Analysing where your business is right now…
BizGro Questionaire
BizGro owner John Maher “I have now decided to make this my life’s work; help business owners to get a life again, plug the gaps, restore their work/life balance and help them build an asset which is investor ready. Even if they decide not to sell, they will become free to enjoy the wealth created.”
What can we do for you? Well that depends on where you are at and where you want to go.
To determine this, we will work our way through the following questions together.
Once completed, we will have enough information to put together a report or action plan on what you would need to do to achieve the desired objectives e.g. Give you a successful business which operates on auto-pilot and delivers at least equal or more than when you lived in the business.
So let’s get started:
Company Profile/ Background:
Owners Background:
Company background:
Where do you, the owner want to take this? Is there a clear strategic vision? Does everyone know what it is? Is everyone pulling in the same direction?
Who does what?
Is there a “system” in place? Is there an Operations Manual, policies & procedures, inductions, training, job descriptions & performance appraisals? Does everyone know what is expected of them?
Are there any clearly defined measurable goals in place? This is not only for the individual, but also each dept and indeed the whole company.
S.M.A.R.T = Specific, Measurable, Achievable, Relevant & time-based.
Sales/Marketing:
Lead Generation: Are the sales team making the most of “no to low cost strategies?”
The soft sell, the consistent presence in the marketplace. Are they networking, business group breakfasts etc. Industry associations? Chamber of Commerce?
Are leads being captured? How?
What is the follow up procedure? You do have one??
What is the conversion ratio?
Do you maintain a database or better still a CRM accessible to everyone who will deal with a customer throughout the project?
Staff/ Key people
Does each person know what is expected of them? Do they have a job description and clear KPIs?
Does your company have a Skills Matrix detailing clearly which employees are capable to complete each task, this should be cross-referenced. This same matrix should be able to pick up on potential weaknesses and allow for training.
What is the general attitude, morale, commitment in your staff, honest opinion required here?
Do you really know your people?
Are you getting the best from them?
What do they really want?
Are they committed?
Do they know what you and your company stand for?
Financial Data
LFY YTD Budget
Sales T/O
GP%
NP%
Sales staff
Do you have an Accounts Receivable dept/person? Do they have a clear understanding of what is expected? Is there an S.O.P? Current days in receivables? Cost of stock on hand?
Operational Data
Product Mix? Winners vs. Losers?
Supplier contract reviews?
Production efficiencies?
Is the plant layout optimized? E.g. could you implement cell manufacturing?
Work flow; from inwards goods to Despatch in the shortest line.
Have you eliminated clutter, obstacles etc, to streamline workflow, eliminate heavy lifting etc – look at 5S here.
Reduce WIP by promoting JIT systems, quicker the job is finished, quicker you get paid!!!
Stock reduction – both raw material & finished goods. Communicate with suppliers and customers regarding forecasts, consignment stock etc.
The basics for the owner of an SME…
BizGro: Helping you the business owner to get a life again, plug the gaps, restore work/life balance and build an asset which is investor ready. Even if you decide not to sell, you will become free to enjoy the wealth created.
What can we do for you? Well that depends on where you are at and where you want to go.
To determine this, we will work our way through the following questions together. Once completed, we will have enough information to propose an action plan to build a successful business which operates on auto-pilot. So let’s get started:
- Strategic Plan
Where do you, the owner want to take this? Is there a clear strategic vision? Does everyone know what it is? Is everyone pulling in the same direction? What are the company’s goals for the year ahead? Are they SMART?
Does the company have a business plan? Not the one in the bottom drawer you used to get a loan from the bank but a real live step by step document with stated goals and how you will achieve them. This will keep you accountable.
- Sales/Marketing:
Lead Generation: Are the sales team making the most of “no to low cost strategies?”
Are leads being captured? How?
What is the follow up procedure? You do have one??
What is the conversion ratio?
What is your market share? Who are your competitors?
Do you have a USP, if so what is it?
Do you maintain a database or better still a CRM accessible to everyone who will deal with a customer throughout the project?
Is the company webpage updated regularly, are any social media sites used, how about SEO, Google ad-words etc?
Do you have a regular newsletter?
Do you test & measure your marketing?
- People
Does each person know what is expected of them? Do they have a job description and clear KPIs?
Are regular performance appraisals undertaken?
Does your company have a Skills Matrix detailing clearly which employees are capable to complete each task, this should be cross-referenced. This same matrix should expose potential weaknesses and demonstrate the areas that require development.
What is the general attitude, morale, commitment in your staff, honest opinion required here?
- Financial Data
LFY YTD Budget
Sales T/O
GP%
NP%
Sales staff
- Operational Data
Product Mix; identify the winners & losers. What is average G.P% of each?
New product development; what is the current product’s lifecycle status?
Production efficiencies; is the plant layout optimized? E.g. could you implement cell manufacturing?
Are there SOP’s in place for every process? Are they revised regularly?
Have you eliminated clutter, obstacles etc, to streamline workflow, eliminate heavy lifting etc – look at 5S here.
Reduce WIP by promoting JIT systems, quicker the job is finished, quicker you get paid!!!
Supplier contract reviews?
Supplier terms, consignment stock etc?
Food for thought then 
Lean Thinking – The 7 Wastes
Lean Thinking and what does it mean for your company?
Like you I hear words like ”LEAN” and “5S” being used extensively in manufacturing circles.
But what does it mean exactly?
How will your company benefit?
What will the future state of your business look like once implemented?
In fact Lean is not really about 5S at all, it’s much more than that if we embed the lean culture in the mindset of everyone. For this to be successful, your management team must fully support it, believe in it & nurture it. You will need to allocate resources towards training (both time & dollars), you need to promote and encourage lean thinking in every aspect of the business because the leaner the business becomes, the more profitable it will become.
