RAISING THE BAR

Difference between Business Development and Marketing

2011-01-03T10:20:00.001+08:00

Business Development is a sales activity that is expected to deliver results in the medium to long term, for example developing a channel or partner strategy. This is different from a pure Sales activity which is more short term and normally involves selling directly to end customers and/or through ready, existing channels.

Marketing is a function which supports both sales and business development allowing them to target specific market verticals/channels/customers by developing material, market knowledge and sales propositions that are based on relevant 4P strategies: price, promotion, product and place.

Sales and BD go and sell what marketing (normally along with product management) have put together to describe, price and position the products.

In a nutshell, Marketing is getting the word out - whereas business development is to ensure that we get business from buzz!

8 Little Thoughts for 2011

2011-01-01T15:01:00.000+08:00

1. Reflecting on 2010, it has proven to be most challenging and opportunistic. Whilst we have seen our social well-beings improved post crisis, more could be expected going forward and thus, we can expect the pace in business to accelerate as we transition into 2011. We cannot afford to take things for granted. We cannot take it easy and moving backwards is not an option.

2. Achieving size and scalability is the objective of every business. In order to be ahead than our competitors, we need mobility and speed. This is important to keep in mind. In order to attain speed, lateral thinking holds the answer; and thinking beyond the norm is the key to success. We must be able to innovate and instill the discipline to acquiring and applying knowledge.

3. Challenges will confront us as new members join and other members leave. Therefore it is important to set the right expectations and manage them well. Adaptability is crucial to thrive in an entrepreneurial environment. Compatibility between members is all-important. We must remain united as one.

4. As we march forward and deliver diverse projects, we will meet people with different and colourful personalities. We have to learn to deal with them in various aspects.

∙ People – some people will take us for a ride but we must maintain composure, be resilient, tactful and professional at all times

∙ Programmes – we have been successful in offering them and design them to be as uniquely as possible and yet fulfill our stakeholders' needs. We will continue to do this.

∙ Purposes – never forget that business is about people, treat them right, be fair, competent and professional; the profits will come. Lest we forget, we are all part of society and so contribution to social causes also makes our life richer. Be humane and always be humble.

5. In order to value add to the Group in the short, medium and long-term, members must remember the following:

∙ We must strike an optimum balance between efforts and output

∙ Cross-skilled and adaptable to various stages of the business cycle; especially in the volatile but high growth environment

∙ Knows how to execute plans in a methodical manner

∙ Good communication skills including effective listening skills and able to ask poignant questions that will lead to an outcome

∙ Team work and passion, that is, looking beyond a job but include passion and hunger for knowledge and success

6. My personal advice to all members in VSAPAC:

As directors – Learning never stops unless you say so and keep in mind the importance of adopting transformational and contingency-based leadership

As analysts – Enjoy your life as a young adult by all means but never forget the threat of competition for talents both within the country and well as externally is very real – just like in a business setting. You must position yourself well with a good portfolio of skills and competencies, develop dedication and have integrity while young. It will stand you in good stead.

7. Casting our mind to the future and looking forward to 2011, we have a whole plethora of opportunities to pursue and initiatives to activate.

∙ We are spreading our wings and going in pursuit of international markets.
∙ New and innovative products will be introduced.

∙ We need to secure new talents and train them in the Vectorian tradition and methodologies so that opportunities for progress open up for our analysts.

∙ We must establish new business partners who will jointly grow with us; the Vectorian way.

∙ We will take stakes in or acquire companies with good management teams.

∙ We must network and widen our client base as part of our growth strategy.

∙ And, as we work towards the above objectives, more Private-Public Partnership initiatives are being planned.

8. Let me conclude by sharing with all of you how much I have enjoyed working with all of you. I have seen good work and great progress attained by our analysts and the strong leadership demonstrated by the senior mgt team. I stand together with you going into 2011 ever ready do battle as Vectorians. I wish you all a Happy New Year and blessings to you and your loved ones.

Key Areas in Financial Management That Businesses Should Focus on

2010-12-27T03:55:00.000+08:00

By Zagros Lam

Financial Management is the process of managing the financial resources, including accounting and financial reporting, budgeting, collecting accounts receivable, risk management, and insurance for a business.

In an organisation, the process of financial management is associated with financial planning and financial control. Financial planning seeks to quantify various financial resources available and plan the size and timing of expenditures. Financial control refers to cash flow monitoring. Inflow is the amount of money coming into a particular entity, while outflow is a record of the expenditure being made by the entity. Managing this movement of funds in relation to the budget is essential for the sustainability of the business.

From an organisation standpoint, the process of managing finances is to achieve the various goals set by the organisation at a given point of time. Businesses also seek to generate substantial amounts of profits, following a particular set of financial processes.

While a well-organised bookkeeping system is vital, it is even more critical on what the organisation does with it to establish its methods for financial management and control. With a good financial management system, the business owners will not only know how the business is doing financially, but why. The business owners will then be able to use it to make decisions to improve the operation of its business.

There are 6 critical areas that are involved in the operating activities of the organisation which forms part of a good financial management process. The ability to master and manage these 6 areas will greatly shape the financial vertical of the organisation:

1) Financial Planning - Identify what financial resources are needed to obtain and develop the resources to achieve the goals. Typically, financial planning results in very relevant and realistic budgets.

2) Financial Accounting - It clarifies records and interprets in monetary terms transactions and events of a financial nature. Financial accounting will involve maintaining records of transactions (book-keeping), preparing balance sheets and profit and loss accounts, preparing value added statements, managing cash, handling depreciation and inflation accounting. The accounts prepared by the organisation will be audited to ensure that they present a 'true and fair view' of its financial performance and position.

3) Budget Management - A budget depicts what the organisation expects to spend (expenses) and earn (revenue) over a time period. Amounts are categorised according to the type of business activities, or accounts (for example, telephone costs, sales of catalogs, etc.). Budgets are useful for planning the finances and then tracking if the organisation is operating according to plan. They are also useful for projecting how much money is required for a major initiative, for example, buying a facility, hiring a new employee, etc. There are yearly operating budgets, project budgets, cash budgets, etc.

4) Managing Cash Flow - The overall purpose of managing the organisation’s cash flow is to ensure that there is sufficient cash to pay current bills. Businesses can manage cash flow by examining a cash flow statement and cash flow projection. Cash flow statement includes total cash received minus total cash spent. It primarily looks at the actual cash transactions. It is a challenging task to be able to track and manage the cash flow of the organisation.

Managing Checking Account - The check register is a primary means to record and track cash. It is important to know how to manage the bank account of a business regardless of the organisation’s years of operation.

5) Credit and Collections - One of the biggest challenges in managing cash flow may be decisions about granting credit to customers or clients, and how to collect payment from them.

6) Budget Deviation Analysis - Budget deviation analysis regularly compares what is expected, or planned, to earn and spend with what is actually spent and earned. The budget deviation analysis can help greatly when detecting how well the organisation is tracking its plans, how much to accurately budget in the future, where there may be upcoming problems in spending, etc.

Evaluating Business Tips (II): Before You Invest in a Venture

2010-12-19T16:13:00.000+08:00

When starting a business, there are many risks that need to be considered. One way to think about the various risks an entrepreneur is faced with -- or, for that matter, an investor in an entrepreneurial venture is faced with -- is to break them down into several categories.

Let's start with the first category, the company. Here, the biggest sources of risk are the founders. Do they have more than just being able to start the company, ie. to grow the company? Experience has shown that the prevalence of individuals such as Bill Gates or Michael Dell, Steve Jobs, that can not only start companies, but also manage its growth -- the prevalence of such individuals is relatively limited.

A second source of risk is technology risk. To the extent that your company employs technology, there are obviously issues of, how long will this technology be the leading edge? Secondly, are there any intellectual property issues that need to be addressed? Lastly, there exists the product risk. If you haven't developed a product yet, can you manufacture it? Will it work? All these issues are under the category of company risk.

A second one for the sources of risk is the market for the product. You need to be aware of two big uncertainties. First, what is the customer's willingness to buy? And second, what is the pace, if you're successful, at which competitors will be able to imitate you? One of the things you have to think about when you enter that market is how you can create barriers to imitation, so that if you're successful, the competition won't be able to imitate you very quickly.

A third category consists of risks associated with the industry. Are there any factors in that industry that relate to availability of supply? In some cases, you need to have certain raw materials that are in limited supply, and that some suppliers might be able to take advantage of that. Barriers to entry might change. Regulations might change, and adversely or positively affect your business.

Lastly, there are financial risks. And here, the question is, will you be able to raise the money early on? At what valuation will you be able to do it? Will you be able to raise follow-up money?

And then, from the investor's standpoint, obviously there's a risk that if the company is very successful -- and I can tell you that most early stage companies don't work out, but for the few that do, when it is time for, say, a public offering, will the public market be open?

At the time you make the investment, you don't know what the state of the capital market will be in five to seven years from the date you make the investment. That's a big risk the investor is assuming. Obviously, it's a big risk for the entrepreneur to be able to have some liquidity, and perhaps realize the fruits of her investment, of her time, talent, and in some cases some of the money she puts into that venture.

Evaluating Business Opportunities: Useful Tips (I)

2010-12-19T15:14:00.000+08:00

A key question that all would-be entrepreneurs face is finding the business opportunity that is right for them.

In today's climate, it would be noteworthy to consider for individuals to invest on a tried and tested formula that has worked elsewhere, such as a franchise operation.

In my view, there are many sources for new venture opportunities for individuals - whether it's to set up a consumer-based portal or e-fashion outlet, selling goods and providing services.

Clearly, when you see inefficiency in the market, and you have an idea of how to correct that inefficiency, and you have the resources and capability -- or at least the ability to bring together the resources and capability needed to correct that inefficiency -- that could be a very interesting business idea. In addition, if you see a product or service that is being consumed in one market, that product is not available in your market, you could perhaps import that product or service, and start that business in your home country.

Many sources of ideas come from existing businesses, such as franchises. You could license the right to provide a business idea. You could work on a concept with an employer who, for some reason, has no interest in developing that business. You could have an arrangement with that employer to leave the company and start that business. You can tap numerous sources for new ideas for businesses. Perhaps the most promising source of ideas for new business comes from customers -- listening to customers. That is something we ought to do continuously, in order to understand what customers want, where they want it, how they want a product or service supplied, when they want it supplied, and at what price.

Obviously, if you work in a large company, employees might come up with ideas. Indeed, you might want to listen to what they have to say. You could pursue these ideas by asking yourself some key questions such as, "Is the market real? Is the product or service real? Can I win? What are the risks? And is it worth it?"

There are many examples of people who have succesfully addressed "unmet" needs and started a flurry of "me-toos" and "copycats".

You could go back to the beginning of E-Bay, where they saw an opportunity to connect people through launching a virtual flea market. It offered a platform that connected buyers and sellers directly.

Another example, take PayPal, a company whose co-founder [Elon Musk] was a Penn and Wharton graduate. The company provided people the opportunity to pay online. Flycast is another company started by a former Wharton MBA student, [Rick Thompson]. It addressed issues of advertising on-line. All of these companies have one thing in common. They addressed an unmet need in the marketplace.

There is no replacement for understanding the unmet needs of customers. You have to do this to discover whether you are able to supply those needs, at the price customers want to pay, and if you can still make a profit.

The first step that everyone should go through is to ask the question, is the market real? In order to do so, the first thing you want to do is conduct what we call a customer analysis. You can do that perhaps in a very technical way, by conducting surveys. Or perhaps, in a less technical way, you can attempt to answer the question, "Who is my customer?" What does the customer want to buy? When does the customer want to buy? What price is the customer willing to pay? So, asking the "W questions" -- who, where, what, when -- is the first step. At the end of the day, the one thing every entrepreneur is looking for is revenue, and the revenue will come from customers. That is why you need to ask yourself, is there a market here?

The second thing you want to ask yourself is, who else is supplying that particular market? That is what we call competitor analysis. Ask yourself who else is in this market, and what are they doing for the customers. Are they supplying a similar substitute product or service as you have in mind? That is the second thing you have to establish, and by doing that, you can understand better what need is not met at the moment. That will also give you the opportunity to zero in on the price points and feature points of where you can differentiate yourself from existing players in the market.

You also need to conduct a broader industry analysis to understand the attractiveness of the industry you're going to enter. Is the industry growing or shrinking? What power do the suppliers have in this industry? How many buyers are there? Are there substitute products? Are there any barriers to entry? If so, what are they? That is very important for you to understand, because it will help you realize whether the industry you're thinking of entering is attractive.

In addition, you may want to look at regulations that affect that industry. Are there any regulations that you would be subject to? This especially applies in the life sciences sector, where there are strict regulations that control the supply of products into the market. Every country around the world has a regulator in the life science sector. So, these are the high level questions that you may want to ask yourself.

Once you answer these questions, and you identify the need, given the competition and all the regulatory constraints that exist in that market, that will provide you with the opportunity to tailor your service or product -- or combination of the service and product -- to that marketplace. The logic we are suggesting here is to understand the need, and tailor the product and/or service to that need, as opposed to saying, "Well, I have an idea. And now let me think how I can shove it down the distribution channel."

More often than not, the latter doesn't work. More often than not, the former approach works. This is the approach where you identify the need, do a rigorous analysis of understanding who else is out there, and what constraints exist, and how you could differentiate yourself in a meaningful way. When you approach a new opportunity this way, when you introduce your product and/or service, you can expect to have substantial sales and growth for your company.

10 Ways to Cultivate Innovation at the Workplace

2010-11-13T21:32:00.000+08:00

This note is about sharing ideas on how to transform businesses into an innovation powerhouse. This can be achieved through firstly, understanding 10 steps that you can take to turn your company into an innovation leader that can stand out with new products, services and improved processes and outpacing your competitors.

Step 1: Know what innovation means
First and foremost, be sure you know what innovation is. Innovation is the implementation of creative ideas in order to add value to the firm, usually through increased income, reduced operational costs or both.

Step 2: Innovation is best embraced in groups
Understand that innovation is not an individual but a group thing. Do remember that an idea is not an innovation. It is only the beginning. In business, ideas need to be evaluated for viability, developed into concepts and turned into reality. A new product idea, for example, will likely involve developing prototypes, seeking feedback, testing functionality, setting up production facilities, seeking suppliers and much more. Each of these steps requires the participation of numerous different people, all of whom contribute to the overall innovation process.

Ideally, new creative thinking will go into the product concept at every step of this process, making it more and more creative all the time!

We must recognise that Risk adverse committees or individuals tend to remove creative elements of new product ideas at every step of the production process, thereby reducing innovation potential. If you company is like this, you either need to get rid of those committees or start with incredibly creative ideas so that by the time the committees finish with the ideas, they still have lots of innovation potential.

Step 3: Define your innovation goals and link to bottomline
You need to have clear innovation goals to aim for. Fortunately, these goals tend to be rather similar to strategy and business goals. So, it is usually a simple matter of reformulating these. Typical innovation goals might be to ensure that 25% of your product line is replaced annually; or to improve process efficiency by 5% per year; or that your firm is the technology leader in your sector; or that your company achieves a billion dollar turnover by 2012.

Step 4: Put your money where your mouth is
You need to set up an innovation process, put a team in charge, invest in innovation tools and invest in training. That all requires money. Moreover, you need to make a pot of money available for implementing highly risky yet potentially highly innovative ideas. After all, the ideas with the greatest innovation potential are by necessity radically different to business as usual. This means they are also risky. If you are going to aim for breakthrough innovation, then you need to provide budget for developing and implementing breakthrough ideas.

Finally, bear in mind that if your innovation budget is zero or has ambiguous commercial direction, the attention your managers will give to innovation will also be zero! On the other hand, if there is budget for innovation or potential for high commercial success, you can be sure your managers will be scrambling to participate in the process!

Step 5: Promote an innovation culture
For creativity and innovation to thrive, you need to have a corporate culture that nurtures creative thinking, sees mistakes as on the job training and embraces every step of the innovation process. Sadly, very few firms actually do this.

For instance, what is the typical response to an intern who announces a wild and crazy idea during a unit meeting? Is it (a) to laugh knowingly and explain that there is no budget, the CEO would never like it and that the intern clearly does not know how things work in your company? Or is it (b) to congratulate her on a clever idea, discuss the challenges that would be faced in implementing that idea and asking her to work out how she could improve the idea so that it can overcome the challenges?

Step 6: Establish diverse teams
Diversity is not only politically correct, it is also innovatively correct! Diversity of membership brings a broader range of knowledge, experience, thinking and creativity to any team. You should therefore ensure that project teams, problem solving teams and all teams that are expected to contribute to your innovation process are as diverse as possible.

Step 7: Collaborative tools
Collaborative tools can help support your innovation process. In smaller firms, Wikis, blogs and shared documents permit a lot of collaboration with little technological investment. In larger firms, innovation process management tools can help ensure cross enterprise collaboration, facilitate collaboration by predefined teams as well as ad hoc virtual teams and provide a detailed record of your innovation results. But be careful to choose tools and use them to achieve your innovation goals. Many tools might be great for generating and sharing ideas, but if those ideas are completely irrelevant to your goals, they will not help your firm become more innovative.

Step 8: Make mistakes and learn from them
Most great innovations are built upon mountains of mistakes. As long as you can identify ideas that will not work relatively early in their implementations, you can kill them before they eat up too much budget. You can then congratulate the team responsible for their efforts, evaluate what went wrong, learn lessons and try again. But as soon as mistakes cost people jobs, no one will dare to try anything very radical – and that will kill all but incremental innovation.

Step 9: Implement
Innovation is not about ideas or creativity or training programmes. It is about implementing creative ideas in order to add value. If your firm is reluctant to implement highly creative ideas, then your entire innovation process will be little more than a creative thinking exercise. Moreover, if employees note that highly creative ideas are routinely not implemented, they will not bother sharing or developing such ideas.

Step 10: Evaluate and improve
Your innovation process can also improve through innovation! That's why you need to review the process and the results on a regular basis. Moreover, use your innovation process for generating, developing and implementing ideas for improving that innovation process!

Negotiating to invest/buy into an SME business

2010-07-23T10:03:00.002+08:00

If you're planning to buy a business, you need to be ready to negotiate the purchase price. The seller will want to get a price close to his or her asking price, as well as a smooth transition with few hurdles.

As the buyer, you'll want a good price with terms that have the seller ensuring that there are no skeletons in the closet. While the details of the transaction, including liabilities, warranties, and other responsibilities, are all part of the negotiation process, the price is always the main consideration.

To negotiate a fair purchase price, both sides must determine what the business is worth now and in the future. To begin calculating a valuation, consider the tangible goods and the assets of the business, minus the debt. The more difficult assessment will be in areas such as goodwill, customer loyalty, and other intangibles. It is here that both sides need to substantiate their valuations before negotiatiating.

The seller's asking price is the main deal breaker, and it will give you an idea of whether the business is within your price range.

Several factors then need to be considered and ascertained - such as:

•Why the seller is selling the business. If, for example, the seller is selling for financial constraints, business structure lapses or personal reasons, you have more negotiating power. However, if the seller knows that the business is at its peak and anticipates bids from a number of potential buyers, you will have less leverage or bargaining power.

•Transition. If the seller is willing to stay on to help with the transition — which may help in maintaining steady customers — this may be worth more to you as a buyer.

•The economic climate. In a good economy, it's easier for the seller to hold out for more money. But in a weak economy, the buyer has the advantage. The economic climate will almost always affect the terms of the sale.

•Your reason for buying. While you may not reveal this during the course of the negotiations, you must consider your own needs. The more you want the business, the more concessions you must be willing to make. But if you own several businesses and only want to purchase businesses at good prices to turn them around, it will be easier for you to walk away.

•What is being sold. Consider exactly what you are buying before negotiating a price. Is there IP and/or real estate involved? Are there additional assets in other locations? Can you buy the business without additional assets or the real estate?

•The growth rate of the business. How fast is the business growing? Are the seller's financial projections realistic?

•Comparable sales. Research what other, similar businesses have sold for. For SMEs, it's tougher to compare apples-to-apples. Are similar businesses selling for three times or two times the annual revenue? Are they selling for five times EBITDA (earnings before interest, taxes, depreciation, and amortization), or seven times? These are not valuation measures, but simply gauging the equivalent amount of investments RELATIVE to their financial position - that you are paying for.

These are just some of the key points when negotiating the purchase price of a business. As a buyer, you'll have a price at which to start negotiating and a price you can't exceed, based on the financing you know you can obtain.

Within these two prices lies the negotiating room. Like a chess game, you can move forward or back based on what the seller offers in terms of concessions, and what you can offer back.

Take your time when negotiating the price. List the key negotiating items in separate categories, including those on which you can compromise and those which are imperative to your success in the business. Then compromise on issues that are not deal-breakers, and hold on tight to your have-to-haves. Be prepared to either shake hands and strike a deal, or walk away from the deal if you cannot negotiate what you both consider to be a fair price.

Due Diligence #8: Business to Business Fit

2010-07-22T08:09:00.003+08:00

It is important to evaluate if there is a good fit between the acquiror and acquiree. Among the dimensions that you need to evaluate and articulate are:

1. Strategy fit: how well does the business directionfor the acquiring company fit the target acquiree? How well do the products and markets fit together?

2. Personnel fit: how well will the poeple and culture of the 2 organisations fit together?

3. Financial fit: if one business is growing but needs cash, while the other is profitable with limited prospects, this is a better situation than if both are cash cows or both are cash hungry. There must still be win-win situation, and clear risk-return proposition offered to both parties.

