Take Control – of your business success
“A series of simple yet effective ways for your business to succeed in challenging times”
Managing in Changing Times -- Back to Basics
It seems that all the business pundits are publishing ‘how to’ guides for difficult or challenging times. On these pages, we’ve been outlining key actions business owners can take to succeed and thrive. None of the ideas are revolutionary. All are proven to work. But many simply don’t get done. Old habits and easy distractions are allowed to dominate in businesses that can’t adapt as they need to.
Last month’s edition of CapeBusiness included advice from two local bank presidents. Joel Crowell of Cape Cod Cooperative stressed the importance of communicating with your banker, first about cash flow, and secondly about your business plan. Business Plan! Where have we heard that before? Everywhere! A business plan can be a 20 page document with 10 pages of historical and pro forma financial spreadsheets. You may need one of those to get an SBA or Bank loan, but most of us aren’t there now. But a business plan can also be as simple as a list of goals for the business, a set of action items that need to be done to reach those goals, management responsibilities, and a monthly or quarterly financial forecast for the next 2 years. Businesses have always needed these. The plan is important for the owner as a way of organizing her/his thoughts and communicating to key advisors. More important is the work of creating the plan. Setting financial, operational, and customer goals that are aggressive yet do-able is a wonderful team building exercise. Developing the action plans is the true essence of leadership. We must take control, and not simply react to the market. And the financial projections test the expected outcomes of the actions. This is a technique for today. That’s for sure. But it’s been a technique all owners need to have been doing continuously.
Dorothy Savarese of Cape Cod Five pointed out that this is a time to watch the business environment and make decisions about what to do for your business. Get ahead of the curve. Downsize, if you must, sooner rather than later. Trim excess expenses and negotiate lower costs. And strengthen relationships, with customers, suppliers, and other collaborators. This is all great advice for today’s times. Of course, it was great advice when times were good, too. A business leader always has to be looking around to see what good could happen and make plans to capitalize, or what bad could happen and make plans to mitigate the effects. They must always look at expenses that can be cut without hurting quality or customer care. And relationships are what built a business. They must be nurtured in good and bad times.
So the best and brightest are giving us solid advice for ‘recession-busting strategies’. And they are reminding us that basic business management works in good times and in bad. Go back to your industriy conference notes. Look at an old business textbook. Dig out your favorite book on leadership, regardless of its age. Call your banker. Call your CPA. Call your business advisor. All the advice you’ve been getting is still valid today.
So make a plan. Work the plan. Then celebrate.
Happy Summer !!
(I’d love to hear from readers on their successes getting back to basics and re-introducing practices they used to use in the past I’d be happy to share your successes in this column next month.)
Barry Neagle
President, Neagle & Associates, Ltd.
bneagle@gmail.com
Wednesday, May 27, 2009
Great Questions to ask yourself -- March 2009
Take Control – of your business success
“A series of simple yet effective ways for your business to succeed in challenging times”
Do you know how well you’re really doing?
These are interesting times, no doubt, for business owners and leaders. If we’re going to succeed, we need to build on our strengths and address our weaknesses. And the financial information you need to start analyzing this has recently been updated. Did you know that?
You’ve just had a business tax return prepared, we can assume. Maybe you’ve done it yourself. Hopefully, you used a professional, and your business records are nicely separated from your family finances. So you’ve had to get your financial records up to date. Look them over. If possible, involve your CPA, your banker, your business consultant, or any knowledgeable friend. Compare last year with the last couple of years.
And answer these questions.
• Are sales up or down from last year? By how much?
• How much of your business came from repeat buyers? New customers? Is this good?
• How did your top 10 customers from 2008 do during 2009? Did you lose any? Why?
• Which product lines did the best? Which services grew? Are you promoting them in 2009?
• Are revenues spread evenly across the year, or is there more seasonality than you’d like? Is it getting better or worse?
• Did costs increase or decrease, when looked at as a percentage of sales?
• What can be done to decrease costs without sacrificing quality?
• Did your expenses increase or decrease, as a total, and as a percentage of sales?
• What are the 5 largest expense items on your income statement? What are you doing to keep them under control?
• Payroll is probably in the top 5. Are you waiting too long to ‘right-size’ ? Can people be protected by converting some fulltime people to part time? Do you have the right people? It’s a good time to add quality skills if you can afford it.
• Are accounts receivable being collected as quickly as you’d like? What are you doing ?
• Are accounts payable stacking up because of a lack of cash? Can your banker help?
