Business Growth Masterclass

Welcome to the second in my blog series The Business Growth Masterclass

I’ve called this installment:

How to live and breathe the 5 part formula for Business Growth

Before we start, I just want to check that you’ve done the homework set in the last installment of the Business Masterclass.

  • You’ve created a strong, clear business vision that is realistic and achievable.
  • You’ve posted your vision in a place where you and your staff will be able to see it on a daily basis.

You’re going to achieve your vision (and your dreams!) by adopting the five-step process into all areas of your business.

It’s one thing to try a new marketing strategy, but it’s another to change your approach altogether. It’s just like dieting. Sure, if you cut 20% of your calories for two weeks you’re going to see some results. But, the minute you go back to your old patterns, the results quickly disappear.

Temporary changes generate temporary results. Sustainable results require changes in behaviour; the removal of old habits and creation of new ones.

All of the advanced marketing strategies that you’ll learn in the Business Growth Masterclass will contribute to one of the five steps. By the end, you’ll have worked through all areas of your business and optimised them for success (remember, a 10% increase in the 5 areas can lead you towards doubling your profits (not revenues!).

In this installment of the Business Growth Masterclass we will cover:

  • How the five-step process will impact all areas of your business
  • How to get used to working with the five-part formula
  • A review of the five steps
  • How to set yourself up for success with the program

The five-step process is a way of doing business. It’s not a temporary strategy, and it won’t generate temporary results.

The five-part formula is so effective because it touches on each and every area of your business. It will improve and increase and generate and sharpen and strengthen everything that you and your employees do.

Once you complete a step, you’ll never go back to your old way of doing things again. This is a programme for positive change and powerful results. The change is long lasting and the results are far reaching.

Choosing to begin the five-step process will have an impact on every area of your business:

Lead Generation Conversion Rates Number of Transactions Pound Sales Profit Margins
Any strategy you use to get people to call or walk through the door. Any strategy you use to get people to BUY from you. Any strategy you use to get existing customers to buy from you more often, or stay loyal to your business. Any strategy you use to get customers to spend more money in a single transaction. Any strategy you use to maximise the percentage of the cost of each product/service that is profit.
Advertising
Promotions
Press Releases
Listings
Website
Online marketing
Sales process
Sales staff
Sales scripts
Point of sale
Image Merchandising
Staff scheduling
Staff happiness
Staff training and development
Customer service
Customer loyalty program
Point of sale
Impulse items
Sales process
Sales scripts
Stock
Stock availabilityExclusivity of products/services
Product or service costs
Expenses
Rent / lease
Business supplies
Pricing strategy

Let’s get used to working with the basic formula that the five-step process is based on. You’ll want to post this formula somewhere visible, where you can see it on a regular basis.

# of Leads
X
% Conversion Rate
=
# of Customers
X
# of Transactions
X
Average Pound Sale
=
Revenue
X
% Margin
=
£ Profit

As you can see, each of the items in bold typeface is a factor that influences the bottom line – your profit. Each of these is a step in the five-step process. You will work on each line sequentially, and the impact on your profit will build over time.

A nominal 10% increase in each of the five factors would look like this:

Starting Point Goals (10% Increase)
Leads 4,500 Leads 4,950
Conversion Rate 30% Conversion Rate 33%
Customers 1350 Customers 1633.5
Transactions 1.3 Transactions 1.43
Average Pound Sale £140 Average Pound Sale £154
Revenue £245,700 Revenue £359,729.37
Margins 24% Margins 26.4%
Profit £58,968 Profit £94,968.55

Here are a few blank charts for you to use to see how a 10%, 20% and 50% increase in each of the factors will impact your profit.

Create the chart below on your pad of paper (use the same pad as last week ideally – the process of writing this down will give you a 400% better retention rate). Use the left side of the chart to fill in your existing numbers. If you don’t know, take a guess. The point here is to understand how little increases will have big impacts on your bottom line profits. We’ll show you how to start tracking your results at the beginning of each step in the program.

Starting Point Goals (10% Increase)
Leads (#) Leads
Conversion Rate (%) Conversion Rate
Customers (#) Customers
Transactions (#) Transactions
Average Pound Sale (£) Average Pound Sale
Revenue (£) Revenue
Margins (%) Margins
Profit (£) Profit
Starting Point Goals (20% Increase)
Leads (#) Leads
Conversion Rate (%) Conversion Rate
Customers (#) Customers
Transactions (#) Transactions
Average Pound Sale (£) Average Pound Sale
Revenue (£) Revenue
Margins (%) Margins
Profit (£) Profit
Starting Point Goals (50% Increase)
Leads (#) Leads
Conversion Rate (%) Conversion Rate
Customers (#) Customers
Transactions (#) Transactions
Average Pound Sale (£) Average Pound Sale
Revenue (£) Revenue
Margins (%) Margins
Profit (£) Profit

Step One / Lead Generation: How can you get more people to walk through your door, pick up the phone, and/or visit your website?

Your leads are your prospects or potential customers. They are people who have taken action in response to your ad or promotion, and have shown interest in your product or service, but have not become a customer because they haven’t purchased yet.

Lead generation is important because you can’t increase the number of customers you have. This is because customers are the by-product of two things:

No. of LEADS X % CONVERSION RATE = No. of Customers

This means that you have to generate more leads and get more of those leads to make purchases in order to increase your customer base. Note; this is a very important step because your ‘cost of client acquisition’ (price you pay to acquire a new client) is the most expensive function of your business. (Yours, mine, and every other business on the planet by the way…)

So lead generation is about finding ways to reach the people who need or want what you have to offer and getting them to act – to pick up the phone, visit your website or walk into your business. This is what the majority of marketing strategies are trying to do.

  • advertising
  • business listings
  • direct mail
  • promotions
  • press releases
  • flyers
  • referral partnerships
  • publicity
  • coupons

Step Two / Conversion Rate: How can you get the people who walk through your door, pick up the phone, and visit your website to BUY something?

Conversions are the second factor in the customer equation. A conversion rate is simply our leads divided by our number of transactions in a specific time period.

No. of  TRANSACTIONS / No. of LEADS = % Conversion Rate

This is a key focus of your business and your staff’s time. After all, why spend time and money attracting tons of qualified leads if you can’t make them buy when they’re in the store? We call this “confusing being busy… with being successful!” Don’t let it happen to you.