4. Geographic fit: if the merger gives the two companies a broader market reach, this is ideal but it must be balanced against the operational and logistical costs to coordinate across the 'spread' entities.

Due Diligence #7 - Sales and Marketing

2010-07-22T08:07:00.002+08:00

When the acquiring company is typically interested in growing the business, it is therefore important to understand current activities and results. Some of the key areas of importance would include:

1. Market potential: how do we assess and ascertain the market size, potential and subsequent share in that space?

2. Distribution channel: How is the product sold and how good and loyal is the sales force?

3. Promotion: how is the product promoted?

Due Diligence Checklist #6: Technology

2010-07-22T00:15:00.001+08:00

If this is product-driven company, it is important to know whether the company owns these brands and do they have any patents that have been awarded ot applied for. Is there any other know-how or research and development that could provide competitive advantage?

Due Diligence Checklist #5: Potential Liabilities

2010-07-22T00:13:00.001+08:00

It is important to understand the risk of any major financial surprises in the future. Areas of concern would include

1. Warranty issues
2. patent infringements
3. liens/lawsuits
4. pending regulatory issues
5. unfair dismissals

Due Diligence Checklist #4: Organisation Infrastructure

2010-07-22T00:10:00.002+08:00

What needs to be queried are:

1. Management team - are they capable or running and growing the business? Will they be staying on after the acquisition? If they are leaving, what is the structure of non-competing agreements?

2. Human resources and personnel policies - what is the pool of talent vs needs of the organisation? Is there an employee handbook? What other personnel policies exist?

3. Are facilities in good condition, convenient and customer-friendly?

4. Is there a written quality policy? Any quality certifications?

Due Diligence Checklist #3

2010-07-22T00:07:00.002+08:00

Typically, audited financial statements will be required and these will be reviewed by an external consultant.

Some of the financial measures that need to be studied are:

1. cashflow
2. days sales outstanding
3. tax returns
4. inventory quality and turnaround time
5. accounts payable
6. long-term contracts - payables
7. long-term liabilities
8. asset value
9. accounting systems and processes
10.credit ratings

Due Diligence Checklist #2: Competition

2010-07-21T23:59:00.003+08:00

The process of buying and selling a company requires a detailed due diligence of all key elements of the business.

The points listed below are intended to be a checklist of SELLERS to know what to prepare and BUYERS to know what to ask for.

In this part of the review, the buyer will want to understand the dynamics of the market and the most significant competitors.

The following diagnostic questions help to determine a competitor's present and future goals:

•What have the competitors's major goals been in the relatively recent past?
•Have these goals been achieved?
•What strategies has the competitor employed in the relatively recent past?
•Have these strategies been successful?

In addition to the above broad questions, answers to the following questions help identify a competitor's assumption:

1.What does the competitor appear to believe about its relative position - in cost, product quality, technological sophistication, and other key aspects of its business - based on its public statements, claims of management and sales force, and other indications? What does it see as its strengths and weaknesses? Are these accurate?

2.Does the competitor have strong historical or emotional identification with particular products or with particular functional policies, such as an approach to product design, desire for product quality, manufacturing location, selling approach, distribution arrangements, and so on, which will be strongly held to?

3.Are there cultural, regional, or national differences that will affect the way in which competitors perceive and assign significance to events?

4.Are there organizational values or canons which have been strongly institutionalized and will affect the way events are viewed? Are there some policies that the company's founder believed in strongly that may still linger?

5.What does the competitor appear to believe about future demand for the product and about the significance of industry trends? Will it be hesitant to add capacity because of unfounded uncertainties about demand, or likely overbuild for the opposite reasons? Is it prone to misestimate the importance of particular trends? Does it believe the industry is concentrating, for example, when it may not be?

6.What does the competitor appear to believe about the goals and capabilities of its competitors? Will it over- or underestimate any of them?

7.Does the competitor seem to believe in industry "conventional wisdom" or historic rules of thumb and common industry approaches that do not reflect new market conditions?

Due Diligence Checklist #1: Sustainability of Business

2010-07-21T23:52:00.002+08:00

Introduction: Buying/Acquiring A Business

2010-07-21T23:42:00.003+08:00

Buying a business, especially an SME, is a complex, yet potentially rewarding process, and can take weeks or months.

Because buying a business will involve investing a fair amount of money and time, it is critical to do your homework when gathering information about the business.

This process is commonly referred to as conducting due diligence.

The buyer will want to make sure that the representations of the seller concerning the business are accurate and/or reasonable.

Why Do Due Diligence?

Conducting proper due diligence will help the buyer avoid the following problems:

• Discovering that the purchase price of the business is too high
• Misunderstandings as to the type and condition of the business being bought
• Bad financial situations
• Bad management
• Pending lawsuits
• Contingent liabilities

Doing Your Homework

Following is a list of some of the main documents you should expect to receive in the course of your due diligence:

• Key contracts
• Financial statements, including recent audits and projections
• Customer lists
• Employment agreements and organizational charts
• Professional and consulting agreements
• Minutes and consents of the board of directors and shareholders
• Confidentiality and Invention Assignment Agreements with employees
• Litigation-related documents
• Patents, copyrights, and other intellectual property-related documents
• Licenses and permits related to operation of the business
• Employee problems and disputes
• Reasons for selling
• Strategic plans
• Inventory

5 ways for SMEs to save costs and improve cashflows

2010-07-21T09:54:00.003+08:00

In order for a business to consistently meet its financial obligations to customers, creditors, employees, investors, suppliers, it will need to properly manage its cash flow. Here are six ways for a business to save costs and increase its cash flow.

#1: Offer Cash Discounts

A business can offer cash discounts to customers willing to pay cash immediately for goods or those who are willing to make prepayment for goods. This will significantly increase its cash flow.

#2: Receivable financing

This is essentially the sale of business invoice or projects that have already been secured to a third party who goes ahead to process the invoice while business receives cash from it. Such scheme allows a business to have access to cash upfront rather than wait for an expected invoice to be paid.

#3: Outsourcing of non-core activities

Outsourcing involves ceding non-core business operations and activities to other businesses that are specifically set up for such services. Outsourcing non-core activities will help the business save costs in areas of salaries, acquisition of office furniture and training costs helping to boost its cash flow. Fixed costs will be lowered. The rule of thumb is to keep fixed costs no more than 30% of the business - especially the smaller ones.

#4: Shared Resources

The business can significantly increase its cash flow by sharing its resources (and the costs) with another business. It can share office space, secretaries, human resource personnel, and accountants amongst others.

#5: Negotiate Discounts with Suppliers
Find suppliers that are willing to provide the business with significant discounts in exchange for bulk purchases and a long term partnership. This will go a long way in boosting the cash flow of the business.

How much is your business worth?

2010-07-21T00:48:00.001+08:00

When you’re a business owner and you’re still doing all of the selling yourself, your company may not be worth as much as you think.

There is this case where a five-person training agency with the founder the only one doing the selling ie. drives 90% of the firm's revenue while his employees did the work. They generated a $250,000 in pre-tax profit from $950,000 in revenue doing WSQ-type and employee development training programmes for the private sector.

Curious to see what the business might be worth, he started to investigate how educational or training centres were being valued. At the time, based on listed companies' data, they were trading for 10 to 15 times earnings before interest, taxes, depreciation and amortization (EBITDA) by the stock market. He did the math and figured, using the 10- to 15-times multiple, his $250,000 in pre-tax profit could equate to a business worth $2.5 million or more.

Excited by the prospect of a multi-million dollar payday, he asked around at a regional industry trade show and heard that small training agencies were selling for about four times pre-tax profit. He was disappointed to learn smaller set-ups sold at such a steep discount but was still relatively happy to know that his little five-person shop was worth more than a million dollars.

In fact, he started to think of the $1,000,000 my agency was worth (using a four-times multiple) as if it were a relatively liquid asset like his stock investments.

So there he was - sitting at a boardroom table across from two partners in a 60-employee larger training business that generated around $30 million in sales. He was pitching the partners on investing a little cash and expertise in his company.

He had prepared for the meeting with PowerPoint slides describing the future he saw for my agency. He had everything - projections, spreadsheets — and was prepared for their questions. As he got ready to ask them to invest, one of the partners interrupted: “We wouldn’t buy equity in your business at any price. Your business is really not worth anything right now.”

He felt defensive and angry. He could feel the irritation and the adrenaline pushed away any opportunity for rational thought.

Confidently, he responded, with much authority, “Small training outfit sell for four to five times. My business is worth at least $1,000,000.”

“Well, it’s not worth that to us.”

The problem? In short, the business owner himself. It was then discovered that acquirers place a steep discount, often to zero, on very small businesses in which the owner is doing most of the selling. In the absence of any more objective measure, acquirers often do a quick valuation test by looking at the size of the company and how involved the owner is in the selling. By doing all of the selling, he was actually bringing the value of his company down. Acquirers reason that a very small business is probably highly dependent on the owner, whereas a larger business got big by figuring out how to get other people to do much of the selling.

How do you avoid this small-company discount to zero? It depends on the buyer. Some acquirers look for a company with at least $2 million in sales; others look for at least $0.5 million in earnings before tax; others have no hard number but use soft measures to see how dependent the revenue is on the owner personally.

From the case study, it is clear that the business owner should have focused on hiring salespeople so that he would grow larger and that he could legitimately make a case that other people were doing the selling. By doing that, he sells the idea that the "business is selling on its own" with capable people in the team.

Top 10 HR Areas that SMEs Should Work Towards

2010-07-20T19:59:00.001+08:00

1. clear values and a sense of mission and vision that permeates the culture

2. values that extends beyond the workplace and impact the larget society

3. honest and transparent communication that creates trust, enhances commitment, and encourages innovation

4. extraordinary focus on the customer and on building long-term relationships

5. strong sense of community development and social upliftment

6. long view with a focus on sustainability

7. an understanding that their competitiveness is tied to the talents and commitment of their workforce

8. belief that most of their future leaders are already working for the company

9. constant hunt for new ways to improve employee experience

10. structure around teamwork, minimizing hierarchy, and maximizing goal achievement

Top 10 HR Mistakes Made by Businesses/SMEs

2010-07-20T19:35:00.004+08:00

In the past 10 years of learning within and outside the organisation, we recognise that HR is one of the most, if not the most, complex component of managing a business.

We critically and objectively evaluate the crux of each situation and have put together a list that describes the key issues that need to be overcomed by the organisation (particularly in an entrepreneurial setting), the leadership and the workforce in a joint effort.

Note that while this list is non-exhaustive and relevant, implementing and resolving this requires more than identification of the issues. You require a strong set of perspectives, top-down, and bottom-up approach - almost a 360 degree approach in looking at things - especially if you come from a non-MNC background or in a dynamic setting that operates from a very limited resource and talent pool.

Here are the top 10 HR mistakes
=====================================

1.Failure to develop an effective business communication strategy; internal and external.

* Establish specific communication policies
* internal/external email
* internet/intranet
* social media
* instant messaging
* media/public communication
* corporate document sharing
* Publicize internal communication; open access promotes honesty and trust between management and staff : staff meetings, newsletters
*Handle confidential information appropriately

2.Failure to link individual goals to company goals

* Short-term and long-term objectives; personal and company
* Developing action plans
* organisation > division > department > individual
* HR planning : staff selection & planning, training & development

3.Not utilizing HR metrics to track activity and performance

* Measure how activity is impacting the bottom line, not just the cost of the activity
* Needs to objectively demonstrate benefits to the business

4.Lack of employee motivation and retention strategies

* What motivates employees?
* recognition; feeling valued by the organization
* sense of achievement
* feeling they are an integral part of the organization
* opportunity for increased responsibility and advancement
* compensation package
* Develop credible reward programs
* Unsure that compensation packages are competitive to the market

5.Lack of strategic recruitment plan

* Hire people that fit; effort, expectations, attitude, talent, skills, training, experience
* HR needs to manage the recruitment process, not department heads or executives

6.Lack of training

* Empower front-line management with authority; train them to use it effectively for the organization’s benefit
* Don’t allow lack of awareness to be an excuse for inappropriate actions
* Ensure there is a clear understanding of corporate values

7.Not establishing employee performance guidelines

* Establish a reward system based on performance
* untimely attention to employee performance issues to prevent staff morale issues

8.Failure to keep up-to-date on legal requirements related to HR

* Establish a network of experts for guidance
* Participate in continuing education programs

9.Lack of documentation

* No proper tracking, measuring, analysis, reporting and follow-up
* Meet all legal requirements for payroll documentation

10.Failure to maximize the effectiveness of the HR team or committee (for small organisations)

* HR should be an integral part of the executive team
* Be pro-active rather than re-active to avoid negative perception amongst staff
* Allow the HR department or consultants to be the catalyst for change management initiatives

Top 5 Areas To Focus for Developing a Stronger Business Model

2010-07-20T19:19:00.005+08:00

Business model is the central point that connects all the dots together to deliver value to customers.

The business model details out how a company makes money by specifying where it is positioned in the value chain and how it delivers value. It draws on a multitude on business subjects including entrepreneurship, strategy, economics, finance, operations, and marketing.

In the most basic sense, a business model is the method of doing business by which a company can sustain itself – that is, generate revenue.

Top 5 Areas To Focus for Developing a Stronger Business Model
---------------------------------------------------------------------------------

1. Value proposition - what are the targeted customer's needs, the product or service that addresses the problem, the perceived value of the product from the customer's perspective; and how are you going to deliver this.

2. Market segment - acquire the ability to attract various customer types; and knowing the group of customers to target and their purchasing behaviour, recognizing that different market segments have different needs and payment patters (which will certainly affect the income streams).

3.Value chain structure - with your products/services, where you are positioned (upstream or downstream?) within the value chain. Ascertain the activities in the value chain and how the firm will capture part of the value that it creates in the chain.

4. Revenue model / income streams - how revenue is generated (sales, leasing, subscription, support, etc.), the cost structure, and target profit margins.

5. Competitive strategy - how the company will attempt to develop a sustainable competitive advantage, for example, by means of a cost, differentiation, or niche strategy.

When should you diversify?

2010-05-31T10:38:00.002+08:00

1. Based on evaluating more than 2,500 enterprises in Singapore (period: 2009 - 1H2010) and the current conditions that they are operating in, we find that more than 90% of these businesses have difficulty achieving profitability growth opportunities with a single-business focus.

2. Such focus implies putting all of the firm's eggs in one industry basket. If demand for the industry's product is eroded, then the company's prospects can rapidly dim.

3. However, any businesss should not diversify for the sake of pursuing in cremental income as this is still subject to the firm's competencies and resources; and run the risk of distracting from its "cash-cow" units which are providing liquidity buffer, yet "not necessarily profitable.

4. There are however, 4 instances in which diversification becomes necessary:

i. when it spots opportunities for expanding into industries whose technologies and products complement its present business

ii. when it can leverage existing competencies and capabilities by expanding into industries where these same resource strengths are valuable competitive assets

iv. when it has an established, powerful and well-known brand that can be transferred to the products of other businesses

v. when it is clear that the diversification strategy leads to an increase of 30% of revenue and profitability growth.

Basic considerations for increasing labour productivity

2010-04-20T21:50:00.003+08:00

Most business owners in Singapore struggle with different ways of increasing workplace productivity but most of them are not founded on scientific knowledge about human behavior. Rather, they have tried to use various incentives to increase output through bonus payments, presents and pay rises. Even if this was successful, it was only on a short-term basis. Most of the attempts have been short lived or failed when tested over a period of one year. Other managers and leaders have tried prescribing levels of productivity and imposing them on the workforce. Predictably, these have not been successful. Other unsuccessful groups of managers and leaders have tried threats with the same result.

The basic premise of increasing productive behavior is relatively simple. Firstly, make sure that people receive relevant and meaningful positive reinforcement several times each day. Secondly, remove or reduce reinforcement provided by distracting behavior and activities.

One of the problems that exist in most workplaces, is the number of distractions available to any employee. Text messaging, computer games, surfing the net, gossiping, spreading rumors, e-mailing friends and so on, are all activities which employees carry out instead of focusing on the task at hand. All these things divert attention from the behavior that will contribute to the success of the organization.

It is impossible for business owners and managers to monitor and prevent this increasing number of distractions. The behavioral scientists have an answer. They know that behavior will always be attracted to the area of the work environment that provides the most positive reinforcement. People focus their behavior on activities that provide the reinforcement that they need. They will concentrate on a task or an activity that may not be what the manager or the leader requires. Given this situation the tendency is to punish or to give negative reinforcement to people who practice those unwanted activities.

It is much more effective to increase reinforcement for the important tasks than to tell people to concentrate or stay focused. If someone is doing routine work and receives little encouragement or reinforcement, they will become easily distracted.

On the other hand, if they are doing routine work and receive feedback,encouragement and frequent reinforcement they will resist any distractions. Their focus will be firmly fixed on the job at hand.

One of the major causes of low productivity in industry, is the way the workforce is conditioned by its leadership. If there is a tendency to use negative reinforcement or punishment, discretionary effort will not be applied at all. Every single manager and supervisor should be taught the fundamentals of using positive reinforcement as a leadership tool because of its positive effect on productivity and profits.

Additionally, here are 8 ways to encourage your employees what to do to increase productivity by supporting them in the following areas:

1. Schedule Your Work - Outlining exactly what you have to accomplish each day and managing your tasks. gives you a nice visual of all your work, and allows you to choose which to work on next. And nothing beats the feeling of checking things off your to do list!

2. Take Notes - Have you ever left a meeting and forgotten your next steps? Take notes when in meetings, on the phone or anytime they pop into your mind. This saves time by not having to revisit the conversations later.

3. Organize Your Workspace - A chaotic workspace can distract you from the work at hand. Make sure your desk and computer desktop are neat and organized prior to beginning your work.

4. Open the Doors of Collaboration - Brainstorming with team members is a powerful tool. So is the opportunity to run an idea by a coworker to see if you're on the right track. Team collaboration tools help to open the doors and keep team members connected all day.

5. Tackling the big tasks - There are some tasks, however, that need to be worked on right away. Start working on those "big boulders" first thing in the morning. Once you get them done, you'll feel more accomplished for the day.

6. Delegate to Team Members - If you're feeling overwhelmed by all the work in front of you, ask a coworker for a bit of help. Taking 5 minutes to reassign a task and explain it to someone else will free up a lot of task time for you to accomplish everything else.

7. Keep Team Members in the Loop - By sharing your to do list with coworkers, you are instantly held accountable for completing that work. Ensure you are using a team collaboration solution that offers transparency and allows team members to see other's work easily to manage that accountability.

8. Work When You're Productive - There are always going to be times in the day when you are more productive than others. For some, it's first thing in the morning, while others, late at night. Identify these times for yourself, and plan your work accordingly. But take care of your rest!

By being aware of what you have to accomplish can help increase productivity and allow you to get more done.

Factors for Labour Productivity

2010-04-20T21:35:00.000+08:00

Productivity can be defined as how efficiently and effectively we use our resources at lowest possible cost. Labour plays a very important role and consider as a key driver for the productivity of any organization.

Labour efficiency depends upon their skills and knowledge towards their job.If their attitude towards job is positive and they are internally satisfied with their job they will do their work honestly and they will be loyal with their jobs and their attitude at the work place will be better than those who are not internally satisfied with their jobs.So there should be right people at right place with the right skillset.

Experience makes the labour skills high,the high experience in field leads to high performance at workplace. More experience and high skilled employees play a very important role in the productivity of any organization.

Attitude and mindset are critical elements that contribute to labour productivity - if any employee has high skills but has poor attitude,his performance and output will be low and this will produce a negative effect on the overall performance of any organization.So there should be always positive attitude towards work for better performance. Training also counts a lot. If employees have not accurate knowledge about their work then the organization's productivity can be low. If the employees do not know how to use the new technology or new machinery, have no knowledge to handle the new technology and they are not trained how to use this, then this can produce a negative effect on the efficiency of the organization and the organization can not compete in the market.

Motivation is also another factor in the productivity of any organization.if employees are motivated by their manager their performance level is limited to a limited level. Managers should keep their employees' motivation level high so that they can motivate them by fulfilling their basic needs and their safety needss. Moreover, they can motivate them by increase their salary by giving them bonus on their work. Employees should be rewarded and treated equally and eliminate the discrimination among them. Supervisors and leaders should show sympathy with their employees personal problems, promote their work level and should increase their wages for increased performance and productivity.

By eliminating the negative factors and increase the positive factors as outlined above, we can increase the overall performance of our organizations through labour productivity.

Distribution Channel Strategic Considerations

2010-01-14T22:32:00.000+08:00

Using perspectives of intermediaries in the flow of goods from manufacturers to customers. Distribution may be either direct (from manufacturer to retailer or from manufacturer to customer) or indirect (involving the use of one or more intermediaries, such as wholesalers or agents, to reach the customer). Businesses that want to do business overseas must develop a good distribution network for their goods and services. These are some considerations:

1. Objective: To reach the optimal number of customers in a timely manner at the lowest possible cost while maintaining the desired degree of control.

2. Requirements: Comparison of direct versus indirect distribution on the basis of (a) cost, (b) product characteristics, (c) degree of control, and (d) other factors.

3. Costs: (a) Distribution costs. (b) Opportunity costs incurred because product not available. (c) Inventory holding and shipping costs.

4. Product Characteristics: (a) Replacement rate. (b) Gross margin. (c) Service requirements. (d) Search time. Degree of Control: Greater when direct distribution used.

