Building a Sharper Business - Chapter 1

7/30/2019 Building a Sharper Business - Chapter 1

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Building aSharper Business

Sharper Service,

Sharper Management,

Sharper Profits


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About the AuthorNathan Morris has over 15 years experience in the accounting profession.

He works with a large cross section of clients on advisory issues such as business

management, tax minimisation strategies and business expansion planning for small,

medium and large businesses as well as helping clients with business valuations, acquisitions

and sales

Nathans industry experience covers most small to medium businesses, including

professionals, manufacturing, wholesaling, retailing, hospitality, and primary production.

I really hope that get something out of this book.

It comes as a result of study, years of workingwith small and medium enterprise, helping

business owners when things got tough, arguing

on behalf of clients and tearing my hair out

looking for the right strategy to meet a need.

If you own a business, and you want to do better,

make the most of this opportunity.

Nathan Morris


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Table of Contents:

Introduction

Chapter One Fundamental Principles of Business

Chapter Two Setting Goals and Objectives

Chapter Three Strategy and the Role of the Owner

Chapter Four Managing the Finances

Chapter Five Managing your Sales

Chapter Six Structuring for Growth

Chapter Seven Managing your Investment in People

Chapter Eight Monitoring and Reviewing your Performance

Chapter Nine Holding on to you profits

Chapter Ten Looking after your clients

Chapter Eleven Finding the Right Advisers

Conclusion

For Nathans next Book Putting it all together The Five Pillars of Your

Businessgo to www.morrisaccounting.com.au and watch for updates.


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Introduction

Its not necessarily what you know thats important, but who you know;

and most importantly what they know.

Nathan Morris

These days nobody really denies the fact that accounting can greatly help any business owner to

accelerate his business growth and therefore his personal wealth. The main issue is many businessowners simply do not have that depth of relationship with their accountant. There are two primary

reasons for this;

1. The accountant is unwilling or unable to engage in this sort of work for their client, or,2. The accountant has offered these services to their client and the client has been unwilling to

part with the cents to earn the extra dollars.

The fact is that running a business solo may require working in areas that are far from your

professional expertise. Big business knows this. Successful public companies spend a lot of money to

hire expertise to keep the numbers in check.

With the availability of accounting software and do-it-yourself bookkeeping tools, many small

businesspeople believe that they can do what the big companies cannot and manage their own

finances, to the point of only using their accountant for lodgement purposes

A little knowledge is a dangerous thing.

The reality is that more often than not, the self accounting practices are carried out as the last

priority on the list of all things to do. So when you are too busy to accomplish other tasks in your

business then most probably this most critical of tasks the management of the lifeblood of your

business - will be pushed to the back of the queue.

Im sure that there are a few nods of agreement happening right about now.

So how do we correct this process? Well that is what this book is all about, but without stealing my

own thunder, there are a few basic concepts;

1. Write down your objectives for the business,2. Document what your personal value is to your business this will help you to understand how

you should be focusing your time (and indeed how you shouldnt be focusing your time)

3. Talk to your current accountant about the services he or she can offer. If you are in doubt, askfor case studies of work that they have done or even ask to talk to other clients. If you are not

satisfied that your current adviser can help you here and now and especially in the next five

years, then ask successful business owners who they use.

4. When you have decided upon your accounting adviser for the next period, meet with them toestablish some goals, and what you have to achieve day by day and week in order to reach these

goals. Then your accountant can undertake their work for you in context.

Lastly, read this book and use it to spark within you a greater interest in productivity and

performance.

Sharpen your mind and your behaviour and it is likely that everything else

will follow.

Nathan Morris


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The most important thing to remember is that many business laws are universal. While it

may appear that running a one-person business is simpler, it requires the same kind of

decision-making a CEO of a billion-dollar company makes. In fact, often the best CEOs and

the man or woman running the successful one person operation think in similar ways.

A successful solo entrepreneur and a CEO both think of every aspect of their businesses - product,

sales, customers, profit margin, return on assets. They both know which of the items in their product

line are profitable and which are not. Both understand the value of customers, and the importance of

keeping their products moving off the shelf. Except of course a home-based entrepreneur may be

actually free of the plethora of technical management terminology preferred by big corporations (eg.

dramatically administrate process-centric content, continually predominate sustainable supply

chains or uniquely engage state of the art convergence).

If a person understands that certain business principles are universal, then that person has what

what we know as "business acumen." Business acumen simply put is the ability to focus on the basics

and make money for the company.

You see every business conforms to the three basic parts of moneymaking - cash generation, return

on assets (combination of margin and velocity), and growth. Whether running an online or traditional

business, a business owner must understand these parts individually and the relationship between

them. These three basic parts, plus customers, form the nucleus of any business. Lets describe these

three components;

1. Cash generation is the difference between all the cash that flows in the business and the cashthat flows out. Cash is the lifeblood of any business - the company's oxygen supply if you will.

An astute entrepreneur must always ask the questions: Does the business generate enough

cash? What are the sources of cash generation? How is the cash being used? Failing to ask these

questions at regular intervals and against useful benchmarks can be the beginning of the end

for the business. Without cash, a business can be in trouble even if other aspects of

moneymaking - profit margin and asset velocity - looks good.

