Grow your start up business

As an owner of a start up business starting to grow, what would it feel like to work with your local CMC Partner? 

Well, let’s start with what it doesn’t feel like.

  1. We will not want to collect a lorry load of financial data – most small businesses that we start working with are desperately short of the right information. The book keeper is hired to do the VAT Return and the Annual Corporation Tax return – they have never run a business and don’t know what is needed to manage a business. We will highlight the most important information for you and your business.
  2. We will not work on Business Plans when your concern is about paying the wages and the suppliers next month. The Business Plan can wait! Get the monthly accounts right and the sales pipeline and a few other key pieces of information and do a Business Plan when you really understand how the ‘numbers’ in your business work for you.
  3. We are not dictators – we don’t tell you what to do – equally we are not wishy washy. We work the issues through with you. Based on facts we will get your understanding and we will jointly agree the actions.
  4. We will not want to spend your money. It’s important that your money is used wisely to generate the cash flow, helping move your business forward. In most businesses the cost is in the people and we will work with the people you have. Small adjustments in roles and responsibilities can make a big difference to next months’ figures.
  5. We will not wear rose coloured specs in looking at your people. It is a very difficult thing to have worked with someone for a number of years and for the business to have outgrown their skills. ‘Square pegs in round holes’ cause a massive amount of stress, not least to the individual. Releasing people who are no longer right for a growing business is tough, but invariable the rest of the team can move on at a pace and not be held back.

Don’t think about us as being experts in your business sector – more often than not we will not be familiar with your business sector. We are interested in what you know about your business sector.

If you are relying on us to know you won’t be able to afford us! If you don’t know you will be bust pretty soon.

A good Non Exec knows you, the Business Owner – not the business sector. Your Success is Everything.

So, what do we do?

We add value by helping you to make your business decisions on topics such as:

What are your  revenues – margins – overheads – profits – cash collection – key accounts – sales pipeline value– reputation – good will – business processes – sales ability – account development ability – negotiation skills – terms and conditions – business procedures – key people – recruitment of people – motivation of people – etc etc –

These are the bits in your young, growing business that can easily be overlooked as you rush to get the next order away or answer the next customer enquiry. A couple of hours a month – ‘on your business’ and not ‘in your business’ gives you the quality time you need to think about your business.

Talking to your local CMC Business Partner means you are sharing 23 years of experience having –Your Success is Everything.

Call us now on 01491 285181 for a free confidential appointment

Maximising Your Business Value

Many business owners are primarily concerned with the day to day functioning of their business, and ensuring it generates sufficient income to cover the operating costs and meet their personal financial needs. This is of course appropriate, but it is also prudent to consider the inherent value that they are building in their business. Whilst they may not have any immediate plans to leave their business, creating sustainable, transferrable value is a long term project – and an effective insurance policy in the event they have to stop running their business earlier than anticipated.

So what are the factors that enhance the value of a small business?

Succession Planning

This is often the most significant item when considering the transferrable value of a business. Many small businesses are totally dependent upon the owner, who has exclusive knowledge of critical processes and retains control of all major decisions. There is a saying that an effective manager will work themselves out of a job. This is particularly true for the owner – manager. If the business cannot operate in the absence of the owner, its value to a potential purchaser is very low. The objective should be to move to a situation where the business can continue to perform in the absence of the owner: which requires the establishment of an effective management structure. There is of course a cost consequence associated with the development of the organisation, which must be factored into the growth plan for the business. When successfully implemented, the owner has the freedom to enjoy time away from the business, and concentrate their efforts in work on those aspects or projects that provide the greatest personal satisfaction.

Predictability of income

One of the biggest uncertainties associated with the acquisition of any business is future performance. How reliable are estimates of future income? Continuing, long term contracts or “rental” type income are the most valuable, as they are most predictable. If the business uses this type of model, maximising the number and duration of such contracts will add to the value. In other types of business, being able to demonstrate a consistent, positive trend in income and the accuracy and reliability of forecasting will provide assurance to a potential purchaser, and therefore enhance the price they will consider paying. Ensuring that the business is not heavily dependent upon a limited number of large customers will reduce the potential risk associated with future income.

