According to Verne Harnish, there are seven keys to creating a strategic plan for a business. Here they are -

• Choose the words you want to own in your marketplace. This is especially relevant in the internet age where your prospects are likely to start their search with Google. Choose your words & make sure they rank number one on Google searches.
• Offer a unique brand promise. This is the promise that differentiates you from your competition. For example, 'Lowest Prices Every Day', or 'Real Expertise'
• Make it hurt to break your promise. This is where a money back guarantee can really help to keep you focused on your promise. i.e. Find a better price & we'll beat it by 10%.
• Create a one -phrase strategy. Your one phrase strategy will be an in-house secret, it isn't necessarily a selling point but will help you deliver on your promises i.e only clients with +$1,000,000 in net assets, might be a phrase for a financial planner to live by.
• Support your one-phrase strategy with differentiating actions. Underlying the one-phrase strategy are specific actions that represent how you differentiate your business from your competitors. So in the example above, the financial planning firm might craft their marketing messages accordingly and build their services to be of a very personal nature.
• Establish your X Factor. Your X Factor should give your business a 10X advantage over the competition. Perhaps the financial planning firm mentioned above has special access to financial products that are 10 times easier to deliver to their clients than what their best competitor could manage.
• Measure your profit per X & BHAG ? This is the key measurement that defines the essence of your business model and is tied to your long range goal. BHAG stands for Big Hairy Audacious Goal. So what profit is your X Factor bringing to your business to help you achieve that goal?

The Global Financial Crisis may have been the first major lurch in the carbon based economy. Rapid carbon based global economic growth triggered an oil spike that saw oil pass US at $140/barrel. The financial fuel was cheap credit that spewed out of the US, helping to ignite the final blow off and ultimately burned the financial markets.

Today, with an aging first world population licking their financial wounds and staring into a debt ridden future, the information age is well and truly alive and well. While the GFC saw industrial production plummet, the growth of information flowing on the digital super highway never missed a beat.

Carbon based life is proving to be awfully expensive at the end of the industrial age. Carbon based life not only requires other carbon based life to support its' existence; it also needs water. As both carbon based energy & water become scarcer and therefore more expensive, expect to see changes in consumer behaviour. Here are some that we can expect :

• Use of energy saving appliances such as electric cars
• Smaller more energy efficient residences
• Renewed focus on the environment
• Thrift as a new social standard
• Remote work or working from home instead of travelling to the office will be become the norm rather than the exception
• We'll rely more on communication technologies and we'll spend more time in virtual environments and on the internet
• A return to home grown food & vegetables

How you prepare your business for this future is critical to your success.

For small business owners, collecting receivable monies from customers can be a time consuming & frustrating process. Unfortunately, all too often debt collection is relegated to a secondary task behind every day service or supply operations and given that cash is the lifeblood of a business, neglecting to collect your rightful dues from your customers is akin to not feeding yourself.

Here are some processes & strategies to ensure that you collect your receivables on time every time -

Put in place a credit check process for new customers. People & businesses invariably develop patterns of behaviour and not paying debts or paying debts late is a reoccurring trait that should be picked up with a simple credit check. Use a company like Dun & Bradstreet to run your credit check through plus request contact details of two suppliers who will vouch for the new potential customer.

Send a copy of your terms & conditions to new customers for them to sign off on prior to delivering goods or service on credit.

Resend copies of outstanding invoices along with the monthly statement. Invoices are better for jogging customer's minds as to the product or service that they received from your business.

Develop & implement a system for collecting receivables. Every Monday, you or your accounts person should run through a checklist for chasing down outstanding monies. Send copies of invoices where due dates have been exceeded. Call customers who have had a copy of an outstanding invoice. For debts that are more than two weeks overdue, call daily. For debts that exceed your usual terms plus a certain number of days over term, immediately refer the collection process to a debt collection specialist.

Learn from experience. Bad payers generally continue their habitual behaviour so it is good policy to insist that bad payers lose access to your credit.

Remember that the receivable monies are yours. You've provided the service or goods & are entitled to payment. You don't need to beg and should ensure that whoever is tasked with the collection process is forward, demanding & insistent. This does not need to equate to being rude though.

Don't let customers see that you have +60 days or +90 days on your statements. This provides a subconscious signal that you accept long due accounts as part of your business process.

If you are a micro business & too small to have a bookkeeper, outsource your collection process to a company that specialises in debtor handling.

Remember, debtors or receivables belong to you & your business. The sooner you collect the sooner you can use the money to retire interest bearing debt.

The life of a small business owner is incredibly tough. Small businesses are often under-resourced especially when it comes to the array of skill sets and time required to improve the business. Information systems need upgrading, marketing plans need to be developed & implemented, staff need to be trained and a huge range of other tasks have to be considered, usually all by the business owner or owners. All of these business upgrade & improvement projects have to be performed alongside whatever service is offered or goods sold by that small business.