5. Other Factors: (a) Adaptability. (b) Technological changes (e.g., computer technology). (c) Social/cultural values.

6. Expected Results: (a) Direct distribution: (i) high marketing costs, (ii) large degree of control, (iii) informed customers, and (iv) strong image. (b) Indirect distribution: (i) lower marketing costs, (ii) less control, and (iii) reduced channel management responsibilities.

6 Basic Steps of Going Global

2010-01-14T22:31:00.000+08:00

Doing business around the world can seem a long way from doing business in your hometown. But each year countless small businesses make the trek. Like most long journeys, going global can be boiled down to a series of steps. Here are the six basic steps to going global:

1. Start your campaign to grow by international expansion by preparing an international business plan to evaluate your needs and set your goals. It's essential to assess your readiness and commitment to grow internationally before you get started.

2. Conduct foreign market research and identify international markets. The IE Singapore’s iadvisory portal and NLB’s EBIS is an excellent source of information on foreign markets for Singapore goods and services.

3. Evaluate and select methods of distributing your product abroad. You can choose from a variety of means for distributing your product, from opening company-owned foreign subsidiaries to working with agents, representatives and distributors and setting up joint ventures.

4. Learn how to set prices, negotiate deals and navigate the legal morass of exporting. Cultural, social, legal and economic differences make exporting a challenge for business owners who have only operated in Singapore.

5. Tap government and private sources of financing—and figure out ways to make sure you are getting paid. Financing is always an issue, but government interest in boosting exporting and centuries of financial innovation have made getting funding and getting paid easier than ever.

6. Move your goods to their international market, making sure you package and label them in accordance with regulations in the market you are selling to. The globalization of transportation systems helps here, but regulations are still different everywhere you go.

Post 3 Years of Operating Your Business: Top 10 Areas to Focus on

2009-12-15T00:28:00.002+08:00

There are 10 important areas to focus on once you clear the first 3 years of your operations. An important theme in this case is, G.R.O.W.T.H. Growing your business is a necessity for your business’s survival and your economic well-being. How do you scale up your business once you manage to set up a decent foundation in the first 3 years of your operations? All of these ways of growing your business have been successfully used by other businesses and, with some planning and investment, will work for you.

1. Enhance your existing markets

The first thing that needs to be addressed – and without losing focus - when thinking of growing your business is getting new customers. It is important to remember that the customers you already have are your best bet for increasing your sales; it’s easier and more cost-effective to get people who are already buying from you to buy more than to find new customers and persuade them to buy from you. You got to entice them with more value-adding products in your portfolio bundled with good service.

2. Innovate your product or service.

Discovering and promoting new uses for your products or services is a great way to both get existing customers to buy more and attract new customers. You can also think of widening your product offerings and creatively bundle them to increase volume of usage. All these factors relate to the back-end part of the whole value chain of delivering value to clients. What about the back-end? It is extremely important for businesses to innovate their processes, packaging, marketing and flexible pricing packages that would allow more sales to seep through. As what one of our Minister said, “we’ve got to be cheaper, better and faster” to be able to sustain a competitive advantage.

3. Getting referrals from existing customers to acquire new customers

Getting new customers is another approach to growing your business. One of the easiest way to do this is to ask your current customers for referrals. Doing a great job and just assuming that your customers are passing the word about your business isn’t going to do much to increase your customer base; you have to actively seek referrals. During or after every job or sale, ask your satisfied customer if he knows anyone else who would be interested in your products or services.

4. Extend your market reach.

There are several ways of growing your business by making your product or service available to a new pool of customers. In today’s competitive environment, starting and growing a website with online transactions is fast catching up with consumers. Another approach is to extend your reach through advertising. Once you’ve identified a new market, you might advertise in select media that targets that market.

5. Spend more time networking and participating in trade shows.

Trade shows can be a great way of growing your business. Because trade shows draw people who are already interested in the type of product or service you offer, they can powerfully improve your bottom line. The trick is to select the trade shows you participate in carefully, seeking the right match for your product or service.

6. Start identifying developing new, niche markets

You cannot just rely on existing markets, especially in Singapore, for long – the domestic market is too small by any comparisons. In understanding this, one needs to remember the analogy of the big fish in the small pond. That’s essentially how this strategy for growing your business works. The niche market is the pond; a narrowly defined group of customers. Think of them as a subset whose needs are not being met and concentrate on meeting those unmet needs.

7. Contain your costs.

Sometimes you cannot cut an increase item. But you can get more from it and thus increase your profits. For example, if you increase sales and keep the dollar amount of an expense the same, you have decreased that expense as a percentage of sales. When you decrease your cost percentage, you increase your percentage of profit.

On the other hand, if your sales volume remains the same, you can increase the percentage of profit by reducing a specific item of expense. Your goal, of course, is to do both: to decrease specific expenses and increase their productive worth at the same time.

Before you can determine whether cutting expenses will increase profits, you need information about your operation. This information can be obtained only if you have an adequate recordkeeping system. Such records will provide the figures to prepare a profit and loss statement (preferably monthly for most retail businesses), a budget, break-even calculations, and evaluations of your operating ratios compared with those of similar types of business.

8. Diversify your products or services.

The key to successfully growing your business through diversification is similarity. You want to focus on the related needs of your already established market or on market segments with similar needs and characteristics.

9. Diversify your products or services.

The key to successfully growing your business through diversification is similarity. You want to focus on the related needs of your already established market or on market segments with similar needs and characteristics.

10. Exporting.

Expanding into international markets can also be a powerful boost to your business’s bottom line. Like franchising, this is a way of growing your business that requires quite a commitment of time and resources, but can be extremely rewarding.

Top 10 Considerations For Starting a Business

2009-12-13T15:05:00.013+08:00

It's often said that the first five years in business are a real test of survival but for most SMEs, it's actually the first three years that show whether they will survive and the owner has what it takes.

As a general rule of thumb, and based on our anecdotal observations, around 70% of start-ups would fail in the first 3 years of operations, 20% would just break-even or attain less than 5%net profit margins, while 10% would be able to scale up to the next level - albeit faced with a different set of growth issues.

We believe that the venture is still in a start-up phase for the first three years. This is because there's so much to learn about business ownership. Tasks such as filing the first tax return and business activity statement, engaging the first employee and moving into new premises are often undertaken in these early years and all require experience and time for them to be executed properly.

There are common milestones among all three years of the first 36 months, particularly during the 1st year. But the biggest lesson to be learnt is that no matter how well one prepares, the business plan at the beginning of year four will probably look quite different from the one formulated at start-up.

In order to navigate a turbulent first 12 months, the 10 things that a business entrepreneur must critically evaluate are (other than having a fantastic idea):

1) Setting aside a budget to get a good team, basic equipment and collaterals

2) Letting people know the company is in business

3) Raising sufficient working capital to run operations for at least 6 months without revenue

4) Review company's performance weekl/monthly and determining its needs

5) Being open to opportunities

6) Having a supportive family

7) Targeting mass markets, not just niche markets - go for market share acquisition esp during the 1s year

8) Having confidence in new ideas adn don't be afraid to accept failures/mistakes but LEARN from them

9) Acquiring and selling to real customers (not just friends or relatives)

10) Create strong channel partners and distribution points to get closer to your potential customers, particularly in the 1st 6 mths

Contingency leadership even more critical for SMEs in today's settings

2009-12-13T04:45:00.003+08:00

In SME's context, the contingency approach to management is most relevant on the basis there is no one best way to manage. To be effective, planning, organizing, leading, and controlling must be tailored to the particular circumstances faced by the SME.

Business owners have always asked questions such as "What is the right thing to do? Should we hire more people or train existing ones to grow? Should we use task or people oriented leadership styles? What motivational approaches and incentive programs should we use?"

The contingency approach to management (also called the situational approach) assumes that there is no universal answer to such questions because organizations, people, and situations vary and change over time - it all depends on a complex variety of critical environmental and internal contingencies.

The contingency approach to leadership entails the need for leaders to be flexible in their choice of leadership style based on the situation.

When attempting to influence a group or individual is unsuccessful, one suggested course of action available to the leader is to adopt an alternative style of leadership more compatible with elements of the situation.

The leader must have the skills to predict the likelihood with certainty that the present leadership style "is not working" that warrants the leader's changing his or her style.

For the SMEs, this approach is best combined with transformational-type of leadership. Transformational leaders motivate followers to achieve exceptional outcomes through setting and communicating visions for outcomes that extend beyond individual self-interest and achieve shared outcomes desired by the group.

As such it is the manager who controls and coordinates attainment of goals, while it is the leader that helps shape the vision, articulate the direction, set goals, and orients the teams to outcomes that transform action into goals attainment.

Understanding business incubation

2009-09-24T23:10:00.005+08:00

Many entrepreneurs don't have the space or desire to start a business out of their home. They may however find renting space and setting up essential support functions tough when heavy financial resources and energy are most needed for development of the business itself.

A business incubator can be the perfect solution for such a person.

Business incubators are designed specifically to help start-up firms. They usually provide flexible space and leases, many times at very low rates, fee-based business support services, such as telephone answering, bookkeeping, secretarial, fax and copy machine access, libraries and meeting rooms, business and technical assistance either on site or through a community referral system, assistance in obtaining funding, networking with other entrepreneurs.

The primary goal of a business incubator is to produce successful businesses that are able to operate independently and financially viable.

In deciding to use a business incubator, it can be suggested for you to explore the following items before making a commitment:

A. Space and Service-related Issues:
What are the charges for space and services at the incubator?
How do those rates compare to market rates locally?
What services does the incubator provide?
What are the lease requirements?
Is there room for your business to grow?

B. Quality:
What information does the incubator provide about the extent and quality of the services the incubator provides?
Does the incubator management seem to understand your business needs and can they offer on-site assistance and access to valuable contacts and community business services needed by your firm?

C. Success Rates
If the incubator has been open long enough to have a track record, what is the experience of firms who made use of the incubator for a few years and have now moved to other space?
How do the current tenants feel about the incubator?
Ask for references and check them.

D. Policies and Procedures
What are the policies and procedures of the incubator?
Are some services provided free of charge?
How long can you remain a tenant?
Is there a graduated rent structure as your firm matures or does the incubator want to take royalties or an ownership right in its tenants' businesses in return for reduced charges?
Can you leave easily if your business turns bust?
Does the incubator provide seminar or training programs in addition to other business assistance services?

E. Management
Does the incubator appear to be managed well?
Does the management appear to have good ties with and knowledge of the business community?
Does the incubator have the continuing support and commitment of sponsoring organizations? Who are these sponsors and what are their goals and reasons for supporting the incubator?

The business must be entrepreneurially sound, able to function on its own, if needed. The incubator cannot replace business initiative, personal effort and resourcefulness. There is a term used called "incubator syndrome" in which the entrepreneur allows their initiative and judgment to be replaced by those of the consultants in the center.

While the consultants may give superb advice, it is the entrepreneur's responsibility to make the business succeed.

Succession Planning for SMEs - Part 4

2009-09-24T03:09:00.004+08:00

It is important to note that the succession plan should include an ownership-transfer component to explain how the transfer of asset ownership will be handled, including a description of the transfer mechanism (e.g. purchase, gift or bequest). One or more vehicles to hold shares or various assets could be formed, with each entity owned by shareholders who may have voting or non-voting shares. As complicated as this may sound, it may well be effective to handle and deal with a relatively large family who have fragmented or unequal interests across the Group business.

Other considerations in the transfer of ownership could include:

An explanation of the financing required, the various sources available and the preferred financing option(s) with implications to ROI and WACC.

An inventory and independent valuation of assets and liabilities;

An explanation of the tax implications of the proposed transfer process - at the individual as well as the corporate level - along with a description of how these items will be addressed

A discussion regarding the treatment of children or direct dependents not in the business;

A description of the legal agreements (e.g. employment contracts, partnership agreements, shareholder agreements, buy-sell agreements, etc.). These legal agreements should include dispute-resolution mechanisms.

Finally, to accomplish a successful family transfer you will need to have confidence in your choice of successor to the business leadership and possibly to find fulfilling places in the business for other family members.

Succession Planning for SMEs - Part 3

2009-09-24T03:06:00.003+08:00

Grooming your successor involves training, introduction to key customers and suppliers, and managing the transition so there is minimal disruption to the business. Your successor will also need time to build the skills and knowledge he or she needs to take over the management and operations of the business.

Whereas the founder probably enjoyed both total control and 100 percent ownership, his successors and/or heirs are very likely to have to unequal share ownership, even if one among them succeeds to the management leadership. Thus, ownership of the family business tends to become more complex with the passing of time, and especially with the transition of one generation to the next.

For this exit strategy to work advance planning is necessary, and as far ahead as possible. You will need to address:

financial strategies for family transfer: such as shareholder agreements and the use of insurance policies and various kinds of trusts;

management strategies for family transfer: such as restructuring of the business and the use of outside advisers;

Issues of building financial security such as the owner's retirement plans and protection of the estate.

To sort out these issues, you should rely on a written succession plan approved by your board of directors with input from your family council / committee.

Succession Planning for SMEs - Part 2

2009-09-24T02:59:00.004+08:00

Succession planning is about finding the right exit strategy when you're ready to hand your business over to somebody else. The "right" strategy is one that is compatible and gives the SME owners a sense of being worthwhile and fits their personal and business objectives. Whether you're passing the company to a family member or selling it to outside interests, keep in mind the need for valuing the business to establish a realistic fair value on your business.

Agreements can be put in place that determine how the stock or assets of the business will be owned, which is different from how the business will be managed. Day-to-day operations, control and accountability for the management of the business can be delegated by contract to those most capable of understanding and running the business.

Generally, there are three options for an entrepreneur who wishes to exit from his or her business. One involves a family transfer and the other two involve selling the business outside of the family. Collectively these are known as exit strategies, and every business should have one.

1/ First, owners must identify a vision for the business — and for themselves — through some personal soul searching and information gathering that lead to a decision.

2/ Then, once they have identified an exit, they must begin planning and executing what it will take to achieve that exit by building a succesion plan. As many SME owners are aware, the process of passing control to the next generation can be stressful and divisive. From the outset you should be considering how the ownership change will affect your spouse, your children, your relatives and business partners.

3/ Ensure the entire process is structured and open. If you do select a family transfer as your exit strategy, doing as much advance planning as possible will help you and your successor prepare to deal with management and personnel issues, plan for personal and business tax considerations and erect the proper legal framework.

Succession Planning for SMEs - Part 1

2009-09-24T02:48:00.004+08:00

Through the course of advisory sessions and anecdotal experiences and observations, VSAPAC opines that any small and medium-sized enterprise (SME) owners have founded and built their businesses without giving much thought to what will happen when it's time to retire. Now, for most of the 165,000 business owners across SMEs, retirement is near and they must plan for the succession to new ownership and management.

VSAPAC believes that it is vital that we address the significant number of people planning to leave their business in the next few years. A smooth transition from one owner to the next will help maintain a stable Singapore economy.

Most SMEs do not survive the succession from one generation to the next. In the next 10 years VSAPAC expects the majority of current owners of SMEs will retire. Their businesses are at risk because they have not adequately prepared for the day when they will no longer be there.

Most often the preparations and planning have not been undertaken for psychological reasons, particularly the fear of family conflicts or confrontations.

VSAPAC maintains that succession planning needs to be approached as a business process that can work through the emotional issues to make the best decisions about the future of the business and its owners. That takes time and a good methodology. Succession planning involves decisions in three intertwined realms of activity: the business, the family and the owner's financial security in retirement.

Among the first questions to be asked are what the company's future prospects are and whether a family succession is feasible. Chances for success will be enhanced if you:

Involve the family trust or "committee";
Establish and stick to a clear timetable;
Have a contingency plan;
Involve independent/neutral board members outside of the family.

There are two options to be examined in choosing the successor to the business leadership: appoint a family member or appoint someone from outside the family.

It's important to realize that management and ownership are not necessarily the same. It might be best to retain family ownership while hiring an outside CEO. In such cases a senior manager already in the company might be the most suitable person. Alternatively, the best qualifications might be found in the outside world. The business culture of the SME will be an important decision factor.

>>> to be continued.

Five Reasons Why the Bankruptcy of SMEs May Be Good For You

2009-09-14T10:01:00.000+08:00

1. Every small business that closes down reduces competition for the survivors. You will see a less crowded market where only the strong will survive.

2. Every retail small business that goes down gives you the opportunity of freed retail space, sometimes in prime locations. As stores empty out, landlords become more willing to lower rents for new tenants -- a great chance to snap up a new location at a good price.

3. Every small business that busts leaves an open niche in the market that a new entrepreneur could seize on to start a new business or add a new business line to replace that gap whilst having learnt expensive lessons faced by the previous owner.

4. The current small-business shakeout is culling the weak players from the marketplace, leaving the stronger small businesses still standing. The end result should be generally healthier small businesses to partner with, and sell to, in the coming years.

5. Watching businesses go bust all around you tends to concentrate the mind of a business owner. Likely the current business cycle has helped you examine your business and become more efficient -- 66% of business owners said they have in a recent study -- putting you in good position to benefit as the economy improves.

Recommended measures
1. Compile a list of every business in your sector that's gone bust and estimated what their revenues

2. Size up their locations.

3. Ask to buy their customer lists.

4. Looked into taking over their Web sites

5. Gone to an asset auction to see if you can get equipment deals

6. Upped your marketing spend to reach the failed businesses' former customers

Evaluating a company to invest in - Warren Buffet

2009-08-24T02:24:00.002+08:00

Warren Buffett was once asked what is the most important thing he looks for when evaluating a company to invest in. Without hesitation, he replied, "Sustainable competitive advantage".

Indeed, while business valuation matters, "it is the future growth and prosperity of the company underlying a stock, not its current price, that is most important. A company's prosperity, in turn, is driven by how powerful and enduring its competitive advantages are."

Sustainable competitive advantage and market category leadership give a company the edge that keep competitors at bay and reap extraordinary growth and profits. Warren Buffett seeks to identify rare companies with strong competitive advantage that has a potential to grow even stronger over time. When a company is able to achieve this, its investors can be rewarded for decades.

Often, investors in high-growth companies are disappointed not because the growth projections were terribly wrong, but because the implicit assumptions that the market is making about the sustainability of these companies' competitive advantages are wildly optimistic. Warren Buffett said it best in his Fortune article (November 1999):

"The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors."

3Ss of Competitive Advantages - Jack Welch

2009-08-24T02:17:00.004+08:00

SELF CONFIDENCE

Benefits
Self-confident people don’t need to wrap themselves in complexity and all that clutter that passes for sophistication in business. Self-confident leaders produce simple plans, speak simply, and propose big clear targets.

Challenges
The root of many of bureaucracy ills is insecurity. Insecurity makes people resist change because they see change only as a threat, never as an opportunity.

Action
Give people a voice, get them talking and listening to and trusting one another.
Cultivate self-confidence among your leaders by turning them loose, giving them independence and resources, and encouraging them to take big swings.

SIMPLICITY

Benefits
Simplicity is practically an art form with many definitions. To an engineer, it's clean functional designs with fewer parts. It means judging a process not by how sophisticated it is, but how understandable it is to those who must make it work. In marketing it means clear messages and clean proposals to consumers and industrial customers. And, most importantly, on an individual, interpersonal level it takes the form of plain-speaking, directness – honesty.

Simplicity is indispensable to a business leader's most important function: creating and projecting a clear vision.

Simple messages travel faster.

Simple designs reach the market faster.

Challenges
You can't believe how hard it is for people to be simple, how much they fear being simple.
One of the most difficult things for a manager to do is to reach that all-important threshold of self-confidence in which being simple is comfortable.

Action
Urge everyone in the company to have the courage to be simple.
Create an atmosphere in the organization where people feel not only free, but obliged to demand clarity and purpose from their leaders.

SPEED

Benefits
If you're not fast you can't win. Speed is everything. It is the indispensable ingredient of competitiveness.

Challenges
Bureaucracy is terrified by speed and hates simplicity. People have to think on their feet.

Action
Decisions at virtually every level should be made in minutes, not days or weeks.
Decisions must be made face-to-face, not memo-to-memo.
Forests of meaningless paper trails and approvals must be eliminated.
Decrease control to increase speed.
Reduce hierarchical layers to speed communication and get products to markets more quickly.

The Global Market Place

2009-08-10T00:17:00.004+08:00

Trade is increasingly global in scope today. There are several reasons for this. One significant reason is technological—because of improved transportation and communication opportunities today, trade is now more practical. Thus, consumers and businesses now have access to the very best products from many different countries.

Increasingly rapid technology lifecycles also increases the competition among countries as to who can produce the newest in technology. In part to accommodate these realities, countries in the last several decades have taken increasing steps to promote global trade through agreements such as the General Treaty on Trade and Tariffs, and trade organizations such as the World Trade Organization (WTO), North American Free Trade Agreement (NAFTA), and the European Union (EU).

Stages in the International Involvement of a Firm. There are indeed several stages through which a firm may go as it becomes increasingly involved across borders. A purely domestic firm focuses only on its home market, has no current ambitions of expanding abroad, and does not perceive any significant competitive threat from abroad. Such a firm may eventually get some orders from abroad, which are seen either as an irritation (for small orders, there may be a great deal of effort and cost involved in obtaining relatively modest revenue) or as "icing on the cake."

As the firm begins to export more, it enters the export stage, where little effort is made to market the product abroad, although an increasing number of foreign orders are filled. In the international stage, as certain country markets begin to appear especially attractive with more foreign orders originating there, the firm may go into countries on an ad hoc basis—that is, each country may be entered sequentially, but with relatively little learning and marketing efforts being shared across countries.
In the multi-national stage, some efficiencies are pursued by standardizing across a region (e.g., Central America, West Africa, or Northern Europe).

