Articles by Results

Understanding your Business Environment - Pulling it Together

Posted by Jim Killeen on Thu, Aug 09, 2012 @ 10:37 AM

Jim KilleenUNDERSTANDING YOUR OPERATING ENVIRONMENTPulling it Together

PULLING IT TOGETHER

 

In previous blogs, I’ve talked about businesses operating in 3 Environments, The Far, the Near and the Internal.

 

Here, I’m going to try to bring it all together.

 

Businesses are subject to pressures that come from outside that they have no control or influence over. This can include technological improvements, the status of the economy, and societal developments. While companies have no control over these factors, they can monitor, anticipate and plan for these factors and how they change. If they do this better than their competitors, they are at an advantage.

 

Businesses are also subject to pressures from competition, from suppliers, customers, the threat of new competitors and from substitute products and services. While businesses cannot directly control these factors, they can influence them. For example, they can reduce supplier power by becoming large operators, or by entering into long term relationships. They can affect customer power (the ability and likelihood of customers switching to a competitor) by becoming a high quality provider, thereby forcing customers to switch to a less able company if they do switch. They can (by monitoring technological and social factors among others, and fully understanding the customers’ needs and wants) anticipate substitute offerings and plan how to address them.

 

Organisations can acquire resources that are needed to be able to operate and compete in a market. But by developing the capability to use these resources more effectively and efficiently than their competitors they can gain advantage. They can leverage their resources and capabilities to achieve with scant resources what larger firms with ample resources do not.

 

The key to understanding how to operate in these three environments is to acknowledge that they are not separate. Instead, they are continuous, merging into each other and each having effect on the others.

For example – in Porter’s analysis of Market Competition, Supplier and Customer Power, we can see that having only a few organisations within a market puts several groups at a disadvantage. Suppliers have to deal with very large, very powerful companies who dictate terms. Customers can get a raw deal. So Governments, using Political means will enact Legal powers to limit the power of firms – to avoid monopolies. They may reduce the criteria for operating in the market in the short term, to reduce barriers to entry, and allow new businesses to set up. Or they may actively promote business start-ups with grants, because business activity is low and unemployment is high.

 

Being aware of these things allows us to make decisions about how we are going to compete. We may decide that we can’t compete in the standard service or product offering market – that the barriers to entering the market are too difficult to overcome.  So we provide a substitute, which may be much easier to get off the ground.

 

AN EXAMPLE

Let’s suppose for example that you are a hairdresser, and you want to set up in business for yourself. In other words, you are a potential Business Start Up looking to begin your Small Business Plan.

PESTLE tells you that the government are offering grants for new start-ups and free training on how to develop a plan to get going. It also tells you that people have less money at the moment and so would welcome a cheaper alternative to what’s on offer in the area. It also says there are an awful lot of parents, particularly mums, who can’t leave their children while they get their hair done.

Porter’s 5 Forces allow you to see that there are lots of suppliers of equipment all vying for your business, so the prices of supplies are low. There are lots of potential customers at the moment, and some research that you have done tells you that they have little loyalty to the current offerings. In addition, there is little competition. Porter’s analysis also tells you that there are few substitutes available for the traditional salon experience.

Grant’s Resource and Capability Model tells you that:

  • You have little money, and almost none for equipping a full salon.
  • You have enough equipment (or can afford to buy it) to deal with only one customer at a time. You do have a large estate car.
  • You have no brand, but your reputation is very good – you were senior stylist in a large salon in the town, and people know you.
  • You have values which say that you will always strive to provide a personal, high quality experience for the customer.
  • You are very knowledgeable about latest styles, techniques and methods.
  • You are highly motivated to succeed – you are fed up with others benefitting from your hard work,
  • You will be flexible and willing to work around other’s needs – your customers.

I don’t know about you, but it seems pretty clear to me that a Mobile Hair Salon is a good business model in this situation. It won’t have the costs of rent and rates of a salon, so it can afford to either: have much lower prices than a salon, or have much higher profits, or a little of each – slightly higher profits and slightly lower prices. And a grant to set up – which pays for the additional equipment needed, and help with getting a business plan together, which increases the chance of success.

 

The bottom line in all of this is to realise that although these models come from professors in Universities, we can make them work for us. And this applies to all business and organisations, from small start-ups creating a Business Start Up Plan, to more established businesses and organisations, looking to review and develop their Business Plan.

 

Use the models, apply them to your situation, use some common sense and a little imagination, and see what you come up with.

 

Jim Killeen

 

 

 

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Topics: Business Planning, Small business, Business plan, Small Business Planning, Business Training, 3 Environments Model, Business Start Up, Business Advice, Start Up

Understanding your Business Environment - The Internal Environment

Posted by Jim Killeen on Wed, Aug 08, 2012 @ 01:53 PM

Jim KilleenUNDERSTANDING YOUR OPERATING ENVIRONMENTInternal Environment Analysis

UNDERSTANDING THE INTERNAL ENVIRONMENT 

 

 

In previous blogs, I’ve looked at the Three Environments that a business or organization operates in, and examined two of them – the Far External and the Near External.

In this blog I will be looking at the third – the Internal Environment.

 

You may remember that in the Near Environment chapter, I introduced Porter’s Five Forces and suggested that Porter had identified that in order to be successful, a business must identify and develop its Competitive Advantage – the thing (or things) that it does better or differently when compared to its competitors.

