1. Build the machinery for
lasting success
encourages all staff to perform to their
utmost capabilities. It rewards those who
excel in proportion to their contributions.
Positions, tasks, duties and responsibilities
are defined and communicated and
performance is routinely measured.
Training, job enrichment programmes
and incentive plans are designed to
encourage each staff member to excel.
Successful owners view their staff as their
most valuable asset and resource.
Operational support
Successful owners have developed
operational support systems. These may
be financial or non-financial, manual or
automated. The objective of these
systems is to support business activities
and improve efficiency. They also relieve
management of many day-to-day routine
20 % 0191 461 8000 www.better-business.co.uk Better Business No 165
Beating the recession
activities, giving owners more time to be
strategic thinkers. The information
provided by these tracking systems gives
critical information on sales, cashflow and
other financial performance data so
action can be taken whenever change
occurs. Red flags appear early, before
problems become unmanageable.
Strategic business plan
Successful businesses operate within a
planned framework. A strategic business
plan is written for a minimum of three
years or two years beyond the current
budget year. The plan describes the firm’s
mission to serve its customers. It analyses
marketing strengths and how they will be
exploited. It addresses its weaknesses and
how they will be overcome. It identifies
Too many businesses fail in their early years. To
be sure of success, make sure you have the right
systems in place, says Colin Thompson.
W
hy is it that some small
businesses succeed
spectacularly, growing
beyond their owners’ wildest
dreams, yet others fail miserably
in their first couple of years?
It’s a question that is particularly
relevant in the current economic climate,
and one that small business owners would
do well do examine.
One of the most critical issues is one
of size. Once a small business has grown
to a certain level, management techniques
must change or the business will inevitably
run into trouble.
The owner-manager of a small business
must evolve from a manager of things to a
manager of people and from a technical
expert to a strategic thinker.
This is often a difficult task because of
ingrained habits, but failure to grow as a
manager is perhaps the major reason why
a business will fail.
Four keys to success
So what do successful businesses have
that troubled businesses don’t? There are
four keys to successful small business
management.
Owner’s character
There are several key character traits
displayed by successful owners:
‡ They have a positive attitude, towards
their business and life in general;
‡ They are committed to their effort and
not afraid of hard work;
‡ They are patient. “Entrepreneurs are
simply those who understand that there is
little difference between obstacle and
opportunity and are able to turn both to
their advantage.” Victor Kiam.
‡ They are persistent. “Many of life’s
failures are people who did not realise
how close they were to success when they
gave up.” Thomas Edison
Strategic business plan
Successful owners have developed a
business blueprint called a strategic
business plan that clearly describes their
business concept, their mission and their
philosophy of business. In this document,
they have set personal and business goals
and set out specific time-lines and
strategies to achieve them.
Organisational structure
Successful owners have developed an
organisational structure that functions like
a well-oiled machine. This structure,
including all its policies and procedures,

2. its target markets and pricing strategies
and it identifies and describes strategic
alliances or business partners that may be
crucial to success during the planning
period. The plan also describes positions
on any other issues seen as critical to the
long-term viability of the business.
With a current and meaningful
business plan the venture stands its best
chance of continued success and
achievement. Without a viable business
plan you run the risk described in the old
adage: ‘Failing to plan is planning to fail’.
Organisational structure
The basic building blocks of organisational
structure are:
‡ An organisational chart depicting key
business functions and reporting
relationships between the functions;
‡ Job descriptions and duty lists for staff
that detail reporting relationships, job
requirements, skills, duties and
responsibilities and standards of
performance for each function;
‡ A job performance evaluation system
that measures performance of all
employees and encourages continuous
improvement;
‡ Information guidelines including an
employee handbook that
communicates acceptable boundaries
and the preferred methods by which
staff are expected to operate;
‡ An incentive system that rewards staff
for performing above the standard or
budget by sharing a portion of the
increased profits.
When all these organisational
components are in place and being used
routinely, the business will have structure
and purpose.
Staff will feel they know where the
firm is going and what their role is in
helping it get there. They will know the
boundaries of what is expected as
acceptable behaviour and they will be
aware that outstanding performance will
be rewarded.