Why do I say that? Because you have already quoted a fixed price for the job so as the manufacturers your company ( read people) determine your cost (and therefore the profit) by how much waste they are willing to tolerate!!
The objective therefore of Lean is to identify, analyse, and eliminate all sources of waste in all operations.
The Seven Deadly Wastes:
Overproduction: this is producing more than is required to meet customer demand. . A root cause analysis of the processes would uncover the real inefficiencies whether it is set-up time, lack of training, poor methodologies etc then working on a solution. If there is no system “pulling” the work thru, each department will manage its own work, keeping its workers and work centres busy; unfortunately not on the work needed!! A thorough understanding by all supervisors, programmers, planners and managers of “The Theory of Constraints” would greatly help here.
Waiting: due to poor planning, we see a lot of waiting – waiting on material, information, machines, tooling & forklifts. Better planning and educating people to do something while waiting will greatly assist here.
Transport: Moving of parts unnecessarily is a waste. Look at planning, layout and processes to minimize this.
Over-processing: Best explained as fit for purpose e.g. finish pass (with finishing tool) when machining a dimension that does not require it or tighter than necessary tolerances. Eliminate anything that does not add value to the customer.
Inventory: Excess stock of anything is waste. Look at the supplier holding stock instead of your store or consignment stock.
Motion: Again any movement of people, machines or material that does not add value is a waste. Look at cellular layouts, 5S and Kaizen to eliminate waste here.
Correction of defects: Rework costs time and money as well as the MPO. Poka-Yoke can greatly assist in this area. Poka-Yoke or mistake proofing should be used to avoid the kind of mistakes we see all too commonly e.g. the plunging of tool in rapid into the part. Look at the methodologies used and ask what can go wrong?
So what’s your excuse?
Yes, we all make them, whether it’s in relation to our wealth ( or lack of it ), our careers, our relationships or our health, we are all guilty!
It’s so easy to blame others, the economy, the weather, our genes etc. It’s not our fault, it’s the bloody government. Or it’s the market; if only the market improved, I would sell more!!!
So what’s your excuse? Do you really believe it? Are you really going to continue to tell yourself that or are you going to do something about it?
Are you blaming the market, yet your competitors are busier than ever? An example of this behaviour locally where I live is real estate agents who blame the market for their lack of sales yet there are others who are smashing sales records month after month! The life coach Paul Blackburn defines the difference very well with his simple but true formula called “Playing above the line”. In Paul’s basic formula you can play above the line and take ownership,accountability and responsibility for your relationships (whether business or personal) or you can continue to play below the line and blame, make excuses and deny. Where would you rather be?
Ok, so now we know the problem, let’s look at the solutions:
- Stop being the victim! Step up, do something about your situation. The blame game stops now!
- Appreciate what you do have! Whether that is your health, wealth, family, experiences, career, beauty or whatever, be grateful! Realize that we are all unique, never take your experiences for granted; in the early days of my consulting career I never thought to use stories from my past to substantiate advice I was giving; basically I took my experience for granted not realizing that those experiences were unique to me. Because of our life experiences we all have something to offer, you need to realize that we are all unique, so never take for granted your knowledge, experience, successes and/or failures. We learn from all of them.
- Vision: Are you making excuses for not realizing your dream life yet have not taken the time to work out exactly what that life is? Take the time ( just as you did in the “5 Steps” series) to decide on the life of your dreams, what is it you enjoy doing? Can you turn this into a profitable business? What needs to be done for this to happen? What are your personal goals? What would you like to change/improve in your relationships? How about your life purpose? What will you be remembered by? Put another way, if you were told that you have a terminal disease, what would be your regrets, both what you wish you hadn’t done & what you wish you had. How does that feel? Are you passionate enough about any of these regrets to focus and commit to making them happen?
- Focus: Once you have decided on your vision this must become your FOCUS, your obsession until you achieve it. If it is really important to you, then you will make it happen. Don’t be the “Ali Hafed”character of Acres and Diamonds though! Know what you have and appreciate it’s value! Create a Vision Board with images of what you WILL achieve, set a timeline of your goals, write up a one-page laminated FOCUS page, include your affirmations, read them daily, believe in them (you). Make it happen.
- Persistence: Be persistent in your efforts, even if at the beginning you see no results, bear with the program. For example, if you are working on improving your relationship with a loved one after years of neglect, don’t expect to get hugs & kisses when you propose a night at the cinema or restaurant or whatever. Build slowly on your efforts, be positive, smile & be persistent!
The BizGro guide for business owners – exercises included
A business owner’s guide to building a healthier profit line
and turning the business into a highly saleable asset
Before we begin, imagine its 12 months or two years from now. A potential buyer walks into your business and asks to see how things operate….
You happily walk her through your business pointing out how these days it runs without you, how you have systemized each and every process, how from anywhere in the world you have the ability to log in to the management reporting system and instantly have a snapshot of the key profit drivers.
Then with the click of a mouse you demonstrate this; you can clearly show that the company is indeed one worth buying, profits are healthy, and the business is one which has consistent sales and proven processes to continue selling.
You certainly have got her attention now; after looking at countless other businesses she was beginning to lose hope, that maybe buying a manufacturing company was not such a good idea.
Now she feels like she has just found the Holy Grail!
In this scenario, you are in the driver’s seat; whether you sell and for how much is your call. You have factual evidence that you do indeed have a healthy & profitable business.
You can clearly demonstrate that it runs without you, you have processes in place to ensure that the business will continue to be profitable regardless of who owns it.
Wouldn’t that be nice? Is it realistic? Absolutely!
Now, you may think this doesn’t apply to you or your business as you have no intention of selling, however being investor ready is much more than that; by following the five steps outlined in this guide you will build a business that will run without you, giving you a very saleable (and valuable) asset and the freedom to choose what to do with it.
