The client themselves should:

• Have taken the project through the organisations procedures for approval including having an authorised business case that takes account of the whole lifecycle spend and identifies funding.
• Be clear and explicit about the need for the work and that the desired outcomes have clear benefits and smart objectives.
• Work with their internal sourcing/procurement procedures and policies (and department where there is one).  This will properly use internal skills.
• Use a fast track procurement process when appropriate and available.
• Keep an open mind on which suppliers to consider.
• Define clear rules of engagement to govern the procurement process and communicate these to all parties.
• Have a mechanism for allowing key influencers to engage with consultants during the procurement process.
• Ensure the consultants know about internal political barriers and whether addressing these are part of their brief.  Consultants talk about “hidden agendas” they knew nothing about before they started the project.  The consultants would have changed the approach had they known.
• Identify and make available internal resource required to deliver the assignment successfully.  This is often underestimated.  The late delivery of items from the client is most often the cause for delay.
• Take a holistic approach to assignments to assist economies of scale.  For example, is it best to address the whole organisation at once or one location at a time.
• Consider a variety of resourcing and remuneration options to obtain best value.   It could be that a payment on results is the best way forward.  A significant part of the consultancy market uses this style.
• Be clear with the consultant about the true state of knowledge and understanding of the problem.  Do reveal any hidden issues.  They could cause delay or abandonment.  Do not worry experienced consultants are used to tangled webs.
• Be open to alternative ways of looking at the problem and be prepared to change views.  The reason you are using outsiders could be you have not found a solution inside the company so a different approach could be the solution.
• Give honest feedback.  If there are any issues with any of the team or the approach, or you do not know or understand the approach or progress, this needs to be addressed.  The consultants should welcome this as it aids a successful outcome for both parties.

The consultancy should

• Have bid with the team that will deliver. i.e. you have met the people who are going to deliver;
• Have full knowledge of and understand the business and the requirements of the client. i.e. they have done their research and asked you a lot of searching questions;
• Be clear about their strengths and only quote in line with them.  If the consultancy cannot display the right skills and knowledge they should withdraw.
• Adhere to the rules of engagement laid down for the tender process.  There should be no short cuts or unnecessary prolonging the process.
• Ensure that the required expenditure has been understood by the client and authorised through the total life cycle spend.  i.e. they have made clear what it will cost to get a point where the client can break off and carry on.  This may include costs the client may incur that are not to be paid to the consultancy such as certification to ISO 14001.
• Make sure that both client and consultancy have clear expectations about roles, responsibilities, costs and benefits before the assignment starts.  It must be clear what is expected of the client and when they will have to supply time or information.
• Ensure that the team that is bidding knows about all areas of work between their consultancy practice and the client’s organisation and communicates this effectively within their practice.  This is necessary to prepare for any potential conflicts of interest and to put up the Chinese walls if required.
• Put the interests of the client before their sales opportunity.  The client should get the best solution not the most profitable one for the consultancy.
• Keep the scoping of the project in line with its real complexity and do not over complicate it.  Sometimes it may appear to the consultant that a client has a multitude of issues.  These need be prioritized as part of the tendering process and dealt with in order.
• Talk about the practical needs of the client without jargon or pomposity.  Consultancy will work better if the client gains in knowledge as the project progresses.  Give feedback which the client listens to and acts upon.  The client must be taken on the journey to the end with a great understanding of why and what is required to achieve the result that the client wants and needs.

Protection against hazards at work is a legal requirement and Personal Protective Equipment (PPE) should always be the last resort in the hierarchy of protection, not the first.

If you do identify that PPE should be worn on site or for particular jobs, then there are some important things to think about.

• PPE is a personal thing, so one size never fits all i.e.  always make sure you get the right size and right type of gloves for each person, you can’t work well if your gloves are too big
• Make sure that what PPE you ask people to use is suitable for the task i.e. goggles that mist up when doing the job are a danger.
• Make sure that people know how to use it, look after it and maintain it i.e. if you require hearing protection to be worn then you must tell people what it protects against, how to fit it properly and how to keep it clean.
• Make sure visitors and contractors who work on site know that PPE is required i.e. put up signs to remind people, include PPE requirements in the site rules and site induction.

Always remember that PPE is an additional thing to wear when getting the job done, if it is not right, it could get in the way, it could cause discomfort and it could cause an accident.

Personal Protective Equipment is personal – make sure you involve the wearers when you decide on it.

Risk assessment gets bad press because people make more of it than they need.

The Health and Safety Executive say they don’t want to see files of paperwork, just simple identification of what can happen and then appropriate management of the risk.

Is your risk assessment process practical?

