Hire a CFO Call us 1300 447 740
Hire a CFO Call us 1300 447 740

Tag: strategy

Where Will Your Business Be in 1 Year From Now?

by lauramills
Where Will Your Business Be in 1 Year From Now?

If you want your business to achieve high ambitious turnover growth of at least 20% year on year, you need a business scaling strategy that incorporates a strong vision and a solid business plan.

Helping your small business to grow, to achieve a sustained growth, will involve careful planning and most likely involve taking calculated risks.

You need to think about what you want to achieve. Where do you want to be 1 year from now?  You won’t find that easy unless you know your target market and your customers thoroughly, have products and services they’re keen to buy and be aware of the expenses you’re likely to face.

Managing Growth

To manage your company’s growth, it’s critical that you refer often to your business plan and keep an eye on the business’ key metrics, benchmarks and timelines.

You need to make sure that people have actionable activities; things that they can do and which can be measured.

As well as having repeatable processes and measuring your progress on a day-to-day basis, it’s crucial to be able and willing to adapt and be flexible if things change.

Knowing all your Numbers

Besides monitoring KPIs for turnover, gross profit percentage and salaries, it’s also important to establish KPIs for your profit per product and customer profitability.

You need to know whether you’re doing more business with each of your customers than you were doing the previous year, for example. That’s more important than focusing on going out and winning new customers.

Equally important is being aware of your balance sheet.

Other important KPIs are those that relate to your customer conversion rates, your sales profitability, and your working capital

Funding Growth

You also need to have a clear understanding of what’s achievable both in the short and long-term.

At some point, you’re likely to need to invest in the company to achieve the revenue growth and scale your business the way you want.

That might be to cover the cost of hiring of more team members, the training of your existing employees and their retention, or the development of new product lines or services to boost sales.

Like some companies, you might need additional funding to be able to hire in external experts such as the CFO Centre’s part-time CFOs to fill the personnel gaps within the company as it scales up.

You will also have to decide how you will fund the additional resources you need to sustain your growth.

Companies that enjoy strong growth are prepared to employ the right people and to raise the money they need.  Sometimes they have even personally guaranteed the loans they’ve taken out on the company’s behalf.

They’re taking well planned, well considered risks.

The more risk-averse often shy away from offering personal guarantees on loans or embarking on mergers and acquisitions that would help to fuel their rapid growth.

Invariably however you do need to borrow money to achieve growth.

Merger/Acquisition Growth

One of the fastest ways to scale your business is to merge with or acquire another business in your market. Or, in the case of retail or hotel/restaurant companies, open new branches in different locations. It could also involve forming a joint venture partnership.

You need to ensure there are alignment and support for the from all the company’s stakeholders. Including customers, senior management, non-executive directors, potential joint venture or merger partners. And your banks and other finance institutions, your accountants, and your immediate team.

The benefits of choosing the right target company for your merger or acquisition can mean your market share and assets increase.

Your new staff may have more expertise and skills than your existing employees.

The merger or acquisition may make it easier to obtain capital if or when you need it.

But this kind of inorganic growth can be problematic. The purchase price for the acquisition can be prohibitive while restructuring charges can increase expenses.  It takes time to benefit from the knowledge or technology your company has acquired through the merger or acquisition.

You may find you need to recruit more managers to cope with the increased workforce.

The business may move in a direction you never anticipated. Or the new company may grow too quickly which puts it at greater risk.

Often, the combination of organic and inorganic growth gives you the best outcome. Your company can diversify its revenue base without having to rely purely on current operations to grow your market share.

Three tips to scale your business

  1. Be open minded about taking on investment. Scaling your business will be hard work and you need to find a way to do it without running out of cash.
  2. Conduct market research to ensure people want to buy what you’re offering. It’s got to interest and excite them so much they’re willing to hand over cash for it.
  3. Reward your employees and make sure they understand and are engaged with your vision for the business. You’ve got to bring them on the journey.

