How to success in Business life

how business success requires memory and how to success in education business
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Dr.KiaraSimpson,United States,Researcher
Published Date:05-07-2017
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Making a success of y our business Essential checklists sponsored byIntroduction For many business owners and managers of small companies, n fi ding the time to stand back from the day-to-day running of their business to take stock of performance and longer-term strategic issues, can be challenging. However, reviewing your progress and understanding how to get the best out of your business and where to take it next can be hugely benec fi ial. This is particularly true if there have been recent changes to your business, your market or the economic environment that you operate in. Now, more than ever, businesses need to ensure they are: • moving in the right direction • competing in the right markets, with the right products and services • making the most of their market situation - performing better than the competition • using the right mix of assets, skills, finance, infrastructure and relationships to deliver good value propositions to customers • minimising costs that add little or no value to customers • aware of external environmental changes and are capable of responding quickly to new opportunities or threats • measuring performance so that they can be properly informed about current performance and the success or otherwise of their strategic initiatives. The purpose of this toolkit is to help you to understand how well your organisation is performing against these key areas, prioritise which aspects need attention and provide useful resources to assist you with the next steps. To assist you with this, the toolkit provides a number of checklists • Your financial position. • Your company ownership and internal organisation. • Your company’s vision and values. • Getting value from your business. • Managing innovation. • Managing your physical assets. • Your market. • Your service and distribution effectiveness. • Continually improving your business. • Your management and staff. • Your growth. • Your compliance with regulation and stakeholders’ expectation. These checklists are tickable and your answers can be saved to your computer. At the end of the toolkit there is a summary of useful resources that can be used for identifying the next steps you can take to address any weaknesses identified by the checklists.Understanding your business Being able to understand and evaluate your business is a critical skill that could mean the difference between survival and business failure. If you are to manage your business effectively you need: 1. A robust business plan. 2. A range of key performance indicators to measure your business against. 3. Accurate, reliable and timely information on actual performance. The business plan is a systematic review of your business and should provide a foundation for all future business decisions. It is a living document and should be regularly reviewed and updated to ensure it remains relevant to your company’s circumstances. The key components of a business plan are: • executive summary – an overview of the business’s aims and an outline of the business proposal • primary statements – the profit and loss account, balance sheet, cash flow statement and product summary • strategic position – strengths, weaknesses, opportunities and threats, and an identification of risks and options. In managing the business, you need to give attention to both the business plan and the budget that has been derived from it. If you do so in a co-ordinated and integrated manner, this will help ensure that the information can be used for forward planning and for day-to-day management. Both the business plan and budget will be produced with reference to the accounts produced at year-end and, depending on the type of business, those produced more frequently. The budget comes from the business plan and is your day-to-day means of monitoring and controlling the business, particularly through analysing variances between actual outcomes and those budgeted. Forecasts can be produced during the year to indicate expected out-turn if it is apparent that this will be significantly different from budget. This will be necessary in order to identify actions required to bring the business back on track to budget. Key performance indicators (KPIs) are financial and non-financial measures used by organisations to evaluate how successful they are in achieving their goals. Selecting the right KPIs and using them effectively will help improve your business’s performance. In choosing KPIs, you should consider: 1. Which areas of your business set you apart from your competitors. 2. Which areas tend to go wrong most often. 3. Which areas, if they go wrong, will: • cut off cash quickly • cut off sales • cut off profit. 4. Using appropriate comparators to help identify on where to concentrate. Targets allow you to measure your progress against objectives. There are some basic principles you should remember when setting the objectives. They should be: • clear and concise • relevant • timely • meaningful • feasible. Targets should: • Help monitor performance towards achievement of the objectives in the business plan. They should not simply be repeats of them. • Be in a form that staff can understand and relate to. • Be capable of being broken down to levels below the corporate whole so that groups and individuals know what they are expected to achieve and how their targets relate to overall performance. To be effective and useful, information on performance against targets must be regularly disseminated. It is important that performance measures such as those in the chart on the next page should be: • simple, easy to measure and understand • outward-looking • long-term oriented • both financial and non-financial with the two correlated • viable • capable of generating fast feedback • flexible • continuous and able to show trends. Managers should also seek to encourage the flow of performance information up through the company. This can be overlooked and, consequently, the business deprived of a valuable source of information.Examples of some key performance indicators Frequency Weekly Monthly Quarterly Yearly Strategic• Plant uptime• Total revenue• Customer