A New World Order

I have just returned for my ninth visit to China. What I have learned over the time is that China is a rich, vibrant and colourful tapestry. It is like one of those paintings that every time you go back to visit you find something you hadn’t seen or realised was there before. I would encourage anyone genuinely interested in finding a new market to visit. However, this note is not about doing business in China. That is for a completely separate series that I will post over time. For now, I wanted to discuss what for the foreseeable future is the new world order.

For all of us involved in small to medium business, international trading and foreign affairs might not matter or at least it didn’t. Now with the economic upheaval in our traditional markets created by the Global Financial Crisis (GFC) many SME’s are finding their home markets contracting and traditional export markets are in disarray. Customers are now looking for longer term credit and finding their Banks are not keen to advance funding even against documentary letters of credit (LC’s). So what to do about it? For some it is too late but for those still hanging in there it is time to determine if you have what it takes to venture outside you traditional markets and marketing methods.

Brazil (read South America), China, India and SE Asia are growing. It is their domestic middle-class, which is expanding and starting to consume more foreign goods than ever before. Traditionally Western companies have moved into these markets to set up manufacturing and tap cheap labour for re-export of their products to the West. Now these countries are importing to satisfy their own domestic demand. For those of us who have been watching this is no great surprise. In 2008 I was recommending that companies focus on selling into China rather than trying to find cheap manufacturing sources in China or Malaysia. So now, there is a new world order. Manufacturers need to find their niche in these new markets. Country of origin does matter to this new breed of consumers. They will pay for quality and reliability. Is it or will it be an easy path? The simple answer is no. However, with focus, patience and determination, opportunities abound. I will be penning my thoughts on approaches to these markets in the near future, so stay tuned.

In the meantime, keep on keeping on!

Your ever alert to new business opportunities coach

Neville Calvert

neville@thesmallbusinesstoolbox.com

The Capital Connection

I have been a member of LinkedIn the global professional networking hub that is accessed by millions of professionals. There are various interest groups on the site and members are able to ‘Follow’ people whom they believe have some value to add through their various missives. I don’t make a habit of ‘Following” anyone, or at least I haven’t until recently when I came across a guy named Hal Spice. Hal is a renowned investment adviser, Private Equity Investment Manager and founder of a company Aquao3 focused on providing mobile ‘clean drinking water’ for impoverished nations.

Now you might be asking what any of this has to do with my current topic. Well one of the main issues that is vexing my clients today is that of access to capital for business growth. Traditional banks on the one hand are making much of their eagerness to lend yet on the other making it very difficult and in some case nearly impossible for customers to meet the banks lending criteria under the ‘new world order’. So what does a small business owner do when they need more capital for growth?

The need for more investment should not come as a surprise to you the business owner or and probably especially your Bank. Not probably but most surely, because Bankers are by nature fragile given some the customers they have to deal with and ‘shell shock’ is not well managed if you lob in a surprise financial grenade! In previous letters, I mentioned the need to keep your Banker informed on an ongoing basis, however in the current environment and I that think for some time to come, you will need to consider other avenues to finance you business. These options include, Invoice discounting or Factoring, micro-financiers, Fund Managers specializing in Small Business opportunities (very challenging) and High Net-Worth individuals know as Angel Investors. In order to make this Capital Connection you need to prepare and this is where we at Thesmallbusinesstoolbox.com and Hal Spice come together. In addition to our programmes and templates for strategy, marketing, sales and finance plans and Hal is kindly providing readers with access to great templates to Create Killer Presentations, What Investors Want to See in a Business Plan, 21 Golden Rules to Secure Funding and more. If you would like to access Hal’s templates and lessons they are available FREE via his blog www.halspice.com or if you registered on linkedin visit Hal at www.linkedin.com/in/halspice . The importance of being ‘investor ready’ is vital take it not just from me but Hal.

For now you every ready capital coach,

Neville@thesmallbusinesstoolbox.com

Cashflow still key to small business survival

Managing cash flow is one of the greatest challenges faced by rapidly growing businesses and without proper management, poor cash flow can stunt, or even end a business’s growth before it’s reached its potential.

