5 Ways to Reduce Expenditures in your Business

Strategy Plan One 

January 31, 2012 

 

Tough economic times require tough business and financial management measures.  In some cases with declining revenues, there is a need to balance the budgets by reducing costs.  Here are some ways to potentially assist in this balancing act:

 

Contracted services

In describing contracting out as a cost saving measure, there are obvious sensitivities and considerations in maintaining employment levels first.  Your employees are valued individuals.   However, instead of running up new staffing costs or continuing to support more staff than your organization needs, consider the benefits of contracting.  Contracting offers flexibilities in scope of work, deliverables, cost and timing.  Most contracts provide the ability for a manager to flick the switch on and off when services are needed.  You will have a defined cost attached to each piece of work, and unnecessary overhead costs can be reduced.

 

Flexible Work Arrangements

If you can maintain service levels it may be in your best interest to provide options to employees such as flexible working arrangements from home.  This could reduce office overhead as office space would not be needed.  Virtual assistants are popping up all over the place as viable alternatives, and in today’s age of connectedness, there is sometimes no need to be at a physical location.  Management from afar is sometimes challenging, but performance, quality and quantity of work can still be tracked.

 

Reduction of Fleet Vehicles

Depending on what business and industry you are in, you should probably review the unnecessary costs associated with maintaining a fleet of vehicles for operations.  It also depends on how frequently your employees travel.  It may make sense to move to a Personal Motor Vehicle (PMV) allowance, based on a set rate for usage (usually $0.XX per mile).

 

Partnerships

Depending on the partnership arrangements, a whole list of savings can be realized, from sharing of internal staffing resources, to marketing costs, to utilization of partner resources completely.  Do not overlook partnerships as a valuable cost saving measure.

 

RFP Processes

Request for Proposal (RFP) processes in any business should be considered as an essential procedure for the procurement of any goods and services for the business.  RFP processes allow you to define the scope of work and allow you to send out requests to suppliers to competitively bid on that scope of work.  Ensure you also develop an RFP assessment, ranking score card that may rank bids based on cost, experience, track record, timing, and added benefits.  If you need to find a low-cost provider to reduce expenditures, this may be the process for you.

 

Carefully review your processes and procedures to maximize value, while trying to maintain balance in your budgets.  Whenever possible seek the advice of a qualified professional for financial management.

Strategy Plan One

© Strategy Plan One 2012

Business information, resources and tips for the entrepreneur

4 Key Sections of a Business Plan

Strategy Plan One

January 25, 2012 

When considering business plan development, there are 4 key sections or components to business plans:

 

1.       Business Plan

 

Your first emphasis should be on the content / body of the business plan.  This section of the full document contains the descriptive body of the business or venture.  As you develop this, add in content from research, outside consultations, and your own views, opinions and information.  Keep in mind to write this as objectively as possible, rather than your own biased, subjective views.  It may be easier to write each section separately to begin with.  Later link the sections together.

 

To make the business plan stronger, research all elements thoroughly before writing.  Sources of information include info from successful business people, the internet, library, local business development agencies or business advocacy group, competitors, industry expects, or consultants.  Strengthen your business plan by quoting your source of information.  In a logic sense, you should support any outlining assumptions with factual information.  Use clear and plain language that your reader will understand and will grab his/her attention.  As you work on sections of the business plan, write out ideas completely and clearly, otherwise you may get lost, loose direction or focus.

 

In your own process, you should write drafts first, then edit for a final product.  For the final draft, ensure the product in smooth and error free.  An error-filled document shows incompetence or unprofessional work.  Proof read to eliminate errors, typos, of confusing grammar.

 

2.       Financials (In pro-forma format)

 

The four essential financial documents:

–          12 month cash flow projection

–          3 year cash flow projection

–          3 year projected balance sheet

–          3 year projected income statement

Funding agencies, investors and lenders will need these documents to base a funding or investment decision on.  These documents will demonstrate if a project is projected to be viable, profitable, and/or meet financial goals.  Financial ratios and indicators are important financial measurements of the business.

 

3.       Executive Summary

 

The executive summary is the upfront section of the business plan that highlights key features of your business.  This section summarizes the body and financial sections of the business plan.  It is the first section of a competed business plan intended to grab the attention of the reader.  It should summarize sections in bold, colorful, and brief wording.  Usually a page or two, the executive summary will highlight the merits and benefits of your business or project.

 

4.       Appendices

 

The appendices contain the supporting documents, such as resumes, certificates, diplomas, letters of reference, equipment and supplies quotes, letters of intent, partnership agreements, Articles of Incorporation, maps, photos, product/service samples, and other documents that will support your business plan.  Organize this section, labeling each appendix.  Make references in your business plan to the specific appendix.

