The End Goal in Mind - Strategic Planning for Small Business
Reuben Bergola (RB) 0:07
Hey guys it's Reuben here from business and calm. Today I want to go through a bit more into strategic planning, and I want to do this because I feel as though a lot of businesses out there, struggle with this aspect of the day to day and, and don't really focus too much on the business planning itself, which I think is one of the most important factors of being able to grow your business and also get out of your business as much as possible and then I'm talking about the day to day things, your mind and all that sort of employee mindset so today I'm going to go through the things I've learned over the past few years and also from learning from other businesses that we've worked with as well as mentors that you know that have built multi million dollar businesses. So, this is going to be a deep dive into strategic planning, and specifically, planning, with the end goal in mind. Now, the first aspect I want to talk about is where most business owners fail to plan, and this is a key issue of why they're not successful in the first instance, every time I meet a new client or a prospective client.
I find that the same issues are popping up and it's those issues I could have easily been fixed by planning, initially in planning with the end in mind. You know these kinds of living week by week, they're stuck in that daily grind, and they, it's one of those ones where they started their own business in the first instance to get out of that daily grind. They're starting to resent their business, they have no time for their kids, and they're basically a prisoner in their own business itself. These type of business owners, I would say when I look at them I straightaway think, you know you're an employee, an employee of your own business you have, you don't have the control over your business, it controls you. And this is something that a lot of people fall into this trap of wanting to build a business because of getting out of that nine to five, but then they just fall into the same place anyway so this podcast. The purpose of this podcast is to hopefully help you guys, whether you're starting a business, whether you're, you know, just, you know couple years in or whether you're 10 years in, I want to change the mindset of a typical business owner, I want to change the mindset of your mindset of how you run your business and what to focus on. And we want to start with planning with the end goal in mind, this is something I've learned from one of my mentors, and it's absolutely changed the trajectory of our business. It's changed the way I think and it's changed the way that, you know, we're able to grow in scale and we're growing and scaling, not just on a revenue basis but a profitable basis. So there you know it's very very difficult to do that in a sense where instead if I didn't actually look at the end in mind. So, what I want you to do when listening to this podcast is at the end of it, like anything, implement, implement, and make sure that if you do have a team you, you're talking about this if you if your business partner is your friend, your family member, whoever it may be you need to talk about this and you need a plan now. Take action now because I promise you, at the end of the day you're going to get a whole lot out of this. Now, when I meet up with clients who are just starting their own business. What I try to ingrain in them is to think about running the business as if you were going to sell it down the track, doesn't mean you're going, you have to sell the other track. I'm not saying, Sell it down the track what I'm saying is that you run it operate it so that if something would happen, or someone would come up and say here's $5 million for your business, you're getting the maximum value out of it, because it works without you. It's a business that's running without you, and they are the most profitable and highest value types of businesses where the business can run without you. And it's very very important to start off with thinking about this, so that you don't fall into that trap of running everything yourself, you know, being afraid to scale because then you think your profitability will go down or whatever it may be, it's all these sort of these contributing factors that don't allow people to really get to that level where the business is working for them. So that's the purpose of this podcast guys and I'm Hope you enjoy it. So let's dive in into the next factor that we have to think about. Now, that is the before I guess you can start planning, you need to think about what I want to put you in a good mindset about what your business can give you, because I feel as though many business owners, after a couple of years down the track running their business at the start it's all excitement, it's all fun. It's all about you know, living the lifestyle that you want to live, it's the middle of the day you're able to just go out to the beach if you want to, you know, you don't have to sort out annual leave for yourself sick leave, whatever it may be and it's fun and games. But what I want to get people to the mindset of is that this business can be the biggest investment that you do in your whole life, but it can also be the biggest reward. And I want to start off with, thinking about the opportunity cost of putting your