Although understanding your financial and operational figures can sometimes be a bit of an intimidating prospect, it is of course fundamental within any business. But how many of you really understand your finances and KPI’s to the degree you are fully conversant with where the profits within your business lay, and also where the opportunities are for profitable growth going forward, or even stemming the losses initially? Do you have your ‘finger on the pulse’ of your business and know where you can make marginal gains that will positively impact NOW on your bottom line? Maintaining or even becoming a successful, profitable and expansive business is all about evolution not revolution.
To make a bold statement, I would suggest more than 80% of SME business owners do not have a grasp of their finances to the degree they can confidently look to expand and exploit what their finances are truly telling them, ironically this figure correlates with the 5 year failure rate statistic for SME’s. In fact, many business owners are quite fearful of studying their figures, and not because they necessarily have concerns about what they may find out, it is a fear of not understanding those figures completely, which in turn can help them to make the important decisions in their business. It is not a failing, it is a commonality that business owners fear those typical accountant’s spreadsheets and forecasts because they don’t want to feel inadequate. There, I have said it, but it is very true! For instance if your gross profit had declined by 5% year-on-year would you know why? If you were a £1m business that would of affected your bottom line by £50,000, or £1,000 per week.
The confusion around business coaching
Undoubtedly, there are business coaches and probably more than there should be who have a fear around the numbers, and resort to providing some form of life coaching process to motivate the business owner rather than looking at the realities of the business and what it can achieve. Most business owners need the reassurance they are heading in the right direction, or to understand how they can – the life coaching aspect fades into insignificance following this understanding. The numbers are the crucial element for removing the delusion, getting your ‘finger on the pulse’ and identify the potential; you can then guarantee significant profitable gains. Having found the basement level the marginal gains can then be identified and progressed, for instance: reducing labour costs, improving stock management systems, improving purchasing, reducing overheads, increasing prices, improving operational functions, reviewing logistics, identifying grade ‘A’ target markets, improving sales conversion rates, reviewing currency exchange rates to name but a few, and I haven’t even mentioned spending a penny yet! ….. 10 ideas with a 1% marginal improvement in each area equates to £100,000 on a £1m business
A true business coach is someone who spends time analysing figures, prioritising, and putting in place the financial and operational tools that the business owner can understand, but also demonstrates and helps the business owner on how to implement and utilise those tools to their advantage. It takes away that original fear, and builds confidence to progress the business forward.
I learnt over 25 years in manufacturing premium food for national and international supermarkets that you cannot be successful without a meticulous understanding of the financial and operational figures. An inaccuracy of 1% can be extremely painful in the food production industry, so over those 25 years I spent substantial amounts of time developing tools that I could utilise to give me the insight I needed into constantly improving the performance of the company, thereby positively impacting the bottom line.
The skills I have learnt and continue to refine now provide me with an ability to interpret diverse business models, creating detailed sets of tools, normally in the form of bespoke spreadsheets and templates, the kind you and your team can understand. Yes, that horrible word, spreadsheet. However, my spreadsheets and templates aren’t just there to satisfy your accountant or bank manager, they are created to help the business owner understand fully how the business is performing, identifying exactly where you can make improvements to increase profitability. A fundamental starting point for any business that would like to achieve sustainable growth.
How does this work?
It is fair to say that the business owner has to be transparent with me. I simply cannot work with a business to help make improvements without at least two years of annual accounts, and in-depth knowledge of the businesses daily operations. I have to become part of the business, and gather extensive information, thereby helping myself and the owner identify areas of concern, create strategies, provide the resources and develop the ideas to help advance the businesses prospects. So, the early stages of coaching are about gathering the necessary information to help me create and model financial tools that provide the information needed to develop and progress.
Here are a few examples of bespoke tools implemented for a diverse portfolio of clients, and subsequent outcomes of gathering greater knowledge about the businesses…
Bespoke Furniture & Kitchen Manufacturer
The business was at the time of my appointment losing money. The key here was to understand the financial, operational and production processes within the business model. We implemented a number of tools to improve financial management, in-bound enquiry processes and sales techniques, created production planning systems, refined stock control management and improved quality control procedures. These enabled the business to control costs, improve conversion rates, and streamline production processes, but also see where savings could be made across the whole operation. Amongst many changes, these created an understanding that the business needed to invest in more efficient equipment and enhanced operational procedures. This led to creating substantially increased capacity and efficiencies with the ultimate outcome of turning a significant deficit into substantial net profits.
