5 Steps to “Benchmarking for Success”.

Yes, benchmarking is a “Buzzword” and when you’re running an SME you probably don’t want to use or hear buzzwords. However, this one is important as it gives you a measure of how your company is performing, not just against your own expectations, but against your competitors. Now that’s got to be important – right?

STEP 1 – Identify exactly what your company has done in the past, in comparison to what it does now. This may seem like common-sense, but so many business owners don’t analyse just why they have changed the way they work or the way they interact with customers. Some couldn’t tell you why they chose a system or an app, other than to say someone suggested it. Look at Why you changed and then at What difference it has made. This will give you the baseline for Benchmarking against your own performance.

STEP 2 – Document thoroughly what you do now, in terms of process, finance and people – so basically who you employ and why, how you manage them in the business, how your management of key business information affects your finances, so their effect on cashflow, P&L and investment ability (how much money you have spare to invest in your business at any time), how much time you spend on managing and fixing internal processes, etc. Measure what has changed since the previous year, or even before that. Document this and add to your information record. Now compare this information properly with the information you gathered in Step 1. You have now Benchmarked against your own performance, at least to give you a starting point and a chance to do the real benchmarking.

STEP 3 – Now the exciting bit, despite whether this exercise uncovers some great or poor ways of working. Begin with researching similar businesses to yours. If you have previously completed a Competitor Analysis (essential) then use it as a starting point. Even better is to compare that information with what you can find out about those companies’ performance and growth. If you didn’t complete such an analysis, don’t worry, you can do one now. Just look at the information you prepared, to measure your own business success and changes and apply it to what you can find out about your competitors. Then compare the information about your own progress, growth and change to that of your competitors of a similar size. You have now begun to Benchmark against similar companies.

STEP 4 – Don’t expect amazing ideas for growth to come out of the previous exercises! Yes, you’ve made a great start and you now have useful management information about your own business and your competitors, but most will only have grown a little, or stayed the same, or even shrunk. At another time, we will cover Turnover vs Profitability as these are very different mechanisms for evaluation and when you come to sell a business, you will see that! Now look at companies in the same or similar business-space as you but which are much larger; they may have done things differently, they may have taken on investment to grow – there may be many reasons. Study just what they did to get to the stage that you wish your own company to reach; see if they offered a different staff experience, or if they used Venture Capital, or whether they achieved growth through a single “Golden” product or service. Compare what you currently do with what they did to grow. You are now Benchmarking against Growth Competitors.

STEP 5 – Look at all your data; what is it telling you? Are those great ideas for growth now starting to emerge? Have your aspirations changed, or remained the same? Do you have a clearer view of the future? You can ask yourself more relevant questions now about your business direction and in particular, if you are looking for an Exit in a few years, you can really now begin to create that Exit Strategy, based on sound Benchmarking data, in sync with the markets, your competitors and your aspirations. Record the measurement of your information in a way that you can retrieve and use it instantly. Make those changes in Finance, People and Process that you have identified as necessary for growth. Seek help if required, or just to get an external view of where you are and where you need to make changes to get to your destination.

Thoughts for after lockdown…..

An interesting article in the Times by Ed Conway on 8th May “Zombie Assets are the price of huge transitions” prompted me to write this article.

Zombie Assets are defined as assets on a balance sheet that no longer justify their value because the world has moved on.

We have had many huge transitions in the past; think back to canals once enormously profitable, but when the railways came along these huge investments and assets became a drain on the businesses that owned them, becoming uneconomic.

For a number of years now “The High Street” once feted by investors has become almost un-investable with many closures and empty sites due to online competition, high rates and many other factors. Making many once profitable assets Zombie Assets.

So, as social distancing requires businesses to have a lower density of people and more demonstrate they can work from home effectively, are the new gleaming high-rise offices going to retain their value?

Consider your business:

·      Do you have buildings that will no longer have the same value?

·      Is your stock still needed in the new environment?

·      What about equipment, Cars, Vans?

There will be positives to come out of this situation; the just-in-time delivery systems are too fragile; they have broken down and affected society and business badly. Moves have already been made to bring more supplies back on shore and the impact of Covid-19 and Brexit will accelerate this process.

  • Are you in a position to benefit from these major changes?
  • What can you do to make your business more prepared for this change?

5 steps to improving the sustainability of your Not-for-Profit Organisation.

Charity, Community Interest Company, Social Enterprise, Community Group, Charitable Incorporated Organisation, Cooperative Society, Limited by Guarantee, Limited by Shares, Unincorporated, Trust ………. We could continue …..

These are the myriad types and formations of Not-for-Profit organisations, used to deliver social impact. Regardless of which type you are and of what your charitable aims and key objectives are for your organisation, taking the following steps will help you become more sustainable, by allowing you to better understand the business of your organisation, not just its mission.

STEP 1: Do you have a robust Business Plan, which identifies your key objectives, how they will be delivered, who will deliver them, by when and how much it will cost to do so?

