What gangs can teach us about employees

Listen to what an ex gang-leader had to say about why disaffected youths join gangs in this wonderful interview on the BBC Today programme yesterday.

For the drugs?  Partially.  For the money?  Partially.

But you know he was speaking from the heart when he said it was because being in a gang gave him a sense of belonging, a sense of pride and a purpose.

We are all the same.  Your employees are the same.  Do they come to work for the money?  Is that it?  Or do they have a sense of purpose, pride and belonging?  If they don't, what are you doing about it?

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Vision Building Exercise

Purpose of this exercise

A clear, shared vision for the business is essential.  It informs strategic decision-making, underpins performance of the management team and is the basis of effective communication to employees and staff.

This exercise helps you and your colleagues describe your vision for the business in a semi-standardised way.  This will allow you to compare different perspectives as a team and so come to a common vision.

Instructions

Appoint someone to keep track of time.

Read the guidelines below then write down your vision for the business.  Check back against the guidelines to see that you have incorporated them as far as possible.  Read it out to the rest of the team and discuss.

Guidelines - what makes a good Vision Statement?

-          It must be motivating for you.  It must be something that you think is worth achieving and which matches your values and beliefs

-          It should describe a particular point in time.  This might be when you plan to exit or when you plan to achieve “success” as you see it.  It should have a date

-          It should describe what the business will be in concrete terms – how large, what it will be known for, what it will be able to do

-          It should have a personal goal that describes how you will be spending your life.  This might include your working life or your personal life or the options you would have by then

-          It should have some concrete financial dimension – usually sale value, turnover or profit

Discussion
Appoint someone to take notes on a whiteboard or flipchart.

As each person’s vision is explained, look for areas of commonality and difference.  Are the differences fundamental or simply differences of degree?  Where are people’s values appearing?

Coalesce the discussion into bullet points – don’t worry about the detailed wording now.  Check these bullet points against the guidance above.  They will form the skeleton of your Vision Statement

Revenue Resilience: A Simple Guide

What is revenue resilience?

-         Not all revenue is equally certain.  A business which relies on winning a small number of large contracts each year may well earn the same revenue and profit as a business that gets its income from a large volume of contracted subscriptions and a third company that gets all its income from ad-hoc repair and maintenance across a moderate number of existing customers

o   In theory, the riskier nature of the project business should result in higher profit margins (returns to the shareholders) and the stable nature of the subscription business, lower - but this is not always the case in practice

o   Don’t confuse spreading payments for a project with spreading both the cost and the income by using a different business model.  The first impacts cash flow and actually increases risk – so should require an even higher return.

-         All other things being equal, businesses should strive for as much locked-in recurring revenue as possible

How can you translate one-off into recurring revenue?

-          Some examples of spreading payments are

o   A photocopier which is paid for by charging a small amount for every copy made

o   Mobile phones, where the phone is given free in return for a fixed term monthly contract

-         Each of these relies on a higher total income over the life of the contract to cover the cash flow hit and the risk of default.  It is also necessary to build in a compelling proposition to renew the contract before it expires in order to build revenue resilience

-          Some examples of additional recurring revenue are

o   Software license maintenance

o   Membership of a user group

o   Subscription services

o   Service and maintenance contracts

-         An alternative way of looking at this is separating future income from resource or asset limitations

o   Translate a single consultant’s time into a course to be sold online in perpetuity

What is the proposition for the customer?

-          Possible benefits that would induce a customer to sign up for a long-term contract are

o   Access to a continuous stream of new content

o   Access to special offers and discounts

o   A known fixed charge covering all repairs (a form of insurance)

o   The right to free future upgrades

o   Continuous tuning and maintenance of the original product

Customer concentration

-          One final source of revenue risk is over-reliance on a single or a few customers – avoid this

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You have a business plan - so use it.

So you have built your business plan.  What now?

Assuming that you built the plan in order to provide a routemap to your business goals then the plan should form the basis for your management reviews from now on

-          In order that you can use it to manage the business the plan should contain

o   A detailed month-by-month budget for the first year

o   Monthly sales targets

o   Monthly marketing targets

o   A small number of other monthly KPI targets covering customers, operations and staff

-          The monthly management review should

o   Be attended by the staff responsible for the above areas

o   Follow a set agenda

o   Be scheduled and diarised for the year ahead

o   Take place as soon as possible after the month end once the necessary figures have been produced for the previous month and year to date

§  Management accounts

§  Sales figures

§  KPI performance

o   Identify variances from plan, identify causes and specify remedial actions

o   Record actions against an owner and deadline

o   Review progress against previous agreed actions

-          The quarterly plan review should

o   Revise the forecast outturn for the year based on performance to date

§  In bigger businesses this may result in a revised budget against which to measure in future management meetings

o   Identify any significant remedial actions required to align with the new forecast, such as redundancies or new premises

o   Be scheduled, minuted and followed-up as per the monthly meetings

-          The annual strategic review should prepare the new business plan

If you'd like to know more about developing a business plan then this event is for you.

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Is your business plan STILL insane?

In business planning, sensitivity analysis is a way to sanity-check the assumptions underlying your plan

-          It identifies the variables that have most impact on the outcome of your plan (for instance, sales volume or materials price)

-          In this table, your plan is shown in the “base case” column

	Previous year	Base case	Variance	Best case		Worst case
				Variance	£	Variance	£
Volume of sales	600	660	10%	12%	672	0%	600
Average unit price	£9.09	£10	10%	10%	£       10	-5%	£         9
Sales income	£5,454	£6,600	21%		£ 6,719		£ 5,181
Average unit cost	£6	£6	0%	0%	£         6	10%	£         7
Direct costs	£3,600	£3,960	10%		£ 4,032		£ 3,960
Salaries	£1,800	£1,800	0%	0%	£ 1,800	0%	£ 1,800
Rent	£720	£738	2.50%	0%	£    720	5%	£    756
Net profit	-£666	£102			£    167		-£1,335

-          The best case assumes that you can achieve the best possible values for all the main variables (volume of sales, materials prices and so on) given all you know about the market, your competition and other relevant factors

-          The worst case assumes the opposite and that you achieve the worst possible values for the same variables

-          A credible business plan will be based somewhere in the middle of these two outcomes

-          A credible plan will specify what arrangements you have in place to

o   Ensure that you achieve the best values you can for the variables identified

o   Minimise the impact should key variables go against you

If you'd like to know more about developing a business plan then this event is for you.

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Is your business plan insane?

In business planning, variance analysis is a way to sanity-check the assumptions underlying your plan

-          It compares the planned or forecast figure to the equivalent figure in a previous comparable period – usually the previous year

-          It expresses the difference as a percentage

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	Previous year	Budget year	Variance	Assumptions
Volume of sales	600	660	+10%
Average unit price	£9.09	£10	+10%
Sales income	£5,454	£6,600
Average unit cost	£6	£6	0%
Direct costs	£3,600	£3,960
Salaries	£1,800	£1,800	0%
Rent	£720	£738	+2.5%
Net profit	(£666)	£102

-          Your wider business plan (strategy, market positioning, sales performance, supplier management and so forth) must then provide an explanation for any difference

-          This will expose any assumptions you have made and the potential impact on your business should they prove to be wrong

-          In the above example, the plan is based on increasing the number of sales as well as the price whilst holding unit costs and salaries to the previous year’s level

-          These might all be reasonable and achievable but a credible business plan must explain how and why these things are going to happen

  If you'd like to know more about developing a business plan then this event is for you.

Get more great business tips on our website.