by Tim Dwyer and Jacob Aldridge >> 

IF YOU OWN a private enterprise in Australia then you have ‘a number’. This is your end game, your commercial vision, the sale figure you believe will see you happily sail into the sunset.

What you may not know is your Numbers – plural. These are the periods of No Man’s Land where enterprises stall, and the black holes that suck business owners, their teams, and their dreams into a vortex from which many never emerge. 

Stress in business is often the result of having your vision Number just on the far side of one of these black hole numbers – almost forever out of reach for reasons that are not apparent.

STUCK AT $1.5 MILLION

We met recently with a business owner who shared the state of his company, including revenue of $1.5 million per annum.

Our next question was, “How long have you been stuck there?”

His response was, “Three years – how did you know?”

We knew because we see this all the time. We ask the same question of a business with $17 million in revenue, while knowing a business with $4.5 million is almost certainly experiencing strong revenue growth and will do so until they reach $6 million.

Similar points exist in much larger companies as well.

Did you know it’s much easier to move from $300 million to $700 million than it is to move from $700m to $800m? Those that bust through the $700m black hole almost invariably become $1 billion unicorns shortly thereafter.

How frustrating to be predictably stuck? How energising to know you are not alone.

WHAT TO INVEST IN AND WHEN

Not only are these numbers consistent in private enterprise, so too are the growth strategies most likely to help you bust through for the fastest return on investment.

For the $1.5 million business, the sales system that had worked was now holding him back. Combined with a capacity strategy to plan the growth, we believed sales would propel him to $3 million, at which point his current channel strategies would need innovating.

Many business owners, guided by the generic advice of the internet or other CEOs at different stages, build detailed systems too early ... or too late.

For example, a business in the $750,000 black hole will not see value in a brand strategy that will take it past $12 million. 

Similarly, businesses stuck at $12 million are often using the same brand strategy they had when they were much smaller.

By knowing your numbers you will know what to invest in and when.

You will be in control of what advice you seek, and be able to more easily calculate the return on investment from any initiative.

It also means you will get the timing right for each investment, which speeds up the process of getting to your Number sooner.

www.shirlawscoaching.com

• Tim Dwyer is Shirlaws Australia CEO and former journalist Jacob Aldridge is now a Shirlaws coach in Australia after returning from UK, where he was Shirlaws head of operations. Shirlaws coaches use the extensive business systems research of the organisation to develop businesses and assist business owners to realise their ‘number’. 
• The Shirlaws annual conference is being staged at Seaworld Resort on the Gold Coast from October 7-9. This year's theme is Scaling Your Business: Creating Your Jump – and this year the event features founder Darren Shirlaw. Venue: Seaworld Resort Gold Coast. www.shirlawscoaching.com/australia

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RSM Bird Cameron calls them ‘zombie’ companies – the walking dead. Just like their irksome namesakes, these are companies that can endanger your business, if you deal with them and are not careful.

Andrew Beck, national head of turnaround and insolvency at RSM Bird Cameron said in the past, many underperforming companies managed to slip under the radar and escape insolvency. He warned that with market conditions changing, these businesses need to change course if they want to avoid going under. 

“In 2014, many indebted companies were able to repay the interest on their debts but not able to reduce the actual debt itself or invest in maintaining or updating equipment or make strategic investments,” Mr Beck said.

“Low interest rates let these zombie companies maintain their commitments to their financiers. As such, it is unlikely that these financiers will seek to enforce their security any time soon and this is how zombie companies will continue to battle on.

“The amount of zombie companies may even increase, given there is no expected increase in interest rates in the near future.”

According to Mr Beck, there are four signs that indicate a company may be heading for zombie-status:

Covering the bare minimum. Companies that can only cover the bare minimum, such as running costs and interest-only repayments, may be heading for zombie-status if they can’t improve their position in a reasonable time frame.

Paying interest but not the debt. After paying initial costs such as rent and wages, companies should at least be able to repay interest on outstanding debts. However, if the business is incapable of paying down the actual debt to an agreed timeline then it may already be a zombie. So, unless their operating practices improve dramatically, they are likely to become insolvent in the end regardless of bailouts and support.

Put a hold on growth. Zombie companies generally are not able to invest in new business or hire new staff. When organisations need to put a prolonged stop to growth and expansion, especially if market conditions are average, this can be a warning sign.

Financiers will be reticent. When companies have reached the point where they are only covering interest and not paying off the actual debts, smart financiers and investors will become more hesitant to continue funding the business. This may in turn lead to additional debt from alternate sources (such as creditors, including the ATO) which may go largely unpaid if the company is declared insolvent and will leave lenders and investors without their money.

“Some companies need support or even a bailout because of extraordinary circumstances, while others simply need a longer foundation period before they can start to turn a profit,” Mr Beck said.

“But when an organisation consistently underperforms financially and is doing the bare minimum to meet its financial obligations, it could be a sign that the business is about to reach zombie-status.

“When this happens, there are two options. The first is to try to save the company with an overhaul of management practices and operational procedures.

“The second is to put an end to the cycle and shut down the business. Either way, a zombie company cannot be allowed to continue to wander aimlessly, potentially taking others down with them.”

RSM Bird Cameron is said to be the largest mid-tier national accounting firm in Australia and is an Industry Expert partner with Victorian Leaders, the organisation developing the next generation of leading companies headquartered in Victoria.

www.rsmi.com.au

www.vicleaders.com.au

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ONE of Amazon’s best-selling business authors, Australian consultant Rod Richards, has a few tips for those starting a business – and they are not too dissimilar from measures he advises business leaders to use in rejuvenating their businesses.  For Rod Richards, success is all about business leaders directing their energies to best effect. Here are some of his latest tips.

WHERE is your business headed?

