Gotta love numbers

My client is planning to move workshop to accommodate his growing business. He was trying to work out what he needed to do to cover the additional rent.

He has always managed profitability and cash flow pretty well using spreadsheets but he was struggling to produce something that told him what he needed to know to make decisions about the proposed move.

He says he doesn’t understand “accounting” and, like many business owners, his only experience of financial reports is the annual return produced by his accountant. I’ll leave you to guess how thoroughly he goes into that document.

We talked through the reasoning process his plan needed to support; rent (and so costs) up by x (this required a brief discussion on fixed costs).

Employees up by y (this required a brief discussion on fixed vs variable costs). Revenue up by z – this required a brief discussion about productivity, gross margin and sales capacity. What would his net profit be under a range of different capacities and turnovers.

At the end of this discussion I was able to introduce him to his profit and loss statement – until now a baffling and irrelevant tool of the accountant – and show how it is an essential business planning tool – in fact, one we had just used.

I have hopes of building on this lightbulb moment and moving on to his balance sheet and cash flow statement.

If you are a business owner of anything but the smallest business you need to understand financial reports. To do that, you need to work through them each month.

If you want to understand more about using finance to run a better business then take a look at www.nickbettes.co.uk

Managing in difficult times

Running a business in difficult economic times is tough.  Here are a few things you might like to think about:

First thing is a budget and cash flow forecast that shows how you get through the next 12 months – in particular, making some conservative assumptions, do you have enough cash at the start to execute the plan, pay yourself, pay the bills and grow without ever running out?

Next is a clear marketing plan. You know that people buy what you sell but you need to make sure you invest enough and take an organised and active approach to marketing in order to achieve the plan.

Finally, your sales process. Many small businesses can be lackadaisical when it comes to manning the phone, turning proposals around quickly, following them up and so on. Make sure you follow a consistent, managed and speedy sales process so nothing escapes.

By the way, effective marketing and sales require a CRM. There is no excuse for even the smallest business not to have one today – they are cheap and easy to use.

If you'd like some support and advice as you navigate these tricky times then you can get those things here.

Er..um..doh

My client had hired, at significant expense, a new Operations Director. After a month he was already unhappy with his new hire’s performance.  I asked him how he was assessing this and the answer was, in essence, based on what he saw and heard; how he felt about what she was spending her time on.  It became apparent that this was the approach he was going to use at the end of her probation period to make a decision that would have serious consequences for both of them. I asked him how he and his new employee had agreed what success in the role looked like.  This time the answer was, not to put too fine a point on it, that they hadn’t.  My client looked rather shame-faced as he described his communication to her (and his other staff) as “stream of consciousness stuff”.  When we discussed the way he might measure success for this role he readily identified one key number: Net increased hours of service delivered.  He also identified contributing numbers in recruitment, staff retention and new hours sold. It wasn’t obvious to me how the Operations Director could control all of these outcomes; parts of recruitment and sales in particular seemed to be outside her control.  When I asked where recruitment reported the answer was “Errr…both of us, I suppose”.  After further discussion my client decided that actually recruitment should report to the Ops Director and the only reason he was involved was that he always had been. It also transpired that the way they ran recruitment was, whilst effective, completely undocumented.  This craft-skill approach applied to sales and indeed every process in the business not subject to external compliance.  Different branches and different employees did their best but in different ways and with different results. He agreed that it didn’t seem sensible (or fair) to fire someone for not achieving a target they didn’t know about by relying upon someone they didn’t manage following processes that existed only in other people’s heads. The bad news is that lots of growing businesses have this problem.  The good news is that there is a solution.  You can find out about it at this event.

What is the point of job descriptions?

What is the point of job descriptions?

That is a question I am sometimes asked by business owners.

Another is “Are these job descriptions ok?” which, if you think about it, can only be answered after answering the first question.

The point of job descriptions is the same as the point of a vision statement, or a strategy, or objectives.  To communicate something.  In this case, to communicate the reason the role exists and how success will be measured.

If the effectiveness of a communication is measured by the change it brings about then many job descriptions are completely ineffective.  Hardly surprising when:

• They run to several pages and are stuffed with platitudes and standard phrases;
• There is no simple statement of why the role exists;
• Responsibilities large and small are jumbled together in no apparent order as if in an attempt to record every minor task the role might possibly be involved with;
• Details of how and when to do things clutter the job description instead of being confined to the Operating Manual;
• No clear means of measuring these responsibilities are given, whilst uninformative but faintly ominous words like “key”, “critical”, “timely” and “high quality” litter the document;
• They appear to have been created by someone who was in two minds as to whether they were writing a job description or an advertisement for a job vacancy.

The thing is, creating a useful job description (one that explains what is important and could be understood and remembered by a seven-year-old or a Sun reader) takes much more time and thought than just…creating a job description.  Like marketing or strategy, nine-tenths of the task lies in thinking and one-tenth in writing.  Too often these ratios appear to have been reversed.

If you would like to learn more about how to create useful job descriptions (and how to make your business scalable by getting things done through other people) then you might want to register for this event.

Running aground with every tide

Three recent events prompt me to return to the topic of cash flow forecasting.

