GROWING
YOUR
BUSINESS
Strategy, social media,
cash flow and the future
BROUGHT TO YOU BY
GROWING YOUR BUSINESS
Contents
Introduction
3
1. What’s your cover story? Take time to work on, not in, your business
4
2. Digilogue dreams: Romancing analogue hearts, securing digital minds
7
3. Social media: Ignore at your peril
11
4. Keeping your business alive: Monitoring the vital signs
14
Conclusion
16
Over to the floor | SME owners put
questions to the expert panel
2
INTRODUCTION
Introduction
Getting your small business started is the tip
of the iceberg. It might feel like a triumph in
itself, epically when it becomes a mediumsized enterprise, but keeping it running at a
profit, and doing so while maintaining some
semblance of a normal life outside work is a
huge challenge.
More than 110,000 businesses started in
the first half of this year, but 80% of those
aren’t expected to last past four or five
years. One way to avoid this is by taking
a leaf from the expert’s book. Social media
programs, cash flow planning, long term
strategy building and future proofing for
an emerging digital economy underpin
good business management.
Each of these topics were explored at the
Growing Your Business Seminar presented
by SmartCompany and Officeworks, in August
in Melbourne. The key advice from the four
expert presenters is set out in this eBook to
make sure you have the best tools to take
your business forward.
SMEs at the Growing Your
Business seminar at Zinc
in Melbourne
Written by: Claire Stewart
Edited by: Melinda Oliver
3
Part 1 - WHAT’S YOUR COVER STORY?
Mike Sewell | Market Gap Investments director,
says without a strategy your SME can’t thrive
What’s your cover story? Take
time to work on, not in, your
business
Market Gap Investments director, Mike
Sewell, has more than 20 years as an expert
in financial services and small business.
He says people need to step back and start
thinking about the business as a dividend
yielding asset.
Strategy might seem like a ‘doh’ element in
building a business, but it gets forgotten in
the melee of day to day tasks.
According to research from the NSW Business
Chamber, more than 90% of the 700 best
small businesses in Australia had a five to
10 year strategy.
“Strategic planning is about creating space to
build that asset for you and the lifestyle that
you want, as well as creating a valuable asset
going forward,” he says.
Sewell says all business owners should be
able to articulate their strategy. Work out
what kind of business you want. Why did you
start the business in the first place? Was it
a long held passion to create a product for
market, or did you see an opportunity within
your field that you could exploit?
And it shows in returns: Sewell says his
experience shows management teams who
could articulate their strategy and understood
their numbers, were making more than 25%
returns, compared to other businesses which
were still good, and solid, but lacked that
strategy, and were making between zero
and 5%.
Sewell, who is current chair of the CPA’s
Centre for Excellence for Environment,
Social and Governance and is in
entrepreneur development at AIG, says
developing a strategy that takes account
of where your company is in its business
lifecycle, while leaving room for some
flexibility to change where it might end up,
4
Part 1 - WHAT’S YOUR COVER STORY?
is more important than simply chasing
revenue growth.
“People who succeed reassess and work out
how to reinvent themselves going forward,”
he says.
Reinvention is particularly challenging during
the growth phase because you need to keep
aware of what’s happening in the market and
see other opportunities at exactly the same
time as you are flat out employing people,
trying to manage customers, balancing the
cash to allow you to expand.
Sewell’s trick is to create a ‘Cover Story’.
Imagine it’s 2020 and your company is being
featured on the front cover of a business
magazine and they’re talking about the
journey you’ve taken to get there.
“What is the story I would like to tell, how
do we do it as a group of people, what’s the
headline, what are the good things, what are
the hurdles we faced?”
The answers can then be reflected in
your weekly, quarterly, or annual budgets
planning process.
“Just find half a day a week, to get away
from what you’re doing and to think about
where you want to be, and then shape
the business going forward.”
5
Part 1 - WHAT’S YOUR COVER STORY?
1. MIKE SEWELL’S TIPS
FOR STRUCTURING
YOUR BUSINESS
•
Write your own ‘Cover Story’ and detail
the steps to get there.
•
Don’t just focus on business size and
chase revenue growth.
•
Grow the business so you can sell at
the drop of a hat, on your own terms.
2. PEOPLE
3. MARKET
•
What place do you occupy in the market?
•
Where do you fit in the value chain in
your industry?
•
Stay in touch with the market, and watch
for change in your industry – has change
created opportunities for you?
4. SALES
•
The customer creates value in your
business model, so how do you talk and
relate to your customers, and how often?
•
Who are your current and future clients
and how are you going to service them?
•
•
What sort of people do you need around
you to do this?
How do you attract customers? Is it online,
direct sales, a sales force?
