I was talking recently with one of the top surgeons in Christchurch about how he works with high-risk patients or any patients for that matter. He said he starts with Plan A, but then he also has a Plan B, and a Plan C, and more if needed. The whole surgical team talk through these in depth and everyone knows exactly what to do in each scenario.

Nothing is left to chance - every possibility is evaluated and the best course of action decided on if it were needed. So then, when they perform the operation, the whole team has confidence that they will not get into trouble if things don’t go according to the original plan, and more importantly they know what to do, no matter what happens.

Now does that mean that nothing ever goes wrong? Of course, not. Patients sometimes are unpredictable - they are people after all. The difference is that the plan is there ready and waiting if unlikely scenarios occur. This saves lives.

And this approach ultimately can save your business too. It’s the surprises that you don’t know how to deal with, or just don’t have enough time to fix in the heat of the moment, that are the most dangerous. These usually cause the most damage, take all your focus and attention, and cause the most stress. Have too many of these and you are in trouble big time. You may not be in business any more.  

So, do you have a business plan? Because if you don’t, you need one.

A plan is important to any business, no matter what the size, and I am not talking about the 50 page type plan that sits in the office drawer never to be looked at again. I am talking about a day by day, week by week, month by month plan for areas of your business that need attention like marketing, cashflow or maybe profits, just to name a few.

For example let’s have a look at a typical problem business owners have – cashflow. The cashflow plan would look something like this depending on the business and their situation:

Plan A
•    System for invoicing (making sure money is invoiced on time)
•    Ensure target margins are being meet with jobs
•    System for collecting money on time
•    How to deal with late payers
•    Ensuring you are getting the right kind of customers (in other words the ones that pay)
•    Negotiating with suppliers for credit terms
•    Good stock control (not buying stock too early before needed)
•    Complete a cash flow to see when money is likely to be short

Plan B
•    All of the above, plus:
•    Selling dead stock
•    Extra facility in place with bank when needed
•    Access to extra capital

Plan C (last resort - if in crisis)
•    All of the above, plus:
•    Negotiate payment plan IRD for overdue and current outstanding amounts
•    Negotiate with suppliers to help you through a bad patch

This plan if followed will keep most businesses out of trouble and the bank account thriving.

Now the thing with a plan is that it needs to be put into action and used. So Plan A should be applied every day or at least every week. This is the proactive “sort things out before they get out of hand” plan. 

Plan B and C are if things are a little more serious. By the way please make sure that if you are reading this and you do owe the IRD overdue payments, negotiate a payment plan immediately. If you don’t, you will find very quickly that the penalties and interest will accumulate and could double the amount you owe. If you are unsure how to negotiate with IRD then get your accountant involved or give me a call and we can talk through some negotiation tactics that have worked very well with those I have helped get out of trouble.

On Plan A you will also notice “Complete a cash flow”. This is important as it will show you what times of the year you are likely to out of cash like Christmas holidays, and what times of the month are difficult. Once you know this, you can work out how to deal with it. Always better to see a problem coming and make a plan, than be caught by surprise. I hate bad surprises as I am sure you do also. 

So how does your bank balance look? Are you constantly being surprised when you don’t have any money in the bank? Take the stress out of it and make a plan, follow the plan and have Plan B and C ready if needed.


At the end of the day, if it is you that ends up on the operating table, you want to know that your surgeon has thought through his plan of action and has every eventuality covered. Your business is your livelihood - your family, your staff, your customers are depending on you - think like a surgeon and use this approach to win.


Task:

1. Pick the area of your business that you are having the most difficulty with. 
2. Now list all possible solutions to the problem – Create Plan A.  (If possible involve your staff in this as they will often have some perspectives you would not think of)
3. Think about things that might derail Plan A - other things that could go wrong – and think of solid solutions for these scenarios. This is your Plan B, C and so on.
4. Take action - use Plan A – remember a plan without action does not work! 
5. And have Plan B ready if needed. 

Business owners often tell me this - that staff are their biggest headache. The fact of the matter is that the more staff you have, the more things can go wrong. Many business owners say that if they just had good staff, they would be okay. 

But there is another side to the story - even with the very best employees, they will never meet their potential and live up to your expectations without good systems and clear guidelines for what you expect from them. 

