Business Management

Are you maximizing your business’ profits?

There may be many options to choose from that can help you improve profitability. Analyse your strengths, weaknesses and capabilities for ways to improve.






Here are a few measures that can have a surprising impact on profitability.


1. Examine key performance measures: Falling sales, shrinking working capital, and rising costs are key indicators to monitor.

2. Manage your costs: more effective purchasing can improve margins. Eliminate waste of materials and time.

3. Review sales to long term customers: you may find out some customers are not as profitable as you thought.

4. Increase productivity: Staffs are the largest cost centre in most businesses. Increasing employee effectiveness can improve profits.

5. Review sales: ensure you are targeting the most profitable customers with the right product mix.
In most cases, a combination of these measures will give a boost to profitability. Incorporate these measures into your business plan and review frequently.

Be diligent and execute, execute, execute.

Need an update to your Business Plan?

Any road will get you there if you don’t know where you are going. Perhaps an updated business plan will help improve your opportunity for choosing the right options when you hit that fork in the road.

Here are a few reasons to update your plan.


1. Cash Flow sensitivity.
Most business owners seem to focus on profits instead of cash. The reality is that businesses spend cash to operate, not profits. Understanding cash flow is critical. If you only get one report to manage the business make sure it is a cash flow chart.

2. To support growth and secure funding
Most businesses face investment decisions during the course of their lifetime. Often, these opportunities cannot be funded by free cash flows alone, and the business must seek external funding. However all prospective lenders will require access to the company’s recent Income Statements/Profit and Loss Statements, along with an up-to-date business plan. In essence the former helps investors understand the past, whereas the business plan helps give them a window on the future.

3. Operational focus
Successful business leaders know that a well-written business plan can provide day-to-day operational assistance. Organizations that stay focused on their business plan have a higher chance of success; when used as a road map, it can help business leaders stay focused on business growth, mission and goals.


4. To support a strategic exit
Finally, at some point, the owners of the firm may decide it is time to exit. Considering the likely exit strategy in advance can help inform and direct present day decisions. The aim is to liquidate the investment, so the owner/current investors have the option of cashing out when they want.
Common exit strategies include;
• Initial Public Offering of stock (IPO’s)
• Acquisition by competitors
• Mergers
• Family succession
• Management buy-outs


Investment decisions can be taken in the present with one eye on the future via a well-thought-out business plan. Given that valuing firms is notoriously difficult and subjective, a well-written plan will clearly highlight the opportunity for the incoming investors, the value of it and increase the likelihood of a successful exit by the current owner.

Improve Business Communication

Poor communication can limit the effectiveness of your organization, even if you operate a small business with just a handful of employees. Without strong communication, deadlines can be missed, work processes can be duplicated and employee morale can suffer. Knowing a few ways to improve communication could benefit your organization.


• Make the Mission and Vision Clear
Take the time to explain the company values and mission, whether as part of corporate training or as a regular reminder to employees. When employees are unified in their understanding of the company goals, they will be able to communicate with one another more effectively in order to reach them.

• Listen
Make a point of actively listening to what your employees have to say, even if you don't always agree or don't think it is relevant to the topic at hand. Showing that you are listening gives the speaker a sense of importance and can make him/her feel respected.

• Communicate honestly
People know when something isn’t adding up. If you try to communicate something that isn’t totally true and honest it will eventually be revealed. It’s difficult to maintain dishonest communication in the workplace because it gets too complicated to hold all of the stories together. Speak the truth and leave the rest for later or don’t say it at all if it’s not true and honest.

• Plan External Events
Create opportunities for employees to meet outside of the office. Nothing hinders communication more than when there are employees in the company who haven’t truly met one another. Plan a holiday party or a happy hour after work. This also gives employees something to look forward to, which can facilitate improved engagement and stronger communication.

Obviously there’s a lot more that can be said about communications in the workplace. These steps may help improve workplace communications. Remember to use daily opportunities to practice your communication skills until you feel comfortable in any situation that arises in the organization.

Business Management

Key Management Skills for Success

To run a successful business you need a diverse range of business management skills. Here are some of the keys areas of successful management.



1. Time Management:
Having time management skills is simply having the ability to recognize and solve time management problems. It is as the old adage says, to never put off for later what can be done right now. You can develop this personal management skill by keeping a calendar and beginning to schedule everything including scheduling free time.

2. Financial Management:
The keys to successful financial management revolve around the ability to create wealth for the business, generate cash, and provide an adequate return on investment for owners of the business.

3. Communication Skills:
Business is all about people regardless of your industry and you will encounter a range of people on a daily basis in the operation of your business from customers and suppliers to employees and business associates. With great communication skills comes the power to influence and encourage others and yourself.

4. Leadership:
A true leader inculcates feelings of confidence, admiration in the followers and a sense of commitment towards the business. A leader influences others to follow him. Leaders need to be flexible, adaptable to change and encourage these qualities in the team members too. Being innovative is important for business growth. Innovation is a skill in itself. Leaders need to be open to new ideas, they need to innovate, bring in positive change as and when needed and progress.

5. Foresight:
This is important in business management. You need to be able to sense trouble ahead of time. You need to be prepared for it and plan accordingly. You need to think ahead of time to be ahead in the industry. An excellent example of a manager and business developer with foresight was Steve Jobs. You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new, he said. He believed in anticipating customer needs in advance to be able to give them products they would start wanting.

Management is about taking the right decisions at the right time and getting them implemented by the right people. Effective business management requires you to have a variety of basic skills. The skills outlined here certainly are not all inclusive. Perhaps, the most important thing you need to have is common sense.

Business Management

Ways to preserve cash

Conserving cash can create benefits in economic conditions facing business today. When business is in a slow growth pattern, cash is very important and if you don’t have cash when you need it the most operations can be constrained and the business may fail.

