Achieving your 2024 budget

Most businesses would now have their 2024 budgets fully or partially completed.

But how they are built and used, how often they are updated and their role in driving business performance varies significantly.

How important is your business budget to you and how do you use it?
Is it a vital tool to ensure your business achieves its goals or is it something your finance staff pay more attention to than what you and other managers do?

Is it used just as a control mechanism for spending (which is vital)

OR

Is your budget an action plan with growth targets each manager commits to and is expected to achieve?

If the budget is constructed by taking the current year’s data and just adding certain percentages to sales and expenses, that’s not a good sign.

A properly constructed budget would be built from the ground up by quantifying sales and cost units into a profit and loss account, cash flow and balance sheet. The impacts of changes in anything can then be shown in the P&L and bank balance.

Of course, the last few years have thrown some of the greatest challenges at business predictions through Covid, Ukraine war impacts on energy prices, materials shortages and inflation. As the many global threats seem to escalate the importance of having a properly formulated financial plan tested for the impacts of various factors will greatly ensure your chances of success.

We would all love more certainty in our businesses but the only likelihood is increased volatility.

Having a business and financial plan fully embraced by all your team can give you the best chance of making the absolute best of whatever challenges 2024 throws at your business.

If you are interested in discussing whether your procedures might be improved, just contact me for a chat.

Business should be a numbers game

Business is a numbers game as the saying goes but very often isn’t.

How many of us have made business decisions based on emotions, feelings, hunches or guesses without having all the information we should have had?

Business decisions shouldn’t be based on emotions or guesses. But if you haven’t got the proper information, your decisions won’t be as good as they should be. And they could turn out to be disastrous. 

Having the right information is key. 

Accurate, real-time decisions based on clear, up to date information on what makes economic sense will lead to the best outcomes and totally remove the emotion and guesswork.

Perhaps, your most important decision is whether you have all the relevant, up to date information you require for running your business.   

If you are unsure, just contact me. 

LeanStart – Your route to becoming a faster overnight success?

Becoming an overnight success is very appealing to most people.  It might be what many business people dream of. 

But be warned. As Professor Martin Curley pointed out at today’s Lean Business Ireland conference the typical timeframe for achieving such status is 10 years. Yes, that’s right 10 long years. Worse still, probably the greatest boxer of all time Muhammed Ali said it took him 19 years to become an overnight success!

Irrespective of your goals, ambitions or timeframes in business, one sure way of making steady progress on the road to success is to undertake a LeanStart programme if you haven’t already started on your Lean journey.

Achieving ‘overnight’ success won’t happen, but steady, incremental gains that can quickly be brought to your P&L and bank balance definitely can be achieved.

Having the right information systems to give you the key information on KPIs is a critical place to start.

If you are interested in exploring the possibilities, just email me.

Think of all that could be achieved way faster than all those 10-year overnight successes!

Grid Finance poll – Highlighting the difficult situation for many SMEs.

Well done to Grid Finance on publishing the results of their Red C poll of 300 Irish SMEs and the difficulties they face.

In Ireland’s current booming economy where there is great news on corporation tax receipts and large job announcements from foreign direct investment, the story for our own SMEs is far different and very scary.  The findings in this poll include:

·        Four out of every five said it was getting harder to keep their small businesses going.
·        Only 61pc are making a profit, despite the relative strength of the economy.
·        Nearly two-thirds of businesses in the hospitality sector said their cashflow was only poor to fair. 
·        One-third of all SMEs said they were behind on their financial obligations and cannot access affordable credit.
·        Only a quarter said they believe their business will be doing better in the future.
·        Two-thirds of businesses did not think the Government understood their needs when formulating policy.

Taking each of the above in isolation would prove worrying but taken together they paint a very poor picture of Irelands two-speed economy where the multinationals are largely doing very well but our own Irish SMEs are having an extremely difficult time.

If these SMEs are waiting for Government action to help, they will likely run out of money and time. 