To begin with, you will have an exit strategy when/if you need to sell and at the very least you will have real equity in your business.
Did you know that the majority of businesses for sale are in fact “unsellable”?
Having previous experience as a business broker I can tell you most business owners that asked me to sell their business:
1) Did not have anything more than a job with overheads and
2) They were in fact the business, if they didn’t turn up things didn’t happen.
According to research undertaken by Andrew Vincent of “Your Business Success” only 7% of business owners earn more than they could as an employee AND sell their business at a premium.
Also in the same article by Andrew Vincent it is stated that “according to the Australian Bureau of Statistics, over the four year period from 2003-2007, 777,106 businesses ‘exited’ (i.e. quit, went broke, some sold).
That is an average 3,736 businesses per week”.
That’s a lot of broken dreams….
But that’s ok, you’ve already decided that you are not going to be one of them and if you follow these 5 steps there is no reason why you won’t be one of those few who earn handsomely AND sell the business at a premium (if and when you want to).
A word of caution before we begin however: the steps outlined below are deceptively ‘simple’.
When you read them, you’ll probably say to yourself, ‘That’s pretty obvious’.
And of course, when they’re detailed like this, they ARE obvious.
If they weren’t, you’d have to be concerned. But that’s actually not the point.
The point is that just ‘knowing’ these five steps is very different from actually APPLYING them.
How many times have you had the intention of working on strategies to grow the business, systemize it, improve efficiencies etc; only to get dragged into day-to-day issues?
Then getting frustrated because this is what you pay your staff to do?
Sounds familiar? I see it all the time.
Actually, your employees are possibly just as frustrated as you are. To perform optimally, they need to know and be involved in the company’s strategic vision, helping to create the vision & the strategy so that they own it and believe in it.
Without this vision, they don’t know where they are going and then you get upset because they haven’t arrived yet.
When I work with business owners this is one of the first things I help them to do; decide on the vision and the strategies required to achieve the vision. Then, through a series of workshops I help with their implementation.
Obviously, whether you decide to utilize my expertise & experience to implement these 5 Critical Steps to being investor ready is totally up to you; they are actually broken down to their most basic form to allow you to follow them on your own.
The question is: will you have the discipline required to methodically follow each and every step, to focus on that potential buyer two years from now?
Remember, if you fail to plan, you plan to fail.
As we work our way through this guide you will see some examples of how I have successfully implemented the five steps over the years; the reason for this is twofold: to clearly demonstrate that I can actually help if you decide to call me, on the other-hand if you decide to go it alone, you will have real world examples in each step to help you “become investor ready”.
So let’s get started, what are these five steps?
1. Strategic vision:
Do you have a clear objective for your business?
If not, think about what it is that you want to achieve both personally and in business, then begin to plan the route to get there.
Maybe it’s more time to enjoy family or maybe you have aggressive expansion plans for the next five years before selling the business and retiring on the great price achieved.
The important thing is this; it must be what YOU want to do, then become passionate about it, make it your focus.
Put the systems in place to help you achieve your vision, whilst focussing on the desired outcome.
- What goals will your business achieve today, next week, next month, next year?
- Do your employees know what these goals are?
- How will they be achieved? Are they in fact achievable?
- Do you have the resources; if not what do you need to do to obtain them?
It is imperative that first of all both you and your people have a clear vision of the goals to be achieved and what is expected of each team member.
To do this you need to provide the map and what each team member is expected to do on the road to your destination.
Communicate the vision and the strategies to achieve the vision.
Set milestones and don’t forget to celebrate each one with your team
Make the Strategic Vision S.M.A.R.T.
Specific – what exactly you are going to achieve e.g. $5 million in Sales, 40% increase in profit etc.
Measurable – To get results you must measure them, gauge where you are now versus where you want to get to.
- Do you know how many enquiries you get weekly, monthly?
- What is your conversion ratio?
- How often do your customers buy from you?
- What is the average sales value?
By focusing on these profit drivers alone you will greatly increase the value of your business.
Achievable – Make sure that your goal is achievable otherwise it will be unlikely to get employee buy in.
Relevant – the goals must be relevant to your business – its reason for being a goal must be valid.
Time-based – it is essential in order to achieve your goals that they have a timeline e.g. “We will implement a sales training program focussing on improving conversion ratios by 1 March 2011 for all sales staff” and not “We will do some sales training next year”.
Your Strategic Vision should be documented in detail – this is a live business plan, a road map with clear directions, a how-to manual, which should be reviewed quarterly and updated yearly.
A suggestion here: to ensure successful implementation, start this process with a full day (uninterrupted by phones/email etc) off-site meeting with your key people; ideally use a facilitator to keep the meeting on track and to give unbiased opinion. You could use your external accountant here or a business consultant.
Over the years, I have been involved in both world-class Strategy Workshops and run of the mill “doing it because everyone else is” or “my accountant said it’s tax deductible so we just treat it like a perk for senior management”. I’m guessing you know which company actually achieved their goals.
Begin the meeting with a PEST (Political, Economical, Social & Technological) which is focussed on external factors and is especially useful in determining the state of the marketplace.
This should then be followed by a SWOT (Strengths, Weaknesses = internal factors) & (Opportunities & Threats = external factors).
Allow staff to be totally honest here without fear of retribution, take the feedback on board, avoid being negative. This insight is a critical success factor to achieving your Strategic Vision. Utilize it!
Then do the same thing in regards to your competition: PEST analysis followed by SWOT analysis.
What do you do better than everyone else, why should customers buy from you?
Strive for Operational Effectiveness i.e. doing what you do better than the rest of your industry.
Ideally your strategy meeting will be followed by several workshops to work on issues which become apparent, as well as take advantage of obvious opportunities. Treat each of these workshops as seriously as you did the strategy workshop, no shortcuts.
