Starting a business: Setting goals to keep company on track

With a new understanding of where value is created in the business, Nectarmin has set five goals for the next six months:

INCREASE SALES

Nectarmin needs to focus on winning new customers and selling more to its current customers. It will do this in three ways:

Product development
Expand the product range to give existing retail customers the opportunity to purchase more.

It is considering developing products with ingredients that will be more beneficial and appealing to older customers.

It has also had some feedback suggesting smaller tablets would be desirable, so it may produce a mini-tablet version too. These new products might also attract new specialist aged-care providers to purchase the products.

Marketing
To date, Nectarmin's marketing has involved a lot of time calling on its potential customers and promoting the product.

With a little more cash now available, it is probably time to implement a more comprehensive marketing strategy.

The aim is to target new customers with high potential across a much wider geographic area than it has reached so far. Again, it needs to consider use of intermediary marketing and distribution channels to give it more coverage in a reduced timeframe.

Then, of course, we need to start thinking about exporting to Australia. This market would certainly be too big for Nectarmin to rely on the marketing approach it took in New Zealand.

Its Deloitte business advisers have provided contacts across the Tasman to talk to about doing business there.

Customer management
Nectarmin needs to improve its knowledge of its existing customers and tailor customer management initiatives to suit. It must analyse the levels of customer satisfaction and perhaps consider rationalising its customer base, as it seems to be spending more time dealing with customers who spend least.

This is not logical given the owner has limited time. It would be better spending time with its best customers

INCREASE PRICES

Strengthening pricing could have a positive impact on Nectarmin's results, so long as volumes can be sustained at the higher prices. Deloitte proposes two initiatives to help:

Demand management
Nectarmin has an opportunity, by extending its product range, to increase demand and if it can differentiate its products from rivals it may be able to sell at a higher price.

Price optimisation
As Nectarmin's brand becomes more familiar and is recognised as a quality product, there is an opportunity to position it at the top end of the market and earn a premium.

DECREASE EXPENSES

There is little opportunity to reduce expenses, due to the company's growth. However, Nectarmin does need to manage its cost increases to ensure it is getting improvements with the scalability of the business.

Customer service and fulfilment costs
As growth continues, Nectarmin needs to establish appropriate customer service and structures for receiving and delivering orders.

It is considering the frequency of customers, visits, getting minimum order quantities and introducing small order delivery charges. It may even consider outsourcing the whole distribution process.

Internal services
There is an opportunity to put out to tender several internal services which, as the company grows, are contributing to expenditure creep. Top of the list is developing an interactive website that can take and record orders and it needs to consider the cost of telecommunications spend.

Perhaps an alternative provider would be cheaper.

It also needs to renegotiate its supply contracts for, as the business grows, it expects an effective reduction in the costs of its suppliers. Because Nectarmin can offer them greater certainty over volumes and timing of orders, it expects it should be able to negotiate reduced costs of supply.

Minimise tax
Nectarmin wants to be sure it is complying with all its tax obligations so as to avoid any nasty surprises, penalties and interest charges from the Inland Revenue Department.

Deloitte is going to carry out a review of its tax compliance to ensure it avoids any unnecessary costs and also to ensure it is making the best use of all available tax concessions.

It will also need advice on Australian tax as it moves towards doing business there.

RETURN ON ASSETS

Nectarmin needs to keep a close eye on the levels of inventory and receivables. Both of these represent cash tied up in the business and, in the case of receivables, cash it could better utilise to further grow the business.

Better controls over inventory management will ensure as often as possible inventory is forwarded directly from its manufacturers to the customers. Improvements to credit control will help avoid selling to customers who are slow payers or, worse still, who may never pay.

SKILLS

A big lesson Nectarmin has learned in its first year of business is to seek help from people in the know. But to keep growing it needs access to core skills, in-house and externally.

Strengthen management
Nectarmin can upskill its existing skills by reading and attending courses and can hire in or outsource the skills it lacks as required.

Sometimes the acquisition of skills might involve bringing in new shareholders with those skills.

"It may seem hard to let go of some aspects of your business but, if you lack the skills to continually improve the business performance, you are putting the end goal at risk. It is better to own 50 per cent of a real success than 100 per cent of a failure," says Deloitte Growth Solutions partner Greg Anderson.

Business planning and performance management
Nectarmin has come to appreciate the benefit of having regular planning and performance meetings with Deloitte.

That keeps it focused on doing the things it planned and doing them thoroughly.

* If you would like more information on any of the issues covered in these articles or would like to discuss your business with a GrowthPlus adviser email greganderson@deloitte.co.nz.

* More information on these Growth Challenges can be found on the Deloitte website or www.growth-insights. comwebsite or www.growth-insights. com