Your Business shouldn’t Gently Weep like my Guitar

$150 was all it cost me.

A second-hand guitar from ‘Crime-Converters’ around the corner set me back $150 and I was ready to realise a small dream I had entertained for some time. I wanted to learn to play but was adamant that with a bit of YouTube help, I could teach myself.

I’m a big Beatles Fan and chose one of their best, Let it Be, you may know it. After a few weeks of practice and some hours spent learning cords and other basics, I decided that it was time to present my song to the family.

Gathered in the lounge room, demanding attention, I adopted the appropriate 1970’s guitar god pose and commenced strumming.

After a few bars youngest daughter said, what’s that Dad? What song is that? Choosing to ignore the comment based on her birth being long after it’s release in 1970, I raised my eyebrows motioning to my wife, expected her to chime in with a brief chastise about how the Beatles were the greatest rock band ever. Instead, she returned served with the brows and said, 'yes darling, what is that song, it's not one I've heard before'.

Casting the instrument across the room, I retreated to the office determined to prove it was my family's tone-deafness that was causing this issue. Grabbing the mouse I quickly set up my 'First lesson free' meeting with my future professional guitar teacher. Certainly, he would appreciate how far I had come on my own.

Sometime after I found myself in the professional teaching space of Fred Mac, guitar teacher extraordinaire. I told him I had been using YouTube to teach myself for some weeks. "Well, let's hear what I have to work with' he said. Once again I started strumming Let it Be, expecting an offer of a discount on his services.

“Lovely, he exclaimed, ‘what song is that one?’

The lesson here for me was that I had thought I could manage to do something new on my own with only a few free resources. Yes, you could also accuse me of trying to do it on the cheap, hence my small outlay on the guitar.

I really should have taken two pieces of my own business advice. Firstly that you have to spend money to make money, and more importantly that you need to lean on advice and assistance from external experienced professionals to succeed.

Seeking Help from Experts

Sharing a professional business advisory service means I have access to some of the best business minds in the country, and sometimes I take that privilege for granted.

My day often consists of just chewing the fat with some former CEO’s, COO’s and other leaders about the troubles that face business today and how we might have met these challenges if we still lead the companies we once did.

I'm a firm believer that I, and all former leaders, have a responsibility to give back what we have lived and learnt as a part of being a good corporate citizen. As a result, I have asked the team, our 'Board Members', to write down their best advice on a different aspect of running a business so that this gold exists beyond a water cooler conversation.

With this in mind, I would like to look at two aspects of successfully managing a business. Measuring and preparations for sale are two critical actions to get right.

One of the most important things about starting a business is being flexible. Listening to customers, watching data and making iterations and changes as needed. Sometimes having a path or a rigid business plan can limit you.

We should think of our business more in keeping with a blank canvas and add the master strokes along the way or in the very least, take our business plan with a grain of salt where necessary rather than try and stick to it.

Measuring Performance For Success

One of the main benefits of measuring your performance is to learn where you are struggling. If you have a master budget, performing a monthly variance analysis will let you see where your results are not meeting your projections.

You might find your projections were too optimistic or that your performance isn’t living up to its potential. This might help you identify that you are overspending, using marketing tools that aren’t generating adequate sales, taking on too much debt or managing cash flow improperly, leading to more debt service. Measurements help you identify your weaknesses and let you put controls in place or take other remedies to strengthen your business.

Measuring that Focuses on Strengths

Tracking your production, sales, marketing, labour use and spending helps you determine which areas of your business are performing well and should get more attention.

For example, you might find sales of your low-price, low-margin item you think provides incremental income has the potential to become a significant part of your revenue. A particular magazine in which you’re advertising or a specific social media site might be driving most of your customer traffic. You might have a geographic area that is performing better than others, alerting you to take a close look to find out why.

Measuring to Motivates Teams

When employees see they are contributing to the success of the company, they have more job satisfaction. If they see their department is lagging behind, they might work harder. Setting goals for your employees, measuring the results and communicating them to your staff regularly helps motivate workers who are doing well or struggling. This motivation goes beyond encouraging them to work longer hours, it motivates them to look at how they are performing their jobs, discuss ways to improve and come up with solutions to improve productivity.