Exercise 1 – Strategic Vision
- What is your vision of the business in 3 years? Write a clear statement here, e.g.
“My business will generate $xx,xxx,xxx with a net profit of $x,xxx,xxx. I will work x days per month and this will consist of big picture strategic decisions and implementations. Thanks to exceptional business & people systems my business will generate these consistent returns without the need of my day-to-day involvement”.
Is there an action plan in place to achieve this vision? Is it S.M.A.R.T.?
- Define your plan here:
Do you have the buy-in of your key employees? This is a Critical Success Factor!
To give your team a fair chance of arriving at their destination, they must know where they are going!
Exercise 2 – Who does what Checklist
- Who does what in your business?
- Who generates the income?
- Who is responsible for marketing, ordering stock, inventory levels, manufacturing, logistics, customer service, AR/AP, account reconciliation etc?
You Employee Outsourced
| Sales/ Marketing | |||
| Manufacturing | |||
| Procurement/Inventory Control | |||
| Accounts Payable/Receivable | |||
| Payroll | |||
| Human Resources | |||
| Delivery/Logistics | |||
| IT & Communications |
Do you own a business or a job with overheads?
To grow your business and turn it into a saleable asset, there must be clear direction on who does what and who is accountable! Develop systems, policies & procedures that ensure the business operates efficiently and profitably without you.
2. Marketing Your Vision:
Ok, so you and your team now have a clear objective – its time to tell the world.
If as part of your strategy meetings and workshops you didn’t work on your USP (Unique Selling Proposition); it’s time to do it now.
- What is it that differentiates your product or service from your competition?
- What makes it unique, better?
- Is your product cheaper, is it faster, is it lighter or smaller etc.
Whatever it is, make this your point of difference and make sure your target market is aware of it.
Define in a clear concise statement what your USP is:
Next, do a stock-take of your marketing collateral.
Look at it with the eyes of a potential customer; would you be interested?
- Does your marketing use the AIDA principles of Attract, Interest, Desire, Action?
- Do you have a presence on Internet?
- Is your webpage outdated or is it a live, up to date interactive experience?
- Does it have information to attract, get prospects interested, stimulate desire and importantly a call to Action?
For example you could offer a free “how to guide” about your industry, product reviews or a tutorial, available by entering your email address. This contact then becomes a potential lead and with the right systems in place will be followed up, e.g. by the use of a squeeze page capturing the prospects contact details and entering them directly into the CRM as a lead!
- Follow up is critical, how often do your sales team follow up on a lead or enquiry?
- How do you know?
A great tool which is essential to you being able to let go, to walk away knowing that KPIs will be met, is to implement a CRM, ideally one that is internet based allowing you the owner to log-in from anywhere in the world (e.g. from the back of your yacht) and check sales activity, orders, profits etc.
One such product is Sales-force and if you are in the manufacturing or service industries, there is a great product called Biz-linc from Web-linc in Brisbane Qld. It is based on the Sales-force platform and is actually a complete business process management tool, managing everything in your business. It can even be linked to your accounting package.
By the way, I am in no way associated with Web-linc, but after researching the CRM software available for a particular client of mine, I can say that it is perfectly suited to manufacturing/service oriented businesses & is affordable both in implementation and maintenance with no need for software updates and expensive SQL servers.
So, yes I definitely recommend it. Worth checking out – www.weblinc.com.au
Whether you use a CRM or not it is imperative to measure every aspect of the sales process.
Do you know that by focusing on the following five profit drivers and measuring the results regularly in each you can transform your business?
- Increase leads: create and send newsletters regularly to your existing database of customers & prospects, ask for referrals and testimonials, join industry associations and local business groups. Attend networking events.
- Increase conversion ratio: develop scripts and follow-up processes.
Insist that your salespeople read this book:
www.businessballs.com/freespecialresources/Consultative_Selling_ebook.pdf
- Increase the number of times a customer buys from you: Treat them as a VIP buyer, give them discounts, celebrate milestones with them, ask for feedback and act on it
- Increase the average sales value per customer: encourage your sales staff to up-sell, create a simple form that they tick off each of the options they have offered their customer
- Increase your Gross Profit: through the systemization and continuous improvement of processes discussed later in this guide it is more than certain that you can increase your current GP by 10%
For example you have 100 leads and a 20% conversion ratio, now let’s apply the 10% increase:
| Currently | Increase% | After | ||
| Leads | 100 | 10% | 110 | |
| X | X | X | X | |
| Conversion % | 20% | 10% | 22% | |
| = | = | = | = | |
| Customers | 20 | 24 | ||
| Frequency | 5 | 10% | 5.5 | |
| X | X | X | X | |
| Average Sales Value | $25,000 | 10% | $27,500 | |
| = | = | = | = | |
| Average Customer Value | $125,000 | Becomes | $151,250 | |
| Customers | 20 | 21% | 24 | |
| X | X | X | X | |
| Average Customer Value | $125,000 | 21% | $151,250 | |
| = | = | |||
| Total Sales | $2,500,000 | Becomes | $3,660,250 | |
| Gross Profit % | 20% | 10% | 22% | |
| Total Sales Increase | $2,500,000 | 46% | $3,660,250 | |
| X | X | |||
| Gross Profit % Increase | 20% | 10% | 22% | |
| = | = | |||
| Profit | $500,000 | Becomes | $805,255 |
By focusing on each of these key areas and achieving 10% increases in each, we have increased profit from $500k to $805k!
Is this possible? Yes, I believe so, but even if you were to only achieve 5%, wouldn’t that still be worth the effort?
Remember also, that what gets measured gets results.
Focus on increasing the number of leads, the conversion ratio, the number of customers, their average sales value and the profit on each sale and you are guaranteed to get incredible results!
Exercise 3 – Sales & Marketing
- Leads/Enquiries per month:
- Is every enquiry captured?