Step 1 – For each task, identify what can happen (spot the hazards) i.e. moving office furniture – pulled muscles, trapped fingers or back ache)

Step 2 – Identify the level of risk for the task by working out likelihood of the hazard resulting in injury and the severity of any injury i.e. moving office furniture regularly – you are quite likely to get an injury such as a pulled muscle or low back pain, even a broken finger!

Step 3 -  Identify the control measures that are in place (if any) i.e. all personnel who move office furniture have been on a practical manual handling course to help them understand how to avoid injury.

Step 4- Evaluate the residual risk after applying the controls i.e. the likelihood of an injury is much reduced after training.

Step 5 – If you identify the risk as significant, then you have a legal responsibility to record it.

This is an example of a simple risk assessment for that task.

Always remember:

Involve the people doing the job – they know the risks.

Keep it simple and if you need to put in any further controls, record what you have done and reassess the risk to confirm they have worked.

The facts are plain:

• 603,000 workers injured in 2010/11.
• The Government’s own review of the Health and Safety system states that it is not Health and Safety law but the exaggerated fear of being sued, fed by aggressive claims marketing, that is the root of our problems.

We all must understand that we still have a problem with workplace deaths and injuries.

So what do we need to do:

The review identified some safety legislation is out of date and not needed – let’s get rid of it as fast as possible.

The review stated that the claims “industry” must change – let’s change it by making sure we do not hurt anybody or make anybody ill in their workplace.

Looking at the web “chatter” about the Prime Minister’s “Safety Monster” hunting, you find two major conclusions:

1. Good health and safety benefits business – it does not tie it up.
2. Cutting back health and safety in the workplace will be seen as a benefit for badly run businesses – until they hurt somebody.  The basic sections of the Health and Safety at Work etc. Act 1974 will not change!

Simple safety and risk management is effective.  Effective safety means fewer accidents.

Less accidents means the litigation monster will go away.

Are you playing your part to kill the “Safety Monster” or are you cutting corners and feeding it?   If you are… beware!…it bites back.

The formula for breakeven is:

Fixed Costs X 100

______________

Gross Profit Margin

Sales                        = £3,000,000

Direct Costs            = £1,200,000

Fixed Costs             = £1,080,000

Breakeven Sales     = £1,800,000 or £150,000 per month

(Gross margin is 60% so £1,080,000/.6 =£1,800,000)

If the business manufactures identical items – How many items must be produced and sold for breakeven each month?

The formula is:

Fixed costs for month

_______________

Gross Profit.

Fixed Costs                              = £60,000 p.m.

Sale price per item                  = £2-60p

Direct Cost per item                = £1-00p.

Breakeven number of items   =  37,500  items.

(Gross profit is £1.60 each item so £60,000/£1.6= 37,500)

Fixed Costs.

• Is a Cost Income ratio in place?
• How do individual lines compare to last year’s “actuals”?
• What cost savings are proposed?
• Have budgets been agreed for Marketing, Repairs & Maintenance, Training etc?
• What assumptions have been made for utility costs and has research been conducted to identify cheaper providers?
• Insurance costs – have they “shopped around” for other providers?
• When is rent review due?
• Travel costs – how can these be reduced?
• How many staff under Administration costs?

Net Profit before depreciation.

• Did the business have a target?
• How does this compare to last year and the sector average?
• Is the retained cash flow sufficient to reduce the borrowing?

This list is not meant to be exhaustive – the message is

“Act as Devil’s Advocate” and ask questions but listen to the answers and if it leads to another question – ASK IT.

What type of industry or service are we addressing?

1. Are we looking at a business where the sector in which they operate is in decline or has growth potential over the next twelve months or just plain level trading?
2. Is there a seasonal aspect?
3. Is the proprietor an eternal optimist or pessimist?
4. Have previous forecasts been accurate and who prepared them?
5. What monitoring controls are in place?

Now let’s drill down.

Sales Turnover

What is the basis of the sales forecast – level trading as for last year, decline or steady / fast growth?

• How does it compare to last year’s result?
• If an increase – what additional marketing support and reasons why growth is shown need to be identified.
• If a decline then what additional cost savings will be introduced to compensate.
• What is the breakdown of sales – any prominent names that comprise a large part of the total sales – traded before / credit reference necessary?
• If a business has several income streams from trading – what is the breakdown and what margins does each line produce?
• When was pricing reviewed – any increase or reduction proposed?
• Ask “What if” questions to ensure that key factors and their impact have been considered. For example, what if sales decline by 10% – how will this affect profitability?

Purchases.

