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| ISBN-13: | 9781741768725 |
|---|---|
| Publisher: | Allen & Unwin Pty., Limited |
| Publication date: | 03/01/2010 |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 181 |
| File size: | 1 MB |
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Bullet-Proof Your Business Now
Essential Advice You Need to Survive Tough Times in Business
By Andrew Griffiths
Allen & Unwin
Copyright © 2009 Andrew GriffithsAll rights reserved.
ISBN: 978-1-74176-872-5
CHAPTER 1
There is no time like the present to make your business bullet-proof
Businesses don't just go broke. Generally they run out of money over a period of time. This lack of cash happens for a variety of reasons that in many instances could have been prevented, and of course prevention is far better than cure. Believe me when I say it is so much easier to make your business bulletproof than it is to try and bring it back from the brink of disaster. The suggestions I make in the following pages will certainly make your business stronger and far better able to deal with challenging times, no matter what causes these challenges.
Business principles often seem to get thrown out the window when the streets are paved with gold and it feels as though the good times will never end. But, as we all know, economies follow cycles — good comes after bad and so on. The smartest economic minds in the world can't tell us exactly when the economy will turn, but they all agree that it will turn because it always does. So surely the best thing any business can do is to always plan for the worst and hope for the best. This strategy rarely fails.
The suggestions in this section will help any business owner clarify the key areas that they need to focus on to drive their business forward. By doing this they will ensure that every possible action is taken to secure the long-term viability and success of the business, in good times and bad.
Embrace these ten suggestions and your business will be as close to bulletproof as it can possibly be.
1 Take responsibility for your business
Some time back I had a bit of trouble with the Taxation Office. I was behind in my businesses' tax payments and I was struggling to find the money to pay the growing bill. Things reached a head and I had to have a mediation meeting to explain why I was behind in my taxes and, most importantly, what I was going to do about it.
There were a number of reasons why my taxes were overdue, but they were mostly normal business issues including slow-paying customers, a failure to project manage as well as we should have, and not being tough about collecting money. However, I prepared my story for the meeting along the lines of how tough it was to have a small business, especially when the economy was sluggish, as it was at the time, and how various other real but cop-out issues were affecting my business.
I turned up for the meeting and proceeded to tell my sad story. I went on for about twenty minutes and there were lots of nodding heads but sadly no tears. Then the taxation department officer said slowly, 'This is a very sad story, Mr Griffiths, but we really don't care. You are the company director; you are 100 per cent responsible for your business. We want to know when you will be paying the money you owe the Australian government. If we don't get a firm answer on that from you right now, we will be taking further legal action which will, in all likelihood, mean making you bankrupt.'
Up until that moment I had taken a bit of a loose approach to rules and regulations, particularly those concerning tax. But I realised then that, yes, my name was on the bottom of the page and I was 100 per cent responsible for every single penny my business owed. I left that meeting feeling a little like my innocence had been lost. I knew that from that day on I would take full responsibility for every single aspect of my business and, as I did, my attitude changed markedly.
Before the stern words from the taxation officer, I had been easygoing with my staff, and not that concerned about deadlines or performance. If someone were going through a tough spell, I would keep them employed for months, even though they were not contributing to the business. Now I realised that their lack of performance was costing me money and, while I was never horrible about it, I certainly reacted quickly and made it very clear that this situation had to change.
I made a point of setting budgets and targets for my staff and, most importantly, if they were not met I wanted to know why straightaway. I became much more careful about where I spent money and when I spent money. It was almost like an awakening for me and to some people it may sound strange but I had spent most of my time and energy focusing on the work that I did, not on the business itself. That led to all kinds of problems and the only way to stop them was to take the time and energy to address them one by one.
So, without doubt, the first step in bulletproofing any business is to step up and take responsibility for everything that the business does and I really do mean everything: your bills, your products, your staff, your legal obligations and liabilities, your taxes, your ethics, your services and anything else that falls under the banner of your business. This is not a responsibility to be taken lightly. If the crunch comes, you can blame other people or circumstances that are out of your hands, but it won't matter one bit. If you sign the cheques, the buck stops with you.
2 Have all of the information at your fingertips
I have never been much of an 'attention to detail' kind of person when it comes to financial figures. In my early days as a business owner, my record-keeping would involve literally taking a shoebox full of receipts and cheque stubs to my poor accountant once every few years. (Hard to imagine that I had issues with the Taxation Office, isn't it?)
I had no idea about cash flow, account reconciliation, profit and loss or balance sheets. I bumbled my way around these things for almost twenty years. I never had accurate figures, my accounting entailed simply adding up the money in and the money out in my bank account or seeing how much was in the till at the end of the day. Of course I couldn't budget — I had no way of managing money and I never knew how much anything cost.
I didn't realise how important all this really was. My attention was always on the front end of my business. Focus on making money and as long as you make enough you won't have any problems. This is so wrong for so many reasons that I hardly know where to start!
