7 Deadly Sins - Business Wisdom
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The 7 Deadly Sins of Owner-Managed Businesses… Presented by:
Competitive Advantage Group Bob French, Ken Nangle, Dale Radcliff CAgroup.net (650) 652-9393 Hosted by:
Peninsula Bank of Commerce, Millbrae Frank Hall (650) 652-6327
October 3, 2007
TABsmc.com
The Alternative Board
Overview of the presentation Introductions Objectives for today
Transfer expertise / knowledge, tools Content you can use Share your experiences Provide us with feedback
Presentation structure / the concept Review 7 D’s October 3, 2007
TABsmc.com
The Alternative Board
Our Business Growth Model
October 3, 2007
TABsmc.com
The Alternative Board
1st Deadly Sin
Adequate Planning The difference between a dream and a plan is that the first simply expresses a desire to achieve something, whereas the second expresses a method for accomplishing the first.
October 3, 2007
TABsmc.com
The Alternative Board
1st Deadly Sin
Adequate Planning What is planning—what is a plan? Working on your business not in it Setting priorities Putting a “stake in the ground” as your goals and working toward those goals Systematic process for setting goals and improving the chance you will reach them
October 3, 2007
TABsmc.com
The Alternative Board
1st Deadly Sin
Adequate Planning Planning as a discipline………
Business planning Strategic planning Budgeting - forecasting Succession planning Exit planning October 3, 2007
TABsmc.com
The Alternative Board
1st Deadly Sin
Adequate Planning How do you create a business plan? Set aside the time, no interruptions! Time to think—What? When? How? One page template
Vision Mission Objectives Strategies Action steps
October 3, 2007
TABsmc.com
The Alternative Board
1st Deadly Sin
Adequate Planning How much planning is enough? Quality depends upon time devoted and effectiveness of the process Who should be involved in the process? Planning really never ends. Why? Tools and templates
October 3, 2007
TABsmc.com
The Alternative Board
1st Deadly Sin
Adequate Planning Take away In the next week, take the time to create: A personal vision statement A business vision statement A mission statement
October 3, 2007
TABsmc.com
The Alternative Board
3rd Deadly Sin
Having a sales process What is a sales process? Why is it important? Who has an example?
October 3, 2007
TABsmc.com
The Alternative Board
3rd Deadly Sin
Having a sales process A live example: 1. 2. 3. 4. 5. 6. 7.
Telephone discussion / initial qualification Meet / needs assessment Prepare concept view Develop shop drawings Contract negotiations Production Customer site visit
October 3, 2007
TABsmc.com
The Alternative Board
3rd Deadly Sin
Having a sales process Benefits of a sales process
A check list Repeatable & systematic Transferable Improves results
October 3, 2007
TABsmc.com
The Alternative Board
4th Deadly Sin
Understanding the Financials 1. 2. 3. 4. 5. 6.
Collecting or recording data properly Paying attention to financial metrics Adequate capitalization Managing overhead Controlling debt Having proper financial controls
October 3, 2007
TABsmc.com
The Alternative Board
4th Deadly Sin
Understanding the Financials Financial levers of your business What are your key measurements (metrics) of success? Gross margin? Receivables collection? SG&A expense ratio? Working capital?
October 3, 2007
TABsmc.com
The Alternative Board
4th Deadly Sin
Understanding the Financials Financial ratios Why are ratios so powerful? How can ratios be used? What are some common ratios?
