Posts Tagged business exposure group
25% of SME owners say they would rather retain average or below average performers than fire them, given the current lack of skilled individuals in the market place.
So, a question posed at the Business Exposure Group meeting asked whether retaining poor staff for the sake of retaining the current makeup of the team was sensible. Research has shown that one bad apple in a team can bring down productivity by 40%. In simple terms, if you expect revenue generation of £100K from an individual in a group of four then the £400K revenue at only 60% productivity translates to a loss of revenue of £160K per year. It’s an expensive way of burying your head in the sand!
The message of retaining an underperformer rings loud to your other employees, as well as your competitors. ‘These people don’t know how to manage properly’ and ‘They can’t be doing well if you have still got him on-board’ were just two of the comments made at the meeting. All agreed that firing an underperforming employee saves you money in the long run. It takes away a strain on the team, removes the need for additional oversight, and in reality many of these workers contribute little. In fact, one of our members commented that getting rid of an underperformer was like having additional perks for the other staff, who always rallied round and had a new spring in their step for the benefit of the business when the underperformer was removed.
Some other points raised were:-
- Dealing with an underperformer is not easy, especially when the employee took a chance on the business.
- A business can lose good employees by being slow to deal with the underperformer.
- Good workers are discovered, poor workers are found.
- A comprehensive job description is essential so that an employee knows exactly what is expected of them.
- Have we surrounded ourselves with a few underperformers because during the recession we lowered the recruitment bar, just to fill the vacancy, and now realise that we recruited from the best of a bad bunch.
A business can only show continued success by attracting and retaining top performers who have the competencies that we need now and in the future. They will be agile and can multi-task. They will have sound personal goals, low error and absentee rates. They will provide high customer satisfaction, inspire and train others in your business and generally stay longer and produce a higher rate of return.
The impact of top performing employees is more than 3 times that of an underperformer, yet the difference in pay is often minimal. Perhaps a look at the make-up of your team and the remuneration package for those in your business would be a timely and useful exercise.
Business people live for the struggle of launching their business. But one thing they often forget, is that decisions made one day can have huge implications down the road. It is not enough to build a business, we have to make sure that we have an exit strategy to get the money back out.
This subject was discussed at the last round of the Business Exposure Group meetings. Businesses that scale and ultimately maximise their value are the product of an owner’s almost obsessive focus on building value.
Most of the members agreed that whilst a lifestyle business was fit for purpose today, we should always have an eye on the opportunity to develop a mind-set to exit if the correct opportunity presented itself.
Generally it takes at least 18 months to prepare for exit, but by growing the management structure, spreading the customer base, improving the IT, and minuting all meetings the value can significantly increase because this is all evidence of a well-run business.
During the discussions 3 core areas of value were suggested.
- Creating sustained profitability
- Having clear records and processes
- Building a brand
It was even suggested that the economic climate has presented a great opportunity to sell our businesses to bigger players, because over the last 2 years they have made strong profits and are now sitting on cash in the balance sheets, which could easily and should be used to invest in strategic acquisitions. The market now has more trade buyers than for many years.
It was however surprising how few of the members actually engaged in dialogue with their bigger competitors, eg at trade fairs, in an attempt to make their bigger competitors become aware of the value and strength of our smaller companies. Such, off the record discussions are key, because companies don’t get sold – they get bought, and the need to keep close to the big guys is obvious.
Buyers are not looking for businesses that are chasing revenues, this can blur the proposition. Buyers do not understand revenue streams derived on the hoof. Multiple and varied revenue streams introduce unnecessary complications and additional risk. So the main conclusion from the discussion was to keep the brand simple and focused to attract a strategic fit.
Some of the members had been approached over the years by foreign buyers, willing to pay a premium to secure a new base in the North of England. Others had found real value in finding an appropriate advisor, who would look at the business from an objective viewpoint rather than the owner’s emotional subjective view. The advisor would focus on the key areas of the business and suggest the areas to be worked on to achieve maximum value. Such areas include a business audit on marketing, sales, customers, pricing, operations, management structure and compensation.
It is important that existing owners identity and resolve issues within the business before a potential buyer discovers them. Equally, ensure that the existing management team is sufficiently incentivised to stay, to maximise company value.
All in all it’s about a story and if you are selling the existing management team as the value, then they have to be as strong as possible.
Some of the more pro-active members of the group have their businesses valued by their accountants on an annual basis, so that they can fully understand the areas of weakness and the areas of opportunity in case an attractive offer comes along.
However, don’t get carried away by the one off offer, as 70% of all business sales processes collapse. Stay focussed on your core business and have an eye for attracting multiple bidders to secure the sale. On the other hand, put everything into place, and gradually release yourself from the day to day role of running a business and sit back a little and continue to reap the rewards on a monthly basis of your robust lifestyle business.
