strategy Archives - CFO Centre Australia
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Tag: strategy

Do These 6 Things Before You Plan For 2023

by lauramills
Do These 6 Things Before You Plan For 2023

Now is the perfect time to reflect on the year just gone and plan for the year ahead.  The last two years have thrown many of us challenges and/or opportunities never seen before.  So how can your business go further or do better in 2023?

Below is a checklist for businesses to help you when planning for the future:

  1. Know Where you Stand

Does your financial reporting provide you with an accurate and timely view of the financial performance of your business? These could contain:

  • Historic balance sheet, profit and loss and cash-flow together with a set of key performance indicators (KPIs) that the management team use to run the business on a day to day basis.
  • Rolling forecast balance sheet, profit and loss and cash-flow driven by the same KPIs. Even a static annual budget is better than no target at all.

  1. Analyse

Have you analysed all of your products or service offerings and identified those that should be invested in and those which should be scaled back to improve the performance of the business?

  1. Review Costs

Have you reviewed all of your costs and identified all of those costs where alternative suppliers can be identified and current deals can be renegotiated? This helps to minimise your cost base and refine your negotiation skills.  Are there possible savings from systems and/or process streamlining?

  1. Review Customers

Have you reviewed all your customers and identified the good ones form the bad ones i.e. those that take ages to pay and/or beat you down on price etc.? It may be time to let the bad ones go and focus on the ones you want.

  1. Assess Risk

Have you assessed all of the obvious risks in your business and made sure that you have a contingency plan in place to avoid those with the highest likelihood and most significant impact?

  1. Your Personal Goals

Take the time to really reflect on why you started the business, are those goals still the same today and are you getting closer to achieving them?

 

Plan:

Once you have considered the above, you are ready to start planning.  A clear operational plan for the future of the business, which shows you the steps required to implement that plan is the best road to success.  If you do not have this it will be impossible to identify opportunities that arise next year that fit your plan for the business.

Most of our clients have been through this process with our guidance and as a result many are now looking to exploit the opportunities, to expand their markets and recruit key staff to help drive their businesses forward in 2023.

To get your business in the best shape for 2023, contact the CFO Centre on 1300 447 740.

The CFO Centre is dedicated to helping businesses meet their strategic objectives. Find out how it works by watching this short video on our website –  https://www.cfocentre.com/au/how-it-works/

 

Plan For Profitable Growth in 7 Easy Steps

by lauramills
Plan For Profitable Growth in 7 Easy Steps

Planning for growth is something every business owner will say they do. However, not all business owners will do this effectively and with a focus that will generate profitable growth.

Many businesses plan for growth, but not profitable growth.  Some businesses focus on growing sales without a focus on margins while others build infrastructures to support sales and growth that never materialize.

Michael Porter said, “If your goal is anything but profitability – if it’s to be big, or to grow fast, or to become a technology leader – you’ll hit problems.”

A business must focus on profitable, scalable and sustainable activities if it is to grow. Profit and the generation of cash to re-invest in your business must be made a priority. It’s an essential part of the financial strategy and structure of a successful business.  Profit and a clear business plan will create a focus and the alignment of the organization. Additionally, it’ll attract investors and other sources of funds to fuel growth – all of which impacts the underlying business value of the business.

CFO Centre has identified:

7 Keys to Profitable Growth:

  1. Define your business goals & objectives
    Produce a formal plan from which you can articulate a vision
  2. Critically review your business
    Identify competitive advantage, scalability & sustainability
  3. Establish a financial plan
    Identify milestones, KPIs & dashboards
  4. Create organisational alignment
    Nurture your culture, hire the right people and communicate the vision
  5. Identify the financial resources required
  6. Support the business with systems & processes to optimize performance
  7. Measure, review, evaluate & course correct
    Be proactive & prepared to be reactive

If you follow these 7 Keys and plan for profitable growth, you will ultimately:

  1. Improve and grow profits
  2. Maximise the scalability of your business
  3. Enhance management team and organizational structure
  4. Attract investors and other sources of funds
  5. Increase business value

To enhance the value of your business and grow successfully, follow the 7 Keys and Plan for Profitable Growth.

