just a ‘glitch in the system’ and it will sort itself out.

We treat the symptoms of a problem ourselves because sometimes we don’t know what the root of the problem is. In my case my ankle was sore because of problems in the ankle, Achilles tendon and knee. I was trying to treat the ankle and in fact probably making things worse. Business owners try to treat cash flow problems when they’ve really got a marketing problem or they keep adding to their product line when really their sales approach is broken.

We let problems ‘run their course’ for far too long. My problem was never going to go away itself and I could have solved it 4 weeks sooner. It leaves me asking myself why on earth I hobbled around for 5 weeks in pain rather than see a Physio? You may have business problems that you’ve put to one side e.g. that staff member who is not going so well if left alone, will improve or eventually that marketing campaign that hasn’t worked so far will bring us in some business.

So why do we do this? I’ve been thinking about it for a few weeks and the only answer I can come up with is this. Even though we have problems, unless they are really threatening to us in some way, we will not set aside time to solve them. The ‘pain’ we are experiencing is not enough to trigger us into action and it’s easier for us to leave things as they are. At some stage the balance goes in the other direction and we jump into action.

In my case I thought it was a simple ankle problem that would soon go away. Only when the problem started to impact my ability to walk did I get help at which time I found out my lower leg was a ticking time bomb.

Do you truly understand the root of all of the issues in your business? Are they simple problems or are some of them ticking time bombs? What ‘trigger’ events will you wait for before acting? Are some of your habits sabotaging your success?

Don’t you just love human nature!

Best regards

Owen Joyce

Are you hiding behind your business?

Published on February 23, 2010 in Uncategorized. 1 Comment Tags: , , , , .

At the moment there are supposedly 2 million plus businesses in Australia. This isn’t a very accurate figure because a lot of businesses get registered and never make it out of the gate. Plenty of other businesses do get started but trot along never getting anywhere. Many business owners remain at the helm of these under-performing businesses because;

  • they aren’t accountable to anyone and quite simply they can get away with it. As long as the business is treading water no-one will be any the wiser.
  • they think “What else would I do?”.
  • they don’t want to work for someone else.

The reality is that as business owners we can hide behind the façade and let everyone around us think that we are running really great businesses where everything is going well, staff are really happy and we’re making heaps of money. The real story is of course often quite different.

In one case I asked a client why he liked being in business. Essentially he told me he felt there was a certain prestige from having your own business and that he liked his friends knowing that he was a business owner. I asked him what he’d think if I brought his friends in and showed them his Profit and Loss. I don’t think I’ve ever seen the colour drain out of someone’s face quite so quickly.

The reasons above are not good reasons to stay in an under performing business. If your business is not profitable, not creating wealth for you, not paying you a good salary or leaning towards giving you a great lifestyle then you have to ask ‘Who am I fooling?’ and ‘How long should I let this continue?’. A quick way to determine whether you’re going well is to ask yourself this simple question; “If I hired a general manager to do my job and they performed like I did for the last 12 months, would they still have a job?”. If you’ve said yes, congratulations. If you said no, think about the consequences of your business never improving. The effects reach wider than your own pride.

So how do I turn this around?

The first area you may need to work on is you. If you have been in the habit of letting yourself off the hook then that needs to change. You need to be ready, willing and able to run an organisation that is goal oriented and target focussed.

Then you need to look at your model. Is the business model that you have chosen the best it can be? Is your business consistent? Do people want to work for your business? Many people focus on the product or service but it’s not just about that. You may have a product or service that is better than your competitors but if you’re not marketing, managing cash flow, hiring people and creating systems better than they do, your model is not working properly and could be improved.

How successful is your business model?

Published on February 23, 2010 in Uncategorized. 0 Comments Tags: , , , .

Here’s a question. If a trusted adviser analysed your business and told you that it will be very difficult in the current configuration to make significant profits, would you continue doing what you are doing or would you stop and regroup?

We often find that business owners continue along the path that they set out on even though years later they might be miserable, getting nowhere and making little or no money. It’s vitally important to get the ‘business model’ that you follow correct as early as you can.

I spoke to someone before Christmas who described himself as a ‘busy fool’ which I thought was a great expression. He elaborated by saying that he was busy all the time but wasn’t getting anywhere, had no exciting prospects to speak of and his business was barely breaking even. These are just a few signs that your business model is not working properly.

Here are the reasons why I think business owners sometimes get caught in this trap:

  • They often want the grand plan to unfold overnight and when it doesn’t they lose patience and motivation.
  • There’s often a sense of being trapped; they can’t stop what they are doing otherwise the money will stop and they wouldn’t survive for more than a month.
  • They avoid the things they don’t like doing mainly marketing, sales, debt collection, budgeting or managing. These things require them to be out in front of others or focusing on areas they are not strong in when they’d much rather be doing things they like.  
  • They don’t do a good enough job measuring what’s happening in their business – targets, staff performance and marketing effectiveness which leaves them ‘flying blind’.
  • They don’t recognise that their own skills and knowledge are a big part of being successful and are often missing key pieces of information.  
  • They wait for opportunities to come to them rather than go after opportunities. They don’t realise that unless they make something happen, nothing will happen and they often depend on ‘low hanging fruit’.
  • They think that there are magic wand / quick solutions to problems or that doing something the wrong way over and over will eventually lead to a favourable result.
  • They let their pride get in the way of sound decisions even when deep down they know that they shouldn’t do so.

