WHAT REALLY IS A BUSINESS PLAN AND HOW CAN I BUILD ONE?
WHAT REALLY IS A BUSINESS PLAN AND HOW CAN I BUILD ONE?
What goes into a business plan you might ask.
The business plan needs to at least cover the analysis of
the business, the environment in which it is, marketing, sales, fundraising,
and a repayment plan. But do remember that your business plan should be a
working document and not just for use when seeking business funding.
If your project is a big one then consider if you require
a business feasibility study.
Some investors will ask for a pitch deck or A Concept note
first, while banks will ask directly for the business plan. It can be used to
assess your knowledge, effort, the business itself, market research, cash flow
estimates, and whether you are being realistic or are just overselling a pipe
dream.
In reality, most investors make their decisions without even
seeing your company plan. You might of course also be using a pitch deck to
generate initial interest from investors. Make sure you read our post
on creating a pitch deck that is easy to understand and easy to remember.
A business plan may account for up to 10-20% of the funding
process.
If the investors you are targeting don’t get the
opportunity, scope, or uniqueness of the business at the outset, your chances of
moving further in the investment process will be limited.
Because most business ideas are boring. No one has time to
read a business plan unless they are considering funding you and are simply
doing their due diligence. Business professionals and investors realize that
plans change. In reality, the money you get may alter your plans and the
strategy you are able to follow. Investors themselves might want to amend the
strategies you have created due to their own experience in helping businesses
grow.
Invest in a solid business plan. But don’t mistake it for a
fundraising tool. More than a business plan, I would advise you to create an
18-month plan that outlines your capital-raising strategy.
7 Questions Entrepreneurs Need to Answer
In South Africa, the use of business turnaround
specialists is a new and developing field. This is a good thing, but only
if more businesses are made aware of it, and stakeholders like banks, creditors, and employees see the value in the process.
When it comes to the state of the economy, it’s easy to
become dejected, and this is exacerbated by recent reports and predictions that
insolvencies are set to rise at their highest level since the 2008 financial
crisis. It’s possible that the economic recovery is still some time away
because of the tightening of credit, energy price rises, job losses, and rising
unemployment, as well as the rising rate of inflation.
Nevertheless, recovery is possible, and it will be led by
entrepreneurs. We as entrepreneurs see opportunities where others see challenges.
As the economy begins to recover, professional investors will have the opportunity
to both contribute to and benefit from the process of rebuilding the broader
economy.
What are the warning signs that you need a business turnaround specialist?
- In what ways is your business struggling, or is it something more serious? Returning the system to full functionality may necessitate a company turnaround.
- Over time, most businesses become irrelevant due to their inability to keep up with the competition. There are numerous inefficiencies that have a negative effect on profitability and cash flow.
- Delivering results that are short of expectations is not fatal in and of itself, but if it is not quickly corrected, it can lead to financial difficulty.
- Knowing the early warning signs of business underperformance can help you prevent this from happening, so you can take corrective action.
- In order to avoid a crisis, it is possible to implement business turnaround measures that are reasonable and effective.
- Listed below are ten of the most important financial and operational metrics to keep a close eye on.
Business Turnaround Warning Signs
1. Profits have been steadily declining.
Financial growth is a good indicator of a company’s health.
One of the most obvious signs of trouble is if your profits have declined for
five or more consecutive quarters. Your numbers should worry you even if they
remain static.
2. Cash flow problems
There is a problem even if the business is coming in. Cash
shortages, overdrafts, and bounced checks are all signs of a problem. Despite
the fact that working capital fluctuations are common, they should be
manageable. Got no idea how much money you’ll make? You’re on the wrong track.
3. Lines of credit fully drawn
Another clear indicator of underperformance is the need to
take out fully drawn advances to deal with liquidity issues. You should be able
to cover your operating expenses and generate a profit without having to rely
on long-term debt.
4. Expenses that are too high
Long-standing overheads, such as inefficient IT systems,
underutilized rental space, or excessive and unfunded employee leave accruals,
can be a problem for companies. Inefficiency is inevitable if these costs are
close to, or already outpacing your sales.
