Metaphor

Once more welcome to the regular e-newsletter that I write for SME owner-managers and the world of small business. Lots of interesting stuff to browse and I hope you find at least one idea that can help make your business more valuable. If there are topics that you think I should explore in future please let me know.

The economic picture continues to look grim for 2010, but every day I’m meeting companies who are fighting back against it. I’m constantly amazed at the creativity of the people I meet in the small business world.

Peter

Bank finance – another idea

In my last newsletter I mentioned the experiences and difficulties that many small companies I work with are having with bank finance.  Those remarks made the manager of a Bristol-based Enterprise Development Fund get in touch and tell me how they help companies who need finance or who are struggling with cash flow when the banks say no. Sounds like your situation?

Up to £30K  for successful small businesses that need working capital

• Difficult to raise additional finance for your business?
• Need more than the bank can offer?
• Struggling with your cash flow?

This might help. The ‘Working Capital Loan’ is a new competitively-priced loan product from Bristol Enterprise Development Fund, a not-for-profit company that has been providing loans for small businesses in Bristol since 1992.

BEDF is the best known non-mainstream business lender in the Bristol and the West Country and was set up to improve the local enterprise economy by helping financially disadvantaged individuals and small businesses.

 The Working Capital Loan provides up to £30K to successful small businesses that cannot get the additional finance they need from their bank. Its purpose is to finance short-term working capital needs for businesses that have been trading for at least two years. It is not for expansion or to pay off business debts.

Interest is fixed at the beginning of the loan, which is usually over 2 years, and stays the same throughout so you know what it will cost.

Are you eligible?

You may be if your trading premises and office base are in Bristol, South Gloucestershire, North Somerset or Bath & NE Somerset and you employ less than 25 people.

To find out more contact BEDF Tel: 0117 944 4700 or Email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Web: www.bedf.co.uk

If you prefer contact me for an informal discussion beforehand.  I know that BEDF are keen to lend – you just have to fit their criteria.

The case for coaching

Coaching is a topic that has moved from the fringes to become a mainstream management technique today. But how do you justify the investment in business coaching? I’m delighted to include here an article by my friend Terry Wright who coached me with great results a few years ago. Terry writes on making the business case for coaching

Can Coaching Deliver Value to Your Organisation?

Terry Wright

There has been a rapid increase in the use of business coaching over the last ten years. Organisations not using coaching are now asking the question:

What is the evidence that coaching works for individuals and organisations?

Coaching providers naturally believe that coaching can be excellent value for money. They line up alongside Daniel Goleman who says:

It has repeatedly been shown that coaching and mentoring pay off, not just in better performance, but also in increased job satisfaction and decreased turnover.  But what makes coaching and mentoring work best is the nature of the relationship.  Outstanding coaches and mentors get inside the heads of people they are helping.  They sense how to give effective feedback. They know when to push for better performance and when to hold back.  In the way they motivate their proteges they demonstrate empathy in action.

(Harvard Business Review, What makes a leader?)

Self-praise is no recommendation however. Although coaches support their views with testimonials from satisfied clients, more objective data is needed. 

Good news: recent studies suggest positive answers to questions about the effectiveness of coaching.

Does Coaching Work for Individuals?

In a recent (2008) international survey by Blessing White, around two-thirds of employees being coached claimed that it had produced a significant improvement in their performance and job satisfaction. This high level of satisfaction is replicated in a range of other surveys.  The most common benefits listed include:

• Time to reflect, focus and learn
• An independent, safe, confidential space where you can challenge yourself
• Insight and clarity
• Keeping sanity and perspective; stress management
• Matching your needs and core values to your behaviour and leadership style
• Self-empowerment, self-confidence, self-awareness
• Awareness of others’ perspective and impact on others
• Ability to set and meet goals, prioritise and focus (goal management)
• Ability to embrace change
• Improved Emotional Intelligence (EI) and Spiritual Intelligence (SQ)
• Improved skills and competence
• An improved quality of life
• Cultural flexibility
• A greater capacity for happiness!

Does Coaching Work for Organisations?

A major 2004 Chartered Institute of Personnel & Development (CIPD) survey gave a strong endorsement to the effectiveness of coaching:

Coaching can deliver tangible benefits to organisations – 99% of respondents agreed

Coaching is an effective way of promoting learning – 96% agreed

When coaching is managed effectively, it can have a positive effect on the bottom line – 92% agreed.

