Passport 2 Success by UK Business Advisors Ltd

Passport to Success

Business Guide

Foreword by the TVBA Chairman

hen you started your business, you probably had a vision of what you wanted to do and where you wanted to take your business. Unfortunately, the day-to-day pressures of running a business often get in the way and over time, your vision fades into the background.

The thing that distinguishes the step change that takes a business to the next level is rarely about having the money and resources to do it. It is more about having the vision and expertise. Ÿ

The vision to know the direction in which to go

The expertise to carry through the implementation and make it work

The inventor and founder of General Electric, Thomas Edison’s famous remark “Genius is one percent inspiration, ninety-nine percent perspiration” is very appropriate to all this. One can have plenty of good ideas, but carrying them out and making them a success is another matter. That is where the hard graft and expertise largely lie. Most businesses get stuck at some time or other. It is usually a lack of expertise that inhibits their progress. So finding the key that unlocks the situation and takes the business forward is far more important than a lack of resources. Resources are very helpful but there are many examples of businesses with plenty of resources which founder. The Thames Valley Business Advisors are a select group of Accredited Associates of the Institute for Independent Business with a wide variety of quality expertise. It is their expertise that helps businesses take the next step. This business guide has been put together by the TVBA team to help you get your business back on track and keep it there. I commend it to you.

Brian Dash, Chairman, TVBA

Contributors Duncan Bratt Rachel Head Martin Mellor Mike Phillipps Greg Spence Nigel Wild

Brian Dash Stephen Hill Chris Nabavi Chris Scanlon Paul Whitehouse

Thames Valley Business Advisors Limited is registered in England & Wales, company number 05175740 2

Contents Foreword by the TVBA Chairman Contributors The Four Pillars Approach to Profitable Growth How to Compete How to Write a Business Plan Vision Mission Values Set Ambitious but Realistic Objectives

2 2 4 6 7 8 9 9 10

Generating Revenue Sales and Marketing Build, Fill and Manage Your Sales Pipeline Public Relations Online Lead Generation

12 15 16 17

Operations Customer Service Quality

18 19

Resources Core Competences Getting the Most Out of Your Team Recruiting and Inducting People Retaining Staff Removing Staff

20 21 22 23 23

Money and Monitoring Performance Management Information Knowing Where You Make Your Money Why You Need to Hold and Manage Meetings Raising Finance Exit Planning

24 26 27 28 30

Thames Valley Business Advisors Ltd The White House 66 Altwood Road Maidenhead Berks, SL6 4PZ t: 0333 444 8522 f: 0709 280 8482 BG1.6

The Four Pillars Approach to Profitable Growth

his guide covers a series of topics, which, when taken together, form a Passport to Profitable Growth. The graphic below shows how it all fits together.

Vision Your vision for the business is fundamental to your success. Without it you’ll never have a sense of direction, and you’ll find decision-making and prioritisation difficult. What’s your vision? Have you written it down?

Competition and Strategy Who are your competitors and how do you compete? What makes you stand out from the crowd? The answers to these questions will form the basis of your business strategy. It’s good to think of your strategy as four pillars supporting your business. 1.

How you generate revenue: Marketing and Sales

How you fulfil the demand you’ve created: Operations

The resources you need to deliver the above: Resources

How you measure your performance: Finance

How You Generate Revenue

Marketing Leads and enquiries are the starting point and lifeblood of any business. So promote your competitive edge to all your best prospects – existing customers, lapsed ones as well as new ones you’d like to start doing business with. Do it regularly – in a systematic way. Are you promoting your business on-line? Today it’s the most cost-effective way for most businesses to generate leads. 4

Sales How good are you at converting the leads you generate and the enquiries you receive into profitable sales? Does your sales pipeline inspire you with confidence about the future of your business? A robust sales pipeline is one of the surest signs of a healthy business..

How You Fulfil the Demand You’ve Created

Operations Delivering what the customer wants on time and at the target cost is the essence here. What are the opportunities to improve your customer service? How can these improvements be delivered at the same or lower cost?

Resources

You need resources (people, facilities, equipment, money) to get things done. Without them, you will drive yourself crazy doing too much yourself. How do you choose the resources you need and get the best out of them?

How You Measure Your Performance

Key Performance Indicators Measure the things that put money in your bank account. Ÿ

Number of leads per month

Lead conversion rate

Speed of completing each order/project

Customer satisfaction

Profit from each order/project

Speed of customer payment

Monthly Management Accounts These are an essential performance management tool. Are yours accurate

What to Do Now Ÿ

Read the rest of this guide

Develop a plan for your business using the Four Pillars approach

Get help from an outsider, someone with broad business experience who brings fresh eyes and ears. (Naturally, we would like to be considered for this role but you may already know someone else who would fit the bill.)

Measure and monitor your performance regularly - at least monthly

Watch your business grow profitably

How To Compete A Key Question

hat is the idea, concept or business model that underpins your business? In short, how do you compete or intend to do so? This is the daily challenge of any business owner or manager. This makes you look at your business as a whole and consider how all the various activities that you undertake contribute to your ability to compete. It is a question you need to ask yourself every day as you go to work - “How am I going to compete today?” And at the end of the day on your way home - “What have I done today to make my business more competitive?”

Not Always Obvious Take Starbucks as an example. After a trip to Italy in the 1980’s, Howard Schultz, founder and CEO, returned to America dedicated to recreating the espresso bar culture. He didn’t say, “We’re going to build a chain of coffee shops that serve great tasting coffee.” Instead he said, “We’re going to build a third place between work and home.” The latter is a far more interesting and compelling way to define your business strategy and with which to compete.

Many Different Ways

Simply Better

Businesses compete not just on price, product or service. Subtleties can be important because simple things can get in the way of good service or good products.

Being “simply better” can be a strategy in itself. This usually involves processes, the unsung heroes of successful businesses. Tesco under the leadership of Sir Terry Leahy took the decision that queuing at tills was a major differentiator with its competition. It hired 3000 additional staff to help solve this problem, putting in place processes that moved its staff from filling shelves one minute, to responding to higher demand at the check-out by opening more tills.

Decide what matters to your customers and so how you are going to compete. Focus on these things. You cannot do everything. Give weightings to these customer criteria and prioritise them accordingly. Trying things is a great way to test them out, evaluate customer reactions and get better at them. Look for the opportunities in the process.

Price Being the lowest price is not generally a good strategy unless you have a particular cost advantage over your competitors. Customers may tell you that it was your price that was uncompetitive but in practice, price is rarely the deciding factor in any purchase decision. Volume can help lower your costs through spreading your overheads or improving your purchasing power with suppliers. But being the biggest is not a strategy unless it confers a real competitive advantage. It rarely does. The old adage “sales are vanity and profit is sanity” usually holds good.

Interrelationships Finally, look for the interrelationships between what you do, want to do and might consider doing. Is there a skill you could apply to another customer segment? Defining your core competences is a good way to look at what your strengths and weaknesses are. This can tell you where to focus your energies, either in exploiting what you are good at or improving things which are downgrading your competitiveness. Asking yourself how you compete each day, and over the longer term, is the essence of being a successful business.

Differentiation

Start With Customers So where do you start? With your customers, asking: “Why should you buy from me?” But do not rely on this alone. They often do not know. Smart phones, SatNavs and Facebook are all examples of things that people probably could not have described until they experienced them. Observing behaviour and looking for gaps in service or performance are ways of finding competitive advantages.

Being different is a route every company should explore. This is where innovation and the creativeness in business can really reap dividends.

Study Your Competitors

Don’t Get Stuck

Look at your competitors. Many companies ignore what the opposition is up to. Who are your competitors? How are they doing? If they are growing, then why? How do you compare to them? And beware your own PR: “We are the best”. Well are you and who says so?

Being “stuck in the middle”, as Michael Porter the Harvard Professor so aptly put it, is also not a good place to be. In this fast moving world, never stand still; always be driving for improvement to differentiate your business from your competitors.

Do not neglect IT. It does not often deliver cost savings but it should increase the capacity of staff to handle more transactions and provide better service.

Customers will usually pay a bit more for something that delivers greater convenience or ease of use. And that extra margin has such a beneficial impact on the bottom line.

How to Write a Business Plan

Writing up the Plan

Try and write the plan using the pages that you have already prepared. It may well be useful to enable you to review it in 6 or 12 months time. If you need to present the plan to someone, prepare a presentation first. This again will help to crystallise your thoughts and you will start to see things from an outsider’s point of view. Only when you’ve got everything else done should you then finally write the executive summary. Even then you’ll see changes you want to make or things that don’t make sense.

t’s very important that a business plan is your plan, not something you think will impress the bank manager. It needs to be action oriented, and used as a way of clarifying what you want to achieve, as well as delegating some of those things to those around you. The basics of a business plan are as follows:

Where are we now?

