Businesses Need To Stay In Shape To Qualify For Loans

Businesses Need To Stay in Shape To Qualify For Loans

Recently the Bank of Ireland approved €1.2Bn in new credit for SMEs in the first quarter of the year. But businesses need to stay in shape to qualify for loans in terms of structure and strategy, as well as being efficient in their daily operations. Business advisor John Raftery explains why focusing on the bigger picture is crucial for companies seeking funding to grow their companies.

John why is it important for businesses to be in good health all the time to access funds?
Many companies don’t think about getting themselves into the right shape until they want to access funds, or put themselves on the market to sell the business. I would argue that companies need be in the right shape all the time, right throughout their lifespan. By that I mean companies need a very clear set of performance metrics that drive the company’s performance. These KPIs need to be visible and shared with as many of the staff as possible, if not the entire workforce.

In order to get to that point quite a lot of work needs to be done to make sure you are measuring the right things i.e. your KPIs are the correct ones. This goes back to what I’ve learned from working with SMEs throughout Ireland; that information is assumed to be available but often the information is in people’s heads or it’s stored away on laptops or in spreadsheets. Various individuals have certain pieces of the information, but there isn’t one overall document or format containing all the information for everybody to follow.

A lack of focus on the big picture
A lot of companies are very busy with day to day operations delivering their products and services. This ‘busy’ environment results in a lack of focus on the big picture. I think innately companies know they need to address that issue. They are aware they need to be better organised and create more efficiencies and focus more on the bigger picture, and they need access to information more readily. It’s always in the back of their minds to do that but they never get around to doing it because day-to- day activities take over and a lot of firefighting takes place. One of the reasons so many companies end up firefighting problems is because they don’t take the time to stand back and look at the bigger picture, and get themselves organised and more focused.

What are the consequences for companies who don’t share information like KPIs?
The consequences are more and more inefficiencies, a lack of communication between people and tasks getting completed with the same issues and problems arising again and again. A lot of companies are solving the same problem repeatedly without ever taking the time to do some root cause analysis. Information is often misinterpreted; people assume that what they are doing is the right thing.

For example, I was working with a white goods company who had a team of engineers taking care of service repairs. But the information regarding each engineer’s call out performance was not relayed back to management. It turned out that the first-time repair rate of the engineers was very poor, somewhere between 55 – 60{aa1e4c34c9c0f46e0a1f04e30c2eb1b9efaea7a47ed6ca6f324476e114da37f4}. The company owner never took the time to step back and examine that first time call-out rate because he was too busy firefighting problems within the business. As a result there were a lot of issues around this from customer complaints to rescheduling of visits, wasted time and problems with availability of materials. The company was very busy but unless they share information and step back to analyse and understand that information properly, and understand the issues that are causing the poor performance, they won’t be able to find the right solutions.

So companies can appear to be very busy but they‘re busy doing all the wrong things.
Yes, ‘busy fools’ is a term often used to describe companies in that situation. I always get uncomfortable when I see a company whose staff are doing a lot of firefighting. Now firefighting may be understandable sometimes when a business is going through a particularly busy period, or something dramatic has happened to the business. But firefighting should only be carried out for a short period of time. Then it should be back to normality, back to the organisation’s disciplined behaviours by everybody in the business. Unfortunately some companies are firefighting all the time. Some people even derive satisfaction from firefighting; they say a good firefighter always carries his own box of matches. There are people who think of themselves as heroes – MacGyver types – who like dramatic solutions, rescuing a situation and pulling it out of the fire.

Company Culture
It’s all to do with the culture of the organisation. You can walk into some businesses and everything is very calm because it’s very well organised. People know exactly what they are about and what they are required to do. If you ask them to report on their activities they can articulate exactly what their roles and responsibilities are, and tell you the performance of their department in relation to the overall performance of the business. You go into other companies and they tell you their tale of woe, how busy they are and all the hours they’re working, how they can’t take a holiday, the stress etc. But they are all over the place, there is no central core in the organisation to keep them focused and no disciplined approach that gets them to report back on a regular basis.

What solutions can you offer companies that are stuck in firefighting mode?
Well LEAP has a product called futureSME which is a business solution developed by researchers at the University of Stratclyde using European Union funding. It takes the best practice methodologies of the most successful large companies from around the world and applies them to small and medium enterprises. The futureSME method is the ideal tool to help businesses achieve clarity about their current performance and their vision for the company.

