This is a new blog created as a resource for those seeking some greater undersatnding of what constitutes good design of business websites and why that is important. The articles containe here will generally be the personal opinion of the site editor, Greg Tomkins and attempt to illustrate sound best of breed porincipoals and practices.

The group met on Monday morning at 9am and were presented two challenges for the week. They first of all had to run a business that they had taken over with a loss and over 8 quarterly periods had to get the business into a profitable position through a computer simulation model. Their second challenge was to identify a product they were going to develop and build. For this they were required to develop a complete marketing program around the product including oral presentations, a 30 second video advertisement, other promotional material, a prototype and to present the results put on at a trade stand at 2PM on the Friday at the end of the same week.

I can say quite honestly say that if I and 9 of my learned peers were put to the same challenge we probably would not have too much better. It was marvellous to witness the dynamics of the group as it elected the various management team members form within its own ranks and faced the task of getting on with the job.

I once listened to a guest speaker talk about how he personally faced the creative challenges in his own job by taking time out and putting himself into a state where he was thinking as a 6 year old. Why might you say, would he want to do this? Quite simply, in order to release himself of all the restrictive thinking and belief patterns we create within ourselves as adults. Have you ever noticed the free creative nature of small children? They don’t concern themselves with how much sense their idea makes – they simply create.

A pattern many adults live with is to seek practical sense in all our ideas where in reality we would be better served by creating the ideas freely and then deal with the practicalities of it all later. First of all let the creative juices flow freely.

I watched all of these school students in each of their groups come up with some most fantastic ideas and I honestly had to hold my own “practical” thinking in check and what resulted was pure genius. Sure at the end of the day most of their products had chinks in the armour but the ideas were brilliant and I am sure that some were worthy of further exploration – particularly my groups idea of a device attached to cars driven by youths that monitored the speed of the car they were driving relaying a SMS message back to their parents who could then disable the motor vehicle. It was all linked into a GPS tracking system and central computers but what a great idea.

Unfortunately my team didn’t take out any prizes but I am sure they all learnt so much about business, creative ideas and marketing but most importantly, they learnt so much about themselves and working in teams. They may not have been winners but they certainly were not losers for the experience.

I was fortunate enough to have the time available and I learnt much from the experience for myself. I would thoroughly encourage anyone who can find a similar opportunity to take it on for themselves. Sometimes being taken back to the very basics of business even if it is only in a simulated environment, we can still find lessons to learn for ourselves and that we can take back to our own businesses.
Document1Greg Tomkins Page 1 29/07/2007

As a business owner, are you paying yourself a regular salary?

Do you pay yourself a wage reflecting your own worth?

A great failing in business is that many owners under value their own worth with low salaries yet these same people feel they have a successful business.

You must pay yourself what you are worth and do so regularly, just as you would for any other staff member. To do otherwise is simply cheating yourself and not valuing the effort you put into the business.

Psychologically this can for some, lead to developing the wrong attitude of mind. Frustration and anxiety can set in for the individual. How often do you hear about owners’ frustration when they say their business is going well but they just do not make enough money for themselves? This can have a ripple affect on how these people conduct themselves within the business and with the customers.

Sure when you start out in anew business you make sacrifices however there must be a point in time where you have to decide whether you are really in a viable business that delivers value to your customers, your staff and yourself. After all, you personally need to earn an income that affords you the lifestyle you want for yourself.

Sometimes as business owners you need to ask yourself whether you have a viable business or whether you have simply bought yourself a job. Is your income compatible with industry pay scales for the type of work you do?

Many people look at what they are paying themselves and see this as a good salary for the job. What they overlook as the business owner are the hours they put in to that business.  Take a close look at yourself, work out what an average week is for you by way of hours worked and then divide this into your weekly pay to derive an average hourly rate. Is this still looking so good? You should also consider whether you are giving yourself a paid holiday each year as you provide to your staff. If your not then divide your hourly rate by 12 and multiply that by 11 which will reduce your rate even further.

Maybe you deserve a pay rise after all. When did you get the last pay rise granted by the boss?

At the end of the day you must determine a fair value for your services and pay yourself a salary commensurate with that determined value and if your business can not afford you then take steps to ensure that the business can.

We each share a common belief that if you do not get the people factor right in the business as a priority, then all the work of most accountants and lawyers will be to no avail as the real potential of that business will not be achieved. Quite simply these people do not deal in people, their feelings, ethos and values – they invariably deal in numbers, models, regulations, ratios and law, commercial reality. After all this is their core business and they exist for that purpose. 

There is a growing force in the US that is pushing this people focussed view more strongly than we do in Australia at present but we are starting to see the change however so many still just do not get it.

With the impact being faced as a result of the significant gaps between the generations we now see particularly between “Gen-Y” and the “Baby Boomers”, we are seeing distinct issues arising around succession planning for business owners. This is particularly the case in family business owners looking to pass the reigns over to their children.

As a business owner you may have the greatest product available in the market but without the best team of people supporting your business you will struggle to succeed in the long run of events.

I remember asking Tony Smith founder of the Breakfree resorts organisation what he attributed to his success rising from the humble beginnings of footy tour organiser. He said he simply employed smarter people than himself.