Several aspects of your organization impact your conversion rate:

  • Your business image and the first impression customers have of you/your business
  • The strength and effectiveness of your sales team
  • Your sales process and staff training and development programs
  • The strength of your sales scripts (Do you want fries with that?)
  • The level of purchase risk involved in your product or service

Step Three / Transactions: How can you get your customers to buy from you MORE than ONCE?

The process of attracting and converting a customer is one that costs you money. Customers cost you money. They’re an investment that you need to make the most of to stretch your lead generation investment.

You can reduce the cost of your customer by increasing the number of times that they purchase from you. This increases the total number of transactions in your business and the amount of money that flows in.

So instead of continuously chasing down leads and converting them to customers, increasing transactions is about keeping our existing customers loyal and coming back to spend money.

  • exceptional customer service
  • customer loyalty programs
  • incentives
  • newsletters
  • convenience services
  • bonus amenities
  • referrals

Step Four / Average Sale: How can you get your customers to buy MORE from you each time they buy?

Your total revenue is the product of how many customers you have, how many times they purchase from you, and how much they spend.

No. of CUSTOMERS X No. of  TRANSACTIONS X £ AVERAGE SALE = £ Revenue

Increasing the average amount of money customers spend with you is the final way you can increase the amount of money that comes into your business. It’s amazing how small increases in this value can have big impacts on your revenue. If I were to come into your business tomorrow and you IMMEDIATELY needed to increase profits – this is the first place I would look and the easiest area to make a large improvement in your profits.

You’ll have to show your customer that they needed or want more than what they purchased. The amount that you are able to increase will depend on the type of business you are in – it’s easier to sell gel pens than an additional dishwasher – but generally every business can find opportunities to increase this figure.

  • The strength of your sales team
  • Merchandising at your point of sale
  • Add-on items
  • Cross-selling
  • Usage of impulse items
  • The strength of your sales scripts
  • Upselling
  • Opportunities for packaging and widgets
  • Staff training, development and incentives

Step Five / Margins: How can you make more profit off each product and service you sell?

The last opportunity you have to influence your profit is your profit margin. Your total revenue times your margin as a percentage equals your total profit.

£ REVENUE X % PROFIT MARGIN = £ Profit

Essentially, your goal here is to make your profit margin as high as possible. As the final factor in the profit calculation, increasing your margin is a vital step towards maximizing your profits.

If your margins are too low, you’ll never make any money – regardless of how many customers you have, how often they buy from you, or how much they spend. Your revenue will perpetually go back into your business and be spent on costs.

There are three ways to maximise your margins:

  1. Increase prices
  2. Cut operating and product/service costs (operating costs include rent, leases, salaries, commissions, and office supplies)
  3. Increase gross profit margins (gross profit is revenues minus labor, materials and overhead related to the product/service)

Alarmingly, many business owners do not genuinely know their weekly/monthly/annual profit – you need to go into the business of generating a profit (this will be a paradigm shift for many – it is not about greed, it is about looking after those you care about. The more money you make, the more you can provide for your family, charity, your golf club etc…) and work towards increasing that profit each and every day, week, month and year.

Now that you have a good grasp on how the five-step formula works, and an idea of the marketing strategies you’ll learn to work with, take a few moments and set yourself up for success.

1. Schedule time in your week to focus on the 5 step process.

Identify two timeslots in your weekly schedule that you can set aside for this task – it’s important! This will keep you from putting it off for later, and delaying the positive changes to your revenue stream.

2. Post reminders of your vision, goals and targets in visible places.

Keep yourself focused and on track by surrounding yourself with the positive changes you have already made, and will continue to make. Post your business vision, personal and business goals and targets in your office and staff rooms.

3. Include your staff in the process.

Your employees are a powerful resource in your business – they ultimately are the people that you will need to trust and empower to run the business without your own day-to-day involvement. They are the people that your customers come in contact with on a regular basis, and represent your business image, brand and message.

Let them in on what you’re doing, and educate them on the five-part formula. Show them how their actions, input and skills contribute to the operations and profitability of the business.

4. Start paying attention to your current numbers and tracking systems.

Now that you have an idea of what factors and figures you’ll be working to increase, start paying attention to what those numbers look like now. If you have tracking systems in place, run some reports and get an understanding of your current situation. Think about these questions:

  • where do your customers come from?
  • what marketing campaigns work the best?
  • what lead generation strategies work the best?
  • how many of your customers buy from you?
  • how often do they buy from you?
  • how much do they buy from you?
  • what do your existing profit margins look like?
  • what percentage of your items are high margin, and which are low?

Now that you have an idea of where your business is going, let’s start mapping out how you’re going to get there.

In my next Business Growth Masterclass we will look at setting SMART goals and retraining the way you think about yourself and your ability to achieve what you deserve. There’s lots of important work to do!

As your mentor, I’m here to answer questions and provide support when you need it, so feel free to use the feedback form below to get in touch

Congrats for tuning in,

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Business Growth Masterclass

Hello there, and welcome to my latest blog offering.

I was with three of my business colleagues at the weekend and we were offering our services to visitors to the exhibition. As they approached our booth, we would ask a couple of fundamental business questions.

Bear in mind that our audience, as is the case in many industries and professions these days did not have a great deal of experience in business management, save that which they had picked up for themselves in their day to day lives. Sure, most people get through, especially when the market is stable, but few of them go on to make LOTS of money, and after a few years of grind, begin to wonder what it was all about, and why they keep pushing themselves for what seems like a very mediocre reward for their efforts.

If market conditions change, and the business starts going south, many of these same business owners lack the expertise to respond, and sadly, many of them do not make it through the lean times.

The two questions we ask are “Where are you now?” and “Where do you want to get to?”

All too often the answer to these two fundamental questions is “I don’t really know”

I am reminded of the Cheshire Cat in Alice in Wonderland. When asked by Alice “Which road should I take?”, he replies “That all depends on where you want to get to”. Since Alice admits that she doesn’t know where she wants to go, the Cat replies “Then it doesn’t matter which road you take.”

There is a substantial amount of evidence which points to the fact that if you set goals for your business (and your life, for that matter, there is a great chance that you will achieve all you want to. A key early step in any of our coaching programmes is to establish a set of goals with our clients before going on and implementing strategies and tactics to help them in achieving their goals.

