Updated on 12 October 2022
In order to improve the performance of your organization, you must rely on the cohesion between all elements and teams.
Before increasing expenditures or adding staff, it’s crucial to analyze your processes and see if there are opportunities to make better use of the resources you already have. You should also look to improve cohesion between your processes and teams.
Any initiative to optimize your procedures should start with reviewing your organization’s purpose and defining its short-, medium- and long-term objectives, as well as how you plan to achieve them. You’ll also need a system of checks and balances that covers the company’s key performance indicators to make sure you stay on track to meeting your goals.
Completing these steps will help you remain at the forefront of your market, adjust to changes in your environment and jump on growth opportunities as they come up.
Determine specific objectives
The most important thing is to always circle back to your business’ key offering—its raison d’être—and to identify its short-, medium- and long-term objectives. Having a clear vision will make it easier to define your goals and determine what you need to do to achieve them.
Once you’ve established your objectives, share them with all your employees along with an explanation of what you expect from them. Specifically, how will your strategic objectives translate into operational objectives for your teams? What tasks will be required from your departments and what changes should they expect?
Establish KPIs for tracking results
It’s also important to determine how you’ll measure your results. Your key performance indicators (KPIs) should be aligned with the company’s strategy and objectives. Success can be measured in more ways than one. It’s not all about money. For example, your organization’s primary goal might be to rank in the top five in a given market, be an employer of choice, or be recognized as a responsible corporate citizen.
Next, focus on issues that will help your business reach its goals. Of course, new ideas may arise along the way, but be sure to ask yourself if they’re aligned with the organization’s performance objectives. You can’t fix everything at once. It’s better to stay the course and focus on the goals you’ve already set.
At the same time, you don’t want to be too rigid when monitoring your strategic planning. Deviating from the plan may be warranted if your priorities change. If that’s the case, you should adjust your goals and action plan accordingly. The key is to maintain alignment between your vision, strategy, metrics and procedures.
Optimize productivity
Increasing production capacity is often the first thing that comes to mind to reduce bottlenecks and catch up on backlogs. But a smarter move would be to ask yourself whether the company is using its resources efficiently.
Adopting lean management or lean manufacturing principles can help you boost efficiency and create better products or services in less time and with fewer resources.
Eight types of waste
Lean management is about optimizing business processes. It involves identifying your current processes and analyzing each stage with the teams concerned. This exercise lets you see how data or resources flow and determine where waste occurs, so that you can either reduce or eliminate any inefficiencies. When you cut non-value-added tasks to a bare minimum, the entire process delivers more value.
The eight most common types of waste are:
- Transportation and travel (unnecessary travel between storage sites, excessive material handling during the production stage, etc.);
- Motions and actions (redundant procedures, poor document/part storage, inefficient printer location in the office, etc.);
- Waiting (delayed raw material deliveries due to computer problems, stopped manufacturing due to an upstream error, etc.);
- Overproduction (producing more than customers need leading to slowed flow, storage challenges and excess inventory);
- Inventory (overstocked parts or products leading to stagnating finances and loss of storage space);
- Overprocessing (any process that doesn’t benefit customers should be considered unnecessary);
- Defects and errors (correcting errors costs the business time and money);
- Underutilized talent (not using an employee’s full potential).
Lean manufacturing – 5S method
Meanwhile, lean manufacturing is about how to make things faster, more efficiently and at a lower cost. The goal is to improve the entire manufacturing process. So, how do you go about making your production process more efficient? Use the 5S method to optimize work spaces and the way they’re set up:
- Sort (sort and remove anything that’s unnecessary);
- Set in order (find the right place for each item);
- Shine (clean, inspect and repair);
- Standardize (establish standardized rules);
- Sustain (analyze the things you do and make improvements).
Invest in technology
Making good use of technology can improve digital workflows, business processes, employee training and many other aspects of your company’s operations.
Technology can boost organizational efficiency by automating certain operations and relieving your employees of routine tasks so that they can spend their time on tasks that deliver value for the business.
