Strategic Business Planning

Research into the failure of Australian small businesses has identified, that in 90% of cases, a lack of small business management skills were one of the key causes of business failure. Strategic Business Planning is just one of the core business skills entrepreneurs and small business owners should be looking to develop in order to effectively manage their small business.

Strategic Research

It is important to be able to identify and locate relevant business research. This includes information relating to the global economic environment, national and regional economic information, social and demographic information, social trends, industry and competitive intelligence as well as internal business reports and analysis.

While this kind of information is important, it is vital that you also undertake research to determine customer satisfaction, feedback, complaints, demands and wishes. This type of information helps in the development of better value propositions and is important to product development.

Analysis

You need to be able to take this research and analyse what it means to your business. You need to be able to assess your business’s strengths, weaknesses, opportunities and threats in light of this research. Being able to undertake complex analysis is the key to determining appropriate long-term, intermediate and tactical strategies.

Strategy Development

Using your research and subsequent analysis you need to have the skills to determine what your business’s end game should be and to map out an appropriate strategy for achieving those objectives. A small business owner who takes all the information he can to determine the strategic path his business should be on will be able to make informed decisions based on numbers and hard fact, rather than gut instinct.

Business Planning

Successful entrepreneurs and small business owners need strong business planning skills. You need to be able to take your strategy and communicate it to all the relevant stakeholders. This includes your bank manager, angel investors, your staff, third-party suppliers and anyone else who has a stake in your business. Usually the vehicle that is used to formally communicate your strategy is your business plan.

Business planning skills will help you create a clear, concise document which defines your business vision, your mission and values as well as the strategic path you have chosen and why. You should be able to identify each of the goals and objectives and outline in the plan how and when each of the steps on the journey will be achieved.

Strategy Communication

Simply having a strategy is not enough. You need to be able to articulate that strategy so that people can both understand what it is you are trying to achieve and also their role in assisting you in achieving that goal. Once that is understood, people need to ‘buy into’ the vision and you need to be able to communicate not only the strategy but be able to sell it in such a way as to have your audience commit to achieving those goals.

Developing strong strategic development skills will stand you in good stead as you grow your business. You will be surprised how often you are called upon to articulate your business strategy and, having been through a process which includes researching your business environment, you get to know your business intimately and will be able to discuss the analyses that lead to your business plan and to communicate that strategy whenever required.

Karen L. Paiyo is an Australian Small Business Counsellor, supporting and nurturing the spirit of entrepreneurship in the Asia Pacific Region. Karen empowers small business owners by transferring to them the skills and expertise needed to help them take their business ideas from creative concept to profitable reality, faster and with less risk.

The Principles Of Online Business

Over the past few years, the field of online business has grown to a huge scale as budding entrepreneurs realize the ease that comes with setting up their own business. However, with many of these new business owners going in blind as it were, many of these businesses have ultimately failed. Often, these failures will be caused by similar problems, namely being the business owner in question being unaware of the difference between online and offline business. Although the principles behind running these businesses are somewhat similar, online business requires a different approach in terms of promotion and execution.

Nevertheless, there are a number of business principles that can be applied to both online and offline businesses in order to launch them successfully. How they do after their initial launch will be determined by the action plan of the business owner, but by applying these principles, many of the mistakes made by new online businesses can be avoided.

Stay Ahead Of Your Competitors

Although it can be beneficial to utilize many of the practices of similar, successful online businesses, in order to be a success it is important to develop these practices further in order to stay ahead of competitors. An online business that appears to the consumer to be a cookie-cutter of another, will simply fail as they are not offering anything unique. The web allows new online businesses to research their competitors in order to identify what does and does not work for their target market. Never underestimate the importance of research and changing your findings to suit your unique business and eliminate falling into the background.

Trial and Error

Similar to offline businesses, it is essential that you test out every aspect of your business from the design to promotional campaigns and so forth. The effectiveness of your website in terms of attracting visitors is important, as are the online marketing tools you have utilized. Investigate into how much traffic these factors bring and in turn, how many sales are accumulated compared to your percentage of visitors. A business will always need to test out and and apply new features in order to remain fresh, unique and relevant.

Content Is Key

As a consumer, we will be deterred by products or services that do not offer us a satisfactory level of information regarding a product or service. The same applies to your target market, so it is vital that you provide clear, concise, professional content regarding your business, services, products and so forth. The web is predominately used as an information resource so the more information you can provide your customers, the better. In terms of online promotion, professional material will need to be added onto various online platforms frequently in order to aid your search engine performance.