A philosophy I concur with and certainly Tony is not original with this view as anyone who has read Richard Branson’s autobiography can attest to the fact that Branson did the very same thing.

Surrounding yourself with smarter people is important but not the complete solution. Not only do you need smart people but you need the right people on your team. It is important that all your people fit in to the business culture sharing common values and ethos.

Understanding people is what separates the best form the better. In any business you will have teams be they formally or informally structured. Understanding how to develop these teams, communicating with them and leading them are all factors critical to your business success and your ability to achieve sustained growth and development of your business.

A common concern in many businesses especially now with such low unemployment rates here in Australia is how to get the right people, retain them and dare I say it, get rid of the dead wood.

The answer to this is not to be addressed here but may I suggest that you give thought to your own business? Have you got the right people in your teams, are they actively sharing your business values and ethics and do you instil a sense of belonging and worth within them? Are you carrying people who hold your business back?

Maybe you have not given this much thought lately. Do you indeed have the basis for evaluating your staff performance to identify the leaders, the achievers and the dead wood? Keeping good people relies on many aspects. Now may be a good time to give this some consideration or seek assistance with managing and developing your own teams better.

What he realised was that he was not cash rich in his business. Yes he had plenty of assets and was personally very wealthy but his business wasn’t showing a positive cash flow. He walked away from the business selling it to someone else.

What many of us fail to understand in business is that we need to be generating a positive cash flow in order to feed our growth.

Without the cash to fund your business you fail to innovate, develop new products, find new ways to market and develop the way you carry on business. If you do not have the cash flow you can not expand your business geographically or with market penetration. All of this requires capital input and the best source is from your own sales turnover. Increasing sales, profit margins and reducing costs are some of the ways of achieving this and these aer certainly better than borrowing funds.

With a positive cash flow you have the opportunity to reinvest in your business on initiatives that will deliver sustained business growth.

A simple measure of your cash flow is to simply look at the monthly balance of your current assets. Another common measure is to look at the business Growth Capacity which is expressed as :

This is a ratio which shows whether the business can afford to fund its growth. If the result here is a large positive number, then “growth” should be reasonably easy to fund; if the result is negative, then growing the business will demand more working capital than the additional profit which is generated. A negative (or even a low positive result) is therefore a warning sign. To improve this ratio, either work to increase the “profit” aspect of the equation, or work to reduce the working capital requirements of the business.

So how does your business measure up? To get a better picture do this calculation for each of the last 4 or 6 quarters of business trade. What is the trend over time? If the ratios are decreasing then you might want to look closely at what is going on or if any particular events can explain any anomalies.
 

The purpose of the multiplier is to provide the market with an idea of what a typical business in a particular industry is worth – based on industry benchmark data. It relies on averages for that business type. Access to such benchmark information is available whereby you can determine for your particular business what the expected performance measures should be and the average profit margin. For each business type there will be a different multiplier factor. Of course this is fine firstly, if your business is one of those that has been benchmarked and secondly, if your business fits the average profile. The quality of the multiplier may vary between some valuers and it also will be dependant on the quality of the data used to derive it. If you would like to know if benchmark data is available for your business give us a call and we can arrange to benchmark your business against the industry standards.

Businesses being what they are and owners being who they are, not all businesses will fit the average profile or match the benchmark data. Whilst many would argue that a business should always be ready for sale, my experience shows that this is not so true. If you have been well organised from thew outset about how you have managed your business then you should be ahead of the averages which should therefore make your business of more value.

So how do we then determine the value of the business, and what other factors effect the value?

We have touched on this partly in our May 2007 newsletter. What you need are wel lpresented financial statements. It is important that when valuing your business that you have a substantiated sales history that is at least consistent, but preferably growing, over the past 3 years in order to make your business attractive. The notion of getting the figures to look good for this financial year will just not cut it. Any business valuer or purchaser who knows there ‘stuff’ will see through this in an instant once they look at your financial statements. They will not be looking at this years accounts, they will want the last 5 – 7 years Profit & Loss and Balance Sheet statements and they will be looking at trends in the figures across those years.

It is imperative that you have well prepared financials before you decide to exit your business and if you start work on this several years ahead as part of your business exit plan then you find the end result far more rewarding.

A factor not taken into account in most business valuations is the qualitative assessment of the state of your business. This can be critical to your ability to get a reasonable price on business exit. This is where factors such as:

• the soundness of business procedures,
• how well systematised the business is,
• the degree to which the business might be dependant on particular individuals,
• the strength of sales distribution relationships and networks

to name but a few. All of these factors will have an impact on the value of your business so be sure that when you do obtain an valuation, be sure that who ever does provide you with an indicative value that they have taken these factors into account.

If you haven’t quite got the above aspects of your business in place just yet and are t6hniking of exiting your business in the next few years then you are ideally positioned to create added value to your business now.

Interested in obtaining an indicative valuation assessment for your business or even having a Business Exit Readiness Assessment performed? Superb Coaching can provide this for you so give us a call or visit our web site at www.superbcoaching.com.au and we can talk to you about how well situated your business is for when you want to exit or you may just be interested in having such information at hand.