Accuracy of business information and documentation

Part of any acquisition process will include a due diligence exercise, where the company’s information and documentation will be scrutinised by external professionals. It should be remembered that from the purchaser’s perspective, any difficulties identified could cause them to abandon the proposed purchase or seek to renegotiate the price. It is therefore in the seller’s interest to ensure that all aspects of the business will stand up to rigorous scrutiny. Whilst some problems can be rectified in the preparations for a sale process, others cannot. For example, it is not always possible to obtain cover for a historical gap in evidence of adequate insurance. It is therefore important that on a continuing basis, all information and documentation is prepared and retained such that it can withstand external scrutiny.

Demonstrating the security of any essential business components

Many businesses will be dependent upon some type of limited resource. It may be a particular raw material where quality or quantity are, or can be, limited; the business may be reliant upon the scarce skills and knowledge of particular employees; there may be an item of equipment that would be difficult or costly to replace. No business owner can control external factors, but it is important to be aware of these vulnerabilities and take whatever realistic actions can be taken to limit their potential impact.

There may be other aspects that are particular to individual businesses, but the important point to recognise is that many of these “value enhancing” factors are associated with the day to day operation of the business, rather than a specific exercise to be taken immediately before starting a sale process. There are many examples of business sales that either fail, or result in a value considerably lower than the expectations of the owner because the necessary preparations have not been made, or started at the right time. In those situations where the proceeds of the sale are the owner’s pension fund, the impact on lifestyle can be literally life changing!

Maximise your business value

CMC Partners have extensive experience of working with owners to maximise the value of their business. We have found that it takes a minimum of three years to ensure the average small business is effectively prepared for a sale process. The earlier the preparations start, the more effective the outcome. To arrange a free, informal conversation with David Brassington to consider the implications for your business, call 07837 903180.

Recruiting strategy for small business . . .

Most small businesses have plenty of market to go at – they typically serve markets in which they have very low market share.  Broadly speaking, staff in small businesses are already busy – they follow the example of the owners and tend to work hard.  But, while busy, staff are not always doing work that is appropriate.  It is quite common in small business for skilled people to end up doing work for which they are over-qualified.  So, growing the business means releasing your more senior people to do the work to which they are better suited and bringing in juniors to back fill the admin and the more routine tasks.

Fortunately, this is a win/win scenario.  By freeing up your more able people you can expect to deliver increased productivity, either as a result of more efficient use of their time or by enabling them to do business development work that will lead to incremental revenue. And, secondly, you are hiring at the lower end of the salary scale, so the fees and the risks are also reduced. This model also has the virtue of creating a “built-in” succession strategy.

One of the pragmatic lessons you learn, and routinely re-learn, working with owner-managed businesses is that the people are key.  So it is better to get the right person – someone who is a natural fit with the team – than be too pre-occupied with the percieved best practice of job descriptions and people specifications.  You should still go through these steps but if you find someone who has real talent – then you need to be prepared to be flexible.

Conversely, hiring senior people to the “top table”, especially those with a corporate background (no matter how brilliant their cv), is fraught with challenges and risks – and fails more often than it succeeds.

Whenever you can, grow your own.  They will be more loyal.

Sales

How do you scale your business profitably?

As a business grows and expands so does its associated needs. These needs have to be managed correctly to achieve long term success.

Our top tip for you to remember is your business will not be able to grow successfully by doing everything yourself. You are not a superhero, no matter how much you wish to be! You will not be able to scale up your business whilst carrying on doing the same role as you did when you started off. You need to give some of your work to other people – delegate.

Over the last 25 years we have grown many small businesses into profitable businesses. Read how we worked in partnership with a design agency owner to double the turnover in 4 years. Read the One Ltd Case Study

Using our experience we have compiled a few pointers to help support your business growth avoiding the common pitfalls.

1. Team Leaders /Middle Management

At the start up phase of your business you undertake every job. As your business grows further and you take on additional staff, you still need to monitor every function. However when you grow beyond 10 employees, it becomes too complex for you or your founding team to keep managing all staff members. At this point you face a choice – to continue trying to run things directly, and risk spreading yourself too thin, or to recruit a middle management or team leader level.

If you decide to continue as you are then you will limit the growth of your business. You will be overworked, stressed out and likely to make poor decisions.

If you don’t like the idea of your business becoming too hierarchical, you could promote a team member to a team leader. These team leaders can then take some of the day to day decision making and staff management load off your back, as they have the collective expertise to consider all aspects of an issue and take broad decisions.

2. Internal Recruitment/Promotion

We would always recommend you look internally when delegating or recruiting. Is there anyone internally capable to handle the day to day operations and lower level management issues who has the capabilities, skills and enthusiasm?