satisfaction• Employee satisfaction • Production target • Revenue growth• Workforce knowledge/ compliance• Operating margin skills gaps • Organic growth • Operating expenses • Volume • Capital expenditure to revenue percentage Financial• Overdraft• Sales per sales force • (as for monthly)• Profit • Cash flow member• Projects• Profit per staff • Order book member • Days credit given• Gearing (i.e. the • Days credit taken relationship of owned • Gross and net margin capital resources to • Profit interest-bearing debt) • Profit and loss account• Liquidity (i.e. annual • Balance sheet cash flow as a proportion of total annual cost) • Interest cover (i.e. how many times larger your profit is compared with the interest you pay on your debt) Operational• Keeping to schedule• Units produced • Manufacturing lead • Employee turnover per production force time• Indirect/direct labour member• Stock productivity • Level of projects per • Production utilisation• Percentage wastage production force • Rejects member • Supplier product quality Marketing/Quality• Customer complaints• Market share• New product • Price • On-time delivery• Sales achieved and frequency orders in hand• New product time to • Repeat orders market IndicatorWhat makes a good business tick? Businesses that have a good understanding of ‘what makes them tick’ tend to be the most successful and profitable businesses. This is because they know the drivers that create value in their business; they use a small number of KPIs to monitor their performance against these drivers, and they use this information to ensure they have: • winning products or services that people want to buy and will continue to want to buy • clear objectives simply set out and communicated to all staff to motivate them • a dedication to continual improvement • effective management information and financial control • efficient services and distribution • good, dedicated management with the right information carefully controlling business responsibilities • compliance with regulations with minimum disruption to routine. Good businesses also avoid the temptation of creating highly complex and intricate strategies. They understand that the best strategies are usually those that can be distilled to quite simple concepts. This is because simple concepts are easier to communicate, easier for stakeholders to understand and therefore easier to put into action. The simpler and easier it is for stakeholders to understand what drives profit, the easier it is for them to align their efforts to support the strategy. Identifying and crystallising the most important KPI for a business is one of the simplest and most effective ways of communicating a company’s strategy. It is also the best way to ensure that everyone focuses on a simple model that drives profit in a way that can be replicated again and again.Your financial position Understanding your n fi ancial position is a critical r fi st step in evaluating the health of your business. Cash is the life-blood of any organisation and must be closely managed to ensure the business can survive and grow effectively. Understanding the basic concepts of cash o fl w will help you plan for any unforeseen eventualities that may occur. Do you know: Now In future no no yes yes How much you owe? What level of stock you are carrying? Your daily cash position and where it is taking you? Your bank balance?  How much your customers owe you?  How cash is being consumed in your business? How you are funding your day-to-day capital needs? Whether your bank and other sources of finance are enough for your needs? Where to seek other sources of finance?  Whether your working capital equals short-term funds?   What it is costing to fund your business? Whether you are overtrading (i.e. is your turnover growing  faster than you have resources to sustain it)? Whether your cost of overheads in proportion to your  gross profit is increasing?  Your customers’ credit histories? Your break-even point for sales? Your exposure to foreign exchange/interest rate risk?  What grants/tax breaks are available to your business? A mix of retained earnings, equity, long-term borrowing, creditors and overdraft funds businesses. It is important that the right balance is struck between these. Each has a cost and you have to be sure that you are able to pay it. Back to full listYour company ownership and internal organisation Selecting the right business structure is one of the most important decisions a business owner can make, affecting personal liabilities, taxation and levels of control in the business. The wrong business structure can act as a constraint on the development of your business and cause you problems. The right financial structure is vital for effective management. Having the right information should enable you to determine the right structure for your business. Are you: Now In future yes no yes no Sure that the shareholders/partners/others involved in your business are  contributing to it as you expect? Sure that the ownership of your company will enable it to develop as you  planned? Sure that the ownership and structure of the business is not leading to  unbalanced growth expectations? Sure that your internal organisation reflects both your current business and  how you expect it to develop?  Making the most of non-executive directors? In control of determining your business structure and its development? Distorting your business through being prevented from or pressured into  using further equity injections from potential new shareholders? Managing the whole business (not just one of its functions)? The main forms of company formation are: • Sole trader – a simple form of company that gives you complete control. All profits go directly to you and the business can be dissolved quickly if required. The main disadvantage of being a sole trader; however, is that you are personally liable for any business debts. • Partnership – where two or more people form a company by contract to pool talent and money, and to share profits or losses. The pros and cons are similar to a sole trader company, but it is important to have a formal agreement in place that clearly sets out the boundaries of the business relationship on decision making, profit sharing and dispute resolution. • Limited company – a form of company that is a separate legal entity from you. The owners are its shareholders