It’s never too late to plan.
The end of financial year can be a traumatic time for any business. There’s paperwork to be done, stock to be shifted, reports to be developed and, perhaps, explanations for investors. It’s no surprise then that, in the midst of the mayhem, many companies fail to adequately plan for the next financial year. In this edition, Vantage Performance’s Michael Fingland tells Phil Dobbie that smart businesses will already have developed a corporate plan for the year ahead – but for those that pushed it aside for year-end work, it’s not too late to start now. In fact, it’s essential if you want to gain a competitive edge this financial year.
Phil: Hello, I’m Phil Dobbie, and welcome once again to the Vantage Performance Podcast. Now, in Australia, we are just over the end of the financial year and for many of us it can be a stressful time finishing off accounts, perhaps clearing stock, trying to close sales, and generally tie up lots of loose ends. So is there a way to make it a little bit easier next year? Of course, you know if I’m asking that question, the answer is obviously “yes.” And Michael Fingland says now is the time to start doing something about it. Michael is Executive Director and CEO of Turnaround Specialist Vantage Performance. So Michael, what is it that we’re often missing out on? Because as I’ve said, it is a stressful time isn’t it? Many of us just can’t see the wood for the trees at year end.
Michael: Good morning, Phil. Yes, it is. Most businesses, we’re talking SME, mid-market, large corporate. Most, particularly if they’ve got a June 30year-end reporting profile, run so hard to get to meet their targets that they haven’t spent quality time actually sitting down with their management team to map out the next 12 months. Now best practices, if you’re a financial year end sort of aligned business, April-May is really when you should’ve sat down and worked out your strategic plan for the next 12 months, or December-January if you’re a calendar year.
Reality is a lot of businesses don’t ever do it, or if they do do it, they run so hard to get to June 30 and try and hit their numbers that they haven’t set aside enough time. What we want to talk about today is even though we’re now into July, take a breath. June 30’s happened, you either have or you haven’t hit your targets, and if you haven’t hit your targets that’s when a lot of stress starts to build. Because if you’re a large corporate or listed company you’ve got reporting obligations and answers to provide as to why you haven’t met your guidance. Or if you’re a family business but you’ve got reporting obligations to your financiers, you’ve still got to come up with reasons why, why not and particularly if you haven’t hit your targets, what you’re gonna do about it.
So take a breath, June 30’s happened. Now’s the time, it’s not too late to set aside a day with your management team to revisit what goals you hit, what goals you didn’t hit, and what you’re going to do about it this year.
Q: Does it become such a busy period that you have to put strategy aside for a while? Because some of that stress is created because of the uncertainty that exists at the end of the year. So if you’re a small business for example, and we’ve talked about how January is a tough time for businesses because it’s hard to get paid in Australia because so many accounting people are away on holidays sunning themselves somewhere. I should mention it’s a bit like that at the end of the financial year as well, isn’t it? Because everyone, first of all, is tied up in paperwork and if you’ve got big clients, they possibly have spent their budgets April-May time, and so things start to dry up a little bit in June and July.
A: Yeah, look, it’s a similar pattern. So either the people you’re trying to get hold of to pay your bills are tied up, their accountants are tied up with year-end matters. A lot of that is genuine, you know. There’s a lot of workload for a lot of businesses at this time of year or coming up to June 30. But also as you rightly pointed out, like in January, very difficult to get paid because this time leading into June a lot of businesses are shoring up their balance sheets for reporting purposes. So they wanna show as much cash on their balance sheet as possible, particularly large corporates who have to report on those things. So they drag out their suppliers or they’ve already spent their budget. So a lot of small businesses, medium businesses who have large corporates as clients, always struggle to hit their sales targets May-June because they got to hold off until July when the fresh budget has been released and they can hit the ground running. So that caused a lot of stress for SMEs at this time of year.
Q: So that stress has possibly stopped you pushing ahead with your corporate plan for this fiscal year, for this financial year, and so that’s really putting your business on the back foot. That’s the gist of what you’re saying, isn’t it?