The advantage of internal delegation or job changes are endless – they understand the vision, part of the culture, no delay in settling in, motivating for the staff member, demonstrates career progress within the company. Of course, if there’s no one suitable then you may need to think about recruiting externally.

3. Effective delegation

As a small business owner, it can be emotionally difficult to step back and delegate. You need to allow your management level/team leaders to use their judgment and avoid saying things like ‘I wouldn’t have done it that way’.

To ensure this is effective you need to think about:

  • What work/decision/responsibilities you are passing on
  • What type of people do you need
  • How are you going to select them – internal or external
  • Does this involve job changes/description/pay increase
  • Train and develop
  • Set objectives, measure the output and give appraisals
  • Decide on appropriate level of ongoing reporting

4. Knowing where you add value

Setting up a one or two team leaders will take the pressure off you, allowing you to effectively delegate the day to day operations. This will then allow you to slot into the role where you are adding the most value to the business – this is often a higher level role that make you direct money such as the sales/marketing function or relationships with customers.

Whatever you focus your time on, make sure you enjoy it – else it will become a burden.

5. Monitor closely your cash flow

With an increase in staff costs you need to increase your sales to finance your team. You need to focus more now on business development, marketing, client profiling and pricing to increase your sales. This is where many of our clients struggle and how CMC can really add value to business owners. We can mentor, coach and support owners in their decision making, providing them with the knowledge and skills required.

Cash flow is the lifeblood of your business. Ensure you keep a close eye on your cash flow on a daily/weekly basis. A cash flow forecast will give you a good idea of how much money you have coming in and out of the business. Click here for tips on how to tighten you’re your cash flow . Growing too fast and not having the cash flow to support the growth will have a negative effect.

6. Raising finance

If your cash flow is getting tight then act quickly before it’s too late. Ask your bank manager before you need it, instead of when you need. Banks hate surprises!

Too many business owners we talk to have been disappointed in their efforts to raise cash– but often this is because they’ve asked the wrong people the wrong question. It is crucial that you are clear about why you need to raise money and then match this to the right type of funder.

Click here to read our raising finance guide to help provide an overview of your options and the process.

If you wish to grow your business but find the above daunting then please do get in touch as we will be able to help you increase your profits. CMC have partners throughout England, giving you a local adviser in your location. All our partners have hand on experience of running a business as they are all running their own business within a business.

Call us on 01494 829181 to arrange for a free confidential appointment at your business or in your local area.

Case Study – Turning a Reactive Business to Proactive Business

CMC is helping this successful business to position itself for significant business growth, reduce risks, plan for the future and – when he is ready – provide the founder with a comfortable retirement.


The Challenge: 

  • –Introduce effective business skills
  • Broaden the customer base
  • Change a reactive culture to planned, strategic growth
  • Enable the founder to retire from a healthy and expanding company

The Benefits: 

  • –In six months, sales have returned to £2.3m and profitability is now at an all time high.
  • Directors can now focus on strategy and long term planning
  • Profitable new revenue streams have been identified
  • Clear lines of responsibility
  • Key strategic risks were assessed and steps identified to minimise impact on the business.

I had my doubts, but CMC’s approach was totally different. They are prepared to listen and learn about the company and don’t just expect us to take a standard, off- the-shelf solution. Mark Parsons – Managing Director of IRS Limited 

Download the full story….

For details on how this engineering company achieve business growth and identified profitable new revenue streams….

Case Study – Raising Finance to Help a Dream turn into a Reality

The Story of a New Business Start Up and Raising Finance

By recommendation, CMC was approached to help a qualified lawyer turn his business idea into reality. This entrepreneur highlighted a niche business to help unsigned musicians and bands get recognized through exposing their music to fans, with the use of contests, voting and social media.


The Challenge:

To produce a compelling business plan

  • To raise finance
  • Recruit a team
  • Provide guidance with key decision

The Outcomes:

  • Secured external finance of £750,000
  • A skilled team including operations manager, finance director and marketing manager was successfully recruited
  • The business started operating within a month of receiving the finance
  • CMC’s advice gave the business a great start and the company is still going strong

CMC

Raising finance can be a challenge…

Download the full story to find out how CMC used their network of contacts and conducted research to identify potential investors…

 

How to improve your businesses worth

Your business worth is not all about historic profitability, but its ‘attractiveness’ to a potential buyer – the future of your business. You need to take time to understand your potential buyer, their requirements and then set to work to shape and improve your business performance in ways that will enhance its attractiveness. Below is a health checklist that will help you to focus on the important issues.

