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The latest guide in our Business High Five series, The SME Guide to Conducting a Business Review, takes an in-depth look at how you can assess & improve the operation of your business at any given time.
In this guide, your SME will be able to make use of insights on:
- The Importance of conducting a business review
- How to conduct a basic business review
- Practical learnings to expect
- Key aspects to avoid when conducting a business review
- Recommendations on steps to follow when conducting a business review
The Importance of Conducting a Business Review
Once your business is set up and has started to run well, most SME owners are inclined to let the day-to-day order of things run as they are.
It’s at this point, however, time to rethink your strategy. Following the critical early stages, you should evaluate your progress on a frequent basis, develop ways to maximise the market position you’ve established, and decide where to take your company next. Your business strategy will need to be revisited and updated.
How to conduct a basic business review
According to Lulalend’s CEO & Founder, Trevor Gosling, it’s very important to step out of the day-to-day and review your company’s performance. “Some areas should be reviewed more regularly than others, most notably financial performance, to ensure you are tracking your business goals.”
Many small businesses operate in a reactive, short-term manner. This gives you more freedom, but it can also cost you time and money as you transition from the beginning stages of your organisation to growing and improving it.
Related: The Basics of Reviewing your Business Model
Practical learnings to expect
While the main aim of conducting a business review is to figure out how you can redefine your business goals to further your success, there are other key learnings you can gain from this.
“The biggest thing about reviews is that they help shape the future of your business by giving clear indications of areas that need the most attention. Without this understanding, you can be focussing your energy in areas that won’t necessarily make a difference in the way you perform,” says Gosling.
Key aspects to avoid when conducting a business review
It’s easy to get caught up in the execution of a business review but one should also be wary of the common mistakes business owners tend to overlook in doing so.
“Just like spending too much time on day-to-day operations is not healthy for your business, spending too much time on a business review can also be harmful,” advises Trevor Gosling. “Keep a healthy balance, don’t get lost in the details and when things are not completely clear, don’t be afraid to go with your gut!”
Related: How to write the perfect business plan
Recommendations on steps to follow when conducting a business review
Gosling stresses that you should “always have a plan or goals that you can track your business against. That’s the crucial starting point and without it you’re operating in the dark. When you track your performance against your goals, it very quickly highlights where things are going well and where you are missing the mark. But goals are never static and need to be developed/refined, particularly as your understanding of the market improves, to ensure you are setting targets that make sense and are achievable.”
Download the full SME Guide here.
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To help SMEs get the funding they need to grow their business sooner, rather than later, we offer a 60 day delayed repayment option to all first-time customers. So if you apply for funding today, you won’t have to start repaying for 2 months. If prompted enter promo code LULA when applying.
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Your business model is your business’s plan to make a profit. It’s an outline of how your business plans to make money which allows you to identify your target market and their needs, the expenses you should anticipate as well as the products and services your business plans to sell. Business plans are important for both new and established organisations, as they help businesses attract investment and talent. Importantly, they help assess whether things are working the way you want them to.
To keep ahead of trends and changes, it’s important to review and update your model. Here are 4 ways to consider reviewing your business model.
1. Customer value proposition
Customer value proposition
Do you still resonate with your customers and are you taking their feedback into consideration? Reviewing your value proposition is a great way to establish your relevance in meeting your customers’ current problems, or how you can make adjustments to your product to keep improving their situation. Doing customer research to establish what your customers need can help you in this process. It can give you quantified feedback on the specific benefits of your products. You can find some useful tips for this on our blog post How to Drive Sales Through Customer Retention. It could also spark ideas that you may have overlooked initially. Remember to solve real and important problems for your customers, maintain your differentiation from competitors, and remind your customers why they should trust your brand.
It’s imperative to understand your profitability for the success of your business. The profit your business makes should be used to help secure growth opportunities. Analyse how your business brings in money and opportunities for growth. Start with a profit and loss statement. If you don’t already have one in place, you can start by individually listing how your business generates income and spends money. Also, consider doing a pricing review to understand if you’re making enough margin to be profitable. Once you’ve consolidated the audit, you can try to eliminate work that costs you money and focus on opportunities that generate income. To get a good idea of how to approach this, have a look at Freshbook’s step-by-step outline on how to check if your business is profitable.
Related: How to Drive Sales Through Customer Retention
Take some time to consider if the resources currently available to you are appropriate for your business model and how it’s evolving. Do you have access to the right people, and are you meeting your financial goals? Whether the answer is yes or no, it’s always a good idea to review this aspect of your business. Consider your capacity and demand management, your resource utilization as well as your progress and time tracking. It’s important to establish your actual resource availability and to get a realistic view of your demands and capacity to deliver. Understand what roles and skillsets you need and streamline communication between your employees and the business, as well as with your stakeholders. If you’d like some ideas on how to get started, Planview – a portfolio and work management solutions organisation – has great advice on resource management best practices.