A: Yeah, look. Whether you’re a business that is not in the habit of doing annual strategic plans, or you are but you haven’t got around to it, do it now. It’ll make a huge difference to the business and we always recommend having an externally facilitated strategic planning session, because that way the entire management team can participate. You don’t have someone trying to steer the meeting and also think about strategies. So for a few grand you’ll end up with a really productive session. You’ll come out with a really well documented strat plan. And there’s six to seven key areas across the business that everyone knows about: sales, growth, people, systems, all the usual sort of key areas.
But where a lot of businesses go wrong, or management tend to go wrong is they try and come up with too many initiatives and then they just get weighed down with the sheer weight of, “Well, we’ve got 55 initiatives, where do we start?” So we always recommend that you have no more than three initiatives around each of those key areas, and obviously prioritization is key here, but to document them and then prioritizing in a 100 day plan.
A 100 day plan, you’ll find 1000 templates on the web. But at the end of the day it’s just a project management tool, where you list out the key initiatives across those key areas, who’s responsible, what’s the financial impact, when it’s gonna be completed by, and then the key is, to drive accountability, is to catch up regularly. At least weekly for the first month or two just to get traction. So you’re only focusing on those really big ticket initiatives that will drive the change that you need to hit your new budget for the next financial year.
Q: And applying this discipline, I guess that is gonna help those sorts of companies who feel as though they are almost lurching from crisis to crisis. They’re thinking, “Well, we just got over Christmas and now we’ve just got over the end of the financial year. We’re really going almost from one crisis to another, rather than having any sort of methodical way forwards.”
A: They do. I guess there are two broad categories here. And business is tough, the economy is tough. A lot of industries have just got to June 30 and it hasn’t been a good year, yeah? Some have raced through. So a lot of businesses should be doing strat plans just to realign the management team and give the next 12 months some new focus and energy and give them something to aim for.
So if you’re doing well you still need to do it because it gives you that focus, and I can guarantee you three-quarters of your competitors will not be doing this process. So it’s a way to get a jump on them and get greater traction. On the other side of the fence, those that have struggled to get through to June 30 and see the end of year, well you’d think they’d see the end of June 30 as a period of respite, but it’s not. I mean, business hasn’t changed. You still got bills to pay and nothing changes.
Unless you’ve got some thinking time, some quality thinking time with the management team. So if you’ve had a really rough year or two or three years and nothing’s changing, our philosophy around turn around and strategic change when the business has either stagnated for a period of time or it’s declining, you need to come up with one to two big changes in strategy.
We’ve talked about this a few times over the years. That is what’s required and you cannot, if you’re running hard in the business and you’re working 60, 80 hours a week and the management team’s burned out, you simply don’t have the head space to even try and come up with what those 1 to 2 big changes in strategy are. So take some time out, really try and set yourself a goal. If the business isn’t achieving what you want it to achieve, you might be making money but not what you thought it was gonna do, or it might be down for some real pain.
Set yourself a goal to come up with one to two big changes in strategy. You’ll be amazed with what you find and then you can build a new strategic plan around that if everyone is aligned.
Q: You’re saying this is the time to do it because this is, I guess, and I mean it’s one of those rare opportunities isn’t it, during the year where the start of the new financial year, new plan, new targets, a new way of working, new opportunities. And you’ve got the time to do it because we’re not hitting Christmas, we’re not hitting the end of the financial year, we’re not hitting Easter. It’s actually an opportunity to knuckle down and spend some quality time on this stuff.
A: Yeah, I mean the ideal time to do it, if your financial year end as you’re sort of reporting goals
Q: You’d already have done it.
A: You’ve already done it. The reality is they haven’t got around to it or they just never do it. So the point of today I really wanna get across is it’s never too late, do it now, set some time aside. It’ll reap huge rewards for the business. At the very least, it gives the management team some time out to do some strategic thinking which they will really enjoy. Because again, they’ve been in the minutiae of the business, being transactional and they really enjoy some free thinking time to sort of brainstorm, “What can we do better?” It just drives a lot of enthusiasm, gives you fresh targets as you said, and something new to aim for, which can only benefit the business.
Q: Right. So strategic plan, 100 day plan, do it now. Don’t make the same mistake that you made this year and go into next financial year with a whole new way of working.
A: It’s never too late.
Q: Very wise words. Great. We’ll catch you again soon, Michael. Thank you.
Next time, join us for Great Ways to Lower Your Wage Costs. You can’t miss that one.