Article by entrepreneurmag.co.za

What’s the first step in figuring out how to execute your big idea? Creating a working model for your business.

We’ve all been brainwashed into thinking that the best way to do this is to sit behind our desks and write a long, detailed business plan. You know the kind: It starts with a fancy cover and your mission statement, then describes your team, market, product, competition, and so on.

Most entrepreneurs spend a lot of time and resources writing their plan. Too often, they get feedback from all the wrong people. Their friends and family want to support them, but they’re telling the entrepreneurs only what they want to hear — that they have come up with the next Google or Apple or Tesla (keep in mind, none of this feedback is coming from customers).

By the time the entrepreneur gets to the last section in the business plan — the financials — he’s totally sold on the idea. Sometimes the financial section is left unfinished or dropped entirely as the business is launched.

And why not? We’re passionate. We’re committed. We know we can’t fail. So what are we waiting for? Let’s go!

Here’s the problem: Most entrepreneurs change their business model six times when working through the financial section of their plans. While running the numbers, they identify key distinctions with regard to income and expenses. They gain a deeper understanding of what it will take to break even and how to achieve free cash flow. As a result, they come up with better-informed strategies for attaining their desired financial outcomes.

The most important part of the initial business planning process, and the one people most often neglect, is getting your numbers to tell a story that makes sense for you and your investors. If you start at the beginning of the plan only to learn that your assumptions about the business don’t add up once you reach the end, you’ve lost valuable time and money.

Regardless of whether you’re in startup or growth mode or moving to the next stage of your business, mistakes can be costly, so here’s what I recommend:

1. Start with the last page first

Once I have a basic understanding of what I’d like to build, the market, my target customers, the busi­ness opportunity, and the product, I dig right into the numbers and create a simple one-page spreadsheet that clearly identifies how the money flows. Basically, I write business plans backward. I’ve learned that once the numbers tell the story you want, the rest of the plan will write itself.

2. Don’t wait

Don’t make this process more difficult than it needs to be. Limit your model to one page. Create the simplest, most basic spreadsheet you can that identifies income, expenses, breakeven, cash flow, and the capital required to achieve your outcome. Use conservative assumptions, and don’t rely on best-case scenarios.

3. Get out of the office

You’ll learn more about your business by getting into the market than you ever will sitting behind a desk. At least 50 percent of your time should be outside the office gathering information that can be applied to your plan. That means contacting industry insiders to learn more about the market, talking to prospective customers about their needs, and testing your competition’s products and services.

4. Be careful who you listen to

When we have an idea we passion­ately believe in, we’re convincing. It’s easy for our family and friends to tell us we have a winner on our hands because they want to be supportive.

But when you’re modeling your busi­ness, the people whose feedback matters most are current and potential customers. Listen to what they have to say and apply what you learn to your model. Let their feedback, and not your enthusiasm, sway your projections.

5. Don’t throw out negative feedback

Sometimes it can be difficult to absorb negative feedback in a constructive frame of mind because we’re so close to our projects and have so much on the line. We start rejecting and deflecting feedback that isn’t in line with what we believe.

But honest, educated feedback is like gold — use it to open your mind and ask tough questions about your assumptions. You must be obsessively committed to asking what you can learn from this feedback and how you can apply it.

This is especially important for people entering new markets where they don’t have prior experience. Getting feedback from others who’ve lived in the space will add to your perspective. Sometimes you’ll learn that there are things you don’t know as a newcomer that would significantly impact your financial results.

In fact, this holds true throughout your business’s lifetime. The entrepreneurs I know who’ve built the most successful and thriving businesses are obsessed with getting constant feedback from the marketplace and adapting their businesses based on evolving market needs.

6. Be open to what the numbers tell you

The worst thing you can do is try to manipulate a model to match your assumptions. You need to approach your financial model with a completely open mind.

Recognise that it will probably take longer than you ini­tially thought to get to market, generate revenue, create profits, and accumulate the cash flow you need to operate and further invest in the business. By being open, you’ll be able to make distinctions, apply them to your business, and set yourself on a path to success.

