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Business Success

Business Success

It is common knowledge that every business is different. Despite this, there are certain management practices that every business owner needs to undertake if they are to build a sustainable business. Maclean Partners Chartered Accountants have packaged these requirements into Six Basic Requirements for Business Success.


Most business owners actually know what these Six Requirements are and they know that they should regularly consider them. The problem is that they are usually too busy reacting to their day to day issues to take a step back and properly address these.


The Six Requirements for Business Success are:

  1. Brand: Have a good Product/Service (with suitable location and/or distribution channels)
  2. Develop clear, effective Strategic Direction
  3. Develop clear, effective Marketing Strategies
  4. Manage you Cash Flow
  5. Have a structured approach to proactively managing your business
  6. Manage exit

1. HAVE A GOOD PRODUCT/SERVICE


The first requirement for ongoing Business Success seems fairly obvious - the need to have a good Product or Service. There is however a lot more to this than the title may suggest.


Important considerations include your Local, your Distribution Channels, Pricing, Costs, Packaging, After Sales Services and Future Trends. The importance of these areas differs significantly between different industries - retail, manufacturing, wholesale, not for profit and service businesses.


As an example, consider how technology has impacted on almost every business in the service industry. Sign writers don't need to use paint brushes anymore. How will 3D printing affect the manufacturing industry over the next 10 years.


Although a good Product or Service is essential to generate sales, better businesses achieve greater success by focusing on their brand. Business owners should identify what features they want their brand to be associated with - typical examples include Reliability, Value for Money, Superior Service and Quality - and formulate strategies to achieve this. Of course, their Product/Service must support this 'desired Brand Promise".


Business owners need to be disciplined in how they consider/assess these matters. There is significant benefit in reviewing these factors with someone external to the business who has relevant experience.

2. DEVELOP CLEAR EFFECTIVE STRATEGIC DIRECTION


This is something that businesses are notoriously poor at doing. Business owners in North Queensland typically spend more time planning their next fishing trip than they spend planning their business!


Business owners need to regularly 'take time out' and analyse their Business. Key discussion areas should include future direction, areas of business exposure, key constraints, key opportunities, future performance levels, finance, owners respective responsibilities and remuneration, owners succession status and cash flows. These discussions always results in 'change' so the Key Actions should be documented and frequently revisited. The Key Actions should selectively be shared with staff and possibly other external parties.


Unfortunately if this exercise is not conducted properly it is a waste of time. To do this properly, this Planning should be facilitated by someone external to the business who is suitably experienced and who has a structured program specifically designed for this purpose.



This planning becomes more complicated, and possibly more crucial, with multi-owner businesses - more so when they are 'cross-generational'. A real danger for these businesses is that the owners often have different ideas for the business and, as these ideas are not discussed, they are slowly pulling the business apart. It is critical that all business owners are aligned in where they are taking their business.


3. DEVELOP CLEAR EFFECTIVE MARKETING STRATEGIES

Two truths about marketing:


  1. Developing, implementing and monitoring effective marketing strategies are essential for business success
  2. Most businesses are bad at marketing


Is your business B2B or B2C? If you do not know what this means there is a good chance that all your marketing up to now is not as good as it could have been. You need to analyse your different revenue streams, their respective profitability, likely future trends, identify your key customers, why they buy from you, your competition, your competitive advantage, your sales process, social media and many other factors.


The four areas of Income Growth are Market Penetration, Product Development, Market Development and Diversification. Do you know the difference between these? Do you know where your best opportunities lie? Undertaking Marketing that focuses on one area of Income Growth when your opportunities lie in another will be a total waste.



Before of business undertakes any form of Marketing it should conduct some structured analysis of its market. This analysis should take at least 2 to 3 hours and must be structured to make sure all relevant matters are considered. The chances are you won't know how to structured these meetings so use someone who does.

4.  MANAGE YOUR CASH FLOW


Cash is King! But bad cash management is the downfall of many profitable businesses.


Businesses in different industries typically encounter different cash cycle problems. Retail industries (shops for example) normally have to spend cash to buy stock and when they sell the stock they recoup their outlay (hopefully plus a profit). Service industries (trades for example) normally do their work, raise invoices to create a debtor and then wait for the debtor to pay. This is why businesses must manage their Debtors Days and their Stock Days. Many businesses have to deal with both stock and debtors! On top of this there are certain other payments that need to be made. Some are frequent (wages, rent, debt repayments) and others are infrequent (ATO, annual insurance, capital expenditure). The informed use of debt, for capital expenditure for example is also an essential part of Cash Flow Management.

An amazing fact is that very few business owners actually forecast what their future cash flows will look like. Of course there are many variable involved so these forecasts are never exact. These forecasts should be based on 'most likely scenarios' and should be reviewed and updated on a regular basis. Ideally with someone like an accountant who can both 'make sure this happens' and provide advice where required. As well as having legal implications, it just doesn't make sense to not know what your future cash position looks like.

5.  HAVE A STRUCTURED APPROACH TO PROACTIVELY MANAGING YOUR BUSINESS


The first four requirements to Business Success involve 'setting up the business to succeed'. The fifth requirement recognises that successful business management 'is a journey, not an event'.


We all know that the future is uncertain. Unknown future events will cause problems and present opportunities for every business. The impact of these unknown future events on your business depends entirely on how you manage your business.


Proper ongoing business management typically involves sitting down each month and going through a range of business matters in a structured format. The previous month's performance should be reviewed and future month's forecasts amended accordingly. Strategies must be amended accordingly. The reasons for the month's over or under performances needs to be fully understood. A recurrent cause or a one-off? A permanent cause or a timing event?



These reviews are undoubtedly more effective if an appropriate range of KPIs are used. You should ask an accountants to assist with these KPIs and to attend these reviews every quarter. Once a year these quarterly reviews should be expanded to incorporate a full, formal Strategic Direction review (see Stage 2 of these Six Requirements). The accountants will inject some accountability and discipline to these reviews. Yes, there is a cost to this but there is a far greater cost to not doing this properly.

6.  MANAGE YOUR EXIT


One thing is for sure in the business world - one day your involvement in the business will cease. This exit will wither be 'planned' or 'unplanned'. Unplanned 'Exits' are typically caused by death or other personal tragedy. You generally need insurance against these events.


Planned Exits are more palatable. With these you will exit from the business in a controlled manner and on your terms. The better your Exit Plan the more likely you will be able to control your exit.


For example, you should keep a list of your 3, 4 or 5 most likely buyers and discuss this list at each annual Strategic Planning Day. If you cannot think of any names for this list you may have a problem. Your optimal exit strategies will be determined by what names are on this list.



Think about the difference between Ownership and Management - you do not necessarily need to wind both down at the same rate.

You only get one chance to exit your business so make sure you get it right. Speak to someone who is experienced in these matters and don't leave it too late.

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