Does my Business need an Advisory Board ?

May 11, 2011

In Australia there are 10’s of Thousands of businesses in the $5M to $250M turnover size.

Most have the same issues as the $Billion businesses, but they cannot afford to pay $250K to $1M+ per year for a specialist Advisory Board.

Issues companies need to address for sustainable success – whilst doing business:

Management Finance, Commercial & Legal
  • Business growth strategies
  • Increase in competition
  • Succession planning
  • Changes in business process
  • Leadership
  • Strategic vision
  • Compliance
  • Ageing management team
  • Divergent risk-appetite of Executives
  • Disconnect between Board and Executives
  • Maintaining margins
  • Keeping focus on bottomline
  • Fixed-price contracts
  • Minimising legal exposures
  • Risk vs Reward management
  • Capital to sustain growth
  • Cost of money
  • Return on Investment &/or Capital
  • Exposure to currency fluctuations
  • Mergers & Acquisitions
Research & Innovation Human Resources/Capital
  • Lead-time to Revenue
  • Innovation by competitors
  • Cost of innovation
  • Cost of NOT innovating
  • Value-creation opportunities
  • Service-line extensions
  • Product-line extensions
  • New entrants re-shaping a market (eg: Google)
  • When to innovate, and when to wait
  • Intellectual Property protection
  • Knowledge retention
  • Cost of Retention vs Acquisition
  • Motivation and productivity
  • Fixed vs Variable workforce
  • Total Cost of Employee
  • Skills transfer
  • Team morale
  • Poor internal communications
  • No sense of ownership/belonging by staff
  • “Bench” management
Sales & Marketing Technology
  • Qualifying opportunities
  • Increasing gross margins
  • Salesforce efficiency
  • Brand Identity
  • Brand Promise vs Service Delivery
  • Customer experience
  • Product/Service differentiation
  • Channels to market
  • Channel management
  • Market segmentation
  • Dis-integrated systems
  • Business/Technology alignment
  • Outdated technologies
  • Cost of ICT operations
  • In-house vs Outsourced
  • Poor documentation
  • Limited/No knowledge of systems in use
  • Not leveraging the full benefits of technology
  • Unable to make sense of voluminous data
  • Rising power & consumable costs

The list of challenges facing small to medium, and even large, businesses is bewildering.

The items covered above are only a small sample of the total array of issues that distract business owners and executives away from their main concern – which is making or saving money.

As it just happens, we offer an Advisory Board Bureau that provides you with access to all the expertise you need, when you need it, to help you navigate your way through incredibly complex issues that are taking up TIME YOU DON’T HAVE.

Expertise available through our Advisory Board Bureau

The following list gives you a sense of the expertise at your disposal as/when you need it.

  • Drop-in CEO, COO, CTO, CIO or CFO for a short-term engagement to turn around a company.
  • Development/Review/Validation of a Marketing Strategy or Plan.
  • Mentoring and Measurement of a Sales Team.
  • Mentoring of the CEO/CFO/COO through periods of dramatic change in the business.
  • Development/Review/Validation of a Business Growth Strategy or Plan.
  • Support the business executive team through the pains associated with actual business growth.
  • Oversight of the Acquisition or Divestment of Businesses &/or Business Units.
  • Creating, or Maintaining, High-Performing Teams within a business.
  • Dealing with staff, talent and knowledge retention (or high turnover)
  • Mediating between the Executive Team and The Board where there is a disconnect.
  • Development/Review/Validation of an ICT Strategy or Plan.
  • Oversight of the creation of a Project Management Office to handle all project activity.
  • Health-Check, or Audit, of specific projects that are concerning Management.
  • Specialist sector-specific advice relating to Product/Service innovation.
  • Expanding your sales channels.
  • Health-check of your IT Systems.
  • Benchmarking your Outsourced service providers against industry accepted performance.

So, we can deliver to your business the same quality of Advisory Boards that $Billion businesses have, but with a small business price tag.

How do we do this ?. We’ve aggregated many $5M to $200M businesses, who use our Advisory Board service as a Bureau, which means we can afford to pay for Top Talent by sharing the cost across many businesses.

What will it cost you …. Let’s talk to understand what you need, it could be as little at $5,000 per month.


Business Insurances that you need to consider as part of an Acquisition or Exit

May 5, 2011

This topic has been coming up a lot in the past month, so I’ve decided to add an entry here to stop having to “pull out the record and play it again”.

Buy/Sell Insurance for Small Businesses

There are over 2,000,000 small businesses in Australia, employing nearly 5,000,000 people.

Buy/sell insurance supported by a well-written shareholders agreement can protect the owners of these businesses and their respective estates from the impact of death, disability and critical illness.

Life insurance can be chosen as the funding medium for an owner leaving a business due to death, total and permanent disability (TPD) or critical illness.

Death (as well as terminal illness) and TPD are clearly events that lead to the departure of an owner/shareholder from a business resulting in a need to transfer his/her business interest to the continuing owner(s).

In that case, it is vital for Directors/Shareholders to enter into a written buy/sell agreement so they can set out their respective obligations regarding the transfer of their equity of the business. Plus, the choice of insurance solution for buy/sell purposes depends on the trigger events being covered.

Level of cover for buy/sell insurance

The sum insured should generally be the value of each owner’s share of the business, updated at least on an annual basis.

For example, if the business consists of two shareholders/owners with an equal share of a business valued at $1 million, the sum insured on the life of each business owner should be $500,000 for the express purpose of buying the deceased/incapacitated owners share (that is, they need the insurance to cover other things like their dependents).

The insurance trigger events should be death and TPD and possibly some well-defined types of trauma. 