Perhaps you’ve just launched a new service and are excited to finally convert all that sweat into your very first sales.  Perhaps you opened up shop a few years ago and are at a “respectable” level of success, but are afraid of growing complacent or having the competition gain on you.

But really, do you know where you’re headed – short-term, mid-term or long-term?  The answers lie in how well you know your own business.  

Suppose someone asked you the following three-part question: “What are your financial, business and personal goals?” 

Would you be able to provide clear, positive, definite responses?

These three key areas should be assessed regularly.  It is important to consider where the business is going, where you are going and what needs to be put in place for goals to be achieved. 

When first sitting down with my clients, one of my initial questions is, “What business goals do you want to achieve by the end of the financial year?” 

I look at one-, three- and five-year planning periods.

BUSINESS GOALS

These give clarity and focus to this all-important area. Business goals need to be defined and redefined as necessary as your business develops. They must be specific and measurable.

You can’t manage what you can’t measure. Hazy goals will produce hazy results. Being clear about what has to be done also motivates you and your staff and encourages commitment.  Ensure your business goals are realistic, well researched and achievable.

FINANCIAL GOALS

Know the numbers and determine what gross turnover, gross profit and net profit are needed.  It is important also to know your business cost centres.

Analyse running costs (fixed, variable and semi-variable). This will help you understand their impact on your cash position. Forecasts help you avoid possible pitfalls.

PERSONAL GOALS

Does your business run your life or are you in business to support your lifestyle?  It is worth giving careful consideration as to how close you are to the business. 

It is important to discuss with family the commitment required to run the business and the impact it is likely to have on family time. Organising a balance between work and family can be achieved with input from those involved.

In summary, be specific about what you need to achieve. Setting goals does work if you persist and review them regularly.

-          Rod Richards, Richards Consulting.

www.richardsconsulting.com.au

www.businesstipstosucess.com

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EXTRA >>

TOUGH conversations – confronting staff about behavioural, budgetary or even business survival problems – cast a spectre over most managers. Most would agree it is the hardest aspect for even the most capable managers.

According to behavioural scientist and co-founder of Pragmatic Thinking, Darren Hill – one of Australia’s most in-demand strategists working with companies such as PepsiCo and Suncorp –  it is how managers handle these tough conversations that defines them, and their careers. 

Mr Hill, the bestselling co-author of Dealing with the Tough Stuff – how to achieve results from key conversations, said whether it is an emotionally-charged discussion around a job termination or another colleague’s behaviour, “the common denominator is that all of these conversations will be tough”.

“Difficult situations at work weigh heavily on us and while making minor changes to how you deal with the ‘tough stuff’ might seem small today, over the course of time, those small changes can make a huge impact,” he said.

From his experience and out of his research for the book, Mr Hill has created some tips for managers having to deal with what he calls “the three toughest conversations you will ever have in the workplace”.

‘YOU NO LONGER HAVE A JOB’

The dismissal or restructure conversation.

“Don’t even attempt to remove emotion from the conversation,” Mr Hill said. “There will be emotion and you will have to deal with it. Recognise that tears and sadness are okay but tread carefully with sympathy v. empathy. Statements such as, ‘it looks like you are really upset’ are helpful while ‘I’m sorry this is happening to you’ sends the message ‘I’m glad it’s you and not me’. “

‘KEEP YOUR TONE AND VOLUME DOWN’

“Always remember to keep the tone and volume of your voice underneath the other person’s,” Mr Hill said. “If it does get heated, voices can be raised. Never be tempted to match the escalation. People do not usually shout for very long if the other party doesn’t reciprocate, as it makes them feel uncomfortable.”

‘EYE CONTACT IS DANGEROUS’

Mr Hill said the social rule of direct eye contact is dangerous. “Although we’re taught to look someone in the eye, this is the most personal communication medium and the person on the receiving end often has no choice but to take the message personally,” he said. “Share an independent visual medium such as some written notes to help you talk about ‘it’ (the restructure or termination) instead of ‘you’.”

‘I DON’T LIKE YOUR ATTITUDE’

Mr Hill calls this the “awkward personality conversation”. “Never use phrases like ‘I don’t want you to take this the wrong way.’ This is a classic priming statement and now the person is on the lookout for a way to ‘take it the wrong way.’ Always prime the person towards the successful outcome, such as ‘I need us to both be on the same page’.”

‘AVOID NAMING UNHELPFUL TRAITS’

‘I want to talk about you being arrogant.’ “Ouch. I can guarantee this conversation will head south, fast,” Mr Hill said. “Take the unhelpful trait and find a strength – cynical becomes realistic and interfering becomes inquisitive. This paints a different picture yet remains on topic. For instance, when addressing arrogance: ‘One of your strengths is that you’re a confident guy, but there are times when your confidence can be a little overwhelming or misplaced. Let me give you an example...’”

‘YOUR WORK IS JUST NOT GOOD ENOUGH

The underperformance conversation. “One of the biggest mistakes people make is to focus on ‘traits’ instead of ‘behaviours’,” he said. “Firstly, confusion occurs because the definition of a certain trait varies from person to person. I may consider dedication as taking on extra tasks while you might interpret this as more thoroughness in your projects.

“Secondly, traits are often enduring patterns. Thinking you can change them in a half hour conversation is ambitious. Don’t tell someone they ‘lack initiative’ – highlight that they rarely put their hand up to lead projects and you will have a much higher chance of success.”

Mr Hill also has some advice for those on the receiving end of such criticisms.

“It’s hard to rationalise without the full picture, so even if you’re seething with rage, you need to match the tough conversation with tough questions,” he said.

“And remember this; all bad seas are followed by calm weather. It won’t last forever. Focusing on next steps rather than dwelling on the wrongs will help you to make the best of your situation.”

www.darrenhill.com.au

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