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Business Vitals

Profit-Boosting Executive Training Sessions

Having a business strategy will definitely help you succeed in business. When you wish to travel to a particular destination that you have never been to, you do not just wake up and start walking. You need to figure out where the place is and most importantly how to get there. A business strategy works in the same way. You have to have a proper framework or mechanism that will guide you to the place where you want to go. The first step is to recognize that there is need for a strategy. It is not enough to know this. You need to go a step further and consider excellent strategies.

An online business can overwhelm you with regard to strategy. This is because there are so many strategies out there that promise people success. However, you know only too well that not all strategies work and you need to employ only one that is sure to work. There are no guarantees in life but you can do thorough research that will enable you to acquire a strategy that has been tested and tried. A strategy can either be inspired by different businesses or it can be birthed within you. Many people who have made it with online businesses say that unique ideas are worth capitalizing in.

An online business needs to have a plan B just in case something goes wrong. Therefore, you have to take time and make sound decisions depending on what has been seen to work and what you hope will work. It takes time to know whether plans are working or not but one thing you can be sure of is that if you do not have any strategy, you will be stranded at some point. Do not speculate with an online business. It is time to put in place a good plan that will direct the business to a destination of success despite the bumpy road.

In today’s hostile economic environment, access to capital is the primary differentiating factor between those businesses which have been able to expand and gain market share versus those that have experienced enormous drops in revenue. The reason many small businesses have seen their sales and cash flow drop dramatically, many to the point of closing their doors, while many large U.S. corporations have managed to increase sales, open new retail operations, and grow earnings per share is that a small business almost always relies exclusively on traditional commercial bank financing, such as SBA loans and unsecured lines of credit, while large publicly traded corporations have access to the public markets, such as the stock market or bond market, for access to capital.

Prior to the onset of the financial crises of 2008 and the ensuing Great Recession, many of the largest U.S. commercial banks were engaging in an easy money policy and openly lending to small businesses, whose owners had good credit scores and some industry experience. Many of these business loans consisted of unsecured commercial lines of credit and installment loans that required no collateral. These loans were almost always exclusively backed by a personal guaranty from the business owner. This is why good personal credit was all that was required to virtually guarantee a business loan approval.

During this period, thousands of small business owners used these business loans and lines of credit to access the capital they needed to fund working capital needs that included payroll expenses, equipment purchases, maintenance, repairs, marketing, tax obligations, and expansion opportunities. Easy access to these capital resources allowed many small businesses to flourish and to manage cash flow needs as they arose. Yet, many business owners grew overly optimistic and many made aggressive growth forecasts and took on increasingly risky bets.

As a result, many ambitious business owners began to expand their business operations and borrowed heavily from small business loans and lines of credit, with the anticipation of being able to pay back these heavy debt loads through future growth and increased profits. As long as banks maintained this ‘easy money’ policy, asset values continued to rise, consumers continued to spend, and business owners continued to expand through the use of increased leverage. But, eventually, this party, would come to an abrupt ending.

When the financial crisis of 2008 began with the sudden collapse of Lehman Brothers, one of the oldest and most renowned banking institutions on Wall Street, a financial panic and contagion spread throughout the credit markets. The ensuing freeze of the credit markets caused the gears of the U.S. financial system to come to a grinding halt. Banks stopped lending overnight and the sudden lack of easy money which had caused asset values, especially home prices, to increase in recent years, now cause those very same asset values to plummet. As asset values imploded, commercial bank balance sheets deteriorated and stock prices collapsed. The days of easy money had ended. The party was officially over.

In the aftermath of the financial crisis, the Great Recession that followed created a vacuum in the capital markets. The very same commercial banks that had freely and easily lent money to small businesses and small business owners, now suffered from a lack of capital on their balance sheets – one that threatened their very own existence. Almost overnight, many commercial banks closed off further access to business lines of credit and called due the outstanding balances on business loans. Small businesses, which relied on the working capital from these business lines of credit, could no longer meet their cash flow needs and debt obligations. Unable to cope with a sudden and dramatic drop in sales and revenue, many small businesses failed.

Recently I met some business coaches of Your Business Coaching Club for a self-run seminar on business improvement. Our aim was to explore how we help SME clients to improve their businesses, contrasting and comparing our approaches. As we shared our client experiences, we noticed there were basic four approaches that we follow with variations to suit a specific small business:

Moore’s Law

Gordan Moore noticed that there are trends in technology: IT hardware performance doubles every two years; the price of technology halves as the cumulative sales double; and the number of World Wide Web pages doubles every nine months.
If you look out for the market trends that will impact your products and services, you can focus your business improvement efforts where the trends will help you to improve what you offer your customers.

Kaizan

Kaizan groups break down your business processes into components that you can monitor for performance. Within the measurements, the group seek instances of best performance that if adopted generally could improve the performance of the whole business.
You could extend this by seeking out best practices not just in your own company by in your suppliers and customers. When you have found how other do a process quicker, cheaper and to a better standard, you apply this benchmark to improve your own performance.

Continuous improvements

Total Quality Management looks for annual improvements using the skills and insights of your whole team. Small groups focus on a specific process, explore how it works, collect ideas to try out and then adopt the changes that improve the process.
Thus you could target specific areas that you want to change this year and encourage your staff to suggest improvements. Each suggestion is treated as an experiment run as a project (with a fixed goal, fixed start and end dates, a cost and effort budget and open reporting). Where the improvement is shown to be effective, it then becomes part of the accepted practice.

Groves corollary

Andy Groves believed “only the paranoid survive” so he created competitive pressures on his company before his competitors did.
In this approach, you watch your competitors constantly, check their performance levels, assess their products and improve before they do. A success is when you recognize new opportunities and develop the capability to exploit it before others do.

The key message that we picked up from our coaching meeting is that to leave your competitors behind, you need to invest effort and energy into improving your business.
The method that suits particular clients will depend on the people involved – whether they prefer to generate their own changes, be inspired by the achievements of others or watch what is happening in other businesses and industries.
So the final question is “How will you go forward?”