 

When a small business is growing rapidly there is often a need to pay out money constantly, to buy more stock, hire new staff, open new premises or buy new equipment. Even with profitable sales, investments can take time to pay off, resulting in a cash flow crisis. The trick is to feed a business the money it needs to grow, without starving it of working capital. And a great way of doing this is through a debtor finance loan.

 

Cashflow is still the key to small business survival.  You may be trading profitably in the sense that you are “making a profit”, but unless your cashflow is under control, you are operating at risk.

 

The fundamental gap between when you invoice and when you get paid is the make or break of many businesses.  Cashflow and working capital levels are driven by transactions, so the devil is in understanding the detail.

 

Tips to improving cash flow

• Issue invoices in a timely manner. The average invoice payment period has nearly doubled from 30 days up to 53 days in 2010, therefore it is important that invoices are issued punctually so that they can be paid on time. This ensures that debtors have sufficient time to pay the outstanding invoice and assures businesses will maintain positive cash flow.
• Improve your payment terms with invoices.  Remind customers of your payment terms.  Send out reminder notices, email & call customers when a payment is overdue.  Don’t’ let payment terms deteriorate. Push for the most optimal payment terms.
• Offer payment plans – customers whose businesses are struggling may not be able to pay all of their outstanding invoices when they come due. Offering payment plans not only increases the likelihood of collecting the total amount due, but also can generate goodwill with the customer.  Some key ways to improve cash inflows is to have clear agreements with clients and make sure invoicing is completed on time and any disputes are resolved quickly. Move to more proactive management of customer debt.
• Have an organised system for archiving and paperwork.  Create a system for outgoing invoices, purchase invoices and a cashbook to ensure all information is documented correctly. Growing a business is reliant on being organised.
• Perform all the necessary checks to ensure the business is limiting its exposure to bad debts. Develop a credit policy. Take the time to write out a clear and concise credit policy that applies to all customers and clients.
• Watch your stock – clearly identifying which stock lines are selling and when they’re selling. Ensure that the right quantities of the correct stock lines are purchased – this could not only prove very profitable but also considerably improve cash flow. Challenge inventory parameters e.g. safety stock levels, minimum order quantities & re-order points

 

It’s not as simple as just finding any business loan for a certain dollar amount; it’s about finding the best working capital facility to match the businesses need.

There are many working capital solutions out there.  Perhaps Debtor Finance may help. A debtor finance provider pays up to 80% of outstanding invoices usually within 24 hours and one of the advantages of a debtor finance facility is that no property security is required.

 

However, the message is clear. A focus on the fundamentals of cash flow is critical regardless of the stage of the economic cycle.

 

Greg Hardiman

State Manager

Bibby Financial Services Australia Pty Ltd

gregh@bibby.com.au

 

Bibby Financial Services is one of the world’s largest independent providers of debtor finance spanning Australia, Asia, Europe and North America.

 

 

 

Plan the Action! Action the Plan!

I do get frustrated at things not happening quickly enough for my liking.  My frustrations tend to build up while I am waiting for things to happen.  You know what it is like, you finish a specific activity, and then you have to wait around for someone to either do the next bit or come back to you with an answer.  You can sit there waiting for a long time or at least that is how it feels to me.  Well, I simply don’t do it.  So what do we do about this never-ending cycle of hurry up and wait?  The truth is that there is not a lot you can do about the need to wait for others to complete their side of the job, so don’t make it an excuse.  If business is not going that well or at the pace you would like take ACTION NOW!

If I had a dollar for every time a client told me, “So and so has not responded yet so we can’t move on and we are just waiting for a few more responses before we make the next move”, I would be a millionaire.  Sitting around waiting for things to happen is so debilitating.  You certainly need to keep the pressure on people to ensure you can close the deal.  On the other hand, if you sit around waiting for their response you will begin to doubt their commitment or your product or ability.  Have someone in your office be responsible for making those “How are you going?” calls.  You don’t need to do it yourself.  You need to get back to your action list and keep on actioning! In fact, if you don’t have a good periodic action list i.e. daily, weekly, monthly, quarterly etc you will find that waiting for people to come back to you becomes a convenient excuse for doing nothing.

