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The 7 Deadly Sins

of Owner-Managed Businesses…

Presented by:
Competitive Advantage Group
Bob French, Ken Nangle, Dale Radcliff
CAgroup.net
(650) 652-9393

Hosted by:
Peninsula Bank of Commerce, Millbrae
Frank Hall
(650) 652-6327

October 3, 2007 TABsmc.com The Alternative Board


Overview of the presentation

 Introductions
 Objectives for today
 Transfer expertise / knowledge, tools
 Content you can use
 Share your experiences
 Provide us with feedback
 Presentation structure / the concept
 Review 7 D’s
October 3, 2007 TABsmc.com The Alternative Board
Our Business Growth Model

October 3, 2007 TABsmc.com The Alternative Board


1st Deadly Sin
Adequate Planning

The difference between a dream and a


plan is that the first simply expresses a
desire to achieve something, whereas
the second expresses a method for
accomplishing the first.

October 3, 2007 TABsmc.com The Alternative Board


1st Deadly Sin
Adequate Planning

 What is planning—what is a plan?


 Working on your business not in it
 Setting priorities
 Putting a “stake in the ground” as your goals
and working toward those goals
 Systematic process for setting goals and
improving the chance you will reach them

October 3, 2007 TABsmc.com The Alternative Board


1st Deadly Sin
Adequate Planning

Planning as a discipline………

 Business planning
 Strategic planning
 Budgeting - forecasting
 Succession planning
 Exit planning

October 3, 2007 TABsmc.com The Alternative Board


1st Deadly Sin
Adequate Planning

 How do you create a business plan?


 Set aside the time, no interruptions!
 Time to think—What? When? How?
 One page template
 Vision
 Mission
 Objectives
 Strategies
 Action steps

October 3, 2007 TABsmc.com The Alternative Board


1st Deadly Sin
Adequate Planning
 How much planning is enough?
 Quality depends upon time devoted and
effectiveness of the process
 Who should be involved in the process?
 Planning really never ends. Why?
 Tools and templates

October 3, 2007 TABsmc.com The Alternative Board


1st Deadly Sin
Adequate Planning

 Take away
 In the next week, take the time to create:
 A personal vision statement
 A business vision statement
 A mission statement

October 3, 2007 TABsmc.com The Alternative Board


3rd Deadly Sin
Having a sales process

 What is a sales process?


 Why is it important?
 Who has an example?

October 3, 2007 TABsmc.com The Alternative Board


3rd Deadly Sin
Having a sales process

 A live example:

1. Telephone discussion / initial qualification


2. Meet / needs assessment
3. Prepare concept view
4. Develop shop drawings
5. Contract negotiations
6. Production
7. Customer site visit

October 3, 2007 TABsmc.com The Alternative Board


3rd Deadly Sin
Having a sales process

 Benefits of a sales process


 A check list
 Repeatable & systematic
 Transferable
 Improves results

October 3, 2007 TABsmc.com The Alternative Board


4th Deadly Sin
Understanding the Financials

1. Collecting or recording data properly


2. Paying attention to financial metrics
3. Adequate capitalization
4. Managing overhead
5. Controlling debt
6. Having proper financial controls

October 3, 2007 TABsmc.com The Alternative Board


4th Deadly Sin
Understanding the Financials

 Financial levers of your business


 What are your key measurements (metrics) of
success?
 Gross margin?
 Receivables collection?
 SG&A expense ratio?
 Working capital?

October 3, 2007 TABsmc.com The Alternative Board


4th Deadly Sin
Understanding the Financials

 Financial ratios

 Why are ratios so powerful?


 How can ratios be used?
 What are some common ratios?

October 3, 2007 TABsmc.com The Alternative Board


4th Deadly Sin
Understanding the Financials

 Common metrics
 Gross Margin
 Operating Margin
 Net Margin
 SG&A Expense Ratio
 Current Ratio
 Days Sales Outstanding

October 3, 2007 TABsmc.com The Alternative Board


XYZ Company’s Income Statement
Year ended December 31, 2006

Dollars in (000's)
Revenue $2,000 100.0%

COGS (1,000)

Gross Profit 1,000 50.0%


SG&A (500)
Depreciation @ Amortization (50)
Other (100)

Operating Profit 350 17.5%


Interest Expense (200)
Taxes (100)

Net Profit $50 2.5%

Shares Outstanding 100,000


Earnings/Share $1.00

October 3, 2007 TABsmc.com The Alternative Board


XYZ Company’s Balance Sheet
as of December 31, 2006

Dollars in (000's)
Current Assets Current Liabilities
Cash $54 Accounts Payable $110
Accounts Recievable 166 Accrued expenses 78
Inventories 122 Short-term debt 85
Prepaid Expenses 33 Income tax payable 43
Total Current Assets 375 Total current liabilities 316

Non Current Assets Non-current liabilities


Property, plant equipment 330 Long-term debt 360
Other Assets 310 Deferred taxes 10
Total non-current Assets 640 Total liabilities 686

Shareholders equity
Paid in capital 30
Retained earnings 299
Shareholders equity 329

Total Assets $1,015 Total Liabilities and SH Equity


$1,015
October 3, 2007 TABsmc.com The Alternative Board
4th Deadly Sin
Understanding the Financials

 Take away
 Pick two relevant ratios to your business and
begin tracking every month
 Identify underlying problem and take corrective
action when you see a deterioration in one or
both measures

October 3, 2007 TABsmc.com The Alternative Board


7th Deadly Sin
Lack of a management process

 What is a management process?


 Why is it important?
 Where do you start?

October 3, 2007 TABsmc.com The Alternative Board


7th Deadly Sin
Lack of management process
Our TAB Board members prepare a one page
Monthly Progress Report which includes:

 Personal Vision
 Objectives
 Actions
 Critical issue
 Background

 Ties to member’s business plan


 MPR template included

October 3, 2007 TABsmc.com The Alternative Board


7th Deadly Sin
Lack of management process
What does this one page TAB process tool give you?

 Clarity & focus


 Work on what’s important
 Systematizes the approach
 Accountability
 Forces tracking of the metrics

October 3, 2007 TABsmc.com The Alternative Board


The Alternative Board
Empowering Our Business Owner Members to Achieve Their
Business and Personal Vision

October 3, 2007 TABsmc.com The Alternative Board