Banks and Business Loans

Writing an Effective Business Plan:

Careful Planning Stands Behind Every Success

One of the first steps in getting a new idea or venture "off the ground", or expanding, acquiring or refinancing a project, must be the development of a well-prepared business plan. 

Preparing a proper business plan could not only prove to be time consuming and frustrating to a business owner, but lack of objectivity and understanding of the market, and competing technologies, products and/or services, structures, economic trends and financial planning could seriously impact on the effectiveness of the plan as well as the viability of the venture. 

For these and other reasons, Standard Edge provides business owners an opportunity to prepare a business plan that is understandable to themselves, bankers and other parties. 

After all, writing a business plan is not an academic exercise; It is an in-depth, logical, practical and critical analysis of you ideas, business strategies, personal goals, and short and long term objectives. 

Standard Edge is chosen by their clients for their knowledge and expertise in specific disciplines. 

Equally important are the creative skills in communications and writing that Standard Edge possesses so that business clients have an in depth understanding of how the business should grow and operate. 

An analysis of thousands of proposals show that, 50% were rejected after a review of the summary, 36% because of poorly prepared plans and 11% because of unverifiable information, poor management or a lack of proper planning. 

A well written business plan should set definitive goals and objectives and allow you to measure the results. 

It should define clearly what business you are in, as well as where you intend to go in the future. 

It should identify your strengths and weaknesses (if an honest and critical approach is taken in developing the rationale for being in business and continuing to be in business). 

It would also show how successful or unsuccessful you will be you recognise the changes occurring every single day in your business. 

A business plan is a selling document and as such should be organized and written to appeal to potential supporters of your business. 

Obviously, a plan written for a bank may not provide the information that would be of interest to a strategic partner or key customer. Therefore, it is important to recognize that more than one version may have to be written depending on the target audience. 

In our present business environment, "strategic planning" sessions are now being held by many companies to determine what next to do to survive the "ups and "downs" of the business cycle. 

Always approach writing every new plan as an exercise in "forward planning". 

This is because in writing a plan you must always ensure that the information presented in the plan is substantive, can be quantified, verified and confirmed by independent sources. 

Therefore, writing a business plan requires careful thought and a concentrated effort as you must be able to show clearly what the business is going to accomplish, why it will be successful, how the venture will be financed, the return on investment for your client as well as the investor, and who is going to be responsible for achieving the stated objectives. 

Careful planning stands behind every successful venture. 

It is absolutely essential that you, when writing the plan, recognize the importance of proper strategising, planning and evaluation in undertaking this exercise. 

When writing a business plan for a client, you must always recognize that, your business plan is a reflection of the business. 

Ultimately the business plan will equate directly to the quality of the person writing the plan - and that is YOU!

The Role of Leaders

The Role of Leaders

Demands and expectations of a business leader have never been higher. But just how does a leader develop winning strategies, execute them brilliantly and develop organizational  capabilities and core competencies?  

Leadership is about getting results for your followers. If you get results, people will support you, often without caring too much about how you got them; without results, all the style or charisma in  the world won't retain the support of your followers for long. This is true for the leader of a Scout troop, a sports team, a political party, a government department…and a business. A business leader must increase value.

To be an effective leader requires you to do five things:

1. Understand and interpret the environment in which you operate;
2. Develop winning strategies;
3. Execute them brilliantly;
4. Measure the impact of your strategies systematically, adjusting strategies as indicated;
5. Develop organizational, departmental, team and personal capabilities.

 1. Understand and interpret the environment in which the enterprise operates.

A leader has to be able to sense what's coming up ahead, to see opportunities that should be the target of action and to see threats before they materialize. And the view has to be well into the future. As a researcher once noted, "It's no good mistaking the edge of the rut for the horizon."

Business opportunities are often created or destroyed by both direct influences of economic, political, societal and technological forces as well as complex interactions between these forces. Whole industries were created by the development of the transistor; socialized medicine limits the growth of medical services in many countries; periods of economic growth and slowdown, or realignment of currencies, affect businesses in many ways; and political movements to the right or the left may create opportunities for the private sector to grow or, sometimes, may result in the state taking over functions from private enterprise. 