Can you relate to this story? Bob the Builder has started his new business. He gets known as dependable and does good work. He does everything - manages the projects and works hard on the tools, and Wendy his wife does the accounts. Before long he has more work than he can handle himself, so he employs some extra workers and finds some good subbies. Things get busier, and he is finding he is running out of cash as his business grows. Part of the problem is that Wendy was getting the bookwork done at night, but now that the sheen has worn off and the workload is increasing, more and more is getting left undone. Bills are not getting out on time, so Bob is not getting paid when he should. No one is chasing up old accounts not paid, and some are over six months old.

He decides he needs a good office lady as Wendy does not have the time anymore to keep up with the extra work and is sick of chasing Bob so that she can get the invoices out when she would rather be chasing him round the bedroom. So he employs Cindy and everything seems to be going well, although Bob is now so busy that he doesn’t really know what is happening with every project, or how much money they have.  But Cindy seems to have it under control so why worry, it's working. Then out of the blue Cindy hands in her resignation; she wants to pursue a career in interior design which is what she really loves.

A week after Cindy leaves, everything turns to custard. Bob suddenly discovers there are a whole lot of problems he did not see coming. Suppliers have not been paid for three months and have stopped supplying, customers are unhappy that jobs are taking too long, and there are a whole pile of jobs that were never invoiced. Bob finds himself in absolute frustration – he trusted Cindy and she let him down. 

I have seen this kind of thing a lot. The problem in this scenario is that Bob did not know what Cindy was doing, and even worse Cindy did not know what Bob even wanted. So the chances of this going well were abysmal. Bob was not clear on what time frame was acceptable to send invoices within, when old accounts should be chased, what suppliers should be paid first, how much money should be in the bank, etc...

Can Bob fix it? Not without good systems.

The moral of this story is: Have good staff, but have even better systems. This is the vital first step towards building yourself a great team...

Good systems will show when staff are not performing, Good systems will make good staff, Good systems will mean the business carries on when staff leave, Good systems take headaches out of your business.

Action Point: Look at your key staff and list what you specifically need from them. Then meet with them individually and go through it with them. It could be the most important thing you do this year!

In my last article, we looked at the five key problems in Canterbury businesses in the current economy, as identified by MYOB in their latest business survey results.

I am listing these for you, along with some strategies to help you conquer these big problems. I hope you find it useful.

'Competitive Pressures' and 'Customer Acquisition' ranked as the number 1 and 2 key problems. We looked at those last time. Here is number 3:

# 3 - Price Margins and Profitability
Although this has been ranked as third, in my book this would be first. Many, many, many businesses I come across just don't look at this closely enough. I always make sure my clients understand their profits and margins including what they need to make profit... because without profit you will eventually go broke. Every business owner must know their numbers to stay in business - it is just that important.

I often see companies increase their sales, but reduce their margins to get the work. Or even worse, they loose sales and then drop margins to compete - very very dangerous if you don't know the numbers.

Make sure you know the margins on all products and services you have. Also you need to see every month if you are making a profit or loss. If you don't have monthly figures, the good news is that they won't be to hard to get. Whoever does your GST returns will have them. This will be your accountant, bookkeeping service or staff member. Ask them to show you, and go through it to find out your sales, margins, and profits. When you know sales, margins, and profits, you can look at what you need to do to improve them.

Pricing is a good place to start; even an increase of just 5-10% will have a big impact on profits - and most of your customers won't even notice.

If you are still unsure on this one, give me, or your accountant, a call.

Another problem you may be facing is:

# 4 - Customer Retention
Keeping your customers coming back time after time is really the backbone of almost every business. It is important to understand that generally, by the time you pay for costs of getting a new customer (in advertising, discounts and so on), you do not start making money from them until they become a regular customer. If you have gone to all the trouble of getting them, it is worth spending some time thinking about how to keep them. Often business owners are so busy chasing after the new customers, they forget about the old ones. Madness!

There are literally hundreds of strategies for keeping customers coming back, but there are two principles that can be applied every time:

First, give them a reason to come back. Try a loyalty card or offer them a discount off their next order.

Second, keep in touch with your precious new customer through Facebook, newsletters, regular specials, offering them different/new products, a thank you card, etc.

