2. 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)
www. kestrelsolutions.com.au
1 Minute

3. 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.

4. “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

5. 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

6. 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

7. 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

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

9. 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.

10. 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

11. 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

12. 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

13. Tips for Improving your Cash Flow

14. 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

15. 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

16. 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!

17. 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?

18. 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

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

20. 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.

21. 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.

22. 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.

23. 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

24. 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

25. 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

26. Thank you! Level 4, 232 Adelaide Street, Brisbane 4000
GPO Box 2910, Brisbane 4001 P F
Website: kestrelsolutions.com.au
Thank you!