It is not difficult to set up a simple 90 day action plan using a excel spreadsheet.  Set out your weekly monthly and quarterly goals.  There are 13 weeks and don forget there are 7 days (not five) in week.  I find it best to reverse the order, so I set my goal or goals for the quarter and then work back to my weekly goals and then to the daily actions I am going to need to take to reach my goals.  Commit to this action list and do not deviate.  Distractions will arise each week so you will need to be completely disciplined. Stick to your guns here.  Give a copy of your action to someone who know cares about your success and will make you accountable each week for meeting you objectives.  Set up a convenient time to discuss each weeks achievements and the week ahead.  Discuss both your success and importantly your failures.  Why have you not undertaken certain activities or followed another course other than the one you committed?  Be rational and listen to yourself as you respond, you will sometimes hear the guy with the excuse trying to get out.  Don’t let him.  As much as we hate to admit to it without an organized actionable list few of us would achieve very much at all.  “Better offers” are presented every day you just have to learn to say NO. Do this religiously for 30 to 60 days and you will astonish yourself at what you can achieve in a day, a week and a month.

Until next time

Your, back to the list and into action, business coach

Neville@thesmallbusinesstoolbox.com

The Opportunity Value of Risk

I have just come away from a meeting with a client who is looking to implement a new strategy. Really, it’s an OLD strategy with a new twist, but who am I to say anything. The issue with this new/old strategy as with all strategies really is there risks involved. As we, all know risks need to be managed. The, 64 thousand dollar, question is how?

There are a couple of ways of looking at the management of risk in your business. One is to develop procedures and monitoring to ensure that the risk doesn’t arise. This is the eradication of risk approach, see it, and kill it off!

Alternatively,the second is to see the risk for what it truly is, an opportunity to be understood and managed. The eradication or, expunging etc of risk is by far the most frequent approach adopted by management and particularly by a Board.

The Board certainly do need to be concerned with risk because that s their job and in today’s nervous corporate environment, Board risk is an issue.

I know that you may have a small company and you are wondering how does all this risk stuff affect you. Just think about it.

Most of us risk our lives just getting up out of bed everyday. We cross the road, often against the pedestrian traffic lights and with traffic coming through a busy intersection (J-Walking. Oh sure you have!), or by eating a meat pie from a dodggy road side cafe, or jumping on a new low cost airline aeroplane to get to a holiday or business destination.

That’s different I hear you say. Well, not really!

Each one of the actions outlined above is calculated and when you proceed, you have decided thatwith the benefits being assessed to outweigh the apparent risk. Just because it is done almost instantaneously doesn’t mean you haven’t thought about and how you would manage the risk.

Take, for instance, booking on a low cost carrier out of London’s Stansted Airport or even from Johannesburg or Changi Airport in Singapore. The flight might well be delayed, or they send your baggage to your previous destination from two weeks ago! On board they might run out of food and, of course, worst of all it might not even make it to your destination. I bet you have considered all these possibilities (okay maybe not the luggage bit!) and you have developed a back- up plan to cover the eventualities. You didn’t write it down, or maybe you did. In any event, you thought the whole event through and proceeded on the basis that you had managed the risk. The outcome was , you had more money to spend on your holiday or business trip. You created value for yourself. Well done you!

Now, take this approach into your every day business life. You will face decisions, every one of which is subject to some form of risk. As with your holiday flight decision, where you saved mega bucks because you chose to take a risk on a low cost airline. The same will happen in business. Can you see what the potential value might be created in understanding how to manage you risks and realize the financial benefit, rather than expunging the risk and not achieving your financial goals?

Value Risk management is a tool or process available to all businesses and professionals regardless of what size your business is. The value of the process is in its ability to meet narrow or complex businesses needs. I have used it with companies that turnover $2m a year to $1.5bn a year and everywhere in between. The process is so simple it can be incorporated into ongoing management and Board level reporting. The benefits to business are that the strategy is managed on an ongoing basis rather than once annually in the planning meeting and then stuffed away until next year.

Valuing the opportunity of risk rather than mitigating it may seem counter intuitive but it is after all the very reason the entrepreneur exists.

Until next time Your, humble keeper of risk, coach

Neville@thesmallbusinesstoolbox.com