Are there possibilities for themselves to help them attain a better future?  Quite possibly?

Could the Government do more to help and protect SMEs – Yes, definitely.

Our SMEs need and deserve more support but they must first of all do everything they can to ensure their own operations are being run as efficiently as possible.

If you are an SME in the above position (or heading that way) and you haven’t exhausted every possibility for a better outcome, don’t expect the Government to be the one to save your business.

Hope isn’t a strategy.

KPIs – What are yours

Key Performance Indicators.

We hear so many businesses talk about them and what they consider to be their critical KPIs.

Sure, they have indicators and measures but how many really pick the right ones? 

A KPI should be a measure of how to improve performance not the result such as increased sales.

Probably one of the best exponents of KPIs has to be Ryanair. 

One of their most sacrosanct KPIs is a maximum of 25 minutes for aircraft turnaround at airports. 

This means disembarking all passengers, unloading baggage, cleaning, restocking and refuelling the aircraft, carrying out basic maintenance and safety checks, loading new passengers plus their baggage and getting the aircraft moving again in less than 25 minutes.

So, as they’ve increased their aircraft size from carrying 130 passengers to 197 and soon to 228 what is the constant factor?  Yes, a maximum of 25 minutes turnaround.

Aircraft earn revenue from flying passengers not from wasting time on the ground and Ryanair’s approach highlights this.

So, if a multi-billion turnover business uses a critical KPI of a 25-minute turnaround what might your business use? 

If you are using any financial metrics, then you are measuring the outcomes not the result drivers.

To move the business the key measurements need to ones that will make a real change.

They need to be performance not result indicators.

I’d be very interested to hear what you consider your key “25-minute turnaround” indicator for your business and whether it separates you from your competitors.  

Lessons in humility (and compounding)

A really interesting article by Gary Connolly in the Sunday Times of 23rd April on Warren Buffet. 

Loads of books have been written about the most successful investor of all time and whose like will probably never be seen again. A phenomenal investment genius whose performance has beaten all comers’ hands down over his 58-year investment period. 

As Gary points out, a $1 invested in the S&P500 would have grown to $247 in this period.  A $1 invested in Warren Buffet’s Berkshire Hathaway would have grown to $37,875 over the same period.

One might expect Mr Buffet to lavish the praise on himself for such an incredible, sustained performance.  But the term he uses is: “Our SATISFACTORY performance…”   

Very justifiable self-praise, No.  Loads of humility, Yes.

Two factors have helped in achieving such incredible results. First of all, picking some outstanding winners. Secondly, the benefit of compounding over a period.

So, what relevance (if any) does this have for anyone in business as we are never going to be picking the types of winners Mr Buffet has done.

But we can benefit from both the immediate and the compound, long-term effects of small, incremental gains in our day-to-day work that if sustained can bring compounded gains over a period.

How are these achieved and what might be the compound effect? 

Any of us humble enough to ask ourselves these questions might start looking at the potential gains that could be achieved.  

Have you looked in the right places and with the right plan of action to see what’s achievable and sustainable?

I’d suspect with the right approach you might award yourself a bit more than a satisfactory grade!

Waiting months to get your accounts?

In a time of escalating costs for almost everything, isn’t it more important than ever to have up to date financial information on how your business is performing? 

Not only how you’ve done in the immediate past but also what’s your outlook for the coming year?

But, armed with the right information presented in a timely manner and with the forward view as well as the historic look-back, clients are in a good position to deal with future challenges.

In an analogy with driving a car, they’ve a very good view of their road ahead as well as their rear-view mirror. 

For businesses waiting months (or longer) for financial information their journey is almost the same as driving in semi-darkness with very poor lights.

In a time of unprecedented economic uncertainty, might this be the right time to get the proper view and chart the best route ahead?


Gross margin – Hidden problems camouflaged and an opportunity to increase profit?