Those who foresaw the fall of the Berlin Wall, the emergence of China as one of the world's great  economies, the resistance of many countries to genetically modified foodstuffs, the dramatic realignment of the U.S. dollar against the euro and other currencies in the early part of this century, made – or lost -- fortunes. This outward-and forward - looking requirement cannot be delegated to a small set of specialized scenario-creators or confined to a few days or weeks of the year.

2. Formulate winning strategies

If leadership is about getting results, then the role of the leader is to develop the right strategies to get those results -- winning strategies. Businesses make money by creating value for a customer and then capturing some of it for themselves from what the customer pays for that created value. Strategies are much more than intentions; they describe what an organization is going to do to achieve a defined end as well as the ways and means that will be employed to do that.

The what and the how are usually accompanied by strategic plans detailing who will do what, with which resources, by when…and all the other details that allow for effective and efficient capital and people allocation and coordination. Since people generally follow leaders better when they understand why they are being asked to move in a certain direction, strategies usually provide cogent reasons for action. Strategies are needed at all levels of organizations, from the office of the CEO to the individual salesperson's strategy for their territory. And these strategies must be integrated and coordinated if they are to be well executed. People who lead their followers in the wrong directions may be effective leaders over the short-run. And the short-run may be quite a long-run!

 3. Execute those strategies - brilliantly!

Strategies are only valuable if they can be executed well. And execution of any plan is only valuable if the strategy is right. Arguing which is more important is, therefore, pointless. Both are critical to success. Unique strategies are rare. There are many elements that go into the execution of strategies, key among them are:

1. The alignment of the organization's various department strategies so each and every unit and person is striving to achieve goals and objectives that contribute to the overall mission, vision and objectives;

2. Performance management, at the individual, team, departmental and organizational unit levels to ensure that the right people are recruited, trained, developed, motivated and directed in ways that support the organization's mission, vision and objectives consistent with organizational values.

3. The leadership of strategic and operational change, not just in response to "burning platforms" but in anticipation of events and states that many people in the organization cannot comprehend or visualize at the moment when change must be planned and initiated.

Many excellent strategic thinkers and planners fall short when it comes to execution. They may lack the attention span needed to concentrate on the details of large-scale organizational change; they may not be persistent enough to see those changes through to completion when faced with resistance to change;  they may feel that to do these things is "micromanaging" and that their role is to focus on the "big picture."

Truly effective leaders derive strategy in part from a detailed understanding of their business and how it works, and they drive strategy through each and every business decision and the people who make things happen in the organization. They are as tenacious in implementation as they are brilliant in strategic formulation.

 4. Monitor the results and make strategic adjustments.

The perfect strategy, flawlessly executed, is the exception rather than the rule. Leaders recognize the probable imperfections of any plan and take care to monitor the outcomes systematically and thoroughly, always being prepared to make adjustments or completely change the strategy.

The best strategies and plans incorporate measurements, but smart leaders are always alert to the unanticipated: the competitor who responds differently than the way you thought he would; the sales force that cannot recruit enough people of sufficient quality to execute the sales plan, at least on the preconceived schedule; an unanticipated change in legislation that makes it impractical or illegal to take a certain approach to the marketplace; a market that turned sour; a product that did not live up to expectation.

Really effective leaders understand the frailty of strategic plans. They also understand that if they act promptly they can often make mid-course corrections to plans that can put them back on track, or they may even find a superior solution. Furthermore, they are never blind to the idea that they may have made a mistake. In its early days, Dell experimented with retail outlets -- briefly!

Then Michael Dell realized that he was moving away from the direct sales channel that was the core competence of his company. He rapidly changed directions. One of the best quotations I have ever come  across is: "If you're going to eat crow, eat it while it's young and tender."

It puts a premium on the early  acknowledgement of leadership errors and rapid steps to correct situations; so what if it's a little embarrassing.

Highly effective leaders also increase their sensitivity to discordant information when they are deploying new strategies. Sam Stenberg, the founder of Miracle Food Mart, had a great saying: "When three people tell you that you're drunk…lie down! But that only works if you are listening to the people.

Every great historical leader recognized that courtiers were not necessarily the best advisers of  kings and they don’t retreat to their management bunkers and wait for the first official measures of success to come out. They get out there, personally, meet with early adopters, meet with people who have tried the product and did not repurchase, attend testing panels, see how trade channels respond to

presentations, and so on.