Basic Business Health Checklist:

  • Maximise trading profits and if possible show a rising trend over 3 years
  • Improve recurring revenue – purchasers regard contracted business as more secure
  • Reduce undue reliance on a small range of customers, suppliers and employees
  • Establish clear processes and management responsibilities – demonstrate that the business can function without you
  • Demonstrate that decisions are based on sound information and management accounts
  • If necessary, initiate an annual business planning process. If it exists, make it a core part of on-going management
  • Ensure that there is clear ownership of any critical intellectual property
  • Sell any non-relevant assets, such as property
  • Ensure any industry/supplier accreditations are in order and up to date
  • Ensure HR practices are fully compliant with current regulations
  • Make sure you are compliant legally with contracts and company law

This list may seem a little daunting but done in a methodical way and over time, it will be manageable. The important thing is to plan ahead and start now. You may feel you don’t have the time or possibly the experience to make this happen, but you are not alone and this is where we can help. CMC Partners have real experience of working with business owners to improve businesses value.

We would also help you to:

  • Optimise profitability
  • Create buyer awareness
  • Clean up your Balance Sheet
  • Secure trading relationships with customers, suppliers and third parties
  • Advice on settling disputes to avoid discounts
  • Improve your market position
  • Clearly define your USPs
  • Brand and marketing advice
  • Review management information to ensure up to date and accurate
  • Check terms & conditions are up to date

Improve your businesses worth

Let us help you increase the value of your business. We can offer a one to one confidential meeting with no charge. Your local business partner will talk with you to understand your objectives, discuss the options and propose the next steps. This meeting gives you the opportunity to see if you like what we say and how the partnership could work. ​

Call Pauline today on 01491 829181 to arrange for a free appointment with your local CMC Partner.

Case Study – Prosperous Sale Positioning with Proper Planning and Preparation

Industry: Professional Services

Issue/Objectives: Company exit with early due diligence preparation

Our CMC partner was intrigued in late 2010 to be introduced via a network contact to a company whose owners had heard of CMC’s bespoke approach to providing tailored exit plans.

After a relatively short meeting it was clear that the owners wished to sell and retire, but were not impressed by the “sausage machine” approach of some of the SME sectors big names. They wanted a more hands on approach from an experienced business professional backed up with superb support team. Needless to say CMC was retained.

Quite often business brokers prepare an Information Memorandum, market the company and then re-engage at a deeper level for the final transaction. This is all well and good but it can easily produce discounts to the company value when it is too late to remedy them; after due diligence. This is where the CMC approach pioneered by our CMC Partner has served to differentiate the practice and add exit value to new clients.

This approach is based on CMC’s skill at project managing an exit and all the key professionals (lawyers, tax advisors, IFA’s etc.) involved in the process. At the same time CMC prides itself on working directly with clients to improve the business before any final price is agreed. If the owners do just two things the CMC process more than pays for itself.

The first thing is to work the business as hard as possible and leave the exit project to the retained and trusted CMC partner. Nobody, no matter what their skills, can both run and sell a business at the same time. That means CMC as the experienced project manager removes this burden from owner managers and allowing the owner to work even harder within the business to maximise the exit vale.

The second and equally important thing is to minimise the discounts beloved of buyers who often agree one price at heads of terms stage and then chisel away to the final minute of the final day by citing disasters in the due diligence they have conducted with their legal team.

Proper planning and preparation with CMC avoids pitfalls

CMC has worked with the client cited above and conducted a tender for legal services across the deal, which includes a “buyer due diligence” exercise at the outset.

This gives the legal team time to understand the business, but far more importantly it allows CMC and the owners to take that early stage report and take corrective action during the marketing phase to remove or at the very least mitigate those dreadful discounts. In the current exercise CMC has been able to help the owners redraft all its employee contracts, engage a specialist Intellectual Property lawyer with a style and commitment that appealed to the owner, help with refining client terms and conditions and make certain that all the statutory records will be in pristine condition for the buyer. This well planned and executed exercise didn’t turn up any skeletons hiding in closets but proved an invaluable exercise that will ensure the client receives a fair price and a bigger retirement fund for the owners.

At CMC we encourage businesses to start their due diligence preparation as soon as possible. If the business needs points for improvement, the legal due diligence will soon discover them.

If you want to learn more about how CMC can help businesses maximise exit value through diligent planning, project management and advice during all stages please contact us on 01491 829181.