The areas of your business that need metrics include but are not limited to:

•    Financial. Cash flow management, net profit concerns, scalability of your business, big investments for your business such as P & E or property, borrowings, grants, taxation etc.
• Business vision. Relationships with customers, suppliers. New concept products or services, research & development, business within your business, manufacturing, quality, import/export etc.
• Human resources. Staff relations, incentives, recruiting, commission/legal, org structure, growth, culture, leadership, incentives etc.
• Change. Managing people, profits and business during change, succession planning, business sales or purchases.

If you do not constantly measure, you are unable to manage the business and in raising this issue with the board members I got some real gems such as:

• SWOT’s are only as good as the effort & honesty put in as well as the frequency that they are referenced/updated. But as important is: “Do not sweat the “what ifs” they can cloud your need for a fast decision or judgement call. Sometimes a wrong decision is better than no decision at all.
• Without QA, you are lost! Quality in everything. (Systems, processes, procedures, work instructions etc) These are the business true value.
• Treat your customers like family (keep them close, keep them informed) Treat your suppliers even better! (They can & often, will make or break your businesses viability) Now raise that up another level and treat your staff like you, yourself wish to be treated.
• Take everyone along for the ride on a weekly or monthly basis and you will eventually be surrounded by all walks of life wanting to see you succeed and doing what they can for their part of that success.
• Bankers, legal counsel, accounting/taxation/grants support, landlords/agents etc; are also suppliers and should be treated with the same levels of support, appreciation and by being kept completely up to date with all wins, losses & strategies.

I would add that it's important to develop a broad business plan that incorporates all the above in one shape or another. The more detailed, the better.

Reference that plan (Business document) quarterly and add/update as you go. You will find that after a few years you will have created a business bible that has everything in it from systems, procedures, strategies, forecasts, marketing plans, supplier DB’s, customer DB’s, an IP registers, an asset register and the list goes on.

Getting Ready to Sell the Business

One of the best pieces of advice I can give is run it like your going to sell it. Many people have asked me about preparing a business for sale and my attitude is that if it’s a showpiece every day it’s always ready. Better still, if it’s a magnificent display home all the time, you will be maximising its potential, improving and polishing it every day.

Even if selling your company isn't an option, operating the business as if someone might buy it at any moment is generally a good idea.

Running your business as if a potential buyer is looking over your shoulder will help you maintain excellent business records and nip any small problems in the bud before they become major concerns.

In discussions around this topic with the board members, these issues resonate:

• Keep highly accurate financial records as Tax Returns with the corresponding Financial Statements for each completed FY (up to 5 years is ideal) along with a reliable internal or even external bookkeeping system in place.
• Accurate stocktaking should be conducted regularly and any 'old or slow-moving' stock should be sold off well in advance of the business being offered for sale.
• High stock levels for specific businesses such as wholesale distribution is a big problem in any sale as it can greatly affect the Return on Investment (ROI) on the Buyers investment
• If the business employs staff, be sure that the Seller is clear regarding their position is Full Time, Part Time, Casual, Contractor. Etc.
• The business owner should keep an up to date schedule of current assets (as per Depreciation Schedules, etc.) and should dispose of assets that are no longer used in the business which will make the sale of the business much easier.
• Owners / Directors that must be on the Agency Agreement to sell the business and must be included in the Sale Contract.
• A simple ASIC check of the business ownership should be done by the broker and the solicitors to ensure that all interested parties have full knowledge that the business is being sold.

Another reason why you want to operate your business as if it might sell tomorrow is that there is a slight chance that it might sell tomorrow. You never know what might happen to you or to the others at the head of the company. You want your business to able to continue to thrive and succeed, even if you aren’t able to be there to direct and guide it. Aim to build up your business so that it continues to drive itself, even if you aren’t behind the wheel

Let It Be

Many sessions with my guitar teacher later, I was finally able to entertain my family with many Beatles songs and give them a much needed class in essential rock and roll history.

I also managed to remind myself that things get done quicker and better when I arm myself with the right tools and surround myself with experienced people who listen, understand, engage and advise. It’s made me a better guitarist and a better businessperson.

www.greymattersadvisory.com.au