Building a Sharper Business

Sharper Service, Sharper Management, Sharper Profits

About the Author

Nathan Morris has over 15 years experience in the accounting profession. He works with a large cross section of clients on advisory issues such as business management, tax minimisation strategies and business expansion planning for small, medium and large businesses as well as helping clients with business valuations, acquisitions and sales Nathans industry experience covers most small to medium businesses, including professionals, manufacturing, wholesaling, retailing, hospitality, and primary production.

I really hope that get something out of this book. It comes as a result of study, years of working with small and medium enterprise, helping business owners when things got tough, arguing on behalf of clients and tearing my hair out looking for the right strategy to meet a need. If you own a business, and you want to do better, make the most of this opportunity. Nathan Morris

Table of Contents:
Introduction Chapter One Chapter Two Chapter Three Chapter Four Chapter Five Chapter Six Chapter Seven Chapter Eight Chapter Nine Chapter Ten Chapter Eleven Conclusion Fundamental Principles of Business Setting Goals and Objectives Strategy and the Role of the Owner Managing the Finances Managing your Sales Structuring for Growth Managing your Investment in People Monitoring and Reviewing your Performance Holding on to you profits Looking after your clients Finding the Right Advisers

For Nathans next Book Putting it all together The Five Pillars of Your Business go to www.morrisaccounting.com.au and watch for updates.

Introduction
Its not necessarily what you know thats important, but who you know; and most importantly what they know. Nathan Morris
These days nobody really denies the fact that accounting can greatly help any business owner to accelerate his business growth and therefore his personal wealth. The main issue is many business owners simply do not have that depth of relationship with their accountant. There are two primary reasons for this; 1. The accountant is unwilling or unable to engage in this sort of work for their client, or, 2. The accountant has offered these services to their client and the client has been unwilling to part with the cents to earn the extra dollars. The fact is that running a business solo may require working in areas that are far from your professional expertise. Big business knows this. Successful public companies spend a lot of money to hire expertise to keep the numbers in check. With the availability of accounting software and do-it-yourself bookkeeping tools, many small businesspeople believe that they can do what the big companies cannot and manage their own finances, to the point of only using their accountant for lodgement purposes A little knowledge is a dangerous thing. The reality is that more often than not, the self accounting practices are carried out as the last priority on the list of all things to do. So when you are too busy to accomplish other tasks in your business then most probably this most critical of tasks the management of the lifeblood of your business - will be pushed to the back of the queue. Im sure that there are a few nods of agreement happening right about now. So how do we correct this process? Well that is what this book is all about, but without stealing my own thunder, there are a few basic concepts; 1. Write down your objectives for the business, 2. Document what your personal value is to your business this will help you to understand how you should be focusing your time (and indeed how you shouldnt be focusing your time) 3. Talk to your current accountant about the services he or she can offer. If you are in doubt, ask for case studies of work that they have done or even ask to talk to other clients. If you are not satisfied that your current adviser can help you here and now and especially in the next five years, then ask successful business owners who they use. 4. When you have decided upon your accounting adviser for the next period, meet with them to establish some goals, and what you have to achieve day by day and week in order to reach these goals. Then your accountant can undertake their work for you in context. Lastly, read this book and use it to spark within you a greater interest in productivity and performance.

Sharpen your mind and your behaviour and it is likely that everything else will follow.
Nathan Morris

Chapter One:

- Fundamental Principals of Business

The most important thing to remember is that many business laws are universal. While it may appear that running a one-person business is simpler, it requires the same kind of decision-making a CEO of a billion-dollar company makes. In fact, often the best CEOs and the man or woman running the successful one person operation think in similar ways.
A successful solo entrepreneur and a CEO both think of every aspect of their businesses - product, sales, customers, profit margin, return on assets. They both know which of the items in their product line are profitable and which are not. Both understand the value of customers, and the importance of keeping their products moving off the shelf. Except of course a home-based entrepreneur may be actually free of the plethora of technical management terminology preferred by big corporations (eg. dramatically administrate process-centric content, continually predominate sustainable supply chains or uniquely engage state of the art convergence). If a person understands that certain business principles are universal, then that person has what what we know as "business acumen." Business acumen simply put is the ability to focus on the basics and make money for the company. You see every business conforms to the three basic parts of moneymaking - cash generation, return on assets (combination of margin and velocity), and growth. Whether running an online or traditional business, a business owner must understand these parts individually and the relationship between them. These three basic parts, plus customers, form the nucleus of any business. Lets describe these three components; 1. Cash generation is the difference between all the cash that flows in the business and the cash that flows out. Cash is the lifeblood of any business - the company's oxygen supply if you will. An astute entrepreneur must always ask the questions: Does the business generate enough cash? What are the sources of cash generation? How is the cash being used? Failing to ask these questions at regular intervals and against useful benchmarks can be the beginning of the end for the business. Without cash, a business can be in trouble even if other aspects of moneymaking - profit margin and asset velocity - looks good. If the business generates sufficient cash, the owner is in a better position to grow the business. A business owner can make better investing decisions, not to mention be more in control, if it has its own cash rather than borrowing money reactively. Making decisions out of financial desperation can derail business strategy and limit the businesss ability to exploit opportunities. 2. Return on assets. The business owner uses either his own money or someone else's money to invest in the business. The things invested - be it products, store or web site - are the business assets. A business owner who knows what they are doing will ask the questions: How much money will be made with these assets? What kind of money is being returned through their use? In short, a smart entrepreneur must always ask, "What is the return on assets?" An entrepreneur must follow the rule: the return on assets has to be greater than the cost of using their own money and other people's. Even if profit margin is small, a business can thrive if it has a fast turnover of its inventory. A faster velocity leads to a higher return. The faster the inventory reaches the customer, the better it is for the business.

