| BUSINESS OWNERS ACTIONS IN A CHANGING ECONOMIC ENVIRONMENT |
| You have been working hard in Business for many years, experienced profit in excess, purchased, upgraded and renewed equipment and you are proud of yourself for having invested enough time to learn the business. You know everything you need to know about your industry and how to manage your staff. Your idea of running the business was quite simple: get the job, make the job, get paid, pay the bills, stay out of trouble, make a living and during good times hopefully make profit You have had the feeling to be a successful businessman until the beginning of this financial tumult. You realized in today’s changing economy, you need, as a business owner to see your company differently than you saw it in the past years. For the past years, like most business owners, you may have worked as a micro-manager giving direction to everyone and in constant contact with every detail of running the job with less time remaining to perform the management functions. Today, instead of being paralyzed by fear, it will be better to take immediate actions and we, at Capital Seeds Corporation recommend to you a four steps actions plan: Change in Behavior, the Survival Mode, the Re-engineering Process and the Valuation Phase. 1. Change in Behavior The objective of changing behavior consists in improving the way to manage the business effectively, efficiently and profitably. In economic downturns, take action companies have in both sustaining their customer base and expanding their market share. Business owners who recognize that difficult times could represent an opportunity to improve their business could be on their way to become the next market leaders for their industry and in their territory during the recovery period. In order to change behavior and perform the managerial functions instead of acting like one of the workers, as a business owner, you need to establish structure and guidelines. Structure and guidelines will facilitate a functional chain of command and make each employee accountable and responsible to his supervisor; and the benefit for you as business owner: you will gain in employee productivity and the success of the company will rely on its people instead of relying only upon you as the owner. Now, as the owner of the business, you have time to grow the revenue, the cash flow and the value of the business which weighs a lot on your net worth. 2. The Survival Mode Sales and marketing remains the most important area, you, as the business owner, have to concentrate effort and time. If current capacity in sales is lower than market share, you have available sales to fill capacity. If you have little opportunities for market share gain, you must diversify and create new markets or find new products to sell to existing customers. Increase sales will increase the amount of cash flowing into the company. A Sales and Marketing Plan outlines the steps to get the amount of money the business owner wants to make. In a survival mode, the second tool a business owner needs is a Cash Flow. Nothing else matters more than a Cash Flow if you do not have enough cash coming in. You know without doubt it is possible for a company to go bankrupt if it runs out of cash even with net profit and a good Return On Investment (ROI). The Cash Flow represents a measurement of survival: If you stay above the line you’re OK, if you go below, you could be dead. 3. The Re-Engineering Process Even though you have been in the same business for many years, you should consider again the way you produce and deliver goods and services. The Re-engineering Process will stop any bleeding in Sales, Production, Finance and make the company profitable again. Every time there is something that affects efficiency, you should will check and discover how is this affecting profit. Without initiating the Re- engineering Process, there will be more bleeding and it will be devastating. Failure to make changes in the business and the people within the business put in jeopardy the legacy you as the business owners have built for many years. 4. The Valuation Phase Our Valuation Model is based on the following premises: The Company should be worth at least the price at which it could pay off all creditors Policies and Procedures should be written to be sure that the system is running smoothly and avoid personalities interference The owner deserves a descent salary in comparison to similar type and size of business, the standard of the industry and the market area The Business must pay a fair rate of Return on the Total Investment and be attractive for Banks, Brokers, any other kind of financial institutions or potential buyers and investors. Find the Optimal Price at which the Business could accomplish the three criteria. At Capital Seeds Corporation, since our second Consulting Job, we recognized that every single business is different and every single business owner is an individual with unique personalities, dreams, wants, strengths and areas of improvement, all of these determine the current state of your company and you can plan to survive or improve your company without an in-depth assessment of the current situation. |