Areas where coaching is typically seen to be effective:

• Improved performance
• Business planning/strategy
• Team effectiveness
• Conflict resolution
• Peer relationships
• Relationships with management
• Customer relationships/loyalty
• Sales performance
• Efficiency
• Team morale
• Staff retention and attraction
• Staff commitment
• Job satisfaction

The 2008 Blessing White survey confirms this picture, with 90% of experienced managers believing that the time they spend coaching helps them achieve their goals.

Is there objective proof that coaching adds real value for the organisations funding it? 

Until recently this has been difficult to answer. In the last few years however several studies have come out all pointing in the same direction:

1.    A ground-breaking study in 1997 by Olivero, Bane and Kopelman compared the effects of managerial training alone against the same training followed by coaching.  31 managers in a US health agency underwent a conventional managerial training program which was followed by 8 weeks of one-on-one executive coaching. After the training productivity rose by 22.4%. After coaching, productivity went up by 88%; a significantly greater gain compared to training alone.

2.    In 2001 a Fortune 500 firm examined the effectiveness of its middle management coaching programme. Benefits derived from coaching were quantified in financial terms. Key benefits were productivity, customer and employee satisfaction, work output and work quality.  Financial benefits showed a 529% ROI.

3.    An in-depth study by Manchester Consulting in 2001 looked at 100 senior executives in a range of organisations who had undergone change and growth-oriented coaching.  The ROI was calculated at 545%.

4.    A controlled experiment in Bristol & West Financial Services looked at the added value of coaching as against training.  From a group of 24 managers 12 attended a selling skills course.  Of these 6 also received three months coaching. The actual sales figures were looked at for the three months before and after the training and coaching inputs. 

• Neither training nor coaching -  sales up by 4%
• Training only – sales up by 8%
• Training and coaching – sales up by 27%

Making the Connection - How Does Coaching Deliver Results?

How does coaching deliver results to organisations? What links coaching to the bottom line? Surveys suggest that good coaching produces changes in behaviour. These changes are what drive improved bottom line results:

How to maximise the benefits

Studies suggest that to increase the success rate of coaching:

• Select coaches with care
• Ensure that coaches understand the company’s business and culture
• Identify in advance the desired measurable outcomes
• Manage the process to ensure quality, including good supervision of coaches
• Ensure that the line managers support coaching
• Measure and communicate the impact

Conclusion

Organisations can now be confident that business coaching delivers results. Those who don’t use coaching may want to look again. Studies currently taking place will shed more light on the linkage between coaching and business performance. 

Daniel Goleman was mentioned at the start of this article. Goleman has written extensively on the subject of Emotional Intelligence (EI) and I’ll be writing more about EI in a future newsletter. 

8 ways to murder your business

Life is full of advice today. So rather than looking at what makes a good business I’ve been thinking the opposite; ways an owner-manager like you can cost-effectively shoot your business in the foot.  How do you kill a business in easy steps?

The “New York Times” runs an entertaining small business blog by entrepreneur Jay Goltzays that looks at this question. A former president of Coca-Cola has written a whole book “Ten Commandments for Business Failure”. Based on what I’ve seen here are my eight ways to murder your business. You can probably come up with others.  

1.    Rely on a few customers. Big customers never leave us (or before they do finally take their business to China they always give us plenty of notice). Our business won’t be affected by a 30% drop in turnover anyway.

2.    Don’t forecast cash flow.  The bank is very accommodating when we ask them for an extended overdraft or a further loan, particularly at short notice when we urgently need cash to pay this month’s wages or settle an important supplier. Whoever heard of a business running out of cash?

3.    Ignore your customers. They don’t care how you treat them. Customers always come back, and they still tell their friends to come to us despite awful service. It’s easy to drum up new customers when we need them. That stuff about customers having a choice is a myth.

4.    Never evolve.  Successful companies have the motto: “If it ain’t broke, don’t fix it”. A working business model lasts for ever. Relax. Who cares about upstart newcomers come along aiming to eat your lunch?

5.    Splash out.  You can always tell a good business by their smart offices, big desks, the fountains in the courtyard and this year’s top-of-the-range German saloons in the car park. That’s the reason we have dividends and bonuses. Better to take cash out than leave it in the business.

6.    Fight the competition on price.  Market share is what really matters, so we happily get into price wars with our rivals undercutting each other. We sell just on price because we know customers only buy on price. Discounting is a simple game with low risks. We will survive because our costs are lower than the other guy anyway.

7.    Be a dictator. I like to keep myself well away from staff, suppliers, customers and people offering me advice. Look how well Stalin managed running the Soviet Union for years on his own. I’m the boss. That means having all the answers.

