6 Keys to Successful Company Growth

April 7, 2022 by lauramills

If you want to grow your business successfully, then you need to get the basics right. In this article, we’ll delve into our top six tips on how to grow a company successfully.

1. Clear Vision and effective communication

The most important thing that determines business success is the business owner’s thinking. Allowing yourself time to think, dream and get a clear vision is essential to business growth. Without a clear vision and effectively communicating it, how will you and your employees know where they are going? If the business owner has a clear vision, and shares it with all stakeholders, it’s highly likely that the business will also go in the same direction.

2. Set your goals and develop growth strategies

Your goals for your business will provide an overall framework for everyone to follow. The strategies you’ll use to achieve those goals should serve as a roadmap. It will help you to build a structure and bring a focus to decision making.

Once you’ve translated your goals into strategies, you can develop systems and processes that will help with the smooth running of the business.

Many businesses fail in the execution of their strategy. Don’t be afraid. It’s better to execute a mediocre plan correctly than it is to execute a perfect plan poorly.

3. Employ or outsource top-performing talent

A successful business depends on its people. That is hard-working, determined people whose goals are aligned with the organisation’s goals.

The more your organisation is seen to trust employees with responsibility and to invest in their career development, the more likely it is to attract and retain top performers.

But rather than rush to hire people as you scale up, consider outsourcing tasks and using freelancers or temps. This could save you from hiring the wrong people and facing costly turnover.

Sir Richard Branson, Founder of the Virgin Group, says, “There is little point recruiting great people if you don’t then give them the autonomy to take their role and run with it. It also frees you up as the founder to focus less on the day-to-day activities and more on the over-arching objectives laid out in your roadmap.”

4. Attracting and retaining customers

To build your business, you also need to develop a system to attract and retain high-quality customers. For that to happen, you must understand your customers’ needs and pain points. What burning needs do they have? What keeps them from falling asleep at night?

Your customers must believe that your products or services will meet their needs or overcome their challenges.

Many business owners make the mistake of focusing their entire sales and marketing efforts and budget on attracting new customers. They often overlook the needs of their existing customers.

Ignoring your existing customers is a huge mistake. People don’t like to feel as if businesses take them for granted once they’ve placed an order. If they feel neglected, they’re likely to move to another company.

It doesn’t matter if you run a small business or a large corporation. Your company must deliver an exceptional customer service experience.

5. Know the Hazards

Rapid growth might be desirable, but your company must be able to cope with its effects. For instance, can your company meet a sudden influx of orders? What impact would that have on your cash flow? There are dangers of scaling up too fast. They include:

Hiring the wrong people
Losing track of your finances
Management mistakes
Not maintaining customer service
Ineffective business operations
Technology problems
Cash flow mistakes

6. Stay Focussed

The easiest way to stay focused on what’s important during the scaling up stage is to have expert help from a part-time CFO who has big business experience.

For a fraction of the cost of a full-time CFO, the CFO Centre can provide you with a highly experienced CFO who will work with you on a part-time basis to help you with scaling up your business.

Get in contact with us today so we can book in a consultation meeting with one of our dedicated Regional Directors.

“Most people never pick up the phone and call; most people never ask. And that’s what separates, sometimes, the people that do things from the people that just dream about them.” – Steve Jobs, Apple’s Co-founder.

Photo by Basil James on Unsplash

Why Every Business Benefits From a Part-Time CFO

March 17, 2022 by lauramills

A typical company finance function can be divided up into 3 areas. However, many businesses believe the finance role is principally to produce accurate accounts.

Ask any bank manager and he or she will tell you the bank’s most problematic customers are those who don’t truly understand what is going on in their business. Some customers ask for finance or expect to maintain an overdraft, yet cannot even produce up to date accounts.

Most SME business owners want to focus on the business and not the numbers. The business is their baby and they want it to be their sole focus – not financials!