This article is designed to give you a way of thinking about your business which will mean that you can become one of the winners, instead of being one of the “also rans”.

Welcome to the Business Growth Master Class! Are you ready to dive in?

The first few articles in this programme guide you step-by-step through the process of establishing a strong foundation – or preparation – for the five-step process that follows. You need to prepare yourself, your business and your staff for the changes you are about to create and the success you are about to make yours.

You will notice that every major company in the world has a vision or mission statement – a broad, futuristic idea of what the company will achieve and look like in the future. The five-step process can help you achieve there, but you need to know where “there” is first.

I know you must be eager to jump into marketing strategies and get more people flowing through the door, or more sales ringing through the till. Be patient – this is important work that will build and contribute to your amazing success. Trust me!

In this Session we will cover:

  • What a business vision is and why it is important
  • Why your employees need a vision to follow
  • Examples of powerful vision statements
  • Your unique strengths and weaknesses
  • How to write your vision statement
  • What you need to achieve your vision

So, let’s take a look at what a vision statement is, and why it’s important for you to create one for your business.

A vision statement is a broad, inspiring image of the future state a business aspires to reach. It describes without specifying how aspirations will be achieved, or when. It is ambitious, and forward-thinking. It’s not about where the organization is now, it’s about what the organization will be, or aspires to be.

A vision statement needs to:

  • describe aspirations and intent
  • be inspirational for your staff and customers
  • project a compelling story
  • paint a clear picture
  • use engaging and descriptive language
  • be realistic
  • align with your company’s values

The vision statement will also provide a clear criteria or measuring stick for decision-making. When making tough choices, ask “Does this support the vision statement?” If major initiatives do not support the overall business vision, chances are they aren’t worth the investment of time and money.

If your business doesn’t have a vision statement, it needs one. If it does, then this is a good opportunity to strengthen it or make sure it is aligned with the current dream you have for yourself and your company.

I’m going to work through a step-by-step process that will help you hone in on what your vision is, and then put it into words.

You should note that a corporate vision statement – once created, agreed to and perfected – should remain consistent and unchanged for several years. When a vision statement is changed and revised, it is difficult to create a consistent plan that supports the achievement of the vision.

But first, don’t forget that your employees, joint ventures (companies you align yourself with – the most powerful marketing initiative on the planet is a Joint Venture) and your customers need to believe in the company’s vision too.

Your employees need a strong, clear vision statement just as much as you do. When creating a vision statement, keep this in mind. The vision will need to be something that your employees can embrace and stand behind. A powerful vision statement that your employees can get excited about will motivate, inspire and build morale on the sales floor and in the office.

Think about how you will communicate your vision to your employees once you have created it. How can you inspire them to nurture and support your vision on a daily basis, in everything they do? How can you empower and motivate them to feel ownership of the company’s future and their stake in it?

Take a look at these corporate vision statements so you can get a better understanding of what I’m talking about.

Amazon.com
Our vision is to be earth’s most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.

Dell
Dell listens to customers and delivers innovative technology and services they trust and value.

eBay
eBay pioneers communities built on commerce, sustained by trust, and inspired by opportunity. eBay brings together millions of people every day on a local, national and international basis through an array of websites that focus on commerce, payments and communications.

Facebook
Facebook is a social utility that helps people communicate more efficiently with their friends, family and coworkers. The company develops technologies that facilitate the sharing of information through the social graph, the digital mapping of people’s real-world social connections. Anyone can sign up for Facebook and interact with the people they know in a trusted environment.

Google
Google’s mission is to organise the world’s information and make it universally accessible and useful.

Other Vision Statement Examples:

  • To develop a reliable wireless network that empowers people with the freedom to travel anywhere – across the hall or across the continent – and communicate effortlessly.
  • To be the country’s best quick-service restaurant chain we will provide each guest great tasting, healthful, reasonably priced fish, seafood and chicken in a fast, friendly manner on every visit.
  • To provide high quality products that combine performance with value pricing, while establishing a successful relationship with our customers and our suppliers.
  • To be a profitable provider of high quality software solutions and services that provide strategic value to our customers and create a company that can attract, recruit and retain smart and talented employees.

See what I mean? Let’s start creating your unique vision statement.

1. Start by looking at your strengths and weaknesses from the perspective of everyone who does business with you.

You’ll start with a bit of analysis on where you stand now. Use the chart as a guide, create your own on a pad of paper and fill in your company’s unique strengths and weaknesses. Think about strengths and weaknesses from the perspective of customers, staff, management, vendors or suppliers and owners.

For example, what would your customers say about your customer service standards? Would this area be considered a strength or a weakness? What would your staff say about training and professional development opportunities? What do you think about your income and overall financial growth?

Strengths Weaknesses
Customers
Customer service
Product or service availability and quality
Business location
Business image
Staff
Training
Salary
Professional development
Benefits
Quality of work environment
Management
Training
Benefits
Staff skills
Vendors / Suppliers
Product or service quality
Owner (You)
Income
Business image
Salary

2. Analyze your observations, and remember that your weaknesses represent great opportunities for change and improvement, while your strengths need to be nurtured and developed.

Take a look at what you have written, using the chart above as your guide, and answer the following questions on your pad of paper:

What does the overall picture look like?

How does the overall picture align with the dream you have for your business?

What great achievements and qualities exist in the strengths section? (List 10)

What opportunities exist in the weaknesses section? (List 10)

3. Now that you’ve assessed where your business stands today, where do you want it to be? What opportunities exist?

Here you will take the strengths and opportunities you identified in step one, the analysis you completed in step two, and start describing them in words. Use the chart below as your guide, write three sentences that describe the future state of your business. I’ve included some samples to get you started.

Vision
Customers To be a regional leader in customer service.
Staff To inspire and develop our professionals.
Management To lead a generation of environmental responsibility.
Vendors / Suppliers To offer only the highest quality sprockets.
Owners To be a profitable and highly respected organization.

3. What opportunities and aspirations are the highest priorities for you and your business?

Take the sentences you created above, and list them in order of importance to you. You may have to do this several times before you feel the order is accurate. Then, combine duplicate sentences, or ones that describe similar things.