- Closed sales/orders per month:
- Average sales value?
- No. of transactions per customer?
- No. of customers per year (i.e. who actually bought):
- Are your sales people active in networking groups, associations etc?
- Is your webpage updated regularly?
- Does it capture enquiry?
- Is there a follow-up procedure? Explain:
- What is the conversion ratio?
- Is there a newsletter or similar to entice prospects to send you their contact details?
- Do you monitor visits to your site with Google Analytics or similar?
- Is the content of your webpage optimized for search engines.
3. Automate your business:
Ok, so you know where you’re going, you’ve decided on how you’re going to market and you’ve got a CRM or similar to measure the results of your sales team.
Now, you need to put systems in place so that you the owner are not a part of the business, so that it runs without you. To do this requires a thorough analysis of your business; who does what, when, why, where?
Rather than just writing down verbatim what each person does, take the extra time to work out the right way, the most efficient way to do that task, then document it.
Where are the gaps and what’s falling through them? What can be done better?
Before coming to Australia 11 years ago, I worked as an Industrial Engineer for a large engineering company supplying pipeline components for the oil & gas industry. I worked in what they called the Methods Department with 12 other people and it was our job to streamline processes, maximize efficiencies by whatever means be it technological, multi-tasking, tooling, training etc.
One particular project I worked on reduced the cycle of a particular process from 4 hours to just 13 minutes! Just by studying the process and comparing it to “best-in-world” technology, then implementing same.
Was there investment? Of course, but let’s look at the ROI; 4 hrs = 240 mins
240 / 13 = 18.46!!! That’s 18 components completed in the same time as one previously!
What was the investment? Almost $100,000, but if we look at the gains:
Labour cost of $80 p/h X 240 mins = $320 for 1 = $320
Labour cost of $80 p/h X 13mins = $320 for 18 = $17.77
This project paid for itself in 33 weeks.
Since I implemented this change in their French branch in 1998, it has since been rolled out globally (this is a company with 66000 employees). What do you think the real ROI is on this implementation? I would conservatively say, millions!
So as I said, don’t just describe each and every process. You’re going to have to study each process anyway, so you may as well look at possible ways of improving it. That’s also a good reason to have a fresh pair of eyes involved; after all you don’t know what you don’t know.
I had a prospect recently who complained that he needed to move to bigger premises; later when the prospect became a client and I got the opportunity to explore further, the reality was very different. It turns out that this particular business owner (a pre-fabricated home manufacturer) thought he was doing the right thing manufacturing the roof first as for engineering calculations this is the first part of the house designed.
It’s also the last part of the house required on site though, so his yard was full of product he couldn’t ship! Obvious I know, but a serious dent to cash-flow!
While you are looking at the processes, it wouldn’t hurt to also consider the plant layout; can it also be improved? Is there an opportunity for cell manufacturing for example?
As an industrial engineer I had the opportunity to consolidate my employer’s Scottish plant into their French plant; all 200 machines, lathes, mills & CNCs.
I took advantage of the opportunity to also review current work practices. This resulted in several work centres being moved so that the operator could work on 2 processes simultaneously.
It also increased production output by 66%. What would these sorts of increases do for your business?
How about procurement? Are there opportunities there for improvement e.g. terms of trade, consignment stock etc? Are you aware that by improving your inventory turnover you are also releasing hard cash that can be better used elsewhere?
Exercise 4 – Stock Control
- Do you know what your stock turnover is?
- Do you do regular stocktakes?
- Are you managing the procurement of stock efficiently?
- What are your average days in Accounts Receivable & Payable?
Managing these areas of your business will dramatically improve cash-flow!
I always remember one particular case whereby the company always kept a minimum of 12 winches in stock, the supplier also kept a minimum of 20 winches in stock and they were only five minutes away! At over $1000 each, that’s a lot of money tied up for no good reason, especially as the company was only using on average 6 winches per month.
A client in the balustrade business last year came to me complaining about being behind budget, yet having large order books & couldn’t understand what was wrong. After investigation it was a simple matter of “horses for courses”. This particular client was struggling to fulfil orders because his company was going over the top with the product supplied versus the product required. In effect they were having every single item outsourced to a stainless steel fabrication company who used TIG welding as the process to assemble. I quickly found a product of equal quality which simply clicked together and budgets were quickly surpassed.
So investigate just what you can and can’t do in the procurement area.
Create SOPs (Standard Operating Procedures) for each process, write scripts, take photos, and produce videos where applicable. From answering the phone to invoicing, manufacturing to dispute resolution – have the process documented.
Create an Organisation Chart: Make sure that it focuses on the roles required to achieve your Strategic Vision rather than the actual people who currently perform those roles. Include roles that will be required in the future even if you do not yet have people to fill them.
All this documentation may seem like an awful lot of work but the rewards are enormous! The time and effort put in at this stage will determine just how much of a saleable asset you have. Shortly after arriving in Australia, I worked as the Manufacturing Manager in the number 1 engineering plastics supplier in Australia. They were number 1 precisely because they systemized everything. 18 weeks of the year every Wednesday at 8am all staff were required to attend compulsory training, each week was different and everything from customer service to product information was covered.
And the result? The business sold for tens of millions.
Imagine again, two years from now as you walk that potential buyer through your business, how maybe now that the business runs without you, you’re not even sure you want to sell but it feels good to hear just how much your business is now worth.
Don’t take shortcuts here, many companies simply copy and paste these documents from the net and unfortunately it shows.
Again put yourself in the shoes of a customer, in this case the potential buyer of your business sometime in the future; are these generic documents or are they tailor-made policies and procedures for your company?
Are they professional looking? Are they reviewed and updated periodically and not just done once and left on the shelf?
Is everyone aware of and does everyone follow these procedures to the letter?
Have all the staff been trained in the application of these procedures?
