Small Business Strategic Plan

January 14, 2019

In this article, OnPoint Advisory Gold Coast Business Accountants discuss what a Small Business Strategic Plan is and how it is used within a business.

A strategic plan can provide a map to help your business achieve specific goals and will increase your chances of success in meeting you objectives on time and budget.

WHAT IS A STRATEGIC PLAN?

A Strategic Plan for a business is the process of defining a strategy so the business can achieve specific goals and objectives.

A Strategic Plan can be utilised for large scale ideas, such as planning for business growth over several years.

A Strategic Plan can also be used on a more micro level, such as developing a marketing plan or strategies for a specific department within the business.

Strategy is different from planning. Strategy looks at why certain steps should be taken, whereas a plan outlines how to enact those steps.

Strategic planning brings these ideas together to determine the best possible course of action.

The purpose of strategic planning is to provide a thoughtful approach to obtaining the objectives based on an analysis of both internal and external factors affecting an business.

Benefits of Strategic Planning

There are benefits of strategic planning, which including the following:

Bring into line the goals of a department with the larger business goals;
Provide clear communication to team members, stakeholders, and / or clients;
Clearly state the vision and mission of the business;
Provide clarity on how to deal with internal or environmental variations.

Parts of a Strategic Plan

The best way to see a strategic plan is that it helps outline how you get from where you are now to where you want to be in the future.

Numerous factors are taken into account in order to devise an effective plan.

Here are some of the elements often included in a strategic plan.

– Introduction: The introduction should briefly describe why the strategic plan was developed and for what time period.

– Background: This section may provide information about the business or you could use this for a brief business statement to describe your business.

– Structure:Include this information if it’s relevant to evaluate how your business operates and it is structured.

– Vision: A vision statement should briefly describe what a company wants to achieve or become.

– Values:These are the principles that an business stands for.

– Mission Statement: A mission statement describes the purpose of a business. This is different from a vision statement because it is not a projected goal for the future.

– Problem Statement: Some plans include a problem statement, which is used to outline key issues that need to be addressed.

– SWOT Analysis: A SWOT analysis provides the foundation for developing a strategy plan by examining the strengths and weaknesses within and outside the business.

– Goals: Goals should be liked to KPI’s and broken down into steps, and the action plan for each goal should indicate who is responsible for implementing the strategy, a timeline for starting and ending the action, and how the outcome will be evaluated.

– Evaluation: Methods for evaluation should be spelled out in the strategic plan.

– Executive Summary: The final summary helps end users of the plan quickly understand your thoughts.

We have provided here a Strategic Plan Template for you to use.

If you would like to discuss your businesses Strategic Plan, or need assistance in developing one, please contact us today.

Ten Ideas to Maximize the Value of Your Business

By admin on

January 10, 2019

- business, strategy

In this article, OnPoint Advisory Gold Coast Business Accountants, will discuss ten ideas to maximise the value of your business.

Realizing the maximum value for a business when it sells is the goal of all business owners.

Businesses value can exist separately and apart from its owners. This occurs when there are processes, methods, products, property rights or anything else that allows the business to continue without its current owners.

The ten ideas below will give you a guide to help you see if you are on the right path:

1. Have a Stable Management Team

A business with a solid management team, allowing for important activities to operate autonomous of the owner, will command a higher price.

The stability and knowledge of the management team are an extremely important part of the valuation review by a potential buyer.

If most of the main relationships between the business and suppliers / customers, buyers will factor this risk into the valuation or the deal the proposed deal. Part of the proposed purchase price may become contingent on the owner staying with the business for a period to help continuing customer relationships as part of the hand over process.

2. Demonstrate Sustainability of Earnings

Revenue and earnings that have been steadily growing over several years, versus earnings that fluctuate dramatically, will improve the business valuation.

Year over year growth shows a solid business that is attracting new customers and/or market share. Big fluctuations in sales typically indicate that either the businesses products may be subject to outside factors, or the business has experienced other issues, which could indicate that management may not be stable.

It makes sense to have a written plan detailing future growth and how that growth will be achieved based on industry information, increased demand for the company’s products, new product lines, market plans and growth via acquisition.

3. Systems and Procedures

The amount of goodwill that a buyer is willing to include in the purchase price will be dependent upon systems and procedures.

A business must exist separate from the daily involvement of the business owner to create goodwill. If the owner is seldom away from the business for any length of time, buyers will question the strength of the procedures, systems, and the management team.

4. Maintain Excellent Financial Records

Poor financials are a concern for both buyers and lenders. Business Valuation will be based primarily upon the numbers and the more reliable the financial statements, the more chance they will hold up in due diligence.

5. Keep Personal Expenses Paid by the Business to a Minimum.

When the financials are clean with little “add backs” related to the business owner’s personal expenses, potential buyers and lenders have higher faith in the numbers.

6. Transition Planning

When a seller has a definite plan to “phase out” of the business over a period of time, a potential buyer will recognize that sound planning and thought has gone into the process.

Developing a transition plan will often generate excellent suggestions for improvement in management’s role in the everyday operations of the business. Many business owners should begin this process by outlining their job description, This will highlight functions that should be delegated more to their management.