The areas which the business owner will seek help in first will be determined by the focus and needs of the business whether in sales, operations, admin or finance. If we look at the finance function, it is traditional to break it down into 3 roles:

3 roles of the finance function

1. Financial direction – the CFO

2. Financial control – the Accountant

3. Book-keeping/basic accounting/ AP & AR – the Finance Department Staff

Many business owners think the finance role is transactional in nature and so concentrate just on producing accurate accounting records. This is essential in itself, but not enough to manage and develop a growing business. When focusing on the CFO role specifically then, what are the key tasks of this role and what does the CFO bring that the other finance roles do not? Why would you need a CFO?

I suggest the following four main areas of expertise and input:

1.Strategic

Co-ordinating and developing long term business plans; defining the implementation timetables; assessing the risks involved and seeking the funding required to deliver the proposed plans.

2.Operational

Developing internal controls; managing and developing the reports needed to run the business; improving profit levels; managing cash flows. Does the business owner fully understand the profitability of each product / service they offer? Often the answer is no.

3.Leader

Instilling a financial approach and mind-set throughout the organisation to help other parts of the business perform better

4.Support

Tax planning and legal issues; compliance issues; managing external relationships; outsourcing relationships.

The modern CFO needs to be able to develop all this and more. There are many other considerations that go beyond the pure “job description” above.

What’s the difference between an accountant and a CFO?

A CFO looks forward and financial accounting looks backwards; it’s where your business is going that matters as the past cannot be changed – but learnings can be made and changes made so that past mistakes not repeated.

Experience: it is important that a CFO has a wide range of commercial experience, not just financial. Good CFOs do not learn their skills from textbooks alone, in fact they learn very little from textbooks – they learn by doing. Commercial experience means leaving their offices and talking to customers and engaging with the production and operations teams.

Personality: a CFO must be able to communicate at all levels be it the production teams, sales teams, marketing teams to board level. The CFO must be able to relate to people on all levels of a business.

The CFO Centre provides high calibre CFOs to SMEs on a part time basis, allowing organisations to benefit from the expertise of a highly experienced Chief Financial Officer without incurring the expense of hiring someone full-time. We don’t tie you in with a long term contract.

Whether the business in in fast growth mode and needs control or has hit a brick wall and needs survival solutions to get through a tough patch, our CFO’s can cope with both ends of the spectrum.

For more information about the CFO Centre’s service see How it Works or call us on 1300 447 740

Article written by Peter O’Sullivan – Regional Director – CFO Centre, Victoria

Protect Your Company from Late Payments

March 8, 2022 by lauramills

When your company is facing yet another cash flow crisis caused by late-paying customers, it can be hard to believe there might be a solution. But there are steps you can take to overcome the problems delinquent payments cause and to avoid them happening again.

Late payments are something that hundreds of thousands of SMEs experience. They can threaten SMEs ability to trade, and stifle appetite for growth and recruitment. In worst cases, it can lead to insolvency.

The amount of time SMEs are kept waiting beyond their previously agreed payment terms can be a big issue. Almost a third of companies face delays of at least a month beyond their terms. Additionally, nearly 20% are having to wait more than 60 days before being paid.

Fortunately, there are measures you can take to protect your company from the worst effects of late payments. Furthermore, ensure that you are paid promptly in the future.

Some of these measures include:

Research prospective clients – Before accepting a new client, carry out a credit check and find out if the company has a reputation for paying on time.
Agree on prompt payment terms – Create contracts and terms & conditions that specify when they must pay your invoice and any overdue fees. Include your payment terms on every invoice.
Send invoices promptly – Don’t delay in sending out invoices. Check that the details are correct to avoid delays.
Offer a range of payment options – Make it easy for customers to pay you. Offer them a variety of payment options such as Direct Debit, PayPal, and credit card. If your clients are based in a different country, accept payment in their currency.
Use invoice finance – Invoice finance will give you essential working capital (up to 90% of the approved total invoice) while you wait for the outstanding invoice to be paid. You’ll receive the remaining 10% when your client pays your invoice.
Use an invoice tracker system – You’ll receive an alert when invoices are overdue.
Keep to a schedule – Invoice on the same date every month so that your clients know when to expect your invoices.
Set up internal invoice reviews – Hold regular weekly or monthly internal finance meetings to review your invoices.
Don’t back down – If you have late fees for overdue invoices then make sure you follow through and charge them. By law, you can claim interest and debt recovery costs if another business is late paying for goods or services.
Hire a part-time CFO – For a fraction of the cost of a full-time CFO, the CFO Centre provides highly experienced senior CFOs. Your part-time CFO will assess your company’s cash flow position and take the following steps:

Identify and address all the immediate threats to your business
Determine where improvements and savings can be made.
Instigate the use of regular cash flow forecasts. This way you’ll know in advance of a cash shortfall, and can therefore, make arrangements for extra borrowing, or take other action.

Profit Improvement through Expenses and Supply Chain Management

February 21, 2022 by lauramills

There are two types of expenses, fixed and variable. Careful and regular monitoring should be in place for all businesses.

Fixed Expenses

Fixed expenses remain relatively constant regardless of the volume of sales. These are usually salaries, insurance and rent.

If your organisation has a significant decrease in sales, profit is impacted as fixed costs remain constant. Additionally, although termed “fixed”, those costs can increase alongside changing economic and other trading conditions.

The following tips can help a business improve the management of fixed expenses.

Regularly review all these costs and compare them against other suppliers’ pricing to ensure the business pays competitive rates.
Salaries are classified as a fixed cost. You should review your staffing levels and make sure they align with your business activity
Compare your expenses to the industry standard. This will also help you know if the costs you are incurring are in line.

Variable

On the other hand, variable costs are directly impacted by changes in the activity levels or the volume of products or services that your company produces.

It is crucial to differentiate variable costs from fixed costs as variable costs are critical when it comes to profitability. If your organisation is not performing as expected, sales can remain flat or are decreasing. It is essential to manage these costs in line with the sales to reduce the risk of profit erosion.

The following tips can help a business improve the management of variable costs.

Analysing profit margins, not just on a company level but on all product lines. You may find that one product has a high margin and another a negative margin. This will not be evident unless you report on each product line.
Make sure you are aware of which costs are attributed to sales. If you see that the profitability is reducing, you may need to reduce those not attributed to sales, for example marketing costs.
Staffing can be a high cost for any organisation. Consider hiring staff on a casual or part-time basis so that you can scale your staffing levels up and down based on sales demand. There are also recruitment agencies that will handle this aspect for you.

Supplier / Supply Chain

When thinking of supply chain, you usually think about the delivery of goods, are they on time or are they correct, and when will you pay for them. If you think about your supply chain as another way to maximise your profitability, you will be on the right track.

The following tips can help a business improve the use of its supply chain:

Implementing the proper inventory method, finding the balance between too much and insufficient material.
Technology that suggests minimum material quantities, and when more stock needs to be ordered. As a result, this can reduce reliance on human interaction and ensure the stock is on hand when required.
Review your supply chain arrangements regularly, look to see if you can get a better price or negotiate the current arrangement. Having your suppliers hold the stock could reduce your cost of storage.
Always have two suppliers. If something were to happen to one supplier, this would not impact your organisation as much if you only had one supplier.

Each business has its own challenges when it comes to profitability. This blog only touches the surface around what can be achieved. The CFO Centre has been assisting SME’s for 20 years, offering highly experienced Chief Financial Officers on a flexible, part-time basis. As CFOs, we are qualified CPAs or CAs with extensive commercial experience across multiple sectors, so we know what to look for and how to respond.

Written by Elechia Jones, Regional Director, The CFO Centre

Photo by Adeolu Eletu on Unsplash

What The Rolling Stones Can Teach You About Making Profit

February 21, 2022 by lauramills

At an age when they should (or we just wish they would) hang up their leather trousers and retire, more and more ancient rockers are embarking on yet another tour with The Rolling Stones top of the list.

Prior to Covid, The Rolling Stones (of course!), Madonna, The Who, Neil Young, Rod Stewart, Pearl Jam, Queen, and even Ringo Starr were all performing on stages around the globe. Given that many of them are nearing or way past grandparent-age, you might wonder why they’re still bothering so many years after their first taste of fame.