It also improves aspects like traceability, which gives you a better understanding of customer needs, or enables you to plan preventive measures, such as installing a sensor on your equipment to anticipate breakdowns and let you know when it’s time to service the machine or replace a part. That way you’ll be equipped to plan ahead, rather than just respond to problems. As a result, you’ll avoid downtime on the production line and all the costs associated with it.
Always keep profitability in mind
Maximizing your company’s efficiency involves giving advance consideration to your costing (the sum of all expenses incurred to produce a good or finalize a service), to the profitability threshold and your break-even point, which are essential for determining when your business becomes profitable. This exercise establishes the groundwork for your strategic planning.
Once you’ve identified your objectives, it’s time to develop a budgeting tool that lets you establish financial forecasts for the next two or three years. You should also set up a dashboard with performance indicators so that you can track your results. That way you’ll be better able to make corrections if you start to deviate from your goal. Or, if everything is going well, you’ll know that you should keep doing what you’re doing.
Set up tracking tools
When developing a dashboard, aim for a balanced but succinct solution that gives you a reading of factors related to HR, finance (revenue, turnover, sales, costs, expenses), operations (improvement, optimization, efficiency, effectiveness) and quality (customer satisfaction).
Your dashboard will help you make informed decisions on the company’s objectives, planning and projections. It will also help you establish effective processes, methods and solutions to achieve your goals.
Making the most of your people
One aspect of organizational performance that you shouldn’t overlook is your employees. The more they are motivated, provided with the chance to use their talents and given the recognition they deserve, the better your company will perform.
This is a key responsibility for any company: making sure employees feel involved and valued, so that they can confidently embrace and work toward the vision laid out by the leadership team.
When measuring your company’s HR performance, keep an eye on the following indicators: turnover rate, departures, absenteeism, time required to fill a position, productivity rate and job satisfaction rate.
Include all aspects
A company is like the human body in that it’s a living organism that relies on different organs. That’s why you need to take simultaneous action in several different areas of the company if you want to make it more efficient.
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It’s in your organization’s best interest to hire a consulting firm to obtain the necessary tools and expertise for its activities.
Is your strategic planning process coming up in a year and you’re considering getting help with updating it? Are recruiting and retention difficulties leading you to seek solutions from the private sector? With questions like these, you should definitely turn to a consulting firm.
In addition to these specific needs, there are at least four other good reasons to do business with these firms for public sector departments, businesses, organizations and other bodies:
- Taking advantage of the varied expertise;
- Accelerating processes;
- Taking advantage of an objective presence;
- Getting external advice for authorities.
Taking advantage of varied expertise
Beyond the direct need for additional resources, using a consulting firm allows organizations to have immediate access to a wide range of expertise.
To name a few, services can include strategy, financing, human resources and technology.
A consulting firm will support you in the various facets of strategic and financial functions, in particular with regard to:
- Strategic planning updating implementation activities;
- Review of business model;
- Organizational diagnostics;
- Process optimization;
- Change management and continuous improvement;
- Risk management and service continuity;
- Costing calculations;
- Financial strategy and forecasts.
Human resource services may include the following consulting services:
- Employer brand;
- Attraction and retention performance;
- Compensation policies;
- Work climate analysis;
- Engagement surveys;
- Training and development activities;
- Local or international recruiting.
As for technologies, a firm can contribute in numerous fields, in particular:
- Digital transformation;
- Process automation;
- Cybersecurity;
- Diagnostics on systems in place;
- Objective guidance in new system selection and implementation;
- Advanced data analytics;
- Blockchain expertise.
Accelerating processes
An organization’s leaders and employees often have to deal with several simultaneous tasks and atypical schedules. They must divide their time between necessary meetings, various operational tasks and numerous administrative obligations.
Entrusting certain assignments to an outside team makes it possible for activities to progress in parallel with other organizational activities.
If assignments are well defined, clients will receive a complete product that meets their expectations in a much shorter time frame than if the product had been designed internally, given the inevitable interruptions resulting from the complexity of the activities.