 

A way of doing this is to consider the work of another academic, Robert Grant*.

He has suggested that competitive advantage comes from the resources and capabilities that lie within the firm. 

Grant's Resource Audit

 

The point of this approach is that it is the capabilities of the firm that are important, and that these capabilities rely on but are not limited by the resources available. So, first of all, we can look at resources, and then show how these resources are used to develop capability.

 

Grant believes that the resources available to a firm lie in three groupings – Tangible, Intangible and Human

 

So we will look at each of these in turn.

 

 

 

TANGIBLE

Financial Resources include the money that the company has available to it, or money it can easily acquire, that allow it to compete in the market. This can include money to pay salaries needed to attract the best candidates to positions, money needed for investment in new technology, money for advertising, marketing, and so on. Financial resources also include the financial history of the business. So a company with excellent financial results may be more likely to secure loans to be able to invest.

 

Physical Resources include the things that you can touch, that allow the business to operate. This includes machinery, premises, computers, tools and the like.

 

INTANGIBLE

The Brand of the firm is the acknowledged identity of the firm and the level of service or product it promises, and is closely linked to the Reputation. It generally is a measure of how consistently it is perceived by customers to meet their needs well, over time. It is very hard won, and can be easily lost.

 

The Culture of the firm is the Values, behaviours and patterns of judgments that the firm exhibits over time. It is very difficult to define, but in essence is the Personality of the firm. It might include things like always being honest, valuing employees, being good business citizens and so on.

 

HUMAN

The Knowledge of the firm is the “Intellectual Ability” possessed by the firm and available to it, in order for it to better meet its aims and objectives. It includes knowledge of the market, knowledge of customer groups, what the competition is doing and might be likely to do, and so on.

 

The Skills in the firm are the trained and experienced abilities of people within the firm to carry out key tasks and activities.

 

The Motivation in the firm is the peoples’ individual, internal drive to carry out activities well and to be successful.

 

The Capacity for Collaboration is the ability within the firm for individuals to work together for the success of the firm. It includes the ability of people within departments to work well with people from other departments for the common good of the firm, without putting their own department first, ahead of the firm.

 

 

Resources are important to the success of the firm over time. But of much more importance is the ability of the firm as a whole to use these resources to develop Capabilities. A capability is the ability of the firm to use various resources together, efficiently and effectively to meet the overall goals of the firm. A firm may have potential resources available to it, but usually, unless it uses these resources collectively, imaginatively and efficiently, it will never be as successful as it could potentially be.

 

The easiest way to think about this is to use an analogy.

 

Think of the firm as a carpenter. His Resources include his tools, his skills and the wood he has. His Capabilities are how well he uses these tools together to meet an objective – to make the wardrobe. He might be able to buy less wood due to limited financial resources, but if he has less waste then he’s at an advantage – his costs are lower. He may not be able to buy new tools regularly, but if he has the skills and motivation to keep his tools in tip-top condition, he won’t have to (and his costs are lower).

 

This brings us to a concept known as Leverage. Leverage is when a firm uses its small levels of resources, but with high capability, to out-perform another firm with greater resources but with less well developed capabilities. 

This is sometimes known as the David and Goliath approach to business.

Small firms, using initiative, being able to use scant resources very effectively, working together, collaboratively, to out-perform much larger rivals, and /or much better resourced rivals.

 

You may remember from the last blog, that I introduced the idea of identifying the want or need of a customer. By really understanding the want or need properly, it is possible for a firm with very limited resources, but using them together effectively (Capabilities), to meet the customers’ needs or wants much better than another firm with far greater resources.

 

An example of this can be taken from the Space Race.

 

NASA realised that when astronauts are in the space there is no gravity. Without gravity to force ink downwards towards the nib, pens do not write. So they gave astronauts a “Space Pen”. The space pen had been developed over several years, at a cost of $5 million. It writes upside down and in zero gravity. Lots of expense and time devoted to a problem, using imagination and high levels of technology, and lots of co-operation.

 

The Russians used a pencil.

 

NASA relied upon high levels of financial and technological resources. The Russians were less well financed and so could not afford the technology. They Leveraged their Knowledge – their understanding of what the customer really needed – (something to write with), the Culture of finding simple solutions, and the Motivation to find a solution suitable for the customer – the cosmonauts. A pencil does all of that.

 

So the key here is that Resources available to the firm are important, and you do need some of each. But acquiring resources for their own sake is counter-productive. Of much more importance is to use the resources you have got, but to use them effectively, efficiently and imaginatively, and together, in other words, to develop Capabilities.

 

Jim Killeen

 

 

Some of you may have spotted that I have used the “Space Pen” Urban Myth. I do apologise – it’s just such a good example that I couldn’t resist.

(*Robert Grant is a Business Professor in Milan and also teaches at Georgetown in the USA. He is highly regarded in the field of Business Strategy.)

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Topics: Small business, Business plan, 3 Environments Model, Business Advice, Internal Environment, Resources, Capabilities, Leverage, Grant's Resource Audit

Understanding your Business Environment - Near External Environment

Posted by Jim Killeen on Mon, Aug 06, 2012 @ 10:21 AM

Jim KilleenUNDERSTANDING YOUR OPERATING ENVIRONMENTNear External Environment Analysis

UNDERSTANDING THE NEAR EXTERNAL ENVIRONMENT

 

In previous blogs, I have introduced the idea that Businesses operate in Three Environments – The Far External, The Near External, and the Internal.