Either way it’s all positive as long as you have the right mind-set
Is PR really an ego spend rather than a direct revenue generator, was a question asked at the Business Exposure Group meeting.
Research by Proctor and Gamble showed PR as the highest return on investment of any marketing tactic with a 270% ROI.
A well planned PR campaign can increase brand recognition, search engine ranking, targeted traffic and sales ready leads. But many SME’s put unrealistic objectives forward for their PR campaigns, ones that are not easily measurable, such as
- attain awareness of our brand by the end of the year, or
- introduce our new service with a bang
It is far better to have measureable objectives, for instance
- get 3 mentions in the business press, or
- ask all new customers how they heard of us and get 10 of these through published articles
The reality for SME’s is that PR is vital, it gets you there, whereas advertising keeps you there. For little financial commitment either through traditional PR or Social Media a buzz/noise can be made in the marketplace for your business, and if your plan doesn’t seem to be working do not wait until the end of the next quarter to make adjustments, because with the latest downloadable marketing tools we can make adjustments this week.
Many of the members at the meeting shied away from publicity, acknowledging that this was a mistake, and recognising that PR generates business leads, improves staff morale, assists in recruiting new employees and attracts investors. PR is key to positioning our businesses and we should work towards spending 5% of our turnover on PR and Marketing budgets.
Two further questions were raised at the meeting. Firstly, is it better to use a specialist firm who know how to target PR and have the necessary contacts, or should we do it in-house and pay wages instead. Most felt that an outsourced specialist with a clear and tight remit was the best cost-effective approach.
The second question was, is Twitter the most effective form of business PR, as it has a low financial entry level and an unparalleled reach capability. Not everyone was sold on the Twitter approach, citing that few people take it seriously and the majority of users do not know how to make it work for business.
Whilst the debate could have lasted far longer than scheduled at the meeting, all felt the need but many lacked the certainty, of how to run and implement an effective PR campaign.
If you know the answers then please drop me a line, because it’s all a bit of a black art!
Meetings can be the death of a business. Yet they seem to make some people feel important. For whatever reason, having a calendar of meetings seems to validate the existence of some, yet so many people leave meetings commenting that they are often a waste of time.
Research shows that staff meetings should be limited to 30 minutes, preferably held on a Tuesday morning, have an agenda, and never allow an ‘any other business’ section.
The topic was well debated at the Business Exposure Group with the following points being raised.
- Take the meeting responsibility seriously, and make attendance mandatory.
- Ensure that they are run on added value not just on habit. The value is in the team building, re-affirming core values, and explaining the bigger picture on a regular basis, to communicate and keep staff engaged with the business.
- Staff meetings are not for making decisions, they are for ratifying decisions.
- Ensure that meetings are for sharing information, and do not allow one individual to use it as an excuse to ‘show off’.
- Better decisions are made in meetings because group creative solutions are discovered.
- Meetings are an expensive resource. It can easily cost several hundred pounds of time spent, which is a reduction in profit and one that is often overlooked. So, ask if the issue can be better addressed in a simple email, can the issue wait for another time, or is it better to reduce the time waste of the group and sit down for a one to one with the individual that has the burning issue. Understanding the cost of unimportant meetings will result in fewer meetings being called and a workforce that is not just going with the flow.
Meetings do have enormous value if they are relevant, well controlled and have action points which are followed through, but many of the Business Exposure Group members felt that they struggled to keep the regular internal meetings fresh and engaging.
One of the members put forward an alternative approach to engage individuals, using the one to one discussion in an effective way. They explained that they received tremendous feedback and creativity from staff when they used one or more of the following questions.
- ‘What policies and ideas are getting in the way of you doing a better job?’
- ‘What special talent do you have that we are not using in the business?’
- ‘If you were the owner, what would you be concentrating on right now?’
- ‘What are you working on that has little value and what would you replace it with?’
- ‘What do you need to know about our Company/Industry that would help you do your job?’
How do you operate your meetings? Do you measure effectiveness and are staff and management held accountable?
In conclusion, it was felt that the follow up and follow through were the benefits of a meeting, not the meeting itself.
Are businesses turning to apps to improve business efficiency, generate sales leads, win new business and keep existing customers engaged?
This was a question posed at the Business Exposure Group meeting.
The discussion was split into two halves. Firstly, using applications to organise your business life and secondly, the value of a bespoke business app for your business.
Included in the value of applications to assist your business many of the members were regularly using Dropbox, Google Docs, Evernote, Hip Chat, Re Quall, Campfire, to name but a few.
It became clear from the outset of the discussion that very few businesses ask where does a downloaded app fit into their business? Some felt that most apps add another level of complexity into the company’s business processes, which are not always welcomed by staff who exhibit strong resistance from these business tools, as they become disruptive to familiar work patterns and create additional stress.