Remember that friend that you were so close to a few years ago; you didn't keep in touch and now they have drifted away? Well, customers are the same. There are plenty of competitors that want your customers and they are spending thousands of dollars in ads and special offers to get them. Don't let them steal your customers! Keep in touch and make sure your customers know you value their business.

And rounding out the list of top five problems businesses in Christchurch and Canterbury have in the current economy - SURPRISE! it's:

# 5 - Cashflow
No money in the bank and lots of creditors to pay = stress, stress, stress. This one can be a real killer. Enough pressure from cashflow and it takes all the fun out of business.

Cashflow problems will be caused by one or a combination of the following:

• Poor margins
• Poor profitability
• Too much stock
• Not invoicing on time
• Not collecting money when due
• Rapid growth (don't underestimate this one - this will kill you if you don't see it coming)
• Under capitalised
• Buying new equipment or assets and trying to fund it from existing cashflow

(Re-visit my June newsletter for more on this; email me for a copy if you have lost it)

Bottom line is - to fix your cashflow problems you need to understand which area or areas are at fault.

Start setting up KPI (Key Performance Indicators) in whatever area you need to improve.

Just like in sports - all the best teams measure everything they can that will help them win the game. In rugby the Crusaders measure metres gained, number of tackles, number of missed tackles, number of penalties etc. They decide which key numbers will make the most difference to their game and then work on improving them.

In business it should be exactly the same. For example in Accounts Receivable start measuring how many of your customers are overdue, their dollar value and the percentages. Decide what is acceptable and start working on getting that number or better. This will put you back on track. But don't stop there - make sure you watch this figure closely every week and month. Compare each month to see if you are getting better or worse.

So - those are the top five problems in Canterbury businesses right now and some ways to deal with them.

The big question for you now is - what you are going to do next? Do you say, that was great information and carry on as you were. Or do you pick at least one thing and take action? Only then will it help your business and increase your profits.

Last month I attended a business advisers meeting and MYOB presented their latest business survey results. In this they highlighted the top five key problems Christchurch and Canterbury businesses are facing in the current economy. 

As most of my clients are in Canterbury, I thought it would be useful to list each problem and give you some strategies for how to go about fixing them.

I have listed the problems in the same order as the survey results. This may not necessarily be the same order for your business, but I know that at least one of these is most likely one of your biggest challenges. The first is...

# 1 - Competitive Pressures
The pressures you are facing from other competitors in your market place. If you are in retail for example, a real competitive pressure is most likely the internet and the growing level of purchases online of similar or even the same products as what you are selling.

Every business needs to at least be aware of what these competitive pressures are for them, and how they are affecting business. I am not saying that you should spend all your time worrying about this, but it is important to pay attention.

A great place to start is by asking yourself these questions:

• How are you rating compared to your competition and how are they affecting your business?
  
• How are your competition getting customers?
  
• What am I better at than my competition?

The last question is the most important one, for if you know what you are really good at, and play to your strengths, you will win the game here. Let me illustrate:

I stand a towering 5 foot 3, so I don't often get called a giant (except maybe by my kids). I used to play rugby in North Canterbury and would always be playing against much bigger and physically stronger players than myself. But I also had strengths - I was a little quicker than the others, I had a lower centre of gravity, and I was fitter, all of which meant I could still compete. For example when tackling players who were on average 1.5 to 2 times my own body weight, by going low around their legs, they could not fend me off, so my success rate in this part of the game was very good. However if I tried going high they would push me off and I would be the one kissing the dirt.

Nice story I hear you say, but how does that relate to me. Well, start by asking what your strengths are - it could be that your business has the best products, superior service, location, best staff, largest product range...

Now start promoting these to your customers, leads and prospects, and you are now standing out from the others. Do this well, and customers who value these strengths you offer will start flocking to your business. Play to your strengths, and make sure your customers know what you are really good at.

Going back to our retail shop, advantages they have over their online competitor could be better back up service, knowledge, expertise, less "risky" to deal with etc. That personal service still has value, and you can guide your customer in making the best choice product for them. Online in most cases cannnot provide this kind of one on one service. 

Let's look at the next big problem that many businesses face.
 
