25/03/2019
EXPLAINING THE REASONS FOR THE “MUST DOS”
• Read your Business Plan when you are negotiating financing: Never accept less financing than what has been recommended by your Business Consultant. Better terms, different mix of financing support can be acceptable, but before you commence the implementation of the business ensure that you will have access to the amount of financing that will be needed to get the business off the ground.
• Read your Business Plan when you are purchasing: Make certain that the equipment has at least the capacity and the features of what was described in the Business Plan and that the warranties and support are in place. It is also very important that the business secures or sources enough raw materials for the first 3-6 months of the ramping up period so that expected earnings during this period is not hindered by a lack of raw materials. Where finances will not allow for purchasing all the raw materials required for the ramp-up period, make proper arrangements with suppliers to have the materials available upon demand. You may wish to give them a deposit and pay as you order during the period. Where raw materials are sourced from overseas this can be more complicated but ask for what you want as you may just get it.
• Read your Business Plan when you are executing the implementation process: During the business planning process it is very important that you design the implementation process in detail. Ensure that you follow the implementation process slavishly and have enough funds to make it happen. There are sure to be hitches during the process so try to anticipate those and have some contingencies ready should they be required. In a production business do not omit staff training and test runs.
• Read your Business Plan when you are hiring. Human Resources at the start of any business is as important as Financial Resources so ensure that the qualifications required for the job are met and that the temperament and skills of the potential recruit are what you want. Your “cousin” may be willing but lack certain vital qualifications and skills so do not put him/her in a post for which he/she will be a poor fit. Embrace all the support you can get to allocate the support to give best performance.
• Read your Business Plan and ensure that you have all the materials required. Reviewing your business plan often prior to commencement of operations will ensure that you are adequately prepared. It is important to make notes in the margins of the plan where adjustments were essential to make the processes happen. These notes will be vital when the business plan is being updated.
• Read your Business Plan and properly “sign” your business externally and internally. Branding is essential to all business ventures. The sign on your door or location should not be an after-thought. It should be readable, prominent and well designed as should be any collateral materials that will help to attract customers.
If your business attracts customers into the location, please put your “Customer Promise” in the foyer/entrance/customer hall to set the standard of services you want them to expect.
You may also want to include your Vision, Mission and Value Statements which should also be posted prominently in your back -office and production areas as well as in your own office. These will serve to remind you, other managers, supervisors and staff what the culture of the business is being built on.
Your Company's Customer Promise, Vision, Mission and Values should also be included on your website.
In production areas other signs are important from day #1, code of dress; safety procedures; bio-sanitary requirements; production processes; warnings and the location of safety equipment and first-aid kit.
• Read your Business Plan and properly orient your staff. Have a written orientation process for all staff. It is recommended that Managers and Administrative Staff should also be oriented in the production procedures to broaden their understanding of the business and its needs. The more knowledge staff have of the overall business the better they are at team building and promotion of the business.
Planning for on the job training right from the very start and set up formal training schedules. Make them “family” affairs and during these times encourage staff to share their opinions on how improvements can be made.
• Read your Business Plan to design your promotional tools. Ensure that all the things that market your services and especially your products are well designed and include information that are being used to promote the business such as labels & packaging, website, social media presence, stationery and collateral materials be it branded work-garb or promotional products.
• Share the Executive Summary of the Business Plan with other managers as well as the areas of the Business Plan that specifically relate to their area of management as this will provide them with information on the development of the business and what is expected of them.
Focus on the Financial Projections of the Business Plan and try to hit the targets set from the first day- it is easier to "keep-up" than to "catch-up". Do monthly analysis of Actual business-performance against your Key Performance Indicators (KPIs).
Within each quarter it is easier to adjust monthly projections to achieve the quarter’s goals.
These KPIs should include the following as they have relevance to your specific business:
o Sales of services &/or products;
o Finished services &/or inventory of finished products as well as inventory of work in progress
o Inventory of Raw Materials
o Orders for next period/work pending or in progress
o Invoicing for goods/services delivered;
o Payables;
o Receivables;
o Actual Collections (ageing of accounts receivables);
o Funds in Bank Account.
Review the ensuing month’s projections for Sales and Revenues to guide production of goods and activities of the Sales-team as this will give a clear indication of how the business is performing so that it can meet or exceed the Quarterly Targets. Analyze shortfalls and overages in all areas. These areas include all the inventory on hand, orders delivered, orders in hand, prospects to tap into as these will guide the organization of the ensuing month’s production and sales.
Always the goal is to maintain a low inventory of finished goods (except when certain items of stock are needed for a future high sales season), adequate supplies of raw materials to maintain adequate production, timely production to meet delivery timelines.
If the business is behind in any of its established targets this can be a result of poor/inadequate production; low sales which is directly related to salesmanship or distributorship; high returns; differences in the volumes of sales versus actual sales of the range of goods produced may be an indicator that the projections and production need to be adjusted.
Remember the crux of business is sales, sales, sales and anything that hinders sales will have a negative impact on the business. The business’ sustainability and profitability are hinged to sales.
Analysis of the monthly financial information such as bank balances, invoicing, actual collections, payables and receivables are critical as these all tell the financial story of how well the business is selling and operating. The goal is to keep sales to at least the targets set and not to have increases in expenditure!
It is important to look at how the human resource is impacting sales from the level of production, marketing & sales, administration and management. Poor and careless production workers, inefficient and ineffective human performance in the other areas of the business should not be tolerated as they have a direct cost to the business. These costs cannot be recouped, and keeping them in place reduce the prospects of increased earning from goods and/or services.
• Make no un-budgeted purchases. Especially in the first two years of the business the main goal of management is to keep sales and expenses in line so that the projected financial performance outlined in the Business Plan can be at least met and surpassed. The only increases in expenses should be limited to those that relate to increased sales and correlating increased expenditure for raw materials, direct production inputs and direct selling costs.
Un-budgeted expenditure is one of the main reasons why many new businesses fail or get into extreme difficulties within the first two years.
Remember that operating surplus is not profit and although there will be periods of high operating surplus it is highly likely that these surpluses are needed to provide working capital for projected increases in production that are needed to realize the success of the business in the long-term.