• Is there a Cost Income ratio in place to control purchases to sales?
• How does this compare to last set of audited figures?
• Have potential price variations been considered in the projection?
• Any negotiations with suppliers taken place to agree price?
• If a seasonal business- have purchases been adjusted accordingly?
• Has a sensitivity analysis been considered if purchase costs increase by say 5%?

Wages.

Is there a Cost Income ration in place to monitor wages to sales?

• How does this compare to last year’s actual cost?
• Does this include N.I and tax?
• How many staff does this relate to?
• What is the H.R Plan for the next twelve months?
• How is overtime monitored?
• Where are the potential cost savings if a downturn in trade?
• Where are the directors drawings – are they excessive?

Carriage.

• Needs to be shown separately if possible as this can often be a leaking tap.
• How are costs here monitored and what measures in place to review regularly?

Gross Profit

Generally up to this point, this is where the proprietor has maximum control of the business so “Gross Margin” is key.

• Is a Cost Income in place for G.P?
• Compare to last figures and sector average.
• How is pricing calculated and reviewed?
• Do they understand the difference between Mark Up and Margin?
• Do they know their breakeven sales figure each month?
• To find out how to calculate breakeven go to the next blog to continue

A forecast is what it says on the tin, it is a projection of how a proprietor feels their business will trade over the coming twelve months, an educated guess if you like. However, we need to know what assumptions have been made to assess whether or not this is a realistic assessment of the future activities.  More importantly you need to know and understand what the intentions are over the next twelve months and what monitoring procedures are to be put in place to ensure that this forecast is on target and remains realistic as time goes by.

It is not just about figures either, it is about people and how effective they are at their job.  We have all met those that talk a good case but do they produce the goods at the end of the day and how reliable are they and how effectively do they complete the job?  You need to assess this at the outset, are you provided with promises with no end product i.e. over promise and under deliver. “You will have the figures by Monday” and they do not arrive and you have to chase.  This should start to raise doubts in your mind and when they do arrive start the drill down process and do not accept things at face value, whilst it is a projection, it needs back up information to support.  In the next blog we start to take you through an exercise that will help you to understand the business in more detail.

It is therefore essential that the client retains a clear recollection of the initial purpose of the consultancy. It is important that subsequent changes in goals and directions are subject to an assessment at least as rigorous as the initial decision to contract for consultancy.

A consultancy assignment may contain some or all of these elements simultaneously.  In other cases there may be a clear sequence, essentially a serial consultancy, working from the strategic, through the tactical, to the purely operational.  This may well mean changing consultancies, or adding other practices to the team:  The practice best placed to advise on, for example the strategic implications of business-to-consumer e-commerce across European markets, is unlikely to be the most competent or cost-effective when advising on the consequential re-organisation of a particular warehouse.

The benefits of using consultants should include:

• •     unique solutions reflecting the particular circumstances and aspirations of the client.
• •     speed of action (because the consultancy team, unlike the in-house management, is not being constantly distracted by other tasks).
• •     knowledge of ‘best practice’ and effective solutions from within the client’s own industrial/commercial sector.
• •     exposure to expertise derived from other industries and sectors, or indeed other countries.
• •     provision of specific technical skills that are either non-existent or in short supply in-house, and often the transfer of such skills to in-house staff.
• •     change management skills, enhanced by the consultant’s position as independent, objective and ‘above the fray’.

This should all lead to ‘value for money’ from the consultancy assignment, demonstrated through improved performance by the client.

The client can increase the likelihood of a good outcome from the assignment by establishing with the consultant what the final report will include and how it will be written and presented.  They also need to have a clear understanding of the time commitment of the consultancy and who will be carrying out the work.

It is also important to have a clear agreement about knowledge transfer from the consultant to the client’s organisation and to ensure that the organisation is well briefed about the project to preclude obstruction or lack of commitment within it.

Trusting a consultant to give good advice and value for money can feel like a step into the unknown.  This is a natural human concern if you are running a business.  Will you get on with the consultant, will he or she make you feel stupid, will he or she do what you ask, will you have control over the project and the outcomes are just some of the fundamental questions it is only reasonable to ask especially if you have not had good quality advice before and even more so if you have had a bad experience.

The design of a business growth club tackles many of these concerns head on.  Costs are easily contained and shared across the membership of the club, your exposure is limited, you can see how others in comparable situations handle the consultant team and how they ensure that they get value for money.  You can get to know the consultant team in a safe environment.  Moreover, you control what you share with the team and are only required to divulge what you wish about your business.  There is safety in numbers as you are one of a small group of clients. Altogether the business growth club is a good way of putting your toe in the water to see how it feels – it’s a relatively low risk option for getting advice and support and gives you more control over the process.