•
•
What values should you instil in the
company to attract the right people to
enable you to spend time out of the office
working on the business?
Is customer relationship transactional, one
off, or do you want something long term?
•
Remember that headline clients aren’t
always best for the business. Keep the
right customers happy, and don’t be afraid
to say no sometimes.
•
It’s a rare business owner who manages
to run a successful enterprise nine to five.
For almost everyone else, being your own
boss means having the business totally
entwined with your life: weekends, after
hours, 3am before supplier invoices
are due.
6
Part 2 - DIGILOGUE DREAMS
Digilogue dreams: Romancing
analogue hearts, securing
digital minds
Formulating a long term business strategy
is critical for successful growth, but without
the willingness to reassess and reinvent both
their product offering and delivery to market,
SMEs risk being made obsolete by rapidly
changing technology and an increasingly
digitised consumer base.
If you spoke to Anders Sorman-Nilsson, the
first thing he’d ask is whether you wear an
analogue watch. A surprising number of
people do, he says, despite there being better
digital products to keep time.
It’s usually for fashion, or sentimentality,
that people choose analogue, and it’s the
sentimentality that Swedish born SormanNilsson, an Innovation Strategist with Looking
to the Future, is particularly interested in.
“Everything that can be digitised eventually
will be,” he says by way of encouraging
businesses to prepare for the future
by adapting their strategy to maximise
online commerce.
The trick though, is finding a happy medium
between traditional business models that
baby boomers are comfortable engaging with,
and digital technology that opens up avenues
to the escalating number of people whose
first preference is for online marketplaces.
“We are emotionally and fundamentally
analogue at heart. So how do we win
analogue hearts in a digital world?”
It’s a question his mother faces in Sweden,
as she struggles to get the family’s bespoke
tailoring business to its 100-year anniversary.
Increasingly she has seen customers come
through the door, have their measurements
taken by a tailor, peruse the rows of fabrics
then (not so subtly) scan the barcodes, jot
down the measurements, photograph the
trimmings, walk out and order the same suit
online from China.
“Her business model is well adapted for a world
that no longer exists,” Sorman-Nilsson says.
Futurist Anders Sorman-Nilsson says melding
analogue sentiments with digital optimisation
is the way to attract customers
7
Part 2 - DIGILOGUE DREAMS
SmartCompany editor Cara Waters hosting the
Growing Your Business Seminar in Melbourne
She hates change, but digital commerce
now permeates so much of our everyday
existence that it is no longer an option to rely
on “analogue” sentimentality to secure sales.
She must embrace the digital disruption
but do it without isolating clientele who
fundamentally don’t like change.
“It is important not to create a digital divide,
but a digital provide,” he says.
If you have intellectual property or skills,
or knowledge about your market that others
don’t, create YouTube videos, use social
media to disseminate tips and tricks that
people will find helpful, as a means of creating
that sentimental ‘belly to belly’ connection in
the internet age.
His mother’s shop recently launched
a YouTube video which featured his father
giving instructions on tying a popular four
in hand tie knot. It was a simple, inexpensive
gesture and melds sentimentality with
usefulness, with digital distribution. It was
picked up by a newspaper, and retweeted
en masse. She recorded her best two months
of sales in a decade.
“We’re all in media, so publish optimally,”
Sorman-Nilsson says of the instant
media access that digital and online
platforms provide.
He says to use Google Trends, make sure what
you publish about your business or industry
is ‘news aligned’, that is, find current issues or
debates to hook your content to. Use visual
storytelling, create videos, take photographs
and maximise social media like Instagram,
Pintrest and Tumblr for retail driven businesses.
Critically, the trick to digitising is to prepare
content once, then use scheduling and
automation tools like Hootsuite, Buffer and
Sprout Social to complement your actual
engagement. However, try to avoid your
platform becoming an automatic channel that
only posts links to your own content, though.
Instead, form relationships by engaging
with people, responding to comments, and
instigating discussion, he says.
8
Part 2 - DIGILOGUE DREAMS
Sorman-Nilsson also recommends businesses
host educational events online, or create
and attend digital presentations, then go to
webinars, and use Google Hangouts to post
‘thought leadership’ pieces to drive promotion
of the business.
Whatever you do, review all the touch points
and processes in a business to work out what
must be digitised, and those things – like a
handwritten thank you note – that must never
be digitised.
“Some pieces should remain fundamentally
humane,” he says. “While at times digital may
seem dehumanised, it provides huge human
amplification. But some pieces should remain
fundamentally humane.”
And don’t forget the value of face-to-face contact.