8.    Fix it afterwards. All that stuff about an ounce of prevention being worth a pound of cure is old hat and boring. Mistakes are easy to fix. Life’s too short for planning and controls – we have insurance if things go seriously wrong.

Best of Bristol business exhibition 2 March 2010

On 2 March there is a Bristol business-to-business exhibition at the Mercure Holland House Hotel, Bristol where I will be speaking on improving cash flow.

At this exhibition I will be giving free-to-attend seminars on: “How to improve your cash flow” specifically for SME owner-managers. Instead of the usual Powerpoint the seminars will be completely interactive. I will be showing what drives cash flow, how to improve it, and how to prioritise your actions. All with a live business model on screen, all based just on questions put by members of the audience. If you want to understand cash flow this is your chance to learn in just one hour! I want to make cash flow as simple and clear as possible. (If I’ve used QUAD on your business then you will recognise my seminar is based on QUAD).

There are other seminars covering areas including marketing, business strategy, transport, IT and social networking.

About 100 local businesses will be exhibiting and it will be a good chance to network with other owner-managers.

Let me know if you plan to come, else please come and say hello on the day. And if you do attend my cash flow seminar I hope you find it useful.

The exhibition is open from 1030 and tickets cost £10 plus VAT; buffet lunch, free tea and coffee included.  To book your ticket for this event:

E; This e-mail address is being protected from spambots. You need JavaScript enabled to view it

T: Martin Langdon 0117 9114223 or 07887 658025

www.thebestofbristol.co.uk

Free Stock Photos for websites - FreeDigitalPhotos.net

Investment

The private equity industry has been saying some interesting things recently about investment capital. (Most SMEs are well below the scale of private equity, of course but are affected by the financial environment just the same).  According to reports from Preqin, a consultancy, private equity worldwide has more than $1,000bn in “dry powder” waiting ready to spend.  One US private equity house alone has more than $29bn of uninvested capital, the most in the company’s history.

To me this says that there is substantial potential earnings power here if the right home can be found for this capital. The rub is that there is a lack of opportunities asking for investment, suggesting an industry limping along in second gear instead of the fast lane where private equity would like to see itself.

The main reason the cash remains uninvested is uncertainty with the banks.  Banks remain reluctant to lend for buy-outs. Whereas banks might previously have sold on a high proportion of these leveraged buy-out loans, the world of potential buyers has shrunk.  It remains to see whether banks will recover confidence in backing buy-outs by finding new (and safer) ways to sell on buy-out loans. Until then investors are going to have to keep their cash in the bank longer and investment activity will remain at its current low level.  Ironic to think that there's lots of money around seeking investment.

I've been thinking about what small businesses get from their accountants. The accountant is usually the first port of call for advice for owner-managers (more popular than the bank manager these days .... I wonder why!) 

Are accountants geared up to give good advice in today's economic storms? SMEs, faced with tight profit margins, few overheads to cut and limited access to credit are very vulnerable in the downturn. Stephen Alambritis, spokesman for the Federation of Small Businesses, says: "Accountants are one of the most trusted sources of advice for small business. When we ask our members who they look to for advice, it’s always accountants."

But many accountants and accountancy practices are concerned with the past. They prepare your annual accounts and do your tax computation for last year. Important stuff. But what some small businesses also need - particularly when storms are forecast - is a financial manager: someone who is looking forward with you like the navigator on the bridge of a ship, helping to plan a course ahead to avoid the bad weather and the rocks and dangers that lie ahead? It seems to me that many accountants are not doing much here. When I ask my clients about this the kind of response I get is often: "Well, I don't get much advice about the future from my accountant; they just suggest obvious things like cutting costs or putting up my prices. His job is to make sure that last years figures are right and stop me paying too much tax". 

Only 20% of small business owners think their accountants are providing a first class service, according to a recent survey. 80% said they wanted 'improved analysis and interpretation of their financial data' while 70% said they wanted their accountant to provide a better analysis of their cashflow. In times of growth business people naturally tend to focus on profit but in a downturn we should focus on cash. After years of growth perhaps management is not used to the balance sheet and cash flow as being priorities.

One area that is now the subject of frantic activity is working capital. Unless businesses have been through a stressed situation - or are owned by private equity - they don’t tend to pay attention to cashflow. But cash flow is vital. First understand your working capital cycle; then prioritise the cash flow levers you can pull; then take action across your whole business to improve the working capital position. 

What I'm seeing is a lot of activity in sectors associated with consumer spending, where the problems are particularly acute, and also in healthcare, which is under stress at the moment as a result of nursing home changes. In other sectors, I think housebuilders and retailers are proving to be early victims of lack of financial management.