time, money, effort into a business, compared to other investments such as property or cash or whatever it may be. Now this isn't financial advice. This is just what I've seen and this is what I am trying to get you guys understand how valuable your business can be, how much of an asset, it can be, how much it can actually provide you in the long term, if you do it right and you think about it in the right way. I want to get you out of that mindset that you know after three years it's so hard you're working in the daily grind that wasn't worth it in the first place. I just think that most of the time, you just haven't looked at the business in a right way when thinking about the goal, the end goal in mind, planning it towards a goal, and thinking about your business as an investment, rather than just the business itself. I think about this. If you're investing your money into cash. Let's say you had a million dollars to invest, and you put that into the bank, you're earning, you know, if you're lucky, close to 2% at the moment. And that's a, that's a very, very poor investment. And then we look at property for, on the other side, you know, you're looking at maybe a property with rental yield. You put that million dollars in, maybe you're lucky to get around 5% You know you're investing that for capital gains and growth and, you know, that might take you a few years to get a 10% gain. So it's a very very slow and long burn and your million dollars is not working for you. Now, if you work your business properly, you should be earning much more than that, after paying yourself the percentage of profit after paying yourself should be well above that five that 5% That you're earning from a property, property over 10% The earnings in the growth yield over a number of years and on, you know, an investment property or whatever it may be, it should be well above that I'm seeing that you know a great business should be at least doing 15 to 20% of their profitability of their of their revenue as profit net. After paying yourself a wage of, let's say 100 or 150,000. Now I'm talking about small businesses here and, and, you know, we're not talking about multimillion dollar businesses where some of the actual revenue is, you know, in the 50 to 100 million, and you're only getting 5% net profit. I'm talking about our average day to day family business, you know 10 mil Wessel, and you know you want to earn a healthy amount. And that's what a great business can do for you but unfortunately what I'm finding is that a lot of businesses are just not looking at it that way, and they're looking at it as if you know it was more of a lifestyle in the first place but I think that you have to earn that lifestyle and build a great business that doesn't work around you so that you can do those other things. Now, what should you be doing from here, because I know everyone sitting here probably thinking well if I wish, and I want to, you know at 15 to 25 or even more percent net profit after paying myself 150 That's amazing. And a lot of people say it can't be done, but I truly believe that any business can do it as long as you one understand your business properly too, you've set the right margins, and you have enough profitability with your service. And three, you're looking at a long term in a long term plan so that it's not working without you, you're, you're investing back into that business, so that you have a great structure, and you have a great way of, you know, growing and scaling. You know a lot of the people that don't actually get to that point, are focusing too much on on themselves. As such, and, and working as an employer, so that's where I think a lot of people go wrong. Yeah, how should you be planning. This is the big question, Because this this podcast, ultimately about planning in your business it's ultimately about, you know, doing a deep dive on what you should be looking at now. I want you to sit down. If you're the sole owner of the business just grab a pen and paper. If you are. if you have business partners if you have a board or whatever it may be, when you sit down with them, one hour, two hours max and list down these aspects so that you can actually understand why you're doing it in the first place, right so the first question is, why did you get into that business in the first place, why did you do this, I want you to write down because if we're able to list out the things of why we're doing the business that we're in, why we've created it, we're able to, you know, get that feeling again, of excitement of motivation, so that we can actually start implementing the things that we need to do. Now what you write down was it so that you can leave your nine to five, was it to make a lot of money. Was it spent high with more, more time with your family, was it so that you're able to give back to the world. Now I want you to write down these, because this is what's going to motivate you. The second thing I want you to do after that is think about where you want to be when you retire. So let's say that you're retiring at 16 and let's make it 50 Let's make it a goal that everyone can retire at 50. It may or may not always be the case but why not, let's make it a goal, because if you set goals, then you know, you're able to try and reach out further trying to achieve those goals. So let's say at 50 You wanted to retire.