Preserving cash may not be easy for those businesses that have been used to having the money to spend at any time. However, when some belt-tightening is necessary, some practical cash preservation methods may be prudent.
Here are a few tips:
• Spend wisely. Make sure that purchases are made for need to have not nice to have items. Items should have a focus on producing revenue where possible.
• Ensure new employee hiring is necessary. Employee salaries are a significant cash drain so efforts to maximize productivity from current employees should be a first step.
• Lease equipment. Leasing vs buying can be an important option since equipment purchasing can be a serious cash drain.
• Plan ahead. Make sure you forecast financial activity. A plan outlining expected revenues and expenditures is vital to understanding cash needs. You certainly want no surprises on cash flow activity.
• Renegotiate leases. Rent is often a sizeable fixed cost that can be negotiated. Speak with your landlord; there may be an opportunity to downsize or even temporarily obtain rent reductions. Landlords often prefer to accept lower income than losing tenants.
• Go to the clouds. If your business is large enough to have in-house servers you are aware of the maintenance costs. If business is increasing this may be a cost effective way to create additional capacity without buying expensive new servers.

Business owners should share their cash flow objectives with other key managers to ensure every opportunity to maximize cash savings is realized.

I hope these thoughts are of value as you manage this key resource. Remember: banks don’t usually give you a second chance to run out of money.

Business Management

Business Principles to follow for Success

Business owners don’t often think about basic operating principles but here are a few thought starters to ponder on what fundamentals might help drive the business successfully.






1. Measure risk
In early stages you can have an appetite for greater risk as there is lots of time to recover if you misstep. As the business and ownership matures perhaps a more prudent approach to risk taking is appropriate.

2. Maintain control
Take a hands-on approach to accounting and record keeping and take ownership of results. Gaining control of information allows you to end any dubious activities promptly.

3. Communicate, Communicate, Communicate
Whether it is with investors, customers, co-workers, or business partners, you have to over communicate.
Listen carefully, communicate regularly, and try to be clear and concise.

4. Be Respectful
Treat others with the utmost of respect. Regardless of differences, positions, titles, ages, or other types of distinctions, always treat others with professional respect and courtesy. Value every individual for their unique skills and contributions.

5. Build a network
The activity of building a network of contacts within the industry and the local business community will be invaluable in the long term. Attending networking events and community activities can expand awareness of the business and expose potential future consumers to your products or services.


There are many other principles that could be added to the list; these should provide some input to how you operate your business.

Business Management

Why Businesses fail

There are many reasons businesses fail and these have been well documented. This blog will serve as a reminder to some of the more common issues and I hope create additional focus by owners to avoid the same failure.



1. Weak Management
New business owners frequently lack relevant business and management expertise in areas such as finance, selling, production, and managing employees. Unless they recognize what they don't do well, and seek help, business owners may soon face issues of a failing business.

2. Insufficient Capital
A common fatal mistake for many failed businesses is having insufficient operating funds. Business owners underestimate how much money is needed and they are forced to close before they even have had a fair chance to succeed. They also may have an unrealistic expectation of incoming revenues from sales.

3. No long-term plan 
Often there is a focus on short-term profits. It is obvious that there must be profits but this should not be at the expense of building a long term value in the business and understanding the potential of long term customer relations. Building value requires hard work and planning based on good current information and a realistic forecast of the future.

4. Uncontrolled growth
Seem surprising? Too much growth? Over expansion can be fatal if the business does not have the resources to cope with growth including appropriate financing, personnel and capacity to meet demand. Sometimes less is more.

5. Poor Information
The business cannot be managed if owners do not know what is going on. Without accurate financial information the business is flying blind. Don’t expect the accounting firm who does tax filing to keep track of day to day business; that must be handled within the company by the CEO or top finance person.

6. Inefficient operations
Paying too much for rent, labor, and materials weakens the bottom line. The leanest companies are at an advantage and usually are more flexible and adaptable to market change. Not having the tenacity or awareness to negotiate terms that are reflective of today’s economy may leave a company uncompetitive.

The marketplace is rarely forgiving and owners need to eliminate missteps that certainly are avoidable with a little insight into business management.

Business Management

Business Growth In Slow Economies

It can be difficult to grow a business anytime but properly managed small businesses can thrive in even poor economies. Here are steps to consider when facing challenging markets:





1. Manage costs: To stay ahead of the curve businesses have to cut costs with the precision of a surgeon. Cut too little and the company’s survival may not be assured; cut too much and the business may jeopardize the quality service offered to customers.

2. Broaden the customer base: The business is at risk if too much dependence is placed on a few customers who could develop financial difficulties. Spread the risk and reliance by having as large a base of stable customers as possible. At the same time give important customers special attention, nurture relationships that will build loyalty.

3. Refine Marketing: Refine key selling points and use new internet based marketing to attract a new generation of customers. Take full advantage of free social networking; Twitter and Facebook may offer new free ways to advertise. Combine this with other direct marketing approached to reach customers.

4. Manage assets and profits: Many businesses focus on sales, expenses, and margins and often ignore assets, particularly cash flow. Profits and hence net worth can be increased through cash flow management. Prudent management of needs with both short and long term sourcing of funds with a plan developed in conjunction with a banker can be a strong tactic to ensure growth.

5. Maintain flexibility: Businesses must stay alert and respond quickly to market changes. Pay attention to market feedback and analyse facts. Adapt new systems and use current technologies to facilitate response.

Finding the optimum balance between sales and expenditure will guarantee growth in austere times and enable business to thrive when the market improves.

STRATEGIC PLANNING

Strategic planning is an investment in the business.

Let’s review a few key factors on Strategic Planning that help small business owners determine the value of this process.





