How do growth companies survive in complex times?

Australia’s small and medium-sized growth enterprises face ongoing and increased stress in these challenging times. Business owners have to make difficult decisions constantly and demands come at you from every angle, all day long.

Successful entrepreneurs know, however, that there are enduring key principles that improve a company’s prospects for growth and continuing profits and make it stand out from the crowd.

“At Bibby Financial Services we are constantly interacting with entrepreneurs and fast moving companies. Fast movers are the growth engine of our economy, and this is a key reason why we continue to support the sector, says Greg Hardiman.

“We have observed time and again that staying calm in difficult situations and applying the following disciplines are key when a business is trying to get ahead of the competition.”

Disciplines for success

Cash flow is the lifeblood of a business. Cash flow can be the first casualty in a downturn. In tight times fast movers develop conservative cash flow budgets and ensure they get paid more quickly. They are diligent in collecting what they’re owed. Effective accounts receivable collection frees up cash and can reduce reliance on credit.

Always challenge certainty, especially your own. When entrepreneurs think they’re right, they also think to ask what is missing and search for improvement. Excellence is an unrelenting quest and striving for it is the surest route to enduring satisfaction. The best leaders and fast movers are forever challenging their comfort zone.

Emotions are contagious and feelings are infectious. The best leaders inspire. They are optimistic and ensure employees are just as inspired to succeed in their roles.

Understand basic finance principles. Fast movers ensure financial information and accounts are timely and critical documents are maintained and delivered on a set day every month.

Clearly communicate a business’ point of difference. Clear communication of a company’s point of difference and strategic direction to its customers is imperative. Fast movers view downturns as an opportunity to stand out from the crowd; they continue to tell the market what they do best and remain visible.

Delight customers. Fast movers make frequent customer contact, great service and rewarding loyalty a priority. Fast movers ensure customers are left in no doubt of their importance to the business.
Work smarter, not harder. The best fast movers don’t let running their business run them into the ground. They continually invest in time-saving systems, software and products to free up valuable working hours.

Form great relationships. Strong relationships with mentors, financiers, bankers, suppliers, clients and partners significantly help a business. These relationships endure in good times, when the business is running well and cashflow is well-maintained, and in tough times, when cash flow is tight.

Meaning isn’t something to discover, it’s something to create. Entrepreneurs derive meaning from finding a way to express their unique skills and passion in the service and products they deliver. Figuring out how best to contribute is a lifelong challenge, to be taken one step at a time.

Take responsibility. In a fast moving company no one is left in any doubt as to who takes responsibility for the key decisions. Right or wrong, the buck stops with the leader.

Greg Hardiman

Bibby Financial Services is one of the world’s largest independent providers of debtor finance spanning Australia, Asia, Europe and North America. Debtor finance is designed to improve business cash flow and support business growth by releasing cash tied up in unpaid invoices. Unlike other funding arrangements, no real estate security is required, making it more accessible for small and medium-sized business owners. For more information on Bibby Financial Services please visit www.bibby.com.au

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.

 

 

 

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

My Banker is a bum! (He won’t lend when I need it most!!)

A cent for every time I have heard those words and I really would be a millionaire and possibly even richer.  The thing is it is simply not true.  Now, please do not think I am a big bank lover. I am not; I hate bureaucracy just as much as the next person and unfortunately that is what many banks are. However, the reality of most Small and Medium Enterprise [SME] situations is that Banks are your business partner every bit as much as the taxman (I know) so take a chill pill and live with it. Learn to make the relationship work for you. “Get real” I hear you say, or words to that effect. Yes, you can!

A few years back I stepped into a medium cap company to hear from Chicken Lick’n (the CEO) that the sky was falling in.  Well I went to the Bank to see for myself. Ah ha, indeed the sky was about to fall in. To cut a long story short, we brought in some poles, bought some time, propped the place up for a while, and got things back on track.  In other words, we gave them a plan and executed on it.  Eventually the company worked its way out of its difficulties [all self inflicted] and is now part of a global engineering group, operating very successfully.

The reason that it got so scary for Chicken Lick’n was that the company had neglected to maintain its relationship with its Bankers.  This does require effort and while I agree it is a two way street, remember your [SME turnover $200k-$2.5m per annum] relationship manager probably has 100-150 SME customers to look after.  So guess who’s going to do the running? That’s right you and me.  So what do we do? Here are some simple rules that I apply in my every day business;

1.      Give yourself and the Bank the best information available about your business

2.      Have a clear but simple business plan that shows what you intend to do with the borrowed money [visit www.thesmallbusinessstrategy.com for some help] and how you will operate

3.      Prepare you business plan without ‘rose tinted glasses’. Under promise on your expectations and over deliver on results.

4.      Give the Bank a report at least once every 6 months and make a follow up call to confirm they have the information. The best times are without doubt  half way through the financial year and again after your year-end accounts are ready. This report must be simple.   Dot points highlighting progress against target are good.

5.      If things start taking a turn for the worse, do not ignore it. Front up and let the bank know the situation ahead of time and what you intend doing to resolve it. Keep them posted as you progress.  You might be amazed! Banks have a vested interest in your business succeeding – not failing!!

6.      Your relationship manager may change every five minutes.  I know how frustrating this is. Let it go and connect with the new person. Most of them can become little gems, look after them and your relationship will flourish.

7.      Don’t worry be happy!

Until next time,

Your, paddling like mad, business coach.

Neville@thesmallbusinesstoolbox.com