Is that the end goal and how, how would you see yourself, would you see yourself selling out of the business, would you see yourself still being maybe there in the business but once a quarter, or would you just see yourself completely retired and you're just earning an ongoing dividend, dividends, similar to the ones you get from Telstra and so forth where you're, you know like a either a majority or minority shareholder and you're earning a couple of 100,000 a year in actual dividends and you're doing anything at all because you've built a great business, think about where you want to be, again, this is going to be another motivator, so that you can vote on the Dream Big, but also implement because these are the things that we need to know now, so that we can put a plan together for tomorrow. Now, figure out your industry. If you're starting out, I want you to go and do some research first about industry too many people start their business and they don't do enough research on competitors the industry, what are the average revenues, gross profit margins your profitability. Even if you are an existing business, you should do this and just check it in the first instance, you want to measure yourself against your peers, you want to measure yourself against what's out there at the moment, because if you're saying that everyone, everyone in that industry is only averaging 5% Then it's going to be very hard for you to create a business that's going to be profiting 15 to 25% because this is going to be a different business, you'll have to either innovate or do something that's a lot better than what they're doing at the moment I see this a lot in the restaurant industry. People live the internet with the dream of, you know, making a lot of money whilst being able to produce the food and, and the, you know there aren't there aren't they basically both providing you this amazing meal but I'm seeing that you know less than 5% of restaurants are actually profitable, let alone reaching that 15 to 20% I don't see many at all I would say in our books. There are only a couple that are doing that. And that says a lot because that industry is very very difficult. And I'm not, I'm not saying go into it but I'm saying that assess it first and see if know, if, if that outcome of what the industry is telling you already aligns with your end goal in mind. So when you retire, Is it going to be able to give you that $200,000 a year to write down the actual figure that you want, I want to be earning 100 $200,000 a year without doing anything. Will that business be able to do that without you working in you figured out the valuations of those of those businesses, how much they sell for their profitability, then what do you do. Well, we need to do is figure out where you need to be earning each year as a wage, if you're working within that business, right. So you need to pay yourself first as well so as part of the planning, you need to decide, okay, if I'm still working in this, it means I'm doing something to move it forward I'm doing something to make it operate someone that can do the same thing, and to replace myself I need to pay, I need to pay them a wage. So first and foremost you need to pay yourself at least an arm's length wage, if not more, For the time and effort within the business because I personally don't count that effort as profitability that if it needs to be replaced by someone else. So you need to work out what that amount is, look up, industry. Compare comparative so if you look up, you know, go and seek and see what that role would cost you might be 80,000 might be 150,000, whatever it may be, that's what we're aiming for first so we're paying ourselves. And then in the end we still have a profitability. So for example, go back to that million dollar business. We're sitting there. We have a million dollars in turnover. We want to 20%, so 20%, profitability, after all expenses, that's $200,000 profit. Now, over and above that we also want to be paying ourselves 150,000 For the time and effort that we are putting into the business. So a lot of people will look at the profitability of this business is 350 I don't, I would say it's 200 because if you were to replace it with someone else to do the same work, and have achieved that same outcome you'd need to pay them. So, think very closely about that because in the end, that's what you ultimately want ultimately what some people want to do, they want to just leave, replace it but still own that $200,000 profitability. At the end of the day, so working around that. Now you're getting clear with everything, there you have,
You know why you get the motivation of why you're using, gaining motivation using why you got into the business in the first place, then you're thinking about the end and you're dreaming and thinking about well when I retire. I've got this massive house have paid off all my debt. Earning dividend every single year, and I'm not really doing much anymore, that's the that's the end goal in mind, there's no point in pushing something if you don't want it, there's no point in trying to make a multi, multi, multi million dollar businesses. If you only need minimal amounts and you don't want all of that, you need a base, you need to base the business around your personal goals as well. So now you have all of that you've got the motivation you can see it. You know that the business itself can be profitable because you've assessed it against your peers, then you need to create your budgets, and your projections that are aligned with everything that you've just wrote, not just what you think it should be. This is where I think a lot of people go wrong, they, they don't assess all those factors, taking consideration what those types of businesses should be doing, how much they want to be earning as a wage and then also what the profit what's left in terms of profitability because if you, if you came to me and said to me, Look, I want to be earning a million dollars a year, then I would ultimately reverse engineer it to figure out what your business needs to be turning over in revenue, what the profitability needs to be and assess that whether it's possible or not based on your historical figures as well as industry data, and then I'll create budgets and projections in line with that. I'm not just guessing here, and neither should you. You should be able to have a look at these projections and go okay, this is very achievable if not what I need to do to adjust, and