Doing the Basics well in Difficult Times

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Doing the Basics well in Difficult Times
Bryan Goldsack Managing Director Damar
Industries
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Introduction

• Background
• 18 Years management experience in the meat
  processing industry.
• General Manager - Douglas Pharmaceuticals, Auck)
• Operations Director for Fletcher Challenge
  Forests (Tenon)
• Director of Operations for Carter Holt Harvey (17
  NZ sites)
• Managing Director Damar Industries Ltd
• Damar
• 50 million annual sales, 120 staff, Rotorua and
  Auckland operations.
• Road marking products
• Aerosols - 9 million cans
• Ecomist direct selling franchise model
• Consumer products Hardware and supermarkets
• Pool Pride -
• Technical coatings -
• Liquid filling/manufacturing -
• Industrial solvents -
• Own brand products -

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Observations

• Where do you fit in today's economy.
• It is bad for most.not for all, but certainly
  the majority ..and very likely to get worse
  before it gets better.
• Cant be immune to international economic climate
  impact
• Globally synchronized
• Unemployment 8.0 ???
• Risk of job losses low consumer confidence
• Unfavorable FX impact for importers impacting
  prices.
• Low commodity export demand
• The share market is at the lowest in 5 years.
• GST take over the last 2 months (down 1.2
  billion)
• Borrowers are shy to take on new or increased
  debt.
• Banks perceive high risk remains in the NZ
  market.
• It is not going to improve for quite some time
  (maybe 3-4 years) so we have to learn how to work
  successfully in this new and unchartered
  environment.
• There is no magic bullet. But doing the basics
  well will help you and your business.

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Opinions

• A quote from Graeme Hart always take actions
  to protect profits!
• Consumers won't stop consuming, (but they will be
  a lot harder to persuade to buy goods, services
  or holiday here)
• Companies will have to be extraordinarily astute.
  
• Pricing is shifting from boom to budget. (When
  people felt wealthier, they cared less about
  bargains. Now acutely price sensitive)
• Discounting is the easy option! A study by
  McKinsey of 1500 major US companies showed a 5
  price cut needed a 19 increase in volume to pay
  for itself.
• It's far better to understand the price
  sensitivities of your products and, where
  possible, offer customers better value rather
  than lower prices.
• Will the market size get bigger for you?
  Opportunity in this recession is to take market
  share off incumbents who respond too slowly to
  the change in the market's requirements -
  incumbents who keep pumping out the same stuff
  when the customer wants greater value.
• Take control of the things you can influence.

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Cost Management First Cab off the rank!

• Costs are in your control to manage. You can and
  should influence them.
• Right-size your business. When necessary, cut to
  the bone. Cut in the right places, and where
  necessary invest.
• Do not under any circumstances leave any stone
  unturned. Should be NO sacred cows.
• Squeeze your suppliers, find new ones, negotiate
  (price and terms). (If you dont ask you will
  never know)
• Know how costs contribute to your business
• Know supplier price drivers and monitor them that
  way you keep them honest.  Help make them
  efficient and share the gains.
• Review your costs daily, weekly and monthly, know
  them inside and out.
• Put rules in place and take control. Make sure
  you are the one making decisions on what you
  spend at all times.

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Business Plan Fail to plan you will plan to fail!

• If you dont have a business plan, how do you
  know what you are going to do? (spend the right
  amount of time planning for the future)
• Success is more likely to come from an external
  perspective not an introspective focus (navel
  gazing, woe is me wont work for any of us) it
  doesnt achieve anything and distracts you from
  what you have to do.
• Use it as your road map.
• What has to be done?
• When are you going to do it?
• Do you need cash or capital?
• What do you expect from it?
• Who is going to do it?
• What resources are needed?
• Develop KPIs and measures around your plans.
  Know how to determine if you are successful .or
  not.
• Limit capital expenditure. Be certain of the
  payback and be accurate in your assessment!
• Dont be to proud to seek the views of others.
  Involve your staff in passing the smell test. Get
  their ideas and buy-in.

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Budget Facts not dreams!

• Be accurate and spend the right amount of time
  putting your budget together. Dont assume
  anything! Make sure your assumptions are based
  on facts not dreams or misplaced optimism.
• Bank in your budget only what you feel certain
  you can deliver .
• Use history and current performances to guide you
• When you have finished your budget spend time
  assessing again and again.
• Look closely at the gross sales revenue
  assessments. Are they real?
• Look at your cost of goods. Are prices trending
  up or down? How will FX impact you. Where do
  think costs will be in 3, 6 and 12 months from
  now.
• Know what your margins are. Know where and how
  you are making money and why
• Review, review, review.

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Cash Flow Management Cash is King!

• Know the cash cycles for your business.
• Know your key customers and what their cash
  cycles look like. Make it your business to know
  their business and performance.
• Talk to your bank manager about what your budgets
  and your cash flow looks like through the year.
  Front foot issues.
• Review your cash position regularly.
• Communicate with customers frequently and confirm
  when you are getting paid. 
• Maintain a good relationship with key suppliers.
• Constantly review your inventory position.
  Inventory is your money! Review stock turns,
  consignment stock.
• Lock in certainty where it makes sense like FX
  and interest rates hedging and commodities.
  Review terms of trade, bad debt
• Its too late to cut when you run out of cash. Be
  ahead of it.

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Time is money!

• Identify how revenue is generated in YOUR
  business,
• What type of activity generates sales . Who in
  the business generates revenue? What do you spend
  your time doing.
• Ensure that the maximum time and effort is spent
  doing stuff that contributes to generating
  revenue.
• Complete a time management assessment for
  yourself and your staff. Do something with what
  you learn. Change your focus. Spend time doing
  different things.
• Make the time to review performances against what
  your expectations were (against plan and budget)
  Involve people in your team.
• Have KPIs for your business and your people.
  Productivity levels, costs, attendance, quality,
  sales, performance to plan
• Make sure there is no ambiguity in your team.
  Communicate clearly and regularly
• Love the people you keep. Some of you will end up
  working with less people.
• Spend some time researching and learning. Trends,
  customers, opportunities, competitors new
  developments and technologies.
• Bring in people that can bring you customers.

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Default to action.not inaction!

• Whilst things are serious, the sun will still
  come up tomorrow and we should remain optimistic
  in our thinking but definitely not ignore what is
  happening around us.
• Over the next year, things will happen that will
  stimulate a modest increase in private
  consumption.
• lower interest rates than in 2008,
• lower petrol prices,
• still relatively high wage inflation,
• further tax cuts in April 2009 and
• growing immigration
• USA and China stimulus packages
• There WILL be opportunities during these times.
  Go looking for them!
• Is there a chance I can differentiate my service
  or product
• Can I better demonstrate a value proposition that
  makes customers prefer me.
• Can I make, sell or supply products or services
  that have synergies with my business model.
• Who can I take market share from?
• How can I bring more customers to my business.
• Are my competitors losing ground or no longer
  with us. How can I dominate them.

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Take control of your business and put the basics
in place

• No matter how big or small you are, if you
• have a plan,
• have a budget,
• manage your cash flows,
• manage your time, and
• measure your performance
• then..You have the minimum basics in place to
  succeed!
• If you dontgood luck!