Blog Archives - Page 2 of 2

Why a timeline or timetable is essential for implementing your business plan

September 19, 2018 by

In building your business, do you ever:

Feel out of control – you’re getting by, dealing with one crisis after another, but just barely hanging on?
Find that your longstanding products and services just aren’t selling like they used to, but you can’t find time to develop new offerings?
Think about retiring after selling out to a group of your employees, but you know that they (and you) are nowhere near to making that possible? (see our post on exiting your business for more on that)

A big step towards resolving these issues, and many others, is to have a business plan – an effective business plan.

Many businesses get by without one. “It’s in my head,” you might say. Or, it could be a document you put together years ago, maybe because your bank required it to extend financing, and you haven’t looked at it since.

But as the CFO Centre’s e-book “Business planning and strategy implementation” points out, according to a survey by business and finance software provider Exact, companies that have a business plan in place were more than twice as successful at achieving their goals than those that did not (a 69% success rate versus 31%).

What’s wrong with many business plans?

If having a business plan is so important, how can your company get the best possible benefit out of the work that goes into preparing one?

Our work here at the CFO Centre has found that while having a business plan helps, there are some important elements to success (many of these are presented in more detail in the e-book).

One is that the plan must be a living document – it needs to be something that you review frequently, updating it as circumstances change, and using it to provide guidance on what your daily, monthly and yearly priorities should be.

Another aspect of success, believe it or not, involves packaging. You may be aware that a business plan that is used as a finance-obtaining tool will succeed more if it features attractive layout and design. But having a document that’s pleasant to look at – not just text on a page – will work better even if it’s just used internally. That’s because the people who read it, including you, will have a greater sense of confidence that the ideas in it can be made to happen.

How a timeline helps make it all happen

But the one important aspect, that many business plans miss, is the element of time. Without a clear picture of what is to happen by what time, a business plan is just a wish-list.

The best way to help make sure that the business plan stays alive – and more importantly so that what’s in it comes to pass – is through including a timeline.

A timeline (or timetable, if you prefer) sets out the milestones of your business plan – the number of employees, number of locations, sales targets, net revenue expected and other targets – and indicates what date they are expected to be reached.

For example, let’s say you have a winning retail concept that you want to turn into a franchise. Maybe even a national franchise.

To do that, you need to determine what processes need to be implemented in order to manage a store like yours effectively. That, in turn, leads to a set of written procedures – such as the steps to be taken upon opening the store or on closing, how to make each of the products that are sold, and other aspects of success. Maybe then you need to establish a time by which you expect to have that first satellite operation running, maybe as a corporate-owned location, just to see what happens when you’re not on site to trouble-shoot all the time.

It could be that this sounds so complicated and intimidating that you never actually get your franchising idea off the ground.

Here’s how a timeline helps make your business plan happen:

It breaks down big, scary projects into smaller, bite-sized chunks you can actually do
It reassures you by pointing out that you don’t need to do everything right now
It moves you along because you see a deadline for one of those “chunks” coming up, so you can get working on it

Start with the end in mind, then work backward

This involves a 5 step process.

Get a firm image of your goal. Established business wisdom says to consider first where you want to be (say, 20 franchise outlets across the country, ten years from now) and then spell out in detail what that will look like. Going into detail gives you a more clear idea of what needs to be in place for that to happen. Set a date for that to happen.

Determine the big milestones along the way. This might include writing out the elements of success in your current business, creating written procedures, testing those procedures to see if they cover all reasonable contingencies, opening a second outlet to further test those procedures, selling your first franchise to someone you know already, and onwards.

Think of the resources you’ll need. For example, at some point, you’ll need to engage a franchise lawyer to consult and help in the preparation of a franchise agreement. Think of the finance you’ll need to have in place, maybe from a bank or friend-or-family source, to make the rest happen (to learn more about how to avoid cash-flow problems that might drag you down, see our post here).

Write out your timeline. It might be on paper, on a computerized document, on a calendar program that will remind you about deadlines, or whatever works for you. Maybe multiple formats will be a good way to keep you on track.