Financial funding agencies and, commercial lending institutions want to ensure that you are actively involved in the business planning process, especially if you acquire the assistance of a professional or consultant to help you develop a business plan.  You should fully understand the business plan and its implications as a guiding tool for you.  As a final note, business owners who develop and write business plans have a better chance of succeeding than those individuals who did not.

 

Strategy Plan One

© Strategy Plan One 2012

Business information, resources and tips for the entrepreneur

Advantages of Partnership Building & Collaboration

Strategy Plan One

January 23, 2012 

 

Entrepreneurs and start-up businesses sometimes, in a flawed approach, consider going it alone at the onset of operations, or when it comes to new opportunities.  If your business has valued opportunities or access to a resource, then others will be interested. Likewise, you may find external opportunities with companies that may have synergies with your business and your lines of products and services.

 

In a few case examples, if a new business venture has operated in isolation, the competition in that industry had little interest other than keeping track to ensure the new start-up wasn’t encroaching on their market share.  As you may be preparing to launch your business, the time might be right for you to work with outside firms to further mutual business objectives, and enjoy mutual benefits.

 

Developing close working relationships with partners may result in many potential advantages for your business, including:

 

• Greater benefits gained through economies of scale

 

• Sharing of risk associated with a new project, product or service

 

• Use of your partnering firms’ supplies and equipment, versus your business having to supply all infrastructure and paying for all costs associated

 

• Use of firms’ working capital, reducing the need for you to obtain financial resources

 

• Capacity and skill transfer, drawing upon existing expertise in operations and management

 

• Collaborative marketing, rather than having to develop all of this intelligence in house at the onset of operations

 

• Access to more partners

 

The potential benefits of working with the partnering firms and companies may potentially outweigh any negatives, and should be investigated and considered.  Many successful businesses have noted key success factors including developing strong partnerships and joint ventures.  However, ensure that you spend the time to develop relationships, demonstrate business cases, and build trust with partners.

 

Strategy Plan One

© Strategy Plan One 2012

Business information, resources and tips for the entrepreneur

Financial Resources for your Business

Strategy Plan One

January 22, 2012 

Your Own Money

Yes, you will most likely need to invest some of your own hard earned cash for your start-up or for your business expansion.  Usually it’s a smaller percentage of the overall funding requirement, but it all depends on the size of the project and the size of the financial requirements.  A good starting point would be to set aside your own savings that would equate to 10-25% of the project costs.  It will also depend on what the lenders or other agencies require, and what other sources will round off the full financing package.

Commercial Loans

Business loans are the most common financial source for business projects.  Loans are usually at a higher percentage rate as the risk associated with business loans is higher than with car and home loans.  Most commercial lenders will require a detailed business plan, will conduct a credit check on you, and may ensure that you have collateral or security to back the loan.

Business Grants

If you do some homework and research, you will find that you may be eligible for business grants in the US and in Canada.  Grants usually exist in two formats – repayable and non-repayable.  Repayable grants involve the gradual repayment of a grant over a period of time.  You do not have to repay a grant from a non-repayable grant program.  However, keep in mind that each program will have terms and conditions, and in most cases if you don’t stick to the terms and conditions, those grants could become repayable.  In this current economic climate, it has become harder and harder to acquire grants, and each program has become highly accountable.  If you are privileged to be a recipient of a grant, it is worth your while to follow through with your commitments and adhere to the terms and conditions.

Other Sources

You could also obtain other sources of funds for your business through a small line of credit, loans from friends or family, investors, or from credit cards.  Be extremely cautious with lending sources or credit companies that carry high interest rate terms on the principle amount – these sources would be the absolute last resources for funding your business.

Strategy Plan One

© Strategy Plan One 2012

Business information, resources and tips for the entrepreneur

Make money as an entrepreneur, and a little business planning will help

Strategy Plan One

January 20, 2012 
You may have heard stories or know someone successful who has made a pile of money as an entrepreneur.  Others may also know of stories where the person has lost everything.  There is no sure-fire way of guaranteed piles of money as an entrepreneur but here are some tips that may assist you to become successful and make varying levels of income.

 

Characteristics and Traits

Do you have the personality and traits required to be a successful entrepreneur? This is an excellent question to ask yourself and good starting point for self-assessment.  A cross section of successful entrepreneurs exhibit characteristics such as motivation, determination, educated, experienced in operations and management, excellent partnership building and negotiation skills, and good people skills.  They have great instinct and have vision.   With goals in mind, successful entrepreneurs can see a pathway and plan to achieve those objectives.

Money and Financial Planning

Entrepreneurs need money to start a business.  Whether it’s a $500 or $1 million start up, self-starters will need owner equity requirements to start up a business.  That doesn’t mean you need to cover 100% of the costs, but that you need some of your own cash that can be leveraged to obtain a commercial loan and other sources of funding.