5. A decrease in investment, or even a complete absence
of it
The short-term growth and long-term stability of a company are
both dependent on adequate capital investment. This means that if your ability
to invest in your business, from modern systems to new ventures, is dwindling
or the possibility of it is completely eliminated, you’re in a bad situation.
Operational warning signs of a company turnaround
6. Communication breakdowns
Inefficient operations can be the result of a lack of
communication between departments or between management and employees. In the
event that you’ve observed these kinds of behaviors, underperformance is most
likely to occur by defensive managers who deny or downplay negative information and also pose a threat to the team’s success. This is where the challenge of
managing self-interest vs the interest of the business as a whole comes in.
7. Deterioration in the quality of goods and services
As soon as a problem arises, customers tend to be the first ones to point
it out. The more returns or complaints you get, the more likely it is that you
are performing below expectations. Negative reviews and a smaller customer base
will only worsen the situation.
8. Employees don’t stay long
Staff turnover in South Africa is at a rate of 11.5 percent per year,
according to the PwC. Other
sources put this figure at 25% during 2021 which is quite staggering.
Employee unrest or unusually high numbers could be a sign that things aren’t
running as smoothly as they should. Even worse, when key employees depart,
crucial knowledge is lost.
. Poorly Planned Inventory
Having too much, too little, or a significant amount of
obsolete stock is a sign of poor inventory management. Waste, high storage
costs, and a lack of ability to meet demand are all consequences of this, all
of which are unsustainable.
10. Loss of market share
If you’re losing market share to your competitors, you’re
doing something wrong. Because of this, if your share of industry revenue has
decreased in the last six to twelve months, you need to take notice and begin
to investigate why.
Using Business Turnaround Specialists
There is light at the end of the tunnel
As long as consumers want high-quality goods and services at
fair prices, businesses will be around for the long haul. A combination of poor
management and the emergence of unfavorable market conditions can,
unfortunately, lead to the demise of once-profitable companies. It is possible
that the directors and decision makers have become ineffective, unable to find
a solution, and unaware that the same level of thinking that created or did
not avoid the problems, can’t be fixed.
Because of this, it is rare for a once-thriving company to
go out of business completely. Even so, quick action is required, as is the
assistance of experts who have previously piloted recovery operations
successfully. In some cases, professionals who have witnessed the demise of a
business firsthand are best equipped to help a company recover.
There is no doubt that every company has its own strengths
and weaknesses. However, a number of critical areas, such as reporting
mechanisms, are frequently overlooked by professional trouble-shooters.
Decision-makers will have a difficult time promoting successful business
practices and correcting those that don’t work if they don’t have the right
metrics. Like piloting a plane with no instrument panel when conditions are
clear, running a business without adequate reporting mechanisms can be
disastrous. The wrong direction can be easily taken if the company’s management
is making decisions based on outdated or inaccurate information. This can
create a false sense of security due to incomplete or inaccurate reporting.
Key to solving a company’s problems is a thorough
understanding of the business, including its goals, customers, suppliers, and
even internal departments. Even though customers are the lifeblood of any
business, if they don’t pay for the goods or services they receive, they drain
resources and become an obstacle to regaining control of the profit streams.
This will have an effect on the declining business, as will a supplier who
consistently overpromises and underdelivers. Delays and inefficiencies are just
as common and must be addressed internally.
It’s easy to overlook the current management and the
company’s core team’s wealth of experience and expertise. Just because a
company has gone bankrupt doesn’t mean that the entire management team is
responsible. Employees who have been with a company for a long time often hold
key positions in which they have had great success. Experts in business
recovery know that a company’s past success is as much a result of its people
as it is of its products or services. A thorough understanding of what needs to
be replaced or streamlined and what can be saved is critical. Being friendly
with your coworkers and motivating them can help restore the company to an even
keel.
As in a marriage, the founders’ and managers’ relationships
with the company can go through rough patches, and the same is true of their
own relationships with the company. After rescuing depressed and fearful
management and employees from the depths of despair and helping them to focus
on the task at hand, a new atmosphere is created. In order to turn around a
company, getting employees to put in a little extra effort at a critical time
is essential.
