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Like most of us you have probably been bombarded by emails and offers about GDPR. But the material you receive is rarely any real use.

So our colleagues at Freeman Clarke have produced a GDPR Board Action Plan which is a simple step-by-step guide of how to approach the issue. One of the benefits of working with The FD Centre is that we are part of the Liberti Group. As a whole the group provides part-time Directors in IT, Marketing, Finance, and Legal, meaning you have access to a wide range of expertise for which you may not have an internal resource.

We want to help all of our combined clients…from employment agencies who have stacks of very personal data, including huge numbers of CVs, photos, and official document scans; to distributors who have far less demanding issues, but still need to put some new safeguards and processes in place. In all cases, GDPR will completely overhaul how ALL businesses process and handle data. Therefore Freeman Clarke’s GDPR Board Action Plan Provides Six Key Phases to approach GDPR.

Follow the link to access the Action Plan from an IT perspective:

Freeman Clarke GDPR Board Action Plan

For further advice and to find out how a part-time IT Director can transform your business visit www.freemanclarke.co.uk or call 0203 020 1864

Imagine this: the co-founder of a multi-million-dollar HR management software company with almost 500 employees likes to micromanage to the point he and not the HR department has sole approval over employee benefits.

Likewise, when any of those hundreds of employees requests time off for holidays, it’s he and not the HR department that says ‘yes’ or ‘no’.

The company doesn’t have a dedicated IT employee to fix computers or printers because that same co-founder believes its gifted engineers should be able to resolve any IT problems that occur—no matter if doing so pulls them away from developing products or resolving customer problems.

Far worse, a massive influx of business means the company can’t keep up with licensing its insurance agents in each of the American states in which it operates. News leaks out, and the company is embroiled in a scandal with the prospect of millions of dollars in fines. The CEO co-founder is asked to resign, which he does.

It might sound far-fetched, but these are just a few of the problems the US HR software company Zenefits experienced during its accelerated growth or scale-up stage, according to Claire Suddath and Eric Newcomer of Bloomberg.[1]

Zenefits, founded by entrepreneur Parker Conrad and Laks Srini in 2013, offered free software to automate the payroll, health insurance, and HR services of small US companies. It made most of its money through brokerage commissions that were paid by insurance companies when clients bought one of their plans. The commissions recurred annually so once a business signed up, Zenefits continued to benefit.

That quickly drew the interest of investors—in particular, that of Andreessen Horowitz, one of Silicon Valley’s top venture capital firms.

Within three years, the company had gone from 15 employees to 1,600. During three fundraising rounds, it raised $580m (about £435m). By the end of 2014, it had surpassed a $20m (about £20m) recurring revenue goal and by 2015, was valued at $4.5bn (about £3.3bn).

By then, the company had about 14,000 customers and was in the process of hiring more than 1,000 additional employees. Things were moving at such a pace that a manager said he interviewed and hired people so fast that by the time they turned up to work, he’d forgotten who they were. One entry-level sales rep was told in an interview that the company was expanding so rapidly that he was guaranteed a promotion within a month.

That year, Conrad said in a talk, “There’s a low-level panic that suffuses the organisation, a constant pressure to keep moving faster and faster and faster.”

But then those serious compliance issues came to light and Conrad was advised to resign in early 2016, which he did. The company’s valuation plummeted by 55%.

The new CEO David Sacks wrote later in an internal email to staff, “It is no secret that Zenefits grew too fast, stretching both our culture and our controls.” [2]

Fortunately for the company, it survived and now has more than 20,000 accounts.

The timing was the biggest scale-up challenge for Hyperoptic, which runs its own dedicated Fibre-to-the-Premises (FTTP) network and offers symmetrical gigabit broadband services across 28 cities and towns across the UK.

The company was founded in 2010 by entrepreneurs Boris Ivanovic and Dana Tobak. Two years later the duo secured an equity investment of £50m from Quantum Strategic Partners Ltd, a private investment vehicle managed by Soros Fund Management LLC.

Cofounder Dana Tobak told Alison Coleman of Forbes.com, “Startups, even well-funded ones, need to conserve cash and spend smart. Most companies have multiple ‘engines’ such as sales, marketing, production, and customer support.  We decided to ‘scale up our sales organisation and used progress KPIs to determine when we needed to scale up the other ‘engines’ of the business. Some were faster to scale up than others, and in some cases, the lag negatively impacted customer experience.”[3]

Like Zenefits, Hyperoptic survived its early scale-up challenge. Over the last six years, it’s grown its network fivefold. Its full-fiber broadband now passes 350,000 residential homes and business units.