You need to be clear on where you want to go and put a simple and adaptable plan in place to help you get there. The clearer your vision is upfront, the easier it will be to back a plan to help you get there. Being obsessed with customer feedback will enable you to tweak strategy in a way that evolves with the market and helps keep you on top of the competition.

Article by entrepreneurmag.co.za

Article by entrepreneurmag.co.za

Amazon is known for building a culture that values hard work. So much so that the organisation has received criticism from current and former employees for having to work on Thanksgiving, or even when ill.

When asked about Amazon’s work-life balance, Jeff Bezos remarked that he ascribed to the phrase “work-life harmony” instead.

Here’s how hard-charging business people can maintain energy at home and at work without burning out by finding work-life harmony in place of work-life balance.

Measure work and home focus as a matter of energy instead of time

It isn’t about how many hours you spend at home or at work; it’s about the energy you bring to both parts of your life. If you enjoy working long hours, and that helps you to feel present while at home, then by all means continue.

This is a fundamental principle in Bezos’s theory of dividing one’s time between work and life. Because Bezos loves what he does, he finds energy from accomplishing his work in a manner that works well with his notoriously high standards.

As many can attest, our emotions bleed into all areas of our life. When you can gain energy from doing good work, it can help to propel you to be more successful in your life outside of work. Conversely, when things aren’t right at home, it can be difficult to find the energy to do your best work in the office. A central precept of work-life harmony is living such that both the professional and personal aspects of our life energise us to be our best at home and in the office.

This does not necessarily mean that we should spend our time in a balanced way, as the phrase “work-life balance” implies. Rather, we should spend our time in such a way that we are our best selves. In so doing, we will be better people on the whole.

Build a flexible work-life schedule

Just as different people will amass different levels of energy from work and life outside of work, different people will find they are most productive at different times of the day. The 9-5 work culture that has existed for decades is really shifting now. Most modern offices allow some form of flexible work, which means you have the ability to set your own hours to some degree.

Experiment with working at different times of the day to find the schedule the helps you to be most productive. In so doing, you’ll have more time to do your best work, and more energy to spend with loved ones as a result of increased productivity.

Know when to say “no”

We tend to think that taking on as many projects as possible is a sign of a good professional. But being busy is not the same as making an impact. To do your best work, you’ll need to prioritise projects that you know you can add value to.

Spinning your wheels is demoralising. Look for projects in which you can easily enter a “flow state” where hours melt away. This is the environment in which you are doing your best work, and are happy to be doing the work itself. It is in moments of flow that we often feel most productive, and even fulfilled. Therefore, it is after moments of flow that we tend to feel guilt-free about enjoying quality time with loved ones while unplugging from work.

Communicate commitments

If you’re approaching a time-consuming work project, communicate that to the important people in your life. Otherwise, they may think you are avoiding them due to a more insidious reason.

Providing those you love with a glimpse into your professional commitments can also help them to help you. If a good friend knows it will be difficult for you to communicate for a few weeks, they will know to pause conversations so as not to burden you with having to reply to texts or emails.

Similarly, a partner who knows that you are responsible for delivering an important project may be able to rearrange their schedule in order to better support you in the short term.

Conversely, if family commitments will prevent you from working at full capacity for a certain period of time, set the right expectations with colleagues. A good workplace is one that is flexible to the realities of employees’ personal lives. Managers who care about the well-being of their people are usually willing to help employees take care of personal commitments.

Adapting to a changing work life

Work no longer happens between the hours of 9 AM and 5 PM, Monday to Friday. Work happens Saturday mornings, and late Friday nights. It happens on vacation, and during graduations. The idea of work-life balance suggests that there should be an even split between working and non-working hours.

In reality, those who have undertaken ambitious careers should aim for work-life harmony, a lifestyle in which both aspects of life give you the energy to be your best self as frequently as possible.

Article by entrepreneurmag.co.za

Article by entrepreneurmag.com

A budget is or should be a part of your business plan. It is one of the major control methods to make sure your plan is implemented rather than ignored.

I agree that there are some very successful businesses that operate on a seat-of-the-pants basis, but there are a lot more trying to do so but instead floundering around in the dark.

Unless you are gifted with unerring judgement and great insight you are likely to achieve more success by working to a plan and budget.