7. Diversification

Having a concentration of customers is often a detriment to the value of a business. When the sale to any one customer accounts for a significant part of the sale for the business, the business will be valued down. If you were to lose this one customer, what impact will it have on the business? Working to diversify the customer base will result in a significant increase in the value of the business.

8. Solid Reputation

People looking to acquire a business are constantly searching for “industry leader”. These people now have a wealth of information and feedback about the business at their fingertips, thanks to a multitude of websites where customer can leave comments and feedback about the business.

9. Diversified Suppliers

A for having only a small concentration of customers can be a problem to a business, so can also having a limited number of suppliers. Many businesses buy from multiple sources just to manage the risk that if one supplier experiences a shortages or interruptions in supply, they have a fall back provider. “What happens if…” is a typical question a buyer may ask – and many sellers do not have a ready answer for that question.

10. Secured Premises

A business may or may not be dependent upon its location, but a buyer will not want to take the risk of moving the business right after the purchase. The business should have the right to remain in their current facility for at least 3 – 5 years through an existing lease, or ownership of the building. If the lease is about to expire, and the buyer will have to renegotiate the lease right after settlement, this situation creates uncertainty for the buyer, which will reduce the valuation. Lease options are an excellent method to remove this uncertainty, whereby the business has the right, but not the obligation to extend their lease beyond the current term.

If you want to learn more about how to improve your business value, contact us today.

De-risking Your Business

By admin on

January 7, 2019

- business, strategy

In the article, OnPoint Advisory Gold Coast Accountants, will discuss the some current trends in de-risking your business.

Business owners are becoming increasingly aware of more business risks they are becoming exposed to. More than just financial issues.

Reliance On One Person

Many Small Businesses are totally reliant on one or a hand full of key people who are vital to the running and survival of the business.

But what would happen to the business if something was to occur to these key staff?

The unexpected can occur, like death, illness or they just decide to move onto new ventures.

Will your business survive.

The first thing a business needs is a strategy and contingency plan for these key roles.

Businesses should, as part of this, consider:
– Process Documentation;
– Shareholders agreements, which include buy / sell agreements, if there are unrelated owners;
– Relevant Insurance Policies;
– Estate Planning.

Market Risk

Does your business rely on a few major clients to generate a majority of it’s income?

What would happen to your business if that client restructures and reduces the requirement to use your business? What if they went out of business themselves?

You need to look at extending your market reach, either by expanding your client base and doing a strategic review of your offerings to see if your key market is looking for new products or services you may be able to offer.

At the end of the day, the more you can de-risk your business, the more valuable your business can become.

You would need to have have the necessary processes in place for at least three years for the flow on effect to the valuations to show the full impact.

The sooner the process is started for any business the better you will be.

To discuss more ways you can de-risk your business, reach out to us for a free consultation.

Board Of Advice Program

By admin on

November 19, 2018

- business, strategy

As the business grows, owners seek out specialist advice on:

How to protect their business and all their assets,
Grow the business value and;
Maximise the value on sale of the business so they can achieve financial independence.

In order to provide support to business owners we offer a unique strategic Board of Advice Program service.

Our Board of Advice Program features:

o Valuing your business to determine its true value;

o Analysing and tracking your business profit and cash flow to budgets and targets;

o Comparing your business performance to financial and industry performance benchmarks;

o Regular meetings to:

o Track how your business in performing against its financial goals;

o Discuss any governance matters that need to be addressed and resolved to reduce your business risks;

o Manage strategic growth opportunities as they arise and address any operating matters that are affecting your business performance;

o Agree strategies and action plans that will make your business more profitable and valuable;

o Introduce a trusted team of experts where specialised advice is required;

o Periodically re-valuing your business to quantity the value created.

The objective of our Board of Advice Program is to provide an independent sounding board so enabling you to make informed decisions on how you can strategically grow and transition the value of your business.

We charge a fixed monthly fee for our Board of Advice Program to spread the cost of this service over a 12 month period.

Click below to request a meeting with one of our Board of Advice Program specialists.

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Ways To Improve Profit

By admin on

November 16, 2018

- business, strategy

In this article, OnPoint Advisory, Gold Coast Accountants, discuss a few ways to improve profit.

There is a common thought that owning a business is like a licence to print money. I can hear many small business owners saying – “I wish”.

It’s not as easy as, for example, buying a kilogram of flour, mix in a few other ingredients, bake it for 40 minutes and sell it for $10 a cake – easy money. Right? The margins on this is huge. However, the Net Profit (amount left after paying electricity, gas, phone, rent, staff, insurance and everything else) can be modest.

There are benchmarks available for a lot of industries and professions which can be used as a guide to see how your business is performing compared to others. It is worth the exercise to compare your business to these.

So, to make all your hard work in the business worth while, you really need to exceed these benchmarks. Following are a few tips to assist you get ahead of the bunch.

Know Your Numbers

Not everyone is great with the figures of the business. Some business don’t even have accurate system to capture this information. That is all for another post.