Astute entrepreneurs are good financial planners.  They can foresee the financial risks and plan to mitigate those risks.  Entrepreneurs undertake strong financial analysis to ensure goals can be met.  They analyze financial indicators such as return on investment, return on equity, profit margins, etc.  Business owners will develop a future financial plan for the utilization of profit, or potential investment plans for retained earnings.

Business Planning

A high percentage of all successful ventures have completed detailed business plans.  A business plan is your blueprint for business.  It incorporates everything you must plan for in your operations and management of the company.  Through research and due diligence you will identify the right markets for the right products and services at the right price at the right time.

Establishing goals and objectives is the essence of every plan.  The management, operational, financial and strategic plans are all built around end goals and objectives. With proper planning you will achieve your revenue goals and objectives.  The more effort you and your team put into planning, the closer actual results may be to your planned objectives.

Partnerships & Collaboration

To increase your chances of success, consider partnering with successful people or companies.  If you want to be successful as a new entrant in an industry or want to expand, you will most likely need to consider partnering and collaboration.  Partnerships bring new skills, new markets and new revenue streams to your existing base.  It is exciting to know that success usually breeds success.  Never underestimate the power of partnerships.

Revenue Generators and Opportunities

Analyze your revenue streams carefully.  Assessments of opportunities are extremely important.  Your role as a manager, executive and owner is to maximize benefits from existing resources, operations and new opportunities.  An opportunity may provide a low revenue level, but the profit margins may be huge.  Likewise, a huge revenue generator may result in a break-even or losing venture.  Once again, assessments and planning around these opportunities are critical steps to undertake.

Remember, nothing is guaranteed.  Money, income or revenue levels can never be guaranteed, but through your commitment, hard work, planning and perseverance, your chances of becoming successful and making a pile of money may increase like mad.

Go forth and plan well.

Strategy Plan One

© Strategy Plan One 2012

Business information, resources and tips for the entrepreneur

Detailed Steps for a Strategy Plan

Strategy Plan One

January 19, 2012

The Detailed Strategic Planning Process

A strategic plan can be a part of a business plan or a stand alone document to formulate a strategy for implementation.  In developing a Strategic Plan, our team recently undertook the steps and approach below with one of our clients.  The following may be helpful in planning out a process for development and implementation of your strategy:

• Assessment of market and regulatory trends, globally and locally
• Identification of key success factors in modern businesses (this industry and other industries)
• Review of current sector physical assets and human resources
• Conduct a SWOT analysis  of the competitive environment facing the business
• Assessment of each product and/or service line , including:

Supply and demand,

Management,

Market,

Cost

Best Fit (alignment with the business’ values, ethics and goals)

• Identification of goals and objectives for future industry participation
• Constructive development of strategies (including options)
• Development of priorities
• Resource identification and requirements to achieve goals and objectives
• Development of budgets and financial risk management
• Implementation
• Reviewing & measuring results, and revising as necessary

As highlighted in the steps, you will note the phases of the process, including review, analysis, development, implementation, measuring results, and revision of planning.

Strategy Plan One

© Strategy Plan One 2012

Advantages and Disadvantages of a Home-Based Business

Strategy Plan One

January 16, 2012

The thought running a business out of your own home is appealing to some entrepreneurs, while others may think differently of this type of business environment.  Here are some advantages and disadvantages of operating a home-based business.  Weigh your options carefully!

Advantages:

– good starting base

– can ease into business life and environment at your own pace

– lower risk (financial)

– can achieve work-life balance easier

– increased productivity

– in some circumstances, can take care of children at the same time running the business

– no commuting

– less overhead costs

– tax advantages

– flexible work shifts and work hours

– easy access to work space

– easy to customize work space

– use of existing resources such as phone lines, internet, utilities

– taking breaks and lunch hour in your own home

– privacy from commercial tenants, clients and competition

– easy access to home gym and amenities

– ability to utilize family members in operations

Disadvantages

– too much interference from family

– work-life balance unbalanced towards life, family and home issues

– inability to concentrate on operations and management

– lack of professional space

– noise

– lack of privacy

– inadequate space, and inability to expand office space

– lack of visibility

– customers can’t gain easy access

– optics around level of professionalism

– lack of technology

– some types of businesses can’t be done from home (ie: manufacturing / neighbourhood by-laws)

– additional wear and tear of a family home

– additional insurance costs

Strategy Plan One

© 2012 Strategy Plan One

Characteristics of a Successful Entrepreneur

Strategy Plan One

January 15, 2012

Here are a few characteristics of successful entrepreneurs:

Self Starter

–         a motivated individual that needs very little direction to proceed

–         highly competent and confident to always take the first step and to take on risk

–         highly responsible for own actions, essential to anyone who takes the initiative to start their own business.