Implement. The rest is up to you and your team. Delegate tasks, outsource, do it yourself – but be sure to stay with your timeline.

Understanding Business Risk – How to Avoid the Road to Ruin

September 4, 2018 by

Entrepreneurship means taking risks, such as launching new products, entering new markets, or using new processes. Because this involves uncertainty, there are always chances that things will go wrong.

Our experience at the CFO Centre has been that the most successful companies take the time to understand the downside of the risks they take, and then find a way to compensate for those downsides.

As the CFO Cente’s book “Scale Up” says, a lot of business owners spend an unhealthy amount of time worrying about what might go wrong, but don’t have a formal risk management framework in place. One of the most dangerous positions to be in is not knowing what might harm you. That’s why “Scale Up” suggests starting with a comprehensive risk analysis, to identify potential risks to your business.

This post talks about how you can understand the risks your company faces, and develop a way to manage those risks.

Why is business risk analysis important to you?

Business risk analysis is an essential part of the planning process. It reveals all the hidden hazards, which occupy the business owner’s mind on a subconscious level but which have not been carefully considered and documented on a conscious level.

Not understanding the risks your company faces can bring your company to its knees, as a 2011 report, ‘The Road to Ruin’ from Cass Business School revealed.

Alan Punter, a visiting Professor of Risk Finance at Cass Business School, said the result of a detailed analysis of 18 business crises during which enterprises failed revealed that directors were often unaware of the risks they faced.[1]

“Seven of the firms collapsed and three had to be rescued by the state while most of the rest suffered large losses and significant damage to their reputations,” he said.

“About 20 Chief Executives and Chairmen subsequently lost their jobs, and many Non-Executive Directors (NEDs) were removed or resigned in the aftermath of the crises. In almost all cases, the companies and/or board members personally were fined, and executives were given prison sentences in four cases.”

“One of our main goals was to identify whether these failures were random or had elements in common.”

“And our conclusion? To quote Paul Hopkin of Airmic, the Risk Management Association that commissioned the research: ‘This report makes clear that there is a pattern to the apparently disconnected circumstances that cause companies in completely different areas to fail. In simple terms, directors are too often blind to the risks they face.’”

A lot of business owners spend an unhealthy amount of their time worrying about what might go wrong but don’t have a formal risk management framework in place. It is dangerous not knowing what might go wrong.

What are the risks facing your business?

Business risks can be broken up into the following:

Strategic risks – risks that are associated with operating in a particular industry
Compliance risks – risks that are associated with the need to comply with laws and regulations.
Financial risks – risks that are associated with the financial structure of your business, the transactions your business makes, and the financial systems you have in place
Operational risks – risks that are associated with your business’ operational and administrative procedures.
Market/Environmental risks – external risks that a company has little control over such as major storms or natural disasters, the global financial crisis, changes in government legislation or policies.[2]

The ‘shoot, fire, aim’ approach favored by many entrepreneurs is great for making things happen quickly but often jeopardizes the long-term stability of the business.

What is needed is balance.

Once the business understands the risks, it means that it can move forward decisively and confidently. It’s hard to do this when there is a cloud of confusion hanging over the business.

Where to start?

You need to assess your business and identify potential risks. Once you understand the extent of possible risks, you will be able to develop cost-effective and realistic strategies for dealing with them. Consider your critical business activities, including your staff, key services and resources, and the things that could affect them (for example, illness, natural disaster, power failures, etc.). Doing this assessment will help you to work out which aspects of your business could not operate without.

Identify the risks

Look at your business plan and determine what you cannot do without and what type of incidents could have an adverse impact on those areas. Ask yourself whether the risks are internal or external. When, how, why and where are risks likely to occur in your business? Who might be affected or involved if an accident occurs?

Assess your processes

Evaluate your work processes (use inspections, checklists, and flow charts). Identify each step in your processes and think about the associated risks. What would stop each step from happening? How would that affect the rest of the process?

Analyzing the level of risk

Once you’ve identified risks relating to your business, you’ll need to analyze their likelihood and consequences, and then come up with options for managing them. You need to separate small risks that may be acceptable from significant risks that must be managed immediately.