Tobak credits its growth to customer support as well as external funding.

“We have a 4* Trustpilot rating; the highest in the industry. Our customers have really supported us by sharing their experiences with their neighbours, family and friends, which has meant that we have been able to expedite our rollouts across urban centres.”.

This year Hyperoptic received £100m in funding from a consortium of four ‘tier one’ European banks (BNP Paribas, ING, RBS, and Dutch investment bank NIBC). Last year, the European Investment Bank agreed to provide £21m to fuel Hyperoptic’s rollout and market expansion.

With the new funding, the company plans to grow the network another sixfold and make its hyperfast broadband service available to two million homes by 2022 and five million by 2025.

While your scaling up might not experience all Zenefits’ internal and external challenges Zenefits or even the timing issues that Hyperoptic did, it is likely to face at least one of them. It might be:

• People challenges
• Sales and marketing challenges
• Operational challenges
• Administrative challenges
• Financial challenges.

As the FD Centre’s founder Colin Mills said in his book, ‘Scale Up: How to Take Your Business To The Next Level Without Losing Control and Running out of Cash’, the scale-up stage is when businesses really struggle because they’re growing but don’t have the infrastructure to support their expanded operations.

They might have the necessary revenue, manufacturing base, or customer reach of a substantial business but their controls, processes, personnel, leadership and culture are often still that of the much smaller business they were a short time before, he said.

Worse, they often don’t have the resources to create and maintain such an infrastructure.

During the scale-up stage, they face running out of cash or simply getting stuck, he said.

It’s only possible to avoid such problems by revising your entire business model. If you don’t, then all the small problems that niggle at you now are likely to become major issues once you begin scaling up.

Even if your business is already going through the scaling up stage, it’s still possible to retrofit, design, and redesign it, he said.

“In many ways, like most things in life, scaling up is not rocket science. No genius is required, said Mills. It can often be about common sense. “But common sense isn’t always common practice, and being able to focus on the most important things as you scale up is a skill that can get lost in the complexity of the whole process.”

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

And for a fraction of the cost of a full-time FD, the FD Centre will provide you with a highly experienced senior FD who will work with you on a part-time basis to help you with scaling up your business. To discover how the FD Centre will help your company to scale up, please call us on 0800 169 1499 or contact us here now.

[1] ‘Zenefits Was the Perfect Startup. Then It Self-Disrupted: What happened when an HR firm had some epic HR problems.’, Suddath, Claire, Newcomer, Eric, Bloomberg.com, May 9, 2016

[2] ‘Why Successful Startups Stumble’, Virgillito, Dan, Shopify.com, October 11, 2017

[3] ‘The Scale-Up Challenges Every Audacious Startup Must Face’, Coleman, Alison, Forbes.com, September 13, 2015

Leaving lucrative and secure C-suite positions mid-career to build a part-time portfolio might seem crazy but many of those who’ve done it say it is one of the sanest decisions they’ve made.

Take Michael Citroen, who at 58 years old is a 14-year veteran of the part-time portfolio job world. The former Group Finance Director (FD) relishes the challenge and excitement of working with half a dozen SMEs in his role as a part-time FD. “It’s nice going into different businesses and meeting different people and having different challenges to deal with. There’s so much more variety every day.”

He particularly likes that the businesses he deals with are all at different stages of growth. Some are very new, others are more established, and a couple has been guided through a sale with his help.

Citroen had been working full-time as the Group FD of a large privately-owned company when he made the decision to go freelance.

“It was getting very political,” he recalls of his former company. “And I also wanted to be in control of my own diary,” he says.

So, in 2003, he resigned and joined FD UK, a company that offered part-time FDs to SMEs. When that company was bought out by the FD Centre five years later, Citroen stayed on and is still working with them today—part of an expanding international network of part-time portfolio FDs.

“That’s another great aspect of working within a network of part-time FDs: there’s a massive backup. If there’s anything you need to know, you just ask the network, and you’ll get answers back really fast. I wouldn’t have that if I was working alone.”

Besides the enjoyment of working flexibly with entrepreneurs and with other part-time FDs, Citroen says he values the security that being a part-time FD with half a dozen clients brings.

