SUCCEEDING IN BUSINESS IN THE 21ST CENTURY

Executives, entrepreneurs and luminaries committed to advancing a transformation of the working world are redefining what it means to be a successful company in the 21st century.

Convening the exchange of leading practices, deepening research and recognizing those on the leading edge of forward thinking transformation, futurists aim to catalyze a global shift toward humanity in business, inspiring and enabling organizations to cultivate purpose-rich cultures that better serve their employees, customers and the world.

Its original research and year-round events, including at global forums such as the Clinton Global Initiative Annual Meeting and the World Economic Forum, are bringing together a diverse mix of business leaders, academics, scientists, entrepreneurs and storytellers to advance the science and execution of purpose in business.

More and more, customers are making their buying decisions based on an organization's stated aims and more millennial's are choosing their employer based on its purpose. Now that companies are armed with the impetus and the business case to transform around purpose, the discussion needs to shift from ‘why’ to ‘how.’ And this is where forward thinking planning and strategies comes into play. The old quote by Mark Twain: "To stand still is to fall behind",  is more relevant today than it has ever been before.

IT'S HERE NOW

5 REASONS WHY YOUR SMALL BUSINESS NEEDS A BUSINESS PLAN

1. To map the future

A business plan is not just required to secure funding at the start-up phase, but is a vital aid to help you manage your business more effectively. By committing your thoughts to paper, you can understand your business better and also chart specific courses of action that need to be taken to improve your business. A plan can detail alternative future scenarios and set specific objectives and goals along with the resources required to achieve these goals.

By understanding your business and the market a little better and planning how best to operate within this environment, you will be well placed to ensure your long-term success.

2. To support growth and secure funding

Most businesses face investment decisions during the course of their lifetime. Often, these opportunities cannot be funded by free cash flows alone, and the business must seek external funding. However, despite the fact that the market for funding is highly competitive, all prospective lenders will require access to the company’s recent Income Statements/Profit and Loss Statements, along with an up-to-date business plan. In essence the former helps investors understand the past, whereas the business plan helps give them a window on the future.

When seeking investment in your business, it is important to clearly describe the opportunity, as investors will want to know:

• Why they would be better off investing in your business, rather than leaving money in a bank account or investing in another business?
• What the Unique Selling Proposition (USP) for the business arising from the opportunity is?
• Why people will part with their cash to buy from your business?
• A well-written business plan can help you convey these points to prospective investors, helping them feel confident in you and in the thoroughness with which you have considered future scenarios. The most crucial component for them will be clear evidence of the company’s future ability to generate sufficient cash flows to meet debt obligations, while enabling the business to operate effectively.

3. To develop and communicate a course of action

A business plan helps a company assess future opportunities and commit to a particular course of action. By committing the plan to paper, all other options are effectively marginalized and the company is aligned to focus on key activities. The plan can assign milestones to specific individuals and ultimately help management to monitor progress. Once written, a plan can be disseminated quickly and will also prompt further questions and feedback by the readers helping to ensure a more collaborative plan is produced.

4. To help manage cash flow

Careful management of cash flow is a fundamental requirement for all businesses. The reason is quite simple–many businesses fail, not because they are unprofitable, but because they ultimately become insolvent (i.e., are unable to pay their debts as they fall due). While the break-even point–where total revenue equals total costs–is a highly important figure for start-ups, once a business is up and running profitably, it becomes less important.

Cash flow management then becomes more vital when businesses pursue investment opportunities where there are significant cash out flows, in advance of the cash flows coming in. These opportunities need to be assessed against any seasonal variations in the business and the timing of the flows. If you are a “cash-only” business, you can bank the income immediately; however, if you sell on credit, you receive the cash in the future and hence may need to pay some of your own expenses before that income hits your account. This will put a further strain on the company’s solvency and hence a well structured business plan will help you manage funding requirements in advance.

5. To support a strategic exit

Finally, at some point, the owners of the firm will decide it is time to exit. Considering the likely exit strategy in advance can help inform and direct present day decisions. The aim is to liquidate the investment, so the owner/current investors have the option of cashing out when they want.

Common exit strategies include;

• Initial Public Offering of stock (IPO’s)
• Acquisition by competitors
• Mergers
• Family succession
• Management buy-outs
• Investment decisions can be taken in the present with one eye on the future via a well-thought-out business plan. For example, if the most attractive exit route appeared to be selling to a competitor, present day management and investment decisions could focus on activities that would increase the company’s attractiveness to that competitor.

Given that valuing firms is notoriously difficult and subjective, a well-written plan will clearly highlight the opportunity for the incoming investors, the value of it and increase the likelihood of a successful exit by the current owner.