# 2 - Customer Acquisition
Getting (acquiring) new customers. Every business needs a good healthy stream of new customers. You will always be losing some customers no matter how good you are. Sometimes they shift to another town, they are earthquake affected (we all fully appreciate this one), they no longer need your product or service, they are at a different stage of life, or...  It is important to have a good robust short and long term marketing plan. Why short and long term? Because you need to be attracting the type of customers that give you a long term future for the business not just a short term boost without repeat sales.

The 50% off ad in the local paper, or Grab One? Sure it will give you a boost for a week - with one-time customers that take the deal and disappear off looking for the next bargain never to be seen again. This is great to help you be busy, but it won't necessarily create you a business. Better to first work out who your best type of customers are, and target them specifically. Grab One or 50% off may still fit, but you are now seeing the bigger picture.

A client of mine is a stock feed supplier. We discovered that a very profitable customer for him was farmers with lots of working dogs. They regularly buy biscuits and other products from him every month without fail. They were easily to find and they were regular steady income. They also had good profits and margins.

So work out the ideal customer groups for your business, and then work on attracting them. Remember we can't be all things to all people, but we can become very good, almost unbeatable, at servicing a certain type of customer.
 
So we have looked at the first two of five key problems in Canterbury businesses. Look out for the next exciting article and we'll look at the remaining three problems.
 
In the meantime, think about what edge you have over your competition. And how to attract new long term customers.

The problems you are facing in your business will always be the result of something else causing it further upstream. Let's take a look at a familiar picture I come across often.

It was a bright summer's day in January and our friend Bob the builder made a new year's resolution to start his own business. He worked for XYZ Builders but knew if he worked for himself, he would get more money and be able to work when he wanted to - he could be his own boss. Bob knew how to build and was damn good at it, he could put up a house quicker than most, his work was top notch and customers were very happy.

A few months later Bob took the plunge and went out on his own. To get started he undercut other competitors in the market. There wasn't much profit in it, but it was work, and it felt good to be busy and on the tools. A couple of years went by and he had grown from a one man operation to a team of eight, but the market was tight so he found that to get jobs he often had to reduce the price to be competitive.

The days were long, so by the time Bob got home he was too tired to do the paperwork, like invoicing, paying the accounts, checking the bank accounts, etc. He just didn't enjoy this part of the job, so it was often left to the last minute or sometimes was just not done at all.

Although cash was a little tight and some bills were a couple of months behind, he had plenty of jobs and lots of money to collect - things would work themselves out - nothing to worry about, or so he thought.

Things were lean for a few months, but the newspapers were saying the economy would pick up soon, so he just had to hang in there a bit longer. Suppliers were getting a bit tougher with overdue amounts and told Bob he had to pay them up to date before he could get more supplies. He decided to chase a few outstanding invoices himself, to discover that some of his customers had gone belly up, resulting in $189,000 in bad debts - money he was never going to see again.

To make matters worse, his accountant showed him that although he had plenty of sales, there were a few jobs he had lost money on and that he was looking at a loss for the year of $259,000 (that's without the bad debts he was scared to tell his accountant about). Now he was running out of money fast and needed a loan from the bank just to keep going. The bank said NO, as he had no security left. Bob's dream was starting to crumble in a pile of debt.

Bob was a great tradesman, but not so great at business. Let's look upstream and see some of the areas that first started to go wrong.

• Bob had not learned how to get better prices for his work. He did a better job than his competitors, but was not getting paid what he needed or what he was worth.
   
• Bob didn't know how to attract better customers who would pay top dollar and also pay him on time.
   
• Bob didn't know when he was making money or losing it. So each month he was not sure if he was ahead or behind. A dangerous place to be.
   
• Bod didn't understand margins or know if they were high enough. He was competing on price without knowing what he needed to charge to make a good profit. If your margins are too low, it is almost impossible to make money.
   
• Bob wasn't invoicing on time, so the money wasn't coming in on time either. (I have seen some businesses not bill jobs for 12 months - a crime against business.)
   
• No one was checking to make sure customers were paying on time and chasing them up. (You did the work, so you are entitled to get paid).
   
• Bob was not paying his suppliers on time. (Important because, as Bob found out, without the materials, you can't complete the job.)
   
• Bob probably didn't keep in contact with his bank manager, so the bank assumed the worst.

A few adjustments upstream can make all the difference.