Business building tips Brisbane – threats that can wipe out a business

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This is the story of Arthur, a Brisbane pharmacist.  After working as an employed pharmacist for a few years, he purchased his own suburban pharmacy.  The shop was located beside a doctor’s surgery.  In fact, as part of an arrangement with the doctor, the previous owner had built a doorway directly from the doctor’s waiting room into the pharmacy.  It was truly a captive audience!

All went well for a few months.  Arthur is a personable guy who made a real effort to connect with his customers.  He sought feedback from customers about what he should stock in the shop, other than prescription drugs.  He even greeted his customers by name after reading the name on the prescription – very clever!

A few weeks ago, tragedy struck, dealing Arthur a double blow.  Firstly, the doctor moved out from next door to a nearby regional shopping centre, to join a group of doctors who were locating next to a major pharmacy.

Shortly after, in January 2011, Arthur’s shop was completely submerged in the recent Brisbane floods.

I will be amazed if Arthur’s pharmacy business survives this blow.  That will be a real shame because my interest in this business has been as a customer who had always received excellent service.  This is one of many businesses I observe in my own neighborhood.

These are the kinds of events that are categorized as ‘threats’ when undertaking S.W.O.T. analysis (Strengths, Weaknesses, Opportunities, Threats).  Threats are not to be confused with ‘weaknesses’.  Weaknesses usually relate to skills and knowledge that are missing.  Threats are events that can kill or cripple a business.  They can occur suddenly, and are usually caused by nature, government legislation or reliance on one source (in this case – income).

I am not being critical of Arthur over the flood issue.  After all, when the last major flood hit Brisbane, he wasn’t even born.  Besides that, our governments had us believe that with new flood mitigation infrastructure, it would never happen again.

However, the previous arrangement between the doctor and the former pharmacy owner which was responsible for the majority of the pharmacy’s business is something that should have sounded alarm bells.

This is where business owners can get blindsided.  The relatively few business starters who actually undertake planning before taking the plunge are usually too focused on the opportunity and the upside.  They tend to ignore downside risk on the basis that it may never happen, and it certainly won’t happen to me.

For more business building tips Brisbane, visit my other blog at:

http://www.aikido-secrets-to-calm-success.com

Until next time!

Gary

Don’t bet on the weather or politicians

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If you are looking for a business building tip in Brisbane, don’t bet on the weather or politicians!

This is the story of Godfrey.  Godfrey is a very intelligent and entrepreneurial business man who saw an opportunity a few years ago.

A few years ago, Queensland, Australia’s north eastern sub tropical State, was headed for a drought.  The El Nino weather pattern had been forecast for some time.  Godfrey decided that in the face of drought, Queenslanders would need access to water.  So he decided to go into the business of manufacturing and selling water tanks in Queensland.

Knowing very little about the technical aspects of plastics molding, he bought a share of an extruded plastics business which then ceased selling its traditional plastics product line and ordered the construction of several large water tank molds.

His timing was excellent.  As higher and higher water restrictions were imposed in Queensland, both the State Government and Federal Government offered attractive subsidies for residents to purchase water tanks.

Instantly, residential water tank sales went ballistic!   Residents were effectively being paid by the government to purchase water tanks and store their own water.  Soon there were countless manufacturers and importers entering the market as demand outstripped supply.

Meanwhile back at Godfrey’s water tank factory, two twelve hour shifts a day still couldn’t keep up with demand.  He  decided to increase his investment and ordered more water tank molds.

Then it rained and soon after, the State Government changed the subsidy rules and later announced the phase out of the subsidies all together.  Tank installation rules changed and residential sales plummeted by 70% overnight and the demand for tanks quickly dwindled.

By this time Godfrey had made a significant investment in manufacturing assets, gearing up to meet growing demand.  When demand disappeared almost overnight, he was facing some serious survival problems.

So what really happened?  Godfrey rode the wave of success on the back of a change in government legislation.  It was also the reversion of that subsidy legislation that killed off consumer demand.

His business was built on the whims of politicians; a very dangerous strategy indeed.  The demand for water tanks hadn’t fundamentally changed.  The reality was that the government was giving money away.  When they stopped, the market returned to its previous state, except there were now far too many suppliers.