 

Here, I am going to examine the Near External Environment, and how it affects our ability to be successful in business. For this I will be using a very famous model (in business academic circles anyway) proposed by Michael Porter* – The Five Forces Model.

Porter's 5 Forces

 

Porter believes that for any business or organisation, there are five main factors that put pressure on a business and affect its likelihood of success. These are:

  • Market Competition,

  • Customer Power,

  • Supplier Power,

  • Threat of new Entrants,

  • Threat of Substitutes.

 We can go through each one of these in turn, starting with the most obvious –

 

Market Competition.

This relates to the competition you are up against to obtain and retain customers for your product or service. So if you are a hairdresser, your competition is other hairdressers. Porter believes that the key to surviving this competition is to identify, develop and maintain Competitive Advantage. This is an aspect of your product or service offering that is difficult for the competition to replicate or acquire, and which makes you more attractive to customers. The possibilities for achieving Competitive Advantage are dependent on the market you are in, and the imagination of the company. In short it is the thing or things that you do differently or better when compared to the competition. For example, what do you think the Competitive Advantage of Ferrari is. Or Porsche?

 

To go back to the Hairdresser example – what might their advantage be? Perhaps it is that all of their stylists trained at Vidal Sassoon – and no one else in the area has those types of stylists. Or perhaps it’s that they provide a crèche for children while parents are being seen to.

Whatever your industry or market, it is very helpful to identify something that you can do that is different or better than your competitors, and which (very importantly) will attract and help to retain customers.

 

Customer Power.

This relates to the size of the company in relation to the size of the market. It also relates to the ability of the customer to switch from one company to another to acquire the thing they want. Consider Supermarkets. In terms of size, Tesco’s is very large and takes up a large part of the market. It is therefore less worried about ONE customer leaving and going somewhere else. However, it is very easy for customers to switch. So to be successful, Tesco has to try and decide how it is going to try to satisfy a large number of different customers with different needs and wants who can switch relatively easily – customers with little loyalty to the firm. So they sell lots of variety, both of product types and product identities (Brands).

On the other hand consider Rolls Royce Engines, who make engines for aeroplanes. There are very few companies who do this, but also very few customers (aeroplane builders). So Rolls Royce engines make few products, but all the products are very carefully tailored to suit the very few customers who order them.

 

Supplier Power.

Like Customer power in reverse, this tries to analyse the power of suppliers over the customer. For example, if you are the only petrol Station on the M1 within 50 miles all round, you can pretty much dictate prices (within reason). So if you are the only Train Operator between A and B, you can control pricing and, since the customer has little choice but to use you if they want to take the train, you also dictate service levels. But of course, no Government would allow that, would they?

 

Threat of New Entrants  

While you may know how many competitors you have, and who they are, you also need to be aware of how likely it is that someone else will enter the market.

The easiest way to think about this is: remember how easy or difficult it was for you to enter the market and start trading. That’s how easy it’s going to be for someone else. It depends on how much money it takes to set up, any special technology that must be mastered, any special licenses that are needed, and so on. So entering the market of window cleaning is fairly easy, entering the market of making aeroplanes is very difficult.

 

Finally, the Threat of Substitutes.

Often overlooked, even by leading business figures, it is very important in business. Basically, in order to understand this threat – and it is a big one, you need to really understand the Need or Want that you are satisfying for your customers. Then ask yourself: How could my customers satisfy this need or want without my product service offering or one like it.

 

For example, Coke – its main competitor is Pepsi, but that is not a substitute, it’s a competitor. In order to understand substitutes we need to understand Need or Want. So for Coke, its customers want something that will ease their thirst. Tap water does that, so tap water is a substitute product.

 

Now consider cars. Suppose you are Ford. Your Competitors are Volkswagen, Vauxhall, Toyota, etc. But they are not your substitute threat. If you ask yourself: “What is the need or want that is satisfied by Ford?” We can say “A means of getting from A to B”. Buses do that, so do bikes, so do trains, so do aeroplanes. So these are the substitute threats.

Now, you might reply to the question of need or want: “A means of getting into work, so that I can sit at a computer all day and do paperwork”. In other words “A way of me being able to work”. But computers do that. Hence, why so many people work from home. They do not need a car because they do not need to travel.  So the Internet is a Substitute Threat for cars in meeting this customer need.

 

The lesson here is that advances in technology often allow substitutes to take over from established markets. When Henry Ford started making cars for the masses, the established market was horses. The substitute was cars.

The same with typewriters. It used to be if you wanted to send an official letter, you typed it using metal keys and ink, onto paper and sent by post. Now, there is no need for ink or paper. We still type, but the product is not physical– the substitute for typewriters was a computer.

Remember Amazon from a previous blog? – they are a substitute for Bookshops. Kindle is a substitute for Book Printers.

Consider a Barber. He cuts hair. For men. This is a service. 40 years ago there were very few substitute threats. Now, I can buy a home hair trimmer for the price of a decent haircut, and give myself a number 3 every month. No barber. A product has replaced a service.