Finally, in the global stage, the focus centers on the entire World market, with decisions made optimize the product’s position across markets—the home country is no longer the center of the product. An example of a truly global company is Coca Cola.

Note that these stages represent points on a continuum from a purely domestic orientation to a truly global one; companies may fall in between these discrete stages, and different parts of the firm may have characteristics of various stages—for example, the pickup truck division of an auto-manufacturer may be largely domestically focused, while the passenger car division is globally focused. Although a global focus is generally appropriate for most large firms, note that it may not be ideal for all companies to pursue the global stage.

For example, manufacturers of ice cubes may do well as domestic, or even locally centered, firms.

Comparative advantage suggests trade between countries is beneficial because these countries differ in their relative economic strengths—some have more advanced technology and some have lower costs.

The International Product Life Cycle suggests that countries will differ in their timing of the demand for various products. Products tend to be adopted more quickly in the United States and Japan, for example, so once the demand for a product (say, VCRs) is in the decline in these markets, an increasing market potential might exist in other countries (e.g., Europe and the rest of Asia).

Internalization/transaction costs refers to the fact that developing certain very large scale projects, such as an automobile intended for the World market, may entail such large costs that these must be spread over several countries.

Basic Concepts of the Forex Market for Int'l Trade: What SMEs Should Know

2009-08-09T13:21:00.007+08:00

According to the 2007 Triennial Central Bank Survey of Foreign Exchange and Derivative Market Activity conducted by the Bank for International Settlements, the forex market generated $3.2 trillion dollars worth of transactions each day. This makes the forex market the quiet giant of finance, dwarfing over all other capital markets in its world.

Unlike the stock market, where investors have thousands of stocks to choose from, in the currency market, you only need to follow eight major economies and then determine which will provide the best undervalued or overvalued opportunities. These following eight countries make up the majority of trade in the currency market:

United States
Eurozone (the ones to watch are Germany, France, Italy and Spain)
Japan
United Kingdom
Switzerland
Canada
Australia
New Zealand

These economies have the largest and most sophisticated financial markets in the world. By strictly focusing on these eight countries, we can take advantage of earning interest income on the most credit worthy and liquid instruments in the financial markets.Economic data is released from these countries on an almost daily basis, allowing investors to stay on top of the game when it comes to assessing the health of each country and its economy.

Yields and Returns

When it comes to trading currencies, the key to remember is that yield drives return. When you trade in the foreign exchange spot market, you are actually buying and selling two underlying currencies. All currencies are quoted in pairs, because each currency is valued in relation to another. For example, if the EUR/USD pair is quoted as 1.3500 that means it takes $1.35 to purchase one euro. In every foreign exchange transaction, you are simultaneously buying one currency and selling another. In effect, you are using the proceeds from the currency you sold to purchase the currency you are buying.

Furthermore, every currency in the world comes attached with an interest rate set by the central bank of that currency's country. You are obligated to pay the interest on the currency that you have sold, but you also have the privilege of earning interest on the currency that you have bought.

As an example, let's look at the New Zealand dollar/Japanese yen pair (NZD/JPY). Let's assume that New Zealand has an interest rate of 8% and that Japan has an interest rate of 0.5% In the currency market, interest rates are calculated in basis points. A basis point is simply 1/100th of 1%. So, New Zealand rates are 800 basis points and Japanese rates are 50 basis points. If you decide to go long NZD/JPY you will earn 8% in annualized interest, but have to pay 0.50% for a net return of 7.5%, or 750 basis points.

Leveraging Returns

The forex market also offers tremendous leverage - often as high as 100:1 - which means that you can control $10,000 worth of assets with as little as $100 of capital. However, leverage can be a double-edged sword; it can create massive profits when you are correct, but may also generate huge losses when you are wrong.

Clearly, leverage should be used judiciously, but even with relatively conservative 10:1 leverage, the 7.5% yield on NZD/JPY pair would translate into a 75% return on an annual basis. So, if you were to hold a 100,000 unit position in NZD/JPY using $5,000 worth of equity, you would earn $9.40 in interest every day. That's $94 dollars in interest after only 10 days, $940 worth of interest after three months, or $3,760 annually. Not too shabby given the fact that the same amount of money would only earn you $250 in a bank savings account (with a rate of 5% interest) after a whole year. The only positive over having the bank account earn you interest is that the return would be risk free.

The use of leverage basically exacerbates any sort of market movements. As easily as it increases profits, it can just as quickly cause large losses. However, these losses can be capped through the use of stops. Furthermore, almost all forex brokers offer the protection of a margin watcher - a piece of software that watches your position 24 hours a day, five days per week and automatically liquidates it once margin requirements are breached. This process insures that your account will never post a negative balance and your risk will be limited to the amount of money in your account.

Carry Trades

Currency values never remain stationary and it is this dynamic that gave birth to one of the most popular trading strategies of all time, the carry trade. Carry traders hope to earn not only the interest rate differential between the two currencies, but also look for their positions to appreciate in value. There have been plenty of opportunities for big profits in the past. Let's take a look at some historical examples.

Between 2003 and the end of 2004, the AUD/USD currency pair offered a positive yield spread of 2.5%. Although this may seem very small, the return would become 25% with the use of 10:1 leverage.

During that same time, the Australian dollar also rallied from 56 cents to close at 80 cents against the U.S. dollar, which represented a 42% appreciation in the currency pair. This means that if you were in this trade - and many hedge funds at the time were - you would have not only earned the positive yield, but you would have also seen tremendous capital gains in your underlying investment.

The carry trade opportunity was also seen in USD/JPY in 2005. Between January and December of that year, the currency rallied from 102 to a high of 121.40 before ending at 117.80. This is equal to an appreciation from low to high of 19%, which was far more attractive than the 2.9% return in the S&P 500 during that same year. In addition, at the time, the interest rate spread between the U.S. dollar and the Japanese yen averaged around 3.25%.

Unleveraged, this means that a trader could have earned as much as 22.25% over the course of the year. Introduce 10:1 leverage, and that could be as much as 220% gain.

Carry Trade Success

The key to creating a successful carry trade strategy is not simply to pair up the currency with the highest interest rate against a currency with the lowest rate.

Rather, far more important than the absolute spread itself is the direction of the spread. In order for carry trades to work best, you need to be long a currency with an interest rate that is in the processes of expanding against a currency with a stationary or contracting interest rate. This dynamic can be true if the central bank of the country that you are long is looking to raise interest rates or if the central bank of the country that you are short is looking to lower interest rates.

In the previous USD/JPY example, between 2005 and 2006, the U.S. Federal Reservewas aggressively raising interest rates from 2.25% in January to 4.25%, an increase of 200 basis points. During that same time, the Bank of Japan sat on its hands and left interest rates at zero. Therefore, the spread between U.S. and Japanese interest rates grew from 2.25% (2.25% - 0%) to 4.25% (4.25% - 0%). This is what we call an expanding interest rate spread.

The bottom line is that you want to pick carry trades that benefit not only from a positive and growing yield, but that also have the potential to appreciate in value. This is important because just as easily as currency appreciation can increase the value of your carry trade earnings, currency depreciation could erase all of your carry trade gains and then some.

Getting to Know Interest Rates

Knowing where interest rates are headed is important in forex trading and requires a good understanding of the underlying economics of the country in question. Generally speaking, countries that are performing very well, with strong growth rates and increasing inflation will probably raise interest rates to tame inflation and control growth. On the flip side, countries that are facing difficult economic conditions ranging from a broad slowdown in demand to a full recession will consider the possibility of reducing interest rates.

Foreign Exchange Rate Risk for SMEs

2009-08-09T13:08:00.004+08:00

Predicting the next move in the markets is the key to making money in trading, but putting this simple concept into action is much harder than it sounds. Professional forex traders or SMEs that actively trade because of their cross border trade transactions - have long known that trading currencies requires looking beyond the world of FX.

The important fact is that currencies are moved by many factors - supply and demand, politics, interest rates, economic growth, and so on. More specifically, since economic growth and exports are directly related to a country's domestic industry, it is natural for some currencies to be heavily correlated with commodity prices.

The top three currencies that have the tightest correlations with commodities are the Australian dollar, the Canadian dollar and the New Zealand dollar. Other currencies that are also impacted by commodity prices but have a weaker correlation are the Swiss franc and the Yen.

Knowing which currency is correlated with what commodity can help traders understand and predict certain market movements. Here we look at currencies correlated with oil and gold and show you how you can use this information in your operations.

Oil and the Canadian Dollar

Over the past few years, the price of commodities has fluctuated significantly. Oil, for example, surged from $60 a barrel in 2006 to a high of $147.27 a barrel in 2008 before plummeting back below $40 a barrel in the first quarter of 2009. Similar volatility can be seen in the price of gold, which hit a high of $1,033 an ounce in March 2008 before falling below $700 an ounce in June of the same year.

With many countries around the world in recession, the trend of commodity prices can mean the difference between a deeper downturn and a faster recovery. Knowing which currencies are affected by what commodities will help you make more educated trading / fx exposure decisions.

Oil is one of the world's basic necessities - at least for now, most people in developed countries cannot live without it. In February 2009, the price of oil was nearly 70% below its all-time high of $147.27 set on July 11, 2008. A decline in oil prices is a nightmare for oil producers, while oil consumers enjoy the benefits of greater purchasing power. This is a complete 180-degree change from the situation at the beginning of 2008, when record-high oil prices put a big smile on the faces of oil producers while forcing oil consumers to pinch pennies.

There are a number of reasons to explain the fall in oil prices, including a stronger dollar (oil is priced in dollars) and weaker global demand. As a net oil exporter, Canada is severely hurt by declines in oil, while Japan - a major net oil importer - tends to benefit.

Between the years 2006-2009, for example, the correlation between the Canadian dollar and oil prices was approximately 80%. On a day-to-day basis, the correlation can break, but over the long term it has been strong because the value of the Canadian dollar has good reason to be sensitive to the price of oil. Canada is the seventh-largest producer of crude oil in the world and continues to climb up the list, with production in oil sands increasing regularly.

In 2000, Canada surpassed Saudi Arabia as the United States' most significant oil supplier. Unbeknownst to many, the size of Canada's oil reserves is second only to those in Saudi Arabia. The geographical proximity between the U.S. and Canada, as well as the growing political uncertainty in the Middle East and South America, makes Canada one of the more desirable places from which the U.S. can import oil. But Canada does not service only U.S. demand. The country's vast oil resources are beginning to get a lot of attention from China, especially since Canada stumbled upon a new stash of oil after a reclassification of its Alberta oil sands to the "economically recoverable" category. This makes the Canadian dollar extremely vulnerable in the event that oil prices continue to spiral downward.

Oil and the Japanese Economy

At the other end of the spectrum is Japan, which imports nearly all of its oil (compared to the U.S., which imports approximately 50%). As of 2009, it is the world's third-largest net oil importer behind the U.S. and China. Japan's lack of domestic sources of energy, and its need to import vast amounts of crude oil, natural gas and other energy resources, make it particularly sensitive to changes in oil prices.

Japan also lacks the flexibility to switch to nuclear power because it is a huge net importer of uranium for its nuclear power plants. As of 2008, the country's dependence on imports for primary energy stood at more than 84%. Oil provided Japan with 49% of its total energy needs, coal with 20%, nuclear power 13%, natural gas 14%, hydroelectric power 3% and renewable sources a mere 1%. Therefore, when oil prices skyrocket, the Japanese economy suffers.

So if you want to trade commodity currencies, the best way to use commodity prices in your trading is to always keep one eye on movements in the oil or gold market and the other eye on the currency market to watch how quickly it responds.

Due to the slightly delayed impact of these movements on the currency market, there is generally an opportunity to overlay a broader movement that is happening in the commodity market to that of the currency market. Bottom line: It never hurts to be more informed about commodity prices and how they drive currency movements.

Using a back-to-back loan in international trade

2009-08-09T13:04:00.004+08:00

Back to back loans or parallel loans are a financial move used by companies to curb foreign exchange rate risk or currency risk. They are loan arrangements where companies loan each other money in their own currency.

For example, if a Singapore (SG) company is engaged in a back-to-back loan arrangement with a Mexican company, the SG company borrows pesos from that company, while the same company borrows dollars from the SG company.

Usually, if a company needs money in another currency, the company heads to the currency market to trade for it. The issue with trading currency is that a currency with high fluctuations can result in great loss for the company.

A back-to-back loan is very convenient for a company that needs money in a currency that is very unstable. When companies engage in back-to-back loans, they usually agree on a fixed spot exchange rate , usually the current one. This eliminates the risk associated with the volatility of exchange rates because the companies are repaying their loans based on the agreed upon fixed rate.

This is how back-to-back loans work: To avoid currency or exchange risk, companies look for other companies in another country and engage in back-to-back loaning. For example, if SG company X, has a subsidiary in Japan, Y, that needs one thousand yen, company X will look for a Japanese company with a subsidiary in the U.S., Z, that needs one thousand dollars.

A back-to-back loan occurs when company X loans Z $1000 and the Japanese company loans Y, ¥1000. The two companies usually agree on the duration of the loan and at the end of the loan term, they swap currencies again. Back-to-back loans although not as popular today but they still remain an option for companies seeking to borrow foreign currency.

International Trade: What SMEs Should Know

2009-08-09T12:53:00.003+08:00

International trade is the exchange of goods and services between countries. This type of trade gives rise to a world economy, in which prices, or supply and demand, affect and are affected by global events.

International trade allows us to expand our markets for both goods and services that otherwise may not have been available to us. It is the reason why you can pick between a Japanese, German and American car. As a result of international trade, the market contains greater competition and therefore more competitive prices, which bring a cheaper product home to the consumer.

Trading globally gives consumers and countries the opportunity to be exposed to goods and services not available in their own countries. Almost every kind of product can be found on the international market: food, clothes, spare parts, oil, jewelry, wine, stocks, currencies and water. Services are also traded: tourism, banking, consulting and transportation.

A product that is sold to the global market is an export, and a product that is bought from the global market is an import. Imports and exports are accounted for in a country's current account in the balance of payments.

Global trade allows wealthy countries to use their resources - whether labor, technology or capital - more efficiently. Because countries are endowed with different assets and natural resources (land, labor, capital and technology), some countries may produce the same good more efficiently and therefore sell it more cheaply than other countries. If a country cannot efficiently produce an item, it can obtain the item by trading with another country that can. This is known as specialization in international trade.

Let's take a simple example. Country A and Country B both produce cotton sweaters and TVs. Country A produces 10 sweaters and six TVs a year while Country B produces six sweaters and 10 TVs a year. Both can produce a total of 16 units. Country A, however, takes three hours to produce the 10 sweaters and two hours to produce the six TVs (total of five hours).

Country B, on the other hand, takes one hour to produce 10 sweaters and three hours to produce six TVs (total of four hours). But these two countries realize that they could produce more by focusing on those products with which they have a comparative advantage.

Country A then begins to produce only TVs and Country B produces only cotton sweaters. Each country can now create a specialized output of 20 units per year and trade equal proportions of both products. As such, each country now has access to 20 units of both products.

We can see then that for both countries, the opportunity costs of producing both products is greater than the cost of specializing. More specifically, for each country, the opportunity cost of producing 16 units of both sweaters and TVs is 20 units of both products (after trading).

Specialization reduces their opportunity cost and therefore maximizes their efficiency in acquiring the goods they need. With the greater supply, the price of each product would decrease, thus giving an advantage to the end consumer as well.

Note that, in the example above, Country B could produce both TV and cotton more efficiently than Country A (less time). This is called an absolute advantage, and Country B may have it because of a higher level of technology. However, according to international trade theory, even if a country has an absolute advantage over another, it can still benefit from specialization.

International trade not only results in increased efficiency but also allows countries to participate in a global economy, encouraging the opportunity of foreign direct investment (FDI), which is the amount of money that individuals invest into foreign companies and other assets. In theory, economies can therefore grow more efficiently and can more easily become competitive economic participants.

For the receiving government, FDI is a means by which foreign currency and expertise can enter the country. These raise employment levels and, theoretically, lead to a growth in the gross domestic product. For the investor, FDI offers company expansion and growth, which means higher revenues.

International trade has two contrasting views regarding the level of control placed on trade: free trade and protectionism. Free trade is the simpler of the two theories: a laissez-faire approach, with no restrictions on trade. The main idea is that supply and demand factors, operating on a global scale, will ensure that production happens efficiently. Therefore, nothing needs to be done to protect or promote trade and growth because market forces will do so automatically.

In contrast, protectionism holds that regulation of international trade is important to ensure that markets function properly. Advocates of this theory believe that market inefficiencies may hamper the benefits of international trade and they aim to guide the market accordingly. Protectionism exists in many different forms, but the most common are tariffs, subsidies and quotas. These strategies attempt to correct any inefficiency in the international market.

As it opens up the opportunity for specialization and therefore more efficient use of resources, international trade has potential to maximize a country's capacity to produce and acquire goods. Opponents of global free trade have argued, however, that international trade still allows for inefficiencies that leave developing nations compromised. What is certain is that the global economy is in a state of continual change and, as it develops, so too must all of its participants.

What Investors Look for in Your Business

2009-08-09T12:41:00.004+08:00

An important point to understand is that investors are not all the same. At the high end, there are a few thousand venture capitalists working for a few hundred venture capital firms. At the low end, you have friends and family. And in the middle, there are tens of thousands of private investors called "angels."

The venture capitalists are the most demanding. They fund only a few thousand plans per year, and they have to reduce their risks because they're investing other people's money. They probably won't consider your venture unless you're introduced to them first because they have no other way to screen and process all the proposals they get. They aren't sharks or bad people--they're just professional managers doing their job. They won't steal your idea: The last thing they want is another business idea without a team to implement it. Therefore, when they search for investment vehicles, they look for the following:

1/ A management team with a proven track record. Yes, that often means they won't fund your plan because you don't have experience, but you don't have experience because they won't fund your plan. Deal with it. If this is the case, look for angel investors or friends and family.

2/ A defensible product with a competitive advantage. It's easier to predict the success of a tangible product than it is a service, which is why service businesses are rarely interesting to venture capitalists.

3/ Reasonable valuation. Divide the amount you plan to take as investment by the percent of ownership you're offering to give in exchange. For example, offering 50 percent of a company for $5 million means you're valuing your company at $10 million. An outrageous valuation shows investors you may still have your head in the clouds.

4/ A clear statement of the investment offering. Check with your advisors about the legality of your offering, including how much equity for how much money you're planning to offer this time through, and the planned future dilution for later rounds of investment.

5/ Opportunity towards increasing the value of the company from whatever they think it is now to about 100 times that in three to five years.

6/ Your plan has to show that the money is carefully planned and really needed.

7/ A plan that has several other similar investors ready to invest at the same time. Venture capitalists find safety in numbers so they don't want to be the only investor in a deal.

8/ A clearly stated exit strategy. Investors like to see that you've thought ahead to how they're going to get their money back on the deal. Angel investors are harder to predict. They're usually wealthy individuals or small groups who invest in different ways. Most of them look at almost the same factors as venture capitalists. Some of them, however, will consider lesser investment amounts and will even invest alone. They often specialize in a specific type of business, such as retail or technology, perhaps because they know that sector well.

When it comes to friends and family, be very careful about seeking friends and family to invest in your new venture because businesses frequently fail and you don't want to lose your friends and family when you lose your business. And don't make the deal based on a handshake--you should treat your deals with friends and family just as you would with a professional investor.

Organisational innovation checklist

2009-08-06T17:03:00.001+08:00

Many innovative organisations share a number of key features:

flatter structures
open cultures
integrated systems
knowledge sharing
use of partnerships
customer orientation
evolving learning

To achieve sustained innovation organisations may need to develop their organisational structure, culture, and company systems, make good use of technology to share knowledge, consider partnerships of various kinds and be prepared for change. The following features are common in innovative organisations. Check the list and note where your organisation is doing well and where it needs improvement.

Structure
flatter
decentralise
product-based divisions and cells
integrated cross-functional teams
horizontal collaboration
integrate research, technology, production, marketing, innovation management

Culture
open culture
encourage challenge
build trust
nurture talent
foster good communication
motivate commitment
support networking
learning oriented
customer focused

Systems
organise around outcomes
responsive
employee freedom
ample delegation
incentives
recognition
quality across the board
incremental development
good project management

Technology
robust design
parallel overlapping development
knowledge sharing

Partnership
among management team
benchmark competition
close relations with suppliers
consider joint ventures

Business modelling strategies revisited

2009-08-05T23:54:00.004+08:00

What is a Business Model? It is basically a story of how a business works. In general terms, a business model is the method of doing business by which a company can generate revenue. Both start-up ventures and established companies take new products and services to the market through a venture shaped by a specific business model.

There are six basic elements of a business model:

1)Articulate the value proposition - the value created to users by using the product

2)Identify the market segment - to whom and for what purpose is the product useful; specify how revenue is generated by the firm.

3)Define the value chain - the sequence of activities and information required to allow a company to design, produce, market, deliver and support its product or service.

4)Estimate the cost structure and profit potential - using the value chain and value proposition identified.

5)Describe the position of the firm with the value network - link suppliers, customers, complementors and competitors.

6)Formulate the competitive strategy - how will you gain and hold your competitive advantage over competitors or potential new entrants.