Where do we want to get to?

How are we going to get there?

There’s nothing new to this. It’s as old as the hills. We like simplicity, which is often the cleverest route of all.

Now set to and start putting your thoughts down. Involve your team in it – certainly your direct reports. Spend some time on your vision. It needs to be inspiring. We cover some ideas in this guide. But make it personal to you. Sometimes drawing your vision can help to clarify it. Or get each person to draw their vision and then share it with the team! Once you’ve been through the various “pillars”, try and prioritise the actions into

Now

Later

The Content of the Plan

Try and give each action an owner and a timescale. Be realistic, you probably already have a busy business to run. Use a monthly or quarterly meeting to review progress.

We have adopted the “Four Pillars” model that has already been explained. Give a “piece of paper” to each of the sections and divide them into thirds so that each page has the three headings, where are we now, where do we want to get to etc.

Develop a financial model last and then review the actions in the light of the plan. Try and develop the financial model along the lines of key drivers. Things that you can do to the business to make things happen…not simply we’re going to increase sales by x%.

The executive summary may well be the only thing that gets read. Keep it to no more then two pages and cover the chapter headings in the body of the plan. If new ideas occur to you, put them into the body of the plan and develop them.

Sharing the Plan It is important to share your plan with as many people as possible – suppliers, customers, staff, any other stakeholders. It may be that they need different presentations to fit their requirements. But if people know where you’re trying to get to, they are more likely to help you than hinder you. Remember, the man who swept the floor at the space station helped to get a man to the moon as much as everybody else did.

Your vision should:

Vision

our vision is where you want to get to in 3-15 years. It is something that is above the level of strategic and tactical business objectives. Why not set yourself a vision that you consider to be audacious? Great care should be taken to ensure it is not seen as meaningless management techno-babble.

Be inspirational and about how you see the future Reflect your core values and purpose Be short and easy to remember

“Meeting and exceeding customers’ expectations” is not a good vision statement. Be something everyone understands, particularly your employees

Henry Ford:

Coca Cola: To achieve sustainable growth, we have established a vision with clear goals. Profit: Maximizing return to share owners while being mindful of our overall responsibilities. People: Being a great place to work where people are inspired to be the best they can be. Portfolio: Bringing to the world a portfolio of beverage brands that anticipate and satisfy peoples’ desires and needs. Partners: Nurturing a winning network of partners and building mutual loyalty. Planet: Being a responsible global citizen that makes a difference.

Amazon: 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.

Avon: To be the company that best understands and satisfies the product, service and self-fulfilment needs of women - globally.

Nike: To bring inspiration and innovation to every athlete* in the world. * If you have a body, you are an athlete.

Your mission should:

Mission

our mission is what you want to be in order to get to your vision, what your offer to the customer needs to be. It’s what you stand for - your values, and therefore what your core competences need to be to deliver that offer.

Highlight your offer to the customer. Highlight the core competences you need to fulfil the offer.

Ford (today):

Be ‘matter of fact’ in tone.

We are a global family with a proud heritage, passionately committed to providing personal mobility for people around the world.

Explain what you do and how you do it.

Coca Cola: Everything we do is inspired by our enduring mission: Ÿ To Refresh the World... in body, mind, and spirit. Ÿ To Inspire Moments of Optimism... through our brands and our actions. Ÿ To Create Value and Make a Difference... everywhere we engage.

Amazon: To build a place where people can come to find and discover anything they might want to buy online.

McDonald: McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness and value, so that we make every customer in every restaurant smile.

Sainsbury: Our mission is to be the consumers’ first choice for food, delivering products of outstanding quality and great service at a competitive cost through working faster, simpler, and together.

Disney: We create happiness by providing the finest in entertainment for people of all ages, everywhere.

Values

our values should shape the culture of your organisation and what it cherishes. Values are the qualities that you consider essential to making your business succeed. They should represent guiding principles for an individual within the company. So values are also known as core values or governing values.

Walmart: Sam Walton's 3 Basic Beliefs Respect the Individual Serve Our Customers Strive for Excellence

Your values should:

Define how you want people to behave and interact in your organization. Provide a yardstick against which to evaluate actions and behaviours. Ÿ Define how you expect your organisation to treat and value customers, suppliers and each other.

Set Ambitious but Realistic Objectives

his is the point at which your plan starts to take shape. Your goals or objectives are what you set yourself and what you have to achieve to deliver your mission. Distinguish between long term (more than one year) and short term (to be achieved within the year). Short term goals need to be realistic. Long term goals can be more ambitious and relate more to your vision of the future. Objectives need to be set for each main area of the business, typically for sales, marketing, operations, finance and resources.

Sales Clear targets are essential for a strong sales performance. Clearly define your target customer segments, how you will gain access to them and capture their business. Some examples: Ÿ To grow our sales by … Ÿ Increase margins by … Ÿ To capture two of the four major chains in the market. Ÿ To launch an alternative product with these advantages to achieve sales of … in the first year

Marketing Marketing is all about how you compete and what your offer needs to be to compete. From there you need to build awareness of your company, its reputation and the desirability of its brands, products and services. Some examples: Ÿ To be known as the best local provider of ... services in this area through three campaigns comprising … Ÿ To provide our customers with the easiest and most cost competitive access to our products through a specialist website narrowly focused on the … product range Ÿ To give a better service than our competitors measured by …

Operations Delivering what the customer wants on time and at the target cost is the essence here. Some examples: Ÿ Reducing operational and maintenance costs by … Ÿ Achieving on time, in full, order fulfillment of 96% Ÿ Reducing downtime to 10% 10

Finance All the costs of the various parts of the business and the prices obtained from customers are rolled up in the management and financial accounts. Budgets are what make up the financial goals and are an absolute must. These are all too rare in SME’s. In contrast, they are never missing in larger corporations. Some examples: Ÿ Achieve a net operating profit of ... Ÿ Reduce overheads by … Ÿ Increase stock turnover to 15 times per annum Ÿ Reduce debtor days to 55 days Ÿ Invest in new IT systems and achieve a … return on investment Budgets are the best way to articulate these targets.

Resources Resources are what you need to get things done and include things such as facilities, people or equipment. These are usually best dealt with as part of your strategy for a particular part of the business. These can overlap, so it is useful to consider them as a whole. Some examples: Ÿ To relocate to a larger warehouse Ÿ To invest in more internal sales people Ÿ To increase R&D in …

Sales and Marketing

enerating sales – and profitable sales at that – must be the top priority for any business. A passive approach, waiting for repeat business and referrals from existing customers, can take a business so far. But to build a growing business that can thrive even when times are tough, a proactive approach is necessary. Such an approach has 4 key elements. It all starts with a marketing plan that specifies effective methods of lead generation, supported by a solid lead conversion process and a commitment to actions and measurement of all marketing and sales initiatives.

The Marketing Plan Adopting a customer-focused business ethos is a proven method to increase the chances of a sustainable and profitable future. Developing a marketing plan is at the heart of any truly marketing-orientated company, and ensures the customer is at the centre of key decisions.

The plan must be a written document that specifies how your business will generate profitable revenue. It does not have to be lengthy – an excellent plan can be written on one page. Before you start writing your plan, you will need to do some research and planning to discover the following:

matrix that specifies four broad approaches as follows: Ÿ

Market penetration takes a product that you already have and increases its market share. This is usually the least risky approach.

Market development takes one or more existing products into new markets.

What is your current situation?

Who are your current and potential customers?

What marketing environment (both externally and internally) are you working in?

Product development involves developing a new product for a market you are already in.

Diversification would have you develop a new product for a new market. As such, it is the most risky option and should only be explored when you have exhausted the other 3 options.

What are the opportunities for growth?

This part of the process will enable you to get a clear understanding of where you are starting from and the paths to growth that are available to you. The next step in developing your marketing strategy will call on you to make a choice about the path(s) to growth that you will follow.

While you are considering your options and developing your marketing strategy, it is critical that you are clear about how you are going to compete. There are two elements to this – deciding on your target audience and identifying your most promotable competitive edge.

An excellent tool to use to help bring clarity to your thinking is the Ansoff

Your Target Audience Who you are going to seek to sell to is often not as straightforward as you might think. Often, there is more than one, intermediaries as well as end-users, different types of end-users and different types of intermediaries.

Your Most Promotable Competitive Edge Similarly, identifying your most promotable competitive edge is well worth spending some time on. What is it that makes you stand out from your competitors that you can promote to win business? If you have a patented product or similar, the answer can be obvious, but if not, the answer is often your customer service. But don’t stop there! What aspect of your customer service makes you stand out? The more precise you can be, the sharper your marketing will be.

