I had a great meeting with the CEO of one of our client companies today. The meeting was to review the progress the company was making toward their business plan and financial projections. Now that we're half way through the year and June's financial statements are closed, it's a great time to dive deeper than we normally do on a monthly basis to see how things are shaping up.
We spend time asking lots of questions. Was our market forecasting correct? How effective has the new product positioning been? How do we see the last half of the year shaping up? Are there ways for us to improve the financial performance of the company? Are customers paying in a timely fashion? How can we improve cash flow? We ask these and lots of other questions to identify ways to improve the company's results.
But let me back up for a minute. The reason that we're able to compare actual results to their budget is because we created the business plan and projections in the fourth quarter of 2009. You know the old adage, "If you don't know where you are going, any road will take you there." Running your business is much the same. Taking the time to work through key strategic planning elements can go a long way to putting you on the right road. Executing the plan and monitoring your results can keep you there.
Remember a while back when we addressed the value of walking a mile in someone else's shoes to gain fresh perspectives that might help you run your business better? Well, it appears some CEOs have actually done this - as a recent Fortune piece highlights. The participants, Maxine Clark (founder and CEO of publicly held Build-a-Bear) and Kip Tendell (cofounder and CEO of the privately held Container Store).
And yes, just as we anticipated, these retail veterans found they gained a great deal from the experience. Spending time in someone else's realm, dealing with their daily challenges shook things up and while dealing with employee issues, product questions and in-store management issues, they found themselves continually stumbling across ideas and inspiration that they could incorporate into their own operations.
Here's a peek at a few of their takeaways:
Clark, for instance, appreciated how the Container Store acknowledges sales associates for a job well done with Post-It notes left on lockers. Kendell, meanwhile, liked Build-a-Bear's "Strive for Five" technique, which is designed to sell each customer five items. (via MarketingProfs.com)
True leaders know that real ideas must come from a variety of experiences, sometimes you need to take on something completely new to move to another level. Innovation comes from so many places, from crazy situations to mundane tasks, maybe even, from spending time working in a different industry.
To me, the above insight is part of the beauty and value that our Indianapolis consulting services team here at Milestone Advisors brings to our clients. We have worked in a variety of industries, been tasked with an array of projects. Outsourcing bookkeeping, we've done that. Providing market research forecasting for a new business plan or endeavor, we've done that too. What about building a technology architecture to streamline a company's work flow and make them more efficient? Been there. With or staff's diverse backgrounds, we've done it all which better equips us to advise and inspire. What can we do for you and your operations?
Here at Milestone Advisors we advise businesses concerning almost every aspect of running a company. We consult on product marketing plans, financial market forecasting, writing business plans to attract potential investors or simply taking a look at someone's books to see if they could benefit from outsourced bookkeeping.
Recently, there has been a shift in the tools we recommend for marketing strategies. Social media has come out of the blue and now dominates most marketing and business strategy tactics. One of these mediums, Facebook, a social networking site, has become a hotbed for not simply B2C outreach but B2B as well.
In his most recent
column, Fortune's Stanley Bing asks if this platform does society more harm than good. Even if you still plan on using the site as part of your social media strategy it's prudent to be aware of all the uses of Facebook as well as the different opinions being voiced about it.
He writes about Facebook as a place where the ugliest aspects of our worst high school nightmares come to life and fears that the worst perpetrators in this online environment will enter the business world and do immeasurable damage.
"In teaching social networking, virtual presence, aggressive electronic messaging and cold-blooded manipulation of group dynamics, Facebook is preparing young people to thrive in business life, particularly on the executive level. I’m just not sure it’s a future office space that I would want to live in."What do you think? Is this a business world you want to live in? What can be done?
Last Wednesday we had the pleasure of hosting some lenders from a local bank chain. We invited 15-20 folks over to our offices to enjoy an ice cold beer, munch on some artisan cheeses and meats and simply get to know each other on a more personal level.
Now, business interests are at the heart of the invitation we extended, but at Milestone Advisors we believe in making business personal again. We'd like to know the bankers, lawyers, marketers and technology experts that we do business with. We believe our network is full of real people who face real challenges every day. The better we understand the challenges those we work with and for are facing, the better equipped we are to help them with their struggles directly or bring business propositions their way that can will benefit their business.
When we establish genuine connections and nurse these relationships by getting together like we did last week, we become top of mind for those people. We also continue to clarify what we do and how we can help others.
Next time one of these bankers is sitting with a business owner expressing that they need market forecasting or a revitalized business strategy they will recommend their associates - the Indianapolis management consultants who they shared a drink and chatted with last week and our networking will result in new business for the firm.