Every business model needs to pass two critical tests, the narrative test and the numbers test. The narrative test must tell a good story and explain how the business works, who is the customer and how a company can deliver value to the customer. The numbers test means your profit and loss assumptions must add up. At the most basic level, if your model doesn't work, then your model has failed one of the two tests.

To begin the modeling process you need to articulate a value proposition on the product or service being provided. The model must then describe the target market. The customer will then value the product on its ability to reduce costs, solve a problem or create new solutions.

A market focus is needed to identify what product attributes need to be targeted and how to resolve product trade-offs such as quality versus cost. You also need to identify how much to charge and how the customer will pay.

Think of business modeling as the managerial equivalent of the scientific method - you start with a hypothesis, which you then test in action and revise when necessary. The business model also plays a part of a planning tool by focusing managements on how all the elements and activities of the business work together as a whole.

At the end of the day, the business model should be condensed onto one page consisting of: a diagram outlining how the business generates revenue, how cash flows through the business and how the product flows through the business and; a narrative describing the product/ service components, financial projections.

It is important to note that completing a business model does not constitute strategic planning. Strategic planning factors in the one thing a business model doesn't; competition.

The Innovation Process

2009-08-03T23:35:00.004+08:00

1/ The pressure to meet customers’ quality and delivery criteria are reflected in intensified pressure on firm’s processes’ and new technologies and innovations in control systems and organisational arrangements are becoming a necessary part of the process of meeting increasingly stringent customer demands for quality and reliability.

2/ However the management of innovation through specifically managing only aspects to products and services could be inadequate for creating an impact on customer satisfaction and thus establishing superior competitiveness. Products and services provide only one leap, focus or corporate-wide innovation, while the process is a continuous approach of repeated leaps of launches and re-launches, and improvements to provide dynamically continuous and discontinuous innovation.

3/ Therefore new product success is very much dependent on process-that is, what activities are undertaken, when, how well, how thoroughly and even how much was spent. The new product process – the activities that occur from idea to launch and their quality of execution – is absolutely vital to success.

4/ There are 4 distinct processes in innovation:

i. Preparation (definition of issue, observation, and study-assembling the inputs)

ii. Incubation (laying the issue aside for a time)

iii. Illumination (the moment when an idea finally emerges-Eureka)

iv. Verification (checking it out-testing and communication)

5/ Lack of understanding of corporate-wide innovating activity is often partly why companies do not achieve high competitive standards and fail to exploit market opportunities. Cultures which promote innovation activity by placing emphasis on products and services only, while regarding certain functional areas as ‘superstars’ are unlikely to be leaders in the marketplace.

6/ Developing a culture of innovation compatible with the requirements of modern competitiveness does not stop at having sound strategies for products and markets. It requires putting in place systems, procedures, skills, structures and the right level of resources to initiate and sustain a never-ending approach to innovation.

Which is more important: product or process innovation?

2009-08-03T23:25:00.005+08:00

1/ I believe that in the context of SMEs, product innovation is arguably more important than either process or organisational innovation, and can range from minor improvements in a firm’s existing products to an overhaul of the product mix.

2/ In many cases, the development of new products provides the key to the firm’s ability to gain new customers, enter new markets or increase gross margins. Furthermore organisations do not have to be large to gain competitive advantage, rather, that they must produce an innovative product which enables competitive advantage which in turn leads to firm growth.

3/ Capitalising on product innovation means firms must move from reactive to proactive developments. Strategic developments are defined as the result of conscious attempts to identify and address specific market niches, move towards higher value-added markets, to establish a position of technological leadership.

4/ Reactive developments on the other hand, occur where the final product specification, either in detail or in outline, originates from one of the firm’s current or potential customers. Successfully undertaking reactive developments is typically more difficult, as time and resource pressures are often intensified.

5/ Moreover, in these situations the risk involved may also be greater, as technical and production deadlines may preclude the type of thorough market research which would be undertaken where developments were part of a more ‘managed’ process. However innovation is not limited to product only and is not just a straightforward process starting with R&D and ending with the introduction of a new product or process. Instead innovation can be a much messier. It can start anywhere in the company, can involve people from any area of the business and need not involve any significant technological advance.

Innovation Revisited

2009-08-03T23:09:00.004+08:00

1/ Innovation can be described as the introduction of new things or methods or, alternatively, as the change that creates a new dimension of performance.

2/ What is clear is that innovation and change are becoming increasing central parts of the SME businesses as business owners struggle to keep up with changing tastes, global competition and faster life cycles.

3/ It is the commercial application of knowledge or techniques in new ways or for new ends; it may involve radical innovation or incremental innovation. In each case the innovator achieves a competitive advantage, at least until another company catches up or goes one better.

4/ Innovation then, is change, managed to maximise business value. Innovation has always been understood in terms of technologies, products and services offered. Companies’ efforts have always been to optimise various features of products and services and to develop and use relevant technologies for establishing competitive advantage.

5/ Since the 1990’s competition in Asia has changed in many ways, by creating more difficult conditions and introducing new parameters in an unprecedented way, for instance, there is:
· Ease of entry to most markets.
· Wide availability and affordability of technical know-how.
· Transfer of technology and expertise on a more global basis.
· Increased saturation in many markets.
· Widespread imitation products and copying.
· Increased customer satisfaction and demands.
· Great similarities between products and services so that differentiation is on ‘softer aspects’.
· ‘Time to market’ and speed of innovation more and more appreciated as key competitive parameter.

6/ Firms operating on a cost leaderships strategy are also highly influenced by cyclical downturns in economic circumstances. Therefore firms operating under this strategy, need to look towards innovation which creates the differentiating factor.

Traits of a Good Leader - SME Perspective

2009-08-02T23:26:00.003+08:00

Key Trait #1: You must have a vision. Standing firm when it comes to your company's policies and procedures is all well and good, but it doesn't speak to having a vision. As a leader, you have to learn to communicate your vision or the vision of your company to the people you want to follow you.

· Learn to paint a picture with words. Speak it, write it, draw it, touch it. Whatever methods you can use to create a picture, do it. As they say, "A picture is worth a thousand words."

· Ask each of the other managers in your company to tell you, in their own words, about the vision of the company. How close is it to what you thought they understood? Is your team on the same page as you?

· As you work, your company's vision should be in your mind every day, and you should reevaluate it occasionally so that it stays current with the changing times in which we live. And remember, your staff needs to be just as involved as you in keeping it up to date if you truly want them to buy in on the vision. Be sure to keep your key players involved.

Key Trait #2: You must have passion. Your employees want passion; in fact, they'll go to the ends of earth because of it, live and die for it. Their leaders' passion inspired them to take on new and very dangerous challenges. To build an extraordinary management team, you've got to light the "fire in their bellies," to get them to feel passion about the company and connect to the leader's vision. Passion is such a key part of being a great leader that if you don't have it, you simply can't be a great leader. Think of all the great leaders throughout the ages and try to name one that did not have passion. And passion is infectious: When you talk about your vision for the company, let your passion for your vision shine through. Others will feel it and want to get on board with you. If you don't have passion for your vision, you need to recreate your vision or reframe your description of your vision so it's connected to your passion.

Key Trait #3: You must learn to be a great decision maker. How are major decisions made in your company? What is your process for making them? For instance, do you talk to your management team and create a list of pros and cons to help you make the best decision? Maybe you conduct a cost analysis. Or do you create a timeline for the implementation strategy, process and timing? Some leaders have a set process, and others fly by the seat of their pants. But you don't want to be one of those leaders who consults no one before making a decision, announces the change the next day and then gets frustrated when no one follows it.

· Be quick but not hasty.
· Be committed to your decision but not rigid.
· Be analytical, but don't over-analyze (Too much analysis can cause paralysis.)
· Be thoughtful about all concerned, but don't be obsessive.

Key Trait #4: You must be a team builder. To become a great leader, you must develop a great team or, one might say, a well-oiled machine. But how do you do that? You can start by handing off responsibility to your team and letting your team to run with it. Don't breathe down their necks and don't micromanage, but make yourself available if questions or problems come up.

When projects aren't on track or your team is falling behind on deadline, it serves no one if you start pointing fingers. This is when you need to rise to the occasion and inspire confidence in your employees, to let them know you support them and ready to help. Be ready to alter plans and make new ones. Don't forget to use humor to keep your team's spirits up during a crisis. When an emergency hits, your team will look to you to be a tower of strength and endurance.

Key Trait #5: You must have character. Without character, all the other "keys" are for naught. That's because your innate character strengths and limitations play a critical role in your leadership style. The real question is, are you aware of just what role they play? All great leaders have taken steps to learn about their individual personality and what part it plays in their leadership style.

A great leader is someone who has a clear vision and can turn that vision into a vivid picture that others can see. When you speak about your vision, it should be with a passion you feel in your heart, a passion that creates so much enthusiasm that your team will want to jump on board.You should be continually assessing your own character and never stop growing, personally or professionally.

Leveraging online media to market your business

2009-08-02T19:28:00.002+08:00

1/ Before investing the time and money, clearly define your potential blog's goals and objectives, and then determine your exact target audience. Figure out what you'll offer that's unique or that will set your blog apart, and make sure you have enough potential content to keep your blog continuously updated and fresh.

2/ Next, figure out how you'll drive a steady flow of traffic to your blog and build its audience. Properly and creatively promoting a blog on an ongoing basis is essential for building an audience. For many bloggers, this often proves to be their biggest challenge. Having unrealistic expectations about how quickly and easily you'll be able to drive traffic to a new blog is one of the biggest reasons why bloggers fail.

3/ If done correctly, a blog can attract a dedicated audience to build upon and share expertise, information, ideas and content, while boosting awareness of your company and brand. If done incorrectly, however, you can leave customers feeling dissatisfied and ready to turn to your competitor.

4/ Create friend-sumers.Promote a company, product or service by creating a blog that features how-to advice, news and other information of interest to customers. Through the blog, visitors can post testimonials, feedback, questions and comments, plus participate in surveys. By taking an informal, non-sales approach, a company can interact with customers, gain useful feedback and build an online audience that can ultimately be directed to the company's main website or retail store.

5/ Provide exceptional customer support.Supplement a company's existing technical support and customer service with an online forum for customers to openly post questions. While employees can update and maintain this type of blog, users feed it with comments and also tap the knowledge of other users by reading past questions and interacting on the forum. If done correctly, this type of blogging can dramatically cut the cost of personalized technical support and customer service. Check the comments section for frequent users who can be recruited as bloggers to further increase your blog's content. They can also be asked to "host" certain threads or wikis to encourage dialogue on topics that need a little TLC.

6/ Increase your credibility.A blog is an ideal tool to position yourself as an expert in your field by sharing your thoughts, knowledge, experience and insight. Obtaining expert status can increase your earning potential, make it easier to land a new job or promotion, and help attract new customers.

7/ Gain more exposure.Ask independent bloggers to write reviews and articles about your company. Having your information published on different blogs builds your legitimacy and exposure. Also, it's often faster and easier for a business to get blog content (as opposed to traditional website content) listed with the major internet search engines.

Managing People in a Downturn

2009-08-02T17:02:00.003+08:00

Entrepreneurs, like other leaders, often ask questions about how to manage in a downturn. Following are key questions, and my recommended answers to them:

1/ How should I manage and lead differently in light of the economy? The best response is to communicate, communicate, communicate. Your employees need to hear from you, the person at the top. Lack of communication leads to a rampant rumor mill that most often has harmful effects. Even the best of leaders' intentions can be misconstrued and twisted in the absence of direct communication. The leader must provide regularly scheduled updates on issues such as sales, services, revenues, losses, projections and near- and long-term projects and status.

2/ That said, this message must be clear, upbeat and to the point. Employees, just like stockholders and trustees, dislike having to sift through corporate bluffing and unnecessary details to get to the "meat" of the message. Above all, the message must be honest, even when it's negative. The entrepreneur must not underestimate the level of understanding of the recipients of the message. No one likes to be spoken down to, and above all, no one likes to be lied to. If the leader tries to sugarcoat the message or minimize the impact of a situation, it'll soon become apparent to the audience. And when it does, they'll be angry; in fact, angrier than if they'd received a direct, yet negative message to begin with.

3/ Furthermore, if the leader minimizes the negativity or is dishonest, his credibility will be injured, perhaps irrevocably. The leader must be constantly sensitive to employee morale and motivation. Realistically, sad economic news delivered in a depressing way leads to downbeat employees, which in turn leads to decreased motivation. It becomes a domino effect: Decreased motivation leads to decreased productivity, which leads to decreased output and revenue, which leads to possible employee termination for non-performance. Morale may plummet; however, if the leader is honest and clear, and frames the message in realistically optimistic terms, morale doesn't necessarily decline in the face of negative news. The key is to be a level-headed, rational, understanding and positive leader.

3/How often should I communicate the status of the company to employees? This depends on the type and size of the company, the industry and the degree of impact the harsh economic situation is having on the organization. The general rule is to communicate often enough to keep the employees up to speed, yet not so much that they overreact to the daily or weekly fluctuations of the marketplace. This is true unless the very survival of the company is directly tied to the frequent changes in the marketplace, in which case updates need to be made more often. Therefore, on the average, monthly status updates are appropriate.

4/ Should I allow my employees to participate in these information sessions? Yes. Employees want and need to be heard. Many leaders are reluctant to open up the floor to their employees because they fear losing control. This usually only occurs when motivation is down and anger is high--two factors that can be minimized with frequent and honest feedback. Many organizations hold town hall meetings to create open communication between employers and employees. This helps both parties hear and understand each other's viewpoints, questions, frustrations and worries. If a meeting is held where only the boss speaks, the employees are prevented from airing their questions, fears and concerns--data the boss needs to understand in order to be an effective leader. In many cases, the leader can easily and rapidly clarify misconceptions and avoid disastrous rumors by allowing an open flow and exchange of information.

5/ Should I give my employees a heads up about layoffs, work restructuring, etc.? Because this category of information is usually depressing, productivity and morale are certain to decline once it's delivered. In brief, no work gets done because the people are in shock and feel betrayed or confused. The best time to convey the bad news is right before it's scheduled to occur. Therefore, if a noon layoff is set, employees should be told, individually or in teams, shortly before then. The leader should allow time for questions and expression of fears and concerns--and yes, be prepared to be yelled at or even threatened. All of these are realistic and common reactions to receiving bad news about one's employment future.

6/ How should I communicate bad news? No one likes to get bad news, especially when it applies to one's livelihood. Let there be no doubt--layoffs are difficult to accept. However, there's a communication format that can lessen the pain. As stated above, the message needs to be clear and concise. "Beating around the bush" isn't acceptable; neither is a very brief, dramatic statement like "You're fired." Instead, the leader needs to use a three-part sequence to deliver the message. First, say something positive, like "You've been a valuable member of our team for some time. I want you to know that I appreciate your contribution." This statement contains negativity, but it can be softened and better accepted if the message begins with a positive statement and the communicator is certain to express concern for the other party. Next, continue with the bad news. Tell them you have to cut your losses and terminate some people or cut back on certain projects. Pause and wait for your words to "sink in." Third, state what you'll do to help out those being terminated. Say you're setting up stations to show employees how to develop their resumes, search for new jobs, etc. If you don't intend to do this, then ask them to finish up what they're doing, gather their things, say their goodbyes and leave the building by a certain time.

7/ The most important thing to take away is that there's a framework to use when openly and honestly delivering news, even when that news is bad. The leader's credibility and honesty is at stake at every juncture here. As a result, the entrepreneur needs to be certain to invite feedback and express concern for the well-being of the employees.

Handling Difficult Employees

2009-08-02T16:37:00.003+08:00

1/ The FIRST STEP is don’t ignore the problem. Assuming that the employee provides value to the company and possesses redeeming qualities, there are ways to deal with difficult employees. Most often, managers will simply ignore problematic staffers. Managers who live by this rule hope the problem will just go away; that these people will somehow turn themselves around or stop being troublesome. Ignoring the situation is the wrong solution to what could likely become a progressive problem.

2. Intervene as soon as possible and don't procrastinate! It is important to take action as soon as the negative behavior pattern becomes evident--when left untouched, this problem will only escalate.Occasionally, the difficult employee has no idea that his behavior is a problem or that others react negatively to his actions. This is because most people tend to put up with the annoying behavior and “go along to get along.” At the same time, some employees just consider it a “job frustration.” Just like some managers, employees want to be liked by colleagues and subordinates and are therefore reluctant to speak up when a problem arises.Ultimately, it is the manager’s responsibility to take the appropriate action to correct the problem. Whether the concern exists due to the employee’s lack of knowledge of the issue, lack of feedback or projecting the difficulty onto someone else, the manager has the responsibility of addressing and turning around the predicament. The manager needs to gather information from employees to discern the extent of the problem and personally observe the employee interacting with customers or vendors.

3. Research the problem personally. Armed with accurate data and examples, the manager needs to then take this person into a conference room or office--away from others--and calmly address the issue. To begin, the manager needs to ask the employee if he is aware of any ongoing issues to determine if the difficult person is aware of the problems.If the employee is “unaware,” the manager needs to describe the unacceptable behavior. The employee might interrupt to disagree or deny the existence of any issues. Nevertheless, the manager needs to continue by giving clear examples of the unwanted behavior.The manager also needs to allow the employee to respond to the allegations. If the difficult employee refuses to believe that the allegations exist despite the evidence, the most the manager can hope for is an intellectual acceptance of the possibility that a problem exists.

4. Help the problematic employee to get back on track. Once the employee begins to understand that these negative behaviors are real and experienced by others in the organization, the manager or someone from human resources should begin to coach the difficult employee in displaying more acceptable and appropriate behaviors. The employee needs time and practice in “trying on” new, more suitable behaviors. HR and/or the manager need to provide specific feedback to this employee on the success or failure of his efforts in minimizing the negative actions and implementing ones that are more positive.

5. If all else fails, termination may be necessary. If the employee continues to deny his inappropriate behavior and refuses to try to improve the situation, the manager needs to place this person on the fast track towards termination. Often this involves recording a series of well-documented verbal and then written feedback about the behavior. Strictly following company protocol, there should be a period for the employee to address the questionable behavior. If this trial period does not result in improved behavior, then the employee needs to be terminated.

6/Always remember that most employees will recognize the negative behavior and will at least attempt to turn it around. This is especially true during tough economic times when unemployment is high and finding a new job is difficult. In any case, the manager needs to follow company guidelines in recognizing the unacceptable behavior, providing direct feedback, providing input to try to turn it around and ultimately taking action in a timely manner.Not doing so is a disservice to the problematic employee, other employees and the success of the organization.

Managing People and Talents

2009-08-02T16:27:00.001+08:00

1/ When you're an SME, the people you work with are some of your most valuable assets. Your team motivates you when you're down, shares their experiences when you need new strategies and partners with you when you're looking to open new markets.

2/ Your challenge is to motivate and inspire all your workers, many of whom may not be full-time employees. You also need independent contractors and consultants to meet your clients' expectations. Your success depends on how well you focus their attention on your requirements and leverage their limited time and resources to benefit your business.

3/ People invest more in their work when they believe that their contributions are valued and they share in the reward of a job well done. It's vital that your team members feel as though their opinions matter and they have a stake in your company's success. Keep them motivated by discovering what's truly important to them and incorporating that into your business plan.

4/ Set specific expectations with the input of team members. You'll achieve the best results when people have a clear understanding of what's expected of them. Motivate team members by giving them a sense of importance; encourage them to provide input on decisions that directly affect them. Ask them to define their expected outcomes and come up with an action plan to achieve them. Their participation will improve your business and increase their commitment level. When workers "own" a specific project, they're often galvanized to go the extra mile to make sure it succeeds.

5/ Encourage collaboration. Promote teamwork by fostering communication. All business models and strategies are unproven until they're tested. Your team members are experts in their areas. Allow them to collectively improve your business acumen by sharing success stories and new strategies. Developing and testing unique solutions bands people together and makes your team stronger.

6/ Provide space to innovate. People get excited when they learn new skills or methods to achieve success. Arrange a luncheon so your team can connect with each other and discuss how best to achieve your company's goals. This sets a solid foundation for your team to approach new challenges together. Let your team have creative time without you; your strong personality could stifle originality. When people are part of a solution, they're more inspired to make sure it works.

7/ Share information when you know it. People feel they're an important part of your business and vested in its success when they're kept in the loop. Let them know, as specifically as possible, how their actions, industry trends and outside events affect your business. The more upfront you are, the more they'll feel committed to your success.

8/ Keep people motivated by treating them how you want to be treated and letting them contribute their individual expertise. Knowing they're an intrinsic part of your future success inspires them to achieve more with less.

Making PR work for SMEs

2009-08-02T16:14:00.003+08:00

SMEs with small budgets for advertising and public relations activities have to plan their strategies properly because once the initial budget is gone, there are seldom second chances.

1/ A good public relations strategy is an alternative to advertising. Effective PR is a cost-effective way to gain editorial exposure for your product, get more leads, generate more sales and build a great brand.

2/ Credibility in the campaign is important. People often see through advertising, but a product mentioned in the context of a news report or print feature story gives it a passive endorsement and third-party credibility advertising just can’t buy.

3/ A news report is actually far more likely to move people to action than conventional advertising, and a good public relations strategy is the way to get the media to seek you out.

4/ Know your market. The more specific you can get about which community should use your product, the easier it will be to identify which media you need to work with. Be very narrow in your target, realizing that no product ever commands 100 percent market share, nor does it need to in order to be successful.

5/ Identify the product benefits relevant to your market. Features aren’t as important as "benefits" ie. what your product does for your potential clientele. Remember, at this stage you’re trying to sell your product or service to the media so your story will get published. Let them know the benefits and show them the numbers to prove that your product saves users time and money--or makes money.