You need to consider:

How important each activity is to your business
The amount of control you have over the risk
Potential losses to your business
The benefits or opportunities presented by the risk

Conclusion

By managing the company’s risk profile and the risk profiles of the shareholders the whole business can be brought into alignment and can operate as a unit rather than as a set of individual parts.

This is actually one of the most critical roles in any business and your part-time CFO will support and guide you through the process.

At the CFO Centre, our CFOs have an intimate understanding of every conceivable risk that growing businesses face. This means that we can help you build a much stronger business by knowing how to navigate through the growth stages of the business cycle confident that you are equipped to meet the challenges as they present themselves.

It is never possible to eliminate all risks in a business, but it is possible to create a framework and implement systems which lower your exposure to risk. That, in turn, allows you to focus primarily on growing your business.

Knowing that you have a framework in place to mitigate risk means that you can free up time and mental energy.

Lower your risk today

Let one of The CFO Centre’s part-time CFOs help you with business risk analysis. To book your free one-to-one call with one of our part-time CFOs just click here.

[1] ‘The Road to Ruin’, Punter, Alan, Financial Director, www.financialdirector.co.uk, Aug 18, 2011

[2] Source: https://toolkit.smallbiz.nsw.gov.au

Is the problem your company solves BIG enough?

June 19, 2018 by

If you have ambitions to grow your small company into a large one, you need to make sure it has room to grow.

To see how that works, consider that humble box of baking soda in your refrigerator. Baking soda was originally developed for, well, baking. It solved a baker’s problem – the difficulty of getting baked goods to rise. But then, people discovered other problems the product solved – diaper rash, kitchen fires, grease stains … and refrigerator odors.

Manufacturers such as Arm & Hammer found demand for their product that was quite unrelated to their company’s original idea.

But what Arm & Hammer found out indirectly about solving wider and bigger problems, you need to do intentionally. How do you do that? Here’s a three-step process.

1. What problem(s) are you solving now?

You may have started your business to provide a specific product (such as baking soda) or service. But your customers may look at the situation quite differently. They’re looking to buy a solution to a problem they’re facing, like diaper rash or a carpet stain. Sometimes, it’s more than one problem – a box of baking soda helps bake cookies and helps clean the kitchen counter.

So, you need to get a clear idea of what problems you’re solving for your customers now. To do this, consult with your customers directly, get input from your sales team, and see what people are saying about you on social media.

Then ask yourself: are the problems we’re solving now the problems that will help us continue to grow? Should we be solving different, maybe bigger, problems?

2. Find the right bigger problems to solve

The world is full of bigger problems – climate change, overpopulation, civil unrest, and many more. But how do you find the right bigger problems? Some ideas that may guide your quest:

Do people with money feel this problem? If you’re running a business, you need to earn revenue – so the problems you solve must involve people who have the money to pay you. And, the problems must be pressing – those ideal customers must actually feel the pain and urgency enough to want to pay you to solve those problems for them

Does this problem give meaning and urgency to your life? As well as pressing on your customers, the problems you’re solving must motivate you. They have to help you get going in the morning and stay at it all day. Only then will you be able to motivate others on your team, even those who don’t interact directly with customers, to help solve those problems too.

Does this problem have staying power? You need a problem that will continue – and better yet, continue to grow. Only then will you have the basis for a business that has sustainability.

Now, let’s consider how you can bake that sustainability into your business.

3. Develop a solution that’s disruptive

If your answer to the problem of refrigerator odors is another box of baking soda, you may need to re-think your approach. You’ll be struggling against a well-entrenched competitor.

Instead, the solution you offer must be disruptive – in other words, it must be unusual and offer new solutions to existing problems. One reason is that if it’s a big enough problem, it won’t be solvable by current thinking, or someone would have solved it already. And, you need to seize attention, and offer an advantage compelling enough so that potential customers will say, “I want some of that.”

Our work at the CFO Centre is something like that. We saw a problem – entrepreneurs whose dreams crash to earth because they don’t have the financial lift they need under their wings. And we saw that many companies can’t afford a full-time experienced CFO (that cash problem again), and what’s more, they don’t need one.