“You don’t have all your eggs in one basket,” he says, explaining that if one client leaves he knows he can attract and retain another, so his income isn’t at risk.

“The FD Centre is very focused on helping its part-time FDs to win new clients,” Citroen says. “I could never have done as well as I have if I’d had to do it on my own. I had no idea about marketing and the technical aspect of things like websites when I first began.”

Like many people starting out on the part-time path, Citroen had been worried about giving up a salary with perks initially. “To begin with it was a little insecure, giving up a regular job.”

He quickly discovered that the financial return you get is contingent on the amount of energy you’re willing to expend.

He realised early on the new lifestyle would enable him to spend more time with family whilst maintaining a good level of income.

“It gave me time to be with them without having to answer to anybody.”

It’s something that another part-time FD Neil Methold has appreciated about this way of working. Being a part-time FD for the past six years has meant he’s been able to play a large role in his teenage son’s life: getting him settled into senior school and being able to attend almost every one of his sporting events.

“If I’d been working full-time I wouldn’t have been able to do that. And that’s priceless,” says 53-year-old Methold.

Like Citroen, Methold has found the move into the part-time portfolio world beneficial in so many ways. Not only has he been able to enjoy more family and leisure time but he’s had the pleasure of coaching and mentoring people working within his clients’ companies.

“My greatest satisfaction comes from coaching and mentoring people within these companies so they become self-sufficient and can do more and more of the work themselves.

“Nowadays I say to clients ‘My success here will be inversely proportionate to the number of days I charge you. In other words, the more I can get your people to do the work on a daily basis the less I have to do’. I see it as my responsibility to ensure the work is done, not necessarily to do it all myself. I think that has a significant impact on client retention.”

So too does learning to adapt your style of working to each client, says Methold. It wasn’t something he was aware of when he first started out, he confesses.

“But one day, I was mowing the lawn and thinking it all through in my head. That’s when I realised I was being too harsh, too demanding, too assertive, too telling. You have to be direct in a big company because there are shareholders and high expectations.

“But that doesn’t work with SMEs. You have to use a different style—you have to be softer and more accepting that things don’t necessarily move as quickly as they do at large corporations and that there are going to be different priorities.”

It was when he began to adapt his style of working to suit each client rather than going in “full guns blazing” that he started to enjoy much better relationships. It’s why he has retained his clients for so long, he says.

“You can’t go in and be all corporate. SMEs don’t want that. They want someone they can trust and rely on and build a good relationship with. A friendly face. Not just a very clever big shot. You need to be down to earth and be (remove ‘be’) people-focused.

“When I really accepted that and started to slow down my own pace I become more accepted. You have to adjust and be a bit of a chameleon to suit how they are and not how you think they should be.”

Citroen says the ability to communicate is critical in your role as a part-time FD. “You have to have the ability to talk to your clients on a personal level and to be able to relax with them. Clients will call you late at night or on a weekend because they’ve had an idea they’re excited about and want to share with you. People who can’t handle that aren’t successful as part-time FDs.”

Both he and Methold agree that time management is key to success in the part-time portfolio environment.

“Although I’m not in contact with my clients every day, I do keep in touch with them every week, whether it’s a phone call, text, or email,” says Citroen. “It’s all part of the relationship I have with my clients.”

Successful part-time FDs need to take the initiative when it comes to client contact, says Methold. “You have to work really hard at proactive communication with your clients. It’s easy then for them to see you are valuable. I will go to see a client, and on the way home has three 20-minute conversations with three other clients who I haven’t been with that day just to keep moving them forward.

“You have to commit to doing that extra stuff. You can’t just go in for a day, leave and send a bill.”

This obviously takes a lot of organisation, and that’s another skill a successful part-time FD must have (or develop!), he says.

“I have various lists, so I know what I have to do and at what point each week to make sure I don’t drop any balls because when you have lots of clients doing different things, it’s very easy to forget stuff.

“You need to be aware of what’s happening with each client and what you last spoke about. You can’t go, ‘Ah, can’t remember that last meeting. Sorry.’ When they are talking to you, you are their FD.”

Being willing to deliver such high-quality service is something that makes a difference when it comes to client retention, he says.

“Clients really do value that you put yourself out to ring them at the weekend or speak to them late at night or when you’re on your holiday. That s when you and the clients really do start to cement the relationship.”