How to be More Strategic and Successful in 2023

by lauramills
How to be More Strategic and Successful in 2023

The impacts of covid-19 will stay with us for the rest of our lives.

We’ve seen new businesses birthed with success and others thriving amid chaos. We’ve seen neighbourhood classics tragically lost, and others that struggle to survive day-to-day.

Critical points like these thrust every business owner from acting with strategic intention to reacting to curveballs. As we are coming to the end of 2022, most businesses are settling into one of three camps:

  1. Thriving, but not trusting the success
  2. Reviving but hesitant to make bold moves
  3. Surviving and feeling battered, bruised and disillusioned

No matter which category you fall into, you likely are eyeing the rest of 2022 with caution. You’re optimistic but timid in your approach to making those big visionary goals you’ve made in the past. You may even find it hard to dream of a better future because it feels so out of touch with what is happening globally. You are not alone in those feelings.

Now is the opportunity to rewrite the rules and stop settling for less in your business. It is the opportunity to cast a strategic vision that is different from the past and to create more success and growth in your business and your life. Here are some ways you can make it happen.

1. Accept that change is necessary

Change is difficult, but it is for-ever ongoing for small-business owners. And change is happening at a frightening pace.

You’ve likely noticed that the old reliable ways of getting clients and serving them are faltering. The to-do list of things that need your attention is never ending. It’s time to put them to bed.

If change is already happening in your business, why not get ahead of it? When you are reacting to these changes, you treat the symptoms. The better approach is to embrace change to treat the problem.

By treating the problem, you employ change to work with you, not against you. People are likely to welcome strategic change now—especially if the change makes their lives better too.

One way to bring agility and innovation into your business is to implement a quarterly strategic planning and review process into your business. This planning keeps your efforts focused, actionable and accountable while remaining agile and able to shift as new learnings come to the table.

As part of the process, ask yourself these questions.

  • What would disrupt your business enough to change everything?
  • How can you be on the leading edge of that change?
  • How can the business be relevant and profitable five or even 10 years from now?

 2. What does the customer really want / need?

The old rules of supply and demand have gone. Through issues with manufacturing and distribution, product-based businesses feel the pinch. Changing client needs and social distancing have left recession-proof businesses struggling. Service-based businesses are finding that their services are no longer crucial or needed. No business or business model has been unaffected.

The reason is simple: The customers’ needs and their problems are in a constant state of change.

Engaging in a conversation with your clients to identify opportunities is a perfect strategy moving forward. The strategy could be as simple as asking a probing question at the end of every client interaction. It could also be more involved such as surveys or quarterly client advisory groups, to follow a more formal process.

More than ever, staying in tune with the customers’ needs and the problems you can solve is imperative. It is the gateway for future growth and innovation.

3. Work smarter, not harder

Australian culture is all about hard work. If you have struggled to achieve your goals, you’ve likely heard someone telling you to work harder.

Since the rise of intellectual capital as a commodity in the 1980s, the ability to be successful is less about our ability to work hard. Many business owners have told me how hard they work only to find success seemingly out of their reach. Evidence that success is not about hard work.

Sure, success demands focus, determination and resilience. But I challenge the notion that hard work is one of the requirements. If it were, we would have more success stories to celebrate.

Working smarter is about leveraging the talents of people and collaboration. When you remove hurdles and bottlenecks in your processes, you promote ease. It’s the processes that are often the problem. That which is easy gets accomplished. That means being able to produce more revenue with the resources you have. You likely will see a boost to team morale and stop spending time putting out fires.

It leverages technology and systems to streamline the business, allowing it to run smoothly. According to Gartner Research, by 2024, organizations will lower operational costs by 30% by combining hyper automation technologies with redesigned operational processes.

