Formula 1 for Business. O'Connor Daniel
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inspiration for this book came from seeing the many small to medium sized businesses which do not perform to the level that they could or should and certainly not to the level which was envisioned when they starting out on their business journey. One business owner, a client, said to me after his business had been turned around into a very successful and valuable enterprise “why don’t you write a book to help more business owners understand and apply the principles that turned me from struggling to thrive in my business and reclaiming my life”. Thanks for the suggestion Ernie.
We would like to acknowledge the many courageous business people out there who seek to better their lot and maximise the value of their business for the benefit of their family and to society at large. We believe that it is these intrepid, entrepreneurial souls who crank the wheels of productivity in our capitalist machine. May you prosper!
We want to thank the many teachers we have encountered along the way, some during our academic educations, some as leaders in the corporate world, some formal mentors and of course the many people we have encountered who have provided valuable teachings from insight provided from their experiences. You know who you are.
To our many Formula 1 For Business associates whose commitment to our program has allowed for the rich contribution to many business successes, we thank you.
To our many, many clients who have placed their trust and belief in our program, teachings and integrity we extend special thanks; you represent our prime focus and it is through the rewarding interaction and work with you that we derive our greatest satisfaction.
A rich thank you to Cathy Jonas our Editor and to the fine people at Global publishing Group for the invaluable guidance, support and belief in our ability to transform our knowledge, passion and experiences in business into this book that we hope will help so many.
Of course a special mention has to go to you the reader. We acknowledge your desire to grow, improve, perform at a higher level and ultimately to fashion the business and life you envision.
Thank you all.
INTRODUCTION
From a collective 40 years in business management consulting, this book was developed by two prominent Australian management consultants with the intention of awakening owners of small to medium enterprises (SME’s) to the possibilities within their businesses. The writers believe even small business owners can have their business operating at increasing levels of profit and can build greater ‘value’ in the business so as to ‘cash in’ on the this value when they sell or use it to fund their life on an ongoing basis. The techniques and tips presented are commonly used by these and many other management consultants in medium sized companies, typically from the $10m to $50m turnover.
The need to take very seriously the challenge of making your business the best that it can possibly be is greater now than at any other point in history. This is the case (across western democracies) because we are fast approaching the time when Baby Boomers will be looking to exit their businesses to fund their retirement. In Australia there are 800,000 SME’s and presently eighty percent of them are owned by Baby Boomers.
This means that within the next 12 years, 640,000 Baby Boomer businesses will soon be either ‘on the market’, passed down to offspring or simply closed down. It is clear that there will be a stampede of business sales, as well as a flood of ‘exits’ the likes of which we have never seen before. In this turbulent environment, if you intend to sell a business in the next twelve years you wil need to be very mindful of the level of competition there will be in the ‘business sales’ arena. You would be well advised to stand out from the stampeding herd of would-be sellers. This book is focused on helping the smart business owner make his business asset as profitable, valuable and attractive as possible in order to do just that.
It’s likely that you are presently in the driver’s seat of your business; and from the cockpit it seems that the world revolves around you. This is one of the factors that holds many SME’s back. If your business is relying on you, you have a ‘job’ not a business. One of the key concepts of this book is to ‘fire yourself’ from the hands-on ‘driving’ and ascend to ‘Team Management’; in Formula 1 racing not one team manager ‘manages’ from behind the wheel.
Many business owners who do not address the key ‘pillars’ on which business value is built will be left with a business in which no buyer is interested. You may have spent twenty years in building it up and may have been counting on the business to augment your ebbing superannuation accounts and real estate portfolio, to provide surety and security in what should be your golden years. This is the real potential tragedy looming for many SME owners right across the western world, but it can be averted with the right perspective, planning and action.
The good news is that there are always buyers for good businesses. The operative word here of course is ‘good’. In the eyes of the prospective buyer, that which makes a business more valuable and more ‘saleable’ will also make it more profitable and will provide the owner with more time and lifestyle. So whether you are seeking to renovate a business specifically for sale or are looking to maximise the performance of a business without a foreseeable sale, the information contained in the pages to come will deliver the foundations for your success.
One of the key principals underlying the philosophy of this book is that ‘if you are not growing you are going’, which is to say that ‘if your business is not expanding faster than CPI, you are losing the value, profitability and ultimately you may lose your lifestyle. Statistics bear out that if an SME is the same size (revenue and profitability) and it was twelve months ago, it actually has less than a fifty percent chance of breaking even in three years. This suggests that there would be little perceived value in the business, which goes against the very reason we are in business.
But ‘growing’ is not confined simply to revenue and profitability, these are the end results. These end results are reflected by growth in the forms of ‘improvement’ and ‘evolution’ within the various functional aspects of the business. If you are not always improving you are effectively ‘standing still’, while all those across the competitive landscape in which you play are improving and moving forward, the reality is that you are really ‘going backwards’; and often at a more alarming rate than thought possible, particularly now when the rate of change is greater than ever.
The authors have consulted to many businesses over the past 25 years and have distilled a structured ‘Formula’ to help determined business owners to success. When applied, this ‘Formula’ serves to multiply profitability and tangible business value. The process will provide the means by which to improve profitability and the value of your business but also ‘how’ to go about working your way out of the business, for maximum payback. ‘Formula 1 For Business’ uses as a metaphor for business a Formula 1 racing team which has many of the same components:
The Vehicle is the business itself and naturally much attention needs to be placed on the set up, capacity, functional efficiency and speed at which the vehicle performs. Without a fast and reliable vehicle you simply cannot win in either in the competitive area of the F1 racetrack or in the competitive arena of business. Our focus is firstly to do the things which will allow the vehicle to get up to full speed.
The Driver is critical because no matter how impressive the vehicles performance capacity, it simply will not perform to capacity if it is not driven with skill and expertise. If the driver is only accustomed to driving at a speed of a hundred kilometres per hour and yet the vehicle can deliver two hundred kilometre per hour performance, the vehicle will not deliver it’s potential. This can often be the case with small to medium enterprises so we also focus on the skill and comfort zone of the person driving the business.
The Pit Crew are other team members are the staff. Without attracting, motivating, getting the best out of and ‘keeping’ the best staff,