1. WHAT IS IT?

- A planning tool for management to formulate high-level business strategy.
- Strategic Planning provides the foundation for the development of a more detailed Business Plan.
- Strategic Planning is top down: Strategic – Tactical – Operational.


2. WHY DO STRATEGIC PLANNING?

- To define the precise mission of the firm.
- To measure the competitive environment.
- To prioritize external opportunities and assess potential threats.
- To help manage growth.
- To focus on key objectives.
- To satisfy succession planning needs.
- To focus on internal strengths and overcome weaknesses.
- To formulate strategy to maintain a competitive position.


3. WHEN TO DO STRATEGIC PLANNING

- When the business needs to establish guidelines for a new or updating of a Business Plan.
- When a review is needed to maximize resource utilization.
- When the business needs to prioritize growth options.

4. What are the goals for Strategic Planning

- Quantify objectives for the business.
- Establish indicators of achievement.
- Develop an implementation plan.
- Assign responsibilities and accountability.
- Identify resource requirement for plan achievement – financial, personnel, equipment, facility, products.


Creating, articulating and sticking to your vision is the single most important job you have as a leader. Strategic planning isn’t a one-time event. Once you’ve laid out your strategy, it’s crucial to stay focused over the long-term.

I hope you are able to plan for success.
   

Keys to Managing Success

Let’s look at some key factors that contribute to business success. The role management plays is critical and management must focus on and achieve the goals and objectives set for the business. This is accomplished with a number of key management functions.





1. Planning: 
The key to your success is having a business plan in place. Whether you're about to launch a start-up or you've been in business for years, your business' direction is guided by your business plan. To begin the planning process, you'll need to do some critical analysis; business planning is about realistically forecasting where your business is going.

2. Organizing: 
Organizational design is the way in which you set up your company (employees, information and technologies) to best meet your business objectives. How you structure your business has a major impact on how well it functions. There is no single best organizational design for all small businesses. Each business structure is as unique as the organization it represents.

3. Leadership:
A leader is someone who has a vision, a drive, and a commitment to achieve beyond that vision. The leader must then also have the skillset to enlist the support of others in the organization to achieve the stated goals.

4. Controlling:
Many small businesses lack proper control systems because they are focused on production or service issues.
Having a control system allows you to monitor measure and adjust your organisation’s performance, whether it is sales, production capabilities, or general efficiencies. In other words, the purpose of business control is to identify unfavourable business performance so appropriate actions can be undertaken.

5. Communicating:
Communication is essence of management. The basic functions of management as shown, planning, organizing, leading, controlling cannot be performed well without effective communication. Business communication involves constant flow of information and receipt of feedback. This is essential for the growth and success of the organization.

In the end, management will determine the success or failure of a business. Success surely cannot be attained without decent management skills.

Business Management

Want to Make Better Business Decisions?

Making a decision is one of the most powerful acts for inspiring confidence in leaders and managers. Yet many bosses are sometimes squeamish about it. Some decide not to decide, while others simply procrastinate. Either way, it's a cop-out -- and doesn't exactly encourage inspiration in the ranks.

It can help to learn how to make better decisions. You'll be viewed as a better leader and get better results overall.

Here are five tips for making quicker, more calculated decisions:

1. Stop seeking perfection. Many great leaders would prefer a project or report be delivered only 80% complete a few hours early than 100% complete five minutes late. Moral of the story: Don't wait for everything to be perfect. Instead of seeking the impossible, efficient decision makers tend to leap without all the answers.
2. Create a constructive environment. For successful decision making, make sure you establish an objective, involve stakeholders, hear others opinions, and ask the right questions.

3. Generate Good Alternatives. This step is still critical to making an effective decision. The more good options you consider the more comprehensive your final decision will be. When you generate alternatives, you force yourself to dig deeper, and look at the problem from different angles. If you use the mindset ‘there must be other solutions out there,' you're more likely to make the best decision possible.

4. Don't problem solve, decide. A decision can solve a problem, but not every problem can be solved by making a decision. Instead, decision making often relies more on intuition than analysis. Deciding between vendors, for instance, requires examining historical data, references and prices. But the tipping point often rests with your gut. Which feels like the right choice?

5. Communicate Your Decision, and Move to Action! Once you've made your decision, it's important to explain it to those affected by it, and involved in implementing it. Talk about why you chose the alternative you did. The more information you provide about risks and projected benefits, the more likely people are to support the decision.

An organized and systematic decision-making process usually leads to better decisions. Without a well-defined process, you risk making decisions that are based on insufficient information and analysis. Many variables affect the final impact of your decision.

Managing Conflict

Good leaders are great at resolving conflict. Great leaders keep conflict from arising in the first place.

Conflict in the workplace can have a negative effect on the day-to-day working of your business, or result in a large scale strike or other employment dispute. It can also affect the general health and wellbeing of your employees. Here are a few ideas illustrating how you can manage relationships in your business and minimize conflict between individuals, teams, and larger groups of employees.

1. Signs of conflict
Conflict can arise at work for a number of reasons. For instance, two employees may have a personality clash, an employee may have a grievance against their manager, or a manager feels an employee is underperforming
Conflict can have a negative impact on your employees and this may be demonstrated by:
• a lack of motivation - fewer people volunteer to take on new tasks or providing input at team meetings
• unpleasant behaviour - people start to make derogatory remarks towards each other and there are fewer social events organized
• falling productivity - people are not cooperating with each other
• increased sick leave and absence of staff
By spotting signs of conflict early, you have a better chance of: identifying causes, resolving the conflict.

2. Causes of conflict
Every employee has needs and certain expectations at work, and conflict could arise when people feel that these are not being met or are being ignored.