Five years on, the El Nino weather pattern has been replaced by the la Nina weather pattern.  Dam storage capacity has risen from a low 17% to a peak of 200% and widespread flooding has replaced drought.

A business building tip in Brisbane? – be careful betting on the certainty of the weather and politicians!

Until next time!

Gary

Use milestones on your goal journey

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Good goal setting can help you set up the whole picture of your business.   If it helps you, break down your main goals into bite size bits so that you can organise yourself around them.

To do this, insert some milestones along the way.  In other words, you may have to pass two or three milestones before you reach one of your main goals.

Milestones are signs along the way that show you that you are still on the right path and reassure you that your journey to the main goal is closing fast.  So instead of one main goal that takes months to achieve, you now have a multi-part goal that allows you to tick off completed tasks every month or even every week.

Example 1

For example, let’s say my main ‘build or create’ goal is “to start a specialist consulting business in the building industry by 30th June”.  My milestones along the way might be:

Milestone 1. Find an office space at desired rent by end of February

Milestone 2. Lease / buy equipment and fitout office by end of April

Milestone 3. Hire & train staff or arrange outsourcers by mid June

Achieve main goal. Open for business by end of June

Example 2

Let’s say my ‘customer attract’ goal is “to attract 200 customers by the end of year 1”.  I can simply break this down to what must be done each week – i.e. about 4 paying customers per week.

Example 3

Let’s say my ‘future exit’ goal for my consulting business is to build a saleable asset (i.e. my business) that has a value of $1M in 10 years time.

(For the sake of simplicity I am omitting the effects of inflation and the present value of future dollars)

So working backwards, I will need sustainable earnings (i.e. bottom line, before interest and tax), of say $200,000 per year.  That assumes my selling price ($1M) is the equivalent to a capitalisation of 5 times my sustainable earnings rate ($200,000).

(Be careful – the 5 times capitalisation rate I used is an example only and varies widely with the type of business, industry factors and economic conditions)

I will probably need to demonstrate 3-4 years of stable, sustainable earnings for my sale at year-10, so I will set the first time that I earn $200,000 net earnings as my year-6 goal.

Therefore, I will make my year 1 profit goal $50,000 and I will endeavour to add $30,000 to my net profit in each of the following 5 years to boost it to $200,000 by year-6.  This is as big as I want to grow and it is also the limit of my current service capacity.

So in year-1, to achieve a $50,000 net profit, my sales will be $150,000 at a gross profit margin of 60% with fixed overheads of $40,000 (example only).

To achieve $150,000 sales I must sell my services to 200 customers at an average of $750 each (example only).  At a 5-to-1 strike rate, I will have to make 1,000 calls in the year which is about 20 each week or 5 each working day.

So starting at your ‘future exit’ goal and working backwards is another way of arriving at today’s ‘customer attract’ goal.

By breaking down your goals and adding milestones, you are creating a ‘goal journey’.  Now you can decide before you start whether your goal journey is achievable or whether it sounds a bit too hard.

Until next time!

Gary

Business coaching Brisbane – read my previous post for more on goal setting

Interested in the art of business peace?

Check out http://www.aikido-secrets-to-calm-success.com

To learn Aikido in Brisbane visit http://www.griffithaikido.com.au

In 2011 set a goal to start your journey

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In goal setting, every journey starts with a destination in mind.  Operating a business is a major life journey that is rivalled in time and commitment only by your major life relationships.

One of the real risks of rushing into business without adequate planning is that if you don’t control your business early, it will control you.  There are so many forces and influences that can pull, push and buffet you all over the market place.  So it is good to start as you mean to go on.  That is, in an organised way, with you at the helm!

It is critical to start the control process early by having control over what you ultimately build and where you take it.  That, in plain English means starting out with a plan; not a 300-page business plan full of boring detail, but a brief and to-the-point chart of your journey, as you know it now.

I would argue that the most important feature of your plan is your goal setting.  Although dreaming up a few goals sounds easy, this is the part of business planning that most people struggle with.

What goals should I set?

