Work smarter not harder in 2013

As the economic environment we operate in changes down a gear, we have seen a lot of businesses take a closer look at what they are doing and why, while others stick their heads down and pedal harder hoping things will go back to they way they were.  With the new year looming and businesses everywhere grappling with change, we thought it was timely to give you some ideas on how you can work more on your business, setting yourself up for a stronger year in 2013.  It’s time to work smarter not harder.

When times are good most business owners are focussed on the task in front of them and literally have no time to focus on planning as they need to deal with the customers or clients that have engaged them.

Then, when they get a sense that business is starting to slow down, they get nervous and focus even more closely on the current needs of the business, rather than looking into the future.  As humans we are all creatures of habit, so often, pedalling harder in our businesses along the same road is the easiest and most comfortable thing to do when times get tougher.  But is it the right thing to do? Or could you get there faster by standing back and selecting a shorter route?

We all know that family business owners are among the hardest working people in the community. They are often the first to arrive and last to leave their workplaces each day. They deal with all facets of their business from operations, marketing, staffing and administration to name a few, with each area’s complications adding to the stress of being a business owner.

Not only are family business owners good, hard working people, but they also like to think they are good planners.  But in reality, in almost every family and small business, there is simply not enough emphasis on planning for the future, on working smarter not harder, or on finding a shorter route to the goal.

But if you are a business owner, how do you get from working in your business every day, to working on your business? And what might it do for you in the future?

In principle, working on the business is taking time out to determine your personal objectives and the objectives of the business. (Please note this is not always making more money, it may be to reduce risk or have more personal time or less stress or all of the above.)  When business owners work on their businesses they could be:

  • developing a plan focussing on the objectives set.
  • developing an annual budget which is reviewed periodically knowing profit expectations, capital needs and cash flow needs.
  • determining the people resources required to achieve their objectives. To share your vision and to create a culture that develops your team into “doers” .This includes setting the values and ethics they expect within the business.
  • creating and implementing a sales and marketing plan, to assure you and your team, there is adequate revenue flows and revenue sources.
  • putting in place a programme to make sure you are up to date with your products and services, as well as pricing.
  • reviewing processes and procedures to maximise efficiency.
  • understanding variable costs and fixed costs to allow the business to manoeuvre when there  is a change in the market.
  • ensuring they have a good focus on the industry and the customers to understand change and the evolving needs of customers and clients.

Working on the business requires taking time out to develop a well thought out plan, programming the plan then executing that plan. The difficulty is that it is easy to fall into the habit of going back to “working in your business“  and getting distracted from the implementation.

Our team often gets called in to be the independent person that assists with the development of the plan, execution of the plan and sorting the programme from month to month, keeping the business owner and their leaders executing their plan on a controlled basis.

So why not start working on your business now for 2013.  You can start by considering the changing economic environment and work through each of the items below to form plans for your coming year.

P lanning

P rojecting/budgeting

P ricing

P roduct/ service

P romotion/marketing

P remises and location of the business

P eople within the organisation

P rocesses and expectation

Or you can give us a call  and we’ll help you with it.

You can be sure that your competitors are making plans to improve their share of the changing market.  Isnt it time you did too?

Glen Stapley is an Associate Director of Prosperity Advisers Group.

Succession Planning for Professional Services Firms

It takes years to build up a strong, partner-led professional firm, but many businesses can destroy this value quickly by failing to plan for the succession of senior staff.

What is your plan?

Have you considered how you will exit your firm or manage the exit of one of your partners should they get ill, seek retirement, or face an unexpected change of life?

Have you identified the likely successors for your role? What is in place if one of the principals is removed by illness or death? Will your business have ongoing viability if you are no longer part of the team?  Do you know what your firm is worth?  What will be the taxation consequences of a sale of your equity?

If you can’t answer these questions you could be exposing your business to risk should you have a principal of the business retire, resign or confront health issues.

Often professionals are so busy working in the business they don’t work on the business and succession usually isn’t an urgent consideration. It is, however, important to work through the process and develop a plan that will deal with the succession of your business in all circumstances, including an unplanned exit.