The business owners are great craftsmen, and produce beautiful furniture for a discerning market. The help they needed wasn’t to manufacture better products, it was to create a profitable business, and we were able to do this within the first financial year following a previous history of continuous annual losses. This also reflects that each client’s priorities must be identified and adhered too.
Specialist Mobility and Construction Company
This 13-year old business was stable, but had essentially reached a plateau with profits starting to dwindle owing to increasing overheads. The owner had really fallen out of love with the business, struggling to find the drive and ambition to continue. The task was to create and implement extensive management tools for financial and operational systems, identify new target markets and implement comprehensive marketing plans to increase the sales performance across the company. This took some initial persuasion and encouragement because it required a level of financial commitment to change the ethos and direction of the business. However, the financial tools demonstrated the restructuring of the business would create substantially increased ongoing profitability, but importantly emphasised the opportunities and markets the business should continue to be exploring in the future, whilst developing an extended and diverse array of much needed services.
Now 8 months down the road as I write this article, the business has increased by 21.8% and this growth is projected to increase quite dramatically in one of the most exciting and vibrant market sectors there is. Importantly, the owner has fallen back in love with the business and has a clear and solid growth plan and structure in place, and looking forward to the next exciting part of the journey.
The veterinary owner of the business had opened a second ‘state of art’ practice having invested £100,000’s and he did not have the necessary management controls in place to ascertain the profitability and performance of both independent sites, and the group as a whole. Furthermore the owner had been through some very difficult personal circumstances and was feeling very isolated and exposed. Therefore, it quickly became apparent a great deal of support was required and we focused on implementing extensive financial and personnel controls in the form of budget against actual forecasts, cash flow forecasting, costings templates and undertaking a comprehensive review of salaries through out the company.
In addition it was fundamental to gain the trust of the team because they were very suspicious of previous business coaches who had not performed and were very unreceptive to change, happily they are now comprehensively on our side. The next stages are creating improved staff rota’s and holiday management systems and conducting appraisals.
The business has substantially moved forward and the owner has complimented me because he says it’s the first time in twenty years of owning his business that he understands what is actually happening on a day-to-day basis, which as a result has made decision making substantially easier.
Without creating bespoke tools for each business progression can be difficult, a coach has to have a fluid and progressive mind and the ability to be pro-active for their clients.
The three examples I have given are very typical of the diversity of businesses I work with, but also shows just how different the individual businesses needs are. Every business has its difficult periods, it is a natural part of being in business, and every owner at some point will fall out of love, lose enthusiasm or experience frustration.
The one incredibly important aspect of my work is to demonstrate the inescapable success of the business, which is very often overlooked by the business leader – you can easily forget your success stories, but the difficulties are much harder to forget, potentially dominating your daily thoughts, which leads to profound negativity, and poor decision making, when looking at what you have achieved.
The financial and operational tools, which are entirely bespoke for each business, start to unlock the hidden strengths in every business, but the exciting part is what they uncover. When the business owner is at the point of all they see is a mist that never seems to fade, putting the tangibles into context is hugely enlightening for them, but also uncovering what has seemed mystifying in the past.
Now you may think that this is a long and arduous task, but one simple tool I use is an Orbit Map at our first coaching session, in essence a three year business plan on one page; I have seen some quite incredible reactions from owners, as a result of the plan, who then start to reignite that spark and passion for their business. A major tipping point in the early stages of seeking a minimum of 20% high growth year-on-year, which is the target myself and the business owners set for the business.
If you are just seeing mist, experiencing frustrations, or indeed falling out of love with your business, my guarantee to you is there is an exciting future for every business, and business owner that wants to uncover the potential within their business. It does take time to implement, but to feel in control of your future is liberating once we start to understand what can be achieved. I can help you see very clearly through that mist!