Every company has a different approach to communicating internally. Meetings are used to discuss company issues as well as brainstorm to develop plans for clients and delegate responsibilities for the execution of said plan.
Getting together is necessary to discuss the latest market research forecasting, new financial models or a product launch plan. Yet, sometimes they simply equate to lots of talking, little doing.
Yet, when run effectively, meetings put everyone on the same page and foster positive relationships throughout a company as well as the resulting creativity that occurs when minds meet.
MarketingProfs offers actionable advice to run a meeting that doesn't waste your time or your clients' time.
• Set a clear agenda when you schedule the meeting. The best outcomes happen when everyone is fully prepared to discuss the topic at hand.
• Ask for full participation. Instead of letting one or two voices dominate the conversation, create a collaborative environment in which all ideas are welcome. "Encourage everyone to speak up," he suggests, "but respect those that require time to process what they're thinking by not putting them on the spot right away."
• Don't lose track of time. According to Stephens, you should set a limit—and stick to it. "When the time is up," he notes, "the meeting is over. If you didn't accomplish [your] goal you'll plan accordingly next time won't you?"
• Establish what each participant will do next. Make everyone accountable by distributing an immediate summation of each team member's responsibilities.
I would recommend adding an area to your business communication strategy or strategic plan that deals with internal interaction and meetings. Establishing best practices for regularly occurring meetings will foster positive communication and increased productivity.
Some recent advice from the popular marketing site,
MarketingProfs, really struck a chord with some of us here at Milestone Advisors. Selecting a marketing strategy is a complex process. It demands creativity, research and must be find favor with most, if not all, of your marketing department.
It's easy to get caught up in simple strategies designed to surprise customers or cut prices for clients. But true marketing genius lies in understanding that delivering your message is a complex process and should be designed in ways that will not simply foster shock and awe, but will build brand and customer loyalty for years to come.
Here are some thoughtful tips on developing
affective marketing tactics courtesy of
Paul Williams.
Be IndividualizedThis doesn't mean a form email that uses mail merge to fill in an individual's name. This means understanding that person, their business and what their role is within their organization and appealing to them using that understanding as your foundation.
Immediately Add ValueThis is something I talk about a lot but I believe in it. That's what I try to do with this blog. Providing people with information of value, things that they can use, is what being in business is all about. We must all interact in this way for anyone to achieve success.
Be RemarkableI think this is where some make the mistake of adopting a flashy tactic or shocking slogan intending to solicit "ooooh" and "ahhhhhh" permanently aligning themselves with the idea of what is 'cool' in people's minds. It simply means stand out in a fresh way that they will want to share at the next company meeting. Not because you're cool but because you were innovative.
Be Appropriate & RelevantIn my mind, this should be a given. Getting attention is important but do so in a way that is useful to your specific audience.
The Resource When They Need ItResearch and anticipate your audience's needs. When they realize what they're lacking, you're already offering it. (Williams uses a perfect analogy of old black and white movies, the guy always has a match or lighter ready as soon as the gal puts a cigarette between her lips). Being the first one in line with a perfect solution is a powerful thing.
Whether you're beginning to outline a market research plan, attempting some market research forecasting or building a brand marketing strategy - all of the above concepts should be understood and influence your approach to each one.
I would most certainly be remiss if this week I didn't find a way incorporate the Super Bowl bound Indianapolis Colts in a blog post. Being an Indianapolis consulting firm that works side by side with entrepreneurs and business owners to build strategic business plans, develop actionable financial models and conduct extensive market forecasting, the Colts are actually a great example of how to seamlessly run an organization, setting it on a path to the ultimate goal. While for the Colts this means heading to Miami to play for the Lombardi Trophy - for local businesses it means profitability and sustainability, two concepts you can easily learn from the leadership of the Colts organization.
They plan well - detailing what decisions should and will be made in given situations (i.e. the seamless transition from Tony Dungy to current coach Jim Caldwell). They conduct extensive research to inform these decisions (for example, look at their draft history and the outcome of last year's picks). They also know when to lead and even more importantly, when and how to delegate.
Over the past few weeks, several pieces have been published profiling the Jim Irsay and other leaders within the Colts organization including a piece in
USA Today and one in
Sports Illustrated. After reading through these and hearing people discuss even more, it's clear business owners can take a cue or two from Irsay and other involved with the Colts to achieve their dreams.
Now let's go Colts!
In terms of small business, the answer is no. By nature, running a small business or launching a start-up is simply fraught with decisions that have no guaranteed outcomes. Yet, as most of these operations are just beginning, they aren't gambling much at all and have very little to lose.