The relationships you have with clients are what helps to make this such a rewarding way of life, he says.

Citroen agrees, adding that working full-time for one company pales in comparison with working part-time across a number of growing businesses. “The job satisfaction you get working as a part-time FD is enormous. I would definitely never go back to full-time employment.”

If you would like to find out more click this link: https://www.thefdcentre.co.uk/join-the-team/

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. Of the 1.7 million SMEs in the UK 640,000 say they have to wait beyond the agreed terms for payments, according to Bacs Payment Schemes.

Nearly 40% of them spend up to four hours a week chasing late payers and 12% employ someone specifically to pursue outstanding invoices.

Late payments can threaten SMEs ’ ability to trade, and stifle appetite for growth and recruitment, says Ian Cole, Head of Invoice Finance at Siemens Financial Services. In worst cases, it can lead to insolvency. Mike Cherry, National Chairman at the Federation of Small Businesses, said if payments were made promptly, 50,000 business deaths could be avoided every year.

So too could the problems that late payments cause. Of those SMEs facing late payments, 16% struggle to pay their staff on time, while 28% of company directors reduce their own salaries to keep essential working capital inside their businesses. A quarter (25%) rely on bank overdrafts to make essential payments, and 15% find it difficult to pay business bills like energy, rates, and rent when they’re due.

Late payments take an emotional toll on business owners and CEOs too.

Over a quarter (29%) of UK SME owners struggle with depression, anxiety, increased stress, and other serious mental health-related issues caused by the worry of late payments, according to research commissioned by The Prompt Payment Directory (PPD).

The survey polled 1,000 UK small to mid-sized company owners who all suffer from poor cash flow due to late or outstanding invoice payments.

More than a third (34%) regularly lose sleep over poor cash flow caused by clients paying late and 7% even claim to have lost their hair because of the anxiety, the PPD revealed.

Nearly a quarter (21%) struggle to pay their mortgage or rent or have been forced to sell the family home. The consequence of these late payment pressures is also destroying people’s marriage, family, and social lives.

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

UK businesses with a turnover of under £1million wait an average of 72 days for payment of invoices, according to the Asset Based Finance Association, the body representing the asset-based finance industry in the UK and the Republic of Ireland. By comparison, businesses with an annual turnover of between £1 million and £10 million wait about 53 days, and businesses with £500 million-plus turnovers wait about 47 days.

Solutions

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

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

Get clients to sign a contract or agree to terms and conditions that specify when they must pay your invoice and late or 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 by offering 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 (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 knew 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.

If you haven’t already agreed when the money will be paid, the law says the payment is late after 30 days for public authorities and business transactions after either:

• the customer gets the invoice
• you deliver the goods or provide the service (if this is later)

You can agree to a longer period for payments from one business to another—but if it’s longer than 60 days it must be fair to both businesses.

Hire a part-time FD

For a fraction of the cost of a full-time FD, the FD Centre will provide you with a highly experienced senior FD. Your part-time FD will assess your company’s cash flow position and take the following steps:

• Identify and address all the immediate threats to your business. It might involve chasing late-paying customers, using invoice financing to give the business an immediate cash injection, or arranging short-term loans or overdraft facilities with your bank.
• Determine where improvements and savings can be made.
• Instigate the use of regular cash flow forecasts. This way you’ll know in advance if your company is going to face a cash shortfall and can make arrangements for extra borrowing, or take other action.

End your late payment and cash flow problems now by calling the FD Centre today. To book your free one-to-one call with one of our part-time FDs, call 0800 169 1499 or just click here.

The story of how LEGO, the family-owned toy company went from teetering on the brink of disaster and hemorrhaging cash to delivering the highest revenues in its entire history and being voted the 2017 Most Powerful Brand in the World makes for a truly inspirational tale…

 

Fourteen years ago, LEGO’s Head of Strategic Development Jørgen Vig Knudstorp delivered the kind of assessment that most managers would gladly superglue their own ears shut to avoid hearing.

“We are on a burning platform, losing money with negative cash flow and a real risk of debt default which could lead to a break-up of the company,” warned Knudstorp at that meeting.

He’d discovered during six months of examining the company that there was a lack of profitable innovation, according to David C. Robertson, author of ‘Brick by Brick: How LEGO Rewrote The Rules Of Innovation And Conquered The Global Toy Industry.