Once you’ve finished your list, take the top three to five sentences and combine them into a cohesive paragraph.

4. Refine your statements so that they are broad, future-oriented and use words that reflect your values, priorities and dreams.

You need to refine your statement so it is smooth, clear and easy to understand. Here is a checklist to use when reviewing the words you have written:

  • is it inspirational for your staff and customers?
  • does it project a compelling image?
  • does it paint a clear picture?
  • have you used engaging and descriptive language?
  • is it realistic?
  • does it align with your company’s values?

TIP: You can use phrases like:

A leader in…
Support the development of…
Offer opportunities to…
Continually create…
Build on…
Inspire…
Develop…
Facilitate…
Achieve…
Deliver…
Bring together…

5. Include your employees in the vision creation process, and ask them for feedback.

Do they understand the vision? Do they support it? Does it inspire them? Can they find meaning in their work based on it? Incorporate their feedback, where possible and relevant.

6. Put your vision statement somewhere everyone can see it – your staff, management, customers and vendors.

Once you have created your vision statement, share it with the world. Your vision is something you have committed to, and can let everyone know where your company is heading. It allows them to see where you want to go, and gives them the opportunity to help you get there.

Now, do you have everything you need to start working towards your vision?

In the next few articles, we’re going to work through a comprehensive goal-setting process that will act as the road map for achieving your vision. You’ll also review, in depth,  the strategy that you will use to achieve your goals, and in turn, the vision you have created.

As your mentor, I’m here to answer questions and provide support when you need it, so feel free to email me at davepreston[at]ologycoaching.com (replace [at] with @ – this is spam prevention).

Congrats for tuning in,

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What can we learn from the Olympics?

Posted on 13 August 2012

What can we learn from the Olympics?

Over the last few weeks we’ve all been watching the world’s best athletes and sports people compete in the London Olympics. What an incredibly talented array of high performers we’ve had the privilege to watch! But what can we, as business folk, learn from what we’ve witnessed in the sports arenas?

One thing is clear – talent alone is not enough – in sport or in business. You also need an abundance of drive, determination and self-discipline.

It has been said that top flight sport is a meaningful metaphor for business, with some striking parallels.  Common features include strong competition, the smallest margins of success, setting and achieving goals and targets, committing to both long-term and short-term strategies and tactics, hard work, perseverance, determination, teamwork, dealing with success and recovering from failure and setbacks.

So what can we learn from sports people as entrepreneurs and business owners?

One difference between sport and business is the way goals are set. In sport, the goals are clear – you know what day and time the Olympic final is, for example. And everything is moving towards that one point where you will have to be at your best.

In business things are more complex and there’s usually a series of goals. So running a business requires a level of flexibility. Nevertheless, having a goal or a fixed deadline is vitally important.  As an example, in organising the Olympics all the buildings in the Park had to be finished on time, it was a given. So in business we need absolute clarity of the desired outcome.

How many times have you thought that there are a lot of busy fools in business?  In sport, busy just doesn’t cut it – unless it is activity directed at the chosen goal, then it has no place. Business is no different.  If people are hugely busy but they’ve got no real clarity of their desired outcomes, the chances of delivering the right results are slim. The number one driver for sports people is performance; businesses need to have that same performance culture if they are to be successful.

What about the role that coaches play?

First of all, there are NO successful athletes or teams who don’t have a coach!  A coach provides independent insight, helps create fresh perspectives and can often see the barriers to progress that the sports person is simply too close to see.  Coaches allow the athletes to get the very best out of themselves and to reach their full potential, whilst at the same time letting them take ownership of what they are doing.

Why should business be any different?

The best sports people are never satisfied – they are always striving for the next improvement.  They are right to do so – their competitors have a powerful motivation to beat them and you can bet your bottom dollar that they will be working hard to do just that!

Business is no different – you are only as successful as your last set of results, so don’t get complacent!

Success in sports and business alike relies on the ability to continually move performance to higher levels. This year’s best performance won’t be good enough next year or the year after!

A lot of your success will be down to having a tough mindset.

Like top athletes, the best business people are not born but made.  OK, there has to be some natural aptitude, but the real key to sustained excellence – in sport and in business – is to develop resilient mental toughness.  If you can stay focused on those things that really matter when faced with myriad distractions, if you can bounce back from setbacks with a determination and a renewed appetite for success, and throughout you can believe in yourself when the going gets tough, then you stand a chance of success!

Remember the famous Henry Ford quote: “Whether you think that you can, or whether you think you can’t, you’ll be right!

Next point – all work and no play makes for a rather dull existence, so DO celebrate success!

Copy the sports people – take time to celebrate your victories.  Remind yourself what your hard work and dedication is all about.  I would suggest that things have never been tougher for most businesses – many of us are focused on survival as a key priority – but don’t let that stop you celebrating your successes, however small they are.

We all experience nerves and stress when we are doing important and maybe less familiar things, whether it is in business, sport or in our personal lives.  Maybe our culture tells us that this is a bad thing, that we should not feel this way.  Don’t believe it – it is both normal and often helpful.  The heightened awareness created by a little nervousness (as opposed to a level of complacency) helps us to focus our best efforts into getting the best result that we can.  Anyone watching the Men’s 200m Final would have seen that Usain Bolt was visibly nervous before his successful Olympic title defence – it was in actual fact a key element of his performance on the night.

One of the world’s greatest golfers, Tiger Woods, said you can’t expect to feel the same on the golf course as you do when watching television.  Woods gave himself permission to feel nerves on the first tee – and it doesn’t seem to have hindered his performance!  So harness your emotions, rather than wasting energy and attention in fighting them.

That’s all very well, but to get to the very top requires something else on top of the things already mentioned.

That something else is Mindset – self-belief and the mindset of the winner.  It is the thing that keeps you trying over and over again.  One of the outstanding road cyclists of this year has been Bradley Wiggins – after winning the Tour de France, he went on to Olympic Gold – both by convincing margins.  Wiggins set his stall out to get his fitness to a level that could achieve this – not just strength and stamina, but the mental toughness to endure the hardships of harsh training and even harsher competition.  And he did it.

No easy route here – his success was down to the tens of thousands of hours put in practicing, training and improving.  Maybe that approach is too hard for you in your business – maybe you are looking for that “quick fix” – the silver bullet?  It doesn’t exist.