Steve Strauss, one of USA Today's business experts recently fielded a
similar question about risk concerning small ventures or operations. His answer is articulate and right on:
But from where I stand, the best small businesses never stop risking; the difference is, they get better at it. Great entrepreneurs continue to look for opportunity and once spotted, continue to go for it. The difference is, and it is a significant one, as they grow in their business acumen, the experienced entrepreneur learns how to make risk-taking less risky.If you want to grow your business next year, then do what they do: Look for opportunity and take smart, calculated, prudent risks. Don't bet the bank on one idea (you can lose a lot of money that way). Don't tell the world about your big vision (you can lose a lot of face that way). Don't re-jigger a lot of your resources towards a new, untried idea (you can lose old business that way.)So, how do you learn to make risk-taking less risky? Our answer is to be certain you ALWAYS have the most complete and accurate financial information with which to make decisions. This means consistent financial market forecasting. Have you made projections for the best case scenario? The worst case? Have you conducted additional market analysis to determine where you stand in terms of competition? All this research and analysis should be conducted before any decision making takes place so you can be more assured of a positive outcome.
As a partner at Milestone Advisors I have seen many business owners struggle to remain profitable over the course of the last year. And what has been slightly more difficult has been watching such great idea people question their own merits. In order for our country's economy to rebound, we need our entrepreneurs to be more confident than ever. Here are three exercises I believe have a positive affect on companies and are appropriate at this time of year.
1. 2009 was a challenging year for many companies, and it's easy to lose sight of the positive. Take a moment to reflect on accomplishments and celebrate successes with your employees and stakeholders.
2. Cash is still in short supply for most businesses. Plan upcoming cash needs carefully and develop contingency plans. There may not be much room for error in your forecasts.
3. Opportunities abound for companies to capture market share and grow the top line. With many weaker competitors unable to sustain themselves, now is the time to review customer relationships, seek new customers, consider expanding target markets and analyze other growth opportunities. Companies that can focus on profitable growth will flourish.
Now is a great time to revisit the plans and strategies that define your operations. Careful and close examination of accounting practices is necessary to ensure you can accurately perform financial forecasting. Market research forecasting is necessary to plan to overtake competition. Focusing on growth opportunities and give yourself credit for the positive. 2010 is going to be a good year.
Over the past year in particular we have seen endless cost-cutting measures being taken by companies both large and small. In lieu of accounting advice, some have chosen to simply eliminate employee appreciation programs, celebrations and bonuses. Others have analyzed their cost and set out to find more cost-effective, creative means to reward employees and boost morale.
A recent Indy Star
article discussed some numbers and what's being cut this holiday season. Below are some of the key findings:
- 62% of companies will have holiday parties this year, compared with 77 percent in 2008 and 90 percent in 2007.
- 30% of companies will spend less on holiday parties this year.
- 36% of companies are catering a meal this year, compared with 57 percent in 2008.
- 31% of employees at small businesses will get end-of-year bonuses, compared with 44 percent last year.
- 35% of employees at small businesses will get holiday gifts, compared with 46 percent in 2008.
While cutting extra expenses like holiday parties and gifts can be a good idea to save in areas of discretionary spending, keep in mind, measures like these can also affect employee attitudes. Happy, satisfied employees tend to more effective workers. Make sure whatever cost cutting measures you are taking, you're also making an effort to reach out to your staff and show you appreciate the work they do.
Want to extend cost-cutting habits beyond the holidays? Get in touch with Milestone Advisors. Our experienced accounting staff can look over both your accounts receivable and payable, combine that information with market forecasting and a review of your current financial model to develop effective accounting strategies that will amount to significant savings year round.
His story is as inspiring and motivational as any - a curious 19 year-old dismantling computers in his dorm room instead of investigating all that college night life had to offer is now the leader of the company that has changed the way we think about computers.
Inc. has Michael Dell quoted back in 2002 saying, "the worst thing you could do to a new business is to give it too much capital." An interesting thought considering most entrepreneurs are continually struggling to garner funding to secure their start-ups future.
But could there also be advantages to being, as the
article calls it, a lean operation?
Companies with funding challenges are sometimes forced to find creative means of accomplishing objectives which can often lead to innovation or breakthroughs that help streamlines processes making a company run more efficiently. Thus, giving the organization a leg up on competition and opening up new doors.
These challenges could lead to rethinking operations, outsourced bookkeeping, conducting more market research or forecasting possibly even writing a completely new business plan or brand marketing strategy that will shake up strategies that already exist, positioning the company for success in a changed market.