STEP 2: Do you have the right Governance structure, which allows you to call upon the relevant skills and experiences of your Directors / Trustees when needed? Does your Board meet in a structured way and does it provide constructive challenge, advice, support and rigour to your organisation?

STEP 3: Do you have a mixture of Enterprise income and income from Grants and Trusts? Remember, longer-term grants are becoming harder to obtain and more organisations are now applying for them. Relying on mainly grants for anything but short projects is NOT sustainable.

STEP 4: Do you know if your Staff Skills and Capabilities actually match the needs of the organisation? Have you undertaken an analysis of this recently and do you recruit based on need? Is your staff & volunteer structure properly managed and Fit-for-purpose?

STEP 5: Do you really know what your Incoming & Outgoing Finances are? Can you fully articulate what the Overheads are for the organisation and can you forecast your financial pathway for the next 12 months and beyond? Do you have expertise in-house to create Management Accounts and relevant financial reports?

Remember, your amazing, wonderful, impactful and respected organisation, delivering fantastic results for your beneficiaries, will not continue unless the money comes in. Getting the balance right, with respect to income, staff, process and of course Business vs Not-for-profit is Essential for your success.

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When Can You Afford A New Employee

How would you like to know you can take on that new employee you’ve wanted? and find £25,000 hidden in your processes?

 So, you really need a new employee to assist in an important area of your business, but don’t know if you can afford to make the decision. Can you do it from your own resources, or do you need to find some money from a loan to cover the cost, or do you just do nothing!

 It’s a question that many business people ask themselves every day. Here are 5 steps to help you make a more informed decision.

 1. Review your sales, what’s on order, what repeat business do you have, when will you bill those sales – try to look forward at least 6 months, but preferably 12 months. i.e. create a sales forecast (Make sure your forecast is realistic and Challenge each number)!

 2. Build a profit and loss forecast, which, in simple terms is:

 a. what you raise sales invoices for each month, less what you receive in purchase invoices

b. what you pay yourself and employees

c. any leases or rents

d. other costs.

Build into this forecast the new cost you’d like to incur. Remember, although you maybe looking to recruit at a cost of £36k salary, this cost is £3k per month.

 3. Build a Cashflow Forecast, which is based on when you get your money in from your customers and when you expect to pay out for all your costs. Look at this by month.

Look first at the starting position, i.e.:

a. how much money is in the bank

b. what you are currently owed

c. when you will get paid

d. what you owe

e. when you’ll need to pay

f. Don’t forget corporation tax, VAT and PAYE.

Do this on a monthly basis, using opening bank balance plus expected money in, minus expected payments, to see what you expect to have in the bank at the end of the month, rolling the closing number each month to be the opening balance of the next month.

 4. Review Headroom, this means how much money you want to keep in the bank, to allow a cushion for the unexpected. For example, do you want to keep enough to cover 3 months, 6 months or 1 year of all monthly operating costs in the bank.

 5. Compare Headroom to cashflow at each month end. When you have the cashflow, how do the closing balances compare to what you want to keep as a cushion.

If your forecast shows you always have more in the bank than your cushion, then you know that you can afford to take on that member of staff; if not, you many need to try to get a loan, or defer a decision until your forecast improves.

 What are the Benefits of this approach?

a. You’ll have a better understanding of how your business functions, and how much money/profit your business makes.

b. You’ll have a better understanding of your processes and whether they really give you the information you require

c. You will also be able to identify cash issues early and do something about it

 Finally, you may find that £25,000 that you thought had been paid but hadn’t, when you work to get the opening position right; something I did with a recent client!

 Phoenix consult has created a 5 Minute diagnostic to look at 4 key areas and to provide you with an objective assessment of your business. It’s FREE so give it a go at: https://phoenix-consult.co.uk/diagnostic/

 

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Is Finance Holding Back Your Business

The Finance of a business can be thought of as different activities that build, block-by-block to deliver profitable business growth, with fewer issues and a better focus on your business. These blocks split into Business Processes, Management accounts, Cashflow, Profitability analysis, KPI’s (Key performance Indicators), Budgets, Forecasting, for both Profit & Loss (P&L) and Cashflow; the more information the better decisions you will make.

The Business processes cover all the “day to day” business activities that need to be undertaken to run a business, e.g. – sales, purchases, people and for some businesses stock. These processes feed into your accounts package and drive the cash flow of the business.

Management Accounts pull together all the information created in the business processes and create a Profit & Loss account, which your accountant takes to prepare your tax returns, etc.

For a small business that can be all that’s needed.

For larger growing businesses, all the business processes become more complex and need more management; the business needs better, regular, Management Accounts (MA’s), including Profit & loss, Balance sheet and most importantly Cashflow Forecasts.

With good Business Processes and MA’s, detailed Profit Analysis and accurate Planning & Budgets can follow.

Without good information and proactive management, based on this information, a business will be “leaking” profit & cash flow – i.e. your ‘hard won sales’ £’s

Good forecasts will Identify any cash needed to Finance growth, e.g. working capital or equipment.

Who are the key people that you need to deliver your plan – how do you retain them?

