ElephantNot all business ventures can be successful.
The reasons for failure are varied.
In New Zealand 7% of incorporated companies go into liquidation.
This excludes companies that just cease trading and there are a lot.

There are 3 key areas that support success.

 

Companies Incorporated in New Zealand
 (Limited companies only)
Company incorporations NZ

 

 

 

 

 

Company Liquidations in New Zealand (Limited companies only)
Company liquidations NZ

 

 

 

 

 

Reasons for failure
1. Lack of Industry Experience and Knowledge
Knowledge in one particular field does not make a business owner automatically a good business manager.

2. Insufficient Start-up Money
The start-up typically consumes more financial resources than anticipated – cost control and effective budgeting are often neglected.

3. Failure to Understand Market and Customers
Lack of obtaining customer feedback. The successful business is dependent on the extent the owner/manager understands the needs of the market segment(s).

4. Poor Employee/Management Skills
The saying goes ‘people are the most important asset’. This is often overlooked and underrated.

5. No or poor Cash-Flow Forecasting
Unfortunately most small and medium sized companies do not use cash flow forecasting.

3 Key areas ensure success

1. Cash Flow
This is arguably the most significant success factor for any company. Very applicable to smaller and medium sized companies. Whether start-up or expansion phase, the old saying ‘Cash is King’ is as valid as ever.
Cash-flow forecasting
I am a strong believer in a rolling 12 months cash flow forecast. Perhaps even 18-24 months. And I still have a preference using the old Excel spreadsheet method.
Why?
Because it forces one to think and manually enter every possible future transaction: revenue, expense, tax.

2. Process Review
This goes hand-in-hand with a robust cash-flow forecast. A systematic internal activity/process analysis and review is Must-Do.
How to?
The challenge for owner/managers is to allow (quality) time to review and fine tune processes.
Best to use flow diagrams and keep testing assumptions.
There are a number of (software) tools available that track processes, however I find the old whiteboard and coloured pens are great to get started.

3. Share the data
It is not always easy for business owners & managers to share data, particularly financial data. It does require a little trust in your staff – but the benefits are worthwhile.
Why ?
The more your staff/team understands the bigger picture the better. The more people own the data the greater the motivation. It may require some training to get everyone up to speed.
I have seen huge turnarounds in motivation to support a company’s direction.
I have seen people with relatively little formal education exploding into action to support and drive the business forward.

Do the 3 key areas really ensure success?
Yep, It certainly will go a long way to align all the internal factors. Cash flow forecasting, process analysis and staff involvement provide an platform to put the business in a sound position.
However, it is not a miracle cure. It remains vitally important is to understand customers and markets.
And business owners need to be able (and prepared to) to delegate some tasks.
As the saying goes:
“Jack of all trades, master of none, though oftentimes better than master of one.”

Curious? Contact me for an FREE assessment of your business
www.pdf24.org    Send article as PDF   

5 vital steps to prepare your company for investorsFebruary 14, 2016 | Markus Schwarzer

money 1Most Small Medium Enterprises (SME’s) face tough choices on how-to-grow:

Keep ticking over and consolidate the current business.
But be limited by own funding access.

2 Seek investors to grow into new markets, develop new products and services.

Seeking and accepting investors, means ‘giving up’ control.

This may be hard to accept for business owners.

On the other hand a pro-active investor may bring highly sought after expertise into the business.
This decision point is a tricky one for business owners.

I’d recommend the following 5-steps before embarking on finding investors:

1 Set goals
What is your ambition? Are you prepared to relinquish some control?
I have worked with businesses that sought investors but were not quite clear why they were considering getting investors on board.

To fix negative cash-flows or reducing debt may not be the best motivation to engage investors.

Set 2-3 main goals on why you want to get investors on board, e.g. do you want to set up business in a different location because you believe (and can show) that you can create value with your unique business proposition?

2 Clear strategy
Position your business clearly by naming your 3 key strategies going forward based on your performance to date.

The investor of today does not profit from yesterday’s growth  W. Buffet

State what was achieved so far and what the future holds:

  • point out the growth potential
  • support this with research
  • and a suggested marketing strategy

This ensures that potential investor can verify that you have thought about the future. It is vital to convey confidence in your value position. This in turn provides potential investors with a real level of comfort.

3 Getting ready
‘Getting ready’ is often underestimated. Meaning to get your internal processes in order:

  • fully understand your internal activity chain
  • streamline your financial reporting
  • fine tune your business dashboard (if you use one)
  • and your personnel management

Once a potential investor is showing interest in your proposition, you want to put your ‘best foot forward’. Demonstrate that the to date performance is no fluke. Your business processes are sound.
Sure they can be improved but they are good enough for now.

The better prepared you are the more confident the investor will be about you and the business opportunity.

4 Value
Price is what you pay. Value is what you get W. Buffet

Be realistic when you value your business – There are many approaches in establishing an accurate valuation for your business. Finding the best method for your business will provide you with the best measure of value.

5 Passion
Add passion to your investment proposal. You have done the foundation work. Now you’re into marketing mode.
Stay away from clichés such as ‘unique opportunity’ and ‘once in a life time…” etc., bring your own flavour or secret sauce into it.

Convey the energy that made you set up the business in the first place.

Include the sacrifice, the struggle, the joy and the commitment. And of course the future opportunities.


Tip: Have an exit door
Always leave the exit door ajar. An investor will jump on the wagon (or jump off).
Consider you own future in the business. Perhaps you wish to reap the benefits of your
hard work and increase your personal liquidity. Or you would like to retain a minority interest as a shareholder and hand over the management.