• Did inventories grow or shrink? Are you sure?
• Is the business generating cash?
The exercise of looking for these answers will tell you a lot about where you’re strong and where you need to spend some time. If its hard to get answers, you may not be really taking control of your business. If you haven’t set up your accounting systems to be able to answer these questions, talk to your bookkeeper. This is important stuff! Maybe you use QuickBooks or NetSuite. Maybe an Excel spreadsheet. Maybe simply a checking account. It’s not too late to make sure that 2009 is the year you start get the information you need to be a better business executive.
Next month, we’ll look at what you can do with this information and how it can lead you through 2009 and beyond.
Barry Neagle
President, Neagle & Associates, Ltd.
bneagle@gmail.com
“A series of simple yet effective ways for your business to succeed in challenging times”
Do you know how well you’re really doing?
These are interesting times, no doubt, for business owners and leaders. If we’re going to succeed, we need to build on our strengths and address our weaknesses. And the financial information you need to start analyzing this has recently been updated. Did you know that?
You’ve just had a business tax return prepared, we can assume. Maybe you’ve done it yourself. Hopefully, you used a professional, and your business records are nicely separated from your family finances. So you’ve had to get your financial records up to date. Look them over. If possible, involve your CPA, your banker, your business consultant, or any knowledgeable friend. Compare last year with the last couple of years.
And answer these questions.
• Are sales up or down from last year? By how much?
• How much of your business came from repeat buyers? New customers? Is this good?
• How did your top 10 customers from 2008 do during 2009? Did you lose any? Why?
• Which product lines did the best? Which services grew? Are you promoting them in 2009?
• Are revenues spread evenly across the year, or is there more seasonality than you’d like? Is it getting better or worse?
• Did costs increase or decrease, when looked at as a percentage of sales?
• What can be done to decrease costs without sacrificing quality?
• Did your expenses increase or decrease, as a total, and as a percentage of sales?
• What are the 5 largest expense items on your income statement? What are you doing to keep them under control?
• Payroll is probably in the top 5. Are you waiting too long to ‘right-size’ ? Can people be protected by converting some fulltime people to part time? Do you have the right people? It’s a good time to add quality skills if you can afford it.
• Are accounts receivable being collected as quickly as you’d like? What are you doing ?
• Are accounts payable stacking up because of a lack of cash? Can your banker help?
• Did inventories grow or shrink? Are you sure?
• Is the business generating cash?
The exercise of looking for these answers will tell you a lot about where you’re strong and where you need to spend some time. If its hard to get answers, you may not be really taking control of your business. If you haven’t set up your accounting systems to be able to answer these questions, talk to your bookkeeper. This is important stuff! Maybe you use QuickBooks or NetSuite. Maybe an Excel spreadsheet. Maybe simply a checking account. It’s not too late to make sure that 2009 is the year you start get the information you need to be a better business executive.
Next month, we’ll look at what you can do with this information and how it can lead you through 2009 and beyond.
Barry Neagle
President, Neagle & Associates, Ltd.
bneagle@gmail.com
Management by Fact - April 2009
Take Control – of your business success
“A series of simple yet effective ways for your business to succeed in challenging times”
Management by Fact
Last month, we looked at some of the valuable business information that can be contained in your financial records. Your accounting systems may need some tweaking and your bookkeeper may have to change the reports they are providing. But the data can be there with a little bit of planning.
My experience is that many owners do NOT have the information they need to run their business. They have trusted their instincts in the past, and it used to work just fine. They don’t know another way. However, in these times, our trained business instincts need to be supplemented by what I call “management by fact.” For example, if you discover that one product line is growing much faster than another, find out why. Should you push it more? Raise prices? Facts can also cause you to question what you used to take for granted. For example, if you are working hard to push new installations of your product, but the facts tell you that you make higher margins on service than new installation, maybe you should push the service work, even servicing installations done by your competitors.
Each business has a few key indicators of financial health. They are going to be different for each business, but they will all include variations on sales revenue, cost controls, expense management, inventory and cash. It’s a real shame that most owners never look at them until it’s too late. Here’s a simple process to make sure that doesn’t happen to you.
A Budget
We recommend a very simple management system to use financial information. It starts with a budget. Make a monthly forecast (even a guess if that’s all you have) for sales, costs, expenses, payroll, net earnings, and cash. If you’ve never done it, use your bank statements or financial records, broken down by month. If necessary, use a bookkeeper, CPA, or business consultant to help you. Of course, you want the budget to show a realistic view of your business. If it makes money for you, is it enough? If it doesn’t, can you sustain the losses? You’ll know. Don’t be afraid to change the budget as you get smarter during the year.
