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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, it is very difficult for the vehicle to reach anywhere near optimal performance. Pit crew performance either in F1 racing or in business can determine success or failure and we invest some time in showing what works in having employees perform.

Specialist Engineers are represented by those specialist advisors that provide council to the business to comply with regulations and enhance performance. Accountants, Lawyers, IT specialist, HR specialists and Management Consultants all contribute to strategy, various aspects of operations and ultimately play a huge role in overall success or failure.

Information Monitoring is crucial to both the race car environment and the ability to run a business. You can only manage what you can measure and having accurate and timely information and measures in business today is the basis for sound decision making. Knowing the KPI (key performance indicator) measures of a business and the people within it largely determines the performance of the vehicle. We provide the seldom discussed insight into ‘knowing your numbers’.

The Sponsors are those who provide the financial backing for the whole venture. They seek to gain a return from their investment from a winning team. Both business and racing would be impossible were it not for the ‘sponsors’. In an SME this may be the owner, the bank or even some outside interest; their performance imperatives must be satisfied. Attracting or building the finance for your venture is critical.

The Fans are the stakeholders and buyers of your product or service and without their following, contribution and satisfaction the show cannot go on. Ultimately there must be a market for the product or service, someone willing to purchase. Acquiring a customer and keeping them is the basis for business growth and ultimately what determines your business success.

All of these components are necessary, functional contributors to the ultimate function, profitability and value of your business vehicle. Throughout the book we provide insight into the various components, how you can make them work for you and what to do to enhance their role in building your businesses profitability and value.

Another key concept within ‘Formula 1 For Business’ is that of ‘incremental improvement.’ Elite performance in any field is a function of many small improvements and constant vigilance with monitoring. The system we present will help you to implement one thing at a time and to be diligent in testing and measuring everything you do.

The book does not provide any quick-fix or window dressing, temporary or illusory benefits. The experience of the authors is that when most business owners get started with these tools, they eventually fall in love with their business all over again. They typically enjoy substantially greater earnings, often for significantly less personal effort and ultimately build the value of the business which can be ‘cashed in’.

This book is not intended as simply a nice read to while away your precious time but rather as an instructive device to improve your lot. Also don’t expect everything to work the first time you try as rarely does success come in the first effort with anything – you need to persist.

We have witnessed this transformation happen to all sorts of businesses and their business owners and it is our sincere hope that when you implement several of the techniques in this book, you will enjoy the transformation from hard-working operators, to manager, to owner to business collector/trader.

We wish you well in your quest to transform your average family wagon enterprise into a Formula 1 racing business!

Are you ready? Is your harness secure? Now, start your engines…..