How do you measure your Financial success?

How do you measure the success of your company? Many small-business owners rely on two traditional financial reports: the balance sheet the income statement. The first tells you what your business owns and owes at a particular point in time, and the second tells you what profit you’ve made over a period of time.
Although both are important here are a few other controls to monitor the health of your business:

• Cash Flow. Are you generating sufficient cash to operate? Is bank financing required to help fund growth? Ever wonder at the end of the year where all the money went? This will provide the important tracking.
• Accounts receivable Collections: Cash flow is dependent on timely collection of receivables. As receivables grow cash flow is stretched thinner. Slow collections can affect liquidity and your ability to cover short term obligations.
• Average sales per customer. As overall sales grow it is important to maintain growth with existing customers. This is often easier than finding new business and a measure of your success in gaining repeat business.
• Margin. Don’t become too focussed on net revenue and become content if this increases yearly. It is important that revenues don’t cost more to generate each year. Operational efficiencies are important to monitor continuously.
Sometimes businesses can measure their performance against competition within the industry. That may help highlight areas where improvement may be needed.

These were just a few considerations. Please let me hear your thoughts.
Gerry@polarisgroupmc.com

Do you have a crisis management plan?

Is your organization struggling to deal with a crisis or plans to ensure the business exposure to a crisis is minimized?  It is not uncommon to see this paralysis because managers often prefer not to deal with the situation.
Let’s look at some steps that can be taken to help build a safety net.

1. Maintain sensitivity for even minor events. Some could have the potential to develop into major issues that could be a blow to the business.
2. Plan ahead with a look to long term strategies as a guide. Work out best and worst case scenarios to help prepare for unseen events.
3. If a crisis arises act quickly; procrastinating rarely improves the situation.
4. Create a crisis management team with a mandate to identify potential problems and empower them to enact changes to protect the business.
5. Provide effective training to key employees and take steps to eliminate small issues so they don’t erupt into major problems.
6. Explore optional solutions and look for new ground to operate from if standard solutions prove inadequate. Think outside the box for solutions.
7. Don’t panic in a crisis situation. As the leader employees want strength. Keeping a cool head may facilitate focussing on the issues and getting a solution right.The key to avoiding or minimizing the impact of crises that may arise is to be proactive ahead of adversity.

I hope these tips provide insight into ways to fight through any situation that may arise with minimal damage to your business.

It’s Time for an Effective Business Plan

Creating a road map for a business may be a key to growth and success but how many entrepreneurs do it right. Here are suggestions for developing a solid plan.

1. Shorten the planning horizon. With the speed of change today the 5 year plan has become obsolete. Shorten the timeline to 3 years. You can have great vision and well developed strategy but unless you can connect the dots between where you are today and where you want to be you will fail.
2. Manage what you can measure. Knowledge is power. Monitor the right information and your plan will have a greater chance of succeeding.
3. Increase planning frequency. When the 2-3 year plan is complete, management meetings should be held at least quarterly to review where you are and what to do next. This will enable the organization to assess progress and realign targets to meet new business conditions.
4. Write the plan yourself. This is an element of business that entrepreneurs love to delegate to a consultant. A plan is better understood if it is created within the organization. The elements contained within the plan vary depending on the size and complexity of the organization. Only when there truly is a lack of the skillset for developing plans should the process be delegated to an outsider like a consultant.
5. Share the process. Entrepreneurs who keep their plans close to their chest, not revealing them to anyone, do so at their own peril. Making other managers part of the process provides the opportunity to hold them accountable and share ownership of the plan.
6. Be realistic. Plans that are overly optimistic or too safe are both wrong. Optimistic plans project revenues and a resulting spending scenario that may not be achieved. Deficits will result. Plans that are too conservative may result in limitations on spending because revenues are not expected. This may result in lost opportunities. Every effort to achieve realism should be undertaken and frequent reviews help keep the business on track.
7. Share the plan. Once completed the plan should be shared with the management group so everyone understands expectations and the yardstick for success. The organization should, where possible, tie performance bonuses to result attained in the plan.

When employees feel a sense of ownership about the future you may be amazed what they will be willing to do for the organization to help ensure success.

Are you ready to pass the baton?

How much time have you spent recently preparing your organization for the future with a succession plan?

Too often I have spoken with owners of business who have given no thought to how their business continues past their time or even who should be in line for succeeding others in key positions.
There is a fine line between structuring an organization so strong back up is available for key positions and being top heavy with management staff.

While it is important to develop and maintain an organization chart that identifies potential replacements for key positions it is a plan that must be kept confidential among only a few very senior managers. Clearly if the succession plan was broadly known the group of subordinates would constantly be chafing at the bit to move up the ladder.

The succession plan should be updated regularly. Performance of employees change, new stars arise and training of key individuals to broaden their experience become important elements of the plan.