50 Ways NOT to Start and Run a Business

Plan to fail if you;

1. Don't research the market you wish to enter
2. Don't develop a business plan
3. Don't create a business model
4. Don't adjust your goals and plans as you move forward
5. Don't create  3 year revenue and expense projections
6. Don't understand the meaning of Cash Flow
7. Don't create a budget and stick to it
8. Don't keep receipts for every purchase no matter how small
9. Don't keep good records
10. Don't set money aside for tax payments. GST, PST, Income Tax
11. Don't learn what is deductible and what is not. Accountants are not babysitters
12. Don't set up a good bookkeeping system with the help of a good accountant
13. Don't avail yourself of a good insurance agent
14. Don't have insurance covering yourself and your key employees.
15. Don't have business interruption insurance 
16. Don't treat people as you would like to be treated
17. Don't listen to good advice from peers
18. Don't listen to your customers and clients
19. Aren't prepared to go all out to satisfy an unhappy client or customer
20. Don't consistently check your revenues against your expenses
21. Don't pay your suppliers on time
22. Don't contact your suppliers if your cash flow has slowed down and you need an extension
23. Don't keep a journal and jot down ideas as they come to you
24. Provide a product or a service no one wants
25. Let your ego take over and ignore good advice
26. Get married to your idea and don't listen to people offering ways to improve upon your idea
27. Are arrogant and unbending
28. Stop learning because you know it all
29. Hire relatives and friends to save money instead of qualified personnel 
30. Aren't  prepared to work long hours
31. Aren't prepared to learn how to work smarter
32. Don't take courses to improve your knowledge
33. Don't join groups who can provide referrals
34. Aren't prepared to network
35. Chose cheaper materials for your products to save money
36. Cut back on advertising and marketing during busy times. 
37. Don't take your accountants advice
38. Don't do your research on what is the best bank for your business. Not all banks are alike
39. Don't keep money aside for a rainy day.
40. Are not prepared to negotiate deals. Therefore give up something to get something
41. Don't learn to bargain
42. Don't become web savvy. 
43. Don't take the time to learn more about marketing in the 21st century
44. Don't use your family in the business to create additional tax benefits.
45. Don't become tax smarter
46. Don't read, read and read more about your industry and your clients industries
47. Don't subscribe to influential trade magazines in your business
48. Don't manage your time efficiently
49. Are late for appointments, particularly with clients
50. Don'r recognize good employees for their handwork and diligence

These are listed in no particular order of importance but do cover many of the reasons businesses fail. The old saying; "if you fail to plan, you are planning to fail" is as true today as when it was first stated by Benjamin Franklin. 

IN THE IMMORTAL WORDS OF THOMAS EDISON:

IMPROVING YOUR COMPANY'S BOTTOM LINE

There are two basic methods for improving the bottom line of any business. 

1. Lowering overheads / costs.
2. Increasing cash flow. 

The former is a great deal easier to accomplish than the latter. Increasing cash flow means developing new business, finding new customers / clients or providing more products or services. The latter is a relatively simple exercise if you do not know how much revenue you have to generate each month to make a profit.

If you plan on reducing costs as a first stage, you need to know what your monthly "nut" is. The monthly nut is the amount of money required to operate the business month to month including every business cost down to the cost of toilet paper and excluding the business owners or partners salary or draw. That can be included in the monthly total if you wish.

In the businesses I have owned, I have always wanted to know what my monthly cost is before my draw. How much money do I need to bring in over the next 30 days to cover my company expenses.

If you don't know what your business overheads are, how will you know if your business is profitable? First step; create an Excel spreadsheet and list all your expense categories. Next step is to ensure you get receipts for every purchase whether it is paid by cash, check or credit card. With items like parking, if you just use coins, keep a small notebook in the car and write down the amount you paid the meter. If you do a lot of driving and a lot of roadside parking, you will be surprised to see how much you spend on meters. Keep in mind, this amount comes off your business taxable income. Same with meetings over a coffee. Or buying a train ticket, as examples.Get a receipt and keep a file folder for the receipts. Total them up at the end of the month. Carry out this exercise every month for the next 3 months and then do an average. 

Costs that have to be paid annually, divide over 12 months in your spread sheet. At the end of 6 months, divide by 6 and at the end of the year, divide by 12. 

Now figure out what you (and your partner or partners) need to draw each month. Add this to your monthly total and now you know exactly how much revenue you need to generate each month. From this, you can deduce if the mark-up on the products you sell  or the hourly rate you charge for your services is is sufficient. 

You do not need an MBA to carry out this business analysis.