As has often been said – “good enough never is” – so why settle for second best?  Do you have the level of discipline that successful sports people have in abundance – that of never being happy with your performance?

Accepting second rate performance is a huge risk in business.  In sport, when a person does badly, their performance is reviewed, analysed and they work out how to improve (usually with the help of their coach). Sadly, in business average performance is often tolerated. The choice is yours – you can either carry on accepting mediocrity or do something about it.

It’s not easy, though, is it? In today’s difficult market conditions, it’s easy very easy to think that things can’t be changed.  We end up acting as victims and accepting our lot.  Well, it’s not good enough – you only have to look around and see that even in this difficult recession, there are companies who are forging ahead.  One final sporting analogy – the best tennis players like Roger Federer, Rafael Nadal and Andy Murray deliver the core skills their basics exceptionally well under extreme pressure.

How do they do that?  They filter out those things that are unimportant to achieving success – and under pressure, they focus solely on the task.  That’s what we need to do in our businesses – don’t allow yourself to be distracted from the things truly necessary to succeed.

If you’re interested in applying the Olympic standard to your

Why do some businesses thrive during the depth of a recession?

The Bad News and the Good News

The bad news: we are living through the worst economic times since the Thirties Depression. And maybe there is still worse to come. If we were part of the Euro-zone (and here, I’m referring to the European currency), we may very well have been in the same boat as Greece, Spain, Ireland an Portugal.  Don’t believe what you hear on the BBC and read in the Newspapers;  most of the people in these organisations have vested interests in talking up the markets. That is, if they know what they’re talking about. Remember that Japan suffered deflation throughout the Nineties. What has to unwind in the coming years is the enormous debt that America and Britain have accumulated.

So the good times are over for the minute. What does this all mean for your business?

The good news: not every business is going to go bust, the smarter businesses will not only survive but actually prosper at the expense of their competitors. These smarter businesses will invest now and continuously to improve their competitive edge.

So what is competitive edge?

Low cost alone seldom gives you the competitive edge but Ryanair is an exception, although you might raise an eyebrow and ask about their reputation for charging even for basic on-board amenities. Quality at a reasonable price usually counts for more, as in Marks & Spencer, and Apple has established its competitive edge for innovation and the user-friendliness of its products. Indeed when you get to Apple’s stage, the brand alone speaks for your competitive edge. Notice that your product or service doesn’t have to be the best available in the market provided your customers’ experience of your business is quality. Quality means reliability and responsiveness to your customers’ needs.

So to my definition of competitive edge: the perception that a business delivers something different and/or of better quality to its customers. This difference refers to the uniqueness or innovation of your product or service; better quality refers to the quality of your customers’ experience of your business.

Setting aside uniqueness and innovation, how do you develop a competitive edge through giving your customers a quality experience?

When you get down to it, quality is simply about people and process – people design the process and people deliver the process. Improving your people means increasing their skills and knowledge and improving how they get on and communicate internally and externally. This leads to the development of high performance teams and individuals who are responsive to your customers while maximising their contribution to profits. Developing efficient processes in your business translates to responding to your customers efficiently and accurately which means better bottom line performance for your business.

Remember: if you do nothing new your business will likely end up doing nothing different or worse. Invest in improving your competitive edge and you have every chance of seeing a rich dividend on your investment in these testing times.

If you want to be one of those businesses who will thrive during the depths of recession, e-mail me for further information.

The Financial Challenges and Pains faced by SMEs and The funding options available to them at different stages of their development.

The Financial Challenges and Pains faced by SMEs and The funding options available to them at different stages of their development.

Structure

1. Introduction

2. Stages of Growth

3. Funding Options

4. Types of funding available

5. Stages of Growth and the Funding Options available

Introduction

If only the Government and high street banks understood the challenges faced by SMEs in running their businesses. The sad fact is that this vital sector to the British economy is either overlooked entirely or offered finance at exorbitant and unacceptable rates.

The challenges nearly always boil down to cash flow problems. However, if lending was increased to the SME sector not only would these challenges disappear but valuable jobs and growth could be created it is a win/win situation.

The challenges created by lack of cash flow include the inability to:

 Fund new orders due to debtors paying late
 Pay for vital imports of stock
 Pay VAT or PAYE on time
 Plan achievable growth
 Buy new technology
 Keep acceptable credit terms with suppliers
 Take advantage of volume discounts
 Introduce new products or services
 Increase stock on a seasonal basis
 Start a new business
 Acquire a new business
 Stave off a pending decline

It is very important for management teams to review their funding needs at least once a quarter. They need to be aware, at all times, of any cash flow difficulties that may be on the horizon and what solutions are available to them.
The solutions that will be available to them will differ depending on the stage of development that the company is at when the funding need appears. Not all funding solutions will be suitable or even available to all companies.
Suitable funding solutions need not be hard to arrange as long as the management teams are not taken by surprise. If they are taken by surprise, are not prepared and have to go cap in hand to the bank, they are then more likely to be offered the wrong solution, at inflated prices and onerous terms and conditions. That is if they are offered funding at all.

The key to successful funding is to be aware of your needs well in advance. Firstly, prepare the ground thoroughly, research the marketplace and then make the funders compete for your business, just like any other supplier that you deal with. Money is just like any other product that you buy.

Stages of Growth
As mentioned above, not all funding sources will be available to you. It will depend on what stage of growth your company is experiencing. It is important to understand the stages that many companies will experience at some time during their life.
The following list contains many of these stages, although the list is not completely exhaustive. Some businesses will experience all the stages and some just a few. It is also possible that a number will only experience a couple of stages, going straight from concept to collapse.

The major stages of growth are as follows:
 Concept
 Start-up
 Growth
 Consolidation
 Acquisitions
 Management Buy Outs (MBOs)
 Management Buy Ins (MBIs)
 Decline
 Failure
 Phoenix

Funding Options
Now that we have identified the stages of growth, we need to identify the funding options that may be available, and when we have done that we can discuss which options go with what stages of growth.
Remember that funding seldom comes from a single source and in most cases is a mixture of different types of funding. It should also be noted that taking risks is not in the nature of funding providers and, in the marketplace that we are in at present, personal guarantees for any type of debt funding will be required. These can be either supported or unsupported. A supported personal guarantee normally involves the pledging of a property or other asset to guarantee the loan. Angels (explained later on) taking an equity stake are more likely to take risks but will still want to minimize them and this will require a much higher return to compensate for the risks that they are taking.