In small family organizations a succession plan may be even more important. The owner may have family members who he would wish to carry on the business but is he/she qualified? Are there competing siblings who vie for the role of president? How does the current owner resolve that issue?
A well-developed plan not only provides for a smooth transition when needed but also can be a critical tool in situations that result from an untimely injury, illness, or death of the owner. You do not want a vacuum created from the absence, for any length of time, of leadership in the business. A prolonged absence of an identified leader can destabilize the business.

The owner or president of the business has the fiduciary responsibility to be proactive and protect the business and ensure survival is optimized. That means an active role in preparing for his/her exit and change in other key management positions.

You never know when there will be a need to pass the baton.

Use Networking to Improve Results

Business Networking is a really valuable way to expand your knowledge, learn from the success of others, attain new clients and tell others about your business. Here are benefits that you could enjoy by expanding networking activity.

1. Generation of referrals/Increased business
This is probably the most obvious benefit and the reason most business owners decide to participate in networking activities and join networking groups. Referrals that you get through networking are normally high quality and most of the time are even pre-qualified for you. You can then follow up on these referrals/leads and turn them into clients. You get much higher quality leads from networking than other forms of marketing.

2. Opportunities
There are always lots of opportunities that come from networking. Opportunities like joint ventures, client leads, partnerships, speaking and writing opportunities, business or asset sales… the list goes on, and the opportunities within networking are really endless.
The opportunities that you get involved in should align with your business goals/vision, otherwise you might find that you are spinning your wheels chasing after opportunity after opportunity and getting nowhere.

3. Connections
“It’s not WHAT you know, but WHO you know”. If you want a really successful business, then you need to have a great source of relevant connections in your network that you can call on when you need them. Networking provides you with a great source of connections, and really opens the door to talk to highly influential people that you wouldn’t otherwise be able to easily talk to or find.
In addition that person will have a network you can tap into as well.

4. Advice
Networking is a great way to tap into advice and expertise that you wouldn’t otherwise be able to find. Just make sure you are getting solid advice from the right person – someone that actually knows about what you need to know and is not just giving you their opinion on something that they have no experience in.

5. Raising your profile
Being visible and getting noticed is a big benefit of networking. Make sure you regularly attend business and social events that will help to get your face known. You can then help to build your reputation as a knowledgeable, reliable and supportive person by offering useful information or tips to people who need it.

Look for groups to join that can expand your knowledge base and your business. Take no opportunity to network lightly – strive for excellence.

Are you a Good Communicator?

There are a number of ways managers can increase effectiveness of communications. Here are a few suggestions to consider for your business.

• Bring life to your vision. Anyone can write a mission statement. But you aren’t communicating that vision unless you repeatedly signal how those values translate into concrete actions. What people learn from your routine decision-making matters far more than what you pack into your speeches.

• Ask good questions. When you want to persuade someone, questions can be more powerful than statements. The reason: you engage another person more strongly. You get him or her thinking about the ideal answer – and the steps necessary to get there. By being less dogmatic, you let people on your team build game plans that they believe in.

• Be aware of things you don’t know. If your subordinates are any good at all, you often won’t know the details as well as they do. Expect to be learning constantly. Find ways that your in-house experts can quietly bring you up to speed on emerging issues. You’ve got vital strengths that other people don’t, particularly in terms of experience, broad perspectives and judgment. As you work toward important decisions, make sure your remarks and conversations are opening the way for other people to keep augmenting your knowledge base.

If you’re conveying a clear vision, asking good questions, setting the right priorities you’re creating that winners’ aura that is the ultimate reward for great leadership communication.

Are you a Great Leader?

Organizations succeed for many reasons but those that have strong leadership improve the odds of maximizing profitability.
Here are a few important principles to consider in order to strengthen leadership skills.

1. Listen. Listening is the most valuable--and probably the most underrated--skill CEOs need to succeed. Great leaders listen to what their customers and prospects want and need, and they listen to the challenges those customers face. They listen to colleagues and are open to new ideas. They listen to shareholders, investors, and competitors.
2. Be Authentic. Great leaders are who they say they are, and they have integrity beyond compare. Vulnerability and humility are hallmarks of the authentic leader and create a positive, attractive energy.
3. Be Transparent. There is nowhere to hide anymore, and businesspeople who attempt to keep secrets will eventually be exposed. Openness and honesty lead to happier staff and customers and colleagues. More important, transparency makes it a lot easier to sleep at night - unworried about what you said to whom.
4. Be Responsive. The best leaders are responsive to their customers, staff, and investors. Every stakeholder today is a potential viral sparkplug, for better or for worse, and the winning leader is one who recognizes this and insists upon a culture of responsiveness. No matter the medium, responding shows you care and gives your customers and colleagues a say, allowing them to make a positive impact on the organization.
5. Show Passion. Those who love what they do don’t have to work a day in their lives. People who are able to bring passion to their business have a remarkable advantage, as that passion is contagious to customers and colleagues alike. Finding and increasing your passion will absolutely affect your bottom line.

Above all, treat others as you would be treated. By showing others the same courtesy you expect from them, you will gain more respect from coworkers, customers, and business partners.