Consider which elements of your client experience and service could be delivered through automation, saving critical points for human interaction and forward looking strategies for your business. The organisational efficiencies gained can offset growth investments and produce a more efficient team.

4. Profit is the aim, not a reward

One of the most misleading entrepreneurial and inspirational quotes is: “Follow your passion and the money will follow.” If only things were that simple.

If success is a reward of hard work, this quote puts profit on the same unattainable pedestal. Passion for what you do gives you fire in your belly and can bring a sense of contribution. At the end of the day, though, passion doesn’t pay the bills; prolific profit does.

By shifting your mindset around profit and other metrics in your business, a magical change in how you spend your day occurs. You start focusing on initiatives that produce results and impact your bottom line.

A 2018 Cone/Porter Novelli Purpose study found that “78% of Americans believe companies must do more than just make money; they must positively impact society as well.” This marriage of purpose and profit is an instance where everyone wins. Clients love supporting social impact; businesses can be profitable and improve their community and world in the process.

For many of my clients, bringing profit up on the priority list, even with reduced revenue, is the defining element of rebuilding business stability.

5. Be a confident leader who empowers others

The entrepreneurial trials of the economic crisis have shaken the confidence of even the most experienced entrepreneurs. We are questioning everything in our professional and personal lives. Whispered conversations with other entrepreneurs over the year let us know that we are not alone in that journey.

With this period of reassessment, the future feels less certain. That uncertainty erodes our confidence to take risks and make bold moves. Past success, “knowing” and being right are pillars in the old definition of confidence.

Be careful—that shaken faith also seeps into our teams’ bones. They want something to champion.

There is good news that can breathe new life into your confidence. You do not need all the answers. You do not even need to know the “how” beyond “what is the best next step?” And, you don’t even need to be right.

Empowering others is what defines the success of top leaders. What got you here has centered around who you are and what you can accomplish. Those accomplishments won’t fuel the future. Relying on your efforts alone is a limiter when scaling your business — even in strong economic times. The old definition of confidence was about what you could do. Your future confidence needs to be about your team and the belief in what the team can do.

For 2023 to be the beginning of your comeback story, you need to take action differently enough to move the needle in your business. Make bold moves that advance and protect your business. Marry your vision to these tips, and you could be looking at a successful year.

Peter O’Sullivan, The CFO Centre

Why SME’s shouldn’t ignore Risk Management

by lauramills
Why SME’s shouldn’t ignore Risk Management

Many people think that risk management is only for large corporations. This is not the case! Risk management is a NECESSITY FOR EVERY BUSINESS. The hard part is to properly align risk management processes to each unique organisation.

The world is undeniably riskier. Change is ever more rapid, and this has been accelerated by COVID. Increasing digitisation of business processes will inevitably increase cyber-security risk. The world is still highly connected, and McKinsey estimate that supply chain shocks will reduce profits by 42% of annual EBITDA profits every 10 years. Geopolitical risk, climate change, border closures and business disruptors (new business models, social media etc) will all play a part.

• RISK MONITORING

It’s important not to let risk slip off the radar, and for to you be aware of possible issues. Talking to people in your industry can give you insights from other perspectives. Being sucked into day to day operations can leave no time to think about strategy and risks. Moreover, when implementing these strategies, try to consider the related risks by staying close to your business analysis and industry trends.  Talking to a CFO, who with a wealth of experience and a fresh pair of eyes may give you new perspectives and insight!

• RISK APPETITE

Decide how much risk you are willing to accept. This depends on the operational and financial strength of the organisation, as well as the business strategy and your risk versus return profile. What’s the takeway? Risk is part of doing business, but make sure it is within your limits, and you are in control.

• RISK MANAGEMENT

  • Understand how to mitigate risk, e.g. insurance, experts, financial tools or internal controls.
  • Work on simple scenario modelling to understand implications and solutions. Simple cyber security audits can also be useful.
  • Curtail activities that exceed your risk limits.
  • Restructure staffing so that owners/managers have some time to think about risks and strategy.
  • Ensure risk management is embedded in the organisation.
  • Ensure internal controls are in place so you have confidence that risks are controlled and reported.