Contact us now if you want to learn how a part-time CFO (Chief Financial Officer) can help you to implement the best business growth strategy.

How to Outsmart Your Competitors with a Business Plan

by lauramills
How to Outsmart Your Competitors with a Business Plan

Most business owners know that without a comprehensive, up-to-date business plan and an implementation timetable, they may be missing out on opportunities for growth and not realising their full potential.  However, around 30% of SMEs don’t have one. To ensure you’re ahead of your competitors, it’s imperative to find the time and/or resources to create and implement a plan for the start of the new financial year.

A formal plan can be an extremely valuable tool for managing and growing a business. It allows a company to recognize its strengths and weaknesses. Furthermore, research has shown that SMEs that have a business plan in place are consistently more profitable than those who don’t.

A Formal Plan

Planning is the key to the success of any business, no matter its size or age.  Yet many SMEs don’t have a plan. The majority of those without such a plan say they don’t believe it’s necessary or that they keep their plans in their head.

It’s concerning that so many small and medium-sized businesses don’t have a formal business plan. Without clear direction, they may be missing out on opportunities for growth and not realizing their full potential.  A plan is invaluable and should see out the company’s:

  1. Strategic direction
  2. Main operating and financial targets;
  3. Actions it will take to achieve those targets,
  4. New initiatives and investments planned;
  5. And their impact on the company’s performance

Creation and Implementation

Creating a well thought-through, comprehensive business plan is an arduous task. Thinking through objectives and likely outcomes which may occur many years down the line is challenging. But it is the hard work up front which makes for lighter work down the road as all of our team of part-time CFOs will attest to.

Most CEOs and business owners simply don’t have the time to spend on quality strategic thinking or 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 and getting it right brings a real sense of clarity and direction to business – this is where an experienced part-time CFO can make a significant contribution.

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’.

Proper business planning is very liberating for the business owner, whatever their objective might be. A well-constructed and regularly reviewed business plan will instil real confidence that the goal is indeed achievable.

Key Benefits

Writing a business plan has many benefits for businesses of any size and in any industry. It can help owners and senior managers to:

  1. Clarify objectives and develop suitable strategies.
  2. Understand the market.
  3. Identify and overcome internal and external threats
  4. Organise the company
  5. Access external funding

Key Elements

The most important part of your business plan is its financial information. Your financial forecasts should include your cash flow predictions for the next 12 months or more. You’ll also need to include sales estimates and costs to ensure the business has enough working capital or to ensure you understand any needs to arrange additional financing.

You need to explain all assumptions in the business plan, with best and worst case scenarios. Detail the risks you’re likely to face and how they will be dealt with.

Conclusion

  • An up-to-date business plan or ‘roadmap’ in your business will allow you to experience a sense of control, which may have been absent since the day you started your company.
  • The business plan will remove a significant amount of confusion from your operating procedures. There will always be challenges contained within new projects but you will have a proper framework against which all decision-making can take place.
  • The plan provides the blueprint for delegating responsibility to your team and allows you to create some space in your own environment to work on growing your business.
  • You will move out of the chaos and into a more serene working environment where each of the gears, which make up the bigger system, is able to move in harmony.
  • Potential hazards will have been identified in advance and dealt with before they become unmanageable. You will be able to move from a culture of fire-fighting to a culture of fire-prevention and the benefits will be felt by each member of your team and most probably by your customers too.
  • A part-time CFO can assist with creating, implementing and reviewing your Business Plan, as well as be a constant guide and sounding board for you.

The business plan is the first key to profitable growth!

Photo by fauxels: https://www.pexels.com/photo/photo-of-people-doing-handshakes-3183197/

6 Keys to Successful Company Growth

by lauramills
6 Keys to Successful Company Growth

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

Growing a Business

by lauramills
Growing a Business

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 to $750k turnover last financial year. This year they may potentially reach a turnover of $1.2m.

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.