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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.

Get your business fit for retirement

How we helped this business owner double his revenue and retire with confidence

It is possible to exit or sell your business and gain a strong retirement income. For so many businesses, succession planning is an overlooked “nice to have” element of business management; an activity to “get to” when the more pressing matters of day to day management, sales, and business execution are in play.

But, without addressing succession, you can put yourself under too much pressure when things are “down to the wire” with retirement in sight. Your team can be left feeling uncertain about the longevity of their roles and the future success of the business.

As a business owner, keen to retire, sell or otherwise leave the business in a good condition, succession planning is crucial.

One of the key services offered by Gibsons is helping businesses to do just this, and we have many case studies to share. Our experienced consultants can support you throughout implementation and ensure increased business value and success,  helping you exit on the best possible terms.

Over a 4-year succession planning program, we did exactly this. We supported one of our manufacturing sector clients move from an $8m to $18m turnover business, with the transition to a new management structure and clear succession of key management and the owner. This business has since doubled that size, and with a great General Manager and team in place, continues to provide its owner a very healthy income in retirement.

Succession planning can take many pathways and raise many different issues and this business was no different.

The issues were weighing so heavily on the owner, he had begun to doubt he could ever retire and extract the value that his family had spent three generations building.

Working closely with him, we created a business plan to identify key strategies to revitalise the business and introduce succession preparedness activities, like management team structures and formalisation of processes. Mentoring of key management staff commenced. Operations were reviewed and rationalised, and transition plans implemented. Human resource processes and an accountability structure was set in motion.

A future for the business was mapped out, with career paths for younger members of the team and exit strategies for the older members of the team.  A Customer Relationship Management and sales management process were also established, and key management roles were transitioned.

3 years into the plan, the owner/Chief Executive Officer was in a position to semi-retire.

The final year of our succession planning saw a marketing program enacted, to grow attractive markets and position the company as the leading Australian manufacturer in those sectors.

A much larger and more profitable business was created, and Gibsons are still relied on to this day by the owner, to ensure the business remains on track with growth and success into the future. Placing Gibsons in this kind of role can bridge the gap between business owner vision and new management, allowing them to retire with peace of mind.

 

Know your Business Direction: Business Marketing Plan

You Cannot Develop a Marketing Plan if You Don’t Know Where Your Business is Going

Marketing cannot exist in isolation from the overall business strategy.

Before you can establish and implement an effective marketing plan, you must first define the overall strategic goals for the business. For example, the marketing plan for a business to grow from $5 million to $6 million will be quite different to the marketing plan to grow from $5 million to $10 million.

Any business planning process involves three elements:

  • Establish where you are now
  • Identify where you want to be or what you want to achieve
  • Determine how you are going to get there.

The critical difference that impacts the planning process for Small to Medium Enterprises (SMEs) compared to large organisations is that, in most SMEs, the owner / managing director and his or her family are directly involved in running the business to achieve personal goals. Whereas, in large companies, the business is generally run by professional managers to achieve corporate goals.

Therefore, the starting point for a business marketing plan for an SME is to have a clear understanding of what the goals or personal mission statements are for each of the stakeholders. Only then can you develop a clear vision for the business and define the business goals. The marketing strategy can then be developed to achieve the business goals.