We want to encourage business owners away from making these mistakes so that they can make good business decisions and develop a business model that will deliver sound results over time.

By investing time on yourself, you will learn the skills and attitudes you and your staff need to avoid the thinking that leads to the issues above. Making mistakes is part of being in business but continually making the same mistakes is not.

 

Thinking about your model, is it a good one? Do you have all of the information you need to make good decisions? It’s not uncommon to feel overwhelmed by the amount of work that needs to go in to correcting flaws in your model however remember that you don’t need to fix everything .. just choose one problem and persist with it until it’s a problem no more.

What gives a business its value?

Published on November 26, 2009 in Uncategorized. 0 Comments

There are many ways to value a business but the simplest way is to come up with a multiplier which you apply to the net profit generated in the previous financial year. The actual value of a business (and valuation methods) varies very much from industry to industry but there are key characteristics that most buyers will look for. If you keep these in mind, you’ll maximise the value of your business over time. If any of these are out of kilter, it’s worth considering how you will fix them.

The model

Imagine your business is a machine. You put X in the front and Y comes out the back. If your model is sound then by increasing X, Y increases too. Buyers will also look at the trends. Some businesses can grow revenue by putting in more effort but profit doesn’t grow. A buyer will want evidence that your model has the ability to be grown and replicated successfully otherwise they will find it hard to get their return on the purchase price. Your model should also be simple to understand because if it sounds too complicated then it might scare buyers off or at the very least reduce your business valuation.

The database

The size of your database is very important. A buyer will want to be able to access your pool of prospects and customers. They may be happy to continue selling what you sell but a buyer may also be interested in your business because they have something else to sell to your database. One business that we are aware of had sales of less than $1m but sold for over $10m because they had a large database of blue chip clients that was attractive to the buyer. Many small businesses don’t keep good prospect records. Just because someone doesn’t want to buy today, doesn’t mean they aren’t future customers. Also, buyers will often want to survey your customers to check satisfaction levels.

Relationships

Do you have a good relationship with your suppliers, staff, landlord etc. and are these relationships clearly documented. A buyer will always play ‘devils advocate’ and hand-shake agreements do not have value. Anything that can be easily taken away will reduce the value of the business. Make a point of documenting your relationships as it will be one of the first areas examined during due diligence.

Accounts

Your accounts need to stand up to major scrutiny when you sell your business particularly if you’re selling a company and not just the assets of the business. A smart buyer will examine every aspect of your accounts. If it’s a big transaction, they might even go down to individual invoice level to check your figures and they’ll look for patterns. Trying to ‘fatten the pig the day before market’ i.e. ramping up sales artificially around the time of the sale will only cause mistrust and doesn’t work. It’s like only brushing your teeth a few days before going to the dentist! If your accounts are a mess or it’s hard to tell your household accounts from your business accounts, now might be a good time to straighten that out.

Dependencies

Does your business require you to work around the clock to function? Is it dependent on a key person who could be hard to replace? If this is the case, your valuation will be affected. Nobody wants to buy a job let alone a job that is hard and time consuming. If you’re not paying yourself a commercially competitive wage, a business valuer will reduce the value of your business because the buyer won’t get someone to do your job for your wage.

Growth and consolidation

Does the business have other opportunities to expand? If a buyer pays you four times your profit then logically it will take them four years to get their money back if nothing changes. Most buyers will want to grow the profit either by looking at new opportunities or by absorbing some of the functions of your business into theirs to reduce costs. Business owners often spend a lot of time talking to us about what doesn’t work but you must be able to talk about what does.

So, how does this apply to you?

Why not take 10 minutes out of your busy schedule to find out what you can do to maximise the value of what is one of your most important assets. You might be very surprised by some of the simple steps you can take now that will pay off in the years to come. Simply call 1800 632 907 and ask to speak to a consultant. You’ve got nothing to lose – it’s free.

5 steps to writing a killer business plan

Published on August 19, 2009 in Uncategorized. 0 Comments

Business planning is one of those things that many business owners know they should be doing, but either don’t know how, or don’t do consistently enough to be useful.

Proper business planning is simply working through various scenarios and deciding on the one that you think is most likely to be successful. Read the 5 keys to effective business planning below and sign up FREE to access free business planning videos.

