That is so true and even more so in 2016. The world has changed dramatically in the last 10 years with the digital revolution changing the way we live our lives. Everything around us is changing whether we like it or not.
Auckland’s current housing and homelessness crisis is a classic example of a lack of foresight and a failure to plan.
It has been clear for 8 years or more that not enough houses were being built each year, not enough apprentices were being trained to fill the future construction work force and too many construction workers left NZ to go work in Australia because of lack of work here. Emigration then turned around dramatically with substantial immigration leading to even greater pressure on housing, excessive delays in the new housing consent process delayed house building and at the same time incomes did not rise significantly for many. This led to substantial increases in house prices, cutting many out of the possibility of home ownership and leaving many families sleeping in cars and garages.
All of this has been evident for years but nothing was done early enough at a policy level to deal with it. The hope that the market would deal with it and sort out by itself proved to be an optimistic and unrealistic hope. A comprehensive plan was needed to tackle all aspects proactively instead of reactively, piece-meal and too late.
Take your cue from this real life example and ask yourself what you need to do proactively to avoid becoming irrelevant and obsolete. Realise that adopting the “ostrich syndrome” of keeping your “head in the sand” is no longer an option.
There are 2 main reasons why people are in business:-
- To make money,
- To grow the business so it becomes more valuable.
The first allows a lifestyle to be enjoyed while the second when sold will provide the basis for income in retirement. Surplus income also needs to be continually invested into other assets that will bring in passive income.
Each business is therefore a means to an end.
Business Goal Setting is a crucial:-
- How much money do you want to make each year?
- When do you want to retire or exit the business?
- How much do you need the business to be worth then?
Working forwards from today planning needs to focus on:-
- What changes can be made to improve profits?
- How can the business be grown from where it is to where it needs to be?
- How can I out perform the competition?
- Setting a Timeline for each change and step.
There are 4 justful ways to grow a business:-
- Increase the number of customers of the type you want.
- Increase the number of times your customers come back.
- Increase the average value of each sale.
- Increase the efficiency and effectiveness of each process within the business.
Implementing each of these may not bring overnight results as strategies need to be tested and applied with the results measured and trends tracked. Only some strategies will work so those that do need to be refined and adopted. Each incremental Improvement in earnings brings a greater improvement in business value as that is usually priced as a multiple of earnings.
The business processes are crucial to how well and efficiently the business can function while the “way we do business” implemented by each member of the team in the business is crucial as it reflects the culture of the business to the outside world.
The difference between a good business and a great business may be only a combination of lots of small differences spread across all aspects of the business. A year or two back I heard Ian Foster, assistant coach of the All Blacks and former coach of the Chiefs, talking about Super Rugby and differences in the game statistics across most the teams. Individual differences are often quite trivial in percentage terms and even between top and bottom teams, but end up making all the difference between winning and losing.
All this means is that you have to be a little better than everyone else in all aspects of your business.
Tony Richardson and the team at Capital Accounting Associates Limited can assist you with your business plan and its continued refinement.