A Powerful Message When you have decided what your target audience and your most promotable competitive edge are, you need to go to the next stage and turn them into a powerful message (so, the competitive edge

of “the most technically-trained staff in the industrial fasteners business” might become “we’re nuts about bolts”). Finally, you must bring that powerful message to your target audience at every available opportunity. At this point, it is time to consider your marketing tactics or, as they are commonly referred to, your marketing mix. Marketing mix is a selection of customer-focused business elements that work together as a toolkit to market your product or service. The tactical section of a marketing plan summarises how you intend to use each element of the marketing mix, which can be summarised as seven P’s:

Product, Price, Place, Promotion, People, Process and Physical Evidence.

When considering your marketing mix, it is important to keep in mind the two generic stages of marketing - targeting and positioning, which we focused on previously when thinking about our target audience, and our most promotable competitive edge.

Targeting This leads to segmentation that requires the breakdown of your customers into as much detail as practicable to ensure that all elements of the mix are tailored to each segment or group of target customers.

Positioning Positioning comes through communicating your powerful message (derived from your most promotable competitive edge) to ensure current and potential customers perceive your company in the way you would like them to. In simple terms, you need to: Ÿ

Find your most promotable competitive edge

Turn it into a powerful message

Deliver it to the right people

As you complete your Marketing Plan by specifying your marketing mix, you must start planning to use it to generate revenue through the two-stage process of Lead Generation and Lead Conversion.

Lead Generation

lead is the essential first step to any sale. Whether a telephone call, e-mail or website enquiry seeking a brochure, more information or technical help, without leads, you will have no sales. Some of these will come to you automatically as your business grows. But, if your business is to reach its full potential (and you are to get the best price for it when you come to sell your business), you need to put in place a “machine” that routinely generates leads for your business. Generating leads can be done in many ways but there are four ways in particular, that experience has shown us work best for smaller, growing businesses. Two of these, PR and Internet Marketing can be particularly effective and are the subject of separate articles on pages 16 and 17. The other two are Networking and Telemarketing. Both can be very effective too – and the mistake is often to expect immediate results when both benefit from a consistent and persistent approach. In the case of networking, you will only get the desired results when you approach it with the right attitude and the principles of good business networking. Networking groups are springing up far and wide to help businesses with their lead generation. Be an effective networker and therefore one of the business owners to benefit. Equally, with telemarketing, it takes the right approach to find success. The fact is that not many really know how to deliver a successful telemarketing campaign. But telemarketing is like any other approach to lead generation. It is actually quite simple and, if you take the time to get the basics right, you can reap the rewards of increased business and improved understanding of your market. Once you have established a way of routinely generating leads for your business, it is important to master the art of converting those leads to orders.

Converting Leads to Orders Once you have a good flow of leads coming into your business, you need to make sure that you can convert a signif14

icant number of them into business or you will be wasting your marketing effort. You need to take the second step to successful business development.

Above all, make your sales conversations ‘win-win’ and you will find that you are turning more and more of your leads into sales.

The best way to achieve this is to document who says what to the prospect. This will give you a clear process that can be used consistently and improved based on the results that follow. This will make it more and more effective.

With a Marketing Plan in place, a steady flow of leads and a good sales conversion process, you are ready to move to the final step of taking action and, crucially when doing so, measuring the results you produce.

Whatever your process, it will need to include the following elements:

Actions and Measurement

Establishing Rapport. If there is no rapport, there will be no sale. Make your client comfortable with you so that you can build a relationship and continue to build that rapport (and the consequent trust) throughout the selling relationship. 1. Establishing an Up-front Contract. It is important to establish at an early stage what you and your prospect have a right to expect from the forthcoming sales conversation. 2. Uncover and Probe your Prospect’s “Pain”. People buy emotionally (and justify their decisions rationally) and the most intense emotion is pain. Without a sense of pain, your prospect will favour the status quo and there will be no sale for you.

Developing and maintaining an action plan is core to the marketing process – a constantly evolving document that is shared with the relevant people and monitored regularly. It provides the stimulus for regular conversations about progress and obstacles. Most action plans are relatively short-term, but longer-term implications should also be considered. Action planning takes a stages approach: 1. Clarify goals, and ensure they are SMART 2. Link back to the strategy and tactics in your Plan 3. Set criteria for success 4. Prioritise

3. Get all the Money Issues out on the Table. You must address the cost of your product or service but, equally, you must address the cost to your prospect of not buying from you. With the scales tipping in your favour, your prospect will buy.

5. Set timings

4. Discover your Prospect’s Decision-making Process. Can he decide alone? Who else is a decision-maker or influencer? Can he decide now or is something missing?

The final stage of the action plan is the implementation of measurements and controls and then reporting the results. Many models for monitoring the performance of businesses exist and those for measuring marketing and sales performance are included in the Management Information section of this Passport to Success.

5. Present a Solution that will take away your Prospect’s Pain. When the time is right, present your solution. A good way to determine when that time has come in the conversation, is to ask “On a scale 0-10, with zero being interest and 10 being ready to buy, where are you? Five or less and you have work to do, 6 to 9 and you can ask “ What do you have to see to go to 10?”

6. Determine who will complete each action point 7. Monitor the progress of the plan and review regularly

If you want to take your company on to a growth path, it is time to get serious about sales and marketing. Develop a plan to generate and convert leads, measure the results and adjust accordingly and you will be amazed at what you can achieve.

Build, Fill and Manage Your Sales Pipeline

f you choose to measure only one thing in your business, make it the size and quality of your sales pipeline. It is far better than last month’s invoiced sales or the amount of cash in your bank account as an indicator of the future health of your business.

Building your Sales Pipeline Start today with a simple spreadsheet to document all your current leads using the following headings: Lead Number, Customer, Value, Profit, Probability, Lead Source and Next Action. For probability, we recommend using 90/50/10 where 90% is very close to an order, 50% could go either way, and 10% is a long shot.

Filling your Pipeline

Managing your Pipeline

Do you have enough leads to work on? Most companies don’t. Start an active campaign to create more. Join a networking club, seek editorial coverage or use e-mail marketing – whatever suits your business best.

The real value of building a pipeline and writing it down is the opportunity it provides for regular conversations about the progress of each lead and to ask such questions as:

Are you promoting your business online? This can be the most cost-effective way to generate leads for many SME’s today. Whatever you do, do it regularly and systematically and measure the results you get and the cost of each lead. After a fair trial, spend more on what works best and cut back the rest.

Is everything being done to convert each lead? Is our overall conversion rate good enough? Are the leads we are getting of the right quality? Think about engaging an outsider with broad sales and marketing experience who can bring fresh eyes and ears to your situation.

Public Relations

ublic Relations (PR) covers a multitude of techniques and methods for raising your profile and publicising your offer to your target audience without paying for it. In effect you have to create a story that the editor or media owner is prepared to treat as news. There are also some very effective techniques for web PR through YouTube, blogs, Facebook, Twitter and other social media. Viral Marketing is increasing in popularity. This is where the product or brand you want to advertise is wrapped inside some form of entertaining or amusing media. The most common is an e-mail containing a video attachment. The idea is that friends will forward it onto each other so the message spreads of its own volition. Appearing on TV or radio has very strong impact.

Virtually every business has definable target market segments and several common media through which to reach them. Your company's marketing plan should define the most cost effective medium to reach your target audience. Most businesses use common routes like newspapers, trade journals, website advertising and directories. Here, we will examine the typical costs of editorial versus the cost of advertising - how it works and the costs involved. The cost of magazine advertising is far more expensive than editorial. With either, you’ll need to select your publications carefully. You will need to know the readership figures and obtain rate cards to understand the advertising costs and gauge the best return on your investment.

Advertising Once you have set your budget and decided what size of advert you can afford, you’ll need to create the design. You can do this yourself (if you have the relevant software and skills) and you can sometimes get help from the magazine’s art department for the layout. You can also use an agency or freelance designer.

should be tight, informative and contain no waffle. Once written and proof checked, you can submit to each of the chosen magazines. Be sure to follow-up to ensure they have received it and to ask if they intend to run it. Always send a picture, with a caption, to go with your article. It will endorse your story and the magazine will prefer it.

Once your advert is designed in the correct format, you will need to submit it. Many publications run "feature stories" throughout the year and you may want your submission to coincide with one. Check the publication’s editorial feature list for the timing of articles that will complement your message.

Be aware that many magazines will charge a colour separation fee of £75 £150. It must be a high-quality image, at least 300 dpi. It may be worth using a professional photographer to take a library of shots for this and future use.

What does it cost?

How do the costs compare?

Costs vary, but as a very rough guide, a quarter page advert in a trade publication will cost around £500, a half page £900 and a whole page around £1,500. For comparison purposes, let’s say you advertise in 4 magazines with a quarter page advert, i.e. a cost of £2000 excluding any fees to produce the design.

The Choice

You will need to decide on the copy (the written message), a call to action (response), and some imagery to create an impact and endorse your words. The copy is critical because you have a very limited amount of space and each word must be chosen carefully for maximum impact.