If the business generates sufficient cash, the owner is in a better position to grow the business.

A business owner can make better investing decisions, not to mention be more in control, if it

has its own cash rather than borrowing money reactively. Making decisions out of financial

desperation can derail business strategy and limit the businesss ability to exploit opportunities.

2. Return on assets. The business owner uses either his own money or someone else's money toinvest in the business. The things invested - be it products, store or web site - are the business

assets.

A business owner who knows what they are doing will ask the questions: How much money will

be made with these assets? What kind of money is being returned through their use? In short, a

smart entrepreneur must always ask, "What is the return on assets?" An entrepreneur must

follow the rule: the return on assets has to be greater than the cost of using their own money

and other people's.

Even if profit margin is small, a business can thrive if it has a fast turnover of its inventory. A

faster velocity leads to a higher return. The faster the inventory reaches the customer, the

better it is for the business.

Chapter One: - Fundamental Principals of Business


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3. Growth is vital to every business. It energizes the business and creates new opportunities.However, growth for growth's sake does not do any good. The growth of a business "must be

accompanied by improved margin and velocity, and the cash generation must be able to keep

pace."

A smart entrepreneur does not only push for sales. Instead, he or she must know how and why

the business is growing; and whether the growth can be sustained. Sales may be growing, but if

the cash situation is getting worse the entrepreneur must take the prudent approach and step

back. When growing a business, the businessperson must determine if the company is

generating or consuming cash, and whether profit margin is improving or getting worse.

In all four of these components, the business owner can benefit from the advice from a profit

focused accountant. To have someone turn financial data into management information and feed

it to the business owner, then the business owner can continue to focus on the generation of

profitable revenue.

4. Customers. A universal law of business is that no business can thrive without customers. Hence,a smart entrepreneur instinctively understands his or her customers. As Charan explains,

entrepreneurs with business acumen have a close connection with their customers and possess

strong conviction that the business cannot thrive without satisfying them.

Entrepreneurs must always know the pulse of their customers. A savvy entrepreneur knows that

the best way to get to know the customer is to make the special effort to observe and talk

directly to people who use their products and services. Find out what the customers need -

directly from them. Direct contact provides insight that even expensive market research cannot.

A good rule of thumb with customers is to keep it simple. A business owner must clearly know

what the customer is buying and why. It may not be the physical product or service alone, but

intangible qualities such as reliability, convenience or trustworthiness.

The secret of the great CEOs of our time, such as Jack Welch of General Electric, is their "intense

focus on the fundamentals of business." The best CEOs have a knack for bringing the most

complex business down to the fundamentals -- the same fundamentals that govern a small

family retail operation, a law firm or an online travel agency. Like these CEOs, entrepreneurs

should never lose sight of the basics if they want to succeed.

Business is all about common sense. Alas, it is surprising to find how often this common sense of

business is lacking. This book will help anyone understand in plain and simple language the basic

building blocks of a business and use them to figure out how a company makes money and operates

as a total business.


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Chapter One Some questions for you to consider

Think about the following questions and statements, and have an honest think about how they

relate to your current situation, your current objectives, and your attitudes, and tick the

appropriate box.

I need

help now

(no idea)

Im not

there yet

Im going

great

1. Is your business worth growing? 2. How are your critical numbers revenue, profit, debtors etc. 3. Are you spending more than you earn? 4. Have changes in your life in the last year affected the way you do

business?

5. Are your staff operating close to capacity? 6. Do you know your return from your marketing spend? 7. Do you pay your bills on time? 8. Have your outlook or goals changed? Are you satisfied?

Do you have any new objectives?

With your answers above in mind, write down three goals that would help you get the most

positive answer for each question. Make your goals as succinct and specific as possible.

1. .........................................................................................................................................

2. .........................................................................................................................................

3. .........................................................................................................................................

What are you going to do about it right now?

Achieving all of our goals at once is often unrealistic and can lead us to feeling that our goals are

unachievable. Now that you have documented your goals, what action are you going to take

immediately?

1. .........................................................................................................................................

2. .........................................................................................................................................

3. .........................................................................................................................................

Who are you going to call?

Once you have decided on a course of action, who are you going to contact to give you the right

advice and keep you accountable?

1. .........................................................................................................................................

2. .........................................................................................................................................

3. .........................................................................................................................................


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Conclusion

In the pages of this book, I have provided a range of ideas and tools to use to help you to

improve your business.

The biggest mistake you can make when you read this or any other business related book

is to try to implement everything at once. If you do this it is likely that you will get

overwhelmed and then not achieve anything at all.

The design of this book is that chapter by chapter you can come up with ideas that you can

implement one by one over time. This way it is very likely that your initiatives will stick, and

that your business will achieve permanent improvement.

Of course, we would be happy to help you to implement permanent improvement in a range

of areas in your business.

You can access this help, either by obtaining resources on our website, by attending our

regular workshops, or by having a one on one discussion with one of our team.

Even though economic times have been challenging (when havent they been challenging) a

huge part of the fortunes of your business is up to you. We would love to help you do

better.

Your business will always be a reflection of the business owner. If you become

purposeful, organized, disciplined and effective, it is likely that your business

will be this way.

Nathan Morris

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Building a Sharper Business - Chapter 1