The performers will say it’s because they love it and that they ‘don’t want to let the fans down.’ But there’s another hard-nosed reason to get their weary old bones back on the tour bus. And it’s this: touring boosts their profits in a way that digital music sales and royalties can no longer do.

“With digital music so freely and widely available, hardly anyone makes money off sales or royalties these days,” reported Mike Rowell in an article for Forbes.

Top performers can take home 35% of the night’s gate sales and up to 50% of the money made from merchandise sales, according to Forbes’ journalist, Peter Kafka. Their record labels are likely to receive none of that, which means the stars are likely to receive a whopping payout for their performances.

Singing aside, what can you learn from the likes of Mick Jagger when it comes to your business?

To focus on the part of your business that brings the most profits. The Rolling Stones could have retired decades ago and waited for the income from album sales and royalties to trickle in. Instead, they made the decision to continue to tour and have generated many millions as a result. In just under three years, for example, the band’s overall concert grosses topped $401 million, according to Billboard.

The following story also illustrates why it makes sense to focus on the most profitable part of your business.

A major US direct marketing company with over $1 billion in annual sales recently reviewed its database to determine where its profits were coming from, B2B or B2C. At that time, 50% of its sales were to consumers and 50% to businesses. I was shocked to discover that the profits on the business sales were 500% better than those to consumers. Most consumer sales weren’t even profitable even though they represented the majority of customers, transactions, and expenses.

The decision was made to focus on B2B sales. It required a significant turnaround in the business: at that time, the company employed 500 people taking inbound calls from customers and only 100 people making outbound calls to businesses.

The change took two years. By the end of that period, 95% of its sales were to businesses and only 5% to consumers. Sales flourished. They had been growing at 21% before the turnaround but by the end of the two years averaged 50%. Profit growth was equally dramatic.

So, what can you do to boost your profits besides cutting costs? For a start, identify your most profitable customers and then do everything possible to increase sales to that segment of your business. Focus on attracting more customers like them.

Want further reading on profit? We outline 3 of the 4 factors for increasing profit in our blog Critical Factors For Improving Profit

Fortunately, it’s not something you have to do alone. A part-time CFO (Chief Financial Officer) will help you to accomplish a more profitable company with less stress and hassle than if you were to try to do it on your own. Watch our 3-minute video on How it Works,  which explains the part-time CFO model from the CFO Centre.

Photo by Clem Onojeghuo from Pexels

What is the North Star?

December 16, 2021 by lauramills

In the 1950s, strategic planning was around budgetary planning and control, then we jumped to 1970s which focused on corporate planning; 1980s focussed on strategic positioning, 1990s strategic competitive advantage; 2000s strategic and organisational innovation; 2010 complexity and rapid change.

Now, we are talking about North Star Metrics (NSM). The term has been in around since the 2000s and was used primarily in Silicon Valley. It has taken a while to reach Perth.

Here is our view of what the North Star means for SMEs.

If you are not familiar with North Star, it is another form of goal setting. Remember SMART goals (specific; measurable; achievable; realistic; and time-based)? And what about vision boards, or stepping stone goals or even a more recent fad of bullet journaling?

A North Star goal, in its basic form, has also been referred to as the Big Hairy Audacious Goal. It is a goal so big, so far out there and it is not about the destination but more about the journey.

One article recommends to think of them “the way sailors view the North Star: A way to stay on course, no matter where you are. And if you don’t know where to go or what to do, all it takes is a quick glance to get back on track”.

If that is the basic form, let’s have a look at the metric in more detail.

Key steps for creating a North Star Metric

1. Start by Understanding How Customers Get Value

And not just any customers, but instead the “must have” customers who say they would be “very disappointed” if they could no longer use the product. Your goal is to expand this “must have value” across your existing and new customers. Your North Star Metric is how you quantify expansion of this value.