Risk management is a must do. To be successful it needs to be correctly sized, using appropriate techniques. If this is not done, risks can damage or destroy the business. Too complex and it will detract from the real world task of running the business (and probably wont get done anyway!).

Gary Campbell is a CFO Centre Principal based in Melbourne, Australia, advising SMEs on finance, strategy and governance. He is a qualified accountant, MBA, and graduate of Australian Institute of Company Directors. He can be contacted on [email protected]

3 Steps to Scaling Your Business Through Reporting

by lauramills
3 Steps to Scaling Your Business Through Reporting

A client recently said to me: “I want to grow our business and stop the cash burn – how do we do this? When is it the right time to invest and grow?”

What a tough question to answer. Each business is at a different stage.

We spent a day examining his business and determining what the growing pains were. He had started the business a few years ago and it grew from scratch.

It was generating a great turnover and growing but they never had any cash.

“Why?” he asked.

After reviewing the business financials it was quite clear that the internal systems were not in place. He could not possibly understand the profitability of the products they were selling due to these inadequate systems.

Therefore they could not take the next step.

The first question I asked was: “Where do you want to take this business – what’s your goal? To build up the business and exit down the line, or are you looking to exit now? Or is this business a keeper if we can generate a great RoI?”

The response was: “We don’t know the numbers or where this business could get too as we have no clarity on the numbers”.

Something I see very commonly here in the SME businesses I work with – no clarity around the financials.

Next Steps

Step one for this particular client was to build a reporting framework around their products to determine what was profitable and what as not. If there were non profitable products (or those that deliver little profitability), should we dump them or only include them bundles in the online offering?

Step two: Build a fully flexible 3-way financial model (P&L, Cash Flow and Balance Sheet) for the next 3 years. Play around with the assumptions, i.e what other products can we put into the offering to customers?

Step three: Monthly reviews against the plan – what worked, what didn’t work and the whys around both.

The right time for a business to grow is when they can balance new customer demand with their internal systems and processes. Moreover, in the instance of this client, increasing recurring revenue streams. Growing faster generally costs more per customer as they need to engage more expensive channels within the business model.

Scalability is about continuing to engage customers with new offerings, and to engage new customers with your offering to the market.

To scale a business one must consider how the business model will affect the bottom line when you expand operations. If you have low capital expenditure and can grow your business with the same revenue / expense % it is much easier to deliver greater numbers in the long term and provide greater options to your customers.

It is early days working with this client but the potential is endless.

The Top 4 Mistakes People Make When Planning

by lauramills
The Top 4 Mistakes People Make When Planning

A strategic plan is fundamental, it sets out the company’s strategic direction. It defines its main operating and financial targets, the actions it will take to achieve those objectives, the new initiatives and investments planned, and their impact on the company’s performance.

The top mistakes business owners can make when it comes to planning are:

  1. They don’t have a plan at all
  2. They don’t have a formal plan, it’s in their head which is difficult to share with others
  3. They don’t have an implementation timetable attached to their plan
  4. They don’t have a mechanism in place to conduct regular reviews

Without a comprehensive, up-to-date strategic plan and an implementation timetable, companies may be missing out on opportunities for growth and not realising their full potential. A formal plan can be an extremely valuable tool for managing and growing a business, as it allows a company to recognise its strengths and weaknesses.

Chaos Reins

Not spending quality time on strategic planning usually leads to a chaotic working environment. Our clients often talk about ‘not feeling in control’ and ‘not really knowing what is coming around the next corner’. When the plan is weak, business owners tend to operate without the same sense of conviction as those who allocate time and expertise to the planning process. Our CFOs often find that their clients have done some good planning and strategic thinking but need a devil’s advocate to ask the right questions and help to steer the ship in the right direction.