In the groups there was a clear difference between those businesses which operated and were heavily reliant on organisational apps, as opposed to many more conventional businesses who had not embraced the advantages of introducing this technology into the day to day functioning of their employee’s job roles. In fact, this supported research which showed that only 22% of SME’s provide apps for their employees to use at work.
One of members explained that his salesmen had increased their van sales by 450% in the last 6 months since he gave all his drivers an app that enabled them to check stock and pricing in real time, process orders and print instant invoices.
Whereas, another member stated that cash strapped business people are tempted by free online apps that promise to simplify any number of business functions, but in reality the apps require a significant amount of effort to use them effectively.
Moving the discussion onto the question of the value of providing a bespoke app was unanimously discounted for those operating in the B2B world. A good app is built to engage customers and encourage loyal customers to come back through in-depth functionality. Which is great for B2C but B2B members preferred the option to upsell with a face to face opportunity rather than an application.
Apps are only any good if they are regularly used by the customer, otherwise they just become a fad and are easily forgotten. The consensus of opinion was that money was far better spent on ensuring that a business website was up to date, functional and fully mobile enabled, instead of squandering monies on an app which many members were unclear as to how to determine a return on investment from an app, which may show evidence of a contemporary business but not necessarily one that has found the need for an app to succeed in adding significant value to their customers.
80% of businesses don’t have a mobile strategy, so the conclusion around the table was that our money is better spent improving our customer’s mobile experience rather than building a mostly useless and profitless app.
The current business environment is characterised by increasing competition, global trading, technology and the need for enhanced operational efficiency. Yet we are faced with fewer staff undertaking a diverse range of complex activities.
Small business failures can often be attributed to poor management competences – So why do we have varying degrees of resistance to training?
The following comments were made at a recent Business Exposure Group meeting:
- Do staff take training seriously, or is it a day out of the office. Most thought that training only works well if you have a willing participant and that when they return to the office they are able to use their new skills and communicate the benefits to their colleagues.
- SME staff are often forced to be a jack of all trades in order to plug the skills group, which in the medium term is not sustainable.
- There can be fall out from training because the recipient my wish to move on to better opportunities which the SME cannot accommodate.
- Training at the lower level is fundamental because a business is only as good as its weakest member of staff.
- Many small businesses are between the rock and the head place. On the one hand desirous of a training benefit but on the other hand finding the absence of a colleague from the ‘day job’ as detrimental to the ongoing daily requirements of the business.
- Business education for the owner is less a job of sitting in a classroom, but rather by learning on the job with the aid of an expert coach, which will assist the owner in breaking through the glass ceiling created by their limited experience of how to move their business to the next level. A well experienced industry relevant ‘Non Exec’ is the answer for many of our members who have ambitions to significantly grow their business.
Training budgets throughout a business must be proportionate, so that both staff and the owner take equal priority to train and therefore build a strong, resilient business.
Let’s start by asking ourselves if we know what our business is worth. Some would answer that a business is worth precisely what someone is willing to pay for it and what we are prepared to sell it for. So arguably the only way to value it is to put it on the market.
But if we take a step back it is strange that most don’t know what their business is worth. Strange because we know all the other figures – profit, average order value, debtor days, work in progress, sales pipeline value. By knowing how to value a business can help us understand where the value lies and maximise the areas of value within the business.
Some of the comments raised at a recent Business Exposure Group meeting highlighted the following points and all add to why a person would buy a business.
1. Market Share – overnight you can take out a competitor
2. Intellectual Property – this has value but in reality it is only worth something if it generates a profit
3. Brand and Reputation creates the most important value
4. Products and Services may compliment the acquirers business
5. Supplier Relationships may be better than the acquirer has to date
6. It costs a lot to train and harness a good set of employees
7. To scale the business into a new location
8. If a PLC buys a smaller business they can instantly revalue at a higher price on their balance sheet
9. Good housekeeping is essential so that when an approach is received is doesn’t create suspicion amongst staff, clients and suppliers
Having signed contracts, ownership of your website, domain names, software licences and
up to date statutory books are all examples of well-run and groomed businesses beginning
to be ready for sale.
The best time to sell a business is when it is doing well. Don’t leave it until it is too late, ie when you want to retire, because the urgency to get a sale will result in lower offers being made.
Notwithstanding, marketing a business for sale through a business broker is the best channel to create several interested parties and bring them to the table. Nevertheless, it takes many months to find an acquirer and further protraction of negotiation whilst due diligence and legal transfer takes place.
Research shows that most businesses don’t sell because either they are pitched at the wrong price or the seller is not talking to enough serious buyers.
Finally, if you can’t cope with the business changes on the horizon and can’t envisage selling, then perhaps you are better off hiring a new MD and continue to collect the profit without the day to day headaches of running a business.