Editorial Assuming the research has been completed and the target publications have been identified, editorial works in a different way to advertising. It’s advisable for you to aim to produce a series of interesting articles and news that can be released throughout the year. Too many companies try to publicise all of their interesting items in one big announcement and then have nothing left for the following months. It is wise to plan at least the next three releases following.

If you submitted your editorial to six magazines and four of them agree to run it, you would pay £300 - £600 for the colour separations, plus the journalist’s time (say £600), i.e. between £900 £1,200 as against £2,000 for the advertisement. But you should consider the coverage differential as well as the saving.

Twice as much for half the price The advertisement will only provide you with a quarter page. The editorial will give you far more, typically half a page and sometimes two whole pages with a good size photograph! In terms of magazine space, you can achieve £3,600 worth.

You will need to call each magazine and establish who the right editorial contact is for your article. Take the time to introduce yourself and discuss the theme to ensure they would be willing to print it (they’ll always reserve judgement until they’ve seen it) but ask for an agreement for the subject. You then need to write it. This is where a good journalist, not a copywriter, can help you make even the dullest of subjects sound more interesting. The golden rule of PR is that it cannot be like an advertisement; it has to be written as a journalist would write it, so it

Online Lead Generation Your Website

s it working for you or just sitting in cyberspace collecting digital dust? Many business owners get themselves a website because that is the done thing these days, but not many of them turn their website into a business asset. The best way to turn yours into an asset is to make sure it becomes a lead generator. Here’s how …

Landing Pages Once you have decided on your offer and created it, next you need to create a page on your website that only focuses on providing the free gift in return for a visitor’s email address and, optionally, their telephone number. The job of a landing page is to simply get the lead! For this reason it will be formatted differently to the rest of your website pages. Your landing page must consist of the following and nothing else: Ÿ

Your Offer What you need to do is to create an offer which will act as an online lead generator. It is no good relying on the general information on your website to provide enough of an incentive for your website visitors to act on. If a visitor is not directed to a specific offer or “call to action”, they will simply browse your website and leave.

Your offer must be: Ÿ Ÿ Ÿ Ÿ Ÿ

perceived as valuable good quality relevant to your market cost effective for you to deliver free of charge

For example, if you are selling child safe holidays, your free offer could be a short printed book entitled “The 10 Things You Must Know About Child Safety Before You Book Your Holiday”. For someone with a young family, a booklet containing this free information would be seen as valuable.

An enticing headline that qualifies the leads you want. For example, our child safe holidays landing page could read “Get Your Free 32 Page Guide to Child Safe Holidays”. It is clear from this headline that the booklet is free, it is 32 pages long (implied value), and it is aimed at people concerned about child safety whilst on holiday. A form to collect the email address, optionally a telephone number and their address if you are sending them a physical gift. Making the telephone number optional increases the chances of someone giving you their details; you can then follow them up via email. A bulleted list of benefits that the gift provides. Bullets are easier to read on a computer screen and are more likely to be read in full compared to a large paragraph of text. An image of the free gift. If it is an ebook or printed booklet this would be an image of the front cover. A photograph of you. This gives the page some personality; people like to know they are dealing with real people on the internet.

Follow Up

You free gift can be any of the following: Ÿ an ebook (a book that is downloaded and read on a computer, most commonly a PDF file) Ÿ an audio file Ÿ a video Ÿ a printed booklet.

Next you will create a series of emails that will be used to automatically follow up each lead you get. Those people that give you their telephone numbers will also receive these emails. Each email is designed to start building a relationship with your lead in order to eventually get them to do business with you.

By giving away something of perceived value for free, you stand a better chance of obtaining an email and telephone number in return for the gift.

There are several services that can automatically send these emails over a period of time that you specify; these services are known as autoresponders,

Aweber is a popular one. You can also use email services such as Constant Contact or MailChimp to name but two. The way this process works is that once a person enters an email address into your landing page, it gets sent to the autoresponder and your pre-written emails are then delivered according to your schedule.

Get Traffic The next step is to get people to visit your landing page. There are several ways you can do this: Ÿ

Get the landing page search engine optimised (SEO) so that it gets found on the first page of Google and other search engines. Find other businesses that sell noncompeting products to your target customers and get them to email or send your offer to their customers. Buy advertising space on relevant blogs or websites. We would recommend only doing this once you know your landing page works at obtaining email addresses, otherwise you could potentially lose money doing this. Write articles and post them on popular article directories. The article content should be informative not just a repeat of your offer. The articles must link back to your landing page. Use pay-per-click advertising such as Google Adwords.

Track and Test It is very important that you track how your landing page is performing. To do this you can use Google Analytics, which will tell you how many people are arriving on the page, where they came from, the keywords they used to find it, and the percentage that enter their details. You should also test different headlines on your landing page, different colours, and modify your text to try and improve conversions. This process is called split testing and you may want to look at Google Website Optimiser for more details.

Customer Service

the sooner you can deliver and the sooner you can get paid!

Customers want their buying experience with you to be easy. Help them easily find out what the status of their order is with a portal on your website that allows them to access order information.

ustomers expect their suppliers to provide a product or service that delivers what they want, when they need it, at a cost that they are prepared to pay and to a quality level that meets their expectations. Enlightened businesses refer to this as the “Customer Promise”. Keep your promise and happy customers will return to you for more of what you delivered. So how do you deliver what you promise? This essentially breaks down into 4 stages as follows:

Pre-Sales When a customer is looking for products and services, it looks to the “Marketplace”. Make it easy for your target customers to find you, with effective positioning of your products and services. Ÿ Have an effective marketing strategy in place

If you sell through distributors, treat them as you would direct customers! Make sure you understand the complete “order to payment” chain. Make sure you have an effective tool for capturing customers’ needs and wants. A good Customer Relationship Management (CRM) system will pay for itself many times over. A CRM system allows you to keep information about your customers, the products and services they buy and when they bought them. You can then target them with specific offers or discounts.

Delivery It’s no good having orders if you don’t have the capacity to deliver on time. Make sure you have sufficient resources available, i.e. time, trained people and the tools to do the job such as IT, software, transport, expertise etc.

If you cannot fulfil the order to time, communicate with the customer early. Look for alternative ways to deliver.

Post-Sales Having sold to a customer, you need to take care of the customer. Respond to problems and complaints quickly. Customers value a rapid response, increasing customer loyalty. Provide post-sales support as a way of cementing the relationship with the customer. Seek customer feedback frequently (Don’t forget your distributors!). Keep them informed of what you are doing to anticipate their future needs. Keep an eye on how the marketplace is changing. Internalise the customer within your own business by letting your people interact with customers, even those who don’t normally see the customer.

Conclusion Customer service starts before your customers have ever bought from you. Understand the total end-to-end scenario and ensure your customer promise is present at every point.

Ÿ Identify where your customers “go shopping” Ÿ Undertake effective market surveys to anticipate their needs and wants Ÿ Ask your existing customers what else you could do for them Ÿ Make use of the internet and social media to get your business and its products and services out there Ÿ Send out a newsletter with useful information pertinent to them on a regular basis, to let your customers and prospects know you are thinking about their needs and wants Ÿ Provide pre-sales support

Sales How effective is your sales process? Customers want you to respond quickly when they want information or want to buy. Make sure that an order doesn’t sit on your desk waiting to be processed. The quicker you get the order processed, 18

Quality

uality means different things to different people. A people carrier can be a quality car for a family; the affluent young driver may, however, prefer something more sporty. Quality is often expressed as "conformance to requirements". To conform to requirements, you have to identify them, understand them and then meet them. Successful companies that meet the needs and expectations of their customers will achieve a competitive advantage. They also meet their own needs and expectations (a wage, a profit, a healthy working environment, etc.). Quality is therefore something you are already doing. If your company remains in business and customers are happy, you must be doing something right! The question to ask is "Are you doing the right thing first time, on time and every time?" If not, then you may not be as profitable as you could be and your customers may not be as happy as they might be. Many customers insist on evidence of a documented quality management system as a mark of quality before they will purchase your products and services.

Quality Management Systems A quality management system answers the question “Who does What, When, Where, How and Why?” It clarifies: Ÿ

Accountabilities, authority and responsibilities

Policy on quality

Through documented processes and procedures, the steps taken to deliver a quality product or service

The quality assurance (prevention) steps needed to prevent poor quality occurring, such as ensuring your employees are given the necessary skills and competences to do their jobs, through relevant training, coaching and mentoring

Technology also plays a part and ensuring it is “fit for purpose” is also something that affects your processes and procedures.

