Health Check Your Business

Transcription

1 Martin Zander 2014

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3 M. Zander Health Check Your Business This book has been purchased online on: XinXii.com ebooks & documents from indie authors 3

4 Copyright, Legal Notice and Disclaimer: This publication is protected under the US Copyright Act of 1976 and all other applicable international, federal, state and local laws, and all rights are reserved, including resale rights: you are not allowed to give or sell this Guide to anyone else. If you received this publication from anyone other than xinxii.com, you've received a pirated copy. Please note that much of this publication is based on personal experience and anecdotal evidence. Although the author and publisher have made every reasonable attempt to achieve complete accuracy of the content in this Guide, they assume no responsibility for errors or omissions. Also, you should use this information as you see fit, and at your own risk. Your particular situation may not be exactly suited to the examples illustrated here; in fact, it's likely that they won't be the same, and you should adjust your use of the information and recommendations accordingly. Any trademarks, service marks, product names or named features are assumed to be the property of their respective owners, and are used only for reference. There is no implied endorsement if we use one of these terms. Finally, use your head. Nothing in this Guide is intended to replace common sense, legal, medical or other professional advice, and is meant to inform and entertain the reader. So have fun with the ebook, and get your stuff done. Copyright 2014 Martin Zander. All rights reserved worldwide. 4

5 Contents Strategic Business Planning... 7 Let s start with Business Planning... 7 What does a strategic plan contain?... 8 Preparing your plan... 9 Stage Stage Stage Stage Stage Making the plan work for you Benchmarking How well is my company performing? What is benchmarking? Why benchmark? Enjoy the benefits! The benchmarking process: Who should conduct the benchmarking process? Financial Analysis Cash flow Balance Sheet Profit and Loss Financial Ratios Break Even Analysis When does a business break-even? The Importance of cost Added Value Cash Flow, a Performance Indicator How to build a cash flow forecast Profits Performance Indicator Key terms: Balance Sheet performance indicator What is a balance sheet? Why is it useful? The make-up of the balance sheet Fixed assets Current assets and current liabilities Current liabilities Long-term liabilities Capital employed

6 Potential problems Ratio Analysis Liquidity ratios Solvency Ratios Efficiency Ratios Profitability ratios Balanced Scorecard The perspective of customers The perspective of employees Costing & Pricing What affects pricing? The life-cycle of the product Price-sensitivity What does price signify to your customers? Characteristics of the marketplace Your range of products Arriving at a Pricing Strategy Covering fixed and variable costs Cost-plus versus value-based pricing Cost-plus pricing Value-based pricing How to build a pricing strategy Different pricing tactics Discounting Odd value pricing Loss leader Skimming Penetration Raising or lowering prices

7 Strategic Business Planning So how well are you doing? Is your business performing to expectation or were you hoping for more? To check on the health of your business you must first decide what constitutes good health? In this course we ll provide you with a range of tools to help you understand just how well your company is performing and remedies for problems based on four basic formats: 1) Producing a Business Plan, whatever stage of growth your company is at, is a useful means of assessing current performance (re)focusing the efforts of managers, workers and other stakeholders as well as a means of sourcing further finance. 2) Benchmarking provides a context for your business performance by comparing your efforts to your major competitors. 3) Financial Analysis will equip you with the number crunching techniques needed to properly analyze financial performance - ratios, added value, balance sheets, etc. 4) A Balanced Scorecard takes in wider objectives as it is widely agreed that financial measures of performance provide too narrow a scope for a proper business health check. Let s start with Business Planning All businesses reach a point where running the business tactically is no longer enough. However most business plans are developed for the bank and for no one else; they do not help give a strategic guide to a business. Although preparing a business plan to obtain funding does mean writing down some objectives and aims for the future, the pressing need 7

8 is always to secure money, not necessarily to paint a picture of where the business is heading in the medium and long term. At some point, you will need to create a truly strategic business plan a plan for you and your people, not someone outside your company. The idea is off putting though where do you start setting down the future when the day to day running of your business is hard enough already? The benefits can be great however and the finished document can help focus the business and all of your people. It s also not that difficult to do. What does a strategic plan contain? Firstly a vision of where the people running the business and those working in it want it to be in the future. This may be in terms of position in the market, value of the business or types of customers served. Next, the mission statement. Don t get hung up over this much misused and misunderstood phrase put simply - what is/are the guiding principle(s) behind the business? What are you in business for? Having established why you are in business, where you want your organization to be and what it will look like in the future more detailed planning is needed. Key aims and objectives should be set for the business. Keep these simple and don t have too many. Establish just one key aim for each part of your business then develop one or two objectives for each activity area. You may choose financial objectives, new products, new markets, communications or training as areas to focus on. For each, ensure that your objectives are SMART. That means they are specific (relate to one area only), measurable (concrete measures that are understood and meaningful), achievable 8