Artists replaced by photographers and cameras and photographic film. Kodak Film replaced by digital cameras. Digital cameras replaced by mobile phones. Mobile phones replaced by?????

 

The reason I am spending so long on this one is because it is so important. While businesses often spend time deciding who their competition is and how they are going to out-compete them, they can often miss the substitute offering. If you can work out what the substitute might be, perhaps you can get in on the action. This aspect of business training – to look beyond what is immediately obvious – is essential and often overlooked.

 

Now some of you might be saying – “That’s all very well and good, but it’s based on hindsight, seeing something after the fact”. Except that businesses can do it and do it successfully. Kindle is replacing books. That might be a problem for Amazon who sell books, except that Amazon and Kindle are one and the same. Amazon saw the technological advances, saw the threat of electronic books as a substitute for real ones, and saw an opportunity to get in on the ground floor. Not only that, but you don’t need warehouses to store electronic books, which makes Amazon’s Kindle e-book operation more profitable AND cheaper to customers. Everyone wins – except people who print books.

 

Jim Killeen 

 

*Michael Porter is a Professor at Harvard University Business School. A leading business academic and consultant to large companies, he has written several books on Business and is highly regarded in his field.

 

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Topics: Business Planning, Small business, Business plan, Small Business Planning, Business Training, 3 Environments Model, Business Start Up, Business Advice, Near External Environment

Business Plan - Plan-Do-Check-Act Keep the Plan Alive

Posted by Graham Cripps on Wed, Jul 25, 2012 @ 03:28 PM

Plan-Do-Check-Act: Keep the plan alive

Graham Cripps, DirectorFirst, thanks for sticking with your business planning journey.  I hope you have found the information useful so far.

Introduction

This is the final publication in this series and here we will discuss the business plan, how it is constructed, the additional information that needs to be attached and, how to keep the plan alive and therefore, a useful business tool for the future.

If you have been following these articles you will now have all the necessary elements to start to populate your business plan. These elements are: -

  • Clearly defined personal and business goals

  • A full list of your business skills and an action plan for improving or acquiring these skills

  • Customer groups clearly defined

  • A clear understanding of your competition, your strengths and weaknesses and an action plan in place to lever your strengths and minimise your weaknesses in the market place

  • A full understanding of your USP

  • A detailed, realistic sales plan

  • A driven marketing plan

  • A completed cash flow forecast

  • An understanding of your key business processes

The business plan

If you have not already done so, you can download a free Business Plan template by clicking on this button

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Plan-Do-Check-ActOne of the core methodologies the we use at Results is the application of the Deming Plan-Do-Check-Act cycle. Briefly, this is about spending time planning an activity to maximise the chances of success.

PLAN – what you have to do and include all the preparation, research and planning activities

DO – carry out the plan

CHECK – the outcome against the plan and identify any gaps or problems

ACT – take action to improve the outcomes, updating the plan as you go

I propose that the P-D-C-A cycle is applied to your business planning activity. In fact, if you have been following this series of articles, you have been in the planning stage of writing your business plan.

PLAN

The contents of a business plan can vary. The Results Business Plan Template provides a robust framework that has been tried and tested and has been accepted by all the main high street banks.

The business plan content should include: -

  • Executive summary – about you and an overview of your business plan

  • Product/service description – a detailed description of the product or service that you intend to provide

  • Market research details – a summary of the marketing you have carried out for your product/service and the potential market population

  • Customer groups – clear definitions of your customer groups and the products/services to you intend to sell into those groups

  • Your competition – the competition you have identified and their relative strengths and weaknesses

  • Reasons for success – detail the reasons why your business will be successful, include your unique selling proposition as well

  • Risks to your business – for each risk identified, detail the risk and what you have, or will have, in place to protect against that risk

  • How will the business be managed – list the roles and responsibilities and include finance, sales, marketing and operations

  • Sales plan – a brief summary of your planned sales

  • Sales methods – how you intend to sell your product or service into your specified customer groups

  • Sales methods – a brief overview of each sales method and how each will impact upon sales volumes overall

  • How will the business be financed – describe how the business will be financed over time and includes set-up costs, working capital and future stock purchases

  • Cash flow forecast – estimates of cash in the business over the first year and why you believe this is a realistic forecast

  • Pricing policy – how are your prices arrived at, are they competitive and sustainable

  • Your business and the law – list the laws applicable to your business and nay actions taken to comply

  • Attachments – there should be a minimum of: cash flow forecast; sales plan; marketing plan and any additional details that you feel support and strengthen your business plan.

Do 

Having the plan in place is paramount at the start of any business venture. Once the business is trading and you have some experience of operating the business, the next thing is to check how things are going against that plan. As the old saying goes “a failure to plan is a plan to fail”.

Check

How is your business doing against your plan? Are you doing better than planned or worse?

Review all the key measures for your business cash flow, sales and costs.

Act

What actions need to be put in place to either redress the situation, or, take advantage and capitalise on a positive trend.

Summary

A Business Plan is a live document and should be reviewed to check that it remains relevant in all aspects. So make it a regular activity that you undertake at regular intervals.

If you have missed of the previous articles, please click on any or all of the following to access the article and a selection of free templates. For any other related articles including SWOT analysis and setting SMART objectives, please contact Results Consortium Ltd.