Columbus had no idea of what lay ahead of him. All he had was his belief and conviction that what he was doing would lead to new discoveries and wealth for his sponsors (the Spanish court). His plan was simple – follow that vision.

So often, particularly in start up companies, I see that such businesses are being driven by Christopher Columbuses! There is no doubt that a sense of passion supporting the vision of what you are wanting to achieve is critical to the future success of your business however it does not stop there.

In business we need to have clearly articulated and well researched plans – we can’t afford to simply sail off into the future with little expectation of what the result will be. This is the domain of research and development. Herein lies the difference. Organisations that carry out R&D have a real role to play however at the end of the day we need a business that returns a value to the investors by way of sales. For start up companies this is often overlooked and the owners are seeking investors by way of private equity or publicly listing their companies selling the virtues of their product – investors aren’t buying the product – they are buying the business.

In my capacity as a mentor to the Mentoring for Growth program run by the Qld State Government we so often listen to businesses come to us seeking assistance only to discover that they lack any real business plan. Yes they have a great product, some even have a strong sales history and have proven themselves capable of creating wealth. So many though are sailing ahead without any plan of where they are going to, how they will arrive at the journey’s end and with what resources to achieve the result. Yet they are invariably seeking someone to provide additional capital to fund the growth and development of their business.

Without a clear plan of action that reflects responsibility and accountability for measurable results, your business will not achieve its full potential. Such a plan must be supported by documented research and provide the owners, all staff and most importantly, any stakeholders such as investors, with a clear map of what you are doing and how you will produce growth and wealth for that business.

1. Generate more leads through better marketing
2. Create more sales to your customers
3. Reduce your expenses and cost of goods
4. Manage your resource capacity efficiency

How we actually achieve this will be an entirely separate  matter but lets us leave this aside for the moment. We can quite easily achieve great results with what is so often fine tuning your business in the above four areas.

It is like tuning a car engine. Imagine if you will that your business is like your car and one day you notice that it just does not perform as it should or has been. You do not immediately rip into the engine replacing major components, what you do is fine tune different aspects and invariably peak performance results from a combination of different parts working in sync with each other.

You can achieve the same with your own business by carefully tweaking key performance drivers in your business. If I was to suggest to many that small changes in the vicinity of single digit percentages could result in massive changes to the bottom line many would scoff at such a claim.

What many do not see is that it like compound interest. The net result is a compounded result of all the factors and this is larger than simply adding the changes linearly.

Within each of the above four areas there can be even smaller areas of change you can make that will result in improvement to your business. How much can you change the effectiveness of your lead generation or lead conversion within marketing? This is an aspect very often overlooked.

Improving sales turnover is about getting more people to buy more product, more often at a premium sale price. McDonalds have perfected the art of up-selling. Would you like fries or a drink with that – even though you have already told them what you want. How often do you do this with your own customers? Do you make it attractive for your customers to return to your business to buy more often?

The most difficult is reducing your costs. In times when many businesses are running lean this is not always so easy but take a conscious decision to examine the most costly areas of your business on a regular basis – check in with suppliers to see that you are getting the best prices after all some people actually have a strategy to reduce selling price in order to attract more clients.

Lastly take a look at how efficiently your staff are operating. What capacity are they running at and if you do lift sales, will you have the capacity to handle the increased business?

If you are serious about growing your business, making better profits or increasing the value of your business then you should give this your consideration.

We have developed a simple tool to assist you in seeing what impact such changes can make to your bottom line – it is FREE. It provides you with insight into the possibilities of what you could achieve. If you would like to try this tool for free on your own business visit the link at our Free Resources page at www.superbcoaching.com.au or click here  to be taken to the page direct.

The actual behavioural experiment performed goes as this.

“Start with a cage containing five apes. In the cage, hang a banana on a string and put stairs under it. Before long an ape will go up the stairs and start to climb towards the banana. As soon as the ape touches the banana, spray all apes with cold water. After a while, another ape makes an attempt with the same result – all the apes are sprayed with cold water. Then turn off the cold water.

“Now if another ape tries to climb the stairs for the banana the other apes will try to prevent it even though no water sprays them.

Now remove one of the five apes from the cage and replace with a new one. The new ape sees the banana and tries to climb the stairs. To his horror, all of the apes attack him. After another attempt he is again attacked. He knows now that if he attempts to climb the stairs he will be assaulted.

“Next, remove another of the original five apes and replace with a new one. The newcomer goes to the stairs and is attacked. The previous newcomer takes part in the punishment with enthusiasm. Again, replace a third of the original five apes with a new one. The new one makes it to the stairs and is attacked as well. Two of the four apes that beat him up have no idea why they were not permitted to climb the stairs, or why they are participating in the beating of the newest ape. After replacing the fourth and fifth of the original apes there are no longer any apes that have been sprayed with cold water. Nevertheless, no ape ever again approaches the banana. Why not ??

“Because that’s the way it’s always been around here.”

That is how policy begins! This may be a somewhat cynical viewpoint and I agree that not all policies are created with such a history. I do however suggest that many organisations have banana policies and procedures in place to this day or at least have such a viewpoint.