Every business, large or small, regardless of industry, depends on getting certain things right on a regular basis. Survival depends on it. These things we like to call the Critical Success Factors.
Critical Success Factors relate to the business porcesses and activities that REALLY drive business results. At the top level, these are:
Processes and activities that are important to acquiring and holding customers
Processes and activities that determine revenue
Processes and activities that impact efficiency and productivity
Processes and activities that determine team morale
To know how well your business is managing these Critical Success Factors, you need a system of measurement. In effect, Key Performance Indicators ARE these measures. It's important to understand how you can develop a set of KPIs that will allow you to monitor your business' performance on these critical processes and activities.
We'll begin a series of postings related to establishing and monitoring Key Performance Indicators in your business. For more information or one-on-one consultation, please call Simons Bitzer at (317) 782-3070 or visit us on the web at www.SimonsBitzer.com.
Monday, June 28, 2010
Monday, June 21, 2010
The Next Great Wave of Innovation - Succeeding Through Turmoil
Do you see change as a threat or an opportunity? Our industries, our society and even our planet are in a state of flux as we struggle to come to terms with turbulent economies, dwindling resources and a changing climate.
In “The Sixth Wave”, a book on business and innovation, authors Moody and Nogrady predict that we are on the cusp of the next great wave of change for the future. They also demonstrate that periods of change in history have always been the time when the greatest opportunities exist for the introduction of new technologies, new products and services, and for inspired ideas about whole new ways of doing things.
If you see change as a threat, you’re taking a “glass-half empty” perspective. You probably say, “I can’t keep up with this constant technological innovation. There’s something new to learn every week.” You’ll be annoyed whenever there’s a new trend in management. You’ll wince whenever you hear of competitors introducing new business processes. You’ll see change as the slings and arrows of business misfortune.
On the other hand, if you see change as an opportunity, you’re taking a “glass-half full” perspective. You are likely to think, “Every time there’s a change, new niches open up for me.” You know that some of your competitors will be slow to adapt and you’ll be the first to step in and relieve them of a few customers. You’ll say to yourself, “I’m a small business. I have a small, flexible and effective team. Adaptability is my middle name. We’re the 'make it happen' people!”
If you take this attitude, business will become more of a game than a chore. You’ll feel freer to think creatively. You’ll try to communicate this attitude to your team. You’ll do so with a frank and open management style, because honesty is the best way to help people manage change. Fear of the unknown is one of the greatest impediments to change in the workplace.
During this time of transformation, stay alert and keep well informed. Look out for the winds of change. Seek advice. A Business Diagnostic and Performance Review from Simons Bitzer & Associates might be a good way to help you scan the external environment for changes in the industry that could have an impact on your business. This review will also analyze the internal operational strengths and weaknesses of your business.
Yes, it may mean major change for your business, but the way to look at that change is to see it as the opportunity for growth and improvement.
In “The Sixth Wave”, a book on business and innovation, authors Moody and Nogrady predict that we are on the cusp of the next great wave of change for the future. They also demonstrate that periods of change in history have always been the time when the greatest opportunities exist for the introduction of new technologies, new products and services, and for inspired ideas about whole new ways of doing things.
If you see change as a threat, you’re taking a “glass-half empty” perspective. You probably say, “I can’t keep up with this constant technological innovation. There’s something new to learn every week.” You’ll be annoyed whenever there’s a new trend in management. You’ll wince whenever you hear of competitors introducing new business processes. You’ll see change as the slings and arrows of business misfortune.
On the other hand, if you see change as an opportunity, you’re taking a “glass-half full” perspective. You are likely to think, “Every time there’s a change, new niches open up for me.” You know that some of your competitors will be slow to adapt and you’ll be the first to step in and relieve them of a few customers. You’ll say to yourself, “I’m a small business. I have a small, flexible and effective team. Adaptability is my middle name. We’re the 'make it happen' people!”
If you take this attitude, business will become more of a game than a chore. You’ll feel freer to think creatively. You’ll try to communicate this attitude to your team. You’ll do so with a frank and open management style, because honesty is the best way to help people manage change. Fear of the unknown is one of the greatest impediments to change in the workplace.
During this time of transformation, stay alert and keep well informed. Look out for the winds of change. Seek advice. A Business Diagnostic and Performance Review from Simons Bitzer & Associates might be a good way to help you scan the external environment for changes in the industry that could have an impact on your business. This review will also analyze the internal operational strengths and weaknesses of your business.
Yes, it may mean major change for your business, but the way to look at that change is to see it as the opportunity for growth and improvement.
Thursday, June 17, 2010
Is A Merger The Way To Grow Your Business?
Most businesses grow slowly. They acquire new customers, add more products to their range, and expand into new territories as their resources permit. However, increased competition can mean that this slow rate of growth is inadequate to retain existing market share. A business could also simply reach a plateau where further growth isn’t possible without finding new sources of capital and increasing the company’s risk exposure.
