Boost your business through structure and managing risk Boost your business Through Structure and Managing Risk
Why run my practice as a business? • Make more money • Build a sellable asset – consistency rules • Sustainable financial growth • Make yourself redundant • Work smarter not harder
Fundamentals of a good business How can Business Structure help? What is risk ? Why is it important to reduce risk in a business? How to reduce Risk in a business Cash flow is life The Goal
How can Business Structure help? • Structure creates a solid foundation • Structure reduces risk • Structure enables controlled growth • Structure facilitates financial planning • Structure creates platforms for client retention • Structure creates happier, better performing staff and enables sustainability to occur
Why have Structure • Big corporates have (various forms of) structure – that leads to better decision making, more consistent service delivery and optimisation of business. A more professional business with sustainability • Small business is usually NOT structured well - This leads to “ non optimum ” decision making, no consistent service delivery and the business is not optimised. • So - a less professional business with little or minimal sustainability
The 8 Hats Philosophy The 6 supporting Hats are: The table legs need to Research & Development Information Technology be strong to support Administration & Finance the table top. Human Resources Marketing The table top Operations methodology helps to highlight areas of the business needing attention
What is Risk? • Business risk implies uncertainty or danger of loss in profits • And also events that could pose a risk due to some unforeseen events in the future • Both of which could cause the business to fail
Why is it important to reduce Risk? • 70% to 80 % of small businesses are failing within 5 years • 90% fail within a ten year period Prof Christian Friedrich (2016) W hat should be done to strengthen SMMEs in South Africa This indicates the need for businesses to be structured correctly and for owners to understand all aspects of their business
The Risk - Return relationship • Business is about risk versus return • Entrepreneurs tend to focus on the product and the opportunity – and address risk ad hoc • Medico • This means – high risk for usually low return • The Business Owner should identify where risk is and structure to manage and reduce it …
Some REAL facts Last Year an ASISA program had 12 companies • Structured EFFECTIVELY and mentoring • Average Growth 21,4 % • 67 New Jobs created – average 28 % increase • Substantial Investment into the 12 Businesses
The Process of Change … • Unfreeze • This stage is about getting ready to change . It involves getting to a point of understanding that change is necessary, and getting ready to move away from our current comfort zone. • Move • This stage is often the hardest as people are unsure or even fearful . Imagine bungee jumping or parachuting. You may have convinced yourself that there is a great benefit for you to make the jump, but now you find yourself on the edge looking down. Scary stuff! But when you do it you may learn a lot about yourself. • Refreeze • This stage is about establishing stability once the changes have been made. The changes are accepted and become the new norm. People form new relationships and become comfortable with their routines. This can take time Kurt Lewin
How to Reduce Business Risk? • Business structure includes: Collaborative Vision developed (Business Purpose) KPI ’ s and Management objectives established with appropriate dashboards created Defined and formalised roles, responsibilities and reporting structures- Roofing Company Formal and documented procedures and processes Adequate planning and budgeting Effective integrated marketing action and pipeline management • Appropriate structure = lower risk.
Can Your Business Afford You ? “What some people mistake for high cost of living is really the cost of high living.” - Doug Larson -
Cash Flow is Life • Cash Flow is about TIMING : • WHEN you get money in versus • WHEN you pay money out • Accounting is about historical earnings vs expenses • Cash Flow is how much money flows in and out of the business and is available now • A monthly dashboard is CRITICAL
Cash Flow Toolkit - Solution More IN Less OUT • Reduce spending • Financial controls • Time expenditure • Balance debtors to creditors • Costing, GP%, manage costs • Pipeline and control • Expedite inflow - Optimise
Cash Flow Toolkit - Action Plan • Prepare Sales & Cash budget • Documentation: identify 5 critical KPI’s • Cash flow budget - review and compliance • Manage (closely) pipeline and marketing • Consider Tax (And VAT if applicable)
Toolkit Flow Controls Strategy Debtors Make Marketing More Sales Analysis Expenses Debtors Manage Structural Creditors Better Change Expenses GP% Tax Plan Costing Reduce Tax Personal Minimise Breakeven Business
Why run my practice as a business? • Make more money • Build a sellable asset – consistency rules • Make yourself redundant • Sustainable financial growth • Work smarter not harder
The Goal The ultimate goal is to ensure that the practice is professionally managed and is a sustainable business, rather than a pure commission generating entity
Finally Thank you Any Questions….. ian@platinumblack.co.za jacques@platinumblack.co.za
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