Types of funding available:
The 3Fs:

Friends, Family and Fools: This type of funding is normally how an entrepreneur gets started. It is also expected that the management team themselves have invested as much as they can in the company, as other funding providers always look for ‘pain’ money that will keep the team focused. Funders will also wonder why they should risk their money if the management teams are not prepared to risk theirs.
Personal Mortgages: If the entrepreneur has free equity available in their home, and is prepared to risk it, then this is the simplest and often the fastest way to raise funds.

Commercial Mortgages:

Once a company is established commercial mortgages may be available for expansion. Loan to’ Values’ in today’s market place seldom exceed 70%-75% and so a reasonable deposit will need to be available. Affordability will also be an important criteria.

Credit Cards:

Using personal credit cards is not a recommended method of raising capital, because it is one of the most expensive financing methods. Unfortunately many people have resorted to raising funds in this way unaware of the fees and payment terms that are applicable.
There are, however, a number of companies that will buy your credit card receipts from you in advance, if you have been established for a while and have a trading history. This is not a cheap method of easing cash flow problems but can help out if you have short term problems.

Grants:

These vary in amounts and are dependent on the part of the country that you live in. They are becoming much harder to find and secure. It is always a good idea to talk to a specialist who will know what is available locally.

Recruitment:

Recruiting a non-executive chairman, with capital to invest, is often a neglected source of funding. If the right chairman is recruited he or she may also bring much needed market experience as well as a valuable contact list. This sort of recruitment is often undertaken on a success fee only basis; so no fees may be payable until the right candidate has been found and the capital injected.

Enterprise Finance Guarantee Scheme (EFGS) Loans:

These loans are available from many sources and not only the high street banks. They are much more difficult to obtain than the Small Firms Loan Guarantee Scheme (SFLGS) loans that they replaced. The government gives the lender a 75% guarantee against default which the borrower has to pay a 2% per annum additional fee for. Even with this guarantee most banks still ask for 100% guarantees from the borrower. As these loans are a last resort, this seems to disqualify the very people that they are meant to help. A good funding expert will know which banks are lending at the moment and what will be required to make a successful application.

Invoice Discounting and Factoring (ID&F):

Invoice discounting and factoring comes in many forms. It is a valuable source of funding if you have a growing debtor ledger. An ID & F provider will buy your debtors from you and thereby freeing the capital tied up in those invoices. The average ID & F provider will advance 75% of the value of the invoices and once the client pays then the remainder, less charges, is also paid to you.

Most companies in this marketplace will require you to undertake at least a one-year contract with a 3-month cancellation clause and will also require you to put all invoices through their system, even those that pay you quickly. There are, however, a number of companies that now offer single invoice discounting which does not tie you to a contract and lets you discount or factor just one or two invoices at a time. You might need it when the VAT is due, or to fulfill that large order that has come in unexpectedly.
There is now also one company that lets you auction individual invoices to the highest bidder.

Trade Finance:

If you have a confirmed order from a credit worthy client but the product is made abroad and the manufacturer wants payment in advance but your client wants/expects at least 30 days credit, then Trade Finance may be the answer. Trade funders may purchase the goods on your behalf and following delivery to the client collect what they are owed by using invoice discounting or factoring to get their money back.

Stock Funding:

Stock is one of the hardest areas to fund and traditionally only available to those companies that have built up a good track record with a funder. There are some new stock funders emerging, who will buy stock for an organization and who will then hold the products in their own warehouses until you need to take delivery and have paid for the goods.

Angels:

Angels are investors who are prepared to invest in start-up or growth companies for an equity stake in the company. They are prepared to take the risk of investing as long as they can see from the business plan that the management have got the required experience; that there is a sound and detailed sales and marketing plan, backed by a full explanation of all assumptions made and that all operational details have been thought through. They will require a high return on their investment and a clear exit strategy within a 3-5 year period. Make certain that you have registered for EIS as this makes investing in your company even more interesting for an Angel due to the tax concessions that they will receive.

Crowdfunding:

This is a recent interesting development and comes in 2 forms; equity crowdfunding and loan crowdfunding. The principle is the same in both situations, multiple small investors combine together to invest or lend money to a company. The amounts invested can be quite small, often only a few £100 from each investor, so the risks to a single individual are limited. This is an interesting way for start-up companies to get their first start in life. It should be noted, however, that there are issues concerning the EIS scheme with this type of funding. It is also important not to overlook one of the advantages of traditional business angel investors, which is the experience and contacts that they often bring with their investment.

Turnaround/Recovery Angels:

These angels are willing to take a much larger levels of risk and specialize in turnaround or recovery situations. The types of companies that they are willing to consider are those that have fallen on hard times but which in the past were successful enterprises. In other words, good companies that have gone bad for an identifiable reason. These angels can act fast and will often talk to your creditors and secure some much needed time for additional funds to be injected.

Bank Overdrafts:

These do have their uses, if you can get one but they should come with a health and wealth warning. Bank overdrafts can be taken away overnight and so should be used with caution. In today’s marketplace most of the high street banks are also looking for 100% personal guarantees and these often have to be supported by property. Overdrafts are almost impossible to obtain if you are a start-up as many Banks no longer will lend solely on forecasts.

Commercial Loans:

Rather than an overdraft, try and get your Bank to give you a commercial loan. These will also need to be supported by personal guarantees but will be for a fixed period of time and unless you default they cannot be taken away overnight.

Leasing and Hire Purchase (HP):

Why use your valuable cash flow to buy assets for the company when you can lease them over a set period of time and keep your available capital for running and growing the business. Sale and leaseback is also a useful way of raising additional capital on assets that you already own outright. You can sell them to a leasing company who will give you a lump sum and then you can lease the assets back from them.

Regional Venture Trusts:

These are very useful for start-ups and growth companies as they will invest in interesting propositions with high growth potential. Normally they will invest more than Angels but less than Venture Capital.

Venture Capital (VC) and Venture Capital Trusts (VCT):

VCs are normally looking for larger opportunities than the average SME can offer. A few, however, are beginning to look at sub £1m investments and they are therefore worth keeping in mind. Be prepared for some harsh negotiating and for some stringent reporting requirements. VCTs on the other hand are looking for smaller opportunities to invest in and are a useful source of funding.