6/ Establish your product as unique. It’s important to be able to prove your product is “x-times” faster, better, cleaner or more cost-effective than your competitors’ product or industry standard. Such specific and proven advantages will provide the media concrete evidence to feature your product over anyone else’s.

7/ Source and use testimonials. All other things equal, testimonials are one of the strongest ways to enhance the credibility of any promotional piece. This also holds true for your editorial piece as well. The main difference will be the way the testimonial is presented.

8/ Target the media used by your target market. Find out which media outlets your target market typically reads, views or listens to. In many cases, you’ll be able to identify specific journals or programs for the industry you are targeting. If it’s not obvious, you may need to do some research to find out which media are most seen or read by your target market.

9/ Prepare your press release to be printed as is. Start your release with a great headline. Your first paragraph should be no more than 25 words and needs to both explain the headline and summarise the story. Journalists spend on average of seven seconds “speed reading” the hundreds of news releases they receive each day, so the first 25 words are critical. And remember to keep your editorial to one page or less.

10/ Sell your release. Make a phone call to the person named in the media guide. Let them know you have a story that may interest them and their readers. Give them the headline and the first paragraph. They’ll make a decision then and there whether they like it or not. A “yes” or “maybe” means “send me a fax or email with more information.” Then, forward immediately marked clearly to their attention. Earn the right to follow up by asking if you can call back the next day or at some other specific time, depending on publication dates.

11/ Follow up. Call your contact when you said you would to confirm whether or not they received the information you sent and offer to provide more information if necessary.

12/ Keep in contact. But don’t be pushy. If the story is of value, it will sell itself. All you should do is provide your contact with the convenience of more information. This is also a good way to make sure your press release gets a second look.

13/ Use a photograph. A photograph can literally sell a thousand words. Daily media are more photo-conscious than ever, and are more interested in photos than the monthly special interest magazines or trade journals. Those publications are usually only interested in a photograph if it educates or informs the reader.

14/ By following the above, you’ll immediately increase your chances of success and you’ll also start to build the good media relationships you’ll need for the future. You’ll also give your product a strong competitive advantage in the media market, while any results you do achieve from “free press” will be more effective.

Assessing a franchise opportunity

2009-07-01T23:30:00.005+08:00

To assess if a franchise represents a sound business opportunity, you'll need to consider:

1/ what the business is and how it operates

2/ the location of the franchise

3/ the success of the franchise concept

4/ the length of time in business and how financially successful they are

5/ the amount and strength of competition from other businesses in the same market sector - at both a local and national level

6/ any market research that has analysed the public perception of the franchisor's (the business offering the franchise) brand levels of initial and ongoing costs

7/ how much training and support you'll get in setting up and running the business
conditions and restrictions in the franchise agreement, including how long it will run and whether you'll have the option to renew

8/ The franchisor will probably give you an information pack but you shouldn't just rely on this. Ask questions and look for evidence of their claims.

9/ One of the most helpful things you can do before deciding on a franchise is to visit other franchisees and talk to them. Ask the franchisor for a full list of past and present franchisees, not just the two most successful ones.

10/ It is important to visit new and established franchises - of differing levels of success - in as many different locations as possible. This should give you a good idea of the challenges you yourself will face should you decide to go ahead with a specific franchise.

Considerations for opening up a franchise operations

2009-07-01T22:44:00.002+08:00

1/ You need to consider carefully whether you have got the right skills and attitude to run a successful franchise. You need to consider how much you enjoy managing people, selling to the public or working alone - as these are common requirements of different types of franchise.

2/ You need to assess yourself - you must be prepared to sell and you will need entrepreneurial flair. A franchise gives you a business blueprint - but it won't automatically give you customers. You'll need to work hard, probably for long hours. Do you have the necessary dedication?

3/ Running your own business can be stressful. Think how you react to pressure.

4/ You may be starting up in business because you want to be your own boss. If so, would you be happy with the restrictions imposed by a franchise arrangement?
On the other hand, you may want to limit your risk. You might be more comfortable with a franchise than starting a new business from scratch.

Some key questions

5/ Do you like office work? Or would you prefer a business that involves physical labour or using a particular skill? Are you happy working on your own? Or would you be good at recruiting, training and managing employees? Do you like dealing with members of the public? Or would you prefer a franchise where you sell to business customers? Are you weak in particular business skills such as finance? Can you find a franchise that offers the support you need in those areas?

Franchising is good, but not for everybody!

2009-07-01T22:34:00.002+08:00

1/ If you want to run a business but do not have the track record, idea or adequate backend support, then taking on a franchise is an option worth considering. Moreover, a franchise scheme may provide security backed by an established concept.

2/ The right franchise can give you a head start. Instead of setting up a business from scratch, you use a proven business idea. Typically, you trade under the brand name of the business offering you the franchise, and they also give you help and support.

3/ Successful franchises have a much lower failure rate than completely new businesses. But that doesn't mean you don't have to work hard to make the franchise a success. You may even have to sacrifice some of your own business ideas to fit in with the franchisor's terms.

Advantages and disadvantages of franchising

4/ Buying a franchise can be a quick way to set up your own business without starting from scratch. But there are also a number of drawbacks.

Advantages

* Your business is based on a proven idea. You can check how successful other franchises are before committing yourself.

* You can use a recognised brand name and trade marks. You benefit from any advertising or promotion by the owner of the franchise - the 'franchisor'.

* The franchisor gives you support - usually including training, help setting up the business, a manual telling you how to run the business and ongoing advice.

* You usually have exclusive rights in your territory. The franchisor won't sell any other franchises in the same territory.

* Financing the business may be easier. Banks are sometimes more likely to lend money to buy a franchise with a good reputation.

* You benefit from communicating and sharing ideas with and receiving support from other franchisees in the network

* Relationships with suppliers have already been established.

Disadvantages

* Costs may be higher than you expect. As well as the initial costs of buying the franchise, you pay continuing management service fees and you may have to agree to buy products from the franchisor.

* The franchise agreement usually includes restrictions on how you run the business. You might not be able to make changes to suit your local market.

* The franchisor might go out of business.

* Other franchisees could give the brand a bad reputation.

* All profits are shared with the franchisor

Young Entrepreneurs

2009-06-12T22:44:00.006+08:00

1/ Youths of today should be guided and mentored on various aspects of entrepreneurship - more than what any entrepreneurial textbooks, the academic curriculum or school-based activities could offer.

2/ It is encouraging to note that over the last 5 years in particular, entrepreneurship has been actively promoted in secondary and tertiary institutions. There have been games, curriculum, soft-skill based training, outdoor-based activities and study excursions to expose students to the "realities" of the business world.

3/ However, I feel that there are core aspects of entrepreneurship that youths should focus on to reflect the current dynamics of the business world. These include:

a/ innovative approaches on business structure, processes and products

b/ types of risks inherent in a business today and ways to mitigate them

c/ potential effects of entrepreneurship on physical, mental, physiological and emotional state of being

d/ business and revenue model strategies to ensure incubation and commercialisation process is shortened

e/ resource management

f/ networking for youths with established businesses and potential channel partners

4/ There should also be periodic industry updates, including anecdotal points and experential training by established business people for youths to ensure that they have the full details of what's to be expected in a business.

Roadmap to Innovation - introduction

2009-06-09T15:39:00.003+08:00

1/ One of the strategic points for any entrepreneur to consider is how to turn innovation from a marketing concept into something tangible with an impact on the bottomline.

2/ To succeed, a different way of thinking and working is required. One needs to have combine analytical, structural, conceptual and social thinking dimensions, with a focus on implementation as much as idea-generation. It's a tough but potent combination if managed in a disciplined way.

3/ Innovation needs to be embedded into a business structure. It is equally important to remember that not every attempt at innovation is going to succeed.

4/ Failures occur when implementing innovative programmes not because failure of innovations - rather, those involved haven't thought through the potential pitfalls and areas of concerns.

5/ Whilst innovators are positive thinkers and don't want to look at negative sides, you need people who can see the pitfalls objectively and provide constructive feedback to execute the plans well.

Innovation is the only way to stay ahead of competition

2009-06-02T01:49:00.002+08:00

1/ Innovation is the successful exploitation of new ideas to improve the business, products and processes in a business.

2/ A basic understanding of the subject is essential for all business leaders whatever their current or intended product or service.

3/ Innovation is not to be confused with technology. Innovation is the only way to stay ahead of the competition.

4/ Exploited properly it will improve business survivability and lead to increased profits.

5/ Many companies who want to innovate find that they must first increase their motivation and improve their proficiency.

6/ The choice of approach depends on the business strategic purposes and direction, its capability, its market understanding and the size of the risk investment available.

7/ They are, in order of increasing investment:

7.1. Incremental - Continuous product and process improvement.
7.2. New design - Using design and customisation to add value.
7.3. New business model - Embedding the product inside a service
7.4. Increasing functionality - e.g. Adding software technology
7.5. Applying technology - Fusing different technologies to add value
7.6. Breakthrough - Exploiting new technology

5i - #5: Internationalisation

2009-05-26T23:59:00.001+08:00

1/ Once your business is on solid ground and can compete locally, it is ready to look for more growth overseas. After the criteria of Internalization, Innovation, Integration, and Investment have been met, your business should examine the opportunities that Internationalization presents.

2/ Doing business internationally requires its own set of skills and knowledge. Firstly, the international business person must be aware of the soft factors required to be successful in a foreign country. These include:

· An international outlook: understanding globalization and trends in the international business environment

· Cultural awareness: understanding the unique cultural norms of the target country and how these impact business

· Local business practices: being aware of the practical do’s and don’ts that can make or break your deal

3/ The international business person must also possess the tools needed to sell or operate offshore. These include skills in the areas of:

· International trade management: developing and international business plan and implement the import/export structures that will ensure successful overseas expansion

· International marketing: developing and implementing an international marketing plan to achieve business targets

· International market research: gathering timely and accurate information to support sound international business decision making.

· International trade finance: understanding the financial methods and tools that are used to conduct international business transactions

· International trade logistics: identifying the regulatory, documentary, and on the ground tactical requirements of the import/export process

· International trade laws: understanding the legal principles of carrying out international business

· Technology in international trade: using e-commerce and information systems to facilitate international trade

4/ The Internationalization segment of the 5i Program assesses the readiness of your business to compete in international markets, and gives your business the tools and skills it needs to build an international trade infrastructure.

5i - #4: Investments

2009-05-26T23:57:00.003+08:00

1/ In Internalization, we saw the need for your business to build a strong value chain. This value chain is essential to your business’s ability to compete.

2/ The ability to successfully deliver products and services to customers is, in turn, the source of cash flow, which is the life-blood of your company. You need money to pay your suppliers, your landlord, your employees, and your bank loans. If you run out of cash, you cannot stay in business.

3/ The 5i Program’s segment on Investment will equip you with the ability to monitor and improve your business’s cash flow. It will give you tools to:

· Understand the cash flow cycle: learn the skill of cash flow analysis and projection

· Keep a close eye on cash flow: use computer software or other programs to monitor cash flow so that you are aware of your cash position

· Plan for adequate cash flow: make sure you have enough money to pay your bills when they come due know the warning signs of a developing cash flow problem. These include declining bank account balances, poor sales outlook, increasing inventory levels, late payment of bills, and postponement of purchases

· Increase cash flow: know which of the following strategy/ies will work for your business:
§ Increase sales
§ Raise prices
§ Improve collection of receivables
§ Change credit terms to customers
§ Maximize investment returns
§ Find grant money
§ Borrow money

· Decrease cash outflow: develop strategies to reduce or delay the outflow of cash from your business, such as:
§ Cut expenses
§ Trim inventory
§ Use barter
§ Delay paying your bills

4/ Every SME business owner must monitor cash flow and take the necessary steps to avoid problems. It is critical to know how to plan so that your business does not run out of money. The 5i Program’s segment on Investment will show you how to do this.

5i - #3 : Integration

2009-05-26T23:52:00.004+08:00

1/ We saw above in the section on Internalization that your business’s ability to compete depends on its ability to optimize the efficiency of its internal value chain.

2/ In the 5i Program’s segment on Integration we will see how your business’s ability to create competitive advantage also depends on the ways in which it integrates into the larger business environment. We will look at vertical and horizontal integration as well as networking.

3/ Vertical integration is the extent to which your business controls its inputs and the distribution of its products or services. Your business’s control of inputs or supplies is known as backward integration, while your business’s control of distribution is known as forward integration. Vertical integration, then, refers to the degree of integration between your company’s value chain and the value chains of your suppliers and distributors.

4/ Vertical integration can be an effective strategic tool. It can be a means of decreasing the bargaining power of suppliers and distributors, and thereby increasing your control over your business. It can be a method to create economies of scale and reduce transaction costs.

5/ The 5i Program will diagnose whether vertical integration is a good strategic choice for your business. Horizontal integration is another strategic move that your business may consider. It means acquiring other business activities at the same level of the value chain.

6/ Acquiring activities dealing with similar products can create synergies and economies of scope. In contrast, acquiring activities that are substitutes for your products, or acquiring competitors outright can protect market share and reduce competition.

7/ The 5i Program will diagnose whether horizontal integration is a good strategic choice for your business. Networking is another way to integrate your business into the broader market. Networking by membership in organizations such as business chambers and trade associations is a means for MSMEs to broaden their local and regional reach.

8/ Online networking, via social networks, blogs, and e-commerce, is a means to reach out beyond all borders.

9/ The 5i Program will examine how your company can use networking to grow your business. It will give you the tools to:

· Develop a networking mindset (set mission and goals, develop confidence)
· Build your network (find the right physical and virtual communities to join)
· Practice networking skills (make the right impression and communicate the right message)
· Manage your network (share information and extend your reach)

5i - #2: Innovation

2009-05-26T23:46:00.003+08:00

1/ As we have seen earlier in the Internalization segment, the fine-tuning of the value chain, is critical to the ongoing success of any business. The ability to successfully deliver products and services to customers is the source of cash flow and is therefore the life-blood of any company.

2/ Most products and services, however, have a limited life cycle. Their attractiveness to customers decreases over time. Products and services must therefore be periodically refreshed or replaced in order to prevent a company’s market position from deteriorating.

3/ The 5i Program’s Innovation segment examines your organisation’s need for innovative products and processes. It looks at the following main forces that drive innovation:

· Strategic management: the direction, objectives, and decision making process in your business that creates an atmosphere for discovering opportunities and responding to challenges

· The business environment: the social, economic, political, regulatory, and ecological forces that are causing change and provide your business with opportunities and challenges

· Market forces: the changing market conditions that affect the life cycle of your current products and services and create opportunities for new offerings

· Technological forces: the new methods available to your business for meeting customer and stakeholder needs

· Technological innovation: the R&D activities that enable your business to improve existing products, create new ones, and enhance technical capabilities and resources

· Product management: the delivery of products and services to existing customers and markets, and the gathering of data from customers that supports requests for new products and services

4/ Innovation creates value and competitive advantage in many ways. It provides new solutions to old problems. It creates new opportunities for exploiting existing capabilities and resources. It ensures sustainable results through the systematic replacement of outdated products. It builds new capabilities and resources necessary for meeting future challenges.

5/ The Innovation segment of the 5i Program will identify ways in which your business can harness human, intellectual, and capital resources to increase business results through innovation.

5i - #1: Internalisation

2009-05-26T23:40:00.004+08:00

1/ Your business’s ability to compete depends on its ability to create a competitive advantage within its core operations. Internalization looks at all activities in your firm that create value.

2/It identifies those areas in which you can lower costs, increase margins, or otherwise improve efficiencies. The end result will be a strengthened value chain that will create greater returns for your shareholders.

3/ There are five primary activities through which firms create value and profits:
· the receiving and warehousing of raw materials, and inventory control
· the value creating activities that transform inputs into finished products and services
· the warehousing of finished goods and their distribution to customers
· the activities necessary to generate sales, such as pricing, channel selection, advertising, etc.
· the support of customers after they have purchased your product or services

4/ The primary value chain activities are supported by these support activities, which also create value and profits:
· the purchase of inputs such as raw materials, supplies and equipment
· the development of technology (R&D, process automation) to support value-creating activities
· the recruiting, development and compensation of employees
· the organizational structure, legal and finance systems, and culture of the company

5/ The Internalization segment of the 5i Program will examine your business’s effectiveness in performing the functions of the value chain. It will identify ways in which you can reconfigure the value chain (improve efficiency of operations) in order to generate superior value.

6/ It will tell you whether your company should pursue cost advantage (squeezing costs out of value-creating activities) or differentiation (performing value chain activities in a unique way that is not widely available to competitors). The end result will be the strengthening of your company’s core competencies and the solidification of your competitive advantage.

5I - Revolutionary Approach towards SME Consulting

2009-05-26T23:27:00.004+08:00

1. The 5I Capacity Building Programme (CBP) is developed by M Nazri in late 2008 after spending almost a decade studying, analysing and managing a portfolio of more than 500 SMEs across various industry types.

2. The 5i adopts the concept of a holistic, integrated business advisory that leverages on expert systems, portal interface and highly focused methodology that is specially designed to empower voluminous micro and small medium enterprises on a daily basis.

3/ The 5i utilises a revolutionary approach of delivering international best practices in business and financial advisory services that makes it uniquely superior to other existing certifications or programmes in terms of depth, breadth, speed and structure.

4/ 5i is effectively mapped to the "Grow, Glow and Globalise" philosophy that Spring Singapore embraces, commonly covers the following (non-exhaustive) areas and shall be customised for each company in varying degrees:

i/ Strengthening internal competencies and business models
ii/ Innovations in product/service delivery, processes and business structure
iii/ Integrating internal operations and establish external connectivity with stakeholders
iv/ Diversify funding sources and mix
v/ Assess readiness and undertake preparations to expand into foreign markets

5/ 5i is efficiently delivered via a speed advisory approach that asks the Clients directly what they need in the short and long term. Inputs from the client are obtained via a specially-structured approach of questionnaires during face-to-face advisory session and utilising various toolkits and mindmaps in a single session.

6/ Reports will be prepared and a detailed, customised blueprint/roadmap is subsequently prepared in less than 1 week. Thereafter, the SMEs will have a choice of implementing their own planned actions or enlist the help of advisory team to achieve the desired goals.

7/ Depending on the complexity and varying levels of requirements, it make take longer than a week to get the information and prepare the relevant needs analysis framework – varies from Client to Client.

Benefits of Incubator Programmes

2009-05-26T23:07:00.003+08:00

1/ Business incubators are organizations that help entrepreneurs get off the ground through mentoring, funding and facilities. These have been around since the 1950s.

2/ Business incubators stimulate and support creation and growth of new small businesses while providing support that decreases the chances of business failure.

3/ The most common goals of incubation programs are “creating jobs in a community, enhancing a community’s entrepreneurial climate, retaining businesses in a community, building or accelerating growth in a local industry, and diversifying local economies.

Tangible benefits include:

4/ Shared equipment such as copy machines, phones, faxes, computers and internet access

5/ Shared common spaces—conference rooms and lounges—for meetings with clients, and more informal interactions with other incubator tenants

6/ Shared business services such as computing secretarial, accounting, marketing, and legal support

7/ Assistance in basic business activities such as marketing plans, joint promotion, business plans, financial systems, bookkeeping and the like

8/ Often some greater flexibility in the timing and amounts of rent and other payments that are sensitive to the needs of tenant businesses

9/ Joint purchasing of business supplies and other business components, often including backwards and forwards production linkages among firms within the same incubator.

Intangible benefits accrue from

10/ The ability of business owners to act as a support system for each other, although that can also turn into tangible benefits in the form of contracting among incubator firms.

11/ Intangible benefits are most likely to accrue when incubators are designed to include relatively similar firms, in product, process, or service needs. For example, high technology business incubator entrepreneurs can share new developments in innovation, creating extended talent pools, and cross-fertilization of ideas.

12/ Entrepreneurs in incubators devoted to biotech enterprises can support each other in product development and commercialization of innovations. At the very least, even in incubators with mixed firms, new entrepreneurs can share experiences and ideas about marketing, accounting, new product development, hiring and so on.

13/ The ultimate goal of the business incubator is for new businesses to start in the incubator and then move out when they grow too large or are stable enough to operate without the special benefits provided by the incubator.

14/ This opens up space for new firms to begin in the incubator. Thus, firm graduation rates are a critical measure of incubator success and some time limit for tenants should be included in initial incubator agreements.

US Federal Funds pledged $250m a year to seed incubators in the US

2009-05-26T22:58:00.004+08:00

1/ President Obama has pledged $250 million a year in federal funds to seed a regional network of such organizations--an effort aimed at growing jobs and innovation. So people are talking about incubators again.

2/ There are 7,000 incubators and counting around the globe, and they create jobs,grow companies and help technology evolve.

3/ Classically, in a tough economy, if the unemployment rate rises, you will see more people turn to entrepreneurship.

4/ The goal is not only to create jobs, but also to establish regions as specialty centers. Silicon Valley is a classic example of an area that’s been boosted by incubators over the past 30 years. (San Jose, Calif., is arguably the most incubator-packed city in the nation.)

Fiscal stimulus by S'pore Govt effective for the economy in the longer term?

2009-05-26T22:41:00.003+08:00

The Role for Counter-Cyclical Fiscal Policy in Singapore by: Leif Lybecker Eskesen
January 2009

1/ Singapore’s policymakers have often relied on fiscal policy to counter the impact of adverse external shocks.