OLD AND NEW
Fashion label Burberry, which
was established in 1856, has
amplified the attraction of its
physical shopping experience
by digitising the London
flagship store. It now uses
iPads and mirrors that pick
up on what the customer
is holding, or wearing, then
automatically displays
product descriptions and
prices. It also uses huge drop
down screens to broadcast
live events and look-books,
as well as styling and
accessories suggestions.
“Never dine or lunch alone. Breaking bread
might still just be the most profound thing you
can do with someone to connect, and sell.”
9
10
Part 3 - SOCIAL MEDIA
Dionne Kasian-Lew | chief executive of The Social Executive,
says pick your social media channels wisely and use them well
Social media: Ignore at your peril
Eight people every second are joining some
sort of online social media platform and the
biggest growth is coming from the 55’s and
over market. As e-commerce grows at double
digit rates, Boston Consulting estimates the
digital economy of the G-20 nations will hit
$4.2 trillion by 2016, or roughly 5.5 per cent
of their GDP.
Still, leaders and businesses are missing in
action. SmartCompany research shows while
74.49% of SME’s are using social media
to communicate company messages and
marketing, but 41% don’t think they are
getting a return on their investment.
Clearly, it is not enough.
Dionne Kasian-Lew, chief executive of The
Social Executive, which helps businesses
tailor their online strategy, says she hears
all too regularly from business owners and
executives, who say ‘well, I’m successful and
doing OK, and we’re not in social media’.
“That might have been true in the past, but it
won’t be for very long,” she says. After more
than 12 years of exponential growth, social
media has shrugged off the myth that it’s a
temporary fad, to become a business reality.
She explains that surveys show only 15 to
30% of senior executives have signed up for
social media, and many don’t use it actively,
which is a bit like going to a networking event
and standing alone in the corner. Inactive or
‘dead’, social media accounts send the wrong
message about a business. You’re better off
to have one active account, than ten that
haven’t been touched in months.
Reports from CapGemini and McKinsey found
that companies with an online presence,
who actively engage in social media, and are
digitally mature (of which social media is a
part, but not all), are outperforming their
competition by about 30%.
You can’t afford to not be there.
11
Part 3 - SOCIAL MEDIA
“A lot of things I hear from C-suite
executives is that ‘I don’t want to go on
social media because what if someone
says something bad about me?’ Well, you
know what, they already are,” she says.
Kasian-Lew says don’t respond to
malicious conversations, or get bogged
down in politicised debate. But you should
have an online presence not just to dispel
negative information but also to tell your
own narrative.
Twenty years ago, best practice was
companies who had their staff on a tight
leash, where every piece of communication
that went out was tightly scripted and
monitored. It doesn’t work like that now.
People are having conversations about
the brand regardless. Have faith in your
people that they will have good professional
judgement, no different to what you would
expect them to have on the phone, or face
to face.
“So allow them to be open and transparent
and inject a little bit of personality into their
online sharing,” which, Kasian-Lew says, can
be done whilst managing risk with good social
media policies and educating staff about
online etiquette.
For older people who think they’re the wrong
generation to use social media intuitively,
focus on what you know, that younger
generations don’t.
“They might have grown up with it, but it
doesn’t mean they know how to use that
technology for business,” she says. “The years
you have of understanding business and
management… that is all relevant, you just
need to take that online.”
7 MYTHS OF SOCIAL MEDIA
1. Social media is a fad
2. It’s only for posting photos of your lunch
3. It’s only for young people
4. You have to be a code-monkey to use it
6. It’s only for marketing
7. There’s no calculable ROI
12
Part 3 - SOCIAL MEDIA
For service or IP-based businesses, the way to
do that is find a platform like LinkedIn. With
300 million professional members across 200
countries, in 20 languages, it provides a place
to share updates about the business, or ideas
from conferences you’ve been to, publish
thought content, participate in groups, or
curate and link to content you’re reading
from others.
A 2013 report from Cogent research found
that 70% of the most affluent investors spend
time on LinkedIn, and had used it to change a
portfolio mix, or broker, or financial advisor as
a result of information they found there.
Anders Sorman-Nilsson
13
Part 4 - KEEPING YOUR BUSINESS ALIVE
The expert panel at the Growing Your Business
Seminar answer questions from SMEs
Keeping your business alive:
Monitoring the vital signs
Even if you’ve managed to formulate a
strategy, identified how your business can
take advantage of the digital economy into
the future, and nailed how to use three of the
best social media platforms, if cash flow fails,
the business won’t survive.
In December 2012, cash flow was the second
biggest issue on the SmartCompany Crowe
Horwath SME worry list. A year later, it was
number one. Josh Kennedy, Crowe Horwath’s
director of business advisory services says the
most important thing is to focus on collecting
that cash.
