Hotels Managing Growth

We are all looking forward to the IHF Conference in Killarney at the end of the month, following another year of growth in the Irish Hotel industry. It is widely reported on a national basis that this industry has recovered strongly with yields improving. However, as we dig a little deeper this is a story of two halves. Dublin and a few other urban hubs are experiencing the lion’s share of this growth, while more rural destinations are growing at a much slower pace.
Outside these urbanised areas, occupancy is floating somewhere between 50 to 55%. From what we have gathered in the industry in the last two years, the improving occupancy needs to be very carefully managed. We need to understand and target specific demographics to ensure that our ground floor activities are fully utilised by our visitors to maximise their spend during their stay. It is this management of the ground floor activities that is the difference between a healthy profit or not. It is our job to help achieve this profit goal.

All of our clients have done this for 2016….

This is a process that the very largest of businesses do routinely every year and it is a process that every one of our clients will complete with us every year. As such it is the very least you can do to help yourself guide your business as we begin 2016.

Before the Christmas break we had suggested as the holidays progressed that you think about some new year’s financial resolutions.
Maybe this means sales growth, maybe higher profit margins. It could be to collect your cash quicker or reduce your debt levels.
Whatever your thoughts they can only be achieved by a committing them to paper in the form of a financial plan, more commonly referred to as the annual budget.

A Few Simple Questions for Your Business

We hope that last week’s post gave you some pause for thought. In the coming weeks we will ask some simple questions that every business owner should be able to answer, ranging from operational right up to strategic.

The very first question that we ask when we sit down with a new client is ‘How did your business perform last month and how is it performing in your current financial year?’ In order for us to understand the answer we need to dig a little deeper. Listed below are some basic questions.

  • The top-line numbers we are expecting to hear will be sales and how they compare to the previous year, ie. Are they up or down?
  • Gross margin and how this is performing relative to the previous year?
  • Operating/overhead expenses – can we explain any significant shift in these under the respective headings?
  • Current cash tied up in stock?
  • Current debtors position & cash collection target for the coming month?
  • Bank position?
  • How are we performing with our creditors?
  • What are our various tax liabilities?

Every one of Aurora’s clients can answer these basic questions at a glance. Every one of our clients have at their disposal a set of monthly management accounts that answer all of the above.

However, it is our experience that most small businesses cannot answer all or indeed any of the basic questions outlined above, before working with Aurora Accounting & Business Services.

Have a listen to what one of our clients has to say!

We would love to hear some of your thoughts & comments. Please follow us at:

Managing Your Business

We have all heard of Porter’s four P’s

Today we would like to introduce you to Aurora’s four P’s

These are our four P’s of financial management: 

Planning – Performance – Position – Projection 

This model has served our client’s extremely well in good times, has seen them through the challenging times and is set to continue to serve them well as we move forward to a new period of growth.

It is simple, understandable and employable in any business.

It takes all the accounting jargon out of your business’ financial reporting and management.

It has delivered results that our clients have for years commented positively on.

Our four P’s are for managing your business. 

Porters four P’s are for managing your sales and marketing-

Product – Place – Price – Promotion

A brilliant basis upon which to base a marketing plan.

It’s simple, it’s hugely effective and we use it all the time when working with our clients to develop their marketing plans.

Taking Control of The Numbers

When you’re in control of your business’s numbers, good things happen.

Primarily because we know how we’ve done, where we are and where we’re going.

Your time spent on this area of your business very quickly translates into

  • less stress
  • tighter control
  • better insights
  • improved visibility
  • more informed decision making

This all leads to improved profitability

The vast majority of small & medium sized business owners that we have met and engaged over the years had not given nearly enough time to this area.  Yet after a few short months of working with them all the above benefits were achieved.

This is not to suggest that understanding your numbers leads to a stress free life – simply a less stressful life.

We have all heard the expression “knowledge is power”, and to a large extent it is.  It ultimately, in the context we are discussing, allows us make better decisions based on facts (the actual position and performance) of the business.

 

Maybe we could, at this stage, pause for thought as we ponder the following few questions;

 

  • What were the total sales reported for the business in the past two years (off the top of your head) compared to the progress we are making in the current year?
  • How do we analyse our business into its respective divisions and sub-divisions – do we have an easy reference to understand this?
  • What is the overall gross margin of the business?
  • What are the component parts of our gross profit?
  • What is the Labour to Sales ratio and how do we use this to manage the business?
  • What are the total average operating costs of the business?
  • What are the sales in the current month compared to the same period last year?
  • In fact, what is the gross profit / margin, labour to sales and operating costs compared to same period last year?

 

And that’s just looking at the performance – otherwise known as the Profit & Loss Account!

So in our coming posts we will look at the position of the business, commonly referred to as the Balance Sheet….