 A story is told of Jack Welch arriving in a city one day to be met by a local senior general manager. As they were climbing into the car, Welch asked, "Where are we going?" and was told, "To see some of our best customers who would like to meet you." To which Welch responded, "Cancel it; I want to go see the people who aren't buying from us!"

Leaders aren't looking for flattery -- they are looking for information that will inform and improve their strategic decisions. Does this personal involvement create some concerns among subordinates that they are not being trusted to do what they are supposed to do? Yes, sometimes.

But real leaders don't get too upset about this. They would much rather risk this than to have anyone believe that they did not sweat the details, and most of those who are responsible for the details are delighted with the leadership attention they are getting.

 5. Build organizational capabilities

Highly effective leaders act for both the short- and the long-terms, simultaneously. So, while they are surveying their environments, developing winning strategies and executing them brilliantly, and monitoring them systematically, they are also investing time, effort and money in building their organization's core  competencies, management and leadership talents. 

The business manager often cuts costs to meet profit crunches. This is frequently done at the expense of anything that promises long-term returns.  Many commodity - focused companies, such as those in basic steel production, respond to downturns in the price of steel or increases in input costs by laying off people in inverse order of seniority, enacting hiring

freezes, stopping all recruitment of new people, postponing or cancelling training and leadership development. Little wonder that after 50 years of doing this, they have aging workforces, reputations as places where you go to stagnate in a role forever rather than to be developed to the maximum of your potential.

The business leader also has a keen eye on costs and, certainly in commodity businesses, is sensitive to the price fluctuations in the marketplace. But unlike the manager, he or she balances the need to cut costs with the mandate to build for the longer term. Employment costs may be cut not by hiring freezes but by buying out two "C" employees and replacing them with an "A", by cutting some lower value training programs but retaining core leadership, and by developing high-potential focused programs. 

Outstanding leaders over the long haul recognize that they must continue to invest in core competencies at the same time that they produce results in the short-run. Whether it is renewing physical plant, equipment, machinery or the talent pool, it represents the future of the organization.

The great British wartime leader and statesman Winston Churchill was famous for many things, but one incident is relevant here. In the middle of an air raid at the height of the blitz on London, he called a meeting of his war planners to discuss the invasion of Europe -- probably not to take place for another two or three years. He was worried that the lack of landing craft would not allow the allies (the U.S. was not even in the war at that time) to put enough troops on the beach. So he acted to ensure that the balance between producing Spitfires now and landing craft later was maintained. Note that we are talking here about leading for the short-term and the long-term. Managers choose between the two, maximizing one or the other; leaders optimize over both. But there is more than leadership strength that must be developed.

Other core competencies, such as knowledge  management skills, intellectual property, excellence in business-government relations,  community acceptability, environmental reputation, all represent valuable assets that can be turned into income or other outcome measures at some time in the future. Leaders add to this store of assets rather than deplete them. Leaders that liquidate core competencies for short-term operating results may not be

doing the leadership job that they appear to be doing on the surface. Liquidating an asset may have a temporary positive impact on income but it may also have a negative effect on the balance sheet!

Outstanding leaders over the long haul recognize that they must continue to invest in core competencies at the same time that they produce results in the short-run. Whether it is renewing physical plant,  equipment, machinery or the talent pool, it represents the future of the organization.

I have described three primary challenges of leadership -- strategic (involving both environmental surveillance and the formulation of winning strategies), executional (implementing those strategies, monitoring their impact and making adjustments as indicated), and developmental (building core competencies and cadres of leaders at all levels).

There is another, more personal challenge.  Leadership can be challenging, frustrating, exciting, exhilarating, depressing, stimulating, dangerous, exhausting -- and many other things. Throughout, the leader must keep a sense of personal balance, humility and integrity. Leaders must keep on growing, learning and developing if they are to continue to be effective leaders. The leader often has responsibilities and obligations beyond the narrow business sphere -- to family, community and the broader society within which he or she operates. These must be balanced with the obligations the leader has toward the enterprise he or she leads and the people who put their trust in their leadership.