Budgets are often prepared by financial managers and tend to focus on operating and capital expenditure rather than sales, purchases, inventory and debtors targets. A better approach is to start by agreeing what performance your company would like to achieve for all key areas.

The sales budget could be a separate section of the main budget to manage expected sales by whatever breakdown suits your business: Type of product, by division, branch or sales channel, or type of customer. In each category budget for margins, discounts and commissions.

Correctly managing your expenses

Key expense items like payroll, overtime, marketing promotions, travel, vehicle expenses and IT costs should be planned for and monitored via the budget but I suggest you don’t clutter the expense budget with too many items which you have little power to manage.

Rather lump these together, you can always drill down if the costs get out of hand. If you have a seasonal business with variations in sales and expenses depending on the time of the year, make individual budgets per month.

Do not forget balance sheet lines, especially capital expenses for new buildings, machinery or vehicles, and also borrowings and other liabilities.

Debtors, creditors and inventory should all be planned and monitored and it is a good idea to monitor measures like average days outstanding for debtors and creditors, days inventory held, bad debts and obsolete or lost stock.

The last items can be target ratios which may not form part of the budget, but should be reported on regularly so that you do not get nasty surprises at the year end. Prepare the budget with everyone concerned to get buy-in. The budget becomes an agreed plan of operations to which everyone is committed.

Continuously review your budget

Monitoring performance against budget should be done at least quarterly, but I prefer once per month in a management meeting. If you are the only manager, set aside time each month for a vital review your performance against budget.

The actual results must be up to date and available. Use a simple spreadsheet showing budget, actual and variance or a dashboard which shows key metrics as graphics or tables.

Examine those items where the variance to budget is significant and probe for reasons. The dangerous ones are the start of a trend — for example sales in one area consistently below budget or mushrooming overtime costs.

For any bad variances that are not just a short-term hiccup you should plan to correct the problem, or if the problem is insurmountable, replan to get around it.

Course correct your budget as you grow

The budget can be changed because circumstances are different to those envisaged when the budget was prepared, but a better option is to add another column for a revised budget, so the amount of the change remains obvious.

Managing the budget should not be limited to complaining about excessive entertainment or travel costs, but a vital tool to give stark visibility to key areas of the business that are not performing as expected.

It should involve all the key players in decision-making to catch and fix problems early, but also to seize opportunities presented by better-than-expected performance at the earliest time.

Treat budgeting as a management tool and it is likely to treat you to more profit and less nasty surprises.

Do this

An excellent way to increase profits is to treat budgeting as a management tool. Never be scared of your budget — use it instead.

Article by entrepreneurmag.com

Article by www.entrepreneurmag.co.za

How do you ensure new clients can pay for the services and products you offer?

Borrowing and paying debts or using credit is standard practice for any business. Some businesses have good payment records, whilst others don’t, so it’s important to always check the credit rating of any business before lending them funds or dealing with them.

Similar to an individual, a company can have its own credit rating. A credit rating is a number generated by a mathematical algorithm based on statistical analysis of information researched for a credit report. Here’s how to go about building a credit report that will save you from collection problems in the future.

What to include in the credit check

If the report is for the purpose of extending credit then the following items would be important to include. However, the extent of your exposure would dictate the amount of information required and some credit bureaus allow their clients to choose the information they wish to include.

• Comprehensive company details are important to understand the type of entity you are dealing with. This could affect how you deal with the company and its information, especially considering sole proprietors and small companies fall under the protection of the National Credit Act. It can also affect litigation in the future.
• Comprehensive details of owners/directors/members to obtain details of current and previous business interests and any judgments.  If a person has been involved in a number of failed companies or has personal judgments you may wish to be more careful in your business dealings with them.
• Bank code. This verifies that the company’s banking details are legitimate and gives a ‘snapshot’ of the company’s cash flow situation.
• A few trade references will give you an idea of how quickly the customer is paying its other vendors and whether they are handling credit accounts matching what they are hoping to obtain from you.
• Details of preferred creditors. If your exposure is high ie. bank overdrafts, mortgage bonds, cession of debtors, and if you are looking for some form of security from the client, this will establish how many suppliers are already ahead of you and also the number of preferred creditors there are in the case of liquidation.
• If your exposure is high, include further detailed financial information including turnover figures, value of debtors and creditors and audited financial statements.