Looking for ways to increase your profits in an era of rapidly increasing costs?

For a business with a mix of products and services, one of the most interesting numbers is the gross margin – sales less direct costs. 

When reviewing their accounts and wondering how and where profits can be increased, some business owners focus on certain overhead costs and make plans to reduce them. Of course, this is understandable as overhead costs are listed line by line whereas the biggest number in most sets of accounts is the cost of sales with no detailed analysis aside from materials, labour, etc. 

Reducing any cost that doesn’t negatively impact the future success of the business is absolutely correct.  But many are missing bigger opportunities where even bigger savings and increased margins are possible because of a lack of information on gross margins per product/service or per customer. 

Getting this information is like switching on a light in a dark room, revealing the good, the bad and the frequently quite ugly!

Switching on this light however is only the start. 

Taking the correct remedial actions such as increasing efficiencies, cutting out non-value-adding activities and if necessary, cutting products/services and possibly customers that won’t contribute to profits, are all actions to take.

So, to increase your profits, don’t just ask your customers for a price increase.  Why not instead take a look under your own bonnet and shine a light there?

If your engine looks as if it’s just been serviced and is ready to race, then tell your customers they need to pay more or alternatively try to get better ones.

Finding the correct light switch is the key.

Going with the flow rather than charting the best course of action.

Over the years I’ve seen many business owners be very organised in some areas of their personal lives but far less so when it comes to certain business issues.

Events like holidays, golf outings, Cheltenham race meetings, GAA, rugby & major soccer matches, fishing trips, etc. are all planned and scheduled meticulously – as they should be!  Properly planned events are obviously far more enjoyable than haphazard ones that could go way off track.  And these events are just rewards for work done and results achieved – and contribute to a good work-life balance. 

In some cases, however the business approach as regards planning is quite “different”.   Instead of having a plan and an outline of all the issues that could affect it, there is a tendency to ‘deal with it as it happens.’    Rather than having clear business plans, forecasts and SWOT and scenario analyses for events that could throw a business way off course, the lack of planning necessitates reacting – dealing with problems as they arise and only when they are big enough to be of concern.  The business drifts with the flow rather than implementing a well-designed plan.

The result?  Business “progress” is fuzzy rather than clear, obscure rather than transparent, lacking in metrics rather than having hard data to measure.   Unlike in the sports they follow where every score is measured and analysed, some business decisions are never fully evaluated and no metrics (or the wrong ones) are applied to many areas of the business.

Shouldn’t our business plans have the same level of planning as we would have for major sporting events and trips?  Is that not a better way to help ensure the best possible outcome?  

To quote former US president Dwight D. Eisenhower – “In preparing for battle I have always found that plans are useless but PLANNING IS INDISPENSABLE”.  

Have you ever found planning to be an issue in your business?

Could you do with some help on identifying the right things to do and doing them right?  If so, I would be interested to hear from you.

Biggest challenges for Irish businesses – Sept 21

As Irish SMEs deal with the new normal following the relaxation of Covid restrictions, the challenges are many and varied depending on the sector but nearly all business faceone common challenge.

Take your pick from Covid issues, staff shortages, changed consumer habits, rapidly increasing costs, Brexit, the power of multiples, winding down of Government supports, more regulations, etc.

Irrespective of your sector, one challenge is going to become the main one facing most businesses – COMPETITIVENESS.

With rapidly increasing costs in every sector, and employees struggling with affordability on housing, rents & childcare, the pressure on wage costs is coming to most businesses. Materials costs, freight rates and energy costs have already increased substantially.  

For any business to survive, you need to become as competitive as possible.  Just cutting costs without a proper analysis won’t work and will likely cause even more damage.  Making your business Lean and delivering what your customer really values is the key to success and growth. 

To quote Charles Darwin: It is not the strongest of the species that survives, nor the most intelligent; it is the one most adaptable to change.

For help with adapting the necessary changes, email or call me.