There are several advantages to quickly bringing in outside
help to help the business recover. Firstly, a fresh objective perspective can be
both healthy and helpful. To ensure that the company’s future is secure,
external business turnaround specialists have no political or other obligations
to family members, clients, or other obstructive players. Having a vested
interest in the company’s survival and renaissance, the business recovery team
will move quickly to ensure its survival and renaissance, avoiding what
otherwise would have been a certain corporate failure.
Business turnaround specialists unquestionably benefit the
subject company and its employees, as well as the ailing economy as a whole.
Investing in resurrected companies gives investors a chance to get involved in
the process. The company can then be profitable again, ready to be sold on as a
profitable ongoing investment for others to grow further with the right
management and professional expertise.
In spite of the fact that the economy is still finding its
feet, the much-anticipated ‘green shots of recovery’ are definitely appearing
on time. Businesses should never become complacent, as the recession and the
difficult economic conditions that followed have demonstrated. While a decrease
in consumer spending makes it more difficult to make a profit, it also
highlights any weaknesses and separates companies that are well-run from those
that have slackened off. Weaknesses in a company’s team can be remedied by
business recovery experts, who work to build upon the team’s strengths and keep
them employed and productive.
7 Key Questions for Management
Management must be able to confidently answer these
questions at key stages of the process for a successful turnaround:
1. Are we still invested in the company’s success?
2. Does the core business have a reasonable chance of success?
3. Key stakeholders can be managed and motivated?
4. Is there enough trust in the company’s leadership?
5. Is our company’s image intact?
6. Will we be able to secure internal or external funding?
7. Does our current business model allow us to serve our customers profitably?
Developing a plan to address the company’s fundamental
issues and the underlying causes of its failure is necessary once it has been
determined that the business can be saved.
Nine essential components of a successful turnaround
1. The management team must accept responsibility for the
company’s current predicament and recognize that they are ultimately
responsible.
2. Commitment to making necessary changes. Too often, the
“the way we’ve always done it” mentality is used to stifle innovation. The
second step of the process requires everyone involved to commit to the process
of change, regardless of their own personal interests. Everyone involved will
lose their jobs if the company fails.
3. It’s all about getting your act together in a time of
crisis. That means taking charge, managing your finances, selling off assets,
securing emergency funding, and beginning cost-cutting measures.
4. There needs to be a focus on sales and training sales
teams, improving margins, and improving the net profit. As a business turnaround
specialist, this is normally core to our recommendation and an area, we
specialize in.
5. All stakeholders should be involved in the
decision-making process. In order to give stakeholders confidence in the
turnaround plan, it is necessary to provide them with clear, consistent, and
predictable information and communication.
6. Reviewing the company’s overall strategy and determining
whether a divestiture, asset reduction, downsizing, outsourcing, or investment is
warranted.
7. Structural change in business; reshuffling or decreasing line/middle
management; improving communication strategy are examples of culture and
operational changes
8. Improving sales and marketing, reducing costs, and
increasing efficiency are all critical parts of the process, and they can all
be improved by implementing the Eliminate, Automate, and Delegate framework.
9. Refinancing, asset reduction, and changes to debt and
equity are all examples of financial restructuring.
Keep in mind that prevention is always a better option than
treating an illness. In many cases, when business owners come to us for help
with saving or turning around their business, it is often too late and the only
solution is Liquidation or bankruptcy.
Your business is only as strong as the people who work for
you. And your accountant should serve as the team’s leader. And not just a tax
preparer you see once a year to find out how much you owe in back taxes. You
need a confidant who you can rely on.
Why? In order to help your management team make important
decisions about:
Too many business owners, in our experience, neglect to
devote time and resources to assembling a solid team of employees who can be an
asset to their enterprises. Do not make the same mistake again, please.
If you’re in need of business turnaround
specialists, Maltech-Africa can help. We’ll help your company not
only survive but thrive.
Contact us at Maltech-Africa to assist you with your
business turnaround consulting needs, specifically through our focus on sales
and training sales teams, improving margins, and improving the net profit. and let
us help your business not just survive, but thrive.
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