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2 steps to growing your business – Chemistry and Planning

Good planning is a hallmark of all successful businesses.

For business success we believe its crucial that you work through a ‘Chemistry Test’ and then embrace a ‘Planning Process’

Step 1: The ‘Chemistry Test’: Is the business right for you?

For entrepreneurs we believe that there are 4 key questions to ask yourself before buying your next business.  Explore these 4 key questions to confirm you’re getting into the right business for the right reasons:

Question 1: What are your lifestyle and financial goals?

Confirming financial and life-balance values before you start will allow you to properly prepare. The article, Our process for not only helping you not only build a great business, but also a great lifestyle, and our video Focus on your financial goal show an easy process for quantifying your financial goal. Knowing this precise amount then allows you to realistically work out what your business needs to contribute. Specificity is key.

Question 2: What type of business model suits you?

Understand the differences between a small “self employed” style business, and a larger “developed” business. The dynamics, personality and skillsets required are very different for proprietors of these business models. Are you best suited to a focus on profit through maximising the resources you have and managing costs or are you better suited to developing infrastructure and size?

You need to understand what you’re getting into and what will be required of you.

Question 3: How does your skill-set and personality profile fit the business?

Are you right for the business and is it right for you? Certain businesses require certain skill-sets. Is there a match? Have you completed a personality profile to assess your strengths and weaknesses? Again, is there a fit for this type of business? Know thyself. Ask these hard questions up front. Be brutally honest with yourself.

Question 4: What will be the business’ Sustainable Competitive Advantage?

How will your business win?

Is there synergy with the other 3 questions?

Only after answering these questions can you make an educated choice about either starting a business or considering the process of buying an established business (after a solid due diligence process).

If you have satisfied yourself that there is a good fit between you and the business, then it’s onto…

Step 2: Embracing the planning process

Understanding and applying the planning process helps you move towards your business growth and personal financial goals.

Key steps in the planning process include:

• Determining Your Financial Goal and Business Model

• Developing a Sustainable Competitive Advantage

• Building a Working Marketing Model, supported by:

It cannot be emphasised enough, that effective planning is a fundamental requirement for business success.

By committing to the planning process, you will be more focused and will fully utilise the resources available to maximise growth.

Let’s consider a scenario…

Bill is considering buying an established business for $2M. It’s a light manufacturing enterprise, fabricating components for use in luxury boats.

Financial Goal

Bill has determined that for financial security in retirement, he wants the business to be worth $5M in 10 years when he plans to exit. He has calculated the profit required to generate that business value. Based on that, he also estimates the sales required and the cost efficiencies he will need to achieve in order to achieve this profit and business valuation target. Throughout this 10 year journey of building the business, Bill also wants to maintain a healthy life-balance with his weekends free for family time and playing golf.

Will he be able to do it?

The rest of the planning process helps Bill to realistically assess if it’s possible.

Business Model, Fit and Vision

Bill understands that this business is currently heavily reliant on the proprietor and another key employee. There scope for growth in sales and profitability and he’s comfortable with developing the business with structure towards a more “developed model”. He understands the value of reinvesting profits into infrastructure. Bill also understands his own strengths and weaknesses and the value of empowering others who can work with him towards a business vision. Bill will be well suited to this business.

Sustainable Competitive Advantage

The business has generated a great reputation for providing a quality product and reliable delivery times. By further building on this reputation, registering a trademark for the brand name, and then effectively promoting the brand and further enhancing word-of-mouth from happy clients, Bill will create a strong and valuable brand within his industry.

Marketing Model

Overseas manufacturers are providing lower cost generic products. However, local boat manufacturers require highly customised products. This is difficult for overseas competitors to replicate en-mass and remotely. The market’s emphasis on quality and service reduces price sensitivity.

Bill’s background is in boating sales. He believes he understands his potential clients’ needs and has fresh ideas on how to grow the brand of the business and build the client base. He has clear strategies for the product, pricing, selling and client retention.

Support

Bill knows he needs to support the planned growth and marketing with the right amount of support and planning invested in the Manufacturing, Finance and HR divisions. He will do this with a high level of communication and planning in conjunction with his out-sourced Chief Financial Officer (CFO).

With this plan for the next 10 years, Bill is now ready to assess whether the business purchase price is right after undertaking the crucial due diligence process which asks, “Is the business really is what it is purported to be?” Nothing should be taken on face value. His outsourced CFO will direct the due diligence process for Bill to ensure all aspects are checked.

If the due diligence process supports purchasing the business at the asking price, Bill can then implement his structured and realistic plan for developing the business to a $5m valuation in 10 years’ time.

He’ll maintain his desired life-balance along the way, not burning himself out therefore keeping his health in tact.

Bill will then be perfectly placed to enjoy his well-funded retirement, perhaps sailing into many a sunset, on a luxury boat…

Goals to Dashboards to CFO… whats the link?

The greatest trap many of us fall for is to set too many goals for the new financial year!

We have found that the most successful planning years tend to be when we have a smaller number of strategies, but with targeted plans towards their achievement.

Setting your goals?

The greatest trap many of us fall for is to set too many goals for the new financial year!

We have found that the most successful planning years tend to be when we have a smaller number of strategies, but with targeted plans towards their achievement.  This is equally relevant in your private goals as with your business ones.

Think about your work or business situation as it is NOW.  Then consider WHERE you want to take it in the year ahead.  This gives you the chance to identify key business goals that you need to set.  

But here’s a key for success. Be sure that you next consider what your “work life balance” objectives are.  Now work all this into 3 key goals.  

Then have a think about what 3 key things you need to change over the next year to achieve each of these 3 key goals.

Knowing what you need to do, and knowing that it fits within your work life plans gives achievability to what you are to do.

All that’s left is to document what you are going to do, how you will do it, when by and how you will measure your success.  You can do this within a “One Page Plan” …. call us for a free copy, it really helps!

Link your business goals to a “Business Dashboard”

Setting goals is one thing.. but we all know keeping the focus and achieving them is the hardest part!  We mentioned documenting our plans in a “One Page Plan”. That’s great for identifying what we need to do and when.  But we also need to be able to monitor the success of these plans.  

This is where the dashboard comes in!

Also by monitoring key data it also ensures that your business is on track for overall success.

Its so important to recognise the benefit of the dashboard will only be achieved if it is relevant to your goals

NCA customises and can maintain dashboards for your business.. It incorporates not only key financial data, but also measurable outcomes from your goal setting and non financial objectives.

Incorporating all key focus areas generates a “Balanced Scorecard” from which you can ensure all aspects of your business are in harmony.

Financial goals? Why not use nca as your Chief Financial Officer (CFO)?

So you have set your goals. You have documented how to achieve these goals in your “One Page Plan” and you have identified key performance measures on a “Dashboard”.   You’re now well on your way to a very focused and potentially successful year ahead.

You may now want to consider the benefit of having your own “CFO” to help guide your business decisions.

We can “roll up our sleeves” and work with you in finance meetings throughout the year on your:

• Cash flow 
• Profitability 
• Areas of business risk 
• Tax issues 

As an “experienced sounding board” for you in making your business decisions, and by helping with your forward planning for achieving future targets, nca’s “your CFO” service and support gives you a crystal clear focus on what needs to be done to achieve the goals of your business.

If you’d like to discuss any of the matters raised in this newsletter, contact your relationship manager at NCA on 9387 0000 or email enquiry@ncaa.com.au.