If you are stuck for ideas, try formulating these three (3) main goals:

    1. A ‘create and build’ goal
    2. A ‘customer attract’ goal
    3. A ‘future exit’ goal

The first two goals are self explanatory but the last goal sounds as if it doesn’t belong.  Why worry about exiting before you have even started?  Because ‘future exit’ means eventually extracting the ‘value’ of your business in cash by sale or other means.

Therefore, you need to concentrate on building up that value from the start.  The value you build up is a function of assets purchased, goodwill built up, and profits made over time.  ‘Future exit’ is a great way to bundle all your financial goals.

How do I set goals?

Your main goals need to be AAA goals.  That is:

  • Attractive (you must truly want to achieve it)
  • Achievable (it is within your grasp)
  • Action-linked (it must link directly to actions on your action plan)

A word of caution!

In setting your goals, you are preparing to live your truth.  That means you will achieve your goals only if you truly want to.  If you set goals that deep down you are not motivated to achieve, then you have set the wrong goals.  You are setting yourself up for a fall.  Set your heartfelt truth as your goals.

This is why I bang on about starting a business for the right reasons.  If you are in it for the wrong reasons then achieving goals is going to be the world’s biggest chore.

Until next time!

Gary

Internet Marketing

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The internet has become the source of information on products and business for users around the world. Mastering even the most basic concepts of internet marketing can increase income for any online or offline business.

Being able to market a product, service or information, globally online, to the demographic of your choice is very convenient and ideal for those on a tight budget.  The use of internet marketing still does not appeal to all businesses or all customers, mostly for security reasons.

However, it can attract a whole new segment of online customers and enhance any business.

Search engine optimisation (SEO) is an aspect of internet marketing that allows any business to advertise their product and business by focusing on the search facilities of major search engines (e.g. Google, Yahoo, etc).

Whilst there is a lot more to comprehensive art of internet marketing, SEO is a cost effective strategy for every static web site that hangs out in cyber space with no passing traffic.  And there are millions of them!

Whilst SEO is not simple and requires the services of a skilled technician, it has been far more cost effective for my clients than the offline equivalent of renting offline advertising space on roadside billboards.

I dare say that internet marketing will also spell the end for printed book-form directories.  Even now, my clients are giving me feedback that they are expensive and largely ineffective.  The reason is that every body searches online.  So why not go where the customers are?

Although internet marketing provides global reach in a very cost effective manner, it does come with its own disadvantages.  These are mostly to do with the perception of poor security as the result of the rising incidence of cyber-criminals, mean spirited hackers and the prevalence of PC viruses.

Until next time

Gary

Your 1-page action plan

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Business planning in Australia should be a straight forward and practical exercise.  Although you need to aware of many potential traps, there is no reason why you can’t write down the heart and soul of your business plan on one sheet of paper.

Preparing a business plan is basically deciding ‘what’ you are going to do and ‘how’ you are going to do it.

One of the main problems with business planning is that new starters follow other people’s templates.  They focus on rigidly following the format of the template.  This means filling in text and diagram boxes.  There is no light and shade and no emphasis on the critical stuff.

Instead of producing a 300-page document that is so detailed that you’ll never read it, distil the important parts down onto a 1-page action plan.

The important stuff is this:

  1. The ‘what’ – your main goals
  2. The ‘how’ – your main strategy
  3. The ‘payoff’ – the all important results

Now let’s look at each in a little more detail.

1. Start with your main goals

The most important feature of your plan is your goal setting.  Although dreaming up a few goals sounds easy, this is the part of business planning that most people struggle with.

I will show you in my next post how to go about setting goals.  In the end, regardless of what others say, your goals are yours.  You must live your truth in business and your goals must reflect that.

2. Be clear on your main strategy

In order to be clear on the ‘how’ of achieving your desired results you must have a good understanding of your customers and their demand.  For example, why will they buy?  What problem are you solving?  Why buy from you instead of any one of fifty other look-a-likes?

Make sure this ‘how’ part of your plan is ALL ACTION.  Any procrastination in executing strategy is deadly.  I recommend that you decide this!  “Out of all the actions I could be doing, which ones will give the highest payoff (i.e. better results sooner)?”  Do those actions!

Business cards, brochures and static websites are tools, not strategies and in isolation, won’t work.  Customers won’t go out of their way to seek you out.  You must act to go find them, and to put your message in front of them, clearly and simply.