3. Growth is vital to every business. It energizes the business and creates new opportunities. However, growth for growth's sake does not do any good. The growth of a business "must be accompanied by improved margin and velocity, and the cash generation must be able to keep pace." A smart entrepreneur does not only push for sales. Instead, he or she must know how and why the business is growing; and whether the growth can be sustained. Sales may be growing, but if the cash situation is getting worse the entrepreneur must take the prudent approach and step back. When growing a business, the businessperson must determine if the company is generating or consuming cash, and whether profit margin is improving or getting worse. In all four of these components, the business owner can benefit from the advice from a profit focused accountant. To have someone turn financial data into management information and feed it to the business owner, then the business owner can continue to focus on the generation of profitable revenue. 4. Customers. A universal law of business is that no business can thrive without customers. Hence, a smart entrepreneur instinctively understands his or her customers. As Charan explains, entrepreneurs with business acumen have a close connection with their customers and possess strong conviction that the business cannot thrive without satisfying them. Entrepreneurs must always know the pulse of their customers. A savvy entrepreneur knows that the best way to get to know the customer is to make the special effort to observe and talk directly to people who use their products and services. Find out what the customers need directly from them. Direct contact provides insight that even expensive market research cannot. A good rule of thumb with customers is to keep it simple. A business owner must clearly know what the customer is buying and why. It may not be the physical product or service alone, but intangible qualities such as reliability, convenience or trustworthiness. The secret of the great CEOs of our time, such as Jack Welch of General Electric, is their "intense focus on the fundamentals of business." The best CEOs have a knack for bringing the most complex business down to the fundamentals -- the same fundamentals that govern a small family retail operation, a law firm or an online travel agency. Like these CEOs, entrepreneurs should never lose sight of the basics if they want to succeed. Business is all about common sense. Alas, it is surprising to find how often this common sense of business is lacking. This book will help anyone understand in plain and simple language the basic building blocks of a business and use them to figure out how a company makes money and operates as a total business.

Chapter One Some questions for you to consider

Think about the following questions and statements, and have an honest think about how they relate to your current situation, your current objectives, and your attitudes, and tick the appropriate box.
I need help now (no idea) Im not there yet Im going great

1. Is your business worth growing? 2. How are your critical numbers revenue, profit, debtors etc. 3. Are you spending more than you earn? 4. Have changes in your life in the last year affected the way you do business? 5. Are your staff operating close to capacity? 6. Do you know your return from your marketing spend? 7. Do you pay your bills on time? 8. Have your outlook or goals changed? Are you satisfied?

Do you have any new objectives?

With your answers above in mind, write down three goals that would help you get the most positive answer for each question. Make your goals as succinct and specific as possible. 1. ......................................................................................................................................... 2. ......................................................................................................................................... 3. .........................................................................................................................................

What are you going to do about it right now?

Achieving all of our goals at once is often unrealistic and can lead us to feeling that our goals are unachievable. Now that you have documented your goals, what action are you going to take immediately? 1. ......................................................................................................................................... 2. ......................................................................................................................................... 3. .........................................................................................................................................

Who are you going to call?

Once you have decided on a course of action, who are you going to contact to give you the right advice and keep you accountable? 1. ......................................................................................................................................... 2. ......................................................................................................................................... 3. .........................................................................................................................................

Conclusion
In the pages of this book, I have provided a range of ideas and tools to use to help you to improve your business. The biggest mistake you can make when you read this or any other business related book is to try to implement everything at once. If you do this it is likely that you will get overwhelmed and then not achieve anything at all. The design of this book is that chapter by chapter you can come up with ideas that you can implement one by one over time. This way it is very likely that your initiatives will stick, and that your business will achieve permanent improvement. Of course, we would be happy to help you to implement permanent improvement in a range of areas in your business. You can access this help, either by obtaining resources on our website, by attending our regular workshops, or by having a one on one discussion with one of our team. Even though economic times have been challenging (when havent they been challenging) a huge part of the fortunes of your business is up to you. We would love to help you do better.

Your business will always be a reflection of the business owner. If you become purposeful, organized, disciplined and effective, it is likely that your business will be this way.
Nathan Morris