Stages of Growth and the Funding Options available
Now let us put the stages of growth and the available funding options together. This is not an exact science and there will be overlap in a number of situations;

Concept Stage:

There is very little help for you at this stage of a company’s development. At this stage the company does not normally exist. This is where the 3F’s come into their own as in loans from family and friends and even business colleagues that you have worked with before. Some small grants are sometimes available for doing market research and prototype building. Many people at this stage will also look to raising money from the free equity they may have in their home and some, unadvisedly, will even turn to their credit cards to make their concept a reality. There are also a number of micro funding organizations springing up that will invest in a concept in the hope of then assisting the company to get set up and started.

Start-up Stage:

One has to be very careful at this stage and costly mistakes can be made. Very often the entrepreneur is so keen to get going that expensive funding is accepted or they sell too many shares for too little money. This will have a significant impact on your ability to raise further rounds of investment without losing control or becoming so diluted that you lose interest.
All the sources of funding available at the concept stage are also available at this stage plus some additional sources that you can now think about.
These include:
 Recruiting a non-executive chairman with both knowledge and capital
 Applying to a Bank for an EFGS loan which gives the banks a 75% guarantee by the government. You pay 2% per annum extra for this guarantee over and above whatever the bank charges for the loan. The banks do not like these loans as they are very risky for them and are therefore difficult to obtain. But they are a good source of funding and there are other organizations that have the right to offer them that are more sympathetic than the banks.
 Leasing and HP. Very helpful at this stage to finance cars, plant and machinery and IT equipment. Remember, however, that you need to be a UK homeowner and be prepared to give personal guarantees.
 Invoice Discounting or Factoring. This type of funding for a start-up is often very important. The funders are not particularly taking a risk on the start-up, they are taking the risk on your clients. Remember there are specialists that are happy to start providing very small sums to start with and others that will be very flexible and are quite happy to just buy one or two invoice at a time to suit your requirements. There is now even an auction site that lets you sell your invoices to the highest bidder.
 Angel Funding. This is perhaps the most important method of raising finance for a start-up, but it is also the most time consuming, the most difficult and the most expensive. You need a first class funding business plan, the returns for the investor will be high and so the business must be quickly scalable and there must be a realistic pre-investment valuation as well as a well-defined exit strategy. You need to have something that sets you apart from your competitors. Something that makes you unique and gives you a sustainable business advantage.
 There are many national and local angel networks available, but it is much better to approach them through an experienced intermediary rather than go direct yourself. Crowdfunding has introduced a new type of angel into the market place and this type of funding can be very interesting, but you still need to have a great business plan. Small investors will care just as much about the return on investment and will need to believe that you can deliver the business plan.

Growth Stage:

Once again all the ones mentioned at earlier stages will be available at this stage as well. The banks will be slightly more interested in you at this stage and overdrafts may be an option, but you should still try and avoid these and request a commercial loan instead. Remember, however that term loans have to be asset backed and have a defined payback plan. Commercial mortgages should also be easier to get at this stage.
Other sources of finance to consider are:
 Trade Finance
 Stock Finance
 Loans from angels
 Regional Venture Trusts either for equity funding or mezzanine loans.

Consolidation Stage:

At this stage of the company’s development you are much more interesting to funders and should be able to renegotiate existing deals. So at this stage look at all the previous debt deals that you arranged and see if you can now get better deals. So have a complete review of:

 Your commercial mortgage
 Bank debt; even consider a total change in banking arrangements
 Invoice discounting or factoring contract
 Your leasing and HP agreements
 All trade and stock funding facilities

Acquisition Stage:

Having reviewed all your existing facilities at the previous stage, you now need to find additional funding to help finance any company acquisitions that you want to make. Looking at a likely target you should always look at their assets and decide if part of the cost of acquisition can be paid back by using invoice discounting or factoring to raise money from their debtor book and also consider selling and leaseback of any owned plant and machinery.
Other areas of funding to consider at this stage are:
 Angel Funding
 VCTs
 VCs

Decline Stage:

Unfortunately many companies, at some time or another, will experience this stage and hopefully come out the other side stronger and fitter.
At this stage you may consider:
 Second charges on property
 Re-financing of any owned assets
 Short term finance such as single invoice discounting
 The sale of future credit card receipts
 You may also consider the recruitment of a non-exec chairman to bring in new ideas and capital from someone who has done it all before.

Failure and Phoenix:

At this stage your only hope may be to approach the Angel networks that specialise in turnaround situations. Most pre-packs and phoenix operations fail because no new money and equally important no new ideas are brought into the company and the same mistakes are made all over again. Bring in the turnaround angels and you get both capital and ideas. Invoice discounting and factoring are also very useful at this stage as they do not rely on looking at the past history. Instead they look at the quality of your customers.

Specialist Funding for all Types of Business and Stages of Growth

The current global economic climate and the parlous position of the banking system are adding significantly to the pressure on UK businesses. However, at 4bc, in collaboration with our strategic partners, we pride ourselves on being able to deliver multiple solutions to meet the individual financial needs of companies. No matter where a company is in its own cycle, we have access to funding for start-ups, expansions, contractions, turnarounds and even companies which are no longer supported by their banks. Introductions can be made to over 650 different sources of funds, including equity, debt and asset backed finance.
Probably the most immediate need for most SMEs is cash flow – we have the solution in terms of Invoice Discounting or Factoring with a panel of 47 funders. However, we adopt a competitive engagement (unlike most banks) thus providing transparent and cheaper options for business. For companies that require funding for only a limited period we offer short-term single or selective invoice discounting or factoring.
These are but a few weapons in our armoury aimed at supporting UK business. Other options include Angel Funding, Trade Finance, Turnaround Finance, Leasing and HP including Sale and Lease Back and even IT leasing, Commercial Mortgages, EFG and Commercial Loans.
In addition to funding, we offer comprehensive support and expertise to businesses by means of Business Planning and Mentoring. Our team has a wealth of practical business experience available to our clients.
Services include: Business plan scoring, business plan creation and re-write, financial modelling, sales and marketing planning, due diligence responses, investor presentation creation, investor introductions and meetings and final investor negotiations.