This doesn’t mean you shouldn’t use Internet; of course you should, it’s a fabulous research tool. There are some great resources, tools, templates and spreadsheets available and you would be silly to re-invent the wheel. However, it is imperative to customize the resources you download to your particular business.
Please make sure also to give credit to the authors of material you download. A great starting point for your research would be www.businessballs.com
Again, I have no association with the owners of this site, but it does have some great info on there!
Exercise 5 – Systems
- Is there a system in place?
- By system we mean is there documentation in place for each process in the company?
- Does everyone understand the workflow?
- Is there a central database which can deliver an up to date snapshot of where the business is at?
- Can you quickly & accurately find out the current status on a job, a debtor, the sales pipeline or aged debtors?
YES NO
| Operations Manual | ||
| Policies & Procedures | ||
| CRM/MRP or similar central database | ||
| Skills Matrix & Training Program | ||
| HR Manual, Inductions, job descriptions & appraisals |
- Is staff turnover high by your industry standard?
- What is staff morale like?
- Do your people feel empowered to innovate?
- What about career development?
- Are employees encouraged to develop their skills
4. Which brings us to your people, their skills & their aspirations?
- Are you getting the best out of your people?
- Are they getting the best out of you?
I have met many owners who mistakenly believe that this is unimportant, that if staff aren’t happy that there are plenty more to take their place!
Wrong! Remember the goal here is to make your business “investor ready”.
Investors aren’t interested in buying a company with high staff turnover, low morale, quality issues and customer service issues.
Investors are interested in buying a company, which is in fact run by employees who are supported by systems, have clear objectives and a product which fills a need.
Your people therefore, are important.
Start by re-interviewing them, yes, even if they have been with the company several years.
You wouldn’t believe the number of times I have heard a business owner complain about a certain skills shortage, not realizing that they actually employ someone with that very skill-set.
Only last week I seen it happen with a client in the construction industry, who desperately needed a designer, yet was unaware that a labourer on his factory floor had seven years experience designing homes!
So listen to the people you have in your organization, to their grievances, their aspirations, their ideas, their wants and needs. It’s a guaranteed win/win.
Remember at the beginning of this 5 step process you created a road-map for your business, well now it’s time to create one for your employees. What do they aspire to? How can you help and how does it help you?
Create a skills matrix for all your employees, you will immediately see the weaknesses in your organisation – fill these first; e.g. if you only have one person who can do a particular process such as set up a machine in your production department make it a priority to up-skill at least two other employees to do this process.
A couple of years ago, just before going out on my own, I had the dilemma of basically trying to achieve 4 months work in 6 weeks. Guess what! With the privilege of a well-honed skills matrix and employee buy-in to the project we got it over the line.
Set a budget for training, encourage all employees to progress, organise regular internal training sessions, not only on manufacturing processes but also on customer service, negotiating, products, sales, time management etc. Encourage professional and personal development outside of the company.
Create job descriptions for each role, include responsibilities and KPIs.
Implement performance appraisals and stick to them.
Consider 360-degree performance appraisals where you seek feedback from the employee about their superiors and from external and internal customers and suppliers regarding your employees. To fully profit from this type of appraisal, the objective must be to improve your business as a whole rather than randomly pick on criticisms.
Appreciate your people, involve them in decision making, encourage innovation, empower them to be creative, most importantly get their buy-in on where the company is going, do this by explaining the WIIFM (what’s in it for me).
On several occasions I have seen production practically double by simply involving those who know best, the very people who do the job every day, seek their advice.
If it was their company what would they do differently? Explain for example that you need to ramp up production in order to get that important order, how can it be done?
On one occasion, I had a client who was stressing that he needed more welders, better welders, more commitment etc.
After a brief discussion with the welding team where I asked questions, then listened to what they could do to make it happen, we managed (with some investment) to get the number of unit produced daily from 8 to 14.
That’s a 75% increase in production. What’s that worth to you?
Let your employees’ offer the solutions and you can be sure that they will be committed to making it happen.
Create an environment that encourages people to give their best, to grow along with the company.
Again, remember the goal is to make your business investor ready.
5. Freedom to choose:
Ok at this stage you have a business which runs without you, what next?
You’ve done the hard yards; you must now optimize your achievements by putting in place continuous improvement programs to ensure that the business can go on running without you.
I would suggest here that the strategy workshop you ran back in Step 1 be run twice a year, ideally a couple of months out from the beginning of the financial year and again at the half-way mark. Include budgets, capital expenditure and new product development.
Speaking of which, where is your product in its lifecycle, should you be preparing for its replacement. Do you have a replacement? Make this part of your strategy.
Now is not the time to take your eyes off the road! Sure, your business now runs without you, but make sure that you keep planning ahead; this is not a one-off exercise.
Well done!
You now have a business that is “investor ready”.
You have a saleable asset; whether you decide to ever sell it is entirely up to you.
You have regained your freedom, you are comfortable in the knowledge that you have a profitable business and that you have reliable cash flow projections.
Now you really get to enjoy working on the business, whether that’s networking at events, working on joint ventures, contemplating licensing or franchising – it’s totally up to you!
Maybe you have always wanted to expand interstate or overseas? Thanks to the first four steps, you are now in a position to be able to seriously consider this.
With your strategy, marketing, systems & people all aligned, you now really can set up distributors, licensees or franchisees and/or become an international company.
The reality is; you now really do have the freedom to choose and have the tools available to know the implications of your decisions.
This is the exciting part; you have now arrived in the top 7% of SMEs.
So there it is; the 5 critical steps to becoming investor ready.
I hope this guide has been helpful, that it inspires you to act and that you achieve your goals.
About the author of “5 Critical Steps to Making Your Business Investor Ready”:
With over 26 years in manufacturing and a good many of those in management roles I have successfully implemented the above steps several times.
