As we begin another Financial Year there may be some items you should address in order to improve on last year’s business management activities and Net Profit.
- Business strategy – do you know where you want to be in 1, 5 and 10 years?
- Budgets or cash flow projections – have you extrapolated your expected revenue and the costs to deliver your product?
- Benchmark expenses – are your expenses staying in line with revenue?
- Business development – are there new opportunities you could capitalise on?
- Systems & technology – is your business administration holding you back?
- Productivity – are employees as productive as they could be?
- Awareness – do you know your strengths and weaknesses?
Strategic planning for the next 12 months of business operation shouldn’t be a time-consuming and lengthy process – it should:
- Be fit for purpose (only as detailed as required)
- Outline your business goals
- Outline your assumptions and key business operations (staff positions, areas open to change)
- Be documented for easy referral throughout the year
- Outline key millstones to achieve longer term goals
Business strategy – If you don’t know where you’re going, how are you going to get there? Coasting along without a plan is a sure way to complacency, and will not get you where you want to go. If you’re unsure on the ‘what’ and ‘how’ to design and implement strategy there are hundreds of sites on the internet to help direct you. If you want or require a more tailored approach, outsource your strategy development to a consultant. The consultant should ask a lot of questions to understand you and your business before providing a framework on which you both work to create a useful document that you can easily update going forward.
- Budgets and cash flow projections – are an easy method to project your bottom line for a given period. A template based on your financial statements is an easy place to start and allows a simple feasibility analysis on ‘what if’ scenarios. By costing out the resources required for a new product, the break-even point can be determined to set the required sales levels and whether it is achievable. Projections are only as good as the underlying assumptions – so be realistic. The budget is for YOUR use and not something to impress the Banks or investors.
- Benchmarking your business fundamentals assists in keeping expenses in-line with revenue. Great businesses understand their metrics and Key Performance Indicators (KPI’s). By tracking your KPIs, you know exactly how your business is performing and can adjust as needed.
- Business development – It has never been easier to start a new business in Australia, hence the competition level is generally increasing. The market is constantly changing and opening up new markets which five years ago may not have existed. Global megatrends are identifying new opportunities for savvy operators willing to think outside historical norms.
- Systems & technology – are improving at unprecedented rates. Cloud based software such as accounting, Point of Sale, communication and data transfer sites are improving by the week. The NBN is now functional in many parts of Australia and is improving accessibility and changing the way many of us conduct our business.
- Productivity – is an essential metric to any business. Whether it be staff, management, machine or factory system, a business’s profit is based on how efficient materials are converted into cash. Management need to monitor and employ a ‘continual improvement attitude’ within the business to motivate everyone to increase their efficiency and output, as often complacency is the source of falling margins. A culture that nurtures new ideas will be open to progress and the benefits it provides.
- Awareness – is a key component to successful people. They are aware of their strengths and limitations and seek external skills where required. They are aware that being emotionally and financially involved in a business or project creates a bias. By seeking a third party for an independent opinion, analysis or ideas the project is more robust and much more likely to be a success.
In an economy with a record low interest rate, many businesses have recently noticed a shrinking revenue stream. This is particularly the case for those without a meaningful strategy or development plan, resulting in a poorer financial return or loss. A key attribute of successful organisations are that they combine awareness, planning, strategy and external support and skills to dramatically improve their business performance.
Stirling Tavener, Business Consultant