2. Should be Possible to Grow NSM “Up and to the Right” Over Time

A good rule of thumb is to choose a metric that can be “up and to the right” over a long period of time. This is why “Daily Active Users” is an example of a good NSM for consumer products like Facebook or online games.

3. Consider the Downsides of a Metric

Think through some scenarios where growing the metric could lead the team to behave in ways that are against the long-term interest of the business. For example, if you made your NSM “average monthly revenue per customer,” then the fastest way to grow this number would be to eliminate all customers that have a relatively low value — even if they are profitable customers. This would likely reduce your overall customer and revenue growth rate.

4. Keep it Simple

Remember that the point of the NSM is to align everyone on your team to work together to grow it. So, it’s important that it is simple enough for everyone to understand it and recall it.

5. Why Not Just Focus on Revenue Growth?

Revenue growth is very important, so this is a natural question that many people, especially business owners, ask. The challenge is that if revenue growth outpaces growth in the aggregate value that your product delivers to customers, it will not be sustainable. Revenue growth will eventually stall and start to decline. But if we can continue to grow aggregate value delivered to customers over time, then it becomes possible to sustainably grow revenue.

For example, let’s take the CFO Centre (CFOC).

How customers get value: CFOC provides highly experienced CFOs to SMEs on a part-time basis.

Grow NSM: the number of active clients

Downsides: CFOC needs to be able to service active clients and this is directly related to number of CFOs

Keep it simple: CFOC wants every SME to have access to a part-time CFO.

This is a big hairy audacious goal. We understand that the number of clients is limited by the number of CFOs but a North Star Metric isn’t necessarily pragmatic or utilitarian. It does, however, provide a direction for the SME and the business owner.

What is the North Star Framework?

In addition to the metric, the North Star Framework includes a set of key inputs that collectively act as factors that produce the metric. Product teams can directly influence these inputs with their day-to-day work.

This combination of metric and inputs serves three critical purposes in any company:

It helps prioritise and accelerate informed, but decentralised, decision-making.
It helps teams align and communicate.
It enables teams to focus on impact and sustainable, product-led growth.

Personally, I would add to this:

Imagine you have your North Star Metric, next you define sub-metrics (break down big goal to smaller goals), define the outputs (key elements of success) of those goals, define how you will achieve those outputs (needs to be measurable) and finally, what are the inputs to reach the outputs.

The CFOC question

At the CFO Centre, we ask our clients: what do you want your business to do for you?

This is an important question as our goal is to build a relationship with a business owner and the questions starts our journey to better understand what is important to them.

The answer to this question can also be the basis of your North Star.

Is the North Star relevant to SMEs?

Overall, I like the concept of setting a North Star for a business but I much prefer the more basic approach: Big Hairy Audacious Goal.

I was in conversation with one business owner who had his North Star, or rather his Big Hairy Audacious Goal. He wants his business to be valued at $1bn by 2029. I thought this was brilliant and I think this is what North Stars are about.

Set your big goal but remember, it is more about the journey than the destination!

Final words

To qualify as a “North Star,” a metric must do three things: lead to revenue, reflect customer value, and measure progress.

Make it bold, tap into your dream and start the journey.

Sources:

Types of Goal Setting – From North Star Goals to SMART to Bullet Journals – Leanne Calderwood; The North Star Approach to Goal Setting | by Patrick Ewers | Better Humans; What is a North Star metric? | Mixpanel; About the North Star Framework – Amplitude; North Star Metric: What Is It and How To Find It For Your Company – Kissmetrics; How To Find Your Company’s North Star Metric (forbes.com); Finding the Right North Star Metric | by Sean Ellis | Growth Hackers; What is the North Star Metric? Theory, benefits and examples | toolshero; What is the North Star for your Strategic Planning? | Insigniam Quarterly; Strategic guardrails for digital transformation | Deloitte Insights

Tips for the Manufacturing Sector

October 29, 2021 by lauramills

Manufacturing Tips – Let’s take a step back….and go back to basics: Production Scheduling!

The last 12-18 odd months has been a time for many people to self-reflect. So why not apply this logic to your business?