To be successful in business and to make your business as bulletproof as possible, you have to have access to accurate financial figures that are as current as they can be. Ideally you need to know at the end of each day exactly what the financial position of your business is. You have to have complete faith in the figures being given to you either by an accountant or your bookkeeper. You have to know your debt position and what all your liabilities are. Nothing is worse than getting a huge bill you didn't know was coming.
Having accurate reports is great but they are of no value at all if you can't read them or understand them. I make a point of getting my accountant to explain all financial reports to me. I read a lot of books and ask a lot of questions. I get copies of Public Company Annual Reports and read through page after page of figures to form my own opinion on the financial state of the business. I took the time to learn how to make cash flow forecasts based on the payment history of my clients and so on.
My biggest realisation was that none of this is all that complicated. It just takes some effort and time to learn what the numbers mean. It won't be long before you will be able to see mistakes in reports or pick up on issues that will affect your business.
Knowledge really is power, especially knowledge about figures. Numbers tell you so much about the state of your business: whether or not you are making money, something that is surprisingly hard to work out at times, how long your cash reserves will last, whether your business is growing, how quickly you collect money and so on.
A business with great records is always worth more than one with poor records, for obvious reasons. My first recommendation in the process of bulletproofing your business was to take responsibility. So here I suggest that you take total responsibility for the financial figures for your business, no matter how much you may dislike that part of the business.
Any business that does not have accurate accounting nor an owner who understands the figures is destined for doom at some stage. I guarantee that the most flamboyant of entrepreneurs, like Richard Branson, who don't seem to have the slightest care about things as dreary as spreadsheets, have incredibly accurate accounting systems and on any day know their exact financial position. I believe that it is impossible to bulletproof your business if you don't have accurate figures that you can understand, delivered to you reliably and regularly.
3 Understand your business
Many years ago a friend who became a business mentor asked me a question that literally stumped me. He asked me how much it cost to open my doors every day. I had no idea. Ironically I am the one who now asks this question of my clients all the time and I am constantly amazed at how little people know about their business. If I ask this question in a room with a hundred people in it, I am lucky if five people put their hand up to say they know.
We all need to know about every aspect of our business. I am not saying that we should become micro-managers, but we need to know certain basics. The profit and loss of a business is not something that we want to learn about months down the line. After all, what if you don't have enough money to cover the loss?
Whether we are making a profit or a loss is something we need to know straightaway. Using a very simple formula, I add up the net cost of products and services, the fixed costs like rent and wages, and all other expenses and come up with the daily sales target that is needed to cover these costs and make a profit. For example, if it cost $1000 a day to run a business, and we sold products with a 50 per cent mark-up, we would have to sell $3000 worth of products each day to break even. But who wants to just break even? Surely the objective is to make a profit? Ideally we would want to make at least double our cost for the day, so we would have to sell $6000 worth of products or services.
Imagine this equation if we were not selling anything. Our cost just to open the doors would still be $1000 per day, so if we sold nothing in a week, we would be $5000 down the tube. I think every business, big or small, needs to know whether or not it has made money or lost money that day. I know of enormous businesses, operating in thirty countries, that get daily figures that are just more complicated versions of my simple formula — without doubt they know if they have made or lost money that day.
We also have to know what is normal for our business: for example, what products sell and what don't; what changes in customer patterns and trends and increases in costs are to be expected. If unexpected changes or increases in cost occur, we need to find out why. So much money slips between the cracks in a business that it is ridiculous.
I once ran a reasonably large marketing company. My receptionist ordered all our printing and stationery supplies. We were moving office and came across this huge stockpile of printer cartridges that would have cost about $10 000. I couldn't believe it. The receptionist had since left and I had to cop it on the chin but I found out from the supplier that she had made these big purchases to get the gifts that came with buying larger quantities. Mamma mia — how much had this cost me? But I learnt some very valuable lessons from the experience.
I now watch out for any anomalies in the bills. Things like phone bills going up unexpectedly, an increase in stationery spending, or even an increase in petty cash spending always activate my Sherlock Holmes genes. But how can you recognise anomalies if you don't know what is normal?
I now always make a point of signing every invoice that comes into the business. I want to know exactly what we are buying and how it is being used. I don't want to sound like one of those anal retentives who get uptight about someone taking a pencil. I don't actually care, but if they take it, I like to know. I am actually a very easygoing boss, but over the years I have realised that the difference between paying attention and not paying attention can be tens of thousands of dollars a year. And let's be honest — surely that money is better off in your pocket rather than being tied up in a ten-year supply of printer cartridges.
Any business owner who knows their business inside and out, and I mean all parts of the business not just the parts that they are most interested in, is way out in front of the competition. The sad reality is that very few businesses have even the slightest idea about any part of their business other than selling the products and services that they specialise in.
Being bulletproof means being aware, informed and disciplined.
4 Have the best advisors you can afford
Having cheap advisors is like buying a cheap motorbike helmet. Why would you? Now I am not suggesting that you pawn your house and your kids to pay for the greatest legal mind to write up the new lease on your shop, but I am suggesting that, generally, when it comes to professional advice from accountants, financial planners, solicitors, marketing consultants and so on, you get what you pay for.