ISO EN 9000:2008 ISO EN 9000:2008 is the most commonly recognised standard for quality management systems and is recognised internationally. It specifies the minimum requirements which an organisation needs in order to consistently provide a product or service that meets customer requirements. Certification to the standard demonstrates a commitment to quality. Customer satisfaction is addressed through the effective application of processes for continual improvement and the prevention of errors. The quality management system must be documented, implemented and then undergo an external audit by a UKAS accredited certification body, with regular surveillance visits and a complete re-certification after 3 years.

The quality management system must reflect your company, not restrict it. What is needed is just enough documentation to enable you to run your company effectively and that will allow you to quickly spot where things need improving - no more! Improved efficiency, reduced waste and continual improvement are the real benefits obtained from installing a quality management system. Deciding not to have a quality management system is easy, just carry on the way you are.

Core Competences

ith this section’s focus on the human capital in a business, the concept of core competences of an organisation is particularly helpful. The core competences refer to the collective know-how a company has or wants to develop in a particular aspect of delivering its product or service. It is these “competences” which make it better able to compete in the marketplace. The collective skills of various people in an organisation are usually a central part of any core competences it may have developed; these combined with any technologies that may underpin it form the competences. What makes them “core” is the fact that the competences are a crucial part of the company’s ability to deliver its customer solution and compete in the market. The concept of the core competences of a business was articulated and given currency by CK Prahalad and Gary Hamel in the Harvard Business Review, May - June 1990. Their research sought to explain why companies outperformed and overtook their often much larger competitors despite fewer resources with which to do it. Their work showed that companies

need to think about what competences they need and how they are going to develop them if they are to succeed. Because core competences rely so much on the skills and know-how of the people in an organisation, it brings so called “human capital” into strategic focus. No longer can decisions be taken on pure financial terms like cutting costs if in so doing, they damage a core competence which is underpinning a business’s success or being developed for the future. It is often said that “business is all about people”. Let’s define that a bit more precisely. A business depends on the attitudes and skills (know-how) of its people. You need both. Hiring people purely on their attitudes will not give you the skills you need. Hire people first and foremost for the right skills. Attitude comes second, important though it is. Management sets the lead on the attitudes it wants its people to have. If it is grumpy, unfriendly, and unhelpful to those with whom it works, it can expect the same behaviours to develop amongst the rest of the organisation. So set the tone you want for your organisation. Nurturing the skills you want is just as important. The concept of core competences now takes on a strategic importance. Investing in the skills base of your organisation is of equal importance as investing in buildings, plant and machinery, technology and systems.

So in framing your HR policy, you should add in the strategic dimension of what your core competences need to be, to make the business successful. A good place to start to do this is in any SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis you undertake. Your core competences should come out of strengths and weaknesses. These are internal and only concerned with your organisation. Issues external to your organisation are dealt with by opportunities and threats. If you need certain competences and have not got them, they should be listed under weaknesses. Out of this list should come a clear plan of action as to how you will obtain them. Under strengths will be listed those competences which you feel you have and which matter to your competitiveness. You will find your SWOT analysis far more meaningful if you use this approach. You will also find on a practical basis that by understanding your core competences, day to day decisions become much easier. When you recruit, the decision should be framed around the competences you are seeking as part of your overall strategy. Recruitment now takes on a whole new dimension, with strategic fulfilment a part of it.

Getting the Most Out of Your Team

he most important ingredient of any company is people, and more importantly, the right people with the right attitude. Like a football team, people have to work together to collectively perform at their best. And, as with a football team, the balance of the team has to be right. A team of highly skilled “prima donnas” will self destruct, but a team with multi-skill sets feeding off each other’s strengths will always find a way of succeeding. Every team needs strikers, defenders, work horses and goal keepers. Get your team and the atmosphere right and you have a winning formula.

Business Plan

So, how do you get the best out of your team and what problems will you face as you move forward?

As a company grows, the hardest thing for many people to do is delegate. We all think we can do the job better or do not have the patience to teach others to do the work, as it takes twice as long as doing it ourselves. A company cannot expand and grow without delegation. Delegate. Trust them. Yes, they will make mistakes, but we all learn from mistakes and people enjoy new challenges. Find people’s strengths and use them. The best managers are good delegators and good delegators build stronger teams.

Communication For any team to succeed, there must be constant communication. Regular meetings should be held with a clear written agenda. But do not hold meetings for the sake of meetings. Once the agenda has been discussed, move on. Share company information. Do not hide accounts and balance sheets. If someone wants to get this information, they can. Trust them, involve them and ask them how they would improve the bottom line of the company. Your success is their success and their success is your success. Use ‘managing by wandering around’ (MBWA). At regular intervals, walk around your business and talk to staff at their workplaces. Show an interest in what they are doing, how it’s going and any problems they face. People are always keen to talk about their job and you will often pick up vibes or any ‘atmospheres’ far better than at a formal review meeting. You have to judge who to talk to and when; find someone up to their eyeballs in a rush job and your presence will not be welcome.

Vision Formulate the company vision with your team. If they participate in setting the vision, then they will make it happen. Make the vision challenging but achievable. It can always be re-set later as the company matures and evolves.

Forming a business plan is the perfect opportunity to get your team working together to discuss where the company is now, where it needs to go and how to get there. For a business plan to succeed, the team members have to be involved from day one. If they are part of the plan, the plan will be followed through. In fact, discussing and setting the plan is far more important than the document itself, which is just a hard copy of all the team’s thoughts and ideas.

Delegation

Problem Team Members Most teams at some stage have a rotten apple who disrupts the organisation and has a negative effect on everyone. This is one of the most difficult situations for managers to handle. If this problem is not addressed, the team can fall apart. The first thing to assess is whether you have a disruptive person or a very talented employee who is frustrated and needs his/her problems discussed and with mentoring could be a vital asset. Management must be proactive. You must sit the individual down to talk over all the issues. It must be made clear what is expected from them and the team as a whole. Listen to their views and try to find a way to resolve problems. If agreement is reached, then the individual needs to be closely managed to ensure that agreed changes are carried through. If they fail to respond, then they must be removed from the team without delay, a non-team player can have a very negative effect on the strongest team.

Mentoring and Training Everyone has their strengths and weaknesses and it is essential that team members recognise and appreciate the benefits of this. To highlight each member’s virtues, regular review meetings should take place. These give management the opportunity to praise the employee but at the same time, bring up any issues and find out where training will be appropriate. Stretch your people, give them new challenges, a bored team player stops contributing.

Use Your Diary Schedule time with each of your direct reports once a month to sit down and talk things over. Schedule two hours so that even if you don’t use it, you won’t have a meeting clash. Prepare for this meeting and ask your direct report to prepare for it too. Use this meeting to minimise interruptions during the rest of the month and you’ll find you have more time on your hands. Diary a team meeting once a month. Use this to communicate the key things that came out of the board meeting, so that everyone knows what is going on. Make sure you prepare for this meeting as well. Try to get others to own certain issues so that you avoid doing all the talking.

Celebrate Success Everyone likes to make money but everyone also likes to be successful and be part of a winning team. Always praise success and celebrate important team events. Catch them doing something right rather than criticise the minute there is a problem. Encourage team members to help each other; this not only helps the team but also, team players learn from each other’s skill sets.

Captain of Your Ship How do you know when you have a good team? If you are feeling redundant and business is going well, you have achieved your goal. Now you can do what you are good at, sit at the bridge of your ship and decide which way to steer your vessel. Your team will trust you and follow you, but don’t forget to get below occasionally to stoke the boilers!

Recruiting and Inducting People Recruitment Process

he statement “business is all about people” is one of those truisms that is often said but often not well understood. People are one of the most important assets in any business because of the skills they have. The right attitude is also very important. However, without the right skills, attitude is not enough. So these are the two credentials you need to look for when assessing the people you have and the people you want to recruit; and in that order, skills first, attitude second. When setting out to recruit a new employee, you need to think through what the job is that you want them to do. Bureaucratic though it may sound, there is no substitute for writing a job description. This should cover the purpose of the job, what are the main tasks and then the skills, experience, qualifications, personal attributes and attitudes needed to achieve it. From that can be derived the specification for them to be able to do the job – the person specification. It is also important to decide the pay and benefits you want to offer which will attract the right calibre of person. It is well worthwhile being up-front about these benefits and the job description from the outset. It is not uncommon for people to spend a lot of time discussing the job, holding first and second interviews and leaving the salary and benefits to the very end before discussing them, only to find they are nowhere near the candidate’s expectations. To avoid wasting time, get the “terms and conditions” of the job on the table at the outset.

Always see your short list of candidates twice. You will be surprised how differently people come across at the second interview when you have more time to get down to the detail of their skills, experience and attitudes.

