As the financial year comes to a close, we may be using the time to reflect on how the past year or years have gone, and what we have or haven’t achieved.
Bill Gates once commented “Most people overestimate what they can do in one year and underestimate what they can do in ten years.”
As you are reflecting on your year, I’d like you to think about why you are in business, and whether there are goals or phases in business you would like to achieve. Recently I have been doing some planning for a business where we are running numbers to see what happens with their profits if they scale up. This is often tranformational for a business.
This is scaling versus growth. You will notice start-ups focus on scaling, they pour their time, attention, and money into scaling the business exponentially. If they are successful this gives them options to sell and exit with the cash, or to continue and reap the benefits of their work. What's your mindset going to be for the coming financial year?
Let’s look at the areas for you to direct your focus for the coming month (or two):
1. Plan your approach
Document what you want to achieve both in business and personally in the next 3, 5, 10 and 20 years.
Assess your state of mind - Are you tired of just being on the 3 or 5% growth scale? Would you enjoy understanding what your scaling points are – how much more revenue or profits could occur with your existing team and processes? If you were to scale, does that mean you need to bring on three more employees?
Equipment - What investment in equipment would have a significant impact on your processing power?
Cash Flow or Working Capital Cash - do you know your number? Have you ever calculated it? Sometimes the restraints in growth a business has experienced is by not understanding the amount of cash they need to leave in their business.
Inventory - Are you a horder? Do you have cash tied up in obsolete inventory? Don't underestimate how much getting even 25% of its value back in cash. To leave it there another year, may result in it having no value.
Distribution - How will you get your product to your customers, what will the impact of increasing fuel prices have on your business?
Staffing - If you are constantly struggling to have a full compliment of staff, what are the alternative solutions you can put into place by redesigning roles, responsibilities, and technology?
Valuation - If you are seeking to sell your business in the next 5 to 10 years, do you know what your estimated cash-out value is? If not, I recommend you discuss this with a business valuer, so that if your number now isn’t so hot, you still have time available to change the outcome. You will need a minimum of three stable or growth years (5 if its lumpy), so you do need to start having a longer vision in mind.
2. Understand technology utilisation in your industry and business
Document what software you use within your business. Understand how your team are using it. So often I have seen an owner invest in software, train the first person, and their subsequent replacements only ever get handovers. This results in poor utilisation of technology. Encourage and reward those who adopt technology early, and who are open to encouraging others to use technology.
3. Understand business vampires – time and leakage
When we are busy our attention usually gets diverted to the squeaky wheel. But sometimes, we need to pay attention to the issues which makes no sound. We can do this by setting a calendar for risk mitigation. This is where we stop and pause, and review particular situations, such as:
Expenses – who manages these? Is there any chance you are paying for more than you need? Examples include: software subscriptions per user, and these users no longer exist? Courier tickets which sit in a drawer? Expensive packaging, when a lower product will achieve the same result. Not recycling, which in turn causes you to over pay for your waste removal.
Insurance – are we over or under insured, don’t do this right on renewal time. You may need time to plan, think, and reflect.
Time & motion – have you developed structured processes for your business
Recently, I had a friend share that they had a change in employees and the new employee was getting through the work in ¾ of the time, and the expectation was once they were on top of things likely to be ½ the time.
This area also relates to technology. Many tasks can be more efficiently processed by a $20 or $50 piece of software. Ask your team to document the what spreadsheets are key to their role. To find out more about solutions to this reach out to your industry friends, a business transformation specialist (me & others), or undertake your own research.
Understand how delegation is working in your business.
Understand how you are winning revenue, and nurturing leads. Are those who are responsible for this, being pulled into the operational aspects of the business?
4. Create momentum
Share with your team what your vision is, ask them for their feedback, assess their willingness to be apart of the journey. Often, when given permission your team will find solutions to problems you didn’t know you had.
Identify if you are all moving in the same direction. If you aren’t, you will need to understand why not, and address the issue.
5. Invest in your team
Our teams can get tired. One of the ways to manage this, is to give them micro breaks, by sending them on training courses. Also invest in your professional development. Take time to reflect, to be with family and friends. This is where we find our energy and think about strategic opportunities.
6. Utilise a business advisor/coach or accountant
There are modern advisers/accountants, and there are the traditional’s. No longer do you need to work with just one. You may enjoy the relationship with your tax accountant, but that doesn’t mean they can provide you with the solutions, tools, or challenging conversations which you need to achieve your objectives. An effective advisor/accountant will help hold you accountable, depending on what you need from the relationship, they may also be your accountability stick.
I love my work. I get to have this conversation with owners and leaders every day. It is great to see the impact on a business when they receive insights, such as the impact on profitability if volume increases. Likewise, destigmatising technology in business. If you are looking to make a change this year, or made one last year, and want to share your learnings please make comment. Alternatively, if you recognise you need help, reach out for a chat.