What many (we like to think all) growing companies can use is ongoing access to a CFO’s ability to clear away the financial stumbling blocks, but without a full-time CFO’s cost. So was born our “fractional” CFO – a permanent, but part-time, financial advisor.

That’s our disruptive solution.

One thing we’ve found out is the importance of having the cash you need to build a way to solve the “big problem” you’ve decided to focus on. Without cash, it’s like you’re trying to walk when you need to fly. To learn more about the importance of cash flow, the reasons for it (such as slow-paying customers, high fixed costs), and some steps you can take to resolve them, download our free e-book, simply titled “Cashflow.”

Become a world class leader with a strategic plan

March 27, 2017 by

By Chris Carl
Regional Director at The CFO Centre

A part-time CFO is to an SME what a doctor, a physical trainer, and a world-class coach is to a superstar athlete. The superstar athlete will always be good – but they will only be great if they are healthy (the doctor makes sure of that), they are in great physical shape (the trainer takes care of that) and that they can compete at a world-class level (the world-class coach takes care of that). In a business setting, the CFO Centre refers to these same three levels of conditioning as Business Support (being healthy), Operational Skills (getting in great physical shape), and Strategic Planning (competing at a world class level).

The highly experienced and successful part-time CFOs from The CFO Centre can help make a company flourish in every respect. From increased profitability, to growth through financing or mergers and acquisitions, to increased happiness in the C-suite and all employees, a part-time CFO can literally help perform miracles. But, these results can only be achieved through sound business practices and a great strategic plan. A successful experienced CFO, that costs only a fraction of a full-time CFO, can make all of these happen.

This article (part 4 of 4) discusses developing and implementing a Strategic Plan to make your company able to compete in any market.

Read Part 1 | Part 2 | Part 3

Strategic Planning

In our final comparison to becoming a world-class athlete, regardless of how strong an athlete you may be, you will never compete at a world-champion level without a great coach. That coach helps you develop your plan to get to the top of the podium – from taking stock of where you stand today, to figuring out what actions might hurt you if not attended to, to laying out a timetable to achieve each part of your overall goal. That coach ensures that you have all of the right resources around you that you will need to win that championship, he/she does a lot more than sit on the sidelines and clap when you perform well.

In business terms, to be able to achieve all of your business goals, (and maybe some you thought were beyond your wildest dreams) you need a Strategic Plan. Don’t confuse this with a wish list. A Strategic Plan involves setting very high goals but it also requires taking stock of your current situation, identifying the risks you need to overcome to achieve your goals, a step-by-step path and resources required to get you there, and a definitive timetable for each step to make sure it all happens. Once in place, it also requires execution.

At The CFO Centre, we believe the highest value we can bring to any client is to help them develop, and execute a “Strategic Plan” that takes the company well beyond what the CEO even thought possible. By following the path of the four key elements, a part-time CFO will bring financial abundance to the company. At the CFO Centre, we define these 4 key elements as:

Strategic Planning can sound lofty and somewhat irrelevant to a company that is in the trenches every day just fighting to survive. But it is exactly what the company needs to get them out of the trenches and on to a much better playing field. A Strategic Plan is like a roadmap and without one, the company will wander aimlessly without direction. And when communicated properly, it helps great alignment and purpose within an organization.

For example, one company I worked with as an investor had world-class technology to help other companies optimize cleanliness and environmental compliance in a manufacturing setting. The small management team was very strong and had great breadth between technical, marketing and financial experience and skill. And while they knew they had a world-class technology, they could not generate the marketing and sales dollars sufficient for them to access and educate the larger customers they desired. By selling to smaller customers, their unit sizes were smaller and they had to keep prices (and therefore margins) low just to be able to make the sale. The result: they were losing money or barely breaking even month after month and year after year.

When I met them through a fellow investor, I found a team that was capable, very focused on getting the job done, and who really knew exactly what they wanted in the long term. BUT, they were stuck in a low margin rut and couldn’t find a way out. So I suggested we take a few more hours out of their life for a few weeks and develop a Strategic Plan.