A business plan is key for business

Defining your personal and business goals

Understanding your in your business

Define your customer groups

Know your competition

Defining your USP

Establishing your sales plan

Establishing your marketing plan

Establishing your business costs

Definine your business processes

 

 

Graham Cripps

Results Consortium Ltd.

www.resultsresults.co.uk

Topics: SMART, Business Planning, Small business, Business plan, business skills training, PDCA, Plan Do Check Act, SMART objectives, Sales Plan

Understanding Your Operating Environment - Far External Environment

Posted by Jim Killeen on Tue, Jul 24, 2012 @ 04:28 PM

Jim Killeen

THE FAR EXTERNAL ENVIRONMENTFar External Environment

In the previous blog, I talked about the 3 Environments that affect a business and its chances of success.

In this blog I’ll be looking at the first – The Far External Environment.

 

 

 

For this, I’ll be using an analysis model called PESTLE.

 

PESTLEThe reason it’s called PESTLE is because, as you can probably see, the first letters of the Key Elements that you have to think about spell out PESTLE.

So, we’ll go through them one by one. For each one, we look for the factors that may have an effect on us and our business, either now or in the future, but which we cannot control.

Usually, we know what’s affecting us now, so it’s important to see what changes may occur that will affect us in the future.

For this, we use Environmental Scanning. It sound very technical, but what it really means is reading newspapers, watching the news and trying to get a feel of changes that are occurring or are likely to occur that might affect us.

 

POLITICAL

This includes Political Parties coming to power – changes in Government. Changes to Political Parties in Government generally mean changes in Policy.

For example, cast your mind back to 2010, with a general election coming up. If you are a company that relies on Government funded contracts, you might be thinking “If the Conservatives get in, they might reduce funding, because they have been saying that the Government needs to reduce the amount it spends each year”. So, thinking this might happen, you could start to plan what you would do.

 

ECONOMIC

This deals primarily with the overall state of the economy. At the moment the economy isn’t doing too well. Most analysts believe it may be some time – years – before the economy picks up.

So if you are a company that was thinking of spending a large “Launch Fund” on launching a range of luxury items, perhaps you might wait to see what happens. On the other hand, you might still want to launch the range any way, but at slightly lower prices, believing that people want a treat and you want to be the “Affordable Treat” provider.

 

SOCIAL

This deals with social trends – of many different types.

Say you run a Hairdressing Salon. Perhaps you have noticed that the local college is expanding, and its 100 yards away from your shop. The next intake is next month. So you approach the college and ask to have a spot during “Freshers Week” (The first week of the term when the new students find their feet). This way, you can make sure that they all know you are local, and have got really good rates for students. And so you increase your turnover. (No matter what you hear, students ARE poor and DO get their hair cut – you might just have found a very large new market)

 

TECHNOLOGICAL

This deals with any new technologies, and how they might be used to help your business. Or it might be becoming aware of threats to your business.

Things like the internet, which allow people to buy without having to go into a shop. If you decide to sell on the Internet it might help you. If you don’t, it might hurt you.

Cast your mind back to the 90’s. Bookshops generally just did not see AMAZON coming – until it was too late. Bookshops seemed to be convinced that people wanted to browse. They did want to browse – so Amazon included this feature in their Web Site.

 

LEGAL

An offshoot of POLITICAL, these are changes in Law that might affect your business. Generally, we know about changes in Law that are coming into force before they actually do – that’s how it works with Parliamentary Law making. So, knowing this, we can be prepared for it.

 

ENVIRONMENTAL

These are the things to do with what most people think of as Nature. So changes in the environment (nature) and the associated implications of these changes. For example, the growth of “green” technologies and products, such as organic foods.

 

With all of these, the key is to think how the factors out there in the work might affect our business. Not all of them will always apply at any given time to any given business. What’s important is that you are generally aware of trends in these areas, how these trends might affect your business, how you plan to deal with them.

 

Jim Killeen

 

 

 

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Topics: Business Planning, Small business, Business plan, Small Business Planning, Business Training, 3 Environments Model, Business Start Up, Business Advice, Far External Environment, PESTLE

Business Plan - Define Your Business Processes

Posted by Graham Cripps on Tue, Jul 24, 2012 @ 12:48 PM

Determine your business processes

Graham Cripps, DirectorWhen all the excitement has died down and your business is up and running, how are you going to ensure things stay that way?

 

Introduction

In this the ninth publication in the series of 10 on business planning we will now have a look at what you need to consider to ensure the business continues to run smoothly in the coming months and years. Even if you are a sole trader, you will need consistent processes that you use so that you do not have to think about what to do next in any usual circumstance.

Defining Your Business Processes

There will be three main areas that you will need to consider in terms of business processes. These are: -

  • Your business and the law – the laws that apply to your business

  • Financial records and reporting – keeping track of  the money

  • Determine your business processes – all the things you do to find, service and keep customers

Any operation within your business needs a degree of stability. If you keep changing the way you do things, you could lose control of costs, find it difficult to keep up with the paperwork or even loose customers. A business process includes, but is not restricted to:

  • Design (of products or services)

  • Accounting and book keeping

  • Sales invoicing

  • Advertising

  • Marketing

  • Business planning

  • Expenses

  • Production and delivery of the product or service

  • Risk assessment

  • Technical operations

  • Packaging and labelling

  • Invoicing

  • VAT

  • Signing off the deal

  • Dealing with customer feedback

As the business gains momentum you will need to be able to ensure that you can continue to deliver your products or services consistently. In the areas of quality, cost and on time delivery, having stable processes is one of the key factors of achieving this.