However small or large your need my funding resource partners can greatly enhance your chances of success.

To discuss call me on 07539 365747
Or email david@4-bc.co.uk

Ever wondered why is it that some people are better at achieving their goals than others

Why have you been so successful in reaching some of your goals, but not others? If you aren’t sure, you are far from alone in your confusion. It turns out that even brilliant, highly accomplished people are pretty lousy when it comes to understanding why they succeed or fail. The intuitive answer — that you are born predisposed to certain talents and lacking in others — is really just one small piece of the puzzle. In fact, decades of research on achievement suggests that successful people reach their goals not simply because of who they are, but more often because of what they do.

1. Get specificWhen you set yourself a goal, try to be as specific as possible. “Lose 5 pounds” is a better goal than “lose some weight,” because it gives you a clear idea of what success looks like. Knowing exactly what you want to achieve keeps you motivated until you get there. Also, think about the specific actions that need to be taken to reach your goal. Just promising you’ll “eat less” or “sleep more” is too vague — be clear and precise. “I’ll be in bed by 10pm on weeknights” leaves no room for doubt about what you need to do, and whether or not you’ve actually done it.

2. Seize the moment to act on your goals. Given how busy most of us are, and how many goals we are juggling at once, it’s not surprising that we routinely miss opportunities to act on a goal because we simply fail to notice them. Did you really have no time to work out today? No chance at any point to return that phone call? Achieving your goal means grabbing hold of these opportunities before they slip through your fingers. To seize the moment, decide when and where you will take each action you want to take, in advance. Again, be as specific as possible (e.g., “If it’s Monday, Wednesday, or Friday, I’ll work out for 30 minutes before work.”) Studies show that this kind of planning will help your brain to detect and seize the opportunity when it arises, increasing your chances of success by roughly 300%.

3. Know exactly how far you have left to go. Achieving any goal also requires honest and regular monitoring of your progress — if not by others, then by you yourself. If you don’t know how well you are doing, you can’t adjust your behavior or your strategies accordingly. Check your progress frequently — weekly, or even daily, depending on the goal.

4. Be a realistic optimist. When you are setting a goal, by all means engage in lots of positive thinking about how likely you are to achieve it. Believing in your ability to succeed is enormously helpful for creating and sustaining your motivation. But whatever you do, don’t underestimate how difficult it will be to reach your goal. Most goals worth achieving require time, planning, effort, and persistence. Studies show that thinking things will come to you easily and effortlessly leaves you ill-prepared for the journey ahead, and significantly increases the odds of failure.

5. Focus on getting better, rather than being good. Believing you have the ability to reach your goals is important, but so is believing you can get the ability. Many of us believe that our intelligence, our personality, and our physical aptitudes are fixed — that no matter what we do, we won’t improve. As a result, we focus on goals that are all about proving ourselves, rather than developing and acquiring new skills. Fortunately, decades of research suggest that the belief in fixed ability is completely wrong — abilities of all kinds are profoundly malleable. Embracing the fact that you can change will allow you to make better choices, and reach your fullest potential. People whose goals are about getting better, rather than being good, take difficulty in stride, and appreciate the journey as much as the destination.

6. Have grit. Grit is a willingness to commit to long-term goals, and to persist in the face of difficulty. Studies show that gritty people obtain more education in their lifetime, and earn higher college GPAs. Grit predicts which cadets will stick out their first grueling year at West Point. In fact, grit even predicts which round contestants will make it to at the Scripps National Spelling Bee. The good news is, if you aren’t particularly gritty now, there is something you can do about it. People who lack grit more often than not believe that they just don’t have the innate abilities successful people have. If that describes your own thinking …. well, there’s no way to put this nicely: you are wrong. As I mentioned earlier, effort, planning, persistence, and good strategies are what it really takes to succeed. Embracing this knowledge will not only help you see yourself and your goals more accurately, but also do wonders for your grit.

7. Build your willpower muscle. Your self-control “muscle” is just like the other muscles in your body — when it doesn’t get much exercise, it becomes weaker over time. But when you give it regular workouts by putting it to good use, it will grow stronger and stronger, and better able to help you successfully reach your goals. To build willpower, take on a challenge that requires you to do something you’d honestly rather not do. Give up high-fat snacks, do 100 sit-ups a day, stand up straight when you catch yourself slouching, try to learn a new skill. When you find yourself wanting to give in, give up, or just not bother — don’t. Start with just one activity, and make a plan for how you will deal with troubles when they occur (“If I have a craving for a snack, I will eat one piece of fresh or three pieces of dried fruit.”) It will be hard in the beginning, but it will get easier, and that’s the whole point. As your strength grows, you can take on more challenges and step-up your self-control workout.

8. Don’t tempt fate. No matter how strong your willpower muscle becomes, it’s important to always respect the fact that it is limited, and if you overtax it you will temporarily run out of steam. Don’t try to take on two challenging tasks at once, if you can help it (like quitting smoking and dieting at the same time). And don’t put yourself in harm’s way — many people are overly-confident in their ability to resist temptation, and as a result they put themselves in situations where temptations abound. Successful people know not to make reaching a goal harder than it already is.

9. Focus on what you will do, not what you won’t do. Do you want to successfully lose weight, quit smoking, or put a lid on your bad temper? Then plan how you will replace bad habits with good ones, rather than focusing only on the bad habits themselves. Research on thought suppression (e.g., “Don’t think about white bears!”) has shown that trying to avoid a thought makes it even more active in your mind. The same holds true when it comes to behavior — by trying not to engage in a bad habit, our habits get strengthened rather than broken. If you want change your ways, ask yourself, What will I do instead? For example, if you are trying to gain control of your temper and stop flying off the handle, you might make a plan like “If I am starting to feel angry, then I will take three deep breaths to calm down.” By using deep breathing as a replacement for giving in to your anger, your bad habit will get worn away over time until it disappears completely. It is my hope that, after reading about the nine things successful people do differently, you have gained some insight into all the things you have been doing right all along. Even more important, I hope are able to identify the mistakes that have derailed you, and use that knowledge to your advantage from now on. Remember, you don’t need to become a different person to become a more successful one. It’s never what you are, but what you do.

If you want to be one of those who succeed in achieving your goals consistently, e-mail me for further information.