This plan had to be real, but it also had to lay out a path for them to get to point that they could be selling this amazing equipment to the large customers who needed it most. We sat down and recorded all of the possible goals (crazy ones and real ones), and we looked at all the things that could stop us. While there were many small issues we solved, or developed a plan for, in this process, one of the best examples of how a great Strategic Plan could work was in deciding how to increase product awareness and sales to the desired customers.

Everyone at the company felt that they needed to bring on a couple of top-notch sales people who could cover the continent. The problem was that, just like a full time CFO, highly qualified experienced sales people are expensive to employ full-time and for this company the selling process could take up to a year. That was an added overhead the company just could not afford. So instead we looked to how we could leverage the skills of others and decided that if we could possibly find distributors who already sell products to our desired large customers, maybe they could be our conduits to sales.

So we laid out a plan, and a timetable (the most critical element is that you MUST have a timetable). We decided that we wanted a distributor in 50 States and 12 provinces. I suggested to the team that we set a goal of 1 year to achieve this and I was almost laughed out of the room. “Impossible” they said. But, not wanting to leave and still wanting to become an investor, I asked them not to think about it as 50 new distributors in the US and 12 in Canada a year, but rather 4 distributors in the US and 1 in Canada each month. I suggested that by breaking this seemingly insurmountable plan down into bite sized pieces that not only might we get there, we might just get there faster than we think.

After much debate, not only did we agree to give this a try, but with everyone being so busy we asked everyone on the team to contribute just a little bit. That meant sharing our plan with other customers and contacts, getting on line to research who might be out there, and start making calls. The admin assistant of the company drove the process by recording and organizing everyone’s efforts and new contacts daily, and by doing lots of outreach on her own as well. The team developed financial terms that were good for the distributor that would also be great for the company, and the sales manager found a draft Distributor Agreement that was only 2 pages and had the lawyer sign off.

In month one we signed off on 2 of the 5 that was our goal, and in month 2 we got 4 of 5. The numbers increased every month and by the end of month 10 we had a distributor in all 50 States and 12 provinces in Canada. We achieved this “unachievable goal” in 10 months instead of the year – even when the team thought getting it done in a year was impossible.

The result of setting the strategic goal to eastablish a network of Distributors was the company increased the value of the average sale from $20,000 per sale to $125,000, margins increased from 20% per sale to almost 50%, and the customer profile went from a privately owned business with under $5 million in sales to 80% of customers now being listed on the Fortune 500 – and three of them on the Dow 30.

To be fair, there were lots of fits and starts to get to this point, and there were times that it all seemed like it would come crashing down. But, by having that strategic plan to keep going back to and to measure themselves by, and by having a month to month plan of something achievable rather than a one year plan that seemed impossible, the Company did achieve what seemed like impossible goals. And today the same team is still working their butts off to continue growing the company – but they smile a lot more than they used to – and they know their now larger paychecks can be cashed.

There are dozens of stories like this from our CFOs at the CFO Centre. Strategic Planning may seem like fluff when you can barely make payroll next Friday. But in reality, a strategic plan is exactly the tool that a company with great products or services needs. Whether you are barely breaking even, or making millions in profit, EVERY company will grow and improve with a well developed, and well executed, Strategic Plan. The part-time CFO is the perfect resource to help an already busy team make this happen.

____________________________________

Chris Carl has a 30-year career growing manufacturing based companies with novel technologies both as start-ups and within Fortune 500 companies. Having held both CFO and CEO roles, he has raised a combined $500 million in debt, mezzanine and equity financing in private and public companies listed in Canada, the US and Europe.

The CFO Centre provides highly experienced, part-time CFOs to small and mid-market organizations at a fraction of the cost of a full-time CFO. We are committed to helping companies work through complex financial issues, in order to maximize profit and provide senior financial leadership.

Our global team has over 400 CFOs across 13 countries; our services include business and strategic plan development, financial reporting, cash flow management, internal control, risk assessment and mitigation, training and development, and negotiations.

www.thecfocentre.ca
1-800-918-1906 or email: [email protected]