 

For more updates please follow us on Linked-In: Aurora Accounting & Business Services

Aurora SME Management Procast – Episode Three

Annual Plans, Monthly Meetings

The objective of an annual budget is to explain how we plan to move our business towards its purpose in the coming 12­ month period. If you don’t know what’s really going on, you can expect a never-­ending stream of nasty surprises.

 

If you missed the first two Aurora SME Management Procast episode you can listen in below.


 

Aurora SME Management Procast – Episode Two

An Idea Is Not A Business

An idea is not a business, but you CAN turn it into one by probing, prodding, pushing and pulling it out of shape until you get a firm and fast grasp of what your idea and future business ACTUALLY IS.

You need to ask “what is our competitive advantage”. Procast episode two examines a case study, with Aurora Accounting’s Alan McGrath, developing a client’s idea into a business.

If you missed the first Aurora SME Management Procast episode you can listen in below.

Aurora SME Management Procast – Episode One

Avoid Getting Lost in the Business

One of my favourite business expressions is “you cannot win a war fighting in the trenches”

It explains so well the concept we are talking about. We find that small business owners get lost in the business, and they forget to work on their business. So how do we avoid this?

Firstly, understand our purpose. This is the why –
“why are we setting up and why will we win in business?”
“why will people buy our services and / or products?”

It is from this that we develop our business model.

If starting up, this is one of the most important things to do.
It is imperative that our purpose is understood with clarity and written down.
You will need to invest time into this exercise – it is one of the most important things you will do – so don’t skip it.
It is very important that we re-visit this document regularly as a constant reminder of our purpose.
– This will keep us focused
– It will lead to the development of our purpose
– It is used to develop our annual planning process

This is an exercise that we must ensure we re-visit regularly, so the good news is – it’s never too late to start.

This leads me nicely to second “Don’t forget to Work ON our business. This is the annual planning process, and another business expression, although a bit of a cliché: “failing to plan, is planning to fail”

This is really a subset of our purpose. Its objective is to explain how we plan to move our business towards its purpose in the coming twelve month period. It sets out our sales volume targets, our sales price targets, and understands the costs associated with these sales.
This is an involved process – a team event. It is co-ordinated by the managing director and is ultimately his responsibility, however it cannot be his/her sole project. The process needs a wider perspective than one person. Ideas need to be challenged, thoughts need to be developed.

The annual operational & financial plan will provide direction, a plan to assess performance against, and a benchmark to set corrective action.

Aurora Accounting & Business Services’ clients engage in a rigorous annual financial planning process. Our view is if big companies value this process and employ significant resources into it then so should we. Our client’s agree. And our clients have enjoyed the benefits of planning – setting our goals and measuring performance and ultimately achieving our business goals.

Aurora launch the SME Management Procast Series

This series is designed to help SME owners/managers identify with a number issues that present themselves in all small & medium sized businesses. The Procast series is a new podcast based on our experiences with our clients as we have travelled with them over the past ten + years.

These experiences are taken from clients in diverse business sectors and yet the issues are common to all these clients. We have supported this management series blog with a PROCAST. This PROCAST offers an audio version of the blog and it message.

In addition, we are extremely proud and grateful to introduce some of our clients as discuss how we worked through the issues we feature in the series. These are real clients talking about the real experience.

As with most things at Aurora this series was a team event.

It was born of a small article I wrote to emphasise the importance a particular discussion I had had with a client. The article worked as it found a way to cut through big long discussion with a number of people attending. Lucky for us, this client was a PR agency and loved it so much asked if she could send out a press release. Two days later I was interviewed by Pat Kenny live at RTE (Thank you Audrey).

At another client’s suggestion I wrote a couple more articles. These I have used with great effect on a number of different occasions, at different times for different clients. Again , thank you John for the encouragement to “Go for it!” From there it was Ian Smith of Noise Multimedia that sat patiently with me as I asked the same question over and again until he finally convinced me that the podcast was a super idea. And lastly, we came up with the name PROCAST quite by accident. It was a typo on my part in an e mail to the podcast producer Matt Houlihan from the International Radio Company.

Episode One deals with the dangers of getting lost in the business rather than the important task of working on the business – remembering that you cannot win a war fighting in the trenches.

So enjoy.

Introduction of new loan or owner capital (funds)

Achieve a positive cash effect without going near our P&L

This is, for a change a positive cash effect that not go near our P&L.

This is an injection of cash either from a bank or from the owners.

It can enter the business as a director loan (my preferred route) or an increase in owner’s equity.

For the moment it is only important to understand that this will positively affect the cash flow while having no direct immediate effect on the P&L.

Cash goes up, profit or loss does not move. It is a balance sheet item.