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 01844 319286 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 01844 319286 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 01844 319286.

Why have an exit strategy?

As an owner manger, if you are thinking of selling your business it is essential to give some thought to your exit strategy and how you plan the get the most from your business when you come to sell it. This planning and preparation work can take a number of years – this is the best way to ensure that the business sells for the maximum amount. You only sell a business once.

BUT…. even if you have no immediate desire to sell your business, then thinking through an exit strategy is a great idea. Having an exit strategy in a sense forces business owners to stand back from their business and take a long hard look from the view point of a potential buyer. Too often, most entrepreneurs spend all of their time with the normal day to day fire fighting, but just occasionally they need to step back and see the bigger picture. The sort of questions they should ask themselves are:

Is all of the businesses value actually in the owners own head? Could the business function without the owner’s constant intervention?
Are they building long term, sustainable value into their business…. is there value in the company brand?
Do customers return to them again and again? – recurring revenues are highly valued
Are there enough processes to show that the business is well managed?

All of these are key questions when a business sale is imminent, but are also very relevant when a sale may be some way off. Owner managers have no problems working “in” the business, but they also need time to work “on” the business – in order to build it’s value.

Having a thought exit strategy also guards against the unexpected. If the owner is ill (or worse!) and unable to continue in the business, then how will the business survive? Or, what happens if someone comes in, completely unsolicited, and offers to buy the business?

So, to answer the opening question…. every business needs an exit strategy!

Video – “Good Governance” – Why Good Governance is Important for Small Businesses

 

Good governance is not just for big corporations – it is just as important for small businesses as well.

Governance is about having in place a set of procedures and structures to ensure the decision-making processes of the company delivers the shareholders objectives, recognises and seeks to mitigate reasonable risks, and ensures the business complies with all current, applicable legislation.  Bob Brown explains more.

To find out more call 01491 829 181 or contact us via the form below.