7 Deadly Sins - Business Wisdom

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October 3, 2007 TABsmc.com The Alternative Board

The 7 Deadly Sins

of Owner-Managed Businesses

Presented by:

Competitive Advantage GroupBob French, Ken Nangle, Dale Radcliff

CAgroup.net(650) 652-9393

Hosted by:

Peninsula Bank of Commerce, MillbraeFrank Hall(650) 652-6327


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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 Ds


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Our Business Growth Model


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1st Deadly Sin

Adequate Planning

The difference between a dream and aplan is that the first simply expresses a

desire to achieve something, whereasthe second expresses a method for

accomplishing the first.


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1st Deadly Sin

Adequate Planning

What is planningwhat 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


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1st Deadly Sin

Adequate Planning

Planning as a discipline

Business planning Strategic planning

Budgeting - forecasting

Succession planning Exit planning


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1st Deadly Sin

Adequate Planning

How do you create a business plan? Set aside the time, no interruptions!

Time to thinkWhat? When? How?

One page template Vision

Mission

Objectives

Strategies

Action steps


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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


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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


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3rd Deadly Sin

Having a sales process

What is a sales process?

Why is it important?

Who has an example?


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3rd Deadly Sin


A live example:

1. Telephone discussion / initial qualification

2. Meet / needs assessment

3. Prepare concept view

4. Develop shop drawings

5. Contract negotiations6. Production

7. Customer site visit


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3rd Deadly Sin


Benefits of a sales process

A check list

Repeatable & systematic

Transferable

Improves results


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4th Deadly Sin

Understanding the Financials

1. Collecting or recording data properly

2. Paying attention to financial metrics

3. Adequate capitalization4. Managing overhead

5. Controlling debt

6. Having proper financial controls


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4th Deadly Sin


Financial levers of your business

What are your key measurements (metrics) of

success?

Gross margin?

Receivables collection?

SG&A expense ratio?

Working capital?


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4th Deadly Sin


Financial ratios

Why are ratios so powerful?

How can ratios be used?

What are some common ratios?


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4th Deadly Sin


Common metrics

Gross Margin

Operating Margin

Net Margin

SG&A Expense Ratio

Current Ratio

Days Sales Outstanding


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XYZ Companys Income StatementYear ended December 31, 2006

Revenue $2,000 100.0%

COGS (1,000)

Gross Profit 1,000 50.0%

SG&A (500)Depreciation @ Amortization (50)

Other (100)

Operating Profit 350 17.5%

Interest Expense (200)

Taxes (100)

Net Profit $50 2.5%

Shares Outstanding 100,000

Earnings/Share $1.00

Dollars in (000's)


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XYZ Companys Balance Sheetas of December 31, 2006

Current Assets Current Liabilities

Cash $54 Accounts Payable $110

Accounts Recievable 166 Accrued expenses 78

Inventories 122 Short-term debt 85

Prepaid Expenses 33 Income tax payable 43

Total Current Assets 375 Total current liabilities 316

Non Current Assets Non-current liabilities

Property, plant equipment 330 Long-term debt 360

Other Assets 310 Deferred taxes 10

Total non-current Asse 640 Total liabilities 686

Shareholders equityPaid in capital 30

Retained earnings 299

Shareholders equity 329

Total Assets $1,015 Total Liabilities and SH Equ $1,015

Dollars in (000's)


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4th Deadly Sin


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


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7th Deadly Sin

Lack of a management process

What is a management process?

Why is it important?

Where do you start?


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7th Deadly Sin

Lack of management process

Our TAB Board members prepare a one pageMonthly Progress Report which includes:

Personal Vision

Objectives

Actions

Critical issue

Background

Ties to members business plan

MPR template included


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7th Deadly Sin

Lack of management process

What does this one page TAB process tool give you?

Clarity & focus

Work on whats important Systematizes the approach

Accountability

Forces tracking of the metrics


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The Alternative BoardEmpowering Our Business Owner Members to Achieve Their

Business and Personal Vision

7 Deadly Sins - Business Wisdom

Documents

Transcript of 7 Deadly Sins - Business Wisdom