It’s Not Just About Pricing

One of the main advantages of online businesses to the consumer is that they will more often than not; find their desired items in a range of varieties and prices. This makes online purchasing much cheaper, therefore attractive than offline means. However, it is more than just offering the consumer a cheaper alternative to a competitor. Combine a reasonable, realistic pricing system with a range of unique selling points and ensure that these points are well advertised- both on your site and other platforms utilized.

Remember: Customers, Not Visitor Stats

As any online business owner will know, the level of traffic your site receives is connected to the amount of sales you will typically generate. However, it is important to remember that you are dealing with real, legitimate customers and as you would ensure your customers received excellent service from the beginning to end of a transaction in an offline scenario, the same must be applied to your online business. Although you may not be dealing with them in a face-face manner, showing thanks for the customer’s time, interest and sale is imperative. Furthermore the implementation of an after-care service is important to help the overall satisfaction of your customers which may affect your overall reputation.

It can be relatively easy to make your online business a success once it is off the ground, but only if you ensure to apply sound, simply business principles to every aspect of the company. Just as an offline business must be cautious of its appearance, promotional efforts and customer service, the same must be considered for online businesses. Although the way in which business is carried out is different, the principles of each method are parallel.

What Is a ‘Covenant Not To Compete’ When Buying or Selling a Business

In most business transactions it is standard to include a Covenant Not To Compete. The logic is simple. The current owner of the business decides they want to sell and a buyer wishes to buy the business. As one of the conditions of buying the business, the buyer stipulates that the seller cannot open the same type of business that the seller currently operates as the buyer is concerned the existing customers will want to do business with the seller rather than transfer their loyalty to the buyer.

When used as a part of a change of ownership on a business between a buyer and a seller, the seller agrees not to engage in the same business or a similar business in a particular area for a period of time. Both these items form part of the negotiations. Generally the buyer wants the geographic area to be as large as possible while the seller as small as possible. Additionally, the buyer wants the time period to be as long as possible while the seller wants it to be as short as possible. Obviously, if the seller is retiring and no longer wishes to be active in a business, the time and geographic area may be of little concern and so they are willing to accept whatever the buyer wants.

What happens if the business being acquired has an online presence and gets business from the internet? This can be difficult for the seller as the buyer can rightly argue that they are not interested in buying the business unless the seller does not operate or be involved with a business in the same or similar industry that has an online or internet presence.

How do you decide the allocation or what part of the purchase price should be made to the Covenant Not To Compete? In the US, the IRS has a two pronged requirement. First, the amount must rest on economic realities and second, it must have independent economic significance. In other words, the value allocated to the Covenant Not To Compete must be realistic when taking into account the full purchase price and it must be able to be shown that restricting the ability of the seller to earn a future income by operating the same type of business must be real.

Some of the factors used to evaluate a Covenant Not To Compete include:
• The seller’s ability to compete and the seller’s intent to compete
• The seller’s economic resources
• The potential damage to the buyer posed by the seller’s competition
• The seller’s expertise in the industry and contacts as well as their relationships with key groups, for example, with customers and suppliers
• The buyers interest in eliminating a competition
• The duration and geographic scope of the Covenant Not To Compete, and finally,
• The seller’s intention to remain in the same geographic area.

A Covenant Not To Compete is a normal part of a business transaction negotiation. It can create tension in the negotiations, especially if both parties want diverse outcomes. That is, if the seller wants the geographic area to be within 3 miles of the current location of the business and the buyer wants 25 miles, that’s a big difference. It’s also not unusual for the buyer to test the seller to make sure the reason they are giving to sell the business matches their actions. For example, if the seller says they intend retiring after they sell the business or intend to move interstate after the business is sold and then says they want the Covenant Not To Compete to be a small geographic area for a short period of time, then it can raise a red flag.

Andrew Rogerson is a 5 time business owner who specializes in business transfer transactions. For business owners that wish to sell their business, Andrew partners with them to value their business, understand tax issues, market the business to potential buyers and handle all parts of the transaction including third-party lending, due diligence and escrow. For entrepreneurs thinking of business ownership, Andrew partners with them to determine their best option – buy an existing business, buy the rights to a franchise or start their business from scratch. He is the author of four books on business ownership called Successfully Start Your Business, Successfully Buy Your Business, Successfully Buy Your Franchise and Successfully Sell Your Business.