Leadership is not for everyone, and it is not something that even really good leaders necessarily want to do for all time. Above all else, leaders need to know when it is time to stop leading, to hand over the reigns to someone else. The leader that outstays his or her willingness or capacity to lead is one that will eventually do poor service to their followers, no matter how well they may have served them in the past.

  

Market Update July 2010

This year has seen a renewed sense of confidence come back into the market.  Amazingly, the economy is expected to return to normal conditions in 2011.  An astounding outcome when you consider the fate of some European nations.  The RBA will probably take a breather in July and August to assess the impact of the rate rises that commenced late last year.  It would not be surprising that the economy will have nominal growth for the rest of the year.  The rate rises have a lag impact and we should start to better understand the effects in July or August. 

There are some hurdles that business owners will need to negotiate over the next two years, not least of which will be the RBA bias towards an uptrend of future interest rates.

Some key areas that could shape your performance in 2010 and 2011.

Economic growth

• long-term average economic growth rate of between 3% and 4% in 2010.
• the uncertainty surrounding Europe and the United States will impact our economy, however, we are more intricately linked with Asia and we should be spared any expected bumps.
• sovereign debt of other nations is a potential risk to the world economy.  How the governments manage this public debt remains to be seen.

Interest rates

• most economists are expecting at least one more rate rise in the second half of 2010 before the RBA considers that the cash rate is back to more normal long term levels.
• interestingly, the major banks are now discounting their fixed term rates suggesting that we are nearing the end of the rate rise cycle.
• it would be prudent to budget for an additional 1% - 1.3% in your cashflow budget for 2011.
• we believe that the banks will make a move before the RBA.
• banks are finding it difficult raising funds in the wholesale markets exacerbating funding needs for the Australian market.

Inflation

• inflation is expected to moderate to around 3%

Australian dollar

• more stability for the rest of the year.
• economists expect the Australian dollar to settle above US90c for the bulk of the year.

Employment

• our determination to resist cutting jobs and using strategies such as forced holidays and part-time to work to manage labour costs helped the economy avoid a recession.
• our prediction of an unemployment rate peaking at 6% was well founded.  Expect the unemployment is expected to trend down and flatline around 5.5%.

Business investment

• business investment will remain flat and this is causing some concern in the greater economy.
• sales and profitability continue to fall short of previous suggesting that business capital expenditure will still be flat for 2010.
• we expected the housing market to remain resilient and this has proven to be accurate.
• recent reports suggest a flat growth model for 2010 – 2012.
• recent slow down in residential lending will increase pressure on banks to provide more competitive rates that will assist first home buyers.
• population demands, supply shortages and the economic recovery will most likely push capital growth to double digit figures in 2012.
• the Australian dollar is putting strain on exporters.
• economists expect exports to increase by 2.5% in 2010.
• imports are expected to rise by around 10%.
• two major factors will be the US consumers continue to cut their spending habits and reduce their debt and whether or not the US policy makers aggressively start to increase the cash rate, even tiugh it is virtually zero.

China

• China's growth will be linked to accessibility of resources.
• Thus will mean further pressure on commodity prices.
• Westpac is predicting the world's powerhouse economy will continue with its strong growth, expanding at 9.4% during 2010.

Sharemarket

• rising rates and sustainability of earnings will make 2010 and 2011 a bumpy ride.
• even with improving economic growth, low inflation and relatively low interest rates there is still plenty of cash not being invested. 
• until investors move from a “cash security” basis, we can expect volatility.

Housing market

• we expected the housing market to remain resilient and this has proven to be accurate.
• recent reports suggest a flat growth model for 2010 – 2012.
• recent slow down in residential lending will increase pressure on banks to provide more competitive rates that will assist first home buyers.
• banks are finding it difficult raising funds in the wholesale markets exacerbating funding needs for the Australian market.
• population demands, supply shortages and the economic recovery will most likely push capital growth to double digit figures in 2012.

Trade

• the Australian dollar is putting strain on exporters.
• economists expect exports to increase by 2.5% in 2010.
• imports are expected to rise by around 10%.
• two major factors will be the US consumers continue to cut their spending habits and reduce their debt and whether or not the US policy makers aggressively start to increase the cash rate, even tiugh it is virtually zero.