3. Finish with the pay-off

The pay-off is what keeps you in business!  So it is important to monitor it.

You must have a measurement system to know if the pay-off is actually achieving your goals within your desired time frame.  However, what you specifically track and measure depends entirely on the type of business you have.

Some people track calls and sales appointments; others track weekly sales and gross profit.  Some people track units produced and fault rates; others track online click rates.  Many old-timers still track cash at bank – the only figure that they trust.

Your one-page action plan

The beauty of a one-page action plan is that you can carry a copy with you, pin a copy on the wall in front of your desk, circulate it easily to employees and outsourcers or fax a copy with your monthly results to your business banking consultant.

Until next time!

Gary

Brisbane floods – what a difference a day makes

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Brisbane flood 2011 – Jindalee

When I posted my last blog entry a few days ago, I had no idea about the natural disaster that was about to befall us.  Most of Queensland has been severely flooded with tragic loss of life and disastrous damage to houses, property and businesses.   On Wednesday and Thursday, Ipswich and my hometown of Brisbane were deluged.

I was so lucky that the water did not reach my house but many of my neighbours and friends were rendered homeless.  Today I have been doing what I can to help these folks with the massive cleanup task.  Parts of Jindalee, Mt. Ommaney and Westlake look like bomb sites.  Spirits are generally high but in some parts, it’s a sea of misery.

The smell of the slimy mud that covers everything is foul and overpowering.    Toads, lizards, eels and snakes have taken up unwelcome residence after being driven  into the submerged buildings by the rising flood water.

Thousands of people are without a home.  Many have lost everything except the clothes they are standing in.  In many cases, buildings are electrically unsafe.  It is so gratifying to see people helping their friends, family and, in many cases, perfect strangers. Offers of accommodation, hot showers and food come from everywhere.

Unfortunately, hundreds of cars slowly cruise past the disaster sites with occupants gawking at the misery and misfortune, all the while snapping photos.  Not of these carnage tourists ever stop to help.  It’s a human disgrace!

Even though you may not be able to lend assistance directly, you can help in a very tangible way by supporting the Premier’s Flood Relief Appeal.

Make a donation at the Queensland Government floods website: https://www.qld.gov.au/emergency/dealing-disasters/flood.html

Thank you for your help.  It is much appreciated.

Gary

Check out this home video which starts with 1-hourly time lapse photography as the flood water rises and ends with a tour of a house about to be submerged.

Go on your 2011 mini retreat

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For many industries, early January is a very quiet time.  Customers and suppliers are on annual holidays.  The kids are home from school.

So if you are not busy in January, consider making use of this down-time.  Give some serious thought to getting your self away for a while on your 2011 mini-retreat.

An hour, a day, overnight – it doesn’t matter.  Find some quiet YOU time!

The main aim is to get some privacy, feel relaxed and tap into your creativity.  Ideally, you will also want to return feeling invigorated and ready for a good year.

There are many choices of where to go and what to do.  Get creative but here are seven (7) ideas to help you:

  1. Overnight in a city hotel
  2. Overnight in a country B&B
  3. Go on a picnic
  4. Have a quiet restaurant lunch
  5. A few drinks in a quiet corner of a pub
  6. Sit on a beach
  7. Sit in a park or on a local mountain top

Whatever you decide to do, make sure you take a pen and paper with you to record your thoughts and ideas.

Whatever your budget and your choice of experience, decide in advance what it is you want to review, and what is it you want to do.

Apart from the financial investment, the biggest investment here is your time.  The real problem is tearing your self away from your business.

The other important choice is who to take with you.  The answer is whoever helps you get the job done.  Whether you want to retreat alone, with a friend, a colleague or a group is entirely your decision.

Your choice will depend on your budget, your business circumstances and perhaps child minding options.  Whatever you decide, there will be advantages and disadvantages.

Just be sure that whoever you take with you is ‘like-minded’.  If the others just want to have a party, then the retreat will not achieve your goals – unless of course your goal is simply to let off steam.

Business planning in Australia?  Happy retreating!

Until next time

Gary

Check out these great sites:

http://www.aikido-secrets-to-calm-success.com

http://www.griffithaikido.com.au

Financial management 4 – Breakeven point

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Once you have made some realistic estimates of your sales and expenses, it is time to move to the next important financial management tool.   That is your ‘break even point’.

