Kestrel Solutions Pty Ltd www. kestrelsolutions.com.au The 11th and Most Important Commandment in running a Successful Business Presented by Peter Lucas Kestrel Solutions Pty Ltd Phone (07) 3232 5250 plucas@kestrelsolutions.com.au www. kestrelsolutions.com.au 1 Minute

What is success? All Business Owners want to succeed But how do we define a successful business? There is no universal definition of a successful business 3 Minutes Exercise – Get some definitions by tables.

“A business is successful if it has not failed nor is not failing.” Here is a definition: “A business is successful if it has not failed nor is not failing.” 1 Minute

Definition of financial failure “Failing to provide, from its main operating business, a sustainable return, at least equal to that which is required of the enterprise by its sponsors, without a requirement for continual injections of additional funding” McRobert & Hoffman –Corporate Collapse McGaw Hill 1997 2 Minutes

Hundreds of books and articles have been written on how to have a successful business, including: 1 Minute In Search of Excellence, Good to Great, Built to Last, The Richest Man in Babylon, Think and Grow Rich, The 9 Steps to Financial Freedom, The 7 Habits of Highly Effective People, The Magic of Thinking Big, See You at the Top, The One Minute Manager, Rich Dad Poor Dad

In fact too many books for any business owner to read, absorb and analyse all this material to help them come up with a simple formula to follow. 1 Minute

Is there a Simple Rule Yes there is The 11th Commandment 2 Minutes

Cash Flow Formula Net Cash Flow = cash inflows - cash outflows Cash Inflows = Cash from sales + Proceeds from asset sales + Capital injections + Loans taken out Cash Outflows = Payment of all business expenses + Capital expenditure + Payment of taxes + Dividend to shareholders + loan repayments + return of capital 2 Minutes This assumes your non cash assets, less liabilities have not decreased from one period to the next.

In a successful business:- Net cash flow is a positive number where a company produces more cash than is needed to sustain the business Also known as NET CASH FLOW 2 Minutes

Many businesses have gone broke although they were profitable. Why Many businesses have gone broke although they were profitable. Why?... They ran out of cash. No business has fallen into insolvency which has consistently generated net cash flow 2 Minutes

How do we consistently generate Net Cash Flow How do we consistently generate Net Cash Flow? By the way we manage our business 1 Minute

Tips for Improving your Cash Flow

We need to constantly manage our cash flow We need to constantly manage our cash flow. We need to consider the cash flow implications of ALL our business decisions. Lets revisit our cash flow equation:- Net Cash Flow = cash inflows - cash outflows 1 Minute

Implications of Decisions Will this decision:- Increase your cash inflows Reduce your cash outflows Or both Is it immediate or down the track How do we make good decisions? 1 Minute

Do we know which of our Products/Services generate the most cash for our business? Do we know which of our Products/Services cost us money? If not you need to find out!

Do you Prepare Budgets? You should prepare a revenue budget Prepare an expense budget Then combine. How does it look? Convert your budget to a cash flow Record your assumptions. Are they realistic?

Prepare Cash Flow Forecast Looks at timing of receipts and payments When the cash comes in and goes out Includes GST Includes loan repayments and capital expenditure

Each month compare your actual cash flow to the forecast. Do weekly cash flow for first 8 weeks of the period then monthly

Reduce Costs Cashflow can be improved by analysing the business to determine where costs can be saved and improving the efficiency of the business. 7 Waste Exercise 1 Minute When was the last time you did a waste audit on your business. Russell does one on us every 2 to 3 years.

The Seven Wastes Overproduction: Where do we produce too much? Products, materials, scrap, etc Waiting: Where do things wait? Transportation: Where do we move things? Travel? Inappropriate processing: Wrong people or wrong equipment for the job at hand Inventory: Build up of inventory Motion: Poor ergonomics or workspace layout Defects: Errors rework, refunds, poor quality Exercise 10 Minutes Handout - Explain what you want them to do. Identify 1 waste in each category in your business, cost it and note ease of removal.

Kestrel Solutions specialises in helping businesses identify inefficiency and rectify it. Efficiency improvement can have enormous impact on profitability and cash flow when revenue is stagnant.

6 key points for Cash Flow Management Positive net cash flow Consider the cash flow implications of each decision you make Do Budget then cash flow Know which of your products/services makes you money Monitor actual cash flow against forecast Reduce cost and reduce inefficiency

Three Choices Which would you choose: Business with turnover of $300m+ very small profit and negative cashflow; or Profitable lower turnover business with limited cash generation; or Business with lower turnover still with good cash generation 1 Minute Ask for vote

Summary There is no universal definition of success Not failing is success 1 rule - Watch Thy Cash Flow Think about cash flow implications with each decision. 2 Minutes

Thank you! Level 4, 232 Adelaide Street, Brisbane 4000 GPO Box 2910, Brisbane 4001 P + 617 3232 5250 F + 617 3003 0334 Email: info@kestrelsolutions.com.au Website: kestrelsolutions.com.au Thank you!