and their liability is limited by their investment in the company’s stock. Back to full listYour company’s vision and values Businesses need to understand the value in their proposition to customers, including the tangible and intangible benefits their products or services bring. This checklist looks at the importance of clarity of vision and values in a company’s offering. Does your company: Now In future no no yes yes Have a vision/mission statement of what your company wants to  accomplish? Know what the key values of your business are? Use its values to challenge regularly the culture and behaviour of the  organisation and to inspire everyone to improve continuously? Focus on end-to-end, value-added processes to maximise business returns,  rather than on individual tasks? Collaborate with customers to design new processes/products? Continuously review its processes to simplify them and remove bureaucratic  procedures? Value employee input and reward people for process innovation? Integrate its processes with its supply chain partners? Evaluate its competitors to understand what they do better, why and how  what they do can be incorporated into your business? Use benchmarking as a tool for evaluating what competitors do, what  customers value and how different techniques meet those needs? Businesses must establish and manage the process for setting vision, strategy and direction in order to achieve superior performance. This needs to be translated into plans, projects and actions throughout the organisation. Back to full listGetting value from your business Understanding the value drivers in your business is essential for maximising your company’s potential. This checklist looks at the factors that can improve or destroy value for your business. Are you: Now In future no no yes yes Spreading your buying/selling contracts too widely over time?  Hostage to just one or two buying/selling contracts or customers/suppliers?  Sure your purchase/sales order books are firm and go forward far enough? Buying/selling on a growing/declining trend in real terms?  Buying/selling any products at a loss?  Using cross-selling and up-selling techniques to improve sales? Monitoring whether your purchases arrive on time and are of the right quality  to meet your manufacturing schedules? Satisfied that your suppliers’ terms, and your own terms to customers, are  competitive? Aware of the financial implications of your pricing policy? Loyal to good customers/suppliers? Scheduling orders to obtain better terms? Developing your competitive position?  Fostering your company’s reputation and brand values?  Developing your business processes to create more value? Enhancing staff skills to improve your competitive advantage? Your business must add value. Make sure your selling price covers all your costs of production and promotion. You cannot sell below cost for very long without going bankrupt. Remember also that working more closely with your customers and suppliers can bring competitive advantage. Back to full listManaging innovation Innovation is essential for business survival in highly competitive markets where it is increasingly difficult to differentiate products and services. This checklist covers the areas that you should consider to ensure your company manages innovation effectively. Do you: Now In future no no yes yes Systematically look for opportunities to innovate through: - developments in technology?  - regulatory changes? - developments in other markets and sectors?  - benchmarking business processes?  - collaboration with suppliers? Understand how customers use your products/services and what they like/ dislike, the alternatives they consider and the complementary products/ services they buy? Actively encourage and reward ideas and suggestions for new or improved  products and services? Have an awareness of current issues and trends that are relevant to your  business? Have processes for capturing and communicating good ideas within your  business? Innovation is about continuously moving ‘up the value chain’ to add value in each and every product and service. Successful businesses understand the importance of innovation and build cultural, marketing and engineering processes to innovate continuously. Back to full listManaging your physical assets Effective asset management helps to improve productivity and performance and reduce costs. This checklist covers the areas that you should consider to optimise your company’s use of assets. Are you: Now In future no no yes yes Using your production capacity effectively? Minimising production times? Minimising material usage? Minimising investment in work-in-progress stocks?  Aware of just-in-time (JIT) procedures? Buying and disposing of major assets in a way that is consistent with your  business objectives?  Using shift work effectively? Measuring your manufacturing or service peaks and troughs for inefc fi iencies? Subcontracting in and/or out? Planning for replacement of physical assets? Producing stock in the right proportion to sales?  Selling everything you produce?  Maintaining your assets properly to cope with demand? Evaluating non-asset alternatives to asset-based service provision? You have invested in physical assets such as machinery and equipment. It is essential that you get the most from your investment, but you must also keep an eye on replacement. Technological change is rapid. You should not allow your processes to become non-competitive. Back to full listYour market Getting a good understanding of how your market is expected to develop is essential if your business is to make the most of its opportunities and remain competitive. This checklist looks at the competitive dynamics in your market. Do you know: Now In future no no yes yes Who your competitors are? Your competitors’ pricing policies? Your competitors’ strengths and weaknesses? How your competitors’ products compare to yours in terms of functionality,  appearance and any other criteria? What your competitors’ marketing activities are?  What your competitors’ supply sources are for products?  Your market share? If there is good continuing demand for your product? If there are new entrants to the market? If there are areas where you could turn competition to co-operation? Your product range and lifespan?   The effects of technological change on your business? Whether the quality accreditation as a ‘preferred supplier’ would improve  your market opportunities?  