By Ben Youn Copyright 2014 Quantum Business House WELCOME to QUANTUM BUSINESS HOUSE.

By Ben Youn

Copyright 2014 Quantum Business House

WELCOME to QUANTUM BUSINESS HOUSE

2 hours for each session 10 minutes tea time Bathroom & Kitchen Today’s Speaker Please network each other Future Plan- Business Forum- Networking Events- Business Mentoring


House Keeping Time

1. Setting up business structure (June 04) 2. Buying a business (June 11)3. Business Planning (June 18)4. Marketing (June 25)5. Raising Finance (July 02)6. Financial Management (July 09)7. Tax system and compliance issues (July 16)8. Risk management (July 23)9. Financial Health Check (July 30)10. Business Evaluation (August 06)


Start-Up Business Seminar 2014

Identifying the possible business threats is the first step

Planning and implementation of risk prevention or mitigation must come to action.

Solid risk management can bring the benefits of:

Lower insurance premium Reduced chance that the business may be the

target of legal action Reduced loss of cash or stock etc Reduced business down time


Risk Management

1. Customer Related

Heavy dependant on a small number of major customers.

Customers that take up a lot of resources (time, costs, etc) but are less profitable than other customers.


Identifying risks (Areas of Risks)

Risk mitigation strategies:

Locking in major customers through long-term service contacts, regularly visiting them, or continually asking their views about the business’s products and services.

Spreading the risk by developing smaller customer base and developing existing minor customers to larger customers through leverage.

Seeking lower –cost ways of servicing the less profitable customers.



2. Supplier Related

If your business is heavily dependent on a small number of major suppliers (a supplier providing 30% or more of the total product requirements), production, profit and cash flows are likely affected if one of them fails or stops supplying.



2. Supplier Related Risk mitigation strategies:

Locking in major suppliers through long-term service contracts.

Seeking alternative suppliers capable of supplying similar items.



3. Staff Related

Retaining key staff. If an employee is critical to the business’s success, then sales and profits may suffer if the employee is the in the competition position by moving to competitor or setting up a business for himself in the same industry.

If some employees are largely autonomous when dealing with key suppliers or customers, there is a risk of fraud or collusion, or there could be significant disruption to the business if they leave.



Occupational Health & Safety Issue. Are your employees working in a dirty or hazardous environment, or do they travel extensively by car?

If staff works in dangerous environment, the business could face fines and penalties, and absenteeism with injury or even death.



Risk Mitigation Strategies:

Implementing recruitment procedures for finding right employees.

Confidentiality agreement put in place and / or reasonable restraint agreements signed by key staff.

Implementing a robust performance development system for communication of performance expectations and goals, monitoring performance and setting remuneration.

Providing ongoing training for staff consistent with the needs of the business.



Allocating several people to fulfil key tasks and provide backup in the event of illness or sudden departure.

Rotating employees through various functions or departments to familiarise them with other areas of the business.

Implementing suitable OH&S policies to minimise risks.

Using equity/interests, profit sharing or other incentives to help retain key personnel and let them share the success they created for the business.



4. Location Related If the business heavily dependent on its

location to generate sales, a move to premises outside the immediate vicinity of the current location may disrupt the business by affecting customers, staff and supplier access.

Another risk is physical damages by fire, flood and other natural disasters. Also, businesses should have a plan for expansion when their current locations cannot meet the needs of the business as they grow.



4. Location Related Risk Mitigation Strategies:

Seeking a number of alternatives for customers, staff and suppliers.

Where the current premises suit the business’s long-term requirements, then consider take a long-term lease or right of first option when the lease expires.

Managing the business to predict future space requirements yearly.

Consider to purchase the current premise if only the current premise meet the business’s long-term requirements including future expansion.



5. Goodwill and Market Reputation Related

If there is a large scale of product recall, fraud, or any similar incidents, the business reputation in the market could be in danger. This could cause immediate distress and disruption to the business with trouble and costs or reworking.



5. Goodwill and Market Reputation Related


Incorporating robust review of process and quality assurance systems.

Investing in research and development and keeping up-to-date technological advances.

Compulsory training and development programs for staff.



7. Financial Transactions Related7.1 Liquidity Risk

If business is running out of money for operations, there could be significant risks to the business and its owners and directors being personally liable for the debts of the business.