October 3, 2007
TABsmc.com
The Alternative Board
4th Deadly Sin
Understanding the Financials Common metrics
Gross Margin Operating Margin Net Margin SG&A Expense Ratio Current Ratio Days Sales Outstanding
October 3, 2007
TABsmc.com
The Alternative Board
XYZ Company’s Income Statement Year ended December 31, 2006 Dollars in (000's) Revenue
$2,000
COGS
(1,000)
Gross Profit SG&A Depreciation @ Amortization Other Operating Profit Interest Expense Taxes
1,000 (500) (50) (100)
50.0%
350 (200) (100)
17.5%
Net Profit Shares Outstanding Earnings/Share
October 3, 2007
100.0%
$50
2.5%
100,000 $1.00
TABsmc.com
The Alternative Board
XYZ Company’s Balance Sheet as of December 31, 2006 Dollars in (000's) Current Liabilities $54 Accounts Payable 166 Accrued expenses 122 Short-term debt 33 Income tax payable 375 Total current liabilities
Current Assets Cash Accounts Recievable Inventories Prepaid Expenses Total Current Assets Non Current Assets Property, plant equipment Other Assets Total non-current Assets
Total Assets October 3, 2007
330 310 640
$1,015
$110 78 85 43 316
Non-current liabilities Long-term debt Deferred taxes Total liabilities
360 10 686
Shareholders equity Paid in capital Retained earnings Shareholders equity
30 299 329
Total Liabilities and SH Equity $1,015 TABsmc.com
The Alternative Board
4th Deadly Sin
Understanding the Financials Take away Pick two relevant ratios to your business and begin tracking every month Identify underlying problem and take corrective action when you see a deterioration in one or both measures
October 3, 2007
TABsmc.com
The Alternative Board
7th Deadly Sin
Lack of a management process What is a management process? Why is it important? Where do you start?
October 3, 2007
TABsmc.com
The Alternative Board
7th Deadly Sin
Lack of management process Our TAB Board members prepare a one page Monthly Progress Report which includes:
Personal Vision Objectives Actions Critical issue Background
Ties to member’s business plan MPR template included October 3, 2007
TABsmc.com
The Alternative Board
7th Deadly Sin
Lack of management process What does this one page TAB process tool give you?
Clarity & focus Work on what’s important Systematizes the approach Accountability Forces tracking of the metrics
October 3, 2007
TABsmc.com
The Alternative Board
The Alternative Board Empowering Our Business Owner Members to Achieve Their Business and Personal Vision
October 3, 2007
TABsmc.com
The Alternative Board
Competitive Advantage Group Bob French, Ken Nangle, Dale Radcliff CAgroup.net (650) 652-9393 Hosted by:
Peninsula Bank of Commerce, Millbrae Frank Hall (650) 652-6327
October 3, 2007
TABsmc.com
The Alternative Board
Overview of the presentation Introductions Objectives for today
Transfer expertise / knowledge, tools Content you can use Share your experiences Provide us with feedback
Presentation structure / the concept Review 7 D’s October 3, 2007
TABsmc.com
The Alternative Board
Our Business Growth Model
October 3, 2007
TABsmc.com
The Alternative Board
1st Deadly Sin
Adequate Planning The difference between a dream and a plan is that the first simply expresses a desire to achieve something, whereas the second expresses a method for accomplishing the first.
October 3, 2007
TABsmc.com
The Alternative Board
1st Deadly Sin
Adequate Planning What is planning—what is a plan? Working on your business not in it Setting priorities Putting a “stake in the ground” as your goals and working toward those goals Systematic process for setting goals and improving the chance you will reach them
October 3, 2007
TABsmc.com
The Alternative Board
1st Deadly Sin
Adequate Planning Planning as a discipline………
Business planning Strategic planning Budgeting - forecasting Succession planning Exit planning October 3, 2007
TABsmc.com
The Alternative Board
1st Deadly Sin
Adequate Planning How do you create a business plan? Set aside the time, no interruptions! Time to think—What? When? How? One page template
Vision Mission Objectives Strategies Action steps
October 3, 2007
TABsmc.com
The Alternative Board
1st Deadly Sin
Adequate Planning How much planning is enough? Quality depends upon time devoted and effectiveness of the process Who should be involved in the process? Planning really never ends. Why? Tools and templates
October 3, 2007
TABsmc.com
The Alternative Board
1st Deadly Sin
Adequate Planning Take away In the next week, take the time to create: A personal vision statement A business vision statement A mission statement
October 3, 2007
TABsmc.com
The Alternative Board
3rd Deadly Sin
Having a sales process What is a sales process? Why is it important? Who has an example?