“It’s the lifeblood of any business,” he says. “In
order to grow your business, cash is King.
“You’re not a bank, don’t let customers
use you as one. Incentivise for prompt
payments with a discount…and don’t be
afraid to sack bad clients.”
Mike Sewell agrees, saying collections that
are generally around the 59-day mark should
actually be around 35 days.
“When you’ve finished a job, get immediate
feedback from the client, check if they’re happy
with the work,” Sewell says. “As you leave, say,
‘we’ll issue the invoice this afternoon, and
expect payment Friday week. On the next
Thursday, get someone to call and remind
them payment is due the next day.”
Online tools such as Business Model Canvas
can help manage cash flow, but Kennedy says
his tips are what businesses should be doing,
as a minimum. Planning and forecasting is a
must. If you’re not sure where to start, speak
to your accountant or advisors, he says. As
part of that, assess your growth plans, work
out how much you need in funding, when
you need it and whether you want to take
equity out of the business to fund growth,
or whether you’d be better using debt, and
bearing the cost of repayments.
14
Part 4 - KEEPING YOUR BUSINESS ALIVE
Next, calculate how much working capital is
tied up in WIP, or stock, and debtors. Keep
an eye on this to ensure your growth doesn’t
get out of control, and leave you short of
cash, Kennedy warns. It’s the rapid growth
phase where many businesses come unstuck
because of over-reach.
The other element is to monitor your
inventory holdings.
“As you’re growing you’ll have a huge amount
of working capital tied up in inventory: be
measured in your ordering, you’ll be better to
order conservatively and run out than have
excess and have to discount it.”
Perform due diligence on your customers,
particularly new ones, Kennedy says. This
includes credit checks, which are a cheap
way of avoiding a crisis down the line when
a client can’t pay for your work. Part of that
is setting expectations with the client about
your terms and the work, from the outset.
“Make sure they understand because you
don’t want surprises, and you don’t want
excuses for non-payment.”
Also, invoice promptly.
“We will be more inclined to pay it there and
then, because it’s fresh in your mind. Same
goes for your customers. If you’re invoicing
customers for the first time, send it, then
call and talk them through it and make sure
they’re comfortable with it.”
Online, or cloud accounting programs can
make a huge difference keeping track of cash
flow, with electronic invoices that can be sent
from any device and contain embedded links
for easy payment – these are paid 37% faster
than those without.
It also makes it easier to keep track of your
tax obligations. Kennedy says whatever you
do, try and set aside your GST, employee
superannuation contributions and any
PAYG payments.
“The ATO is a really expensive form of
financing…and it’s not a good look if you’re
trying to secure investment if you have a poor
history with the ATO,” he says.
If you’re an importer, think about registering
for deferred GST so you aren’t immediately
liable for the tax on imported goods when
they reach Australian customs and can pass
the cost on to your customer.
Finally, Kennedy says, negotiate better terms
with your suppliers, because a change in
payment terms or a small discount can help
with cash flow.
“The same goes with banks, think of them as
your supplier of funding.”
He says don’t be afraid to ask banks for
a discount on your rates, you’ll likely be
pleasantly surprised at their response.
15
CONCLUSION
Josh Kennedy tells SMEs that “Cash is King”
Conclusion
Growing a small to medium business takes
time, a measured yet entrepreneurial
strategy, and a good grasp of what’s ahead
for businesses in an increasingly digital
economy. But with a few simple ideas, and
discipline to implement them, many of the
common pitfalls can be avoided.
Set aside time each week, at least half a day,
to work on the business, develop a longer
term strategy and assess whether you’re
sticking to it. If a longer term strategy is
difficult, create a ‘Cover Story’ to work out
what your ideal life and business will look like
down the track. Don’t be afraid to reinvent
what your business does, or how you do it.
Necessity is the mother of all invention, and
with the booming digital landscape and social
media scene, change can be a plus for small
business. Create an online platform to sell
your product, engage with customers and
tout your wares to a broader, potentially
international, market. Pick one or two social
media sites to use and keep them updated
with your tips and tricks of the trade, thought
leadership pieces or ideas about the industry.
If you can’t manage a variety of sites, just pick
one platform, like a URL, or blog, or use social
media automation tools to maximise your
coverage. Try to balance your online with your
everyday communications with customers, to
maximise the ‘belly to belly’ connection that is
the heart blood of sales.
Finally, try not to let your cash management
slip while you’re busy running the businesses.
Collect your cash as soon as possible, think
about using online accounting to simplify your
systems, monitor your inventory and do due
diligence on new customers to avoid being
left out of pocket down the track. And don’t
be afraid to sack bad clients, after all, there
will always be someone else who loves what
you do.
16