Contact me for a FREE Consultation

 

www.pdf24.org    Send article as PDF   

Value Creation – lame duck or powerful process?January 29, 2016 | Markus Schwarzer

colorful-duckSome people claim that Value Creation is a Lame Duck and is an obsolete approach to our nowadays digital world. Well, I am not so sure.

I may be a dinosaur but I do believe that value creation tools are still as valid as they have always been.

What gives me confidence?
I am confident because I have used the Activity Chain Analysis Business Tool to do precisely that: identify and fine tune the value creation process.

So what – give us a specific example?
One of the best examples I know: IKEA – the Scandinavian furniture designer that sells products that are simple, practical and at low cost to the consumer. I would estimate that 90% of German households have a least one item from IKEA.

What makes IKEA unique?
IKEA develops consistently outstanding products with unique design that fit nicely into the IKEA logistics (flat cartons).  The innovative idea that the customer collects the package after purchase and assembles it at home. Although it can be a frustrating experience too!

How do they do it?
Constant review of their Activity Chain. The whole economic basis of IKEA’s is focussed on targeted cost. The relentless pursuit of optimising all processes in the company.

“Wasting resources is a mortal sin at Ikea” Ikea founder Ingvar Kamprad

Activity Chain Analysis in action
If IKEA encounter a problem in their Activity Chain Analysis, they attack it and turn into an opportunity.

“Solve big problems in small steps” Ingvar Kamprad

A strong focus on cost-optimised manufacturing. Yet they still sell attractive furniture for the mass market.  A fine balancing act indeed. IKEA also optimise processes with their suppliers and communicate closely with their customers.

Can I also use Activity Chain Analysis?
Yes, you can. The principles apply to small and big. Manufacturing or service industry. Online or ‘bricks and mortar’.  All organisations can benefit from this powerful analytical tool.

Want to know more about the Activity Chain Analysis Business Tool?

 

 

 

 

www.pdf24.org    Send article as PDF   

The wallPart 3 of the series on Activity/Value Chain Analysis – a business tool that works and delivers!

Missed Part 1 – click here

Missed Part 2 – click here

Evaluation of Activity Chain Analysis
Activity chain analysis reveals the strengths and weaknesses of a particular activity. It provides insight where to focus the company’s resources and more importantly it uncovers new opportunities
for differentiation and possible cost advantages over the competition.

Is this tool only for big organisations?
No, certainly not. Any size and any type of organisation can engage this tool and receive valuable insights into their current and future activities.

Is this type of Analysis time consuming?
To be honest: it is. Getting the right people together and creating a meaningful analysis does take time. This type of analysis is not a quick fix – however, it is like any other process, if one spends quality time and energy on this, the outcomes are very useful in terms of rectifying current issues and targeting future opportunities that may have not been sighted without this type of analysis. 

How difficult is it to allocate the true costs to an Activity?
The cost allocation to activities is usually the hardest part in reaching a meaningful activity or value chain map. There are a number of issues at play: the access to hard cost data may be difficult (this varies between organisation) and there may be considerable debate how to and where to allocate cost.
This is indeed one of the great benefits of the activity chain analysis: it challenges current thinking, generates different viewpoints and delivers surprising results.

 

How often does one have to carry out this Activity Analysis?
The good thing is, once the hard work is complete it typically only requires regular reviews and some tweaking. However, I would suggest to embed the findings of the analysis into the company’s Dashboard or similar KPI monthly reporting.

This concludes the brief 3-part series on activity/value chain analysis.

I read enough give me access to the tool!
www.pdf24.org    Send article as PDF   

The wallThis is part 2 of the series on Activity/Value Chain Analysis – a business tool that works and delivers!

If you missed Part 1 – click here

Where do you start with a Activity/Value Chain Analysis?
Sketch a detailed picture of the actual process situation – this is indispensable for a meaningful analysis.

A flow diagram provides a graphical representation and is a good starting point – for extensive process modelling there also a number of software programs available such as EPC diagram.

I tend to use a whiteboard and/or paper with my clients to draft up the initial process flow:

  • Start listing key activities, identify dependencies and overlaps with particular focus on weak or ambiguous spots.
  • After that you can start and build your activity/value chain in sequential order
  • Then review the potential for the direct changes to the process, at technical or human level.

What Now?
In principle, the value aspect is the focus: you may detect unnecessary activities or duplications, which effectively diminish your value chain.

This may a good point-in-time to clarify which business areas are serviced in your own company and which fit better better with external service providers (‘make or buy’ decision).

Core Business Activities
It is vital to really question all areas and to check whether the cost of in-house activities are lower than the external providers. I usually recommend a strict focus on the core areas of the company and ‘pass-on’ any ancillary activities to third parties.

It goes without saying that if and when third party providers are used – an intensive information and communication exchange is required if you wish to strengthen the interfaces between activities rather than weaken them – such as Just-In-Time (JIT) delivery comes to mind.

This is an area where even the best in world have at times big issues.

Summary
A carefully conducted value chain analysis is not only beneficial when the company hits the wall – it is extremely useful for a regular review of the internal supply chain and the development of future strategy.

A sound value chain analysis can lead to the identification of advantages (or the lack of) over competitors and provides a checking point how you can improve the market position of your company.

I continue to scratch my head and wonder why this wonderful tool is not used more widely.

Follow me on part 3 next week  – then we look at horizontal and vertical activities within the activity/value chain.

I read enough give me access to the tool!
www.pdf24.org    Send article as PDF