“LEGO had plumped up its top line, but its bottom line had grown anorexic. All the creativity of the previous few years had generated a wealth of new products, but only a few were actually making money,” wrote Robertson. “To make matters worse, the LEGO Group’s management organisation and systems, shaped by decades of success, were poorly equipped to handle a downturn.”

The company’s management team—twelve senior vice presidents who oversaw six market regions as well as such traditional functions as the direct-to-consumer business and the global supply chain—didn’t collaborate but instead operated in their own silos.

The result was that the LEGO Group was expected to suffer a thirty percent fall in sales with £193 million in operating costs. It had a negative cash flow of more than £124 million.

By the end of the year, it was likely to default on its outstanding debt of nearly £620 million. Its net losses were likely to double the following year.

Knudstorp’s stark assessment should have come as no surprise. Something was going badly wrong at LEGO HQ Denmark: in the years from 1932 through to 1998, the company had never made a loss but from then on, the losses had increased year by year. First, there had been a little lost in 1998 but by 2003—the year of Knudstorp’s no-holds-barred assessment—that had grown to something deeply worrying.

Much worse results followed a year later when the company recorded its biggest-ever loss of about £217 million. By then, Knudstorp had been appointed CEO.

“In 2003, we pretty much lost thirty percent of our turnover in one year,” he told Diana Milne in ‘Business Management Magazine’.

In 2004, the company had a further ten percent fall in turnover. “So, one year into the job, the company had lost forty percent of its sales. We were producing record losses and cash flows were negative. My job was how to stop the bleeding.

“We had to stabilise sales and cut costs dramatically to deal with the new reality of selling forty percent less than we had done two years earlier. We had too much capacity, too much stock. It was sitting in the wrong countries. The retailers were very unhappy.”

Knudstorp, a former McKinsey analyst, told James Delingpole of the ‘Daily Mail’, “We had a dress rehearsal of the world financial crisis: a strong decline in sales and a massive increase in our indebtedness.”

The losses were partly a result of the company’s attempt to diversify in the late 1990s, in the belief its brightly coloured building bricks were losing appeal and were under threat from computer games and the internet.

It was coming under pressure from other toy manufacturers since the last of its plastic toy brick design patents had run out in 1988 and the monopoly it had enjoyed for so long in the plastic toy brick market had begun to erode.

LEGO’s diversification saw it expand the number of theme parks it owned in a bid to help increase the visibility of the LEGO brand across key markets. This was despite it having little hospitality experience. Unfortunately, these capital-intensive developments didn’t provide anywhere near the expected returns.

And the company had dramatically expanded the number of products in its portfolio, according to the ‘Brick By Brick’ author. In the years 1994 through to 1998, it had tripled the number of new toys it produced.

“In theory that was a good thing: experimentation is the prelude to real progress,” wrote Robertson. … “Problem was, the LEGO Group’s once-famous discipline eroded as quickly as its products proliferated.

“Production costs soared but sales plateaued, increasing by a measly five percent over four years,” Robertson said.

The company had little idea which products were making money and which were failing to produce an adequate return on the sometimes-heavy tooling investment, according to a case study from John Ashcroft and Company.

LEGO had even created its own lifestyle clothing range and brand shops and launched TV series, DVDs, and video games.

So, by the time Knudstorp delivered his assessment, the company was in serious trouble.

The Turnaround Begins for LEGO…

This is why with the help of Finance Director, Jesper Oveson (former Chief Financial Officer of one of the largest banks in Scandinavia, the Danske Bank), Knudstorp began to make sweeping changes.

Oveson discovered there was an inadequate degree of financial analysis within the company. While there was a profit and loss account by country, there wasn’t product analysis or line profitability, according to John Ashcroft and Company. In other words, the company didn’t know where they made or lost money. Likewise, the theme parks were a massive cash drain but no one knew why.

The two men decided on a short-term life-saving action plan rather than a long-term strategy for LEGO, which would involve managing the business for cash rather than sales growth. Key moves included:

• Setting financial targets. Ovesen introduced a near-term, measurable goal of 13.5% return on sales benchmark and established a financial tracking system—the Consumer Product Profitability system. It measured the return on sales of individual products and markets so the company could track where it was making and losing money. Every existing or proposed product had to demonstrate it could meet or surpass that benchmark.
• Cost-cutting (including cutting 1,000 jobs)
• Improving processes (many processes were outsourced which meant employee numbers could be cut by another 3,500)
• Managing cash flow
• Introducing performance-related pay
• Reducing the product-to-market time.
• Selling the theme parks and slowing retail expansion.
• Cutting the number of components from almost 7,000 down to about 3,000.