October 3, 2007
TABsmc.com
The Alternative Board
3rd Deadly Sin
Having a sales process A live example: 1. 2. 3. 4. 5. 6. 7.
Telephone discussion / initial qualification Meet / needs assessment Prepare concept view Develop shop drawings Contract negotiations Production Customer site visit
October 3, 2007
TABsmc.com
The Alternative Board
3rd Deadly Sin
Having a sales process Benefits of a sales process
A check list Repeatable & systematic Transferable Improves results
October 3, 2007
TABsmc.com
The Alternative Board
4th Deadly Sin
Understanding the Financials 1. 2. 3. 4. 5. 6.
Collecting or recording data properly Paying attention to financial metrics Adequate capitalization Managing overhead Controlling debt Having proper financial controls
October 3, 2007
TABsmc.com
The Alternative Board
4th Deadly Sin
Understanding the Financials Financial levers of your business What are your key measurements (metrics) of success? Gross margin? Receivables collection? SG&A expense ratio? Working capital?
October 3, 2007
TABsmc.com
The Alternative Board
4th Deadly Sin
Understanding the Financials Financial ratios Why are ratios so powerful? How can ratios be used? What are some common ratios?
October 3, 2007
TABsmc.com
The Alternative Board
4th Deadly Sin
Understanding the Financials Common metrics
Gross Margin Operating Margin Net Margin SG&A Expense Ratio Current Ratio Days Sales Outstanding
October 3, 2007
TABsmc.com
The Alternative Board
XYZ Company’s Income Statement Year ended December 31, 2006 Dollars in (000's) Revenue
$2,000
COGS
(1,000)
Gross Profit SG&A Depreciation @ Amortization Other Operating Profit Interest Expense Taxes
1,000 (500) (50) (100)
50.0%
350 (200) (100)
17.5%
Net Profit Shares Outstanding Earnings/Share
October 3, 2007
100.0%
$50
2.5%
100,000 $1.00
TABsmc.com
The Alternative Board
XYZ Company’s Balance Sheet as of December 31, 2006 Dollars in (000's) Current Liabilities $54 Accounts Payable 166 Accrued expenses 122 Short-term debt 33 Income tax payable 375 Total current liabilities
Current Assets Cash Accounts Recievable Inventories Prepaid Expenses Total Current Assets Non Current Assets Property, plant equipment Other Assets Total non-current Assets
Total Assets October 3, 2007
330 310 640
$1,015
$110 78 85 43 316
Non-current liabilities Long-term debt Deferred taxes Total liabilities
360 10 686
Shareholders equity Paid in capital Retained earnings Shareholders equity
30 299 329
Total Liabilities and SH Equity $1,015 TABsmc.com
The Alternative Board
4th Deadly Sin
Understanding the Financials Take away Pick two relevant ratios to your business and begin tracking every month Identify underlying problem and take corrective action when you see a deterioration in one or both measures
October 3, 2007
TABsmc.com
The Alternative Board
7th Deadly Sin
Lack of a management process What is a management process? Why is it important? Where do you start?
October 3, 2007
TABsmc.com
The Alternative Board
7th Deadly Sin
Lack of management process Our TAB Board members prepare a one page Monthly Progress Report which includes:
Personal Vision Objectives Actions Critical issue Background
Ties to member’s business plan MPR template included October 3, 2007
TABsmc.com
The Alternative Board
7th Deadly Sin
Lack of management process What does this one page TAB process tool give you?
Clarity & focus Work on what’s important Systematizes the approach Accountability Forces tracking of the metrics
October 3, 2007
TABsmc.com
The Alternative Board
The Alternative Board Empowering Our Business Owner Members to Achieve Their Business and Personal Vision
October 3, 2007
TABsmc.com
The Alternative Board
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