Ultimately if you plan to sell, comprehensive Management Information makes your business worth more money,

Having all the building blocks in place allows the business to manage both internal (staff motivation) and external relationships in a professional manner, building confidence with Employees, Customers, Suppliers and most importantly External Funders, be they Bank, Equity Partners or Asset Funders

 To summarise, your cashflow is like measuring the heart rate and blood pressure in your body; the profit and loss account and balance sheet shows how fit you are, forecasts and budgets are your plans in life and detailed Management accounts and KPI’s show you how you are meeting your personal targets.

Finance is an important part of your business, but there are many other important areas that need to be functioning well to really make your business work. Why not take our free 5-minute Business Diagnostic test and see how your business is performing today; you might be surprised!

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Business Review, Courtesy of Albert Einstein!

Albert Einstein said “The definition of Insanity is Doing the same thing over and over and expecting different results”! Yet, in business we see this pattern and similar thinking every day. You will no doubt remember businesses such as Woolworths, Blockbuster Video and others, who thought they could continue; well of course they once had a business model, which worked really well.

Then the world changed; we embraced technology and online or eBusiness. Woolworths and Blockbuster Video decided that there would always be a place for their products and for the way in which they sold them. They were right in part of course, as humanity is made up of so many demographics and diverse needs that at least a small portion of us will always wish to “do the same thing we always have”.

However, not taking stock, changing or adapting to change when everyone else does usually leads to a business’s demise, as in the case of the aforementioned duo of companies. There are many more examples of this throughout recent history of course.

To begin to change is hard, but to fail to change is harder – that quote is just mine I’m afraid (but probably someone has said this before!), but it’s something I hold to when reviewing businesses and where they should make their own changes. Once you know where you’re starting from and have begun to change, there is usually no going back.

So, think of the way you manage your business; some of you will be reading this thinking that you know your staff, you know your customers and you may be thinking that there isn’t much you could do to change how you do business. You could be wrong!

Businesses come in all shapes and sizes and with complex customer bases; they have differing products and services and may target different demographics, but they all have one key thing in common – They will only grow and succeed with “Structure”.

So, perhaps you would like to take a moment to review whether your business has Deliverable Plans for the future, does it have the Right Skills and Internal Knowledge to succeed (No, not just trusted employees, which is very important, but alone won’t help you get where you wish to be), does it have processes that are used, understood and which demonstrate effectiveness and efficiency?

Perhaps then it’s time to check if things are in order and if you have the “Structure” required to take your business to the next level and beyond?

Why not take our free 5-minute Business Diagnostic test and see how your business is performing today; you might be surprised!

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Brexit : SME’s Are You Ready?

It seems at present that there are currently three likely outcomes to the current Brexit situation

·     We leave on 31st October with a deal

·     We leave on 31st October without a deal

·     Parliament somehow blocks “No Deal” – which kicks the can down the road to what? No one knows. Election? New referendum? …

If we leave with a deal there is currently a transition period to 31/12/2020, but if we leave without a deal then we immediately become an external country subject to WTO rules.

So what impact will it have on your business? The British Chamber of Commerce has prepared a Business Brexit Checklist which can be accessed at   https://www.britishchambers.org.uk/page/business-brexit-checklist

The Checklist is broken down into

·     Workforce

·     Cross Border Trade

·     Taxation / Insurance

·     Currency / Intellectual Property / Contract

While your business may not trade with the EU, that may not be the case for suppliers or customers. If you buy from importers will this affect your ability to source goods, or the price?

If you sell to a Customer that incorporates your product or services into their sales to the EU how will they be affected?

Could the sudden change have a dramatic impact on the financial viability of suppliers or customers?

Many businesses have not started to plan for Brexit are you one of them?

#Brexit #Business #BusinessGrowth #People #Process #Finance

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Danger Signs for Small Businesses and Not For Profit Organisations

Britain is facing the highest risk of a recession since the financial crisis and needs urgent plans to combat the next downturn, according to an alarming assessment of the nation’s economic health.

Preparations need to be made to reduce the impact, the study by the Resolution Foundation thinktank warns. It states that both uncertainty around Brexit and the global economic slowdown have led to the highest recession risk since 2007.

It raises the alarm over the potential impact on living standards, warning that the five previous recessions have produced an economic shock equating to a £2,500 loss for each household in the UK. They have also increased unemployment by one million.

It comes after a series of warnings over the health of the economy amid continuing uncertainty around Britain’s EU membership. Earlier this month the governor of the Bank of England, Mark Carney, warned that there had been a “sea change” in the world’s financial markets, driven by pessimism about the economic outlook.

More than at any other time, with the dreaded B-Word looming and with a new PM in post and uncertainty about future international trading, businesses now need to become more structured, responsive and efficient. This doesn’r just apply to big business either, with their futures tied into public share perception and large contracts overseas; this applies also to SMEs, of which there are many thousands in the UK!

Now is the time to take stock of your business and look at providing a structure for sustainability and growth for the future.

Use our FREE 5 minute Diagnostic Tool and see how your company is fairing in this uncertain economic climate!

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