One huge advantage new companies have is they are in a position to observe what competition is already doing and take a different, more advanced approach, "attacking" the competition if you will. In being new, your operation is poised for an element of surprise and has an advantage.
Yes, this is a risky time to be opening up shop. But take a look at history, some of our country's most successful operations were started in times of economic turmoil. Entrepreneurs got creative, thinking of means to solve current issues across several industries, fill a need no one else had. It may be the most challenging time to do so, but it is in that challenge that true break through and ultimately, success, awaits.
It's official,
CNNMoney.com is reporting that all of the $375 million designated to buoy the Small Business Administration's lending programs has been completely tapped out. Part of the Recovery Act, the funds were designated to help banks guarantee loans for small businesses. Now the current 148 loans waiting to be processed may not be approved.
With the above help from Congress, the SBA had been able to guarantee up to 90 percent of a defaulted loan, making banks far more comfortable with extending the loans. The aim of the program being to increase small business lending in general and stimulate the economy.
Although the money train coming to a stop is a surprise to no one, it wasn't projected to do so this quickly. We referenced the decrease in SBA loans in Indiana in an earlier
post. Now there are $80.3 million in loan applications waiting to be processed and without the government guarantees from the SBA - they may never be approved.
The good news - representatives from the SBA say they're in talks with Congress to generate additional funding that will allow for continuation of the increased guarantee amounts and decrease in application fees etc.
Should the SBA succeed, are you in a position to benefit from what will be newly available funds for small businesses? If not, you should begin conversations that address bank financing and how to attract investors. Start to look at your current business strategies, conduct some market research or market forecasting, try to determine the best corporate finance strategy and discuss how best to navigate through the SBA loan process. This way, when the opportunity presents itself, you can be the first in line.
Without predictable cash flow, you run the risk of stalling the growth of your business and damaging your credit. Here are some ideas that will help you manage your receivables and expenses so you don't get caught in a cash flow crunch.
- Improve your chances of receiving timely payments from customers by utilizing the accounts receivable module of your accounting software program to track current and past-due balances.
- Study your customers' paying habits so you can project roughly when and how much they will pay. The amount you forecast should be within 5 percent of your receivables each month. If your financial projections are way off the mark, a cash flow problem could be looming.
- Compare your projected expenses to your actual expenses each month. This will help you anticipate the need for more cash and react immediately.
- Base your projected sales on facts - don’t assume the demand for your products or services will always be high.
- If you are a start-up, use market research to help you determine how much demand exists for your product or service.
- Monitor your actual sales to make sure you are on track. If sales dip below your financial projections, the sooner you make adjustments — cut expenses, extend credit or borrow money — the better.
Anticipate when your sales are likely to drop throughout the year. Then make sure you have put some cash aside to cover your expenses during the lean months.
Required Information
As we’ve already mentioned, the key variable in determining your ability to secure capital is your perceived credit risk. In order for the bank to make this determination they will often review every aspect of your business. The pertinent business information and financial accounting data they typically require might include the following:
- Summary of the average amount of funds on deposit
- List of investments, fixed assets, and other assets, with detailed or supplementary schedules, including market or appraisal value where appropriate
- List of major vendors, customers and competitors
- Aging of receivables, with details regarding any concentration among a few customers
- List of notes receivable and any information concerning the risk of collection
- Inventory detail with information on price stability, aging and turnover
- Statement of your liabilities and reserves, with applicable explanations
- Comparison of your operating and balance sheet ratios to industry averages
- Cash flow analysis of your actual past experience and financial projections of future income, expenses and cash flow
- Relevant financial data including sales forecasts, profit and loss statements, cash flow projections and balance sheets
- Miscellaneous documents that flesh out other important details of your operation, including copies of contracts, franchise agreements and tax returns
In the end, each financing transaction (and lender) has its own specific requirements, but these are a few of the more common requests.
As every business owner knows, there are very few certainties when it comes to running a business. In fact, the only certainty might be that there is always an abundance of uncertainty. While there isn’t anything a business owner can do to change this, there are certain things that can be done to minimize the effects that constant change can have on a business. The following actions can help mitigate the effects of uncertainty to help ensure the growth and continuity of your business.
Business Planning
The birth of any business is marked by the development of a clear objective or mission for what that business will do. Following this event, a business plan needs to be developed to determine how the company will fulfill its mission. The following are some important initial considerations when developing your business strategy.
- Gauge your market’s potential size
- Recognize the needs of the customer
- Define your offerings
- Analyze industry statistics and competitive market data
- Identify potential promotion and advertising strategies
- Determine the economic climate within your market: rising interest rates, increasing unemployment, etc.