Actual Results
Then, at the end of every month, get a report that compares your actual results to your budget. If you’re on track, great. If not, do something. You may need to adjust your budget. After all, you’re probably doing this for the first time and you’re learning as you go. But stay focused on what the discrepancies are telling you. Maybe it’s bad data. Do you need a better way to get information into your accounting system? Maybe it’s too optimistic a view of sales revenue. If so, what can be done to push more sales or defer expenses? Maybe it’s something else. Know it and react to it. As you adjust the plan, make sure you look at the impact it will have on cash balances. Cash is still king!
Board of Advisors
On a quarterly basis, get your top employees and a couple of outside advisors to join you for a review of your financial results, comparing your budget to your actual results. If you’re doing better than you planned, celebrate. Do something to reward yourself and your team. If you’re behind on your plan, make adjustments to your operations and to your budget. Outside advisors can be a great source of ideas and encouragement, and may be better than involving employees if you want to keep the books private.
We know that not many business leaders make the time to do these simple things. But we need to be better business leaders now more than ever before. The tailwind of economic prosperity has been replaced by a headwind or resistance. We have to work harder to tack into the wind than run with the wind. So make a few adjustments. Run your business with facts as well as instincts. Use your friends and advisors.
Most people won’t do it. But the winners will. Do you want to be a winner?
Barry Neagle
President, Neagle & Associates, Ltd.
bneagle@gmail.com
“A series of simple yet effective ways for your business to succeed in challenging times”
Management by Fact
Last month, we looked at some of the valuable business information that can be contained in your financial records. Your accounting systems may need some tweaking and your bookkeeper may have to change the reports they are providing. But the data can be there with a little bit of planning.
My experience is that many owners do NOT have the information they need to run their business. They have trusted their instincts in the past, and it used to work just fine. They don’t know another way. However, in these times, our trained business instincts need to be supplemented by what I call “management by fact.” For example, if you discover that one product line is growing much faster than another, find out why. Should you push it more? Raise prices? Facts can also cause you to question what you used to take for granted. For example, if you are working hard to push new installations of your product, but the facts tell you that you make higher margins on service than new installation, maybe you should push the service work, even servicing installations done by your competitors.
Each business has a few key indicators of financial health. They are going to be different for each business, but they will all include variations on sales revenue, cost controls, expense management, inventory and cash. It’s a real shame that most owners never look at them until it’s too late. Here’s a simple process to make sure that doesn’t happen to you.
A Budget
We recommend a very simple management system to use financial information. It starts with a budget. Make a monthly forecast (even a guess if that’s all you have) for sales, costs, expenses, payroll, net earnings, and cash. If you’ve never done it, use your bank statements or financial records, broken down by month. If necessary, use a bookkeeper, CPA, or business consultant to help you. Of course, you want the budget to show a realistic view of your business. If it makes money for you, is it enough? If it doesn’t, can you sustain the losses? You’ll know. Don’t be afraid to change the budget as you get smarter during the year.
Actual Results
Then, at the end of every month, get a report that compares your actual results to your budget. If you’re on track, great. If not, do something. You may need to adjust your budget. After all, you’re probably doing this for the first time and you’re learning as you go. But stay focused on what the discrepancies are telling you. Maybe it’s bad data. Do you need a better way to get information into your accounting system? Maybe it’s too optimistic a view of sales revenue. If so, what can be done to push more sales or defer expenses? Maybe it’s something else. Know it and react to it. As you adjust the plan, make sure you look at the impact it will have on cash balances. Cash is still king!
Board of Advisors
On a quarterly basis, get your top employees and a couple of outside advisors to join you for a review of your financial results, comparing your budget to your actual results. If you’re doing better than you planned, celebrate. Do something to reward yourself and your team. If you’re behind on your plan, make adjustments to your operations and to your budget. Outside advisors can be a great source of ideas and encouragement, and may be better than involving employees if you want to keep the books private.
We know that not many business leaders make the time to do these simple things. But we need to be better business leaders now more than ever before. The tailwind of economic prosperity has been replaced by a headwind or resistance. We have to work harder to tack into the wind than run with the wind. So make a few adjustments. Run your business with facts as well as instincts. Use your friends and advisors.
Most people won’t do it. But the winners will. Do you want to be a winner?
Barry Neagle
President, Neagle & Associates, Ltd.
bneagle@gmail.com
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