The result of these and other changes was that LEGO recovered and went on to become the most profitable and fastest-growing toy company in the world. During the worst of the recession in the years 2007 through to 2011, for example, LEGO’s pre-tax profits quadrupled. Its profits grew faster than Apple’s in the years 2008 through to 2010.

LEGO the Super-Brand

LEGO’s success has continued. Earlier this year, LEGO (now being run by Bali Padda as Knudstorp has moved into a role where he can expand the brand globally) announced its highest ever revenue in the company’s 85-year history.

And it overtook Ferrari and Apple to be voted the world’s most powerful brand. Each year, Brand Finance, a leading brand valuation and strategy consultancy, puts thousands of the top brands around the globe to the test to find the most powerful and most valuable of them all. This year, LEGO won.

“LEGO is the world’s most powerful brand,” it announced. “It scores highly on a wide variety of measures on Brand Finance’s Brand Strength Index such as familiarity, loyalty, staff satisfaction, and corporate reputation.”

Its appeal to children and adults in this tech-centered world also garnered praise from Brand Finance.

It continued, “The LEGO movie perfectly captured this cross-generational appeal. It was a critical and commercial success, taking nearly $500 million [£338 million] since its release a year ago. It has helped propel LEGO from a well-loved, strong brand to the world’s most powerful.”

This goes to show that even when disaster seems certain, it is possible to revive an ailing company. Of course, it helps to have a top-level financial advisor working with you to ensure the changes you’re making are the right ones.

What To Do If Your Company Is Suffering A Cash Flow Crisis

If your company is in dire straits, take action now—don’t imagine you can wish the crisis away or continue to do whatever you’ve been doing in the hope things will get better. They won’t.

Until you identify and fix your cash flow problems then put systems in place for managing cash flow, your company is at very grave risk of insolvency.

Without well-defined and well-managed strategies to avoid running into cash flow problems and a plan to improve cash flow if such problems should arise, your company will continue to flounder.

Fortunately, you don’t have to do it alone. The FD Centre will provide you with a highly experienced part-time FD with ‘big business experience’ for a fraction of the cost of a full-time FD.

He or she will assess your company’s cash flow position and take the following steps:

Identify and address all the immediate threats to your business

Prevent cash flow problems from recurring and

Instigate the use of regular cash flow forecasts.

Having control of your company’s cash flow will allow you to operate within your means, and move away from a ‘feast and famine situation that plagues even the largest companies.

Having the right cash flow management processes in place and being able to spot peaks and troughs in trading to improve cash flow is one of the most critical components of any finance function.

Put an end to your cash flow problems now by calling the FD Centre today. To book your free one-to-one call with one of our part-time FDs, just click here.

 

Sources

 

‘Brick by Brick: How LEGO Rewrote The Rules Of Innovation And Conquered The Global Toy Industry, David C. Robertson & Bill Breen, Crown Business, 2013

‘How LEGO Became The Apple Of Toys’, Jonathan Ringen, ‘Fast Company’, August 1, 2015

‘How LEGO clicked: the super-brand that reinvented itself’, Johnny Davis, ‘The Observer’ magazine, June 3, 2017

‘LEGO Annual Report 2016’, www.LEGO.com

‘The LEGO Case Study 2014’, John Ashcroft and Company

‘When LEGO lost its head- and how this toy story got its happy ending’, James Delingpole, ‘The Daily Mail’, December 18, 2009

What do Sir James Dyson, the Mercedes F1 team, Pixar, Google, and the airline industry have in common? Failure.

They’re hugely successful, yes, but the thing that links them is they never shy away from the ‘F’ word—Failure. Instead, they face and learn from their mistakes, errors, and mishaps. So says Matthew Syed, award-winning Times journalist and best-selling author of ‘Black Box Thinking: Marginal Gains and the Secrets of High Performance’ (John Murray).

“We have an allergic attitude to failure,” he says. “We try to avoid it, cover it up, and airbrush it out of our lives.

“For centuries, errors of all kinds have been considered embarrassing, morally egregious, almost dirty.

“This conception still lingers today. It is why … doctors reframe mistakes, why politicians resist running rigorous tests on their policies, and why to blame and scapegoating are so endemic.”