At times like these, business owners may well consider the possibility of merging their company with another business. The two organizations can be similar to each other or they can be complementary to each other, but at the end of the process they become a totally new business with a new leadership and a new culture.
There are benefits to merging.
Why might you want to merge your business with another business? You might want to extend your geographical reach or simply acquire a large number of new customers. You may need to diversify your product range into higher profit areas or you may require the capacity to fund the development of new products.
It’s estimated that about half of all mergers fail to achieve their projected goals. This means that great care needs to be taken before beginning the process of merging two enterprises.
What to look for in a merger prospect.
The ideal business to merge with is one that will complement yours. Their strengths will offset your weaknesses and the merged entity will be synergistically stronger than the two firms were individually. When evaluating a potential merger partner:
• Look at their management and decision making methods – are they similar to yours?
• Look at their culture. Is it positive? Is it compatible with yours?
• Is their marketing effective and well targeted?
• Is their approach to IT up-to-date?
• What is their risk profile – do they take too many chances or are they too risk averse?
Steps to merging.
The two companies must determine jointly how they will face the future as a unified force. Before a merger can take place there are several steps that each party must take:
• Extensive due diligence must be conducted on both businesses
• Conduct a SWOT analysis on both businesses
• Decide which products will be retained and which will be dropped
• Prepare a comprehensive model showing how the new entity will operate
• Know which employees are essential and which will be let go
• Agree on a management structure including who makes decisions and how they are made
• Agree on a system of remuneration
• Pre-negotiate issues of ownership and responsibility
Invest whatever time and funds are necessary before the event, verify all financial data and get financial and legal advice before proceeding.
At times like these, business owners may well consider the possibility of merging their company with another business. The two organizations can be similar to each other or they can be complementary to each other, but at the end of the process they become a totally new business with a new leadership and a new culture.
There are benefits to merging.
Why might you want to merge your business with another business? You might want to extend your geographical reach or simply acquire a large number of new customers. You may need to diversify your product range into higher profit areas or you may require the capacity to fund the development of new products.
It’s estimated that about half of all mergers fail to achieve their projected goals. This means that great care needs to be taken before beginning the process of merging two enterprises.
What to look for in a merger prospect.
The ideal business to merge with is one that will complement yours. Their strengths will offset your weaknesses and the merged entity will be synergistically stronger than the two firms were individually. When evaluating a potential merger partner:
• Look at their management and decision making methods – are they similar to yours?
• Look at their culture. Is it positive? Is it compatible with yours?
• Is their marketing effective and well targeted?
• Is their approach to IT up-to-date?
• What is their risk profile – do they take too many chances or are they too risk averse?
Steps to merging.
The two companies must determine jointly how they will face the future as a unified force. Before a merger can take place there are several steps that each party must take:
• Extensive due diligence must be conducted on both businesses
• Conduct a SWOT analysis on both businesses
• Decide which products will be retained and which will be dropped
• Prepare a comprehensive model showing how the new entity will operate
• Know which employees are essential and which will be let go
• Agree on a management structure including who makes decisions and how they are made
• Agree on a system of remuneration
• Pre-negotiate issues of ownership and responsibility
Invest whatever time and funds are necessary before the event, verify all financial data and get financial and legal advice before proceeding.
Tuesday, June 8, 2010
Our Top 10 Cash Flow Tips-Part 2 of 2
The best way to ensure that Cash Flow remains positive, timely and available is to have a Cash Flow Plan and Forecast. Below you will find additional tips on managing and possibly even improving your cash flow.
4. Set your credit terms carefully.
If the nature of your business requires offering credit, then it is important to set clear limits to your terms of credit.
5. Get payments in quickly.
Master the art of debtor management. Let debtors know how much time remains before due dates. Stay in close touch with major debtors as payment deadlines approach. Consider offering small discounts for early payment as an incentive.
6. Pay your creditors strategically.
Take advantage of credit terms and prioritize payments according to the consequences involved in going overdue. Wages, taxes and direct debits are at the top of the list for on-time payment; key suppliers may be prepared to wait a while to keep your business. Don’t pay early just to get a discounted price unless getting the discount is better than being without the cash.
7. Plan for the lumps.
Be aware of when lean cash flow patches are coming up and plan accordingly. Avoid funding major purchases from your business’ working capital unless you are sure you have the cash to cover it.
8. Get finance products working for you.
Overdrafts, premium funding, lease facilities and cash flow funding products can all be excellent tools to help match a business’ cash supply with planned outlays. Even the business credit card can be a good way to ease the squeeze as long as you are sure the debt can be paid before interest kicks in.
9. Don’t incur tax and other statutory penalties.
10. Keep your hands out of the till.
Make cash drawings for personal purposes according to conservative cash flow forecasts.