Conflict could be the result of:
• poor management communication
• unfair treatment
• unclear job roles
• inadequate training
• poor work environment
• lack of equal opportunities
• bullying and harassment

3. Preventing conflict
To minimize and prevent conflict in the workplace, you should try to learn as much as you can about why conflicts occur and develop processes to address them. Common action points that employers should consider are:
• developing a strategy for managing conflict with managers, employees and your representatives
• having sound policies and procedures in place
• explaining plans for change and making employees feel involved
• listening to and consulting with employees on decision-making
• rewarding fairly with pay or bonus schemes
• ensuring work safety
• ensuring that managers are properly trained

4. Managing conflict 
When a conflict arises you should try to take a calm approach and not react in a challenging way. You should also not ignore the problem and hope that it will go away.
The best way to handle conflict is to face it and have a planned approach. If you have policies or procedures in place, you can use these to determine how you approach the issue or to give your employee an idea of how you will approach addressing the problem. It may help to have an employee representative and/or a senior manager available who can help when employees find it difficult to confront their managers or when you are not able to speak to each employee individually.

Business Growth

Manage Your Business Growth

The do’s and don'ts of business expansion

At one time or another, every business goes through a growth spurt and, whether it’s a multi-national corporation or an entrepreneurial enterprise, expansion is a tough process to navigate.
The real danger for any expanding business is that it does so too quickly or in an uncontrolled way. When this happens, cash flow and customer satisfaction are usually the first casualties and, in extreme circumstances, these can result in the demise of a once flourishing business. The trick is therefore to manage the growth process so you reap the benefits in the medium- and long-term.

Plan your expansion
It may seem obvious that any entrepreneur going through an expansion phase should do so with a game-plan, but many businesses expand in reaction to circumstances and don’t draw up a solid plan. Without this roadmap, it’s easy to get lost along the way, making changes to your business that are either too costly or not well thought out.

Don’t over-expand
While planned expansion can take a business to a whole new level, over-expansion is one of the biggest dangers of a growth phase. It’s easy to get carried away in the heat of the moment and to expand beyond the needs and the financial capacity of the business.
As a rule of thumb, plan capacity based on a five-year projection of demand and allow an additional 10% of capacity over and above that for periods of heavy demand or for partial down-time in any part of your business. More than this could be very risky and leave a business with overheads it can’t cope with.

Get professional financial advice
Whatever the nature of your expansion, there are financial implications for the business and it’s always best to seek professional advice. If you need to build or purchase your own premises, for instance, it’s important to speak to a financial institution that has experience in this area.
For plant and equipment, you may need to consider a flexible financing option, either a loan or a combination of a loan and an equity investment. Again, an institution with experience in the field and in your own industry is essential.

Develop a Project Management Schedule for the expansion
Again, this may sound self-evident, but many businesses expand without treating the expansion like a project – one of the most significant it will ever undertake.
When drawing up a project management schedule:
• Identify key deliverables
• Attach dates to these deliverables
• Identify key responsibilities
• Set up a regular review schedule
• Identify procedures for managing non-delivery on any part of the project
• Build in appropriate timing and financial contingencies
Managing the process is as important as planning it and it’s important to commit to this in a formal way, building in the appropriate checks and balances.

Keep your customers informed
Expansion of any kind can cause disruptions in your day-to-day operations and it’s important that your customers know what to expect. Before commencing an expansion, tell them what you’re planning and what the expected completion date is. If possible, tell them what disruptions to expect and how you’re intending to deal with them.

Announce the completion of your expansion
Once the expansion phase is complete, it’s important to let both existing and potential customers know about it. Tell them about the increased capacity of the business and the additional products and services you can offer. Develop a special marketing drive to announce the occasion and send out media releases, especially to the local and regional press.

Celebrate this moment in your business – it’s one of the best marketing opportunities you could ask for.

What makes a business successful?

The keys to success for any organization are directly related to what an organization is, and how it operates in the world. Once you understand what an organization needs to survive, you can better understand how to succeed.



Here are a few factors that may be applied to your business.



1. Managing and developing people 
 People today want some direction and structure, but they also want freedom and encouragement to develop their skills and knowledge. Effectively managing people requires balancing constraining forces (providing direction, structure, organization, some rules) with liberating forces (encourage personal growth, development and creativity).

2. Strategic focus 
 In today’s rapidly changing world, it’s not just enough to have a purpose for existing. Leaders have to focus the organization’s resources on the greatest opportunities, which can shift with each new day. If you review what has happened in the world or your organization in the past year or two, and you’ll understand what we mean by the reality of constant change. Opportunities come and go. Major customers or income sources can change or even go out of business at any time. So it’s necessary for leaders to keep focused on the desired goal of increasing sales and profits, or more satisfied customers, while constantly steering the organization across the stormy waters of the marketplace. The job of focused leaders is to optimize business in a changing environment.

3. Operations, or what people do all day
 What the people in your organization do day in and day out to create value for customers, to earn or justify income, strongly determines whether you succeed or fail. You can’t separate operations from strategic focus which gives direction, people who do the work, customers who pay the money and physical resources needed to do the work.



4. Resources 
Finances, facilities and equipment are the big 3 physical resources. If you don’t have enough money, you can’t start or sustain an organization. And one of the biggest expenses is providing adequate facilities and equipment for people to work in and with. Experienced managers learn that cash flow is king. It doesn’t matter how much customers owe you, it’s when their money enters your bank account so you can use it to sustain the organization. Failing to manage cash flow is the No. 1 reason for business failure.

5. Customer relations
Customers are where the money comes from, so in many ways this is the most important success factor. As the famous business guru Peter Drucker said years ago, the purpose of a business is to get and keep customers. Getting customers involves marketing – indeed this success factor includes all kinds of marketing and sales. The key to successful customer relations is to give them what they need, not just what you want to sell. Effective sales and marketing begins with asking existing and potential customers what they need, what problem they want solved or deficiency filled. By keeping in touch with customers and asking these questions often, you’ll do a better job of developing customer loyalty and keeping competitors away.