Should the report be required because you are considering a supply agreement whereby the subject of the report is to become a supplier, the focus of the report would be somewhat different and should include the following in addition to most of the above, as it would be necessary to establish both financial stability and capacity.

• Operational details, which would include major customers, contracts and agencies.
•  Details relating to capacity would be important in order to ensure the company was capable of fulfilling your requirements. This would come from type of premises, number of permanent staff, vehicles etc.
• Financial information, including audited financial statements to ensure stability. This may be hard to come by and depends on the disclosure. It may be easier to use an independent company to request it.
• Customer references to establish the reliability and operating style of the company.

How to read and interpret a report

Researching a company’s judgments, bank code, financial information and what suppliers have to say in the trade references may seem to be the most important aspects of a credit report.  However, checking on previous or current business interests of the principals, the type of entity or whether the directors have been involved in a previously failed business can often be very telling and a better indicator.

It’s not sufficient to just obtain a credit rating, and by using a professional credit check you will ensure that reports include more information which improves the report’s accuracy in terms of creditworthiness and risk. Using a bureau that is registered with the National Credit Regulator will ensure that the research generated is above board and may well prevent bad business dealings from occurring down the line.

Dealing with cash emergencies

The unexpected can happen to even the busiest businesses. A big customer can be late on payments, or a normally busy season is not so busy. Colleen DeBaise, the author of The Wall Street Journal Complete Small Business Guidebook, shares three ways you can deal with a cash emergency.

Get out there and sell

Jump start your sales efforts to find new customers and work the ones you have. Now’s the time to make sales calls – if you don’t, your competitors will, especially if they learn you’re in trouble.

Review your line of credit

See if there’s any room to borrow. If there’s not, talk to your banker and see if you can increase your ceiling. They might give you the money you need to cover the deficit.

Ask your suppliers for a favour

Remember, you’re a customer too. Talk to the people who provide your supplies and your equipment. See if they can extend your terms or give you a line of credit. After all, they don’t want to lose your business. Now is the time to work those relationships.

Article by www.entrepreneurmag.co.za

Last year I shared a couple of tweets from this passage by Louis Groenewald and received more re-tweets than ever before: “Passion is a powerful language. Passion for a cause crosses cultural and language barriers. It is felt, rather than mentally understood. Passion feels authentic. It sends out honest vibes. It can be quiet and vibrant and at other times it can be overwhelming and dominant. Passion can also be the most destructive force on earth driving evil motives. Passion is a catching thing! It can be seen in our eyes and body language. Our passion for excellence as leaders has the tendency to cross almost impossible boundaries of cultures and philosophies. Passion is a universal language. The greatest passion is that of unconditional love, often manifested by mothers and leaders committed to universal values.”

Unfortunately I find leaders are less passionate about what they do than in the distant or even recent past. And the same can be said of employees in general, fortunately with exceptions here and there. Simple passion for one’s job seems to be disappearing quickly in the modern workplace, and as this happens the passion for excellence is also severely impacted in a negative way.

And of course there is a strong correlation between a leaders’ passion for the job and that of the employee.

There may be many reasons for this decline in passion. Clem Sunter recently touched on this when he wrote: “Where people are employed, many of them are working much longer hours than their parents did last century. It has been known, particularly in the investment banking industry, for companies to set the norm of 70 to 80 hour weeks which is 10 hours or more a day with no day at the weekend off.”  He continues: “Stress-related illnesses are multiplying and the work/life balance has gone straight out of the window. Even Australia, which is not known for having a cruel work ethic, has introduced migrant labour into its mining industry with its “fly in-fly out” system, putting pressure on the marriages and quality of life of those who spend two to three weeks a month away from their families.”

Against this backdrop, in today’s fast paced, ever moving environment which never comes to a standstill, and where pressure on leaders increases daily, they have to be on top of their game like never before – and I would hasten to add that they had better possess bundles of passion if they are going to succeed. But it is difficult to be on top of their game when the facts about the situation they lead seem to fluctuate and change at the blink of an eye – because in today’s world everything affects everything. The socio-political, economic and technological environment is so integrated that one thing changes and affects another, which affects yet something else – the well-known domino effect. Many leaders struggle to have sufficient insight into their environment to see how dynamic changes around them impact the facts of their own situation.