Determined

–         ability to navigate through all challenges and issues with ease

–         ability to stay the course until the very end

–         a strong will and strong mind to see things through

Ability to Manage Risk

–         ability to foresee the elements of risk

–         ability to analyze risk, and implement a plan to mitigate or reduce risk.

Vision

–         the ability to see the end goal or objective easily, and can strategize a pathway to achieve the goal

Ability to Adapt

–         ability to adjust and to learn to change

–         embraces a continuous learning environment

    Strategy Plan One

    © Strategy Plan One 2002-2012

Grants for Business – Avoid These Common Mistakes

Strategy Plan One
January 13, 2012

1.  Minimal effort / minimal application package
Incomplete information packages or applications will set you far behind in the process.  Have a clear understanding of the requirements and ensure you provide more than the minimum.  Ask questions if you are unclear on any section of the grant application. Developing a business plan in advance will help you prepare for applications.

2.  Sense of Entitlement

The decisions behind grants and contributions programs are based on merit or criteria.  Do not approach the process thinking that because you are disadvantaged in some way, that program officials will just roll over, not analyze your application, and approve without meeting the conditions.  You will not be entitled to a business benefit of this nature; you must demonstrate that program criteria have been met.

3.  Not understanding the programs applying to

Common mistakes are made in applying to the program without understanding why the program exists, how to apply for a business grant, or what has to occur throughout the whole process.  Understand your needs first (ie: funding needed), and then find the appropriate program that meets your needs.  Carefully review and analyze the program and its criteria.  Ask questions.

4.  Not following up with further documentation

It may occur that the program officer may need additional information (it happens frequently).  Make sure you are readily available to fill in the gaps, submit supplementary documents, and do whatever it takes.  If you are not available or are late in your responses back, chances are that the program will either place the funding application on hold, or decline it all together.  If you put an initial effort in, follow through right to the very end.

5.  Contingency Planning

If your grant application is not accepted, have you thought about alternatives and your next actions?  You may have been declined, but don’t give up.  Use this as a learning exercise.  What are your other options?  Other grant programs, lending agencies and even investors may provide a source of capital for your business.  Be prepared with alternatives and an action plan.

Strategy Plan One

© Strategy Plan One 2002-2012

Entrepreneur – Another 5 Valuable Tips

Strategy Plan One

January 10, 2012

 1.              Consider funding options (loans, grants, contributions) to assist with financing

In the planning process you will identify the resource requirements to establish or expand operations.  You will identify start up costs, expansion costs, and costs related to operating until a break-even point has been achieved in your business.  You should realize that you might not have enough equity (your own money) to do this.  Also, it may not be the best option to fully fund this from your equity, even if you have all the cash investment required.  In either case you must do some research and find funding sources, which may include a commercial loan, grant, contribution or investor equity.  Leveraging sources against sources may reduce financial risk and may result is a better return on equity (return on your cash investment).

2.         If you are seriously considering self-employment, be prepared to put in long hours and massive amounts of efforts to be successful.

The more effort you put into your business, the more results and benefits you will experience.  This is definitely applicable on the front end, where massive amounts of your energy, time and resources will be required to be successful.  Through planning you will be cognisant of where your projected break-even point is, and in some cases you may need to achieve that sooner rather than later.  Be prepared to do anything it takes to be successful.  Working long days, evenings and weekends will be par for the course.

3.         Learn from your mistakes, failures, recover quickly and pro-actively plan for scenarios your business may face.

Successful business managers, leaders and executives have consistently noted that their experience in failures and mistakes gave way to successful ventures and practices.  Every major successful corporation or business has gone through ups and downs, and most contribute success from learning and experiencing failures.  The abilities to continuously learn and adapt are brilliant leadership qualities.

4.         People (staff) may be your most significant resource; engage and empower your staff and treat staff with respect.

The staff that surround you, work with you and support you are your greatest resource.  Most of the time, without your valued staff, you don’t or will not have a successful business.  In terms of mutual relationships, your business will be successful due to great staff, and in turn, you will empower and encourage team members to be successful.  It’s a win-win scenario.

5.            Business planning is a core management function.  Review plans, goals and results frequently; revise plans accordingly,

Business planning is not a one-time initial exercise, but one of frequent occurrence.  Plans, goals and objectives need to be reviewed, analyzed and revised on a frequent basis, in step with your annual business cycles.  This may mean that business planning occurs on a quarterly or bi-annual frequency, as your business needs to adapt to the dynamic and changing environments to be successful.

Strategy Plan One

© Strategy Plan One 2002-2012