I hope these ideas help understand the keys to success in your organization.  Please let me know your thoughts.
gerry@polarisgroupmc.com

Thinking About Staffing Additions?

The following outline identifies issues small businesses may deal with on staffing:







1. Should the business hire permanent staff or contract help?
Staffs usually provide more continuity and stability but add to cost due to employment taxes and perhaps benefit programs.
Staffs provide the advantage of employee loyalty and an edge in a more positive morale and productivity.
Contract people can be terminated at any time negating the costs of severance programs.
Contracting can add flexibility by allowing the adding or deleting of staff as demand requires.
Compatibility is sometimes harder to than competence so staff can be more productive within a group or department.
Hire a contract person as a temp. If the person works out you can make the job permanent.

2. Should business promote from within or add new employees.

Promoting from within does enhance employee morale and loyalty to the company. Employees who see the company as interested in career development and loyal to staff tend to make a greater effort in supporting company goals and success.
Introducing new employees from the outside does provide a fresh approach to some positions and can re-energize the company. Also, securing new outside talent may reduce the cost of training and development of current staff.

3. Full time vs part time staffing

Businesses should be careful not to add staff too soon. Temp or part time staff can be used as the business grows and changes to permanent positions can be made as the business matures.
If the business has seasonal peaks and valleys, use of part time staff provides the flexibility to adjust to demand.
In some situations, job sharing can provide the opportunity to maintain a larger pool of employees who are familiar with the work but prefer to work part-time.
Let growth, profitability, and demand dictate when to expand permanent staff.

I hope these ideas provide a little insight into options for staffing as the organization grows.

Keeping Key Managers

Keep Key Management Personnel

There is a key role for incentives in managing and retaining key executives for the company. Here are some reasons for and examples of how to structure effective incentive programs for management.


 Reduce Turnover
You want to retain key management personnel for a number of reasons. High turnover destabilizes the company and can have severe effects on moral of employees and the bottom line. You want to retain high performing managers to enhance your own company’s growth potential and to keep key people from wanting to look at other opportunities

 Set Goals
Good managers don’t expect a bonus without achievement but don’t set the bar so high as to be unachievable. That becomes a disincentive to achieve.
Set goals that help improve your bottom line; just achieving new sales records is not a priority if the costs exceed the benefit. Sales executives should be just as concerned about profitable sales as the CFO.

 Share Profits
Pay executives for overachieving by sharing profits. As profits goals are exceeded rewards can continue to be major incentives if shared fairly. Reward contribution.
You don’t have to give everything away in this process. Be competitive but unique and allow key employees to participate in goal setting. When they are part of setting the goals they are more likely to increase efforts to reach the bar.


 Be Transparent
Be completely transparent. If goals are profit based show actual revenue/profit results so that there is a clear understanding of achievements. Conduct periodic reviews to ensure all incentive participants know where they stand. Let’s not have surprise results announced at year end….good or bad.

Incentives are important tool to maintain a motivated and dedicated management team and a well-designed plan can bear fruit over the long term.

Do your business ethics measure up?

Have you ever wondered how many of the successful businesses get caught in the public spotlight and are criticised for the lack of integrity in the organization.






Culture counts and it starts at the top with senior management or the board of directors. Organizations need to understand that ethics drive compliance and the leadership is responsible for setting the tone.

Checks and balances require care in how the organization structure is designed, how human resource decisions are made, and how overall business is conducted. Organization integrity is paramount; when difficult decisions are faced the instinct must be to default to core values.

Larger organizations often pressure smaller business for concessions they can ill afford but if they don’t concede an entire contract may be lost. This happens even if the original pricing were agreed between the parties. Where is the pride in living up to one’s word? What values are at the core of that behaviour?

Ethics are derived from values and they make integrity a way of life in the organization. Honesty, respect, and responsibility can be pillars on which to build. It is essential that these values are shared throughout the organization through practice in decision making.

The vast majority of businesses are ethical and at least have informal standards expressed through the behaviour of the CEO and senior managers. Anyone working in an organization that seems to behave in an overtly unethical way and chooses to stay or ignore the behaviour is part of the problem.

Corporate governance is used to promote business ethics and social responsibility. It also creates the framework for guidelines used by all individuals who are part of the organization.

Need to manage your Money Better?

Cash flow is the fuel your business needs to keep running smoothly. Here are a few techniques you may want to consider to improve your operation.

1. Budget cash flow.
Create a cash flow budget to make sure you can pay expenses; it allows you to be proactive in monitoring revenues and expenses. Include sales/revenue forecasts, receivables, and outflows including costs of goods, debt payments and operating expenses.

2. Understand sensitivities.
It is important to know which items impact cash flow most among price, volume, costs or overheads. Cost of goods is a key component but may be difficult to change. At the same time competitive pressures may prevent a price increase.

3. Credit.
Effective credit policies are a key component to successful cash flow management. Early payment can be encouraged through discounts on early payment or penalties for late payment. Careful monitoring of late payments is important so they do not become write-offs or tie up working capital.

4. Payables.
Review payables regularly to maintain obligations. An aging schedule will show you how much you owe and whether anything is past due.

5. Reduce costs
Review operations for ways to reduce expenses. When business volume accelerates consider hiring contract or part-time staff before committing to full time employees.

Good luck with your review and improving your cash management. Your banker will appreciate your efforts and this can have a positive impact on the banks impression of your business and the professional management approach.

Crisis Management

Unplanned events can have a devastating effect on small businesses. Crises such as fire, damage to stock, illness of key staff or IT system failure could all make it difficult or even impossible to carry out your normal day-to-day activities.
At worst, this could see you losing important customers - and even going out of business altogether.