The environment in which leaders lead seems to be bombarded by all sorts of obstacles, challenges and negative perceptions of their followers. These too seem to change on a consistent basis, and while this was always present, the pace and severity seems to continually increase. This clearly has an impact on people’s attitudes, which has a direct correlation with performance – once again because of the dynamic composition of our modern, connected society.

On the positive side, as challenges and obstacles arise, so do innumerable opportunities, options and possibilities. This is the nature of life and amidst the persistent change of facts and constant wave of obstacles a leader needs to be fully aware of this. If he is not and allows himself to be consumed only by challenges he is on a losing streak.

Because of all this and more, these distractions make it very difficult for most leaders and their team members to keep a focused eye on the strategy and vision.  As a result they easily divert from what they agreed on, in order to get a handle on the changing facts and deal with the never ending challenges. As this happens and performance is negatively affected, they panic and seek answers or even quick fixes by unnecessarily changing direction and relevant structures, implementing new systems and procedures in a desperate attempt to impact performance indicators and accommodate or correct the course. And then their organisation moves towards becoming a compliance institution rather than a value adding institution. This is a dangerous place to be.

Under this mounting pressure leaders neglect to calmly, consistently and systematically follow up, evaluate and measure the right priorities pertaining to the plan and vision. Or, they do far too much of this because of a compliance culture. The emphasis becomes one of measuring or evaluating for the sake of doing it or to simply enforce compliance, rather than doing it in areas that add most value or that are core to the business. They lose confidence to adjust when needed and more often than in the past act tough inappropriately, out of context and due to frustration and lack of confidence. They stop trusting and listening, and instruct instead, sending a message of panic and spreading the feeling of distrust and even fear across the organisation. And so the spiral continues.

To make matters even worse, the environment does not slow down to give them a chance to breathe. In fact it just continues to pick up pace and thrust new and different challenges at them, or the same one’s in different guises, but faster and more regularly than in the past.

What to do about this? As is always the case the answer is simple but difficult, yet it remains the answer nevertheless.  A leader must implement a process, system or way of always remaining in tune to the following:

1. The changing facts of their relevant responsibility – not only as they see it but as their team sees it. They have to keep listening.
2. The constraints, obstacles, challenges of their relevant responsibility, together with the negative perceptions their people may have at any given moment. Why? Because these impact directly on their attitude, which has a direct correlation with their performance. Again, this must be viewed not only from the leaders’ angle but his team must always be part of identifying and addressing these.
3. The positive opportunities, options, strengths at their disposal, together with the positive perceptions that exist. Also for reasons of attitude, to remain sane and positively focused on solutions and even ways to miraculously leapfrog their pressured environment into proactive space where they achieve profitable movement.
4. Exactly where they are leading their people to – the destiny. This must be on every agenda and always top of mind.
5. The clear and relevant plan or strategy that will take them there and continually raise the believability levels of followers that they can get there.
6. The relevant resources, structures needed to follow the plan towards the destiny. If this is not done structures will get out of hand, irrelevant, expensive and consume unnecessary energy that should be expended in other areas.
7. The above six points need to be evaluated together with the leaders team, on a regular basis and in accordance with the pace of change of their environment
8. Only when the leader feels on top of the seven points above may he adjust where relevant and even act tough appropriately where the situation requires it or people require it.
9. Finally, he needs to continually focus and re-focus his team and organisation on the vision, the destiny of where they are moving to.

As we have assisted leaders to “culturise”,  “habitualise” or institutionalise this crucial nine step process on all levels of their organisation, we have seen how the timing of when to refresh, revisit or tap back into it changed. A team may for example feel to do it every year or six months, but soon realise that the pace of their changing environment requires a more regular approach. They are forced to stay on top of every point every month, week or even day.

This is the reality under which leaders operate today. There is no way of escaping it. If leaders do not master these nine steps they will become crises managers that mostly feel out of control and they will lose their passion, resulting in their people losing their passion, which can only move one way fast and that is nowhere – failure.

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