For more information about cash flow projections, please contact a Simons Bitzer team member at (317) 782-3070 or visit us at www.simonsbitzer.com.
4. Set your credit terms carefully.
If the nature of your business requires offering credit, then it is important to set clear limits to your terms of credit.
5. Get payments in quickly.
Master the art of debtor management. Let debtors know how much time remains before due dates. Stay in close touch with major debtors as payment deadlines approach. Consider offering small discounts for early payment as an incentive.
6. Pay your creditors strategically.
Take advantage of credit terms and prioritize payments according to the consequences involved in going overdue. Wages, taxes and direct debits are at the top of the list for on-time payment; key suppliers may be prepared to wait a while to keep your business. Don’t pay early just to get a discounted price unless getting the discount is better than being without the cash.
7. Plan for the lumps.
Be aware of when lean cash flow patches are coming up and plan accordingly. Avoid funding major purchases from your business’ working capital unless you are sure you have the cash to cover it.
8. Get finance products working for you.
Overdrafts, premium funding, lease facilities and cash flow funding products can all be excellent tools to help match a business’ cash supply with planned outlays. Even the business credit card can be a good way to ease the squeeze as long as you are sure the debt can be paid before interest kicks in.
9. Don’t incur tax and other statutory penalties.
10. Keep your hands out of the till.
Make cash drawings for personal purposes according to conservative cash flow forecasts.
For more information about cash flow projections, please contact a Simons Bitzer team member at (317) 782-3070 or visit us at www.simonsbitzer.com.
Tuesday, June 1, 2010
Our Top 10 Cash Flow Tips-Part 1 of 2
1. Know your business’ balance sheet thoroughly.
This may sound obvious; however, many people don’t know how cash flow works and its significance to sustaining their business. Many owners focus on their profit and loss statements alone. Unfortunately, healthy profits can mask an impending cash flow crisis. Profit and loss statements don’t usually contain the information required to make an adequate cash flow projection. For that, you need a structured balance sheet that includes all the influencing factors including debts, interest payments, inventory and so on. This is the basis for your cash flow projection which represents the likely incomings and outgoings over a particular period of time.
2. Set up a cash flow budget.
You need to focus on forward planning to generate a “best guess” about likely future sales and expenses. You can set up your own program in Excel. If you’re not familiar and skilled with Excel software, ask your accountant for help to set it up properly initially.
3. Review and update cash flow budgets regularly.
This is your best insurance against potential cash shortages. If your business has a predictable cash flow, then cash flow budgeting on a quarterly basis is often enough. The rule of thumb is that the greater the cash flow uncertainty a business faces, the more often a new cash flow budget should be prepared.
If cash is really tight, you might need to move to weekly projections and decide which invoices you’ll pay and whom you need to get payment from as soon as possible. Watch bank balances and make sure you don’t have checks waiting to be deposited. This can be time consuming, but you won’t be the first business that has had to do that from time to time.
Rapid growth sounds good but, ironically, too much of this good thing can bring on a cash crunch – which takes many business owners by surprise. Strong sales one month often means a cash shortage next month. By monitoring the business’ cash status you may be able to arrange credit from suppliers and banks to cover the temporary shortfalls. However, these arrangements take time to set up so you need to be prepared in advance.
This may sound obvious; however, many people don’t know how cash flow works and its significance to sustaining their business. Many owners focus on their profit and loss statements alone. Unfortunately, healthy profits can mask an impending cash flow crisis. Profit and loss statements don’t usually contain the information required to make an adequate cash flow projection. For that, you need a structured balance sheet that includes all the influencing factors including debts, interest payments, inventory and so on. This is the basis for your cash flow projection which represents the likely incomings and outgoings over a particular period of time.
2. Set up a cash flow budget.
You need to focus on forward planning to generate a “best guess” about likely future sales and expenses. You can set up your own program in Excel. If you’re not familiar and skilled with Excel software, ask your accountant for help to set it up properly initially.
3. Review and update cash flow budgets regularly.
This is your best insurance against potential cash shortages. If your business has a predictable cash flow, then cash flow budgeting on a quarterly basis is often enough. The rule of thumb is that the greater the cash flow uncertainty a business faces, the more often a new cash flow budget should be prepared.
If cash is really tight, you might need to move to weekly projections and decide which invoices you’ll pay and whom you need to get payment from as soon as possible. Watch bank balances and make sure you don’t have checks waiting to be deposited. This can be time consuming, but you won’t be the first business that has had to do that from time to time.
Rapid growth sounds good but, ironically, too much of this good thing can bring on a cash crunch – which takes many business owners by surprise. Strong sales one month often means a cash shortage next month. By monitoring the business’ cash status you may be able to arrange credit from suppliers and banks to cover the temporary shortfalls. However, these arrangements take time to set up so you need to be prepared in advance.
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