Helping Hand

Being a CEO without a high-level finance person to bounce ideas off can be tough. CFOs often possess a different albeit complementary set of skills to CEOs/MDs. It is natural for business owners to bring people into the company who see the world in the same way they do. However, it is often more valuable to have key members of your team who possess very different skills to your own.

Constantly doing the same things in the same way with the same people will usually lead to achieving the same results. If you are worried about whether you have the right team in place to fulfil the vision you have for your business, or whether you have the funds you require, or whether your business plan is sufficient to reach your objectives, then we would recommend you take the time out to work through the detail. It is rare to see a company succeed if it doesn’t have a robust plan.

Our part-time CFOs often work with clients who started off with intentions to run a business and have ended up working in a job. However, with the right business plan in place and a robust implementation approach, the business owner is able to run the business without getting drawn too far into the day-to-day details. Contact Us if you would like to discuss your options.

How A Strategic Plan Will Change Your Business

by lauramills
How A Strategic Plan Will Change Your Business

Strategic Planning is the key to the success of any business, no matter its size or age but it’s said that many small to medium-sized businesses don’t have a plan of any kind.

 

What is a Strategic Plan?

The strategic plan sets out:

  • the company’s direction and priorities;
  • its main operating and financial targets,
  • the actions it will take to achieve those objectives,
  • the new initiatives and investments planned, and
  • their impact on the company’s performance.

Nearly a fifth of SMEs say they prefer to keep plans in their head, according to research by Close Brothers Asset Finance. Mike Randall, CEO of Close Brothers Asset Finance, says, “It’s concerning that so many small and medium sized firms do not have a strategic business plan.  Without clear direction, they may be missing out on opportunities for growth and not realising their full potential.”

A formal plan is an extremely valuable tool for managing and growing a business as it:

  • clearly communicates the company’s priorities
  • ensures all key staff are working towards common goals
  • sets the focus on key objectives
  • delegates actions and accountabilities amongst employees
  • ensures that decisions made will benefit the long-term company goals
  • allows a company to recognise its strengths and weaknesses.

Failing to plan is like planning to fail

Strategic Planning is an area SMEs should be focusing on.   Furthermore, a plan is only useful if it is reviewed regularly to ensure it meets the current and future needs of the business.  It’s vital business owners regularly review their financial strategy to ensure they have the right funding in place to meet the needs of their business, at its current stage of the business lifecycle.

Most CEOs and MDs simply don’t have the time to spend on quality strategic thinking and to document and communicate that thinking in a way which allows the whole business to buy into the vision. Harder still is managing and implementing the business plan. Significant strategic course corrections are commonplace in fast-growing companies. These should be embraced. The tricky part though is in managing regular change. That requires a combination of time and specialist knowledge.

There is an art and science to effective business planning. Getting it right brings a real sense of clarity and direction to a business. This is where an experienced part-time CFO can make a significant contribution.

There is an art and science to effective strategic planning. Getting it right brings a real sense of clarity and direction to a business.

 

Business Plan for Funding

It’s likely at some point in your business journey, that you need access to funding. Whether that be to scale faster, expand into other territories or buy other businesses.

External funding could be via banks, non-bank lenders, venture capitalists, and angel investors.  None of these are unlikely to look at any funding request that isn’t accompanied by a very solid business plan.  It defines exactly what you want to achieve, and how you plan to achieve it across a set time period. It’s a sure-fire way to ensure that growth targets and plans are being met.

However, business owners will struggle to formulate a concrete business plan without firstly ensuring that their strategic plan is solid and robust.

Our team can assist in creating and implementing a solid strategic plan and/or business plan that paves the journey for your business. Click here to find out more, or contact us on 1300 447 740.

