Business Management Articles
Managing Success
Ken Ficocelli
BDO Dunwoody LLP
March/April 2005, Okanagan Business Journal
You wouldn’t think too much success could be a bad a thing, certainly not for the average businessperson in the Thompson-Okanagan region these days. By all measures, our economy is roaring success – firing on all cylinders from one end of the valley to the other. So to raise concerns now over the boom’s downside would strike some entrepreneurs as odd – if not downright silly.
Indeed, the Okanagan’s bright economic outlook sits on a solid foundation. Housing starts are up. In Vernon alone residential permits last year soared 45 per cent over 2003 with a total value in new construction of over $53 million. Further south in Penticton, Big Box retailers Rona, Home Depot and Superstore will soon throw open their doors to customers. And Kelowna continues to be a magnet for newcomers, as baby boomers – drawn by our breathtaking scenery and mild climate – retire and settle in the city, bringing their capital with them.
But growth has its price. Without good professional advice and a solid plan, small and medium-sized businesses could see the current boom turn into a personal bust. And the risk is not only high for start-ups, but also established businesses who want to increase market share either through organic growth or expansion.
Strategic Planning
Most businesses look upon strategic planning as a frill, something better suited to a major corporation than a storefront operation in Salmon Arm. In fact, strategic plans are essential to any business regardless of size.
On a basic level, strategic plans help businesses get where they’re going by identifying their goals. Accountants often hear from entrepreneurs the common refrain: “My goal is to make money.” But what does that really mean? Do you want money in the bank? Do you want enough money to retire at 55? Are you seeking financial independence? The first step to a good strategic plan begins with nailing down these goals.
Such plans aren’t a case of one-size fits all. To start, any plan must recognize the nature of a business. If the operation is highly structured and details oriented, its owner may prefer a linear, top-down approach to planning. If the enterprise has an artistic flare, the plan could take a highly divergent and “organic” tack.
Once the approach is agreed on, a professional advisor sets out to determine the primary goals of the organization. Note: we’re talking about goals – plural. Entrepreneurs, when honest with themselves, will admit they want to achieve a number of things with their business. A good strategic plan does not focus on one narrow goal, but rather a broad band of objectives. Hitting the benchmark’s for each objective – sales, market growth, expansion – will fluctuate, but a good plan let’s a business keep to the middle of the band and on track.
Once the objectives are set out, the advisor sits down with the team and culls ideas on how to reach those goals. A solid background in the business, industry or market sector helps a chartered accountant save time on this stage, since he or she can talk the same language with key players.
Once in place, strategic plans are not carved in stone. They should be constantly referred to and revised as needed, usually once a quarter, and updated as the market and business changes dictates. According to a business’ needs, plans can map out the future for one year, three years, or as far as five to ten years. For smaller businesses, however, a three-year plan is advisable.
Cash-flow Management
Cash is the key to any business success. All businesses need cash to buy supplies and product, pay taxes and employees, and meet other expenses. Even established businesses rely on a carefully managed cash flow to maintain and drive their growth. It’s only when you understand where you are at financially that you can take advantage of the future.
Cash flow management is about more than just having the necessary money to cover off the bills each month. It’s about the right tax strategy to ensure you don’t pay out more to the Canada Revenue Agency (CRA) than necessary. It’s about knowing when to lease and when to buy equipment or space. It’s about debt consolidation to reduce the amount of paid out to the bank each month.
Chartered accountants help manage cash flow at every stage – from finding the necessary capital either for start-up or expansion, to helping secure additional sources such as credit or lines of credit from banks and financial institutions.
Professional advisors don’t tell entrepreneurs what approach to take. Ultimately, that’s a decision made by the business owner. Chartered accountants spell out the options, such as when credit extensions are needed, and how much as not to become onerous for the business.
Accounting Systems
Every accountant has their own story of a client who kept their business’ documentation – statements, invoices, receipts – stuffed in a shoebox, to be pulled out around tax time. While such cases are rare today, many companies’ still come up short with accounting systems that can’t meet their growing demands.
A proper accounting system does more than keeping track of bills and accounts payable. It gives advisors vital information. For instance, a company can lose out if product demand outstrips its line of credit and it doesn’t have the necessary cash to cover materials or other inputs. By tracking the numbers, an accountant can forecast for owners the right moment to up their credit limit and avoid such a shortfall.
Ultimately, everything comes back to the strategic plan. With the economic outlook for the Thompson-Okanagan region looking bright, with more Canadians expected to settle here over the next decade, all businesses should consider sitting down with a professional advisor and plotting out their future.
Ken Ficocelli, Chartered Accountant is a Partner for the BDO Dunwoody LLP Kelowna office. As the lead partner involved in the financial reporting for the firm, Ken brings substantial experience and a strong commitment to service. He possesses audit and advisory service experience in areas including High Tech, Credit Unions, First Nation Organizations, private companies and professionals. Ken graduated from Simon Fraser University and received his Chartered Accountant designation in 1989. Ken became a partner with BDO in 2002.