Financial Planning
In order to properly grow a business, you not only need to have the proper amounts of funds available, but you must also efficiently manage these funds. In creating your financial plan, it’s important to be able to articulate your objectives and answer the following questions.
- How much money do I need?
- What type of loan do I need?
- What repayment plan is most appropriate for my situation?
- What cash flow levels do I need to repay the loan?
- How will I use the loan proceeds?
- What type of collateral is required to get the requested bank financing?
In order to answer these questions and define the objectives, you need to be proficient in cash flow management. This involves, among other things –
- Forecasting, budgeting, receiving, controlling, disbursing and investing funds generated by your business
- Improving liquidity and increasing profits by increasing cash inflow, reducing cash outflow, and investing idle funds in higher yield vehicles.
Marketing Your Business
Since customers are an essential ingredient for any successful business, what can you do to increase your presence in the marketplace and attract customers? The following are some suggestions for raising the visibility of your business.
- Look for new niche markets you can serve and customize your advertising to appeal to the special needs of customers in those niches.
- Raise your visibility in the local market in which your business operates by speaking at local business associations like the Chamber of Commerce, the Rotary Club and relevant trade associations.
- Create brochures or flyers to distribute in the town or city in which your business operates.
Cash management is ultimately about cash flow, and very few small businesses are blessed with a “flowing” supply. In fact, very few businesses in general are immune to cash flow problems as they continually make strategic decisions that impact their cash position. Some of these decisions, such as whether to add staff, increase inventory or purchase capital equipment are vital to the continued success of the business, but must be carefully analyzed in order to ensure enough cash remains available to continue to operate the company.
Fortunately, cash flow is something that can be managed and somewhat controlled. However, it takes a dedicated business owner or part-time CFO to monitor the business’s activities and anticipate changes in cash flows. The following are some tips and suggestions for improving your company’s cash flow:
Manage Your Cash
Like any resource, a business’s cash flow must be managed, and a big part of managing that cash flow is taking the time to carefully forecast both cash outflows (expenses) and anticipated inflows (revenues). This will help you anticipate when you’ll have cash on hand, when you’ll need additional cash, and how the timing of expense payments will impact the company’s cash balance.
Another part of managing your cash flow and building financial projections is evaluating and implementing various performance scenarios. When developing your financial model, be sure to consider the impact both increased and decreased sales levels (and collection of receivables) will have on your business and anticipate both events. Most businesspeople are acutely aware of the problems decreased sales levels will have on cash, but few are able to grasp the problem of too many sales - a business can get itself into plenty of trouble if it’s forced to grow too quickly!
Monitor Your Spending
One of the most common problems with new businesses is the owner’s tendency to spend freely, especially in the beginning when cash is ample and optimism is at an all-time high. This is when cash management can have a profound impact on the longevity of the business. Your objective during the startup phase (and in the future, for that matter) is to focus on each expenditure’s return on investment. Lavish furnishings and catchy marketing prints are nice, but are they worth jeopardizing keeping the business’s doors open?
Lease Equipment and Property
Acquiring equipment or property can be an expensive endeavor, but leasing (as opposed to an outright purchase) can help preserve cash flow. When evaluating acquisitions of items such as equipment, automobiles and property, it’s important to analyze the short-term and long-term financial impact of both buying and leasing.
Monitor Inventory
While it’s important to have ample inventory on hand to continue to attract customers and facilitate transactions, having too much inventory on hand can create problems (think of it as cash sitting on your shelves that you can’t use). Therefore, be careful to only purchase inventory that you can turn quickly. The other side of the inventory strategy is having dependable vendors that can fill orders quickly – the less time it takes between ordering and receiving inventory, the less inventory you’ll need to have on hand.
Accounts Receivable Collections
While it would be ideal to get your customers to pay on time (or early), most small businesses are required to sell on credit and, therefore, need to focus attention on cash collections. Unlike their larger brethren that have strict credit policies and personnel devoted to collections, small businesses often have few resources to allocate to accounts receivable, while having a greater need to collect payment in a prompt fashion. Therefore, be creative and vigilant in collecting from your customers, and even consider outsourcing significant past due accounts to a collection agency or other accounting services. In many cases, the best source of capital for a small business can be found by collecting from your current customers.
Employees
Employees are both valuable and expensive for a small business. In addition to an employee’s direct costs, which include salary, payroll taxes, and fringe benefits, additional costs are often incurred for office furniture, computers and other incidentals, as well as the time and effort required for training and management. To minimize costs and financial exposure, employers should focus on improving the productivity of their current employees through training, process improvement and other measures, as well as utilizing independent contractors and outsourcing certain activities that don’t require a full-time staff.
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