To run a business, processes are used every day. In the quest for efficiency, it’s important to review them and keep the ones that make sense, and improve the ones that don’t. With rapid changes in technology and the evolving demands of your target market, dysfunctional processes can lead to breakdowns in communication, increased costs, or unhappy customers to name a few challenges. Make this an important step to review to help streamline your tasks and business activities. To get started on this consider these steps recommended and outlined on Mindtools:
Step 1: Map the process
Step 2: Analyse the process
Step 3: Redesign the process
Step 4: Acquire resources
Step 5: Implement and communicate change
Step 6: Review the process
Related: How to Write the Perfect Business Plan
Running a business is hard work, but regularly reviewing your Business Model can make planning for the future easier. Make it a priority to keep up with the ever-evolving needs of your clients, talent, and expectations of any investors so you can stay relevant. Try not to overlook the components that make you successful and how you can upgrade them. Remember, if any of your adjustments need financing that you might not have at the time you can always get in touch with one of our Funding Specialists at Lulalend to find out how we can help you meet your business objectives.
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There’s a very good chance that you’ve been talking about resilience in and around your business and there is a good reason why. In a 2016 survey, Control Risks explained business resilience as “an organization being able to identify, analyze, and implement planning to be better able to recover or ‘bounce back’ from disruptive events”.
Many business and managerial practices have proven that a focus on resilience is increasingly important to ‘bounce back from disruptive events’, such as a global pandemic. In this article we share insight on the following:
- What is resilience?
- How do you manage and measure it?
- How do you build a more resilient business?
Related: Increasing Your Business’s Resilience to Come Back Stronger
What is resilience?
Business resilience can be defined as an organization’s ability to predict, plan, react, and adjust to changes and disruptions in the business environment. If a company can effectively develop its resilience, it can eventually secure its ability to accomplish its goals and objectives, regardless of the unpredictable events and changes taking place.
How do you manage and measure resilience?
Traditional management methods have some significant drawbacks that make it difficult to assess and achieve resilience:
- Many conventional companies have been designed to increase shareholder value from dividends and share value. Very few organizations really aim to calculate resilience beyond particular material threats.
- Companies and shareholders also concentrate on optimizing their short-term returns. However, resilience requires a multi-time perspective: to forgo a certain amount of productivity or success now for the sake of more sustained performance in the future.
- Businesses have focused primarily on designing and implementing stable strategies that perform well when the causal relationship is simple, predictable, and unchanging. Resilience deals with what is uncertain, changeable, unpredictable – which although can have serious implications.
Managing resilience requires more than just coming up with new ideas or resources to apply to today’s approaches. It needs a different business model – one that embraces complexity, uncertainty, interdependence, systems thinking, and a multi-time scale perspective.
Related: How to write the perfect business plan
How do you build a more resilient business?
There are 3 major areas through which resilience can be enhanced:
Leadership and strategy – Building a resilience vision starts with the identification and awareness of vulnerabilities and an overview of the possible effects of these vulnerabilities on the business.
Operations – Operational resilience can be improved by recognizing possible crises that might affect the business and rating these threats against the effect they will have and then implementing a risk reduction and management plan.
People – Employees and their expertise are essential to the organization’s resilience. Investing in the workforce is the only path forward. Ability levels, turnover of workers, work satisfaction, training, and learning opportunities should be closely controlled. Ensuring that people are involved in the change program, and keeping them motivated, will yield rewards for every business.
Let’s not forget, many businesses already take on some form of risk management but mostly to understand the effects of specific, known risks. Your business’s resilience should also be to deal with unknown risks, be able to adapt and change any external stress, and possibly turn it into an opportunity to succeed.
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Having an effective cash flow system is the heartbeat of any successful business. This is especially true in a construction business where managing cash flow between different projects can mean the difference between success and failure of your business.
We’ve put together a few tips and tricks that can help you manage your cash flow to ensure your construction business remains profitable across all projects.
Understand your customer
As a business owner, it is always ideal to work with contractors and customers who know how to process your paperwork, provide approval on work completed, and pay for services soon after completion. Knowing your customer’s creditworthiness by reviewing their financial statements or annual fiscal reports can help you understand how they have worked in the past and guide you on how to manage your relationship with them. It is important to know that they will be able to pay for the work you complete for them, even before you begin.
Do a Cash Flow Forecast
Create a reasonable cash flow forecast for each of your projects. Depending on the length of the project, plan out how much work will be completed each week or month and how much you can invoice for. Remember to consider how much you are set to pay vendors so you have an estimated idea of how much cash you will have at every stage during your project. At the end of each project, compare your forecast against your receipts so you can improve future forecasts and in turn better manage your cash flow.