2/ Empirical results based on the study suggest that fiscal policy can indeed be used for demand management, although the impact may be somewhat short-lived.

3/ This may reflect a number of factors, including the absence of creditconstrained economic agents, a high propensity to save among households, the use of quasifiscal measures not captured in budgetary data, a monetary focus on price stability, and leakages due to the openness of the economy.

4/ Notwithstanding the relatively short-lived impact, fiscal policy should still play a key stabilizing role in the current downturn given the considerable downside risks to growth and vast fiscal space in Singapore.

5/ To be effective,fiscal stimulus should be timely, well-targeted, significant, and prolonged. Moreover, it will be important to signal willingness to do more if needed to help allay uncertainty and bolster the impact of the fiscal measures. A fiscal stimulus package could include both revenue and expenditure measures.

Lending Consideration #5 - Character

2009-01-24T23:54:00.001+08:00

1/ Character refers to the general impression you make on a prospective lender.

2/ If you have demonstrated some form of financial strength - funds or have equity in a property, have no credit defaults, little debt and a sound track record record with financial stability; you will be seen to be a less ‘risky’ borrower.

3/ Of course there is no guarantee that anyone will repay their loan, as per their contract, but assessing the character of a borrower from personal meetings or their preparedness to provided full and frank disclosures, often is a good indicator of future loan conduct.

4/ The five ‘C’s of Credit are issues that all lenders consider in one way or another. Some lenders will process loan applications on a ‘scoring’ basis with limited human interference in the crit approval / decision process.

5/ Lenders have developed robust statistical credit models that isolate poor credit risks based on historical data.

6/ Of course these models are not foolproof, so people still will review marginal cases.

7/ Thankfully, in the recent years, a number of specialist lenders have actually gone back to more ‘traditional’ methods of credit assessment by looking at every application in detail.

8/ These specialist lenders are endeavouring to identify reasons to actually approve a loan, when other lenders have scored the loan as ‘declined’.

9/ Lending today has become a vastly more complex industry however to secure the right finance, you really need to secure the right assistance.

Lending Consideration #4 - Conditions

2009-01-24T23:49:00.002+08:00

Generally, the ‘conditions’ issue is one that lenders regard when considering the economic circumstances of the overall national economy, the state and regional economies and also the industry type the applicant or security is involved in.

A SWOT analysis - as a guideline - is commonly adopted by lending institutions to have a quick check on your company during a loan evaluation process.

Strengths:
• What advantages does your company have?
• What do you do better than anyone else?
• What unique or lowest-cost resources do you have access to?
• What do people in your market see as your strengths?
• What factors mean that you "get the sale"?

Consider this from an internal perspective, and from the point of view of your customers and people in your market. Be realistic: It's far too easy to fall prey to "not invented here syndrome". (If you are having any difficulty with this, try writing down a list of your characteristics. Some of these will hopefully be strengths!)

In looking at your strengths, think about them in relation to your competitors - for example, if all your competitors provide high quality products, then a high quality production process is not a strength in the market, it is a necessity.

Weaknesses:
• What could you improve?
• What should you avoid?
• What are people in your market likely to see as weaknesses?
• What factors lose you sales?

Again, consider this from an internal and external basis: Do other people seem to perceive weaknesses that you do not see? Are your competitors doing any better than you? It is best to be realistic now, and face any unpleasant truths as soon as possible.

Opportunities:
• Where are the good opportunities facing you?
• What are the interesting trends you are aware of?

Useful opportunities can come from such things as:
• Changes in technology and markets on both a broad and narrow scale
• Changes in government policy related to your field
• Changes in social patterns, population profiles, lifestyle changes, etc.
• Local events

A useful approach for looking at opportunities is to look at your strengths and ask yourself whether these open up any opportunities.

Alternatively, look at your weaknesses and ask yourself whether you could create opportunities by eliminating them.

Threats:
• What obstacles do you face?
• What is your competition doing that you should be worried about?
• Are the required specifications for your job, products or services changing?
• Is changing technology threatening your position?
• Do you have bad debt or cash-flow problems?
• Could any of your weaknesses seriously threaten your business?

Carrying out this analysis will often be illuminating - both in terms of pointing out what needs to be done, and in putting problems into perspective.

Lending Consideration #3 - Collateral

2009-01-24T23:44:00.001+08:00

1/ Simply put, collateral refers to an asset or assets that a lender ‘secures’ by way of a mortgage to protect themselves in the event of borrower loan default.

2/ As far as any secured loan is concerned, collateral relates to real property security. This could mean Residential, Industrial, Commercial, Rural, Vacant land etc. Practically anything that has a Title Deed.

3/The collateral provided by a borrower provides a lender with the ‘security’ necessary to hedge against a borrower defaulting on a loan.

4/More often than not, a security is valued either by lenders staff or by licenced valuers who prepare written reposts outlining their ‘opinion’ of the properties

a/ Estimated market value
b/ Marketability of the property
c/ Size, type and use of the property
d/ Location
e/ Encumbrances
f/ Planning issues
g/ Geographic location
h/ Improvements
i/ Local economy impact
j/ Market volatility
k/ Comparable Sales evidence
l/ And more.

5/ The lender relies heavily on the ‘integrity’ of the valuation report, particularly when a borrower requires a high ‘loan to value’ ratio of borrowings.

6/ In essence, if a borrower only requires a loan representing only 20% of the value of a property (all other things being equal) the likelihood of a ‘bad debt’ loss for the lender is remote.

7/Of course, if a borrower requires 100% of the value of the property, then the credit risk with the proposed lender (and the mortgage insurer) will increase dramatically. Lenders will then offset this additional risk factor with a comprehensive valuation report, mortgage insurance & often an increased interest rate compared to standard home loan rates.

Lending consideration #2 - Credit

2009-01-24T23:32:00.008+08:00

1/ The second ‘C’ of credit analysis is all about your credit history.

2/ Consumer & small business credit history records in Singapore are still a very basic system of ‘event’ recording. At present, the leading bureau merely provides lists of ‘events’ There is no interpretation or assessment provided, simply a credit report that shows

a/ Consumer Credit enquires
b/ Credit defaults
c/ Legal Actions
d/ Directorships & Proprietorships
e/ Bankruptcies

3/ However, you will have a credit record that shows;
a/ No credit history (if you are a new arrival to Singapore or are borrowing for the first time)

b/ A credit history with no ‘adverse’ entries noted or
c/ A credit history with one or more adverse credit entries

4/ Now, the key issue for any borrower is to understand what lenders are looking for when they review your credit file. Having No credit history can be frustrating in some circumstances, but this problem generally impacts on borrowers intending to obtain ‘unsecured’ loans (personal loans, car loans etc).

5/For secured loans (like mortgages) having no credit history is of little relevance, unless it conflicts with other information that is available to a lender.

6/A credit history with no adverse entries allows the borrower a fairly free hand at the choice of lender and product available from the entire lending community.

7/Lenders call these applicants ‘clean’ and are the most desired borrower type. If a borrower has good income, significant assets, low debt levels and a ‘clean’ credit history, then this credit ‘profile’ is the most preferred borrower type and implies a low risk of any future default or loss for the lender. It doesn’t guarantee it, but it looks good.

8/ An ‘adverse’ credit history is an area which catches many borrowers out. If you have a ‘poor’ credit history, this could mean different things to different lenders.

9/ For some lenders, having a number of unpaid defaults, may not necessarily mean you cannot obtain a financing facility. It simply means that the number of lenders that will look at you application is reduced.

10/ Most lenders try to understand your application and the reasons for any credit default, but that does not mean that you are guaranteed to obtain a loan with any lender you choose.

Lending Consideration #1 - Capacity

2009-01-24T23:30:00.004+08:00

1/ The capacity to repay a loan is the most critical of the five credit factors.

2/ Any prospective lender will want to know exactly, how you intend to repay the loan and from what income source(s). If you are running an active business, it is a relatively simple task to identify how much you earn, irrespective as to whether you are profitable, loss making or simply breaking even.

3/ The lender merely has to confirm this information in your application, through the relevant credit bureau or via the registrar of companies.

4/ Simply speaking, different lenders have different policies as to what income they will accept, which is why there is a broad range of maximum loan sizes available from lenders to the same applicant.

5/ Historically, lenders required a self employed individual to provide ‘full financials’ with their application and for the business to have been operating for at least 2 years.

6/ This meant that for ‘self employed’ borrowers seeking mortgage finance, the task was extremely tough. Start up business’s often had to ‘tough it out’ with little capital, as they were often, ineligible to borrow.

7/More mature businesses also had to provide adequate financials to demonstrate the capacity for the applicant to ‘service’ (pay) the prospective debt.

8/In more recent times, more flexible ‘product development’ structures have allowed self employed borrowers to simply ‘declare’ their income or in some cases, to only acknowledge their capacity to service the debt.To the lay person, for lenders to adopt this approach seems simply foolhardy.

Lending Considerations by Banks - Introduction

2009-01-24T23:28:00.002+08:00

1/ The Five ‘C’s of Credit – What lenders look for in a mortgage application.

2/Regardless of where you seek funding - from a bank, a non bank lender, or any credit provider - the prospective lender will always review your creditworthiness prior to making a decision as to whether your loan application will be ‘approved’.

3/The "Five C's" of credit are the basic components of any credit analysis. The 5C’s described in subsequent sections are designed to give you an insight into what a lender is thinking and what the key issues that will be assessed.

Reflection on Budget 2009 and Preliminary Outlook for 2010/2011

2009-01-22T21:13:00.001+08:00

Overall view positive - The Budget is designed for the broad-based SME community to overcome working capital constraints – but a large number of micro/small enterprises and start-ups (below $1m turnover, that make up circa 80% of SME population) may need more specialised assistance, especially those with high growth potential.

Key comments

1/ The spillover benefits to SMEs/tenants emanating from the 40% property tax rebate for industrial and commercial properties for landlords is helpful – provided that
a/ landlords pass on the benefits to their SME tenants in the next 3 months, and
b/ landlords are be willing renegotiate the terms notwithstanding the terms that have been signed 12 months’ back when rental costs were much higher.

Rental costs typically constitute 20-25% of an SME’s operations on average and may free up working capital obligations significantly
SMEs across the board are delaying payments to landlords under existing arrangements and such measures may help to ease the burden on all parties

** We are seeing surges in rental costs and the momentum is likely to persist in 2011. Retailers particularly, will see a relocation and repositioning of their outlets to make way for more profitable ones. Most of them are facing declining margins despite increasing sales. Most of them are likely to survive but some of vertical integration and/or consolidation of their operations is likely to take place

2/ Micro-Small firms that sustain losses in the past 3 years of assessment can claim against those losses capped to S$200,000. This is particularly helpful for retail and traders that make up a large part of the micro small business community – which faced the brunt of cost surge in 2007/08 on the back of muted demand for their products and services. MMBs were saddled with high operating costs which are largely fixed in nature. When the demand for their products and services declined in the last 18-24 months, their margins similarly deteriorated, and consequently, sustained further losses as crisis sets in. The tax relief can help to a certain extent, mitigate these and allow time for these firms to be rehabilitated or restructured to recovery.

3/ VSAPAC welcomes the move by the Government to promote innovation through the setting up of the Core Innovation Fund. VSAPAC is committed to this cause, and have developed new measures and initiatives to promote more new businesses and aspiring entrepreneurs. Innovation is an important capital that needs to be honed by SMEs to remain competitive, scalable and investible. More importantly, VSAPAC can provide the relevant infrastructure and expertise for MMBs to develop new products, businesses and innovate processes via its helpdesk.

** more B2C businesses and to a lesser extent, high-tech industrial or biomedical projects are likely to be the hot picks in 2011.

4/ The New Bridging Loan and the Trade Financing Scheme programme caters mainly to mid-sized enterprises, and may be less relevant for the micro and small businesses that make up a large part of the micro business community.

** private financing by retail investors could prove to be a viable source. Efforts on microinvestments by our group have begun to yield good performance/returns.

5/ Although the risk sharing component for LEFS and Micro Loan Programme has been increased, the crux of the issue still needs to be adequately addressed. Micro and Small businesses need help to address their working capital gaps and business fundamentals before even applying for loans. Banks will not lend proactively unless these fundamentals have been adequately and clearly addressed. We believe that the credit crunch faced by financial institutions will result to them become more selective. Banks would not want their Tier 1 Capital Adequacy Ratio (CAR) to be affected despite the guarantee– less the bank regulator and their shareholders would raise concerns. Any write-offs in an SME lending portfolio, when summed as a whole, can be very significant to a bank’s capital adequacy ratio. The government seeks to mitigate the bank’s exposure by a) increasing their guarantee b) making tax deduction on loan loss provisions for banks. Putting all these into perspective, the focus for banks will not just be on earnings per se but more of capital preservation and quality amid more write-offs and provisions.

** Banks need to invest a lot more on training and understanding the pschye and business positioning of SMEs beyond their financial statements. They have to be more customer-centric in terms of understanding their business model, income streams, business structure, core competencies and value chain. They have to act as financiers but think as investors or business advisors - this requires a total mindset change. One of the global foreign bank has already begun this process with VSAPAC's assistance, and implementation across the group is taking place in 2011.

6/ Over the medium to long-term, we would like to see the formation of an SME development bank that is primarily focused on extending specialised assistance to Micro and Small Enterprises with good potential to grow. The equivalent amount of fiscal stimulus or guarantee exposure could be channeled towards formation of such a specialised bank, as seen in Thailand, Malaysia, Sri Lanka, Bangladesh, Vietnam and other parts of Asia. Such specialised bank would go a long way to help identify, select, fund and groom promising micro and small businesses to be sustainable, scalable and profitable enterprises.

VSAPAC with its robust infrastructure, systems, expertise and experience, can play a strong conduit to help such institution nurture micro and small businesses through helping them manage their working capital needs and requirements.

Outlook - Asian + GCC economies for 2009

2009-01-03T22:46:00.002+08:00

1/ Morgan Stanley says in its report that China’s economic outlook for this year is best characterised as “getting worse before getting better.” It expects China’s economy to experience further deceleration in the first half of this year, before regaining momentum in the second half.

2/ The massive policy stimulus implemented since last October, including progressive interest rates cuts and the four trillion yuan package, are expected to help sustain the dragon economy’s growth, albeit at a slower rate. Morgan Stanley forecasts China’s GDP this year to grow 7.5%, compared with 9.4% last year.

3/ India, as the new tiger economy of Asia, is also expected to experience growth this year, sustained by improving domestic demand, and assuming its tension with Pakistan will be defused.

4/ Morgan Stanley’s bear-case scenario pegs India’s GDP growth at 4.3% and bull-case scenario at 6.3%. The Indian government’s economic stimulus packages have thus far laid more emphasis on monetary than fiscal measures because of the country’s huge deficit. Hence, the government is expected to announce further cuts in key interest rates throughout this year.

5/ Meanwhile, the outlook for the original four tiger economies of Asia remains bleak even with the various monetary and fiscal stimulus plans announced by their respective governments. Singapore and Hong Kong are expected to remain in a recession this year before recovering in 2010, while South Korea and Taiwan may manage minimal growth for the whole of this year despite a challenging first half.

6/ On the other hand, Malaysia, Indonesia and Thailand are expected to grow slower than anticipated (not exceeding 2.5% on the average). Thailand is plagued by domestic political unrest that affects its core industry - tourism, while Malaysia and Indonesia’s trade continues to decelerate. Declining commodity prices are also affecting the income of these economies.

7/ Blessed with huge oil reserves, the Gulf Cooperation Council (GCC), which comprises Saudi Arabia, Kuwait, Qatar, Bahrain, Oman and the United Arab Emirates, is expected to show some resilience in the midst of the global financial turmoil. This is mainly attributable to the surpluses from oil revenues when oil prices reached their peak in the middle of last year.

8/ In addition, the GCC governments have been proactive in implementing fiscal and monetary policies to boost their economies.Nevertheless, economic growth in the GCC region this year is expected to be slower than previous years.

9/ The World Bank estimates the GCC economy would grow around 4% this year, compared with around 7% last year or more than 5% in the past few years.

10/ Meanwhile, the GCC is moving towards a broader economic unity and a common currency scheduled to be launched next year. The convergence is expected to further strengthen their position in a globalised economy.

Global growth likely to stay muted in 2009

2009-01-03T22:39:00.007+08:00

1/ We have just crossed 2008, the year that marked the escalation of the global financial crisis which wreaked havoc on economies worldwide and caused several industrialised countries to slide into recession.

2/ I believe that 2009 holds even greater challenges as the world lives through the effects of the financial crisis.

3/ The World Bank has already pegged its growth forecast for the global economy at 0.9% for this year. The weakest outlook will be for the high-income countries, such as the United States, Japan and the European Union (EU), whose overall economy is expected to contract 0.1%, while developing economies as a whole are expected to register growth of about 4.5%.

4/ Faced with an increasingly gloomy outlook, unemployment in the United States is expected to hit 8% to 10% this year, compared with 6.7% as of November last year. The world’s biggest economy is also expected to contract further this year, with the Organisation for Economic Cooperation and Development forecasting a decline of 0.9% and Morgan Stanley Research, a 1.9% drop, for 2009.

5/ But with US President-elect Barack Obama taking office on Jan 20, hopes for a shorter period of a languishing economy are arising. The new administration is expected to unleash a new massive fiscal plan, focusing on long-term infrastructure and job creation projects, next month to revive the country’s slumping economy.

6/ According to Obama’s top advisers, David Axelrod and Lawrence Summers, the new economic stimulus package, spread over two years, could exceed US$775bil in value. The main goal of the package is to create or save three million jobs. In addition, Obama is expected to introduce tax policies that will favour the middle class to boost private consumption.

7/ To date, the outgoing Bush administration has pumped in about US$1.3 trillion, including the US$700bil rescue package announced last October to bail out financial institutions that have failed due to their own reckless risk-taking activities, namely the subprime mortgage and its related businesses.

8/ Furthermore, the US government had extended a US$17.4bil package to rescue its ailing motor industry at the end of last year, while the country’s benchmark interest rates have been slashed to the current levels of zero to 0.25% to boost its economy.

Singapore economy to face the most severe recession in history

2009-01-03T22:27:00.005+08:00

1/ I believe that 2009 will mark the most severe recession in Singapore's history, surpassing the Asian Financial Crisis (when GDP contracted 1.4pc) and the 2001 tech recession.

2/ Underpinning this view are the observations that China, Russia, India and Brazil, with their vast markets and rising wealth, could provide little support as the engines of growth that could save the world from recession. Those hopes are fading fast and forecasts are getting gloomier.

3/ Factories in China, India and Russia slashed output and jobs at a record pace in December08 in another sign the world’s largest emerging markets were wilting under the recession that has gripped most industrialised nations.

4/ Factory activity surveys in the United States and Europe showed steeper contractions in December08, as demand collapses at home and crushes growth in many of the developing nations that rely on Western consumption.

5/ Singapore's recession deepened in the fourth quarter as the global financial crisis took its toll on manufacturers and the services sector.The government has warned the economy may shrink by as much as two per cent this year.

6/ It was the third consecutive quarter of decline in gross domestic product and was worse than the most pessimistic forecast of nine economists polled by Reuters which was for a decline of 8.6pc.

7/ The government now expects Singapore's GDP to come in between a decline of 2pc and growth of 1pc this year, lower than the previous forecast of -1pc to +2pc made in November.

8/I would expect for more aggressive fiscal stimulus on the Jan 22 budget, and further monetary easing by MAS (the Monetary Authority of Singapore) in April, or even before.

Embracing smart technology critical for SMEs

2009-01-02T00:49:00.003+08:00

1/ Asian SMEs need to create a new generation of technology to raise the level of competitiveness in the ICT world.

2/ To achieve this, SMEs, especially Singapore firms, need to be more innovative and emulate the successes of established firms or Fortune 500 companies to have a strong business and revenue model focus, and have a thorough understanding of what drives market needs.

3/ Singapore notably has been behind the curve in the last IT wave and needs to do some catch up in niche technology in areas like finance, bio-med, tourism, transportation and logistics, retail and services and education.

4/ We need to be fast-tracked on the learning curve - via a hands-on approach rather than a workshop-based approach - through internships, partnering, mentorships with experienced CEOs who embrace innovative technology, even in brick-and-mortar settings.

Should SMEs change the way they do business today?

2009-01-02T00:40:00.004+08:00

1/ The economic structure of most Asian economies have fundamentally changed with reforms and recovery plans to deal with crisis underway, especially for Singapore.

2/ Being export-dependent, we are largely vulnerable to dynamics in the region. Large corporations, financial institutions and now SMEs, are feeling the brunt of the crisis.

3/ Topline pressures due to muted demand and/or limited financing support despite longstanding relationship with banks have caused serious liquidity crunch, and this trend is likely to persist by 1H2009.

4/ Should SMEs revisit the way they do business? Should they be finetuning their business models, in terms of who they sell their products/services to, the types of products and services that have been traditionally in their sales portfolio, the types of income streams that come into their operations?

5/ I would say a big YES - because yesterday's business model is unlikely to work effectively today because the economic fundamentals have largely changed. The rules of the game have been altered due to external forces, and SMEs have to proactively manage these lest 'the more they sell, the more erosion they are likely to experience in their margins.

Financial healthcheck amidst the current crisis

2009-01-01T17:08:00.007+08:00

1/ Implication of financial crisis to stakeholders - stakeholders are getting more selective and place more scutiny in terms of how they deal with your firm.