Taking advantage of an objective presence
External experts can help an organization pool various components in order to achieve its business targets.
In addition to organizational expectations, the various sectors are subject to their own internal constraints and must respect deadlines. While the variety of employee styles and personalities may represent a source of complementary skills, it can also, at times, be a source of tension. It can be difficult at times to align all needs between peers and ensure that efforts are coordinated.
However, the presence of an external expert often ensures success in carrying out cross-functional activities. The result would be stakeholders who are properly prepared for work meetings, express their points of view to a greater extent and rally more strongly towards the consensus reached.
Getting external advice for authorities
Additionally, for governance purposes, organizations must regularly produce a compliance review, audit or certification on projects, achievements or financial statements.
In parliamentary committee, with your board of directors or departmental team, these external opinions and recommendations allow management to confirm a direction and demonstrate their activities to the authorities.
Responding diligently and efficiently to your needs
In this regard, our teams’ agility, know-how and dynamism are in keeping with our desire to respond diligently and effectively to the needs of government departments, businesses and public agencies, as well as those of other public and parapublic industry entities.
Our commitment to quality is evidenced by our specialized business line for the public and parapublic industry, integrating all aspects of management, our continual compliance with the government legislative and regulatory framework, and our professionals’ ongoing training.
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Updated on 14 October 2022
You wish to acquire an SME as part of a business transfer. Key step to take: convince a banker to help you finance the transaction.
You’re on the verge of buying an SME as part of a business transfer and negotiations are coming along well. Before your dream can come true, you’ve probably got one more step: convince the bank to help finance the transaction.
Remember that, first and foremost, when financing a project, the lender’s priority is to minimize its risk, particularly considering that an ownership transfer is a fairly risky event in a business’s life.
That being said, as a transferee (we’re using the singular here, even though you may be several partners), you have an advantage over someone who’s just starting a business. The company you want to buy already has a history, its revenues and profitability, clients, etc. are known quantities. You have tangible information to support your application.
Different criteria
The company’s background is a key element in analyzing a business financing project because different criteria apply depending on how old the company is. SMEs that are less than five years old are generally considered to be more sensitive, as they are riskier.
Lenders also consider the size of the transaction, which will impact their requirements. In the case of smaller transactions (under $500,000), for example, the lender will look at a few key indicators, such as the transferee’s credit and net worth and could require personal guarantees. In this type of transaction, the lender could also analyze the transferee’s ability to inject funds to support the business and cover any contingencies.
A solid team is key
If the lender is satisfied with the financial aspects of the application, he will then undertake a qualitative evaluation. This is when he will take a close look at the quality of the transferee’s management team, including:
-The transferee’s entrepreneurial experience and knowledge of the targeted company. If the transferee is already in the company (family member or employee), the risk is lower, since the transferee already knows the business and its industry;
- Whether key employees are identified and if they will remain;
- The transferor’s commitment to stay on to ensure a smooth transition;
- The presence of an advisory committee, ideally with the transferor on board;
- Whether the transferee is supported by a professional accountant and is receiving outside help (specialists, mentor, etc.), particularly if he has any managerial weaknesses.
Make a good impression
The fewer unknowns in the project, the greater the financial institution’s confidence will be. Be prepared and properly supported. You need to carefully plan the business’s transfer and development.
The financial forecasts must be well developed and based on solid assumptions.
Beyond the numbers though, it’s critical that you make a good impression with the lender. You have to prove that you’ve asked yourself the right questions and found solutions to offset any weaknesses. For example, talk about the support you have (transferor’s involvement, advisory committee, support from a professional accountant, etc.), especially if you’re an external transferee and don’t know as much about how the business operates or its industry.
Our team can help you with complex steps, such as evaluating the business, performing the pre-purchase investigation and determining the strategic issues and business plan.
Hint: To accelerate the processing of your financing application, get the lender involved early on, that way the process won’t be delayed if he has additional questions.
The balance of sale
Another key component of the business transfer financing process is the balance of sale. This is the total transaction amount that will have to be subsequently repaid to the transferor, in accordance with the terms set at the time of the sale.
