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How a robust business review can support sales growth and profitability

It seems obvious enough. If you fully understanding what’s happening in your business, then you are well placed to exploit your company’s strengths and tackle any key issues appropriately. Yet despite this pretty simplistic notion, many business owners do not have clarity on the financial health and operating complexities within their companies. When sales and profitability levels fall, it can be all too easy to focus on the wrong things particularly if you are a very hands-on owner.

All too often we see business owners taking a cut to their salary and operating their business more from a survival standpoint rather than taking a step back to see where the gaps and issues are. This was the case for a small manufacturing business whose Earnings Before Interest and Tax had dropped to -12%, with a turnover of $1m per annum.

Gibsons helped this manufacturing company to access government funding which enabled a rigorous review of the business.

Through Gibsons’ strategic review the key strengths of the business were clear to see – a small and highly skilled team headed up by an owner with a high level of technical understanding, and a satisfied and very loyal customer base who were not sensitive to changes in price. Customers valued the products and service provided by the company and the owner was very passionate about the business.

The strategic review brought to light some fundamental issues to the company’s operations. No financial performance reviews, coupled with little or no understanding of costs in estimating, were central to the profitability issues the company was experiencing. The owner was only taking a very modest salary and was unable to fund any growth to the business as a result. The company had experienced a poor financial performance for the previous 3 years. However, with no financial review being conducted, the specifics and an understanding of why this had taken place was not immediately clear.

Gibsons set into place some key actions to overturn this downward profitability trend and address the issues identified. An effective system for costing and estimating was developed and implemented, with staff trained in its use. Administration support was clearly defined and set up to better support the owner. Freeing up the owner’s time, he was better placed to focus on sales, estimating and overseeing production. Regular accounting and financial review processes were established so the company was better positioned to respond promptly as issues were identified.

Within a short timeframe, these actions moved the company from -12% to 15% EBIT and increased their turnover by $0.8m p.a. The owner was able to take a market-based salary. Gibsons continued to support the business as necessary to enable this level of performance to continue.

Without clarity on your business’ operations and financial health, it is hard for any business owner to take the appropriate actions needed to overturn a drop in profitability. An independent third-party advisor can bring an objective insight to identify and support the changes needed to enable sales and profitability goals to be met.

Culture has a BIG influence on profits…

…and good culture starts with good management.

No matter how skilled and experienced your staff, without a sound management and accountability structure in place, you’re setting your business up for failure. It is commonly assumed that if a business is made up of a group of highly skilled, degree qualified professionals, that the operation and people should be able to self-manage. This is rarely the case.

Management is a skill and discipline in its own right that is essential for every high performing business.

Without good management practices in place, staff are unlikely to contribute equally, enthusiastically and consistently over a period of time. This can slowly chip away at a positive business culture creating dissatisfaction and disillusionment amongst your team and undermining even the best-laid plans.

As a business consultancy with years of experience and extensive expertise in strategic management, Gibsons is well placed to provide invaluable, objective insight into an appropriate management structure for your business. We provide the support needed to meet your business goals and align with your company values as well as setting up meaningful accountability processes and systems.

An effective management structure with appropriate decision-making mechanisms in place, will support the business structure needed to generate profit, accountability and a healthy company culture.

In demonstration of this, Gibsons was approached by a large and well-known firm in the Professional Services sector to help them deliver a Strategic and Business Plan. With no decision-making mechanisms in place, and little understanding of management as a separate area of expertise and skill, the business had started to develop an unhealthy culture.

It became clear during our engagement that a number of staff were underperforming in their roles, lowering the organisation’s efficiency. With the absence of performance measures and little management of expected standards, there was limited accountability throughout the company.

To overcome these challenges, Gibsons implemented its Employer of Choice program to engage staff, align them to business goals, and to build a culture of accountability based on core values. Personal leadership mentoring for the company’s CEO as well as the mentoring of supervisor staff took place. Select staff were provided with soft skills training around people management, personal performance and project management to upskill. An effective board structure and practice along with sales management practices, Key Performance Measures and a management reporting regime were all initiated.

Changes to management structure and processes can take place quite quickly whereas cultural change within an organisation is something that takes time to have positive influence in decision-making processes. The turnaround in this Professional Services company took 4 years and resulted in an EBIT improvement from 10% to 15%. For a Professional Services firm in its particularly sector, this was a significant increase. The improvements made in the company’s staff engagement, culture, human performance and morale which increased customer satisfaction were able to become entrenched in the business and sustainable.

Never underestimate the importance of having all your people working towards the same goals to shared and agreed standards. People and their synchronised alignment with business goals is at the core of business success.

The right technology solutions can make or break a business

When we think about a successful business, whether large or small, there are some key ingredients which cannot be overlooked. Yes, you need the right people, in the right roles, and a well thought through business strategy with considered objectives.

Matching your IT strategy to your business strategy seems like a ‘no-brainer’ but many businesses don’t perform this step and run the risk of limiting their ability to achieve their goals. For instance, if your strategy is growth then your IT infrastructure must be easily extensible – if it is not then your business processes will falter when you hit the limits. If your strategy is customer retention and growth, then your customer care application software must add value to your relationships, not just perform transactions.

But, even if you have the right strategy, underpinning your success is a need to get your business processes right, and the technology that supports them. Without trust in the data that you have about your organisation and appropriate systems in place, business decision making is based on ‘finger in air’ conjecture. You run the risk of spending time on activities which could be automated rather than time on more strategic endeavours. Financial and administration errors can often start to become more commonplace.