2/ As crisis deepens, stakeholders like financial institutions, trade creditors and investors know that your balance sheet will experience significant pressure. To protect their interests, they will want to place more controls or restrictions in terms of their dollar exposure to your firm. More importantly, they would like to know what measures you are taking (other than delaying payments or asking for more money), to proactively deal with the protracted effects of the crisis.

3/ Financial healthcheck helps to identify and address existing gaps. It becomes necessary for firms to take proactive measures to deal with these gaps over a pre-defined, systematic roadmap under the guidance of experts or professional advisors.

4/ How can financial diagnosis help us to improve your business? Be it inventory write-downs, credit repair, fund raising, margin enhancement or re-designing your business model, financial healthcheck is a starting point to chart your course towards building and managing a better business.

5/ How do we go about to know the health of our business? You may contact the Centre of Excellence of Financial Management, 9 Shenton Way, #03-09/10, Union House, Singapore 068813 or visit www.vsapac.com and look out for Vector Scorecard module. You may also arrange for a 1 hour free consultation with our Enterprise Development Centre partners or directly with us to do this exercise.,

6/ What do you need to prepare before getting your financial healthcheck for your business? You may bring your 2-year financial accounts (either audited or mgt accounts) and/or answer a brief questionannaire. You may also bring your business plan, if available for us to understand your business better.

What does financial healthcheck for a business entail?

2009-01-01T16:45:00.016+08:00

1/ Financial healthcheck entails the analysis, diagnosis and review of a firm's conditions using qualitative and quantitative analysis based on a financial or credit standard / benchmark from a given industry or sector.

2/ Financial healthcheck needs to be done on a relative as well as an on an absolute basis.

3/ One needs to have the right expertise and experience, with the right infrastructure and systems plus benchmarking standards to undertake this exercise.

4/ Earnings generation ability - firstly, the firm needs to be assessed in terms of its ability to generate income streams that are sustainable, recurring and adequate relative to its internal needs, competitors and underlying competencies. This is to be made reference to its gross, operating and net profit margins vis-a-vis its operating expenses, capital expenditure requirements, current liabilities and cashflows.

5/ The position of a firms's risk levels - this refers to its level of debts (short-term and long-term) incurred at the absolute and relative basis. We need to look into a firm's debt position relative to its shareholder funds or capital, as well as its level of returns that are being generated. We need to evaluate how much debt does a firm incur in relation to how much equity it has, and how much returns are being generated using the debts?

6/ We also need to evaluate the firm's cashflows and its adequacy, and understand the sources/availability ie. from financing, operating or investment activities. From here, we have to identify the extent of the funding gaps and working capital requirements in order to generate more business, or would the available cash be used to pay off debts, or both?

7/ The efficiency of a firm is also important to assess. We need to know how much capacity does the firm currently have - or resources - before it undertakes new business activities or strategies.

8/ As part of the financial healthcheck, qualitative considerations also have to be undertaken: the clarity of the firm's strategic posture, the robustness of its business model, the business priorities mapped by the business owners and the business structure. These factors have an immediate and future impact on the financial profile of a business.

9/ Integrating both qualitative and quantitative aspects of a financial healthcheck thus becomes a holistic process - you will get to know the drivers that cause your firm to be strong or weak in certain areas in a systematic way, and not just purely on instincts.

10/ An important thing to remember is that financial healthcheck is not just a diagnostic exercise to know whether your firm is doing well or not. It is about identifying in specific terms, what are the areas that need to improve, what causes these at the root level, how to address these whilst taking into considerations strategic and financial aspects of your business, and what are the specific action steps to take to manage these.

Now, it's the "S" Word: Preparing to Sell Your Business with 8 Key Considerations

2008-12-21T17:07:00.005+08:00

1/ Get a business valuation done by a professional firm. One of the first things you should do is obtain a realistic idea of what your business is worth from an objective, outside source. A professional valuation will give you a basis for gauging buyer offers and will give you an idea of what you can expect to net from the sale. It will also tell you your business's market position, financial situation, strengths and weaknesses.

2/ Have your books prepared properly with actual and forecasts reasonably and accurately depicted. Buyers evaluating your business generally require at least three years' worth of financial information. The more formal your statements (accountant-reviewed or -prepared vs. internally generated statements), the better the impression you'll make-and the easier the due diligence for a buyer. Tax returns may suffice.

3/ Understand the true profitability of your business. Most privately held businesses claim a variety of nonoperational expenses. Make sure you have supporting documentation for these expenses. In addition, there may be infrequent expenses you have incurred during the past three years that should be excluded in a buyer's analysis of recurring cash flow. There may be moving expenses if you've moved to a larger facility or unusual legal expenses.

4/ Make a good first impression. Will a buyer visiting your shop for the first time see order or chaos? Buyers look for companies that show well, as an orderly shop is often indicative of an orderly management team and back-room operations.

5/ Consider management succession. If you're absolutely vital to your business, who will a buyer be able to turn to for help running the business after you leave? You should have a succession plan in place before going to market.

6/ Know your reason for selling. Buyers are always curious as to why a seller wants to exit a business. (If it's so great, why are you leaving?) Be prepared to articulate your reasons.

7/ Get your advisory team in place. Start interviewing attorneys and accountants who are proficient in mergers and acquisitions. Strongly consider hiring an intermediary, either a business broker or an investment banker, to represent you and help you through the selling process.

8/ Keep your eye on the ball. Don't let your business performance decline because you're too focused on the sale of your business. This will only give buyers additional negotiating power to lower their offers.

Managing Finances - 5 Golden Rules

2008-12-21T17:00:00.002+08:00

1/ List all pipelines across key stages of the sales cycle

2/ Do 16-week cash projection and identify funding gaps

3/ Establish active and standby financing lines from diversified sources for short/long-term needs

4/ Prepare project funding termsheet, complete with details on Return on Investment (ROI) and Profit Sharing Schemes

5/ Develop financial targets in line with priorities of the business and its strategic direction

The "F" Word - Finance!

2008-12-21T16:52:00.004+08:00

1/ SME business owners and managers have to develop at least basic skills in financial management. Expecting others in the organization to manage finances is clearly asking for trouble.

2/Basic skills in financial management start in the critical areas of cash management and bookkeeping, which should be done according to certain financial controls to ensure integrity in the bookkeeping process.

3/New leaders and managers should soon go on to learn how to generate financial statements (from bookkeeping journals) and analyze those statements to really understand the financial condition of the business. Financial analysis shows the "reality" of the situation of a business -- seen as such, financial management is one of the most important practices in management.

4/ Financial analysis can tell you a lot about how your business is doing. Without this analysis, you may end up staring at a bunch of numbers on budgets, cash flow projections and profit and loss statements.

5/You should set aside at least a few hours every month to do financial analysis. Analysis includes cash flow analysis and budget deviation analysis mentioned above. Analysis also includes balance sheet analysis and income statement analysis.

6/There are some techniques and tools to help in financial analysis, for example, profit analysis, break-even analysis and ratios analysis that can substantially help to simplify and streamline financial analysis.

7/How you carry out the analysis depends on the nature and needs of you and your business.

8/ Types of financial management functions that need to be carried out by any SME:

budget management
cashflow management
financial reporting
financial analysis
forecasting and scenario planning
credit collections and control
budget deviation analysis
bank management

Managing Operations Smartly - 5 Golden Rules

2008-12-21T16:42:00.003+08:00

1/ Identify value chain components that are pertinent to your firm

2/ List down targets or key performance indicators (KPIs) for each component

3/ Determine time required to achieve the targets

4/ Establish basic reporting guidelines

5/ Ascertain roles and resources

Managing Operations Smartly

2008-12-21T16:07:00.006+08:00

1/ Operations management focuses on carefully managing the processes to produce and distribute products and services.

2/ Usually, small businesses don't talk about "operations management", but they do (and have to) carry out the activities albeit in an adhoc, unstructured manner compared to their larger counterparts.

3/Overall activities typically conducted by SMEs in such a manner often include product creation, development, production and distribution.

4/ A major part of operations management for SMEs is control. Regardless of the negative connotation of the word "control", it must exist or there is no organization at all.

5/In its most basic form, an organization is two or more people working together to reach a goal. Whether an organization is highly bureaucratic or changing and self-organizing, the organization must exist for some reason, some purpose, some mission (implicit or explicit) -- or it isn't an organization at all.

6/The organization must have some goal. Identifying this goal requires some form of planning, informal or formal. Reaching the goal means identifying some strategies, formal or informal.

7/These strategies are agreed upon by members of the organization through some form of communication, formal or informal. Then members set about to act in accordance with what they agreed to do. They may change their minds, fine. But they need to recognize and acknowledge that they're changing their minds.

8/ Key areas of operational importance include:

Administrative controls: Computers have revolutionized administrative controls through use of integrated management information systems, project management software, human resource information systems, office automation software, etc. Organizations typically require a wide range of reports, e.g., financial reports, status reports, project reports, etc. to monitor what's being done, by when and how.
Evaluation sessions: entails carefully collecting and analyzing information in order to make decisions. There are many types of evaluations in organizations, for example, evaluation of marketing efforts, evaluation of employee performance, program evaluations, etc. Evaluations can focus on many aspects of an organization and its processes, for example, its goals, processes, outcomes, etc.
Financial Monitoring (particularly budget management): Once the SME has establish goals and associated strategies (or ways to reach the goals), funds are set aside for the resources and labor to the accomplish goals and tasks. As the money is spent, statements are changed to reflect what was spent, how it was spent and what it obtained. Review of financial statements is one of the more common methods to monitor the progress of programs and plans. The most common financial statements include the balance sheet, income statement and cash flow statement.
Policies and Procedures (to guide behaviors in the workplace): Policies help ensure that behaviors in the workplace conform to local laws, and also to expectations of the organization. Often, policies are applied to specified situations in the form of procedures. Personnel policies and procedures help ensure that employee (or tax) laws are followed and minimize the likelihood of costly litigation. A procedure is a step-by-step list of activities required to conduct a certain task. Procedures ensure that routine tasks are carried out in an effective and efficient fashion.
Quality Control and Operations Management: The concept of quality control has received a great deal of attention over the past twenty years. Very broadly, quality includes specifying a performance standard (often by benchmarking, or comparing to a well-accepted standard), monitoring and measuring results, comparing the results to the standard and then making adjusts as necessary. Recently, the concept of quality management has expanded to include organization-wide programs, such as Total Quality Management, ISO9000, Balanced Scorecard, etc. Operations management includes the overall activities involved in developing, producing and distributing products and services

Business Priorities - 5 Golden Rules

2008-12-21T12:26:00.007+08:00

1/ Finance: Undertake an exercise to estimate the financial impact of each major business strategy that you choose, to a) profits, b) cash c) gearing/risks d) efficiency measures (financial). Need to know for every unit of resources that you put into the firm, how much returns, risks and liquidity that you get back after a certain time. It sounds easy - but need to accurately and reasonably measure if not wrong focus will be attended to!

2/ Marketing and sales: Need to look at 3 areas pertaining to your a) clientele base b) distribution network c) marketing mix. Key questions to ask:

Are you launching a marketing campaign to existing or new clients and channels?
Are you prepared (and how) to increase usage and volume of purchases at a discount?
What margins are you prepared to offer to your agents, distributors or resellers (existing and new)?
Are you willling to relook into the offer given to them?
What is the sales cycle vs the margins/volume targeted for each product campaign?

3/ Resources and Operations: ensure that you have enough workforce at the core and non-core functions of your business in a given month. For an SME, important to plan on a quarterly basis (of course, yearly would be good, but due to dynamic nature of an SME setting, a shorter timeframe for monitoring resources is highly recommended!). Priorities need to be set for the value chain at each stage of the process, summarised as follows:

acquiring the raw materials or labour
packaging and processing the products or services
delivering the above to the end-users
post-sales and support to the end-users

4/ Product management - this relates to how well you manage your product mix with the primary objective of selling fast-moving inventories/services or shortening the sales cycle of slow-moving, high margin products/services. You need to make sure that the suite of products do not suffer from

obsolescence
mispricing
overstocking (with little commercial rationale)
over-concentration on certain types of goods and services, among others

5/ Business infrastructure and systems - there should be adequate tools in the form of spreadsheet models and simple databases to track the following for most businesses:

How much profits and sales are being generated?
How much cash is available in the next 16 weeks?
Who are our customers, and what are they purchasing from you?
What is their profile and do you have a good system of managing contact details of key personnel from the firm?
Where is your marketing kit and sales documentation stored?
Do you have a sound backup of your files?
What is the financial and business health of your firm at a given point in time?

Business strategies today

2008-12-21T12:03:00.008+08:00

1/ Successful SMEs are those that focus their efforts strategically. Strategy should be a stretch exercise, not a fit exercise.

2/ To meet and exceed customer satisfaction, the business team needs to follow an overall organizational strategy.

3/A successful strategy adds value for the targeted customers over the long run by consistently meeting their needs better than the competition does.

4/ Strategy is the way in which the SME orients itself towards the market in which it operates and towards other players in the marketplace against which it competes.

5/It is a plan an SME formulates to gain a sustainable advantage over the competition. The central strategic issue: why different firms, facing the same environment, perform differently.

6/ Strategy answers the following questions:

what are the sources of the company's sustainable competitive advantage?
how will a company position itself against competition in the market over the long run to secure a sustainable competitive advantage?
what are the key strategic priorities?

7/Strategy is an agreed-on guide to action that should lead business to success in the marketplace by satisfying customer needs better than the competition does.

8/Strategy formulation is the major task for the entrepreneur and CEO, but it is the task of middle managers and project managers to carry this strategy out and turn it into results

9/ It is therefore very important to prioritise the key areas for execution because for an SME, resources are highly limited and spread everything thinly means that your focus will not be strong.

Business Model - 5 Golden Rules

2008-12-21T11:44:00.006+08:00

1/ Must have the right profitability mix of margin and turn-and-earn elements

2/ Ensure that your income streams from your business model contain elements of recurrence and sustainability.

3/ The components of your business model have a strong inclination towards scalability and portability.

4/ Able to value add to existing customers and acquire new ones from other players

5/ Must be coherent and consistent to the vision and mission of firm - as well as compatible to the core competencies of the firm and its team members.

Watch Ultimate Business Model For Your Success in How to Videos | View More Free Videos Online at Veoh.com

http://www.makebigmoney.com This video compares the network marketing business model with the traditional business model of corporate America.

Watch Hipcricket in Game Videos | View More Free Videos Online at Veoh.com

Jeff Hasen gives us some insight on their business model and expansion into the hispanic markets

Considerations for a good business model

2008-12-21T11:34:00.010+08:00

1/ In the most basic sense, a business model is the method of doing business by which a company can sustain itself -- that is, generate revenue. The business model spells-out how a company makes money by specifying where it is positioned in the value chain.

2/ The business model topic is very popular among business people today because in various industries we can see a proliferation of new and innovative business models (i.e. new ways of making money). In several industries new business models are threatening or even replacing established companies and conventional ways of doing business. Just have a look at the music or airline industry.

3/ Hence, the interest in business models comes from two opposing sides: firstly, established companies have to find new and innovative business models to compete against growing competition and to fend off insurgents and secondly, entrepreneurs want to find new and innovative business models to carve out their space in the marketplace.

4/ Key considerations

The value proposition of what is offered to the market;
The segment(s) of clients that are addressed by the value proposition;
The communication and distribution channels to reach clients and offer them the value proposition;
The relationships established with clients;
The key resources needed to make the business model possible;
The key activities necessary to implement the business model;
The key partners and their motivations to participate in the business model;
The revenue streams generated by the business model (constituting the revenue model);
The cost structure resulting from the business model.

5/ Within this context the business model concept is a particularly helpful unit of strategic analysis tailored to today's competitive business environment. It helps executives as well as entrepreneurs increase their capacity to manage continuous change and constantly adapt to rapidly changing business.

E.g. Charles & Keith has a traditional business model of trading - selling ladies' footwear in shopping outlets. Their value proposition is in offering a fashionable and affordable range of ladies' footwear targeted at low to middle income customers, modeling their products after the current fashion trends. Recently, by remodeling the concept and appearance of their outlets, they have managed to project an image of elegance and style whilst maintaining affordability and cost competitiveness. In order to adapt to changing business climates, they have gone online (first ladies footwear retailer to launch online store in Singapore in 2004) as well as diversified into other products like bags, belts and sunglasses.

Core Competencies - 5 Golden Rules

2008-12-21T11:29:00.011+08:00

1/ determine the competency dimensions (pdt innovation, service, customer quality, process mgt, brand reputation, image etc) and gauge where your strength lies compared to your rivals.

2/ expand your competencies (existing and new) into potential business opportunities and ideas.

3/ map priorities to commercialise selected ideas or refine existing business model based on identified competencies.

4/ develop action plans based on the points highlighted above.

5/ estimate and gauge resources required to develop and maintain the core competencies that your firm has.

Nokia's Future Product Innovation - Morph is a concept demonstrating some of the possibilities nanotechnologies might enable in future communication devices. Morph can sense its environment, is energy harvesting and self cleaning .

Morph is a flexible two-piece device that can adapt its shape to different use modes. Nanotechnology enables to have adaptive materials yet rigid forms on demand.

It is also featured in the MoMA online exhibition "Design and the Elastic Mind".

It has been a collaboration project of Nokia Research Center and Cambridge Nanoscience Center.

ACGME Core Competencies: A Training Tool for Faculty and Residents points out opportunities and tools for competency documentation and assessment through case-based scenarios involving residents and faculty.

Why managing core competencies is highly critical

2008-12-21T10:38:00.007+08:00

1/ Core competencies are the most important, value-creating skills within an SME’s business.

2/ These provide the key areas of expertise which are distinctive to your company and critical to its long term growth.

3/ Your company's core competencies are the things that you can do better than your competitors in the critical, central areas of your company where the most value is added to your products. These areas of expertise may be in any area from product development to employee dedication.

4/A competence which is central to your business's operations but which is not exceptional in some way should not be considered as a core competence, as it will not generate a differentiated advantage over rival businesses.

5/It follows from the concept of Core Competencies that resources that are standardized or easily available will not enable a business to achieve a competitive advantage over rivals.

e.g. Dell's core competency lies in its concept of full customization from the comforts of home, whereby customers are able to piece together their own desired and personalized computer at a more competitive price, as Dell does not have any "Bricks and Mortar" outlet. However, Dell is constantly coming up with more competitive advantages. Currently, taken from Dell's website, they are poising themselves for the future by "fight(ing) IT complexity and is responding by building services that will allow customers to spend more time on innovation and growing their businesses and less time on managing their IT infrastructures."

Mission and Vision - 5 Golden Rules

2008-12-21T10:27:00.006+08:00

5 GOLDEN RULES OF SETTING YOUR MISSION AND VISION

1/ be specific, focused and coherent. Don't generalise too much or simply describe what you want to achieve; rather articulate the business that you want to be in, what the ultimate destination will be, and how you intend to distinctly compete with other market players.

2/ identify where are the opportunities you want to be in, and the position within the value chain of your business. It helps to have a clear idea to stakeholders the unique position that you are in, and how you intend to compete in the marketplace.

3/ ascertain who are your target markets in dimensions such as market, product usage, demographics, etc.

4/ ensure compatibility with your underlying core competencies ie. executable. There is little point in putting up a mission/vision statement with the above components, but these are remotely associated with your capabilities and competencies. This then becomes a motherhood statement without the capacity to deliver.

5/ evaluate and articulate the impact to your stakeholders. It is also important to ensure that whatever you set out need to be compatible to your objectives, aims and goals of your stakeholders- who can be your shareholders, employees, lenders, etc. Basically, people need to have an added comfort that they are dealing with you as a business with integrity and good values.

Watch EVO Mission 1 in Faith Videos | View More Free Videos Online at Veoh.com
EVO's mission is to help you make greener choices everyday. Millions of small purchasing decisions add up to a major impact on the health of our families and our planet. Discover forward thinking businesses making innovative products. Find out how evo.com can help you save money by being green: consumer less and consume wisely.

Introduction

2008-12-11T22:22:00.029+08:00

1/ The series of postings found in this Blog is to address some of the issues affecting SMEs today. What are the key challenges affecting businesses today? Who are affected? How can you take advantage of opportunities that are being 'concealed' in the market place? Who's moving and shaking the industry right now? What are the strategies that businesses adopt to survive? Basically, this blog is about sharing bread-and-butter issues affecting businesses.

2/ I'd like also to extract key lesson points that are relevant and practical for the business community in Asia. In essence, this blog is about equipping oneself with the survival kit to deal with the various challenges affecting businesses today.

3/ SME development at the policy and ground level is something I'm deeply passionate about. Since the time that I was exposed to entrepreneurship at the age of 18, I never turned back.

4/ Entrepreneurship is in my blood. To commercialise 'something' out of the generation of many ideas, and make at least one of them work. Mistakes and hiccups experienced along the way, one has to have the tenacity, focus and discipline to make any venture successful.

5/ That said, this Blog is specially designed in such a way that business owners, budding entrepreneurs, corporate professionals and policy makers are able to better understand the issues, dynamics, risks and opportunities inherent in the SME ecosystem.

6/ I must stress that this Blog is not meant to be exhaustive and encyclopaedia of business strategies and knowledge - it is never intended this way. The aim is to put across key points, that are relevant and pertinent to SMEs and their stakeholders at a given point in time - raise questions, and get engaged in dialogues.

7/ So this is it, folks! Give it time, this blog will have more 'meat' in months to come. Put on your selt belt and join me for a ride in the world of entrepreneurship!

- Nazri