Example: the business employs another person part time. Having identified your business processes and having written them down will form the basis of any training that they require.

What actions do I need to take?

First select the business processes that you have established that works for you, your business and your customer. Write down what you do and, if possible, create forms etc. that can be used. Determine, who within the business (you may not have any employees, but you may have a friend who helps with IT or a book keeper). The written document should at least be dated so that you can track any changes that are made. These become your Standard Operating Procedures for the business.

What are they used for?

Standard Operating Procedures (SOP’s) record the important processes used within your business and is a record of what works well for the business, the customer and any other interested parties.

You may not do some things that often and remembering what you did last time can often be challenging, so having a written record is important.

They do not have to be complex, even a set of blank forms with notes on may be enough.

So, SOP’s can be useful for: -

  • Training other members of staff

  • Ensuring consistency of process and customer satisfaction

  • Providing a record of what was done

  • Providing valuable information for improving processes in the future

  • Allowing the business owner to know that the customer will be satisfied with the outcomes, even when they are not involved directly

Example – Hairdresser, customer advice session

This has been put together by a mobile hairdresser. This is a simple check list that is a form of risk assessment.  Hair Dresser Risk Assessment Form

Having used a simple check list, this hairdresser will always check these specific points with any new client before he/she provides any services.

 

 

 

 

 

 

 

Graham Cripps

Results Consortium Ltd

www.resultsresults.co.uk

Topics: Business Planning, Small business, Business plan, business skills training, Small Business Planning, Business Training

Business Plan - Establish Your Costs

Posted by Graham Cripps on Mon, Jul 23, 2012 @ 02:35 PM

Establish all your business costs

Graham Cripps, DirectorBusiness costs are obvious aren’t they?                                                                       

Having spent some time thinking about you, your business plan, your customers and market place, I’d like to spend just a short time thinking about costs. No I’m not going to give you a list, but what I am going to do is give you the desire and know how to draw up your own.

Physical Costs

We can break these costs down under two specific headings, Fixed Costs and Variable Costs.

Fixed Costs Model

 

 

Fixed costs – are those costs that will remain the same for your planned level of sales and capacities. E.g. if you have planned to make and sell 4,000 cakes in year one at 80 per week, your fixed costs would increase if your orders became say 200 per week. You would need, perhaps, more mixing, baking, packing, storage and delivery capacity. This could mean another part time member of staff (see Fig. 1).

 FIG 1 - Fixed Costs

 

 

Variable Cost Model

 

 

Variable Costs these are the costs that vary with sales volume and other business related activities like travel, marketing and advertising. Costs are not necessarily proportionate to the level of business as they can become less per sales unit depending upon unit sales volumes in any given period. This is due to efficiencies in the supply chain that can be achieved as a result of increased volumes.     Fig 2 - Variable Costs

 

                                                                                

Adding it all up

Having determined all the costs of running the  business, we can now start to understand what our financial future begins to look like and take actions where it could potentially go into the red (trading at a loss where outgoings are greater than incomings).

So, in previous publications we have spoken about market research, your sales plan and your marketing plan. All of these require some monies to carry out the activity and we also need to understand at what level to set prices and volumes to ensure we have a financially viable business model.

Having a sales plan and established all the costs, we are now well placed to generate a cash flow forecast. This forecast is an estimate of the business outgoings and income over, typically, a 12 month period. This allows actions to be put into place before the business is in trouble.

So, what does a cash flow forecast contain?

This is an example of a cash flow forecast and contains the following: -.

Cash Flow Forecast example

Sales income – month by month sales forecast that can be more than one line

Other income - could be a loan or other form of cash injection

Outgoings – all of the expenses that the business has to allow for including rent, rates, power, marketing, materials, wages/drawings and income tax

Calculation fields – are needed to show totals for each area and then total cash available at the end of each month.

Initially, the figures used are those based on your best intelligence. However, as each month is closed, the figures used are actuals for that month. As your history builds, decisions can be made on the “actual” figures making the spread sheet more and more accurate over time.

 

 

Outgoings

The outgoings of the business fall into two main categories in terms of cash flow. These are the fixed and variable costs discussed above. The cash flow forecast will also need to include for tax and national insurnace contributions as well as any wages and/or drawings that will be take each month/week.

Results have a number of templates for the following: -

  • Fixed costs

  • Variable costs

  • Personal survival budget

A personal survival budget is key for sole traders as this will define the minimum that the owner/operator will need to earn through the business to survive. This includes for all their personal bills and commitments.

For further information on this or any other article, contact Results via our web site www.resultsresults.co.uk .

 

Graham Cripps

Results Consortium Ltd

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Topics: Business Planning, Business plan, business skills training, Small Business Planning, Cash Flow

Business Plan - Establish Your Marketing Plan

Posted by Graham Cripps on Mon, Jul 23, 2012 @ 01:32 PM

Establish your marketing plan

Graham Cripps, DirectorIntroduction

In this, the seventh of ten publications on business planning, I will discuss marketing and how to approach constructing a Marketing Plan.