The Best Bridging Finance for SMEs
Be realistic about your profitable estimate
You should never consider taking on a construction project that will not be profitable for your business. Managing your cash flow on profitable projects is difficult enough. You always have to avoid moving funds from one project to pay for another just to keep an unprofitable project going.
Negotiate contract terms in your favour
It is important to ensure that the payment terms you agree on are in your company’s best interest. The invoicing schedule you should prefer is one that reflects upfront costs that set the project in motion, such as being paid for materials when they are delivered rather than when they have been installed. Come up with a schedule that works for you and your vendors so both parties have an understanding and you can avoid having disputes about money and payment terms throughout the project.
Always check Change Orders
Change orders can have a big impact on your cash flow so it’s important to know what you can and can’t charge for. Change orders should be clearly established in the contract. Keeping on top of and documenting the extra work completed is essential.
Be strict about collecting payments
It is always good to have your accounts receivable down to 40 days or less, however, this may not always be the case. When invoicing customers, ensure you have all the correct and necessary documentation and that you are submitting to the relevant people so you can avoid delayed payments. Do not be shy when requesting payment against an agreed contract.
3 Ways Bridging Finance Instantly Improves Cash Flow for Your Business
Close the Project
Closing a project and collecting payment can be tricky at times. Effectively managing the final punch list can improve the timeliness of the final payment. With the help of Lulapay, you can collect payments upfront and we can offer your debtors payment terms with us. Read more about how this works here.
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In the face of COVID-19 most businesses have already been taking some steps, out of pure necessity, to increase their resilience.
However, as we settle into the uncertainty and prolonged semi-locked down period, we thought we would highlight the areas most experts agree should be prioritised to increase business resilience.
In this instance we define resilience as the ability to come out of a crisis faster and stronger than competitors in your industry.
In terms of survival over the lock down period many businesses have already made use of Cost cutting, and while most owners are good negotiators, we tend to get lax in times of plenty. We must use the memory of COVID-19 to keep us on our toes in terms of how we spend our budgets, how often we choose to negotiate and how extravagant we are in times of plenty. In addition, as seen in this McKinsey study of 2000 businesses, in times of crises an early and strong focus on cost cutting can better position your business for an earlier and stronger recovery. It is worth noting that in this instance the best form of cost cutting is increased efficiency through greater digitisation.
In addition to this, business insurance, as we have all seen, is worth the investment. So too is staying on top of things like UIF and encouraging your employees to invest in income protection. It is far too easy to underestimate how often these big crises occur, but once a decade is a good benchmark (last decade there were two – 2002, and 2008).
This leads to the next level of resilience – building up savings or having access to funds that can see you through any prolonged period of reduced income. On a personal level we are told to build first 3 and then 6 months worth of savings as an income buffer – and it shouldn’t be any different for your business.
While you are building this buffer up, and indeed after, it is worth having additional funding options in place. Fast access to funding allows you to fill any gaps, or more importantly to take advantage of opportunities to grow your business and recover faster ( Lulalend’s instant access credit facility is designed to help support your business through good times and bad. It has no fixed fees so it costs you nothing to have it in place “just in case”).
Throughout the current crisis we’ve all felt there was a lot of noise, but few quality sources of information. Did you manage to discover the right source of business information. If not, it is worth making sure that you have a good, reliable source of information so that you don’t waste time trying to find the answers you need. This allows you to take action faster and keep your focus where it is most needed.
One area that can help with this is finding a good mentor or building a strong network. Simply looking for businesses in your industry either locally or internationally and sending out a request to ask for some guidance can be the beginning of increased support and insights.
What is clear from the McKinsey study is that the most resilient businesses act faster to recover faster, especially as opportunities begin to present themselves as the markets change, and as competitors begin to offload assets. Furthermore the gains they make during this time stand them in good stead for years to come.
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What is Yodlee?
Yodlee is a leading data aggregation and data analytics platform powering dynamic, cloud-based innovation for digital financial services. This advanced technology makes it easy for clients to upload documents, knowing that their information is protected.
How does Yodlee work?
Yodlee collects data on Lulalend’s site through screen scraping: a technique which collects data and sorts them into categories. After entering the details into Lulalend’s site, it gets encrypted from that point, to ensure that your details cannot be viewed by third parties. Your credentials are securely stored on Yodlee’s system and cannot be accessed by Lulalend
I don’t trust Yodlee, can I send you my bank statements?
Yodlee is trusted and used by many major companies such as PayPal, Amazon and many global banks. We use it to get a read-only view of your bank transactional history. This allows us to process your application automatically, avoiding time consuming validations that are required for uploaded bank statements. Yodlee is totally secure and your bank credentials are never viewed or stored by us. Alternatively, you can upload your latest 3 months formal bank statements (Please be advised that scanned copies do not help much as it does not allow us to extract the data automatically).