Valuation of buy/sell insurance

Given that the Australian Taxation Office will most likely deem that the disposal of a business interest under a buy/sell agreement occurs at market value, it may be prudent to use current market value as the preferred valuation method.

This value would need to be updated on a regular basis (i.e. at least annually).

An alternative would be for the business principals to use a particular formula, reflecting either an industry standard or a method appropriate to that specific business. In this case, it would be prudent for the owners to recalculate the value using the formula, and then subjectively determine whether the outcome is realistic and acceptable. It is worthwhile having the business’ accountant review the valuation and confirm that it is justifiable on ordinary commercial terms, which – depending on the sums insured – may also be an underwriting requirement. 

CGT Considerations

Please talk with your accountant and/or tax lawyer about the Capital Gains implications, to get some understanding of whether CGT liabilities should be incorporated into the buy/sell cover sum insured.

Policy ownership considerations for buy/sell insurance

Certain ownership structures have tax implications depending on the type of structure chosen for buy/sell insurance cover. In any case, it is important for business owners to seek advice that is appropriate to their individual situation and objectives. Regardless of the circumstances, the implementation of a buy/sell agreement is vital. The most common types of structures are as follows:

  • Self ownership – Each business owner owns his or her policy.
  • Cross ownership – Each business owner owns an insurance policy on the life of each of the other owners.
  • Trust ownership – An independent trustee of an insurance trust (also known as a bare trust) owns the policies on behalf of the insured (indirect self-ownership).
  • Superannuation fund trustee ownership – A super fund trustee can own the policies on behalf of the insured.

Buy/sell insurance provides vital protection for small business owners against the impact of death, disability and critical illness. You should be mindful of the important areas of buy/sell cover, including the choice of risk products, the level of cover, business valuations, policy ownership structures and their tax implications.

I highly recommend one of the leading players in personal and business insurance – Risk & Business Consulting ( – to guide you through the specifics of what you need for this complex but vital area of protecting your business interests.

The Second Biggest Issue Facing Your Business

July 16, 2010

It is commonly agreed that business cashflow, and the maintaining/growing of it, is the biggest issue your business will face day-after-day and year-on-year.  The challenges associated with sustainable growth and customer retention should not be underestimated no matter how successful you’ve been and for how long you’ve been in business.

Second to business cashflow as the issue which causes more heartache and business failures (or businesses to severely underperform) is success planning.

What sorts of businesses have succession planning issues:

  • Businesses that have been operating for more than 5 years;
  • Businesses where the principals/executives are over 45 years old;
  • Businesses that have high staff turnover in the next generation of future leaders;
  • Businesses where there are no logical successors within the business today;
  • Family businesses where the Sons/Daughters are not interested in being part of it;
  • Businesses where the founders/principals have been part of it for more than 15 years;
  • Small to midsize Legal/Accounting/Medical/Dental practices (from 5 to 20 practitioners) where the major participants do not intend to be there in 5 years; and
  • Businesses where the principals/executives are starting to suddenly encounter the health issues that come with middle age.

In other words, well over 50% of all businesses out there today.

What is Succession Planning?

Succession planning is a process of determining critical roles within the company, identifying and assessing possible successors, and providing them with the appropriate skills and experience for both present and future opportunities.

In other words succession planning covers these important, and often poorly executed, steps:

  • Staffing and Recruitment … You Recruit and Retain superior employees who are right for the business
  • Learning and development … You provide employees with the tools, methods and experiences to develop their knowledge, skills and abilities
  • Leadership … You provide employees with the techniques and practical experience to genuinely – and naturally – be the future leaders of your business
  • Annointment … You make sure that – when the time is right – everybody in the business knows who has been selected to spearhead the succession.  If things change suddenly you do not want your plans to fail do to opportunistic “coups” that take place in the vacuum caused by the sudden changes
  • Performance and Compensation management … You prepare employees for advancement and/or promotion into ever more challenging roles
  • Talent Management … Even though you’ve identified the future leaders, some times you need to replace these superior employees for the long-term future of the business.

Why Do I Need a Succession Plan?

Succession planning is a process by which the successors (future key employees/leaders) are identified for key roles throughout an organisation including vital roles in each department of the business.

Because it (should) take into account the strategic vision and objectives of the business, it means a business with a good succession plan in place, will perform no worse and often much better as a result of the changes caused by the succession.

This is because both employees and customers are ready for the changes when they occur in terms of appropriate skills and experience to have no/minimal impact to business operations (and profitability).

Conversely, businesses without a succession plan in place will inevitably stumble when events occur – such as a sudden death or departure of key executives.  These stumbles manifest as a drop in revenue, earnings and often customers who are dissatisfied with the performance of what was previously a good business relationship.

In fact, many businesses who have not prepared succession plans actually go out of business as a result of the events that triggered the need for that succession plan.

What is in a Succession Plan?

Typical activities covered by a succession plan include:

  • Identify, Define and Articulate the roles and skills which are critical for future company growth
  • Analyse and address each of the gaps (processes & people) revealed by this planning process
  • Identify and Specify the developmental needs of all employees to fill tho key roles
  • Ensure that all key employees understand their career paths and the roles they are being developed to fill
  • Create the learning environment that trains people for skills and positions that may not currently exist in the company
  • Recognise that the employee’s time needed for training/learning as part of the succession plan may mean their current roles need to be backfilled for some time and that this is a cost of securing the future of the business
  • Allow the succession plans to evolve with the business through regular executive discussion of people and roles
  • Identify the top performers in all departments and work openly with them to ensure they are engaged and satisfied to stay with you for a long period
  • Continually manage and monitor the succession processes, and whether planned development for individual employees has taken place AND delivered anticipated/acceptable outcomes

Feel free to contact us, if you want more information, or want to commence a succession plan for your business.