In order to know what success looks like in a business it is necessary to define the KPIs. In most businesses this will include the margin earned but productivity might be key in one business, MDs ability to take holiday might be matter for another, market share might be the driver for another owner.

If you know what you are trying to achieve you can then track progress towards that achievement and take corrective action where needed. More water might be needed in the garden, more sales staff might be the answer in business.

Deciding what the relevant measures are isn’t always easy but its key if you want to recognise (and celebrate) success when it comes along.

Written by Caroline Billington of http://www.a-count-a-bility.co.uk

I have had occasional mushrooms in my garden but this year I seem to have had more than ever and can offer a selection from very small and yellow through to large and creamy coloured. The sad thing is that I suspect none of them are edible and I am certainly not going to risk it.

Many clients have permanent finance staff working for them and it can be useful for the part time FD to get involved in any recruitment process. The challenge for MDs is that it can be hard to ask the right questions, let alone judge whether it is the right answer, when looking for staff in a discipline you aren’t sure about. In addition, many candidates are skilled at telling us what we want to hear so it’s often worth having a specific ‘test’ to make sure they can deliver and not just talk about it.

Finding the right staff can sometimes feel a bit like looking for the mushroom in amongst all the toadstools on offer but expert advice can help reduce the risk of getting it wrong.

I love this time of year when the trees change colour and sometimes the most unexpected plants provide the most vibrant show. I don’t even know the name of the main show off in my garden – I am sure an expert would, but an amateur would be as surprised by the display as I was the first year. I saw it’s role in my garden in a totally different light as a result.

There is seasonality in business that is predictable, and planning helps to ensure the business is ready to respond to those peaks and troughs. The great thing about management reporting (not just the numbers but other KPIs) is that it can help reflect, and then predict, some of those peaks and troughs. And a fresh pair of eyes can often help ensure that the correct reporting is in place and interpreted.

Landscape gardeners can help ensure all year round colour in the garden. Business owners need to achieve overall profits for the year. The challenge is that however skilled or open minded we are, our view is only one view and often we need to be shown the different perspective. Who can be your ‘other pair of eyes’?

Business Plan
Every business should have a business plan, whether or not they need funding, but when used for funding it will need to be in a more established format:

As well as basic company details, such a plan requires a 2/3 page Executive Summary that must capture the reader’s interest in your company by giving brief details of the business history and objectives; the management team; the market opportunity; its planned routes to market; the competition; any development plans; its IP protection; a financial forecast summary; the funds being sought and what it will be spent on. More detailed sections should then follow expanding on these headings, plus a possible appendix section to put CVs, broachers, copies of IP registration details etc.

Financial Plan
When seeking investment, a detailed three year financial plan will be required that, ideally, includes profit & loss account, cash forecast and balance sheet by month, although after the first year this can be reduced to quarterly figures. Recent historic actual results will also need to be displayed, as well as all basic assumptions used in the forecast, including sales mix, pricing, volumes etc that have been used to build your forecast. Build your model in a way that allows you to affect some level of sensitivity so that you can swiftly demonstrate what an x% drop in sales would mean to the business, a question often asked by would be funders.

Once you have achieved your cash injection, use this forecast as you next year’s budget, and have your future monthly management accounts compared to it with any significant variance being investigated against your forecast assumptions, and learn from why things are different.  Make sure that you intimately understand the Plan and Forecast, as you need to be able to confidently answer any question about it.

Business Plan
Financial Plan
Due Diligence
Term Sheet
Dilution
Valuation
Legal Documentation

Taxation
Other than in respect of taking out an ordinary bank overdrafts or loans, it is always wise to consult your tax advisor at every stage along the way to try and ensure that the potential/eventual outcome has the most beneficial outcome for you and your fellow shareholders. There are also tax schemes that encourage investment (EIS) and these should be considered whenever possible, not only to secure that investment, but to make for happy investors.

Support
Whatever funding route you take it will involve a lot of preparation, detail, procedure, negotiation, legal jargon and most of all time to achieve a successful outcome. A FinanceHead can not only ease that burden by managing the transaction for you, but explain to you at every step along the way what it all means to you and the effect it may have on your business. Being seen as being in control of your business should enhance an investors’ view of value and give them comfort that their investment will be well managed.

Businesses have assets in the form of their people, tools of their trades and potentially stock – all should be taken care off. In the case of physical assets this may involve tracking the financial value and securing with a lock and key. In my experience people are better kept safe through financial reward, training and a good working environment.

One element of the role of a Financial Director is safeguarding the assets of a business, and advising on the appropriate tools to do. And your staff don’t need to be in fear – we don’t suggest locking them up.

Earlier in the year I had to decide what to plant in my garden – which included carrots. In fact I did an early and late planting but the latter have completely failed. I had planned what I wanted to achieve and I thought I had gone about executing the plan in a consistent way but for some reason the success has not been repeated.

There are many aspects to running a successful business and it is a pretty rare person that has ALL the required skills. In fact, plenty of people either don’t understand all the skills needed and/or don’t have the team around them to deliver using those skills. It can be useful to do a skills audit and see where the gaps are, what risks that presents and how best to deal with them.

It appears I still have more to learn about gardening (no surprise there!) but in the mean time I am proud to share what I do know by contributing to the Money element of the Your Business Your Future programmes.

Within business some flexibility can be appropriate. It might be delivering to customers out of hours, paying a supplier a bit early in return for exceptional service, allowing staff to go home early some days, pricing products differently for different markets – you get the idea.

FinanceHeads (www.financeheads.co.uk), is all about providing a flexible service. There are many roles within businesses that are not needed full time or evenly through the year – for many SMEs the role of Finance Director maybe one of those.

And to prove how flexible I am, I don’t mind whose garden I am in or whose bench I am sitting on when enjoying my glass of wine.

Once every 3 years I recognise that my garden hedges are so out of control that I need to get a professional in to sort them. They now look great and I wonder why I lived with the chaos for so long. This year I found a fabulous new, good value, supplier and have vowed to get him annually in future and keep things under control.  Do you need to make a similar vow in relation to your business’ finances?

What does this look like with a real business situation?

Unfortunately real life is made of failures and situations where the only solution is to rebuild from the foundations.

In financial language this is called zero-based budgeting.

It consists of a very detailed exercise of how the company functions and how financial success can be achieved through planning from what is left after the previous losses. This approach takes the view that any business activity must be measured and any cost must add value to the business before being approved.

In the end how did countries like Japan and Germany become World economic powers after being destroyed during Wars?

If you want to know more how your business can benefit from a Finance Director applying the zero-based budgeting approach to your business, do not hesitate to contact me.

Matteo Turi FCCA

Chartered Accountant and Finance Professional

Skype : matteo.turi

Tel. +44/(0)7915/202111