As a business growth specialist, I help business owners become investor ready. It is also something I am very good at and enjoy doing.
Why would you hire my services rather than one of the many consulting or coaching franchises who have probably knocked on your door telling you how great their program is and how it will increase your profits in a few simple steps?
Well, the problem is that they are mostly selling a one-size fits all out-of-the-box package which they received on their one week training course after paying a substantial franchise fee. Chances are they don’t even understand manufacturing.
What they really sell you is a step-by-step guide on how you need to systemize your business and that they are there to keep you accountable. Now that’s fine if their experience actually aligns with your needs, however I have found that in most cases they are marketing people.
On the other hand, I have been in manufacturing all my working life, know and understand how it works. I don’t sell programs; in fact I don’t sell anything!
What I offer is to work side-by-side with you and your senior management team to:
- Prioritize problems/issues to be resolved
- Agree on expected outcomes
- Agree that this is something I can resolve
- Agree on the value of these outcomes i.e. extrapolate the added value of the exercise to your company and what this is worth.
To put your mind at ease, if the work that needs to be undertaken is not within my expertise I will say so.
If I don’t honestly feel that I can help you get to that day with the potential buyer where you really do have a saleable (and valuable) asset then I will decline the contract.
Imagine again its 12 months or two years from now.
A potential buyer walks into your business and asks to see how things operate….
Will you be investor ready?
After reading this guide you should by now be aware of my capabilities and your needs.
If you feel that the services I offer and the expertise and experience I bring to the table could be of benefit to your company, please feel free to call me to book a diagnostic session.
Please be aware that this will require 45mins of uninterrupted time and will require all decision makers to be present.
Rest assured that this is an obligation free session to determine the status of your business and if indeed I can help.
John Maher Business Growth Specialist 0425 781 752
Step 5 of 5: Turning your business into a profit-making machine!
If you have followed each and every step up to now, you should be in a position to finally enjoy the fruits of your labour. Obviously, if you haven’t implemented any of these steps but instead continue doing what you have always done whilst expecting different results, well then I’m afraid that this guide will be absolutely useless!
Until you change your mindset:-) Which, after re-reading this guide I am confident you will do, as you realize that doing what you have always done and expecting a different result is actually the first sign of madness!
But you are a successful business person who understands a basic 5 step program and how important it is to implement it.
You do, don’t You?
As I said in the introduction to this guide, it is deceptively simple at first glance, however after years of experience in various industries I can tell you that the businesses I know who implement each and every one of these are few and far between. I can also tell you that the best example of successfully implementing all 5 of these steps that I know of (and sold by a mentor of mine) actually achieved a sale price of well over $80M and the business wasn’t even freehold!
For those of you who have read all five steps, this is the same company I worked in when first arriving in Australia with the incredible mentoring & training of all staff each Wednesday, 18 weeks of the year. Who said employees were unimportant?
Now, for Step 5: Freedom to choose
Okay, at this stage you have a business which runs without you, what next?
You’ve done the hard yards; you must now optimize your achievements by putting in place continuous improvement programs to ensure that the business can go on running without you.
I would suggest here that the strategy workshop you ran back in Step 1 be run twice a year, ideally a couple of months out from the beginning of the financial year and again at the half-way mark. Include budgets, capital expenditure and new product development.
Speaking of which, where is your product in its life-cycle, should you be preparing for its replacement. Do you have a replacement? Make this part of your strategy. Have your team (because at this stage they are running your business) look into R & D grants, Export Development grants etc.
Now is not the time to take your eyes off the road! Sure, your business now runs without you, but make sure that you keep planning ahead; this is not a one-off exercise.
Your role at this stage is that of CEO; it is important that you analyse the reports, benchmarks, KPIs etc AND act on them. By this I mean request clarification, express concern, demand action!
Continue to look to the future with ongoing growth strategies, consider JVs, mergers & acquisitions.
Even at this stage (and in reality even more so), independent advice is critical, be active in business leader associations, use a mentor, give & receive feedback AND act on it!
Well done! You now have a business that is “investor ready”.
You have a saleable asset; whether you decide to ever sell it is entirely up to you.
You have regained your freedom, you are comfortable in the knowledge that you have a profitable business and that you have reliable cash flow projections.
Now you really get to enjoy working on the business, whether that’s networking at events, working on joint ventures, contemplating licensing or franchising – it’s totally up to you!
Maybe you have always wanted to expand interstate or overseas? Thanks to the first four steps, you are now in a position to be able to seriously consider this. With your strategy, marketing, systems & people all aligned, you now really can set up distributors, licensees or franchisees and/or become an international company.
The reality is; you now really do have the freedom to choose and have the tools available to know the implications of your decisions.
This is the exciting part; you have now arrived in the top 7% of SMEs.
So there it is; the 5 critical steps to becoming investor ready.
I hope this guide has been helpful, that it inspires you to act and that you achieve your goals.
About the author of “5 Critical Steps to Making Your Business Investor Ready”:
With over 26 years in manufacturing and a good many of those in management roles I have successfully implemented the above steps several times.
As a business growth consultant I help business owners become investor ready. It is also something I am very good at and enjoy doing.
Why would you hire my services rather than one of the many consulting or coaching franchises who have probably knocked on your door telling you how great their program is and how it will increase your profits in a few simple steps?
Well the problem is that they are mostly selling a one-size fits all out-of-the-box package which they received on their one week training course after paying a substantial franchise fee.
Chances are they don’t even understand manufacturing.
What they really sell you is a step-by-step guide on how you need to systemize your business and that they are there to keep you accountable.
Now that’s fine if their experience actually aligns with your needs, however I have found that in most cases they are marketing people.
On the other hand, I have been in manufacturing all my working life, know and understand how it works. I don’t sell programs; in fact I don’t sell anything!