then that's going to get me to where I want to go. It's, it's, there's so much more value out of that, there's so much, there's so much more motivation when you do it that way because you know why you're doing that ultimately from those budgets and projections. If you find that there are things missing whether that means you know your structure is not in place properly your pricing is not in place, you don't have enough margin your profits too low, you need more staff and capacity then you can start implementing projects throughout the year, so that you can make it happen. That's exactly what we did here with our business, a new wave, we always think what's the end goal in mind and our end goal is, you know, build a legacy built business, that changes our clients lives changes our staff live and ultimately doesn't have to be run by myself. It ultimately can be run by a team that's all moving towards the same cause. And to do that I figured out exactly where my profitability needs to be, how much I need to invest back into the business of that profitability, and what that's going to look like in the next five or 10 years. And that's exactly what we're doing we always have that in mind. So I highly encourage everyone to have a look at this as soon as possible. Look at it with your team if you haven't schedule it in because it's so important and if you need help with it, just let us know. Send me an email, one of our team members can run through this with you, we can go through doesn't take long may take a couple of hours, like I mentioned before, just to sit down and figure out what you want and how to align that with your business so you know my final comments I guess, is invest in this time. Invest in a strategic plan, because you don't need to do this often, but when you do, it makes a major, major impact on the direction of your business, it changes your mindset. I want you to work towards a goal and plan and implement accordingly. Don't just plan. Don't just think, implement, because that's exactly that's what that's how you. That's how you're gonna move the needle, it's, it's a difference between, you know, a good business and a great business and an absolutely phenomenal business is how much people implement, and how much people plan, and set goals and projects and do them. That's the difference. Always work your business as if you were going to sell it. That's another tip, even though you may not. I'm always looking at this in a way where I'm thinking to myself, Well if I want to get what's my end goal is to ultimately,
you know, still be within the business but we're looking at the bigger picture but to do that I need great team members and a great managers I need a marketing team, I need a CFO, I need a, maybe even a CEO to replace myself, I need all of these factors and I'm thinking about this long term and every single decision I make now is towards that it may be five years down the track, it may be 10 years down the track. But what I'm not doing is looking at the short term factors and saying, Well, there's a lot of profitability in this business. I'm going to rip it all out and I'm forgetting that I need some of that to keep building, and to keep growing forward. I hope that makes sense. And if it doesn't, you know, just give us a call and again we can help you with that. So change your mindset from employee to business owner to more often than not, this is not the case. Everyone's still, the employee, the person that they left their old job, and they didn't want to be anymore. They're still that person, they're still that person that you know relies on themselves right older clients are calling them with issues, concerns, you know, everything, basically everything slowly, all the decisions still need to be made through one person and that's the business owner. And fair enough if you have, you know, issues with control, but it's until you let go of this and you delegate you bring on team members and people that are smarter than you, to help you to grow and help you on this journey, then you're not going to get to where you want to be. Make sure you align your personal goals with your business goals and utilize all of your advisors. Now again, you know, I always say this, but of course I'm gonna say you're killing it, but it really does matter. It really does matter having one that is aligned with what you want to do, so that they can help you structure plan and set foundations and ultimately get you to where you want to be. What we want to do is you know we'll sit down, but only in the business side or sit down with our in house financial planner, sit down with you work out what your personal business's goals are thinking, with the end in mind and plan everything around that to make sure that it's all working seamlessly to make sure that we have enough in your pocket today that we have enough pot money in the business tomorrow. And then we have all of these working together to reach the goals in five or 10 years time, that's what we want to do, you know, stop living week by week, and we're planning. So I hope that helps guys I'll probably leave it at that. Again, thank you so much for listening to this podcast and if you if you do enjoy it, please subscribe please send it to any of your friends that you think that would find this valuable, I'm going to do more of these if you do have any sort of questions that you have out there about owning a business or running a business. We work with so many new different businesses, I'm going to share not only my experiences with them but also my experiences within my own businesses. In terms of growth, headaches, the pain points everything that sort of other people don't talk about. We'll talk about it here because it's important. You know, not every business, every will every business that you see on Instagram is basically, you know the perfect business and they must be doing so well but I want to talk about the things that will actually move the needle. You know there are the things that this is this is what we call this business, uncut it's raw, it's, it's real and we're hoping that this will motivate people to not only build their business but to realize that everyone's in that same place, and I will change every person's life that I can in terms of sharing what I know, and knowledge and we'll get on some great guests on here to share this as well. So thanks guys. Look forward to meeting you next time. And hopefully you can grow your business and start planning.