Introduction ~ The Business Diagnostic

“This won’t hurt a bit!”

A Business Diagnostic (BD) is a snapshot or reconstruction of the business as it stands now and over time (last 5 years and up to ten years historical data to be reviewed if necessary) – the good, bad and the ugly!

This will deal with:

  1. What the business is, how it generates revenues and profile revenue flows, who is in the business, what they do and where the business (and the people in it) is going
  2. Review business MIS to ensure timely and efficient management and processing of creditors/debtors and cashflows – revise and update as required
  3. Understanding of the cost of doing business, fixed and variable and the impacts on those costs now and over time, what can be done to alter and reduce theses costs where possible
  4. Understanding of current and required debt and nature of debt and associated costs (interest rates, establishment and ongoing costs)
  5. Development of cash flow projections with accompanying underlying projections to allow business owners to better understand where they are going and what it all may look like over the short/medium/long term as well as identify and potential additional borrowing needs
  6. Develop relevant and appropriate benchmarks to allow the business owners to determine minimum healthy business performance indicators (such as profit per animal or item sold, profit per acre/hectare/perM2 of business space/COGS/GP and so on
  7. Managing and communicating arrears
  8. Work with business owners and Accountants to understand tax position of the business (accumulated losses, retained earnings, profits, losses, deductions, offsets) and where appropriate assist in the development or refinement of a proactive tax strategy
  9. Where appropriate provide an interpreting service over time between business owners and their bank (and other stakeholders) to help both parties understand the business footprint to build (if required) increased confidence that personal/financial/business milestones over time are able to be achieved
  10. If business and/or people behind it is/are currently in duress, develop an understanding as to why and with business owners identify/build a range of solutions for presentation to and agreeance by, key business stakeholders
  11. Engagement with various government agencies and stakeholders that support business’s located in regional and marginal areas (such as QRAA, DPI, Valuers, Accountants, lawyers, Banks etc) where appropriate
  12. Strategies to get the business in profit and hold it there, reduce reliance on debt particularly to fund operational costs (how to keep the Bank Manager and Credit Bureau comfortable)

Succession

“Paint me a picture”

Succession plans will have been discussed as part of the BD. DS&A provides a dedicated service to explore succession with the business and family partners who make up the business and/or who are associated with any or all of the business partners

The steps to be covered will include (and not necessarily be limited to):

  1. Understanding family dynamics
  2. Who are the key stakeholders in and outside the business
  3. The importance of having an open discussion about “retirement” (or doing something else!)
  4. Development of a clear understanding of who does what in the business, why, who makes the decisions, why, and why this might change
  5. Development and implementation of a clear and agreed system of key performance benchmarks (KPBs), remuneration and incentives based on key performance being reached or exceeded
  6. What are the rules of the game around proactive communication and keeping personal stuff away from work stuff
  7. What are the documented policies of the business around working conditions, WH&S, the availability and use of business assets and so on?
  8. How do you plan for the future for all of the generations involved in the business, expand the business sustainably over time to cater for those generations who want to stay in the business and look after the emotional and financial independence of those who are going to take a step or two back (and when?)

Wealth

“Superannuation spooks me – beware of the red under the bed!”

Having determined the succession needs of the business, the people in it and armed with this information and having completed the BD, the next step will be to develop a wealth strategy over time for all of the generations in the business now, including those who will step back soon (or now) such that the business is protected, as will be its capacity to grow and remain in profit

The development of this strategy will include (but not necessarily be limited to):

  1. The role of superannuation and self-managed superannuation funds (SMSF) in achieving the above
  2. Building cash in a tax advantaged environment that will be sufficient for those taking a step back from the business to be able to fund their lifestyle independently of the business
  3. Understanding what the lives of those who are taking a step back (or who are to do that in the future) will look like at the time of taking that step
  4. What that lifestyle will cost over time
  5. Development of a wealth/investment strategy for all generations that sits within families tolerances for risk to allow them the comfort of not risking unduly their capital whilst providing a return (and access to that return) to fund their lifestyle over the next 10/20/30 years and onwards
  6. Different types of investment products (apart from term deposits, savings accounts, shares and property) that will also contribute to achieving the above yet also pass the sleep test
  7. Be prepared to engage in this process and be educated (it is not rocket science y’know)

Risk

“I don’t need insurance – or seatbelts!”

This, along with estate planning, is invariably forgotten about or just plain ignored. This also will be touched on as part of the BD but a specific review will be undertaken as most families are inadequately insured with the review dealing with (but not necessarily limited to):

  1. Who in the business and families has insurance and why (or why not)
  2. The implications (emotional and financial – short and long term) to the business and the family/ies of the death or incapacitation of a key person in the business and/or family
  3. Different types of insurance available and a review of the different types that may be applicable to the business and families who stand behind it
  4. Determine potential benefits of insurance and cost (including the potential deductibility of some premiums – that might get your attention?)
  5. The completion of the necessary forms and underwriting/implementation of insurance solutions for all generations in the family/business
  6. The need for regular reviews of insurances and the importance of changes that occur to policies over time and the implications to your (potential or existing) cover

Estate Planning

“A Will?.. I have got a piece of paper here somewhere that I signed in 1978…is that it?”

Again, estate planning will have been touched on as part of the BD however this will be fully explored as part of a succession and wealth conversation dealing with (but not necessarily…get the idea?)

  1. We live in litigious times
  2. The importance to you and the beneficiaries of your estate in having a current will
  3. The importance of estate planning as part of your business and wealth strategy
  4. What are the different types of structures available to protect your estate (from the tax man and anyone with a bone to pick?)
  5. What is a testamentary discretionary trust (TDT) and would a TDT be of value to you and your family?
  6. How often do you need to review your estate plan?
  7. What might it cost?
  8. What you need to do and when.

Summary

In essence DS&A pull together all of the pieces of the jigsaw puzzle that people certainly think about but just do not have the time to deal with it or do not know how to deal with it or where to look to find the solutions they need.

The services provided are on an upfront and ongoing basis based around the needs identified and circumstances as do and will pertain over time.

At all times and prior to the different levels of engagement being taken up, costs are clearly articulated and a formal letter of engagement is executed. The process is completely transparent on a no obligation basis.