But with good planning you can take steps to minimize the potential impact of a disaster - and ideally prevent it happening in the first place. Here are a few ideas to consider:

1. Plan
It's essential to plan thoroughly to protect yourself from the impact of potential crises since you may lack the resources to cope easily in a crisis.
Failure to plan could be disastrous. At best you risk losing customers while you're getting your business back on its feet. At worst your business may never recover.
As part of the planning process you should:
             -    identify potential crises that might affect you
             -    determine how you intend to minimize the risks of these disasters occurring
             -    set out how you'll react if a disaster occurs in a business continuity plan
             -    test the plan regularly

2. Assess the impact
You need to analyse the probability and consequences of crises that could affect your business. This involves:
- assessing the likelihood of a particular crisis occurring - and its possible frequency
- determining its possible impact on your operations

This kind of analysis should help you to identify which business functions are essential to day-to-day business operations. You're likely to conclude that certain roles within the business - while necessary in normal circumstances - aren't absolutely critical in a disaster scenario.

3. Minimize the Potential Damage
Once you've identified the key risks your business faces take steps to protect your business functions against them.
Premises:
Good electrical and gas safety could help protect premises against fire. Installing fire and burglar alarms also makes sense.
Think what you would do in an emergency if your premises couldn't be used. You might consider an arrangement with another local business to share premises temporarily if a crisis affected either of you.
Equipment/machinery:
If you use vital pieces of equipment, you may want to cover them with maintenance plans guaranteeing a fast emergency call-out.
IT and communications
Installing anti-virus software, backing up data and ensuring the right maintenance agreements are in place can all help protect your IT systems. You might also consider backing up your data offsite on a secure server.
Printing out copies of your customer database can be a good way of ensuring you can still contact customers if your IT system fails.
People:
Try to ensure you're not dependent on a few staff for key skills by getting them to train other people.
Consider whether you could get temporary cover from a recruitment agency if illness left you without several key members of staff. And take health and safety seriously to reduce the risk of staff injuries.
Insurance:
Insurance forms a central part of an effective risk-management strategy.

4. Continuity
You should draw up a business continuity plan setting out how you will cope if a crisis does occur.
             It should detail:
- the key business functions you need to get operating as quickly as possible and the resources you'll need to do so
- the roles of individuals in the emergency
Making the most of the first hour after an emergency occurs is essential in minimizing the impact. As a result, your plan needs to explain the immediate actions to be taken.

These are some steps that can be taken to ensure that damage from any crisis is minimized. Proper planning can be critical to survival.

This week’s blog is written by Federica Nazzani, President, Capital Assist (Valuation) Inc. The blog provides a continuation to last week’s article providing some of the optional methods for valuing your business.

This is the second part of a two part article on the topic.


Making Sense of Valuation
By Federica Nazzani

Approaches to value
There are three general approaches to valuing a business and/or asset, namely the cost, earnings, and market approach.  The approach adopted will be determined having regard to factors specific to the company including profitability and the risks related to the operations of the company as well as industry and economic conditions.
  
Cost approach
The cost approach is (i) the sum of the costs required to replicate the asset or (ii) the book value of the assets and liabilities of the business.  The cost approach may be appropriate where the value of the business interest does not include intangible value and the earnings potential of the asset does not exceed its cost.  This approach does not consider competitive strengths and weaknesses, potential for earnings growth or risk associated with achieving the earnings of the business and therefore, requires significantly less judgment than alternative approaches.  This approach most often results in relatively lower valuation.

Earnings approach
The basis of the earnings and/or cash flow approach is the future economic benefits derived from the business and/or commercial exploitation of the asset, taking into account the risks associated with achieving those benefits.  Most important to a purchaser of a business and/or asset is the ability to generate future earnings and cash flows and satisfy an investor’s expected return on investment.  It is determined by applying an appropriate capitalization/discount rate to a selected stream of historic and/or prospective earnings or cash flows.  The more aggressive the cash flows or earnings assumptions, the higher the capitalization/discount rate for achieving those projections.
A variation of the earnings approach, most often adopted in corporate finance, is the discounted cash flow technique (“DCF”).  DCF is calculated as the present value of future cash flow expectations.  It is applied in various situations where a business is in start-up or growth phase or forecast to experience a change in operations (i.e. merger, divestiture, etc.), or in instances where the business has a finite life.  The preparation of a detailed financial forecast will require a detailed review of the historic performance, internal operations and relationships between revenues and costs, and an analysis of the external competitive environment (i.e. trends of competitors and industry as a whole).

Market approach
Value determined based on the market approach is often based on the use and analysis of comparable transactions in the marketplace.  These transactions are a good indication of the prices paid in the marketplace for similar assets and/or business interests.  However, certain transactions do not provide a direct means of determining value as it is often difficult to find comparable assets and/or business interests and public disclosure of transaction information is frequently not available.

Understand the basics 
The valuation exercise is best described as “an art, not a science”.  This is correlated to the level of judgment that is required in supporting value.  Arriving at a valuation or the worth of a business and/or asset will require an understanding of the basics including a defined and supportable business model, thorough assessment of the future operations and relative risks, and a clear understanding of the competition and industry trends.

Please contact Federica for more information on this important topic. She can be reached as follows:

Federica Nazzani
President
Capital Assist (Valuation) Inc.
Tel: 226.347.8100
Email: fnazzani@capitalassist.ca

This week’s blog is written by Federica Nazzani, President, Capital Assist (Valuation) Inc. The blog provides an outline of factors to consider in valuating your business. I hope you find the outline of interest.

This is the first part of a two part article on the topic.