Now this is not always the case, but my experience tells me that more often than not it is. If we were sick, we would want the best doctor we could get and worry about how to pay them later. Yet when it comes to business all too often there is a fear of cost, so the business settles for second-best and gets second-best advice.
In my field I encounter countless businesses that want to do all their marketing themselves. I get that and I wish them luck, but often they have no idea what they are doing. So they waste a pile of money on things that don't work, execute it poorly because they don't really have the time to do it properly, and when they don't get the results they want, they blame marketing as a profession. If they used a professional to at least develop a plan that they could work by, they would be miles out in front financially because at least they would be on track towards doing something that works.
This fear about fees is generally unwarranted. When it comes to choosing professional business advisors, spend some time recruiting them rather than just engaging the first one you encounter. Talk to friends and associates, interview prospective advisors to make sure they can give you what you want. Be upfront and tell them that you are concerned about being hit with big bills and come up with a way to resolve that issue by working with each other. It is all about communication. If you can't communicate effectively with your newfound advisor from the start, they are probably not for you. If you like to have specific recommendations explained to you in detail, find an advisor who will do this.
Sometimes you might have to go through a few advisors until you find the right one. But that is why you do the recruiting when you are bulletproofing your business, not when you are in crisis. In fact the point of having exceptional advisors (good just doesn't cut it) is that they will play a huge role in preventing you from getting into grief.
I once paid an incredible advisor $130 000 to help me restructure a business I owned. I had gotten into trouble due to a messy partnership. If I hadn't used him, I am sure I would have gone bankrupt, or at the very least would have had to find the best part of half a million dollars to get out of the horrible mess I was in. So was he worth it? Absolutely — every single cent. And at the time I didn't have that kind of money, but I found it because I knew the cost would be far more if I didn't use him.
Over a lot of years, after dealing with many complex financial issues, legal issues and every other issue imaginable, I have found that when I go down the cheap route, I get nothing but trouble. So what I learnt was to get better advisors and become more commercial in my dealings with them. That is, I ask them hard questions about their fees up front, I give them a budget or I negotiate. I want our relationship to be win/win but I don't want the fear factor operating when working with them.
Apart from paid advisors, I strongly recommend the value of having good business mentors around you. I have one very good friend, Neville Burman, who constantly amazes me, even in the darkest of times, with his words of wisdom. Whenever I have had challenges, Neville and I have sat down and spent a few hours talking through every single option, many of which I wasn't even aware were options, until we found a solution.
This kind of sounding board is priceless for any business owner. There are always people around who have been in a business for a long time and who are willing to take a novice business owner under their wings. You can learn from their mistakes, but please remember, if you ask for their advice, it's a pretty good idea to take it. I have been in business for many years and have had a lot of mentors going back over twenty-five years. Today I have more mentors than ever before, simply because my decisions have more riding on them than they ever did.
Regardless of whether your advisors are paid or free, get the best people you can. Invest time researching them and build relationships whereby you both benefit and these people will help your business to grow for many years to come.
(Continues...)
Excerpted from Bullet-Proof Your Business Now by Andrew Griffiths. Copyright © 2009 Andrew Griffiths. Excerpted by permission of Allen & Unwin.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
Contents
Acknowledgements,Introduction,
Section 1 There is no time like the present to make your business bulletproof,
1 Take responsibility for your business,
2 Have all of the information at your fingertips,
3 Understand your business,
4 Have the best advisors you can afford,
5 Without customers you don't have a business,
6 Build a large network,
7 Commit to constant and never-ending improvement,
8 Treat marketing as a priority,
9 Cash is what makes or breaks any business,
10 Get a life,
Section 2 What should you do when you start to get nervous?,
1 First and foremost don't panic,
2 Become an accounts detective,
3 Make your customers your best friends,
4 Ramp up your business development activity,
5 Figure out your cash situation,
6 Stock control is critical,
7 Negativity kills productivity,
8 Add value, don't discount,
9 Plan now what to do if things get worse,
10 Make bulletproofing a daily activity,
Section 3 What needs to be done if the situation gets really serious?,
1 Take action immediately,
2 Let those close to you know the seriousness of the situation,
3 Get advice and get a second opinion,
4 Cut costs without destroying your business,
5 Have someone close by to confide in,
6 Think outside the box,
7 Your suppliers don't want to see you go broke,
8 Don't over-promise and under-deliver on repayments,
9 Make the tough decisions and make them fast,
10 Keep one eye on where you are and one eye on where you are going,
Section 4 How do you survive when your business doesn't?,
1 Figure out what went wrong and learn from it,
2 Accept that businesses go broke,
3 Talk about your feelings and get help if you need it,
4 Stay healthy,
5 Other people will value your skills,
6 Use your time wisely,
7 People really do understand,
8 Let go and get excited about your future,
9 List the great things you got out of your business,
10 This may be the best thing to ever happen to you,
Section 5 Some words of inspiration,
Where to from here?,
Recommended reading,
Recommended websites,
About the author,