But generally there are some key figures that you will generally need to focus on. You need to get to know and understand your Profit and Loss intimately.

An example of a business P & L benchmark report

It’s pretty clear that this business is beating the industry average in the main areas. Now these are the main areas for this example as they are the three biggest expenses.

By measuring these on a regular basis, we will know where the opportunities are and then start to formulate and implement changes to improve the Net Profit.

Start Growing Sales

The usual place that people start to look at when trying to improve profit is by cutting costs.

This will improve margins for time but sales will then start to decline as the quality of the products and services provided fall. Then with less sales, more drastic measures will happen with costs, and the business will eventually disappear.

The alternate to cutting costs to improve your percentages is to increase sales.

At his point most will jump on marketing ideas – discounts, social media, etc. While these will generally work there is no real substitute for providing a top quality consistent product or service.

Improve Efficiencies

No one like inefficient services. It not only affects the customers but also the staff.

So what can be done to help make your business more efficient?

– Simplify your product range.
– Improve your workflow.
– Automate as much as possible, whether it be the accounting function, stock management or staff scheduling, for examples.
– Reduce double handling of information.

Change Your Product / Service Mix

The “Mix” of the products or services you sell are NOT all equal. Some have high sale values and high margins, while others will be the opposite will low margins.

The first step is to know your products and services, and their profitability.. Once you have the information, you can determine what is the best for your business.

Think the low selling, low margin items are dragging your profit down, and are at times also the most time consuming or expensive to produce.

Increase Capacity.

Once your Sales start to grow, and you have discovered and improved efficiencies within your business, you will generally find that you are inadvertently created the opportunity to increase the capacity of your business.

If you would like to finds out more, reach out to us for a coffee and a chat.

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How to deal with cash flow problems – a quick guide

By admin on

July 13, 2018

- business, strategy

Dealing with cash flow problems

Below are some suggestions for unlocking funds without affecting your operational capacity. Keep in mind that you should always seek professional guidance before making changes to your business if you are unsure of the repercussions or potential issues.

Hidden sources of finance

Most business owners immediately think of the bank or loans when they’re short of money. But there are many more resources you can tap before you ask for that expensive overdraft or for an overdraft extension. You can often free up funds from within your business by re-examining your business systems, and these funds might in themselves be sufficient for your immediate needs.

To free up funds from within your business, you could look closely at the following.

Assets

Your assets include debtors, stock, pre-paid expenses, vehicles, plant and equipment, fittings and property. Each of these is a possible source of funds.

Debtors

Are you letting some customers have the free use of your money for months?

Here’s how you fix the problem.

Get invoices out promptly.
Send the invoice with the goods, and date the invoice from the day the service was completed rather than following the standard ‘last day of the month’ date for invoices.
Consider changing the terms for some of your customers, or for new customers.
Follow up promptly when invoices aren’t paid by the due date.
Establish the average age of your Accounts Receivable and set yourself the goal of reducing this age by a set target every month. It’s amazing the impact this will have on your cashflow, even collecting one day quicker.
Consider offering a discount for prompt payment.

Stock

Do you have excessive capital tied up in stock? This can occur in two ways:

Carrying high levels of items that you could obtain from suppliers at short notice.
Having too many slow-moving items (and too few fast-moving items).

You need to regularly review your stock levels, your stock turnover rates and your purchasing policies. Can you free up money by reducing stock? What about moving out of the slow-moving lines or having a quick sale of the slow-moving stock? It might pay you to reduce some items quite heavily to get some money in quickly.

Pre-paid expenses

These pre-paid expenses often relate to services. For example, you might have always paid your insurance bill for the year all in one hit, but could you instead arrange to pay small monthly amounts?

Fixed assets

Fixed assets can often be the source of a significant amount of cash. Are your assets fully utilised? You might be able to sell off little-used assets and hire suitable replacements when you require them.

Suppliers

Finally, consider your suppliers as a possible source of funds. Ask for extended payment terms for a short period to give you the opportunity to sell the goods first before you have to pay. If the supplier won’t budge, try splitting the order in two and offer to pay normal credit terms (30 days) on one half of the order and 90 days on the other half. Your suppliers will be more likely to agree to this kind of arrangement if you’ve paid them promptly in the past.

Your customers

Don’t forget that your customers can be a source of business funds. In addition to the good debt collection tactics already discussed, consider the following:

Ask some of your credit customers if they would be willing to use their bank credit cards for purchases from you, instead of using the account facility they have with you. They will more than likely have a credit card that offers 55 days interest free terms.
If you’re starting a new business, consider establishing it on a cash-only basis to keep the funds inside your business rather than locked up in Accounts Receivable.
If you supply goods over a period of time or if you’re a service business, ask if you can invoice for progress payments.

Next steps

Identify exactly how much additional cash you’ll need – this is especially important if you decide you need additional finance from a lender.
Seek professional help from an accountant, business mentor, or your bank manager.
Reduce your expenses and tighten your credit policies based on the steps above.
Research additional options for increasing your cash position, from low-interest bank loans and overdraft facilities, to equity assistance.