Induction Process Once you have got a new person on board, make sure you do not just leave them to get on with it themselves. This is your opportunity to impart the culture and attitudes you want from them. This is not about being interfering. But if you want clean and tidy workshops or offices, this is the time to make that clear – it is a company culture you want to impart. You have hired them for their skills. So ask them how they propose to tackle things. By asking, you are showing them respect for their knowledge. If you have some strong views about how something should be done, discuss it. Be open minded. Get them to meet all the people they need to know and interact with. That does not mean that you have to organise all this yourself. Give them a list of the people and parts of the organisation you want them to meet and get to know. Ask them to organise it for themselves over the next month. Doing it this

way shows you want people who are self-starters. Get them to tell you or their line manager what their first impressions are. How would they approach things? Have they some lessons for you? What are their thoughts on what needs to be done to get their tasks done and fulfil their job’s goals? At the same time you are getting a feel for their capabilities and attitudes from which you can start to make a judgement about how well they will contribute and fit in. Remember you have a year in which to decide if a person is right for your business or not, without having to go through the disciplinary process demanded by law after that. If it is not working out, that should not come as a surprise to the person involved at the end of their 12 months. And do not leave the discussion to the last day. You should abide by their notice period, so if that is a calendar month, you only have 11 months in which to do this. Hopefully this will not be necessary, but it is as well to be aware. If you have made a commitment to give them a bonus for achieving certain targets, make sure those targets are in place during the first month. Failing to do so is like telling them that if they do not fulfil their promises, it does not matter either. It does matter. You have to set an example, otherwise you cannot expect others to behave in the same way.

Selecting people is another area about which many companies have bad experiences. Recruiting good people is not easy, but you can do a lot to reduce the risk. Focus on the skills and experience you require. Test candidates in the things that are important to their speed, efficiency and know-how. Ask them detailed questions about what they have done personally in pursuit of their job with past employers. Do they know what they are talking about, does it ring true, can they produce real evidence of their contribution as opposed to what the company and others did where they worked?

Retaining Staff

ne of the keystones of good staff retention is hiring people with the right skills and cultural fit. Non-performers and misfits will soon leave and high staff turnover is costly on output and team morale. Make your staff feel valued, a part of the organisation. Make them feel that what they do is important and most of all, that you as the boss appreciate it. Remember the hangar cleaner at NASA who was asked what he did? He replied: “I help to put astronauts into space”. Your pay and benefits package needs to be competitive. Scrimping on salaries unnecessarily will cause itchy feet. Are your salaries fair in terms of equal treatment? The law demands it, but discrepancies between salaries for similar jobs, or between male and female, are a sure way to cause friction. These days, applicants look at the whole package on offer. If you can offer benefits such as a bonus scheme, private health insurance, pension and life assurance and a good holiday allowance, these will make you attractive as an employer for both recruitment and retention.

them how the company is doing, both good and bad. Not only will they feel part of the organisation, they are far more likely to be right behind you if the going gets tough. Manage by wandering around. Take the time to walk the job, stop and talk to individuals; show an interest. It’s all part of making them feel valued. Consider regular staff performance reviews. These should bring together all the informal chats over coffee, meetings and similar events over the review period. They mustn’t contain any surprises, such as problems long gone and never before mentioned. Refer to the past but focus on the future. Such reviews may not suit every organisation, so think hard before introducing them. Have a formal training programme. This benefits the company in ensuring it has the skills to move forward and it benefits staff because they feel the company cares and values them and they gain new skills. Don’t tolerate poor performance; you can’t afford it. If you do nothing, the cancer will spread to other staff and their respect for you will diminish.

Removing Staff

Do each of your staff have clarity about their role, what is expected and the targets to be achieved? This will motivate them to work hard and to take pride in their achievements. Give them authority to make decisions in their area, so that each ‘owns’ his or her particular role. This increases self-worth and makes them feel valued - the strongest motivators, far above the salary cheque. But delegate, don’t abdicate.

Be supportive. No company should be tolerant of repeated failure, but people like to feel that if they make a mistake when giving it their all, they will be supported. A blame culture is a killer. Words of praise are worth much more than a salary increase.

Dismissal

Build a team, a force far greater than the sum of its parts. It will utilise the strengths of its members, support them in difficult times and cover temporary gaps without loss of performance. Communicate, communicate, communicate. Talk to your team regularly. Tell

ssentially, there are only three ways of removing staff:

Ÿ Dismissal on the grounds of performance, conduct or capability Ÿ Redundancy Ÿ Retirement

Dismissal is a serious step, but if an employee’s performance doesn’t improve after counselling, help or warnings, you have no choice. Any dismissal must be fair, and you must have written disciplinary and grievance procedures in place. For new staff, It is wise to have a probationary period, during which either side can terminate the contract at short notice. Employment protection legislation covers only those with a complete year’s service, but even within that first year, dismissal after the probationary period must be done properly and fairly.

Always start off with an informal and advisory chat. Try to get to the bottom of the problem, which may lie in personal circumstances. Be supportive, offer help and stress you want to see the person back to their old self. If the situation doesn’t improve, you may need to move to a verbal warning. If that fails, it will be a written warning. The last resort is a final written warning, then dismissal if there is no improvement. For serious misconduct, a written or even final written warning may be appropriate. The disciplinary procedure must contain a list of specific or types of conduct that constitute gross misconduct that will warrant summary dismissal.

Redundancy Making staff redundant is now more complex and the law more demanding. Before identifying staff at risk of redundancy, you need to devise a fair method of selection, including criteria for selection. It’s mandatory to consult with staff, inform them of the situation and of the criteria to be used. Once the at risk staff have been identified, they must be advised in writing, then consulted individually about ideas and proposals they may have to avoid or reduce redundancies. Where more than 20 staff are at risk, employee or trade union representatives must be appointed and there is a minimum consultation period of 30 days; for 100 or more staff, the consultation period is 90 days. Employees of any age with two or more year’s service are entitled to Statutory Redundancy Pay (SRP), between ½ and 1½ weeks SRP per year of service according to age. It is wise to consult an HR specialist if contemplating redundancies.

Management Information

‘W

hat gets measured gets managed’ is one of the truisms of the business world. In our view, the best business owners are those who measure their performance, and don’t rely on ‘feel’ to make and justify their decisions. So, making a commitment to measuring your performance is an important first step. But then, what do you measure?

Most business owners who measure performance measure output activities – things that follow the generation of sales orders – like cash and debtors. This is very valuable but, if you stop there, you will be left driving your business looking at the rear-view mirror! So, go further and start looking through the windscreen to drive your business by measuring inputs or the things that lead up to the generation of sales orders. Measuring these is far more valuable.

Input Measures (Looking through the windscreen) These are the things – like leads, active contacts and proposals (often referred to directly as the Sales Pipeline) - that generate sales orders and so drive your business. Measuring them puts you in the driving seat looking through the windscreen to see a solid view of the future. Once you start measuring these inputs, you will find yourself engaging actively in improving results. Ask yourself how many orders you need to achieve your 24

sales target, how many proposals you must write to create that many orders and how many leads you need to generate to lead to that number of proposals. Then, think about what you need to do with each of your target groups: 1.

Existing customers: Do they have new business coming through? Are you performing to their satisfaction? How well are you staying connected with them?

Lapsed customers: Stay connected with a regular e-mail or newsletter with a periodic telephone call to see

if the time is right for them to become a customer again. 3.

Prospective new customers: Generate a list of those you think might do business with you and call them using professional telemarketers to determine whether they are worth pursuing. If they are, add them to your active contact list and stay in touch via e-mail and telephone until they are ready to buy. We see a three-stage pipeline process that you need to take them through, shown opposite in a chart series we developed for one of our clients.

The key is to find an approach that works for you and your business. Keep working at it and, pretty soon, you will find that you have created a ‘Business Development Machine’ that generates a steady, consistent stream of new orders. So that’s it. Climb into the driving seat, give yourself a clear view of the road ahead and keep checking the rear-view mirror. You are in for quite a journey.

Knowing Where You Make Your Money

y measuring your performance, your performance will improve. You will see what has worked and what has not. It will also show you how you are progressing towards your vision. This section looks at three aspects

When does the money come in? Cash flow forecasting is an essential business tool. It helps you to manage the future - and get plans in place to deal with issues arising from that.

How much money do you make on each transaction? This is called your gross profit: sales less directly attributable costs. Costs comprise: Ÿ

the materials that you purchase from third parties

the labour you use in making the product or service

any directly attributable overheads

The words “directly attributable” are particularly useful in helping you decide what costs to include at this stage. It only includes costs that vary with your production – so not the rent for the office or the office-based staff. This enables you to understand your pricing better.

How much money do I need to cover my overheads? Identify the cost of your total overheads. Say this is £1 million. Identify how much money you make on each transaction – your gross profit. Say this is £100. Take your overheads (£1m) and divide it by your gross profit (£100) and this will show you how many transactions you need to sell to make a profit. 10,000 in this example. Now play with it. If you were to reduce your selling price by 10%, how many do you need to sell? Reduce your overheads, etc. You can also do this by month, and use it for target setting. Furthermore, it enables the sales and marketing to understand what the requirements are. 26

This is called the break-even point. It’s very useful in helping you to understand just how you do make money.