Considering your succession options

Consideration should be given to the outcomes for your business if you were to get ill or have to step away from the front line.  Then, once understanding the impact, you should consider the options available for succession and the issues and merits of each option.

Where the firm has multiple principals there should be equity/shareholder agreements in place which identify the roles and responsibilities of the parties can also identify the steps to follow to buy out an exiting party.

It should also outline the method to value the equity interest and what terms will apply to the payment.

A buy/sell agreement that deals with unplanned exits is often funded by an underlying insurance policy that is triggered when the events in the buy/sell occur.

It is better to put these documents in place when there is no immediate requirement to negotiate an exit as they can then be done with no specific agenda in mind.

Business Structure

Other considerations for the succession plan is reviewing your business structure to allow for easy entry and exit of parties and access to any asset protection and taxation concessions where available during operation of the business and in the event of sale.

Financial Review and Improvement

There should also be a financial due diligence to identify the areas for improvement in the practice, including financial reporting programs, growth planning, profitability improvement, systems development and risk management.

When these areas are improved they enhance the value of any business and will result in greater profitability of the business and a smoother transition.

Identifying your successor

It is also important to consider whether there will be an external sale of the business or whether a potential leader can be identified within the current team.

The knowledge and experience that resides in a principal often forms a substantial proportion of the firm’s intellectual property and capital. That knowledge and experience needs to be passed on to potential successors.

Internal succession may also need to be backed by appropriate recruitment of staff who aspire to being a principal, leadership and management programs to provide development, and growth in the practice that facilitates progression of team members to principal.

Well planned succession

Ultimately succession of a principal can be best managed where the business is transition ready, there is a process in place to manage an exit and the process is clear for all parties involved.  That way, when succession becomes an issue, it is not a reason for unnecessary conflict or stress.

 

Debbie Matthews is an Associate Director of Business Services and Taxation at Prosperity Advisers. 

 

Derisking your Business Partnership – Some simple but important steps

Running a business with others whether through a company, trust or partnership is not something that many people step into lightly.  Most get to know their business partners for months or years before they go into business, building trust, rapport and structure around them as they go. 

So it makes sense that many partnerships are now insuring against the unexpected exit of a partner from the business  with Buy/Sell insurance that allows remaining stakeholders to buy a partner out in the event of specific events like death and disability.  

It is an important element of succession planning in partnerships, where individuals rely on each other to run their business and deliver their services or products to the market.

Take for instance the business run by Mark, Jeff and Drew, partners in a firm that sold high profile residential property.  The real estate agency had a premium referral based clientele and a superb reputation that enabled them to live a good life.  Despite their success, the partners had never taken the time out to build a succession plan, put business agreements or insurances in place.

Sadly, Jeff’s lifestyle got the better of him, and he died suddenly and unexpectedly from a heart attack.  His wife, Kathy, who had never really been interested in the business since she left to have children 10 years ago decided return to work again, demanding to be treated like and equal partner by the other two as she was a beneficiary of Jeff’s 33% shareholding.

It soon became obvious to Mark and Drew that Kathy was out of her depth.  Clients who had previously worked with the agency were complaining, two of their best staff resigned and the agency was denied an important regional contract they had held for 12 years.

The hostility and resentment between Kathy  and Mark and Drew grew to the point where Lawyers became their best way of communicating.

The situation was stressful for everyone in the office, and it had virtually destroyed the value of their once buoyant and successful business to the point where it was virtually worthless.  When one of the senior staff left and set up an agency down the road in competition with them, they knew their run was over.

Had Mark, Jeff and Drew sought advice on succession planning their partnership and implemented buy/sell agreements and insurance this situation could have been avoided altogether.  When Jeff died, funding would have immediately triggered to buy Jeff’s ownership share from his estate.  The inclusion of staff incentives schemes in their succession plans may also have kept staff in the business, minimizing the risk of them setting up in competition with the firm.

Are you in a business with others?  What should you do?

  • Seek professional advice to draft a buy/sell agreement
  • Put in place buy/sell insurance
  • Draw up an effective succession plan that take into consideration sudden and planned exits
  • Ensure your buy/sell agreement is regularly revised and amended as circumstances change.
Image source: Flickr: o5com