5 keys to effective business planning

  1. Plan for multiple scenarios
    A good business plan doesn’t just discuss the best case scenario but gives the reader insight into different possibilities and why the business is likely to be successful. Anyone with experience in business understands that a business plan is not a forecast.
  2. The process is important, not the document
    The document you end up with is only a by-product of the business planning process. The thought processing, investigating, analysing, researching, advice seeking, information processing and skill acquisition you do while you are planning are what really matters.
  3. Your abilities are under the microscope too
    Your skills and knowledge as a business leader will be very obvious to readers of your business plan as will your attitudes. Remember that “you don’t know what you don’t know”. If you sense that some areas of your plan are weak, you should address these concerns before implementing the plan. Management capability always receives a greater weighting than other aspects of your plan.
  4. Back up your plans with concrete facts
     Every statement you make should be backed up with concrete facts. It’s also important to avoid sweeping statements like ‘we will take on Google’ or ‘we’re the next SEEK’. Even if it’s true, it can make you sound over-confident or naïve.Instead of a general statement like ‘We’ll recruit 3 sales staff’ expand by saying ‘We will be recruiting salespeople with 3+ years experience in our industry. We have spoken to several recruiters who can help us to source both permanent and contract staff. Our 2 month training schedule will ensure new recruits are well-equipped to succeed in the role.’
  5. Keep figures clear, concise and realistic
     Your figures should be clear, concise and realistic. Three years of projections and a cashflow statement would be standard. If you are presenting to investors or a bank, it is best to talk them through the figures and the assumptions you’ve made face to face rather than let them draw their own conclusions.

Below you’ll find a set of excerpts from business planning case studies contained in the Your Business Success Program. The program is designed to help you to gain the skills to not only run your business but to compile a bulletproof business plan that will stand up to serious scrutiny. Simply enter your details here and we’ll email you them to you instantly.

Business Planning Video Excerpt 1 – Enlisting the professionals

Quantifying you goal

When you’re business planning, it’s important to involve experienced people. In this excerpt Geoff Harris from Flight Centre and Boost Juice as well as a team of other experts roll up their sleeves in a business planning session. Get instant access now.

Business Planning Video Excerpt 2 – Funding considerations

Financing a Franchise

Whether starting or buying a business or franchise, a major consideration in your plan has to be the money. How will you fund it? Will the banks help? What risk is there for you? How can you insure against the risk? The financial section of your business plan needs to be extremely strong. In this excerpt, a young couple talk to a banker about buying a new business. Get the link to watch this now.

Business Planning Video Excerpt 3 – Protecting yourself

Trademarks

Another consideration worth thinking about is how you protect yourself, your business, your products and the way you ‘do things’ from being imitated by others. When you become successful, this intellectual property will be worth a lot of money so it’s diligent to cover this off in your business plan. Register FREE to watch this video now.

Business Coaching: what you need to know before choosing a business coach

Published on August 19, 2009 in Uncategorized. 1 Comment Tags: , .

If you’re considering bringing a business coach into your business, the first step is for you to have a clear understanding of why you need one.

The following are statements we commonly hear from business owners we come into contact with. If one or more of these statements rings true for you, then engaging a business coach is a proven method of propelling your business to the next level.

  • I’m so heavily involved in the day to day tasks, I don’t get time to look at the business at a high level
  • Nobody can do things the way I do them. The buck stops with me so I get bogged down in the detail in order to survive
  • I know that I’m going wrong but I just don’t know what to do about it. There’s never a good time to address the issues
  • I don’t have time to look for long term solutions to problems so I end up putting out fires all the time. My working week seems to get longer and longer
  • I can’t seem to find the right people to fit my business and even if I do, they don’t stay. Often, they leave at the worst possible time
  • I don’t have the time or money to change things
  • I can’t see how this business is ever going to help me reach my personal goals

How Business Coaching can help

Business coaching is well-established as a sure fire way to grow a successful business and get your life back into balance.

A business coach will:

  1. Boost your business skills and knowledge. Your own personal development is an important outcome of a business coaching relationship and will be vital as your business continues to grow.
  2. Assist in your decision making process. A good business coach will increase the number of positive decisions made and will always provide unbiased opinions.
  3. Allow you to draw on the successes and failures of others to help you properly direct your business. A coach will help you solve problems once and for all rather than ‘putting out fires’.
  4. Act as a sounding-board and provide an objective / aerial view on the conditions in your business. It can be lonely at the top and a good coach will make you feel more at ease about your decisions.
  5. Save you time and help you to reach your goals quicker. Most businesses encounter similar problems and there’s a good chance a coach can immediately answer a lot of your questions.
  6. Offer you someone to be accountable to. Setting goals and meeting them is not only important but vital in order to make your business successful.
  7. Guide you in the creation of a bullet-proof model for your business and help you to continually build value in this important asset. Your business coach will ensure your business is aligned with your personal goals and ambitions.

Introducing the Your Business Success Program

Your Business Success is a business coaching program designed by experts, business coaches and highly successful entrepreneurs to be effective and affordable in the current economic climate.

The program uses 80 business case studies on DVD, workbooks containing over 2,500 ideas, questions and concepts and one-to-one contact customised to your business and your budget.

Much of the material is taken from over 11,000 hours of interactions with business owners during the last 10 years, so it is well-proven across multiple industries and scenarios.

The case studies feature real businesses being assisted by some of Australia’s best known business men and women, as well as an army of marketing, sales, financial, human resource, IT and operations experts. You won’t find this much business knowledge in one place anywhere else.

So you get a taste for how it works, we’ve complied 9 short video excerpts from the Program which you can access FREE just by registering here. Simply enter your details and access instructions will be emailed to you immediately.

Click here to register