Short term cash flows need to be on a weekly basis for the next thirteen weeks. Try to maintain it at a reasonably high level. We recommend doing this in thousands of pounds, but certainly not in pennies. Prepare the forecast monthly and retain that in an unmovable column. Update the cash flow on a weekly or even daily basis. At the end of the month review the actuals against the original forecast and understand why the actual differs from the forecast.

Cash-Flow Management The key to managing the future is to learn from the past.

Long Term and Short Term There are two sorts of cash flow management – long term and short term. Long term covers the annual budgeting round – say for the coming year. This involves a few courageous forecasts of what we hope will happen if everything comes together. Short term forecasts cover the next three months – basically as far as you can see. This is highly conservative and involves no courage at all – just what you can see. This article focuses on the short term forecast.

that helps – or use your ageing analysis to forecast. These total up into the column marked latest. Once you are satisfied with your forecast, copy the figures in the “latest” column into the column marked “original, as numbers, not formulas. This way you will set an original forecast. At the end of each week, record what has actually happened and amend your forecast as appropriate. This way you can start to learn how your forecasting at the beginning of the month could become more accurate. In this example Client C is no longer expected to pay by the end of the month – possibly the first week of the coming month, with the inevitable impact on cash balances. This may mean that some suppliers set up for payment in Week 4 may be delayed into the first week of the new month. Make sure that the balance carried forwards agrees with the bank balance. It’s an easy point to overlook. Send this cash flow out at the end of each week to the key players in the business – possibly with some key notes as to where the main issues are that you would like help with. Include a more formal update at the end of the month and include it in the management accounts. If you are in the pleasant situation of having spare cash, use the Friday review to consider what you can put on deposit. After all every little helps, even if it is just over the weekend. We know managing directors who use this as their main short term tool for managing the business. It gives them an instant update on the situation and pinpoints where the short term issues are. And as you measure your performance, you get better at it too!

We do recommend that you prepare your forecasts at a high level. We hate to see forecasts in pennies and encourage the use of round thousands of pounds. After all the future is not as precise as all that. All you are really trying to do is get a rough outline of what the future might hold so that you can take appropriate action. Make your forecast at the beginning of the month, based on what you know. List out the customers and suppliers if

Why You Need To Hold And Manage Meetings

on managing the meeting. However, it really does depend on the situation.

Check Meeting Effectiveness

ypically, we monitor performance by looking at accounts. However, numbers don’t rule the world, people do. This article looks at how to hold effective meetings and puts into context a lot of the mechanisms available to generate profitable growth.

Remember the 6 Thinking Hats:

1. WHITE = facts, figures, information 2. RED = intuition, feelings, emotions

A successful meeting achieves its objectives by ensuring that: Ÿ Decisions are summarised

Why Hold Meetings?

3. BLACK = judgement, caution,

Ÿ Action items and timescales are assigned and agreed

A well organised meeting can be a really effective way of:

4. YELLOW = why something works, benefits

Ÿ Consensus is gained

5. GREEN = creativity, alternatives, proposals, provocation, changes

Ÿ There is a debrief of meeting effectiveness (pluses & minuses), with an action plan for Improvement

Sharing information

Managing performance and resources

Deciding

Delegating actions to protect the leader from trying to do everything themselves

Too often the meeting is a waste of time because not enough time has going into making it useful.

6. BLUE = overview, summarising, process control

If run properly, the meeting will end on time. Ÿ

Has no hidden agendas, no secondary meetings, no pocket vetoes and does not victimise attendees

Sticks to the agenda and timings

Documents the key points and areas of agreement/disagreement, actions and timescales and finally:

Plan the Meeting To get the most out of a meeting, it is essential to plan it. That means:

The Chairman’s Role

Setting an agenda

Making sure participants know what they are contributing – that may well mean talking with them prior to the meeting about what you want out of the meeting

The chairman’s role is to keep the meeting on track:

Sorting out the room so it has the necessary bits and pieces

Circulating the minutes of the last meeting to clarify who has done what from the previous meeting. This will enable you to only talk about the matters arising rather than waste valuable time in the meeting finding out what has and has not been done

Hold the Meeting During a meeting, it is essential that everyone:

Participates, supports and seeks win-win situations

Listens, listens, listens, is openminded, is accountable and is HERE now

Ÿ A follow-up date is set

Open up a new agenda item

Keep the meeting focused on the agenda item and not stray too far from the point

Summarise the view of the meeting with respect to that agenda item. It can be tricky when the chairman disagrees with this personally, but that’s what a good chairman has to do from time to time

Open the next agenda item

After the Meeting Ensure that everything is captured whilst minds are still relatively fresh: Ÿ

The nominated secretary to produce and distribute the minutes to all attendees (preferably within 24 hours)

Those nominated to take actions from the meeting and from any debrief

Keep the chairman/leader of the meeting informed on progress against the actions

Chairing a meeting is a role in itself. Take time to watch others in action and see how they do it. It can be helpful for someone other than “The Boss” to chair the meeting. It can be helpful to ask somebody else to take the minutes. It spreads the work load and enables the chairman to focus

Raising Finance

here are 4.4 million Small Medium Enterprises (SME’s) in the UK.

SME’s find it significantly more difficult to raise the funds required to either start or develop their business than their larger corporate cousins: 98% of their funding applications fail. So let us first consider what you might want funding for.

Seed Capital This you would need before you have any revenue coming into the business. You have a good idea and the requirement is to prove the concept; usually less than £50,000 would be required. Proof of concept funding is difficult to obtain. Friends and family, grant funding and specialist incubation funds are the preferred sources of funding at this stage.

Start-Up Capital You have developed your business plan including market and financial planning and you have started to recruit your management team and are able to start generating revenues. Finance of between £50,000 and £500,000 is normally required for marketing and operations to get the business up and running. There are three probable sources at this stage: equity, debt funding and grant funding, further details of which we will come to shortly.

Expansion Capital You have an established business, which has the opportunity to grow organically or by acquisition and you need additional funding, over £100,000, to support this growth. Again equity, debt and grant funding can all come in to play, but it is more often debt funding in one of its various forms that is the most likely source. 28

Where the figure required is in excess of £1M, there are an increasing number of specialist investment funds who deal in this type of funding. Now let’s review those different sources of funding.

Equity Private investors can include family, friends and/or business angels. Business angels are high-net-worth individuals either operating alone, typically investing £25,000 to £100,000, or in groups where the equity requirement is greater. Their investment criteria vary considerably and you should seek investors who will bring a lot more to your business than just money in the form of their experience and networks. Typically, business angels will want to take a non-executive role within your business and will be seeking an exit for their investment within 3 to 5 years. Most will be seeking returns of between 5 to 10 times the original investment and will want to benefit from tax relief under the Enterprise Investment Scheme (EIS).

Debt Enterprise Finance Guarantee Loans These used to be called Small Firms

Loan Guarantee Scheme (SFLGS) loans and are available through most main high street banks. The Government guarantees 75% of the loan against an insurance premium of 2%, with the lender taking the balance of the risk. The lending premium over base will typically be 3.75% and you will incur a 1.5% arrangement fee. These loans need approval from the BERR and are only available to companies that have been trading for less than 5 years, where the shareholders have already pledged significant personal assets and the business operates in prescribed industry sectors. The willingness of lenders to support applications varies from lender to lender and from manager to manager.

Regional Venture Capital Funds

Bank Loans/Overdraft

There are a number of small regional venture capital funds supported by the government, which are aimed at the SME market. These receive hundreds of applications for funding every year, of which less than 2% are successful.

If you are ineligible for an Enterprise Finance Guarantee loan, you may be able to obtain debt-funding via your bank, but you will be required to provide one or more of the following: directors’ guarantees, debenture and possibly a personal guarantee. Agreement fees will typically be 1.5%, with the premium over base in the range of 2.5% to 5%.

Seed Funds Asset Financing Many of the seed funds are associated with university incubation centres and therefore focus on technology and innovation. For example, NESTA (The National Endowment for Science Technology and the Arts) can invest up to £250,000 in innovation start-ups.

Venture Capital Funds Traditional venture capital funds are unlikely to invest below £2m and therefore tend to be of little interest to the SME sector.

Hire purchase, finance lease and contract hire can be used to fund the acquisition of certain categories of assets.

Invoice Financing This is where a finance company or bank buys your debtors and pays you up to 85% of the invoice value. The balance is paid to you once your customer has paid the invoice.

You can either continue to undertake the credit control and cash collection directly, or out-source this activity completely to the finance company or bank. You will be charged a monthly fee to cover administration, typically in the range of 1% to 1.5% of the average monthly invoicing value and the sensitivity analysis.