Operational support
Usually the most involved system for a
small business is the accounting system.
This may be a relatively simple system
such as QuickBooks, Sage or MYOB.
These systems are particularly good
for non-manufacturing firms that simply
buy and resell items, or service
businesses. They manage customers,
vendors and accounts well and can
generate excellent managerial reports.
No matter what the type of business,
some type of accounting software
package that can capture daily
transactions in a real-time environment
and be easily operated by in-house staff is
Better Business No 165 % 0191 461 8000 www.better-business.co.uk 21
Beating the recession
Infobank
Colin Thompson has over 25 years’
experience in business management,
including business turnarounds and
takeovers. He is also an international
speaker and university professor and
has written numerous research
reports, articles and books, which are
available from his website – including
Managing for Customer Care, a
powerful CD on all the ingredients to
keep your customers and increase
the bottom line.
%0121 244 1802
info@cavendish-mr.org
www.cmtr.co.uk
which can and should be used in
pricing strategy and pricing
calculations. Requires 15-30 minutes
per quarter.
‡ Job or product pricing system. This
system automates the calculation of
pricing required to meet overheads
and budgeted profit goals, or it can
report net profit margin before tax on
any proposed pricing scheme. Use as
needed.
‡ Incentive plan worksheet. This is a
system for equitably distributing profit-
sharing monies to employees based on
loyalty, performance and the extent of
responsibilities. Properly constructed,
it requires only 10-15 minutes per
quarter to input updated information.
‡ Break-even calculator. This system
calculates the firm’s break-even sales
volume by day, week, month or year.
Also provides ‘what-if’ capability to
analyse major decisions that could
potentially affect the firm’s cost
structure before the decision is
implemented. Use as needed.
‡ Weekly sales reporter. This is a
reporting system that keeps track of
sales by product group and
salesperson on a weekly, monthly and
year-to-date basis. Requires 15-30
minutes per week for updating by the
sales manager.
If you have none of these developed, the
task is not as daunting as it may seem at
first. Systems are available from a number
of sources at modest cost and include
back-up training and support. A business
with these critical components in place
stands a much higher probability of
survival than one without. v
SPECIAL OFFER
Better Business readers can receive a free
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Accelerate with Impact by registering on
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newsletter – visit www.cmtr.co.uk.
needed. In today’s fast-paced business
world, relying on an accountant to
provide periodic statements of business
performance several weeks or even
months after the fact is not an acceptable
strategy. Immediate information is needed
at all times.
Other systems
Other systems small businesses should
have in place include the following.
‡ Cash management. This should be a
forecasting system (spreadsheet) that
projects accounts receivable and other
inflows against accounts payable and
other outflows and allows
management to anticipate shortages
and take action before a crisis occurs.
The projection should be for at least
six weeks forward. Properly
automated, this system should take no
more than 15-30 minutes per week to
generate a management review.
Automated systems save time and
money.
‡ Budget. This is critical to management
control. To keep costs under strict
control, use zero-based budgeting.
Traditional incremental budgeting
looks only at increases over the
previous year’s budget and what has
been already spent is automatically
sanctioned. By contrast, in zero-based
budgeting, every business function is
comprehensively reviewed and all
expenditure must be approved, not
just any increases. The system should
be automated to produce monthly
budgets that directly relate to
whatever sales volume was, in fact,
generated. Properly automated, this
system should require only a few
hours per year of management input.
‡ Variance report. This system is
complementary to the budget system.
It should be automated to produce a
comparison of actual results against
budget and should report monthly and
year-to-date totals. The report should
indicate trouble areas, by exception,
for management to take action on.
Properly automated, this system
should take 10-15 minutes per month.
‡ Key indicator flash report. This report
summarises on one page the key
weekly changes in cash position,
accounts receivable, accounts payable,
sales and inventories. Requires 10-15
minutes per week for an
administrative person.
‡ Labour burden worksheet. This
spreadsheet keeps track of the costs
of benefits and other staff-related
expenses by employee and
department. The full cost per hour or
year for each employee is reported,