I have lost count of the number of times I am told “I already have a web site and a business card”, thinking that is all there is to marketing. Well, the statistics show that the more business you need, the greater your marketing effort needs to be, even if you are an established company.

 Methods of Marketing

The methods available to us all are immense. With the growing use of social media by the business community, there is also a growing use of the internet to research products and services, suppliers and even customer comments. So let’s take a look at some of the methods available.

Flyers – good for small very local businesses as a method of introduction. For: cheap to produce in volume, can get the message out there quite quickly, do require a computer to be able to read. Against: a lot will be discarded, needs several repeat drops, expensive in terms of time/cost to deliver, produces around 1% of sales after repeat deliveries (that is 1% of all the unique drops made).

Web site – a must for the majority of businesses these days.  Your web site is useful source for research about your business products or services. For: can give wide coverage for your business, can be cheaply established, can be self-administered, can be updated and expanded cost effectively. Against: needs to be search engine optimised (normally requires specialist intervention), too easy to let the content become stale, needs other interventions to get traffic (potential customers) to the site.

Social Media (Facebook, Twitter, Linked-in etc.) – the past 4 years has seen  massive increase in the use of social media by the business community. From tweets to blogs, from small to international brands, there are subjects within social media on a broad range of subjects, including Business Planning.

So what to do?

For me there is no one answer but I can say that social media can absorb a lot of business time to make it work effectively and that is its main problem. On the “for” side of the argument, social media can be viral in its impact, creating massive increases in business leads, 100 to 250% have been quoted publically.

Just one more thing, social media is not about selling, it’s more about establishing relationships by becoming a trusted contact. Visitors to your company facebook page (and web pages) will, in time, become potential leads and customers. It’s about creating reliable and valued content as well as establishing your businesses authority in  the subject matter in question.

E-mail Campaigns: - Use of e-mail to make potential customers aware of you and your company offerings. For – can be sent to a lot of companies very quickly, free apart from your time. Against – can be subject to spamming rules, difficult to get to the decision maker without purchasing a list of some description which can be costly, often filtered through internal fire walls.

Editorial (local and national newspapers, magazines etc.) – typically this will be supported through items of interest to local communities, business communities and interest groups. Typically through having run a series of adverts in that publication.

Local Radio: It is also possible to get publicity through local radio. Again, normally, items of interest to the local community. For – gets your name out there. Against – normally day time transmission so could miss your intended audience.

Other marketing activity

The few items mentioned above are just a few of the most commonly used. As you develop your business, you will need to increase your efforts and these are some of the activities you might like to consider using your web site or facebook: -

  • Presentations

  • Blog posts

  • Reference guides

  • Case studies

  • Brochures

  • Free trials, templates, guides and white papers

  • Manuals

  • Demonstrations

  • Video casts

  • Video of events, information

All of these need to be targeted at your customer groups and include content of interest to them.

The Marketing Plan

There are six things to consider before you commit to any marketing:

  • How much money can be allocated for marketing (marketing budget)?

  • How much time can you invest in marketing per day/week/month?

  • What are my potential customers looking for?

  • What methods will you use and how will they interact?

  • What are the key messages I want to convey?

  • How do I ensure consistency across all my efforts?

Having answered these questions, establish your strategy which will help ensure maximum impact across all of the media used. Then create the content for your communication.

Remember, keep your customer groups in mind, what is the service or product they are likely to be looking for and market your company as the one to provide for them and why.

The Marketing Plan Matrix is no more than a form of diary that details all of the actions that will be undertaken, when and by whom. The free template we offer has a few examples of activities you may consider as a thought provoker. If you want to learn more contact us via our website www.resultsresults.co.uk .

Graham Cripps

Results Consortium Ltd

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Topics: Business Planning, Business plan, business skills training, Small Business Planning, Business Training

Business Plan - Establish Your Sales Plan

Posted by Graham Cripps on Wed, Jul 18, 2012 @ 12:21 PM

Establish your sales plan

Graham Cripps, DirectorWhat is a Sales Plan and what can it do for my business?

Welcome to this article where I will be explaining the need for a Sales Plan, how to establish the plan and how it fits into your business plan.

 

The Sales Plan

A sales plan is a set of realistic targets that map directly into your financial planning and uses your market and customer research data to forecast your likely sales activity for the coming 12 months. In some cases this can also be estimated for the second or even third year.

The sales plan looks at what products or services you are planning to sell, line by line, and is the driver for your sales and marketing activity planning. In other words, if you plan to sell 10 items per week, what is the sales and marketing activity that will drive this activity to actually occur.

You can download a free sales plan template at the bottom of this article. This template is an Excel spread sheet that has calculations built into the sheet for adding up each month and a rolling cumulative figure to the end of the year.

Research will you need to do

OK, in my third article Define Your Customer Groups, I introduced you to the concept of looking at your customers and breaking them into groups. Each customer group will require different things from you and your products and services. So, in terms of your sales plan, consider which group will buy which product or service.