Grants There are a number of grants available from a wide range of different sources, although the application process can be lengthy and time consuming. All have various criteria that need to be met, such as location (development areas), purpose sector (innovation, environment, etc) and personal (unemployment, etc).

Raising Funding Whether you are seeking to raise equity or debt funding, you will need to present a business and financial plan which clearly underpins your investment or lending proposal. Broadly speaking, this is what happens to investor/lending proposals: Ÿ 60% are rejected immediately Ÿ 25% are rejected after a face to face presentation Ÿ 10% are rejected after further evaluation

Benefits Of Equity

Ÿ Management Team and Organisational Resources

Equity funding offers medium to long term funding with no interest costs or repayment schedules. Shareholders may agree to a dividend policy in the event that cash flow and company reserves enable payments to be made. Equity investors can and should bring experience and networks as well as funds. Bank lenders will require equity investment before agreeing to advance debt.

Ÿ Financial Assumptions Ÿ Financial Plan Ÿ Exit Route for Equity Investors

The Business Plan MUST NOT Ÿ Over-sell the business opportunity

Drawbacks Of Equity Early stage investors will be seeking annual returns of up to 40% to cover their risk; therefore this is an expensive source of funding in the medium to long term. This annual return will reduce for later stage businesses.

Ÿ Forecast sales that are over optimistic; they should always be conservative and not based on straight line projections Ÿ Be overly complex with over emphasis on technical or management jargon Ÿ Discount competition

The search for the right investor is time consuming and difficult. Typically it will take 6 to 12 months before cash is received from an investor, whereas the bank lending process can be considerably shorter. Personal chemistry is always difficult to assess during the early meetings. Shareholding dilution with potentially differing views regarding valuation.

The Proposal

Ÿ 3% fail at the negotiation stage Ÿ 2% succeed in raising the equity or debt funding

Reasons For Rejection

The business plan will vary slightly depending on whether you are seeking equity or debt funding. The plan should be concise (no more than 20 pages plus financial schedules) and should have the following structure:

Ÿ Poor presentation for the business proposition

Ÿ Executive Summary

Ÿ Financial forecasts are poorly constructed with weak assumptions

Ÿ Market Opportunity

Ÿ History

Ÿ Weak cash flow

Ÿ Product Offering and Product Development

Ÿ No track record for the management team

Ÿ Intellectual Property Rights (IPR)

Ÿ Lack of commitment from the management team Ÿ No clear exit route

Ÿ Manufacturing or Sourcing Strategy Ÿ Competition and Competitive Advantages Ÿ Routes to Market Ÿ Risks and Threats

Exit Planning

xit planning is perhaps the most difficult yet most important period in the life cycle of Small & Medium Enterprises (SME’s). It is an event that probably only happens once, yet has a profound effect upon the future life, particularly in retirement, of the owners. Research clearly shows that many owner-managers fail to achieve a full or fair value for their businesses during the exit process. The key reasons for this failure are: Ÿ Unrealistic value expectations and time scales Ÿ Poor preparation within the business prior to the sale Ÿ Unwillingness to use professional advisors Ÿ Inadequate resources allied to the exit process

Planning Your Exit Developing a strategy to maximise the value of your business on sale requires careful advance planning. You should start considering the issues several years before you plan to sell. The actual exit process will take 6 to 12 months and may require varying degrees of preparation of up to several years, depending on the condition of the business prior to sale.

Management Buy Out (MBO)

many factors, some of which are mentioned below.

Here, existing management within the business acquires the company. The MBO team often has difficulty in raising the funding required to complete the transaction. The MBO process is very draining on the company’s management resources.

Net Asset Value

Management Buy In (MBI) Outside investors acquire the company and place their own management into the business. It requires the company to be financially secure with a minimum valuation of circa £500,000.

Buy In Management Buy Out (BIMBO) This is where the Management Buy Out team (MBO) is unable to either raise the equity or debt funding package and seeks an outside investor to strengthen the credibility of the debt lending proposition.

Partial MBO/MBI Here the shareholders agree to sell their shareholding in the company in stages.

Valuation Exit Routes There are several different types of exit routes open to owner managers:

The valuation of your company is not a science, but is driven by market forces and your ability to present your business as a significant investment opportunity.

Trade Sale

There are a number of principles that can be applied to valuing your business:

This is selling the business to another company. It is difficult to retain confidentiality during a trade sale. The trade buyer will probably seek to consolidate the acquired business into an existing operation, which leads to increased employee uncertainty.

Earnings Multiples These are normally based on historic and possibly forward projections for earnings, measured before depreciation, interest and tax, but adjusted for average directors’ drawings. The range for this earning multiple can vary from less than 4 to greater than 10 and is dependent on

The book value of the company as declared in the balance sheet. In many cases owners may expect to achieve a premium when using this approach to valuation.

Cash Flow This is normally based on historic and possibly forward projections for cash flow. Debt funders will focus on historic performance, whereas investors may include forward projections, discounted to reflect timings and risk. Premium valuations are achieved where the business can demonstrate one or more of the following attributes: Size - Larger businesses attract higher valuations than smaller businesses. Strong historical financial performance and projections always attract higher valuations. Remember that every pound invested or spent and not fully recovered in the 2 years prior to selling your company will reduce the company’s valuation. IPR and technology that is protected by patents or copyright, etc, will enhance the valuation. A business operating in a growing market will attract a higher valuation than a similar business in a market that is flat or declining.

Information Memorandum (IM) The IM is a document that you and your advisors produce, which will set out for interested parties all the salient financial, operational, legal entity and other legal issues that a potential bidder will need, in order to make an indicative offer for your company, subject to due diligence and contract. This IM will need to include the previous 2 years’ historical financial performance, the current year forecast and

2 years’ projections for profit, cash and balance sheet. The IM is provided under a non-disclosure agreement to interested parties, thus protecting its confidentiality.

Deal team You will need to appoint a deal team to include: Ÿ

Specialist corporate lawyer

Tax accountant

Corporate financial advisor

The fees relating to these advisors will normally be paid from the proceeds on completion and cannot be charged to the company.

Don’t Ÿ Have an unrealistic view on value and timescales Ÿ Hide skeletons or bad news Ÿ Incur or invest in non-productive costs or assets before the sale process starts Ÿ Over sell your business

Heads of Terms

Completion

Confirm the deal structure in a heads of terms, normally prepared by the purchaser. This document is non-binding, but nevertheless should be reviewed by your lawyer.

This is the formal signing of the SPA and other legal documents and the point at which the purchaser will transfer the funds agreed on completion to your lawyer’s bank account. This is also the time when you will be required to pay the fees of your professional advisors. There may be further payments relating to the consideration post-completion depending on the nature of any earn-out or deferred consideration.

Due Diligence The purchaser and his financial backers will undertake a process of verifying the financial, operational and legal information you have provided in the IM. This process is called due diligence and will require you to provide hard copies of a wide range of documents related to your company and its activities. The due diligence process will either be covered by the non-disclosure agreement previously signed by the bidder prior to receiving the IM, or by the more detailed confidentiality clauses included in the heads of terms. The purchaser will normally require 1 or 2 copies, one of which will be used by your lawyers to create the disclosure letter. Due diligence will normally take 2 to 4 weeks and need to be completed 2 weeks prior to the sale completion.

Do Ÿ Prepare the business for sale Ÿ Appoint specialist advisors Ÿ Ensure accounting and legal entity records are accurate and current Ÿ Be conservative with financial forecasts Ÿ Protect IPR Ÿ Remember cash is king

Ÿ Maintain your competitive bidding position

Ÿ Agree to large earn-outs or deferred consideration

Deal Structure When you come to negotiate the deal structure, remember the following principles: Competitive negotiations — retain a competitive bidding environment. Your business will always be worth more when two or more parties are actively involved in the bidding process. Cash is king — maximise the cash on completion as part of the deal structure. Earn-outs or deferred considerations are always a risk. Short timescales — keep any period of preferred bidder exclusivity to no more than 2 to 3 months.

Sale and Purchase Agreement (SPA) The SPA is normally prepared in draft form by the purchaser’s lawyers. This is the legal document, which covers all aspects relating to the sale and purchase of your company. The SPA will set out the basis under which the assets of your company are being purchased. The warranties section will cover those warranties that you are prepared to provide, normally 2 years for non-tax warranties and 7 years for tax warranties, against which you will disclose any known breaches in the disclosure letter. The SPA will also include any management handover, which is normal in this kind of transaction and possible restrictive covenants, preventing you from competing against your company after completion.

Thames Valley Business Advisors Ltd is a network of 25 local business experts across the Thames Valley who help directors and owners get their businesses to where they want them to be. We are not theorists. We've all run businesses or operated at board level ourselves, so we are well placed to offer the support and help that business owners need to succeed.

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