Inciteful

Doing business as a SME is tough at times and in hard times it is easy to cut back especially in the areas of Sales and Marketing. Whilst it is prudent to review the current position of your business and to analyse the value and return on your marketing initiatives and the type and cost of sales being secured it is critical to keep a level of investment in these revenue generating activities.

So the challenge is balance and an SME owner balance is always hard to achieve. Here are a few questions  for you to consider when reviewing the commitment to budgeted spends.

1. Have you undertaken a full analysis of the results achieved?
2. Have you identified the key issues confronting your market?
3. Have you spoken with your major customers to understand how their business is performing?
4. Do you have a number of control realistic measures in place to evaluate the performance of your sales resources and marketing investment?
5. Have you talked with your Sales Team?

Theses five questions will help you to take the initial steps into understanding exactly what is going on and therefore what actions to take. As this calendar year comes to a close now is a good time to "work on" the business as opposed to "in" the business. As your first 2011 New Year resolution commit to spend a day looking at the business and what is going on and then plan. Just because results have may not be what you wanted, cut back on sales and marketing activities, not investing in these areas can lead to a negative impact on the business. Rather review where you are at an take deliberate and calculated actions for your business. One good way to start this would be to attend the Incite Value Creation Workshop which is focused on helping to kick start your business in 2011. 

 

Meeting with a client recently we were discussing the “best” measure of business performance. Is it profit?  Market share?  Sales growth?  Staff morale?  Working capital efficiency?     

 

At Incite we believe that the “value” of your business is an excellent all round measure of the performance of your business.  In simple terms its the price an objective third party would pay for your business.  Generally SME business valuations are based on the profit the business generates multiplied by a factor which reflects the perceived risk of the business being able to keep generating that profit and continuing to grow.  The profit aspect is relatively easy to measure, most businesses look at that every month and decide whether they had a good month and are having a good year so far.  The multiple you apply to that profit figure is a bit harder to define, but obviously has a significant impact on the overall value of the business.  For example, consider the following two businesses:

 

	Business A	Business B
Net Profit	$850,000	$780,000
Risk Multiple	4.0	4.8
Business Value	$3,400,000	$3,744,000

 

In this case Business B has a superior value because its multiple is higher despite generating less profit. 

 

We believe that business owners and managers should be taking stock and trying to improve that valuation multiple just as much as profitability.  To do this we have developed a matrix of factors that contribute to the risk of the business.  We weight and assess these factors and every month we assess with our clients what has been achieved to protect and improve the multiple.  In this way we are always working on the overall value of the business, not just its profitability.   

At yesterdays quarterly Incite and Futuretrendsgroup  "Boost Innovation In Your Business" syndicate meeting Craig Rispin facilitated a stimulating discussion on how to build process into developing innovation in your business.
In making the process easy to start his message is don't concentrate on the areas where you know you're organisation is very strong as most likely you'll already have good innovation processes in those areas -but perhaps think of areas where you know you're organisation needs to do better.

To start the process think of the following areas:
Customer Engagement Experience: Is this all it could be in your organisation?
Product / Service development 
Technological Innovation 
Process Improvement
and perhaps we all agreed now the most important is Business Model Improvement.

Are you sure you now have the right business model for todays changing markets to achieve the results you want? Look at how many 'disruptive' new ideas have taken off in the last 5-10 years that have changed markets permanently -the iPhone /iPad- online shopping -virtual meetings to name a few.  Innovation can apply to all areas of your business for example take a look at the Kogan 'Live Pricing' innovation see here 
http://www.kogan.com.au/blog/2010/dec/2/kogan-liveprice-revolution-retail-transparency/    
 
In the realm of new ideas Craig argues quantity over quality counts so choose some of the Innovation topics from above that are important to your business  and make a plan to develop one new idea a month for the next 12 months.... would that boost the innovation in your business?

If you're interested in this program and would benefit from a 2 hour Incite and Futuretrendsgroup review of the process of innovation in your business see here for more information  http://www.incitemg.com.au/AnnouncementRetrieve.aspx?ID=35446
  

With the new year fast approaching now is a good time to review what has occurred so far this year in relation to sales. Like most businesses it is likely that results have been mixed and at time surprising with both positive and at times negative results.

Over the next several weeks as sales start to taper for the Xmas period spend time undertaking the following activities to prepare for 2011 as now is a good time to work on the business as opposed to in the business.

1) Sales Network: review the current sales resources and sales structure. Is this structure right to help take the business forward next year or are changes required to help consolidate or leverage new product or market opportunities. If you need to make change then now is the time to prepare for it and put in motion initiatives that will allow you to achieve the desired goals or results.

2) Sales Analysis: undertake a full review of your sales over the last 6 months and 12 months. Identify changes that may have occurred such as one product performing better than others, is one salesperson delivering results over and above the rest of the team, are certain areas better than others, have your customers changed? All very good questions that need to be addressed so that you can leverage the successes and take corrective action on areas that are not performing as well. Dont forget to analyse sales results against the budget and prior year results.

3) Sales Budgets: based on the information obtained realign the sales budgets to reflect real market conditions. This may require implementing other initiatives across the business to address other causal effects, effects it is better to have a clear picture as to where the business is actually going as opposed to an unrealistic desired position.

4) Targets and Incentives: with new budgets reset the targets and incentives for the team to ensure that they are all focused on the same goal and committed to achieving the required results. Implement a reward program to help them succeed, remember don't restrict this to financial rewards other incentives work as well and at times better. 

5) Communicate: upon return in the new year, meet with your team and share the findings and detail out the strategies for the business over the next 6 - 12 months. Be clear as to what you want to achieve and empower them to achieve the results.

Now is the time to take stock and set yourself for a successful 2011 so if you want to change your business understand the areas that need to be changed and this starts with reviewing what has been achieved.

Thanks for joining the new Inciteful blog.  Watch this space for all our news on latest events and workshops, plus lots of updates and Incites into the wonderful world of business, strategy, marketing, sales and planning.  Our business growth specialists will be sharing their expertise here so please subscribe and join us for comments and discussions.

Have you increased the value of your business in 2010? As business owners we frequently get caught up in the "doing" of business. Of course profitability and cash flow are always front of mind for all business owners -but it is important to regularly step back and look at our business and say hey -we might have improved my short term profit or improved cash flow but what has our team done to build long term value over the last 3, 6, 9 or 12 mths?

Incite recently performed this exercise internally and we found ourselves, like most business owners saying "wow we've been busy -but have we really added value to the business in the last 12 mths ?" When we were honest and said -"well possibly not" -then we resolved to do something about it. One tangible result of our internal review is the fact you are reading this blog - a new feature for Incite (keep an eye out for regular 'Inciteful' updates).

Another new feature is our new Workshop Series starting January with our "Creating Value In Your Business" workshop designed to stimulate your own thinking about your goals for your business and assisting you to identify what are the true value drivers in your business -so that you and your team can be sure you do more of them and less of what doesn't.... We'll shortly follow that up with Sales, Marketing, Finance, Export and Succession Planning workshops.

So watch this space and sign up to the RSS feed.

If you're interested in our January Value Creation workshop just click on our homepage here www.incitemg.com.au and follow the prompts for more information.                  

Alternatively post a comment and lets start a dialogue!   

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