Charting your course
Plan now for economic transition
While the country braces itself for the impending economic transition, Australian operated US franchise Snap-on Tools is advising its group and other Australian small businesses to prepare for the transition now. This will help them to effectively weather the full impact of economic changes over the coming months.
"Our experience in the US shows that small businesses need to ensure a plan is in place to secure smooth economic sailing during an economic period like the one we are currently entering. This can be achieved by taking the time to step outside of the day to day running of your business and look at the fundamentals of your operation," suggests Nicholas Hudson, national manager for the mobile franchise.
"Rising interest rates and petrol prices are dominating the average Australian's spending habits. Customers are watching their spending and this is being felt by retailers in general. This can create additional pressure for small business owners who have a lot at stake in running their business," warns Hudson.
Snap-on Tools home based franchise recommends that in an uncertain economic environment small business should focus on building customer relationships. Good service will become more valuable to the customers and will be a major consideration for future purchases decisions.
"Snap-on, having survived the Great Depression in the 1930s and all the ups and downs since then, understands the pressures the business cycle places on small businesses. Being part of a franchise network provides an extra support foundation when weathering these economic storms. Not only can the franchisee lean on the valuable knowledge of the franchisor, they can share their experiences and learn from others when dealing with peaks and troughs in any business," highlights Hudson.
Businesses that fail to plan - a plan to fall
To run a successful business in the 21st century, it simply isn't enough to be great at what you do. The key to continuing prosperity for businesses is the ability to make effective financial decisions and to plan properly says Tim Harrington, Westpac's general manager commercial and regional banking. "Planning gives the business clarity about where it is heading."
1. Plan properly
To make it easier, break planning into five areas: product, people, place, price and performance. Write down the top three short-term plans under these areas that will impact on the business. For example under "people" ask if you have the right people; what actions can you take to ensure you do? Are you in the right location – what actions can you implement to improve? How are you tracking against your planned sales?
2. Manage cash flow properly
Most businesses cite managing their cash flow as one of the biggest challenges they face. Businesses need cash to pay their staff, trade, and take advantage of opportunities. Make a resolution to improve stock management and speed up debtor collections – improve your payments and debtor collection.
3. Monitor financial position
The strength that most owners bring to a business is the ability to either make a product well and sell a product well. Understanding the strength of the business, however, depends upon their ability to understand the financial numbers that underlie the business. Resolve to work out the strength of the business using the financial statements. Make a resolution to develop a scorecard to track performance in your business. This should cover sales, employee costs and margins.
4. Understand the relationship between price, volume and cost.
Most businesses will be price based on how much their competitors are charging. Make a resolution to calculate the business breakeven point and use that as an effective planning tool.
5. Borrow properly
The most important rule in purchasing is to match the life of the loan to the life of the asset. If you are buying stock, use cash. If buying cars, equipment, property or landholdings – they will last a long time and should be funded accordingly – with long-term debt. Resolve to review recent purchases and determine if there is a better way to fund them and work out if the mix of short-term and long-term debt right.
6. Manage growth
Managing growth while balancing the cheque book is a fine art. Managing cash is so critical to managing a business. Resolve to review the working capital situation and look at how you currently fund sales growth? Is there a better way that you could be doing this?
7. Plan for transition
Franchisees should know the ultimate goal they have for themselves and the business. They should look at the measures they currently use to ensure continuity of their business and put in place steps to help achieve the chosen exit strategy.
15.10.2008
FCA Member
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Contact Snap-on Tools (Australia) Pty Ltd
Tel: 1300 054137
Fax: 02 9624 2445