A technology solution that caters for the data and IT requirements of each member of your team, is needed. A specialist consultancy provider like Gibsons has the expertise and experience to conduct a rigorous Business Requirements Analysis to identify needs, and to determine how to best fulfil them.

Often your typical company ‘IT guy’ and even many IT service providers, are not in a position to support a company with the strategic end-to-end technological solution that it needs.

A $120m organisation came to us in need of such support. A national student accommodation provider, their technology solutions were letting them down. Legacy systems were either not scalable or were not an ideal fit for the business model.  There was very little trust in the data in their installed legacy software, and there were significant issues with their accountancy and administration accuracy. Working from the ground up we identified the company’s processing needs in consultation with all stakeholders.

By looking to enable strategic processes, encompass the needs of every role within the business, and heed the lessons learned from the legacy systems, we could ensure the procurement of the most appropriate solutions that would support the business well into the future.  We were also able to identify the real focus for application solutions so that we could specify not just the required features but also the speed and simplicity required in capturing guest data.

Investing in digital and technology strategies for your business that adopt a Whole-of-Business approach, considering both the customer and business outcomes; are crucial for business performance and success.

The technology selection process we adopted was rigorous, ensuring a best fit was sought across managed services for network management, hardware, print, telephony and desktop.

We implemented fit-for-purpose application software and services for the student accommodation industry. We also commissioned general purpose application software for accounting, payroll and rostering that had native integration with the accommodation application. The new technology was implemented at the start of a period of growth at the business and did not required further investment to scale as the business grew.

All too often we see businesses let down by their systems, their processes and the technology that support them. Get these right and you set your business up for greater efficiency and effectiveness across all aspects of your operation.

How to ‘win’ in a market that isn’t growing

How Gibsons helped Pro Powder grow its profit by 600% in 10 months. 

Profit is the one metric that matters most, for nearly all businesses. There are a number of measures that each business should be keeping an eye on, but deciding which ones are more critical for YOUR business requires getting under the bonnet to find out what really makes it tick.

A thorough examination of a business’s operational processes, human resource function, sales and marketing activities, core value proposition and key business drivers is required. While many tried and true theories of business management can guide you on this, the reality is often more fluid, unexpected, and industry specific.

When you are completely immersed within the operations of a business, it can be difficult to see what is actually going on. You are in effect too close to the issues to see them clearly; especially if you, like many business owners, have fallen into the trap of doing too much yourself.

Our work with Pro Powder is a stark example of the great improvements that can be made when a business invites an objective and experienced third party in to help.

A powder coating business, Pro Powder was achieving a $1.4M turnover at the time they engaged with us, but profits were barely reaching the $20K mark. The company’s owner was stretched and feeling that so much hard work just wasn’t paying off.

Despite the company operating at full capacity, its profit margin was still too low to be sustainable without burning out the owner. 

Pro Powder provided our Senior Consultant, Graham Pridham, with full access to the business: its staff, operations and procedures. We assessed financial information alongside insights from discovery sessions, staff engagement and a review of business processes. Because of our extensive experience in supporting manufacturing companies, we could identify how best to support the company very quickly, saving discovery time.

Armed with practical solutions to ensure the team was fully utilised and with insights into more appropriate marketing and sales tactics, Pro Powder were able to invest more time in sourcing and targeting more profitable work. They were able to determine their “ideal” client profile to successfully reposition themselves; as well as focus on sales efforts and accountability.

It can be difficult for businesses like this to choose to invest in getting help when profit margins are so limiting, but the decision to do so can be empowering. The business is now positioned to do well, the owner feels on top of things, and the financial return on investment from third party assistance is very clear.

These are the results Gibsons strives to achieve for its clients, every time, no matter what their size at that time in their journey when they connect with us. We have helped countless businesses to grow and become more profitable, well beyond their own expectations.

Improving businesses is in our DNA.

Quality systems for your business

To produce consistent and predictable quality outcomes you need effective systems in place in your business. Having effective systems in place also streamlines day-to-day operational activities and makes it easier to manage these activities, allowing managers time to deal with exceptions and to work on business development.

What is a system?

A system is basically a set of rules for processing information and facilitating decisions.

Another major benefit of developing and documenting systems and procedures is to help to personality-proof your business. It reduces the level of dependence on particular individuals by downloading their knowledge and documenting it so that the knowledge can be shared with other staff and become corporate knowledge rather than individual knowledge.

What happens when your business systems are lacking or ineffective?

  • Customers are dissatisfied due to unpredictable levels of service and quality.
  • Staff are often frustrated and demotivated because every task becomes a unique challenge rather than an established process with known outcomes.
  • Low productivity: without documented, effective and up-to-date systems, new employees must rely heavily on experienced staff for guidance even for the most basic of tasks resulting in low productivity for both new staff members and for those training and supporting them.

What are the characteristics of effective systems?

  • They are documented.
  • There is some level of automation in data capture and processing information.
  • They are not reliant on individual knowledge.
  • They operate in a predictable and timely manner.
  • They provide guidance in routine decision making.
  • They improve efficiency and reduce costs.
  • They accommodate the ability to measure performance.

If you don’t have systems in place in your business now, where do you start?

First establish a clear picture of the required outcomes, assess the current position, and then develop the logical, step-by-step processes required to consistently achieve the outcomes required. Incorporating input from people at the coal face who work with the processes on a day-to-day basis is essential to develop and refine these systems. They are the ones who are implementing the systems and generally know what works well and what causes frustration.

It is also important that systems adhere to relevant Quality Assurance and Workplace Health & Safety standards.

It is not too late to start developing effective systems for your business and to see predictable and consistent quality results.