Making Sense of Valuation
By Federica Nazzani

Whose side are you on? 
The objective of vendors of businesses is to maximize their selling price whereas buyers will seek to minimize the price which will be paid, thus, the importance of understanding the value assessment.
The relentless question, “What is it worth?”
The simple answer is, “It is a matter of judgment” as there is no hard and fast response to the worth of a company and/or asset.  We often hear of value terms such as “fair market value”, “fair value”, “market value”, “adjusted book value”.  The significance of each of these terms will differ in the practice of business valuation.

There are some basic fundamental principles in valuation:

Price versus value
Price is determined in the open market once a business interest and/or asset is exposed for sale, strategic benefits and synergies are quantified and the parties to a transaction enter into negotiations.  Without exposure to the market, notional value would prevail based upon rates of return required by investors given economic and business conditions existing at the valuation date, but without consideration of possible purchaser synergies.  Synergies may include economies of scale, increased purchasing power or other strategic benefits to purchasers of shares and/or assets. Only when an asset or a business interest is exposed for sale that the impact on “price” of arm’s length, third party purchaser synergies can be quantified with any degree of certainty.  Therefore, the primary objective of negotiation is to transform value into the transaction price.


Value is at a point in time
A principle often overlooked by business owners is that value is determined at a specific point in time and thus, based on a set of facts together with reasonable and foreseeable forecast and business and industry risk assumptions made at the time.  As an example, a business in anticipation of a large contract or in anticipation of the completed development of a technology/asset will have a lower value as it will require a higher risk rate to the estimate of cash flow and earnings than a business with a signed contract and commercially available technology/asset, respectively.
Approaches for valuing your business will be covered next week.

Please contact Federica for more information on this important topic. She can be reached as follows:

Federica Nazzani
President
Capital Assist (Valuation) Inc.
Tel: 226.347.8100
Email: fnazzani@capitalassist.ca

Is the time right?

One of the more interesting and challenging questions as a business owner is “when should I be thinking about exiting this business? There are many factors to be considered but here are a few thoughts.

1. Business Health
Is the business operated from strong principles of strategy with a clear vision? Can that vision be expressed and understood by those who manage the business or potential buyers? If you the owner cannot clearly state the purpose or reasons that you exist don’t expect new owners to invent it for you.

2. Maximize return
In cases where management/ownership is dominated by a single individual it is important to maintain a high degree of confidentiality so that employees do not become insecure and unsure of the stability of the company or their jobs. This instability can easily be communicated to a potential new buyer and create a poor impression.

3. Need change?
Factors that may support your decision to leave can grow out of many conditions. The most common is an age derivative. A long career leading to a desire for more personal time; reap the rewards of your career. Age may not be the prime driver but longevity at the job could be creating burn out. Time to move on.
Another good time chosen is driven by a need for change. You may feel you have achieved all that can be achieved and you wish to quit while on top of the game. This may also provide a high rate of return if the business is at a high level of performance. Selling now may produce the equity needed to finance a new opportunity.

4. Exit from strength
Look for opportunities to exit from positions of strength. A well trained and competent management group may provide the opportunity to offer management buyout.  Managers may be able to pool resources to fund the buyout, you as owner may offer to finance all or part of the buyout or there may be an option to use company assets to finance the loans needed for the buyout. This is often referred to as a LMBO – Leveraged Management Buy Out. It also provides good opportunities for maintaining stability in the organization.

5. The market
The marketplace may facilitate determining the right time to exit. Poor economic conditions or competitive activity can have a huge impact on if or when you should exit. Positive conditions too might bring a competitor to the door with a buyout offer.

So the options are many but not always easy to sort through. Timing is critical, business life changes, choose wisely. These are my thoughts, care to share yours? gerry@polarisgroupmc.com

Do you have a Succession Plan

Succession planning recognizes that some jobs are the lifeblood of the organization and too critical to be left vacant or filled by any but the best qualified persons. Effectively done, succession planning is critical to mission success and creates an effective process for recognizing, developing, and retaining top leadership talent. 
 Here are some of the factors to consider for a successful plan:

1. Senior managers need to be personally involved and held accountable for growing key managers.
2. Managers need to be committed to self-development.
3. Succession planning is linked to a strategic plan and investment in the future growth of the business.
4. The company needs to have a performance system in place to measure competencies that can be used for selection and development of key potential managers.
5. A pool of talent needs to be identified early that can fill key positions for the long-term health of the business.

These are a few of the key points to consider for implementing a succession plan; succession plans address challenges such as recruitment and retention to ensure key positions are always protected in the near term and long term as well.

Good luck with your planning; let me know your thoughts: gerry@polarisgroupmc.com

Need Better Decisions?

Nobody in business has a monopoly on all the good ideas for business and an owner who does not take advantage of outside resources may not make the best decisions for the business.

It may be useful in many situations to add another perspective from a source with expertise and an objective but different point of view.
Several outside sources to consider can include:

• Associations
Some associations can provide good sources of networking to informally add insight into current activity within your community of business, including competition. You may meet peers who can be trusted to share experiences with.

• Professionals
The group of professionals that support your business including your lawyer, accountant, or banker can provide valuable advice in addressing issues in the business.

• Coaches
Independent consultants can be hired to provide expertise that compliments your experience and fills gaps in areas the business may be weak or lacking. Low cost, short term problem solving can be attained in this way.

• Your Team
Do not overlook your own management team. This can be a surprisingly good resource and they have a current view of the business operations. Don’t hesitate to ask; the response can sometimes provide quick results and involvement of the teams increases positive motivation for team.

These resources can minimize the risk of taking on decision making alone and certainly expand the horizons of problem solving. Be proactive in seeking help.

Please let me know your thoughts: gerry@polarisgroupmc.com

Need to be more productive?

Leading a business, no matter the size, requires CEO’s to manage resources including time, finances, people, and operations. There are also multiple demands for time to make decisions and develop strategies to continue growth of the business.