Firstly, a client who is perpetually short of cash in his business. He has had some bad payers and a couple of bad debts but we have sorted his credit control processes out now. Last time we met he was still worried about people who owed him money. I asked himm what debtors were running at and we worked it out at around thirty days. As his terms are mainly thirty days that didn’t seem too bad. In the same meeting he was telling me about his new Porsche and I started to understand his problem. He was taking so much cash out of the business that it was starved of working capital. A business needs sufficient water under its keel to prevent it running aground with every tide.

Another client runs a rapidly-growing building business. When I suggested that he ought to be reviewing his cash flow forecast with his bookkeeper at least weekly he couldn’t understand why this was necessary as “…we have plenty of money in the bank…I never understood why people are so worried about cash flow”. I explained to him the way growth sucks cash out of a business and how quickly things can go wrong. I’m relieved to say that he now has his cash flow forecasting in place and the regular review is starting to open his eyes to the risks and possibilities of managing cash.

The third event was a LinkedIn post by someone complaining about the overdraft rate his bank was charging his business. Apparently “…compounded for a year it is 68%…”. A raft of sympathetic, bank-bashing comments followed his post. It didn’t seem to occur to the originator or the posters that an overdraft is a short-term arrangement not long-term funding, and the compounding cost a punishment for poor planning and cash management.

If you’d like to learn more about cash forecasting and other elements of a systemised approach to running your business then perhaps you should get in touch.

Why your Marketing Manager is Failing

The word “marketing” is universally used to describe a whole bundle of activities designed to generate business enquiries or leads. This generalisation is not useful when it comes to recruiting marketing staff or outsourcing marketing activities.

Traditional breakdowns of marketing focus on stages (awareness/interest/commitment) or the mix (price/position/promotion) or the proposition (niche/pain/proposition). These are all useful models for developing your marketing but again are not particularly helpful when recruiting or outsourcing.

For example, a role titled “Marketing Manager” in a small business will often encompass a wide range of activities such as marketing strategy, planning, website maintenance, email creation, database list creation or purchase, social media content, telesales, Google analytics, email stats, events – and so forth. Because funds and manpower are limited there is a tendency to bundle anything remotely marketing-related into the job description.

This wide range of activities (and so required skills) can often result in performance issues and even a general reaction that “marketing doesn’t work”. This can be damaging both to the business and the employee or supplier concerned.

It is more useful in these circumstances to think of marketing as being three different sets of skills:

• Strategic (the development of the context and strategic goals for marketing). This requires a high degree of conceptual thinking, the ability to envision the long-term future, a deep understanding of the organisation’s competitive strengths and weaknesses and business strategy. These tasks are best undertaken by the leadership team of the business, if necessary supported by a suitable external consultant;
• Professional creative (the development of compelling messages, content and copy and the selection and set-up of the necessary technology and tools). This requires creative flair, deep knowledge of the tools and techniques required and an instinct for words and images that change what people believe. These tasks are best undertaken by a professional marketeer either employed or via outsourcing to a marketing agency;
• Planning and analysis (the scheduling and delivering of marketing content, the operation of the necessary tools and technology and the analysis of marketing effectiveness). This requires an aptitude for organisation, routine, accuracy, numerical analysis, pattern recognition and structure. Such people are often already within an organisation in administrative, technical or project roles.

Whilst someone employed to do all of these things will, in the right circumstances, improve their understanding and performance in the areas that are not their natural strengths, the talents required are so different that this improvement will be limited. In most small businesses where exemplars or even fellow-marketeers will be limited or non-existent the poor jack-of-all-trades is almost destined to fail.

This may be why your Marketing Manager is failing.

One final note: Telesales is often included under Marketing. If you are lucky enough to have someone who is good at telesales do not waste them on marketing activities. Telesales belongs in Sales, where the required aptitudes and skills are altogether rarer.

Account planning - a systemised approach

Why do you need Account Planning?

– Account planning (or account management) provides a structured way for you to manage the development of an existing or target customer relationship
– The aim is to increase or protect the sales from that account
– It ensures that you capture the information essential to developing the relationship and increasing sales
– It ensures that objectives are put in place for developing the account so that you can turn the desire into action
– If you manage a sales team it is a way of communicating and discussing the development of their accounts and tracking progress

How do you implement Account Planning?

– Generally you will apply account management only to your category A accounts. If you haven’t yet done so, categorise your accounts (by potential spend and cost to serve) into categories A, B, C and D
– Create a template account plan for use on each account. The plan should show size and growth of the target company over the last 2-3 years and your sales to them over the same period
– It should summarise the target’s strategy and their target markets. This demonstrates the salesperson’s knowledge of the account and provides a context for their marketing and sales communications
– The account plan should define what you consider to be 100% penetration
o For an accountant this might be doing statutory returns, payroll, tax advice and management accounts
o For an IT company this might be having all desktops under a support contract
– The plan should set out objectives to achieve the desired penetration or to hold what you have
– Note that the account plan should avoid duplicating the information you record in your sales or CRM system such as contact details and activity records. The account plan can be scanned and held against the CRM record if necessary

How do you use Account Planning

– Each account plan should be reviewed and updated quarterly
– Objectives should be assigned to individual salespeople and progress monitored during these reviews