This notion of failure needs to change, he writes. “We have to conceptualise it not as dirty and embarrassing, but as bracing and educative.”

That’s because success in business (as well as in sport and in our personal lives) can only happen when mistakes are confronted and learned from and there’s a climate in which it’s safe to fail.

It’s what the airline industry has done so successfully, he says. Instead of concealing failure, the aviation industry has a system where failure is inherently valuable and data-rich, says Syed.

In fact, his ‘Black box thinking’ refers to the black box data recorders that all aircraft must carry to provide information in case of accidents. One box records instructions that are sent to all onboard electronic systems and the other records the voices in the cockpit.

“Mistakes are not stigmatised, but regarded as learning opportunities,” he says. After a crash, an independent team investigates.

“The interested parties are given every reason to cooperate since the evidence compiled by the [independent] accident investigation branch is inadmissible in court proceedings. This increases the likelihood of full disclosure.”

What’s more, after an investigation into an accident is completed, the report is made available for everyone.

“Every pilot in the world has free access to the data,” writes Syed. “This enables everyone to learn from the mistake, rather than just a single crew, or a single airline, or a single nation.”

Syed gives the example of United Airlines Flight 173 which took off from JFK International airport in New York on December 28, 1978, bound for Portland Oregon.

Just before the airplane went into land, the flight crew became convinced the landing gear hadn’t locked into place. They then spent so long trying to fix the problem that they ran out of fuel and had to crashland into a residential area, killing eight people on board.

An investigation discovered that the flight engineer hadn’t been assertive enough in telling the Captain the fuel was running low. The Captain meantime was obsessed with trying to fix the landing gear problem and avoid giving passengers a bumpy landing.

As it turned out there had not been a problem with the landing gear in the first place.

Afterward, new protocols were put in place and training methods were revised. As a result, nothing quite as bad has happened again.

So much so that flying on airplanes is now safer than any other form of travel because the industry investigates and learns from its mistakes.

“Openness and learning rather than blaming is the instinctive response – and system safety has been the greatest beneficiary,” Syed told Director magazine.

Dyson Vacuum Cleaners

Sir James, the designer, inventor, and entrepreneur, is committed to learning from failure.

He made 5,127 prototypes of his bagless vacuum cleaner before he got it right. This practice has obviously paid off because Sir James is now worth more than £3 billion.

“Creative breakthroughs always begin with multiple failures,” says Sir James. “…True invention lies in the understanding and overcoming of these failures, which we must learn to embrace.”

Without them, innovations won’t happen, he says. “Failures feed the imagination. You cannot have the one without the other.”

Great inventors always develop their insights not from an appraisal of how good everything is, but from what is going wrong, Sayed wrote in the Daily Mail.

Using Failure To Grow Your Business

Obviously, failure is only useful if it’s acted upon. “You can build motivation by breaking down the idea that we can all be perfect on the one hand, and by building up the idea that we can get better with good feedback and practice on the other,” says Syed.

Some of the world’s most innovative organisations like Pixar, the Mercedes F1 Team, and Google “interrogate errors as part of their strategy for future success.”

Take Google’s decision to test which shade of blue in its advertising links in Gmail and Google search worked best, for example.

Rather than ask its designers to choose the shade of blue for those links, Google decided to run tests known as ‘1% experiments in which 1% of users were shown one blue and another in which 1% of users were shown another blue. Then Google went further and ran 40 other experiments showing all the shades of blue.

It paid off: Google found the perfect shade of blue (the one that users were more likely to click on) and made an extra $200 million a year in revenue.

Why Don’t Companies Embrace Failure?

One of the biggest problems in business is the collective attitude we have to failure, says Syed.

“We love to think of ourselves as smart people, so we find mistakes, failure, and sub-optimal outcomes challenging to our egos,” Syed said in an interview with Director magazine. “But the reality is when we’re involved in complex areas of human endeavour—and business is very complex—our ideas and actions not being perfect is an inevitability.

“If we’re threatened by our mistakes, and become prickly when people mention them, we don’t learn from them. We need to eradicate the idea that smart people don’t make mistakes.”

To really be successful, businesses need to encourage a company-wide failure-embracing culture which in turn will create a “process of dynamic change and adaptation”.

“Success happens through a willingness to engage with, and change as a result of, our failings. Get that right and everything else falls into place,” he says.

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