Managing and monitoring cash flow on a daily, weekly and monthly basis

Forecasting cash flow including ‘what if’ analysis

Seeking a committed line of credit from at least two financial institutions

Maintaining a strong relationship with a banker or financial institutions to ensure they understand your business and kept up-to-date with potential loan requirements



Monitoring market conditions to anticipate seasonal fluctuations in cash flow (do not too optimistic)

Put significant efforts on debtor collections



7.2 Credit Risk

Debtors may not able to pay, and this may result in slow receipt of cash or even write off a bad debt




Checking the credit status of the customer before making the sale

Checking publicly available registers to verify that the customer’s business is real and to find out who is behind the business

Ensuring the customers sign a ‘terms and conditions of trade’ prior to supplying goods and services to them



Imposing credit limits to restrict your firm’s overall exposure; obtaining personal guarantees where possible

Including a ‘retention of title’ clause for the goods you supply

Maintaining strong relationships with the debtor to ensure their current liquidity status is always known



7.3 Interest Rate Risk If the business is dependent on borrowed

funds income generated from savings, every change in interest rates will affect the overall profitability of the business through increase in interest expenses or reduction in income from interest.




Consulting your bank for assistance in managing interest rate exposure

Borrowing or investing at a fixed rate to provide certainty of interest expenses or income

Matching interest income against interest expense to net the exposure



8. Competitors Related Every business has competitors.

Competitors can be threats by locating nearby (location threat), reducing prices (price competition), or launching new products in the market (product competition). Thus, a business needs to prepare for the risk from its competitors.




Researching consumer trends and tastes to respond to the change

Continually testing the market to see consumer preference and

sentiment

Promoting products and services that sell better during economic downturn

Promoting goods and services that sell well and are profitable

Using financial statements to benchmark financial and operational performance against industry benchmarks



9. Risks from Business Owner or Key Members

If there is no plan to deal with the departure of the business’s owner due to death or incapacity, the business might have to close or be sold to a competitor to avoid putting undue pressure on the remaining owner or new owners.




Consulting professional advisers who can assist in business succession, will and estate planning

Preparing a business succession plan and a will that is consistent with the plan

Undertaking insurance policies covering income or a capital invested in the event of death or incapacity of the owner or key members



Consider a buy / sell agreement and funding the agreement for the eventual transfer of the business if there are two or more owners

Documenting key processes and critical information so that other people can continue the business operations

Training employees so that more than one person knows how to perform each task



Advantages of Financial Control Good financial control will:

Help align objectives of the business – to ensure thorough reporting procedures and that the activities carried out by the business are in line with the business’s goals.

Safeguard assets – ensuring the business’s physical and monetary assets are protected from fraud, theft and errors and allowing the systems to identify those errors quickly.


Financial Control

Encourage good management – allowing the manager to receive timely and relevant information on performance against targets, as well as key figures that can indicate variances from target.

Reduce exposure to risks – minimising the chance of unexpected events.

Ensuring proper financial reporting – maintaining accurate and complete reports required by registration and management, and minimising time lost to rectifying errors and ensuring resources are correctly and efficiently allocated.


Financial Control

One of the most effective ways to protect the business against risks is to undertake sufficient insurance covers. Before buying insurance policies for your business, you may have to decide which risks you need to cover with insurance and how much.

Building and Contents Insurance

This insurance covers the business buildings as well as contents including inventory against loss.

Business interruption or loss of profit cover

This insurance covers business loss due to property damages by fire or any other insured perils. The cover should ensure that ongoing expenses are met and that anticipated net profit is maintained through a provision of cash flow.


Insurance

Public Liability Insurance

Public liability insurance covers the owner and business against the financial risk of being liable to a third party for death or injury , loss or damage of property or economic loss resulting from the business’s or the owner’s negligence.

Worker’s Compensation Insurance

It is compulsory to maintain appropriate accident and sickness insurance for all employees and certain contractors you engage in your business.


Insurance

Product Liability Insurance

This insurance covers for injury of damage caused by goods the business sells, supplies or delivers – even in the form of repairs or services.

As the type and level of cover needed requires an assessment of the particular business needs, it is necessary to seek an advice from an insurance specialist to ensure your business is adequately protected.


Insurance

Financial Health Check Business Evaluation


To be Continued!!

By Ben Youn Copyright 2014 Quantum Business House WELCOME to QUANTUM BUSINESS HOUSE.

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Transcript of By Ben Youn Copyright 2014 Quantum Business House WELCOME to QUANTUM BUSINESS HOUSE.