Ask the Advisor...

Ask the Advisor This is a forum for you to take the opportunity to get a business advisor’s views on any business issues you currently face and to contribute your point of view on issues facing other business advisors.

Question:
I never seem to get any time to think about where my business is going and feel stuck in a rut. Talking to other business owners I know it seems this is normal but I’d really like to sort it out!

Response:
You are right when you say this is a common problem amongst business owners but that doesn’t mean it can’t be solved! Most business owners start their business because they are good at doing something and want the freedom of working for themselves – the problem with that is that they enjoy the “doing” but a business owner needs to spend most of their time on other activities, particularly strategically driving the business to achieving its goals. If they don’t do that then indeed the business can get stuck in a rut.

The “doing” in the business is Level 3 activity and typically a business owner spends 80% of their time in this area.

The managing of the business is Level 2 activity and again typically this is 10-15% of a business owner’s time.

This only leaves a very small percentage available for Level 1 activity – the real business owner’s role of strategically driving the business forward.

In order to get out of the rut you need to free up more of your time for Level 1 activity, but it is important to plan this carefully or it can go horribly wrong and have a negative impact on the business. So key rules for reducing your level 3 activities are as follows:

STEP 1. Work out which specific roles you perform in each area of your business
STEP 2. Work out what % of time you spend in each area
STEP 3. Put a system in place for the tasks within each area
STEP 4. Employ person/persons, delegate or outsource those tasks
STEP 5. Put reporting systems & KPI’s (Key Performance Indicators) in place so you can manage and monitor each task

Following on from this you then need to reduce your time spent on Level 2 activities – the key rules are similar:

STEP 1. You must plan this process carefully
STEP 2. Systemise level 2 activities with Key Performance Indicators (KPI’s)
STEP 3. Ensure KPI’s are in place for marketing, sales, production, HR and finance
STEP 4. Ensure all reporting and meeting formats are set and are working/reviewed and corrected
STEP 5. Hire/appoint and train a general manager for the business

This is not easy to do and getting the assistance of an experienced business advisor helps to ensure this is achieved effectively and more quickly. Now think of what you can do to drive your business forward with all that time you’ve freed up!

Question:
I’ve only been running my business for a few years and haven’t yet been through a recession. Where should I focus my time in these tough times?

Response:
This is a timely question, but not one that is easy to answer without knowing far more about your business so I’ll have to respond generically (please feel free to contact me with more detail though!)

For most businesses the main focus should be cash flow – after all cash is king! Keep a close eye on how long it is taking to collect payment from your customers and be more diligent in chasing payments – there’s nothing wrong in contacting customers before payment is due to ensure it is on their system for payment rather than waiting until payment is overdue before you chase. Also ensure you vet potential new customers closely – there are a lot of businesses around who are losing their credit status with existing suppliers at the moment through non-payment and are being forced to look at new suppliers so beware!

In terms of your suppliers, ensure you are taking your full credit period with them even if you have not done so previously – the cash is better in your bank account than theirs.

Prepare a cash flow forecast for the next quarter to see if you are going to remain within your borrowing limits – you are far more likely to get an increase in facilities from your bank if you have the discussion in advance of the increased requirement rather than when it has already happened.

Keep a close eye on overheads and ensure you are getting the best deals but don’t make a classic mistake of cutting “unnecessary” costs like marketing and training – by all means check to ensure the spend is delivering value for money but don’t cut it down as this is your investment in your future and it will come back and bite you when the upturn comes.

I guess that’s enough for now but as a final point – keep believing in your business and see these times as an opportunity to take business from business owners who don’t believe in theirs!!

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