Achieve your potential
How to identify great opportunities and deliver them
Identify your potential
Many small owner-managers tell a similar story:
- I am working very hard for little reward;
- Market conditions are poor;
- I have to do a lot of administration;
- I cannot get the right staff;
- I cannot think of retiring yet.
Yet some of the benefits of being a business owner are:
- You are a small fish in a big sea and so there is plenty of market opportunity;
- You can pick and choose your people;
- You can appoint experts to deal with distractions;
- You can set your own objectives;
- You can differentiate your business from your competitors.
Very often the owner-manager is blinkered by his daily experience and fails to focus on why he established the business in the first place. Other owners have never dreamed of what they could actually achieve. By virtue of the fact you are still in business, you have already achieved much more than many, but are you achieving your potential?
To answer this, you and your team need to re-assess your business albeit with the benefit of your experience and what you have achieved but unburdened by preconceived constraints. It is often easiest to start with blue-sky thinking and then dilute this back to a scenario that you feel more comfortable with. What value do you want to realise in what timeframe? Do you want to be local, national or global? Are you seeking financial value or other prestige? What level of risk are you willing to take? What work / life balance do you want?
I firmly believe that most people can achieve what they want to achieve if they truly put their mind to it. The impetus for this is desire so there is no point in seeking a goal that you are indifferent about or unwilling to make sacrifices for.
Re-evaluate your objectives
The first step towards achieving your potential is to re-evaluate what your objectives are. You need business partners to achieve this otherwise you may still be blinkered. Your team of business partners should ideally emanate from different disciplines so that you get varying perspectives – always try to include a salesman and an accountant! You need to state what you want to achieve and other experts need to advise whether you are being unrealistic or if you are failing to recognise the opportunities that exist.
Ultimately you need to define a realistic objective that you and your colleagues all believe is achievable. This may involve numerous reiterations adjusting risk, time, funding etc.
Identify resources required
Now that your objectives are clear (albeit these may be revised again as you continue through this process), you and your team need to identify what resources are required to enable you to succeed. You need to consider all resources including people, skills, property, stock, money, suppliers, marketing, IT, HR etc.
Whilst there are many important components of your business plan the marketing strategy is a cornerstone. In simple terms how do you plan to progress from where you are to where you want to be. There are countless possibilities but, for illustration, consider organic growth / acquisition, high volume / high margin, online / offline, serviced / franchise etc.
Armed with the concepts of where you want to get to and how you intend to get there, you now need to quantify these assumptions. These should be built into an interactive suite of forecasting statements that include: profit and loss account, balance sheet, cash flow statement, parameters. Ideally this suite will be modelled formulaically so that the consequences of any change in a parameter will flow through the model. You must be very wary of changing a parameter but failing to update all the consequences thereof – many poor forecasts have been produced which are unachievable in any circumstances (eg. requiring staff to work 30 hours a day!).
The act of producing this model will pose various other questions which will lead to a better understanding of reality!
Keep revising the model until you have something that you believe is deliverable. Remember to build in a contingency to allow for Murphy’s Law – “if something can go wrong, it probably will!”.
This forecast should indicate the timing of incurring costs and paying for them. You can now expand the model to incorporate timelines, eg. when do you need to start seeking resources in order to have these in place at the required time.
Now that you have a working model you must test the sensitivity or ‘stress-test it’. Adjust the key parameters (although you believe they are currently set at the correct level) to assess the impact of your estimate proving to be inaccurate. Remember that there may well be consequences in either direction! The intention is to discover which are the most sensitive parameters so that firstly you can reconfirm the appropriateness of your estimate and secondly you can take action to minimise the risk of adverse variances.
Now you have a well thought through plan, you can now start to implement it. Track actual performance against forecast performance and identify what is causing any variances and take remedial action where necessary. The sooner you react the smaller the issue that you need to resolve. Realign the model as necessary. Do not hope that problems will resolve themselves – they rarely do!
This is one from a series of articles written by Nigel Grant to help owner-managers increase their profits and achieve their potential. For a free initial discussion to see how you can achieve the potential for your business, contact Nigel Grant of More Profit For You Ltd on 07801624865 or NigelGrantSMEPartner@gmail.com