The methodology is divided into two sections

1. Visual Strategy
The first section looks at visual strategy which is about creating a vision for the company, and understanding what the company mission is in terms of its values and behaviours. It also examines the business model by performing a SWOT analysis to help business owners and senior managers create a clear strategy for the business going forward, and understand what their priorities are.

2. Visual Management
Once that company vision has been clarified you can move to the second step which is about visual management. This is where you set four or five goals for the company and those goals have to be succinct and clearly articulated and, most importantly of all, they must be measureable. Without measurement the staff and management teams won’t be able to gauge if progress is being made or not. You then need to create lines of action which prioritize various activities of the company. You assign owners to those activities and set timelines for completion of activities and outcomes. You also look at what type of results those activities will bring you in terms of efficiencies or cost savings. You will then be able to measure progress against your goals by using those lines of activities. Most importantly you will be able to use KPIs that will tell you if you are on track or not. Visual management will allow you to see where you are successful, but also tell you where you are falling behind and who is responsible.

Management Discipline
Once you have a clear set of KPIs they will drive performance of the company. But what you really need to underpin all of that is management discipline. The management team should meet on a regular basis, weekly or monthly, to review overall performance using the visual management tools. They should review the same things each month like their sales pipeline, their customer service performance, financial performance, operations and staff performance.

You have to have a very disciplined approach to it so that you are continuously monitoring your performance and progress in relation to your goals. If you want to approach a bank to raise cash then the bank can see very clearly how the company is performing. They can see what its direction is, what its goals are, what its strategy is. Rather than deciding that you need money and then creating more work for yourself by developing some business plan on-the-fly to get funding from the bank. That is not the most effective use of people’s time.

Are companies more likely to qualify for loans if they provide evidence of a visual strategy?
Well it’s not the only factor. They also take into account the market the business is in, that also has an influence. But if you require the money for investment because you believe you can improve your business performance, then you will need to be able to articulate what your strategy is, what your current performance is, what your goals are and what you are tracking to measure those goals. So it’s not the only factor but it’s a vital one to get right.

Why should business owners contact LEAP before trying to access funds?
We help businesses get into the right shape so they can access the funds they need to grow. LEAP is the sole licensed provider for delivering the futureSME business model to companies in Ireland. We have an excellent record of transforming businesses particularly in the SME sector. The tools we use were designed specifically for SMEs, and we have a very experienced business team who have worked with a wide variety of companies around the country.

 

Contact Us
Tel: 091 755736
E: info@leapleadership.ie

In interview with Des Kirby 

International Best Practice to support Irish SME success

   New subsidised Business Management programme to transform Irish SMEs 

The heartbeat of the Irish economy relies on the success of the indigenous SME sector. While the focus in recent years has been on ensuring businesses remain viable, there is a need to shift focus on growth. A new practical and impactful business management programme being delivered by LEAP, a Galway-based training and coaching organisation, uses the best practices and tools from the most successful international companies and demonstrates how these can be applied to any business, regardless of size or sector.

The Business Leadership Programme, which is heavily subsidised by ManagementWorks, a Skillnets initiative, commences in Shannon on 18th February and is open for sign-ups. Spaces on the programme are limited so anyone interested in growing their business in 2014 is urged to register.

The programme utilises futureSME methodology, a transformational business strategy that has been developed over a four-year period through an EU Framework 7 Project. FutureSME focuses on the key management capabilities that are essential in driving a business forward and applies them to any organisation. The programme is fully accredited and exclusively delivered in Ireland by LEAP.

Mike Gaffney MD at LEAP
Mike Gaffney MD at LEAP

“Over the six-month period, we work with organisations through a combination of in-house mentoring with facilitated group workshops. The programme aims to transform the entire business, on every level. Using this innovative methodology we will work to build and implement a visual strategy and provide the support necessary for its development and completion. We also review the progress, ensuring its success.”

Speaking about its involvement in the programme, Brian Colleran of ManagementWorks said: “This is a fantastic business leadership programme that should be of huge interest to SMEs operating in very competitive markets. Given it is heavily subsidised and supported by the Government’s Action Plan for Jobs, we are expecting a lot of interest”.

Business owners and managers interested in the Business Leadership Programme in Shannon or futureSME, should contact Sonja Stevens at LEAP by calling 091-755736 or emailing Sonja@leapleadership.ie.  

For more information on ManagementWorks Programmes visit www.managementworks.ie