Whether you can enlarge your market? If there is any forthcoming legislation that may affect your market? Information about your market and your competitors will enable you to plan your business strategy and your business structure better. While it may be difficult to build up a complete picture, you should seek to obtain as much information as you can from your customers, trade bodies, suppliers, competitors and the media. Back to full listYour service and distribution effectiveness Changes in customer demand and expectations can have profound effects on your operations and logistics. Ensuring your operations are flexible, and can respond to these constantly changing demands, is critical to remaining one step ahead of the market. This checklist reviews some of the key drivers of services and distribution effectiveness. Do you: Now In future no no yes yes Sell to a remote location? If so, do you know the cost of the extra transport? Use external carriers or your own transport? Have empty return journeys? Know the total inventory cost and inventory cost per stockkeeping unit (SKU)?  Know the cost per customer of supplying goods/services?  Know how suitable letter/parcel post is for your products or services? Could you: Restructure your distribution network (and depots) to reflect your sales and/or  your manufacturing/service locations? Provide transport for another company? Farm out all your distribution work? Run your own transport fleet?  Make better use of your sales force as part of your distribution network? Transport and distribution can be a considerable part of your costs. It is no good producing a perfect product or service if you cannot get it to the market economically and on time. You must get the best value from your expenditure. Back to full listContinually improving your business Best value requires businesses to ensure continuous improvement in their performance, and to demonstrate a commitment to sustainable development. This checklist looks at the factors affecting quality in your business to examine where there may be opportunities for improvement. Do you: Now In future no no yes yes Consult your customers on the quality of your products? Keep records of customer complaints? Have clear quality standards for your business? Monitor your performance to identify scope for improvements in or through  quality improvement discussions/programmes? Keep up-to-date with what your competitors are doing?  Know what it is that your customers value in your product/service? Build consideration for continuous improvement into each activity/new  development? Ensure that the information you gather for monitoring your business drives  continuous improvement? Quantity without quality could ruin your longer-term market prospects. Quality is a measure of your ability to meet the needs of your customers in a more cost-effective way than your competitors. Be careful to avoid ‘over quality’. Your products and services need only meet your customers’ needs and what they are prepared to pay, not exceed them. Back to full listYour management and staff Good people management is at the heart of achieving a successful, high performance business. This checklist looks at the key criteria for achieving success through people. Are you: Now In future no no yes yes Developing a multi-skilled workforce? Using the right staff in the right place? Properly training and encouraging staff?  Delegating and empowering your staff?   Monitoring labour efficiency?  Obtaining adequate feedback from your sales force? Encouraging communication across activities? Defining the purpose of the job, job duties and responsibilities? Defining performance goals with measurable outcomes? Defining the priority of each job responsibility and goal?  Holding interim discussions and providing feedback about employee  performance? Providing coaching and mentoring to staff to help them achieve their full  potential? Management is all about achieving success through people. Manage them properly and enable them to maximise their own contributions to the success of the business. Back to full listYour growth As markets mature, companies need to find new sources of growth. Businesses that are not growing through new product and service introduction are likely to be in decline, as their existing sales portfolio inevitably matures. This checklist examines the key drivers for growth and managing growth. Are you: Now In future no no yes yes Developing new outlets and products? Training your staff to meet the demands made of them? Planning to dispose of parts of your business to get cash? Sure that your premises are suitable for your business?  Matching production processes to meet demand?  Sure that new capacity will cover demand? Managing projects to come in on time, to cost and to specification? Able to provide capacity enhancement or cover for time or cost overruns? Building new capacity in phases to meet demand? Planning to grow by natural progression or by buying another business?  Exporting? Consider whether you want or need to grow. If you decide to grow then do so in a manner that the business can sustain. Appraise the time it takes for you to bring a new project on stream. Match the market with all the resources necessary to achieve your objective. Back to full listYour compliance with regulations and stakeholders’ expectations It is important that you comply with statutory and other regulatory obligations. Non-compliance is costly and could put you out of business. This checklist covers the key areas of compliance that businesses need to be aware of. Are you: Now In future no no yes yes Conforming with central and local government requirements? Complying with directors’ responsibilities and reporting requirements  in accordance with company law, Inland Revenue and environmental regulations? Meeting health and safety requirements?  Complying with VAT regulations? Legally bound by contracts and aware of their effect?  Complying with employment and payroll legislation?  