Retail sales

• consumer confidence has bounced back but this is not reflected in the cash registers
• concerns about job security and the high level of debt are playing on the minds of consumers at leats until November 2010.
• foods and basic staples, cafes and restaurants (rebounding from last year) and household goods should benefit from an uptick in housing investment.
• Westpac believes that retailers should enjoy stronger performance.

When the Optometry Industry Wasn’t Looking

British optometry chain Specsavers arrived in Australian and changed the industry in a way that is too eerily similar to the fate of other sectors.

The market had always been dominated by OPSM and hundreds of small businesses scattered arounf Australia.  Whilst OPSM is the dominant player, Specsavers has aggressively taken a large chunck of a fragmented market.  It now has over 150 stores with an estimated revenue base $300 million.

Specsavers focussed its strategic growth plan by offering deep discount to customers, helping itself to the No.2 position.  The implications of their strategy has been to force its competitors to lower price and more importantly slowed the rate of growth of its competitors.  

Some of the collateral damage has also seen legal battles between the two groups that would make any lawyer teary eyed.  However, the rising strength of the incredible Australian dollar has seen a fall in import prices for spectacles, frames and lenses and these benefits being passed on to consumers.

New technology will drive the growth the industry in a positive fashion and those businesses that are able to offer new product will be the real winners and help increase consultation revenues to offset the decrease in Medicare rebates.

The "budget" model continues to succeed in many industries – Walmart and Crazy Clarks are classic examples of providing product substitutes at cheap prices.  Budget concepts ultimately change the competition and profitability of an industry – some in years and others overnight. The huge force drives consolidation and purchasing dynamics.  Like any business, focussing on industry changes gives you an opportunity to stay competitive and ahead of the game.  Strategy planning is so critical that its absence exposes small business to market forces that profoundly impact on future sustainability.

Looking at the optometry industry, some of the key success factors (listed below) that optometrists should be undertaking s part of the review and planning process are vital to ensure profitability and established strategic defenses.

Key success factors for operators in the industry 

1. Effective product promotion.
2. Having an integrated operation
3. Output is sold under contract - incorporate long-term sales contracts.
4. Being part of a group buying, promotion and marketing scheme. 
5. Proximity to key markets. 
6. Having links with suppliers.
7. Having a loyal customer base.
8. Economies of scale.

For a free consultation contact us 07 38310077 /  jeg@standardedge.com.au

The Myths of Business

Business Myopia - The Relevancy to Small Business

Had railroad executives seen themselves as being in the business of transportation rather than the railroad business, they would have grown.   Every major industry has been a growth industry, but some that have been or were riding a wave of growth enthusiasm are very much in decline.  

In many cases, the result has been due to management failing to understand some fundamental questions of  business. The railroads did not fail to grow because of the demand for passenger and freight business, rather the demand was filled by other industries, cars, planes and even telephones.  They allowed other industries take customers away from because they assumed themselves to be in the railroad business rather than in the transportation business.

The moral of the story is that the railroad industry lacked the imagination and audacity that made them at one point in time an economic force.

In reality, companies are organised and operated to create and capitalise on growth opportunities.  Companies that assume themselves to be riding some automatic escalator of growth invariably descend into stagnation. There are many 

examples, such as dry cleaning, electric utilities and grocery stores.

There are Four Myths that may contribute to this:

1. the belief that growth is assured by expanding and the creation of an affluent population.
2. The belief that there is a substitute of the industry product.
3. Too much faith in mass production and the  advantages of declining unit costs as output rises.
4. Too much reliance on a product that lends itself to carefully controlled scientific research, improvement and manufacturing cost reduction.

These 4 myths are a  consistent reminder of the risks that businesses must carefully evaluate at every stage of the cycle. The view that an industry / business is a customer satisfying process and not a goods producing process is vital for all business to understand.

Given the customers needs, the business develops its DNA by working backwards through the manufacturing / servicing process and identifying the building blocks of the business.

All in all, the entire business must be viewed as a customer creating and customer satisfying entity. 

Working as team and making sure the whole organisation is enthusiastically aware of the road map is critical for managements ability to execute the business strategies. 

Contact Us for a Free Consultation  - 07 38310077 / jeg@standardedge.com.au