Break even point is that point where you stop making losses and are about to make a profit.  Break even point is different for every business because no two businesses are the same.

I will show you a simple example:

Let’s say you make $80,000 sales for the year.  Whatever it is you sell, there is a cost of making it, creating it and delivering it.  The total cost includes things such as raw materials, parts, the cost of your time or someone else’s time and freight in and out.  Even if it is only your time and expertise involved, there is still a cost.

So let’s say that the total of the costs directly related to making / creating / delivering your product or service is $50,000 for the year.

That means your Gross Profit for the year is $30,000 (i.e. $80,000 – $50,000).  Before you go thinking that this is your profit for the year, this amount left over must now be used to pay your overhead expenses.

All businesses have overhead expenses, and yours will be no different.  These are expenses incurred in running your business but are not directly related to making / creating / delivering your products and services.  Overhead expenses include things like rent, telephone, vehicle expenses, leases and other financial commitments that you must pay whether you make a sale or not.

So let’s say your overhead expenses are $30,000 for the year.

Recall above that your Gross profit (contribution to overheads) was $30,000.  If your overheads are more than this figure, you make a loss.  If your overheads are less than this figure, you make a profit.  (Profit is a strictly defined accounting term but let’s not complicate the example).

In this simple example, your overheads are $30,000, equal to your Gross Profit.  You make neither a profit nor a loss.  This is your breakeven point!

So the way your business is currently organised, and with your current pricing and cost structure, your break even sales are $80,000.  If you make any more sales, the Gross Profit from those sales (i.e. deducting the cost of the sales) will fall straight to the bottom line because your overhead costs are paid (providing they remain fixed).

This is great information to have – to know that if sales fall below $80,000 (or $6,667 per month, you are in trouble.

You can achieve gains either by increasing price, increasing sales volume, or by reducing your overhead costs, or by reducing the costs of making / creating / delivering what you sell.

Any change in these variables will of course affect your break even point.

You must check out these sites:

http://www.aikido-secrets-to-calm-success.com

http://www.griffithaikido.com.au

Until next time!

Gary

Financial management 3 – forecasting sales

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In recent posts in business coaching Brisbane, I highlighted the need for regular accounting and for comparing actual results against your budgeted target.

Now for the really tough part of your budget!  That is forecasting revenue.  This is difficult because any realistic revenue forecast depends on what your plans are to attract potential customers and convert their interest into sales.  Most people do not have a clear idea of this because they are inexperienced.

If you have no real plan, or you adopt a shotgun approach to see what works and what doesn’t, then your budget revenue is probably going to be low.

In my experience, the majority of people make the mistake of assuming sales will somehow just happen, as if by magic.  That’s the ‘rose coloured glasses’ effect.  You can’t be complacent!  You have to make sales happen and you must have a clear plan of action.

So forget about assuming a one line sales figure in your budget.  Dig in behind the figures and think about what specific actions on your part will generate sales.  Any financial forecast should be merely a reflection of your intended actions.

The sales equation is ‘Sales Revenue = Price x Volume’.  Now there are two variables but even this is too general.  You must dig down further and determine the day-to-day drivers of ‘price’ and ‘volume’.

Get specific and assume nothing.  Get real with your pricing and take off your rose coloured glasses when figuring out where your sales volume will come from.  You must build your sales budget from the ground up, group by group, customer by customer if necessary.

This is the only way that you will be able to find out why your actual sales, in any month are under or over your budgeted sales.  Knowing where you over-performed or what you need to work on next month is priceless management information that can only come from taking the budgeting process seriously and building a useful sales history.

So why do I give you this valuable information free?  Because I know from experience that only a handful of the 40,000 readers of this blog will take any notice at all.  But to the few who do, it will put you one step closer to controlling your business, instead of allowing it to control you.

Check out previous Financial Management 1 & 2 posts by business coaching Brisbane.

Two interesting sites I highly recommend you visit are:

Spiral Photography at http://www.spiralphotography.com.au

Griffith Aikido Institute at http://www.griffithaikido.com.au

Until next time!

Gary