Here are a few tips that may help improve your own productivity:

1. Take breaks
Use periodic breaks, every 90 minutes if possible, to recharge energy and alertness levels. Step away from the desk instead of adding another coffee to get adrenalin going.

2. Limit interruptions
Identify specific times for working without interruptions. Allowing employees to engage you in new conversations is not only a distraction but also wastes the time needed to refocus on your task. This should also apply down the chain of command and the CEO should respect other manager’s time.

3. Manage your energy
Do the most important tasks when your energy level is highest. Save mundane tasks to a point in the day when your energy levels are lowest.

4. Slave to email?
Do you have to respond to email the moment it arrives? Plan your time and check mail at scheduled intervals. Use autoresponders if necessary to alert people to your schedule and offer alternatives for emergency communications.

5. Delegate
This is a prime way to manage your time. Assigning tasks to team members not only improves team play but it allows the CEO to focus on more pressing issues.

I hope these ideas help you with productivity and to focus on more of the key issues in the business.
Please let me know what you think: gerry@polarisgroupmc.com

Stress Management Tips

Almost by definition as a small business owner you face a variety of tasks daily that pull you in many directions simultaneously. At times it seems you may buckle under the pressure of impossible demands but this good news is these anxiety attacks are temporary.





Here are a few things you might do to keep stress down:

1. Think Positive. Often stress starts with negative thoughts. Thinking positive weeds out the bad thoughts. That doesn’t mean wearing rose coloured glasses and ignoring issues it just means dealing with problems and emphasizing the positive.

2. Let it go. Many things are beyond our control. Accept whatever your limitations are and don’t worry about factors over which you have no control
.
3. Stay Fit. Learn to relax, stretch and find some quiet time to ward off anxiety. Find the time to exercise regularly; being in shape helps deflect stress. A well balanced diet also improves fitness levels. Finally, get enough sleep to allow the body to restore itself. Deadlines may be more flexible than you think.

4. Say no. As owner you become a jack of all trades and get stuck doing it all. Sometimes the hat just doesn’t fit so you have to say no and get someone with the appropriate skillset to do the task.

5. Manage your time. Find a method that works well for you. Tools are available on line to manage daily workflow. Strengthen your skills for delegating, communicating and using the team.

Those are some of my thoughts for keeping the fun in the job and reducing stress. Let me know what you think.
gerry@polarisgroupmc.com

This week’s blog is written by Andrew Adam, President, Stature Marketing. The blog provides an outline of the benefits of event marketing. I hope you find the outline of interest.


Simple Event Marketing Tips That Make Business Sense

Promoting your business at events such as trade shows, fairs, conferences, and event small community gatherings should be part of your businesses marketing mix.  You can send out all of the flyers, e-blasts, newspaper and radio ads that you want, but nothing quite compares to the power of face-to-face marketing. Explaining, or better yet, demonstrating your product or service in person is the absolute best way to connect with your audience.

There are hundreds of events happening each year in your community and being able to identify those that fit best with your business is an exceptional skill to have.  Here are a few tips to help your decision making:

1. Analyze every event quickly and efficiently

Your email is a great place to start.  Good event organizers target businesses that are a fit for their events.  They are actually doing the work for you, so give them the attention they deserve and hear them out. Open the attachments, and call the organizer or sales representative. It should only take 5 minutes or less to review and make a decision if the event is a good fit.  Good questions to ask are: Who is your organizing team and why will this event be successful? What is your marketing campaign? Who is your target audience? The answers should be immediate and spoken with confidence.

2. Keep a budget available at all times and don't be cheap

When a good promotional opportunity arises it should not be missed. Good quality events can be very costly but are also much more successful.  $10 or $20 for a table at an event is great, but $500 for a booth at a major show could be just what your business needs to grow at the pace you desire.

3. Commit early 

The earlier you commit to being involved the more exposure your business will receive. Organizers get asked on every sales call “who else is on board?” and your business could be mentioned time and time again to other exhibitors who could be potential clients or partners. Not only that, but organizers who promote events very early, need content to promote and that could be you! Organizers greatly appreciate dedication exhibitors and go above and will often go above and beyond to ensure you are recognized.

Spotlight Event: The North American Sport & Hobby Expo  May 30 – June 1, 2014  WFCU Centre

Now here is a community focused event that is doing everything right.




- Major attractions? Check!
- Large and Creative Marketing Campaign? Check!
- Professional Organizers? Check!
- Targeted Audience? Check!
- Reasonable Cost to Participate? Check!
- Sold out well before the event date? Check!
- Promoted well in advance? Check!

You are probably very eager to learn more about this great sounding event. You can find out more at http://www.sporthobbyexpo.com

Or contact:

 Andrew Adam, President

Stature Marketing

www.staturemarketing.com

Need to Finance Growth?

Do you have plans to expand? Perhaps buy a new piece of equipment, expand staff or relocate?
Your plans will cost money—so how will you pay for them?
Many entrepreneurs make the mistake of paying for growth projects out of everyday cash, instead of using a financing source.

Growth issues
A business may be profitable and still be forced out of business. A growing business may have higher concentrations of payables, receivables, and heavy inventories. Revenue increases may not keep pace with cash drains as business is ramped up. The key is to match financing and expenditure type. Working capital and lines of credit should be used for short term recurring expenditures for operating the business.

Match funding and assets
If the business needs equipment or some other capital asset, use business term loans and match the term to the expected life of the equipment.

Plan
Plan ahead so financing agencies can be approached ahead of time. This shows the bank or agency that you have a strong management approach and understand needs. It also can provide conditions for improved borrowing terms.

Negotiate
Early planning may allow the business to negotiate not only lower interest rates but lower administration fees, deferred principle payments, and length of term. Flexible terms may free up additional cash.

I hope some of these ideas help manage your business growth. Let me know what you think.
gerry@polarisgroupmc.com