Unsure of your statutory obligations? Addressing the main ethical challenges to your industry, products and  services? Taking ethical considerations into account when making decisions? Don’t let regulations put you off. An integrated approach to information will mean that many of the demands of the tax man and others can be met from the same information source that enables you to run your business better. Back to full listSummary The current financial crisis means that now, more than ever, small companies need to take a good look at the fundamentals of their businesses, and understand how they can improve performance, strip out any unnecessary costs and focus on the right strategy to survive and take their businesses forward. When times are tough, knowing exactly what you are facing and being realistic about what needs to change will put your business in better shape to respond quickly to further changes in the market (be they positive or negative) as they occur. Using these checklists will place you in a better position to understand areas of weakness in your business and your potential exposure to the downturn. However, the key thing is prioritising which areas require immediate attention and identifying appropriate actions to deal with them. Here are some suggested next steps: 1. Talk to your accountant or business advisor – sometimes it’s difficult to see the wood for the trees and get an objective view of your business. Your accountant or local business advisor can help with identifying potential issues and provide useful solutions and further guidance: • CIMA Members in Practice are Chartered Management Accountants in professional practice that provide accounting services to all types of businesses. Find a practicing accountant in your area now. • Local Chamber of Commerce business advisors provide business advice, support and investment and can put you in touch with the right people to help. 2. Cash is king, especially in an economic downturn. • Cash flow management - This CIMA technical guide explores cash management in SMEs and includes maximising cash inflows, managing cash outflows, cash flow budgeting and using company accounts. It is not intended to be complex or exhaustive, but rather to act as a basic guide to the smaller business. 3. Evaluate your strategy – during times of economic turmoil and low availability of finance, there is often a danger that corporate strategy can take a back seat to survival. • Strategy under stress – CIMA has developed a framework to help boards and management engage with strategy in order to drive better decision making, both during a recession and in preparation for the subsequent upturn. 4. Focus on improved decision making – decision making is becoming the basis of competitive advantage and value creation. By focusing on high quality financial and management information and operational efficiencies in the finance and accounting function, businesses can greatly enhance their financial performance. • Improving decision making in organisations - CIMA’s reports explore the vision for the finance and accounting function in delivering enhanced business decisions and ways in which organisations can make transformational changes in their decision making processes. 5. To ensure effective performance management businesses need to use their resources in such a way as to maximise delivery and fulfilment of their strategic objectives. • CIMA strategic scorecard - This CIMA technical report discusses this in depth.Other useful resources • Topic gateways – CIMA’s innovation and development department has developed a range of useful guides on key business topics, covering subjects such as: benchmarking, competitor analysis, customer profitability analysis, enterprise governance, mergers and acquisitions and strategic analysis tools. • CIMA Mastercourses – provide a range of one and two day continuous professional development (CPD) courses with some specifically for SMEs. • CIMA bitesize briefings – provide short updates on current topics and are designed to minimise time away from the office and offer training at minimal expense. • Business essentials – coming soon: a half day selection of continuous professional development (CPD) training at value prices. • Business Link – the government’s small business support service offers free advice and a number of useful online resources including a business health check. • The Federation of Small Businesses – is a membership organisation providing support, information and advice to small businesses. • – is an online resource start-up business. Their site includes news, information and how-to guides on a range of business issues. • Companies House – has a wealth of information on starting up a company. • UK Trade & Investment (UKTI) – provides companies with knowledge, advice and practical support on international trade, as well as assisting overseas companies to bring investment to the UK. • Business Gateway – is an information service for businesses in Scotland. It provides details of support around finance, premises, training, tendering and free business workshops, along with information resources, link directories, business news and events. • Train to Gain – Train to Gain is the single point of access for businesses to get the training advice and support needed to succeed. • Banks – the following banks provide a wealth of advice on issues facing small businesses. • LloydsTSB • Barclays • NatWest • HSBC • Abbey • Learn Direct – provides a range of advice to support small businesses (including podcasts, videos and articles). • Small – has an extensive range of articles of interest to small businesses, including: starting-up, small business finance, employing staff, legal advice and sales and marketing. • Direct Advice – is an online business resource for SMEs and business start-ups that provides good basic advice on a wide range of issues, including: company formation, basic tax issues, employment law, search engines and websites in addition to general business advice. • My Business – provides small business finance advice, business opportunities and has information on small business development and small business resources. • – provides free small business advice (articles, guides, plans and factsheets), plus a small business directory, news and business services for startups and established firms. • – is an online resource with information and advice to help small business owners, directors and entrepreneurs run their businesses more effectively and efficiently. • Envirowise – is a UK government site which offers free, independent support to your business helping you to become more resource efficient and save money.

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