This is often a major issue during the transfer negotiations. The transferor wants to minimize the balance to reduce risks, the transferee wants a higher balance to keep short-term financing requirements as low as possible.
Most of the time, the lender’s preference is that the transaction include a balance of sale in order to limit its fund injection and share the risk evenly between the three parties: lender, transferor and transferee. The balance of sale takes on greater importance with a less-experienced transferee with limited financing. Furthermore, if there is a balance of sale, it’s in the transferor’s interest to stay on board and support the business’s operations, which also reduces the lender’s risk.
The balance of sale is calculated using the debt ratio, and in a business transfer should not be greater than 3:1, i.e., debt should not be more than shareholders’ equity times 3.
In some cases, the balance of sale could be considered as shareholders’ equity if paying the bank loan has priority. Consider a $400,000 transaction with a $250,000 loan, a $50,000 injection from the transferee and a $100,000 balance of sale. The balance can’t be paid until the loan has been repaid, which reduces the lender’s risk. The balance of sale improves the overall financing application and makes it easier for transferees with limited resources to become shareholders.
If you’re planning to transfer your business, our experts can help. Contact them today!
30 Sep 2021 | Written by :
Alain Tremblay is an assurance expert at Raymond Chabot Grant Thornton. Contact him today!
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Updated on September 15, 2022
Are you thinking about the future? Choosing your successor from among your employees could also be a good way to retain them.
Some of your best-performing employees could therefore be involved in the eventual transaction, becoming future shareholders. To this end, communication between the transferor and potential buyers must be clearly established. The current business owners must indicate their intentions. If they want to leave the organization in five years, they need to be up front about it. Nowadays, business succession is no longer just a family matter.
Therefore, have the courage to discuss the issue directly with those you think could eventually take over internally. Three steps make it easier to complete this transition project.
A– Identify key employees
Have the employees you’re considering established a career plan? Do they have the requisite entrepreneurial skills? What are their professional goals? These discussions set the stage for the next steps. For example, you could give targeted employees a few management assignments in advance to gauge their interest and see if they have the right job profile.
These additional responsibilities assigned over time can also facilitate the transfer of authority. The financial capacity of the buyers to obtain the required financing should also be considered. They can then benefit from a gradual integration into the shareholding structure. At the same time, the buyers will increase their participation in the organization.
B– Get help
Entrepreneurs obviously can’t do everything alone. People who transfer ownership of a company they’ve been running for 25 years sometimes think they can navigate the transfer maze on their own. Beware of this wishful thinking. The support of a specialist can make all the difference in the development of a succession plan. Using an external resource ensures that you have a fresh perspective on the situation. And what could be better than to be able to count on leading-edge expertise to leave nothing to chance?
Lastly, remember that a business transfer is not something you can improvise. By relying on a specialized team, you can anticipate potential problems and gradually transfer the required knowledge. Transferors should not disappear overnight following the conclusion of the transaction.
C– Ensure a smooth transition
Over time, potential buyers will put their own stamp on the business. The transferor and buyer should expect an overlap during the transition process. It is not uncommon to see the buyer get involved during the first year following the transfer and even to hold the position of board chair. This type of transfer doesn’t just take place at the time of the visit to the notary’s office: rather, it is spread over a period of time.
You have to trust the leaders you choose to carry out the process. They may have different methods, but you have to accept these differences. For their part, buyers must understand that it is a part of yourself that you’re leaving in their hands.
Get employees involved and ensure their loyalty
If you plan to withdraw from the business, state your intention early enough to allow for the development of a proper succession plan.
By letting it be known that there are opportunities for advancement as a result of your eventual departure, you give key employees a chance to demonstrate their interest and skills and, perhaps, invest their energy in ensuring the sustainability of “their” SME. That way, you can be sure that you can count on your best collaborators in the coming years.
30 Sep 2021 | Written by :
Éric Dufour is a management consulting expert at Raymond Chabot Grant Thornton.
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