What I offer is to work side-by-side with you and your senior management team to:
- Prioritize problems/issues to be resolved
- Agree on expected outcomes
- Agree that this is something I can resolve
- Agree on the value of these outcomes i.e. extrapolate the added value of the exercise to your company and what this is worth.
To put your mind at ease, if the work that needs to be undertaken is not within my expertise I will say so.
If I don’t honestly feel that I can help you get to that day with the potential buyer where you really do have a saleable (and valuable) asset then I will decline the contract.
Imagine again its 12 months or two years from now.
A potential buyer walks into your business and asks to see how things operate….
Will you be investor ready?
After reading this guide you should by now be aware of my capabilities and your needs. If you feel that the services I offer and the expertise and experience I bring to the table could be of benefit to your company, please feel free to call me to book a diagnostic session.
Please be aware that this will require 45mins of uninterrupted time and will require all decision makers to be present.
Rest assured that this is an obligation free session to determine the status of your business and if indeed I can help.
John Maher
Business Growth Specialist
0425 781 752
johnmaher@tpg.com.au
Step 4 of 5 to turn your business into a profit machine!
In step 3 we finally automated your business by analysing the work-flow; who does what, when & how and then systemizing each and every process.
We’re really beginning to get traction now:
- We have a vision for your business & we have implemented strategies to achieve it.
- We know what your USP is and we have put marketing strategies in place to ensure that your Dream 100 understand why your business is different and why they should be dealing with you.
- We now understand that what gets measured gets results; you now utilize a CRM or similar database to track leads & conversion ratios. You use this same database to send regular updates to customers. Maybe you even went as far as creating an App for smart-phones to connect with them!
- You have developed systems throughout your business which will finally allow you to step back, work on the bigger picture and enjoy the fruits of your labour. But first you need to be confident that your business will survive, no thrive without you.
Which brings us to your people, their skills & their aspirations?Are you getting the best out of your people?Are they getting the best out of you?
I have met many owners who mistakenly believe that this is unimportant, that if staff aren’t happy that there are plenty more to take their place!
Wrong! Remember the goal here is to make your business “investor ready”.
Investors aren’t interested in buying a company with high staff turnover, low morale, quality issues and customer service issues.
Investors are interested in buying a company, which is in fact run by employees who are supported by systems, have clear objectives and a product which fills aneed.
Your people therefore, are important. Start by re-interviewing them, yes even if they have been with the company several years.
You wouldn’t believe the number of times I have heard a business owner complain about a certain skills shortage, not realizing that they actually employ someone with that very skill-set. Only last week I seen it happen with a client in the construction industry, who desperately needed a designer, yet was unaware that a labourer on his factory floor had seven years experience designing homes!
So listen to the people you have in your organization, to their grievances, their aspirations, their ideas, their wants and needs. It’s a guaranteed win/win.
Remember at the beginning of this 5 step process you created a road-map for your business, well now it’s time to create one for your employees.
What do they aspire to? How can you help and how does it help you? Create a skills matrix for all your employees, you will immediately see the weaknesses in your organisation – fill these first; e.g. if you only have one person who can do a particular process such as set up a machine in your production department make it a priority to up-skill at least two other employees to do this process.
A couple of years ago, just before going out on my own, I had the dilemma of basically trying to achieve 4 months work in 6 weeks. Guess what! With the privilege of a well-honed skills matrix and employee buy-in to the project we got it over the line. Set a budget for training, encourage all employees to progress, organise regular internal training sessions, not only on manufacturing processes but also on customer service, negotiating, products, sales, time management etc.
Encourage professional and personal development outside of the company. Create job descriptions for each role, include responsibilities and KPIs. Implement performance appraisals and stick to them. Consider 360-degree performance appraisals where you seek feedback from the employee about their superiors and from external and internal customers and suppliers regarding your employees.To fully profit from this type of appraisal, the objective must be to improve your business as a whole rather than randomly pick on criticisms.
Appreciate your people, involve them in decision making, encourage innovation,empower them to be creative, most importantly get their buy-in on where the company is going, do this by explaining the WIIFM (what’s in it for me).
On several occasions I have seen production practically double by simply involving those who know best, the very people who do the job every day; seek their advice. If it was their company what would they do differently? Explain for example that you need to ramp up production in order to get that important order, how can it be done?
On one occasion, I had a client who was stressing that he needed more welders, better welders, more commitment etc. After a brief discussion with the welding team where I asked questions, then listened to what they could do to make it happen, we managed (with some investment) to get the number of unit produced daily from 8 to 14. That’s a 75% increase in production.
What’s that worth to you? Let your employees’ offer the solutions and you can be sure that they will be committed to making it happen.
Create an environment that encourages people to give their best, to grow along with the company.
Again, remember the goal is to make your business investor ready.
Okay, we’re almost done.
In step 5 you will finally be free to choose!
So until then,
John
About the author of “5 Critical Steps to Making Your Business Investor Ready”:
With over 26 years in manufacturing and a good many of those in management roles I have successfully implemented the 5 critical steps several times. As a business growth consultant I help business owners become investor ready. It is also something I am very good at and enjoy doing.
What I offer is to work side-by-side with you and your senior management team to:
- Prioritize problems/issues to be resolved
- Agree on expected outcomes
- Agree that this is something I can resolve
- Agree on the value of these outcomes i.e. extrapolate the added value of the exercise to your company and what this is worth.
To put your mind at ease, if the work that needs to be undertaken is not within my expertise I will say so.
If I don’t honestly feel that I can help you get to that day with the potential buyer where you really do have a saleable (and valuable) asset then I will decline the contract.
Imagine again its 12 months or two years from now.
A potential buyer walks into your business and asks to see how things operate….
Will you be investor ready?
John
0425 781 752
johnmaher@tpg.com.au
http://au.linkedin.com/in/themakeithappenguy
