THOSE business people lucky enough to have a break over the next few weeks have an ideal opportunity to review their business’s health.
“It’s important to get out of the daily grind and think about where you are going and what you want to achieve,” MGI Bridge Partners Mal Di Giulio said.
MGI has developed a computer based do-it-yourself analysis that enables business people to conduct their own health assessment.
“It helps clients prioritise their financial affairs, including their business, and then produce an action list,” Mr Di Giulio said.
This kind of analysis can be under-taken on a regular basis but needs to be done thoroughly.
“Annually would be good, six monthly would be even better. The critical point is not the timing, it’s putting time aside to do it,” Mr Di Giulio said.
Horwath’s managing partner David Stevens said his firm used a three-stage process to assess the health of its business clients.
The first stage was a strategic overview of the business, its market and its competitors, to assess its performance and prospects.
The second stage was to look at business systems, to ensure they provide accurate and timely information. This included not just tax
nd accounting systems but also things such as warehousing systems.
The final stage was to work with the business owners and assess their goals. While some people aim to maximise the value of their business for sale in, say, five or 10 years, others have no intention of selling.
This may particularly be the case with family businesses, where the business is almost a way of life for the family.
Mr Stevens said that, irrespective of sale plans, succession planning was important for any business.
This included preparing contingency plans in the event of a death or an extended absence from the business due to illness or accident.
Mr Stevens advises business owners to regularly review their competitive environment.
This includes looking at pricing and product trends to ensure their current offering is competitive and up-to-date.
The budgeting process is also critical, so that people can reliably forecast key variables like revenue, expenses and cash flow.
Mr Di Giulio said it was dangerous for business people to rely only on tax and accounting data, since it was a lag indicator.
Other indicators provided a better picture of current business performance, he said. These include transaction counts, the number of customers, how many dollars per customer, and how many times customers come back.
He said structuring was a big issue for many business people. This covers issues such as partnership arrangements and the protection of personal assets.
Another key issue is business systems. This means systemising routine activities so that the business owner can spend more time on matters like strategy and marketing.
“Some people are locked into the idea that; no-one can do it as well as I can. That needs to change,” Mr Di Giulio said.
The topic of marketing may seem intimidating to some business operators, but Mr Di Giulio said that need not be the case.
“We get them to think about their A-class clients and define their attributes,” he said.
“The better you can define your market, then you can be more targeted and effective in your marketing.”
A lot of business people are “flying blind” because they don’t know which clients deliver most of their profits.
Mr Stevens agreed, saying the 80/20 rule applied to most businesses – that 80 per cent of profits came from 20 per cent of customers.
Mr Di Giulio said many businesses mistakenly equated marketing with placing an ad in the Yellow Pages instead of being targeted in their activities.
© Business News 2018. You may share content using the tools provided but do not copy and redistribute.