Then, you will need to research how many of these particular groups are in your area you intend to operate. A good source of data is the Census statistics available on your Local or County Council web site. If this does not give you the detail that you may require, you may need to consider some form of detailed market research to determine things like:

  • Shopping area foot fall

  • Buying habits of your customer groups

  • Travel statistics

  • Life style statistics

  • Etc…………

Once you have a clear and data driven view of your potential market place, you can now think about your marketing and sales activity to:

  • Let people know how to find you

  • Let people know what you do

  • Inform people of your Unique Selling Proposition

  • Getting them to contact you

  • Converting that lead into a customer

I cannot over stress the importance of market research. This data, along with knowing your competition, will give you good insight into your challenge in terms of reaching your customers and making sales in your chosen market.

How to construct a Sales Plan

If you have already downloaded your free Sales Plan template, this section will be easier to follow.

First, determine your realistic target sales quantities per customer group for each of your products or services. Then, for each month, add these together to estimate your likely sales value. Continue this activity for each of the following 11 months. This is your sales plan.

It is not real, it is not a guarantee of business, it is not cash in the bank. It is however, a list of targets for your business to achieve in order for your business to perform to your financial goals.

Beware, a sales plan is only of any use if it is realistic, backed up by effective sales and marketing activity plans and established as a live document (live in terms that this will be revisited on a monthly basis to see how you are doing against the plan and to be able to take the appropriate action).

Quantities may be numbers of units, hours employed, frequency of service etc. Whatever is a “sales unit” for your business’ products or services.

The purpose of a sales plan

The focus of any business must be sales. Sales provide the life blood of the business, cash, and the sales plan drives the business to:

  • Understand the market place

  • Understand the customer

  • Understand the competition

  • Have a key goal set for the business to achieve

  • Take actions needed to improve the financial situation

  • Review the success of all marketing and sales activities, campaigns etc.

Remember, like any other goal or objective use SMART objectives (Specific, Measureable, Achievable, Realistic, Time bound).

If you have not done so already, you can down load your free copy of the SMART Objectives article at the bottom of this page.

If you have missed any of the previous articles, you can access them now by using any of the following links:

 

Graham Cripps

Results Consortium Ltd

www.resultsresults.co.uk

 

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Topics: SMART, Business Planning, Business plan, business skills training, Small Business Planning, Sales Plan

Business Plan - Define your unique selling proposition (USP)

Posted by Graham Cripps on Mon, Jul 16, 2012 @ 03:57 PM

Business Plan - Define your unique selling Proposition                                                                                                                                                                          

Graham Cripps, DirectorWhy should any perspective customer buy your product or service rather than your competitions?

This is a question we could ask ourselves. However, I would propose that you should consider the customers view. In other words, you need for the customer to be thinking “why buy from anyone else”.

In this article, the fifth in the business planning series of 10, I will propose a process for articulating what makes your product or service unique, different or just plain better value for money and how you communicate this to your market place.

If we consider the customer experience of dealing with your business we need to think wider than just the product or service its self. How did the customer find out about you, how easy was it for them to contact you, what was their buying experience, what is their ownership experience and after sales service like?      

OK, a lot to think about so let’s make a start at getting your unique selling proposition statement sorted. There are just 7 steps to consider: -

Research your competition

(see article “Know Your Competition”)

Knowing what your competition can and cannot do is one key ingredient for you to be able to articulate your uniqueness. In my previous article I discussed a process for doing just this.

It is not just about knowing who your competition is and what they do, it’s also important to understand their strengths and weaknesses as well as your own.

Write down what is different, special or unique about your product or service

This is not just about your product or service. You need to consider the whole process from initial contact to after sales service. How easy is it for the customer find out about you, how easy is it for them to contact you, what will their buying experience be, what will their ownership experience and after sales service be like?               

Define these points in terms of advantages for the prospective customer

For each of the above points consider “what’s in it for the customer”. What is the advantage to the customer and will they value that?

Write a brief statement

In no more than 30 words write a brief statement that that explains what you do including the points you have now articulated above. This statement should focus on what you do and what is unique about your business, products of service.

Sanity Check

For each “claim” you make, make sure that you have processes in place so that you can actually deliver.

Get feedback

Get feedback from those critical friends (you know, those friends or business colleague that are only too willing to tell you which way is up!). What do they interpret from your statement, does it engage them, and does it get them to ask more questions about your business offer?

Refine the statement and then publish

Having received the feedback, modify your statement and, after verifying the revised statement, it is now ready to publish.

Remember, this statement must tell your prospective customer enough to get their interest in you and your business and for them to want to know more.

Of course, your short statement is not the full story of your unique selling proposition (USP). Your USP is the whole service you provide from making contact to the after sales service and experience in every detail. So, you need to be able to use your short statement to engage the customer, this is the headline.

A word of advice, avoid using vague statements like “flexible service”, “no job too small”, “unbeatable prices”, unless you can be specific. Vague statements can be off-putting and appear rather cliché to prospective customers.

Still To Come

There are just a few more articles that will be published over the next two weeks: -

  • Establishing Your Sales Plan

  • Establishing Your Marketing Plan

  • Establishing Your Business Costs

  • Defining Your Business Processes

  • Plan-do-Check-Act - Keep The Plan Alive.

With these articles are free templates for you to download and use towards your final business plan.

Graham Cripps

Results Consortium Ltd

www.resultsresesults.co.uk

Topics: Business Planning, Small business, Business plan, business skills training, Planning

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