We are often creatures of habit and do many tasks out of routine, but do not look behind the curtain.

There are literally dozens of articles on the internet and in business magazines on manufacturing financial tips, or top tips to improve your business fast. Everyone starts throwing out the buzz words like: cash flow; inventory management; procurement savings; marketing and e-commerce and better working capital management, the lists goes on.

For most business owners, your eyes have already started to glaze over. Or, you’ve just clicked the close button on the internet browser. I did on several of the online articles I googled!

In other words, in my experience, you need to take a few steps back and go back to basics.

Look behind the curtain and optimise your production schedule.

Step 1.

Identify the key product (Group A) that your business manufactures and sells. What do you want the market to know you as? What is the goal? Is it to increase the productivity of product X and increase sales by X percent?

Step 2.

Secondly, you can consider looking at the other products (Group B, C, D etc) that your business manufactures and sells. What is the goal with these products? Ask the questions for this step that you asked in step 1 for your key product.

Step 3.

Thirdly, analyse the volumes of these product lines and determine what your realistic manufacturing capabilities are (with and without overtime, additional shifts, equipment change overs if required, etc). Do the calculations! If you are not sure how to do the analysis, get some outside talent to assist on a short-term basis.

Step 4.

As a next step, develop the production schedule. With Group A as your primary production, you can factor in peak sales periods and additionally, in “quieter times”, you can manufacture the other products (Group B, C, D etc). Remember to factor in equipment change overs and maintenance requirements, and consider warehousing constraints for raw materials and storing of finished goods.

Graphical Example of Production Schedule:

Step 5.

Setting the production schedule flows to your procurement requirements and timing and as a result, this then follows onto your inventory management. These two areas are driven by your production schedule (not the other way around!).

Golden rule: Do not change the schedule!!! You may need to tweak and adjust for the unexpected, however, chopping and changing the schedule can cause productivity losses and create instability in the organisation.

Step 6.

To manage the manufacturing process from end to end, you need timely reporting and metrics to track the performance. After that, review the reports regularly – some might be hourly, daily, every 2-3 days, weekly or monthly (just depends on your operations).

If your current software system cannot meet the reporting requirement, develop reports that meet your business needs. If you do not have resources internally to develop the reporting, get short-term outside talent.

Longer term, you may need to look at upgrading your software system that grows with your business needs. Think strategically!

Step 7.

Lastly, communicate the production schedule to your organisation. Set the expectations, from the team members on the production floor through to finance, customer service and sales. You’ll find over time that the salespeople that understand the production schedule and work with it, tend to be more successful in sales and meet customer expectations.

Once you are in the rhythm of the production schedule you can work on cost and waste reduction programs. For instance, refining your inventory management, supplier reviews, productivity efficiencies and so on.

In conclusion, go back to basics, break it down into steps and do not be afraid to ask for help.

By Melissa Tirant, Chief Financial Officer, Victoria – The CFO Centre

NSW: Are you prepared for the end of lockdown?

September 28, 2021 by lauramills

Are you ready?

What will you do after 114 days of lockdown?

A question facing business owners in New South Wales

Lockdown is expected to end on 18 October

It was said on a recent Zoom call that the top 40% of businesses will flourish whilst the bottom 40% will flounder

A reference to industries that are best placed for the expected uptick in the economy after freedom day

Best placed includes technology, hospitality (for those that survive) and construction

The other end includes retail, possibly travel (until international travel returns) and commercial property

But I argue that industry is only part of the opportunity that awaits

As important is your mindset and readiness to take advantage of the opportunities that await

I nominate 3 aspects of any business that should be priorities as freedom day approaches:

Have an updated strategic plan that factors the best use of your resources for the next 3 months
Make sure you have an experienced team that can quickly scale if the growth eventuates
Ensure you have the systems and processes in place to ensure orderly growth

I have always been a great advocate of the 3 Ps – a plan, people and processes

Are you prepared to take advantage of a business boom, should it come?

Written By Peter Crewe-Brown – Sydney CFO at The CFO Centre