The Strategic Planning Checklist

by lauramills
The Strategic Planning Checklist

Part A: Strategy Check List

 

1. Analysis of Existing Situation – Organisational Philosophy & Mission & Value

  • Does it reflect what you stand for?
  • Do your people understand its true meaning?
  • Does it make it clear as to how you have to compete and against whom?
  • Is it simply written? Is it clear and unambiguous?  Is it believable and realistic?
  • Does it motivate people? Does it attract pride or cynicism?
  • Does it give us some indication of what we should be doing and how we should be doing it?
  • Do all the constituent parts fit and hang together?
  • “Identity Pyramid” – do you have clarity around all the issues?

2. Internal Appraisal of Company

  • SWOT analysis – revisit previous analysis & ensure it is complete & current
  • Distinguish between endowments and core competencies
  • Assess and audit core capabilities.
  • Gauge fit between external environment and core capabilities
  • Identify fit between customer requirements and core capabilities

Having identified what you perceive to be your competences ask yourself the following questions:

  • Will this give us any source of long term sustainable competitive advantage? Clarify the how? (ie. how relevant is it to the needs of our customers (actual and potential)).
  • Do customers (broadly) agree with our findings (ie. the market place)?
  • Can competitors (present/future) emulate or do better? Do they share our perception?
  • How was this list of core competences arrived at (eg. Training, innovation etc)?
  • Any weaknesses/shortfall still? If so, what further investments will be required?
  • Is there any impact on the strategic balance sheet (ie. Intangible and human assets)?
  • Can it be levered, onto other applications and/or markets?
  • What happens next?

3. Competitive Analysis

  • What is the current process for this task?
  • The Positioning Statement (competitive positioning) – refer below
  • Scan present competitive position but focus also on future competition.
  • Do you really know your competitors strategy?
  • Understand changing face of competition
  • Who could be a future competitor?
  • Is your strategy and your competitors becoming more alike or more divergent?
  • What is the most radical thing that your competitor(s) could do?

4.Value Proposition

  • Consider or revisit the current Unique Sales Proposition within your Marketing plan & ensure it is complete and up-to-date.
  • Do you know why your customers buy from you and not you competitor(s)?
  • Have you asked them?
  • How can you improve customer experience?

5. Environmental & Industry Analysis

  • Consider legal, social, political, economic, technological, markets, labour position, society, pressure groups, and any other environmental issue.
  • Assess potential impact of any change(s) and consider timing implications.
  • Conduct intensive industry analysis.
  • What is the long-term viability of the industry as a whole?
  • What could change the industry dynamics?
  • What is the nature of current industry changes i.e. radical, creative, intermediate or progressive?
  • What could be the impact on your strategy and source of competitive advantage of such changes?
  • Five years or so from now how will the industry leaders look and act?

Part B: Strategy Selection

 

1. Identify Strategic Alternatives

  • All options to be examined – growth, acquisitions, alliances, JV’s, innovation.
  • Upside and downside risks identified

2. Strategy Evaluation & Selection

  • Clear choice to be made
  • How will we compete?
  • Evaluate impact of each option
  • Will it give unique competitive advantage?
  • Can it last? Can it be sustained?
  • Will it differentiate us from our competitors?
  • Can it be converted easily into a set of business objectives / KPI’s?
  • How will competitors react?
  • Easy to implement?
  • Contingencies in place?
  • What about the next wave?
  • Is it consistent with customer requirements and industry changes?
  • Will it create shareholder value?
  • Is it financially viable?

Part C: Strategy Implementation

 

1. Matching Strategy & Organisational Structure 

  • Do we have the necessary resources?
  • Is there a logical fit?
  • Is current structure adequate? Assess extent of change. Do not ignore culture effect.
  • What about the organisation’s values?
  • Is strategy personalised enough? Assess flexibility and robustness.

2. Allocation of Resources & Responsibilities

  • Planning, Plans, budgets, controls, appraisals etc….. all to be consistent with strategy
  • Strategy well translated into clear objectives
  • Priorities and constraints identified
  • Time horizons clearly laid out
  • Management information systems to dovetail strategic choice

 

Photo by Andrew Neel on Unsplash