All too often the enormity of the task set leaves the small business owner in a state of paralysis or simply promising him or herself that the business improvement projects will be attended to at some later date.

These task sets ultimately have to be scheduled and then performed in parallel with usual business routines. Once the decision is made to implement a project, nothing should be allowed to derail the implementation of that project. Discipline in implementation is critical even under the most trying of circumstances. Disciplined project implementation becomes habit forming allowing the small business owner to engage in a never ending series of business upgrade projects always in parallel.

Steve Jobs is a master at innovation. His early association with Apple gave us the GUI or graphical user interface and his more recent association with Apple has given us the iPod, iPhone and other unique, highly recognised technology tools and applications. The question is how does Steve Jobs keep coming up with these masterful inventions?

Innovative entrepreneurs have a particular type of intelligence called creative intelligence that enables discovery yet differs from other types of intelligence. (per Howard Gardner's theory of multiple intelligences)

Innovators are able to leverage both the left & right sides of the brain that yield structured thought & the ability to imagine. In using both modes of thought, innovators naturally leverage the five discovery skills to generate their concepts & ideas.

Innovation starts with connecting the dots. The dots we are talking about here, are potentially different tools, applications, ideas, objects, business processes, physical processes, laws, modes of travel, modes of life, in fact everything that it is possible to encounter in real & imaginary worlds. Strange & unrelated connections can yield amazingly creative insights that yield innovation. Obviously, connecting the dots can only happen in the mind of a person who has exposed themselves to a huge range of dots. Connecting the dots is a backward process that falls into place only after a significant number of dots have been sampled. Steve Jobs dropped out of structured University only to drop back in on the topics that interested him. He also spent time learning calligraphy and attending an Indian Ashram.

Questions have to be asked in order to build structure around the dots. It is of limited value to know that all small vehicles running on four wheels are called cars. To derive innovation potential, it is necessary to ask how cars work, what powers them, how are they constructed, why are some cars more popular than others? Learn to ask, why, why not & what if.

It can also be useful to imagine opposites without confusion or emotion. Hold the thought of Perth with a huge abundance of water or with very little water. Completely different alternatives can lead to valuable insights and allow for synthesis to occur.

Try to embrace constraints too. Limit the freedom of an imagined project or put constraints into your ideas and then see what emerges as an opportunity. In business we have to live with constraints every day. We are regularly under resourced and technology fails. Sometimes we have to be creative in the face of limitations.

Common phenomena go unnoticed by the majority of the population. The everyday mundane is exactly that to most people but to the innovator, the everyday mundane is there to be inspected, examined and picked apart.

Innovators are always on the lookout for the small details in the lives of their customers, suppliers and employees. It is in the mundane that opportunities lie like rough diamonds in the dirt. Learn to observe and don't close yourself off from the world. Flick through the junk mail, read widely, visit lots of websites covering different topics.

Life is one big experiment. Charles Darwin proved that. The evolutionary machine churns out experiment after experiment and in the wild, as in business; lots of failures are required to deliver a survivor. Innovators are constantly experimenting by constructing interactive experiences and then looking for unorthodox responses. It is from the unorthodox responses that insights emerge. Innovative companies are always testing and experimenting. Failure should not be frowned upon but celebrated. Experimentation does not need to be expensive and projects that fail can be killed early or morphed into another project.

Wide networks supply the individuals and groups that are necessary for testing out the ideas of an innovator. Innovators want to sample the experiences of people and groups as they come into contact with them. Most business people seek out networks purely for the opportunity to find markets while innovators seek out different people to tap their unique perspectives in often totally unrelated fields as it is often these encounters that generate a new idea or insight.

As with other skills, innovation requires practice and those that practice will gain a degree of mastery in this most valuable of skills.

Every leader, regardless of their organisational position, owes it to themselves, their employees & their company to practice the skills that deliver an innovative, creative mindset.

Many small business owners are excessively fixated on indirect cost reductions and penny pinching in order to improve the cash flow and profitability of their businesses.

Often cost reductions come about by reducing marketing, advertising, staff amenities and depreciation associated with capital improvement and/or replacement. There is an old business adage that applies here, "you have to spend money to make money". Without appropriate spending in these areas a business will achieve suboptimal growth. Obviously, this is not to say that a business owner should not attempt to find more cost effective alternative goods and services.

In relation to direct costs it is obviously critical to achieve as great a differential between sales and the direct costs as possible in order to optimise gross profit. Gross profit should not be optimised at the expense of product or service quality. Service quality can suffer if insufficient human resources are available to carry out tasks in an efficient and timely manner. Additionally, the potential for sales growth may be limited by long term labour under resourcing.

For long run growth businesses it can actually be beneficial to carry excess labour costs especially if the excess labour can be fully employed with 'value add' tasks such as business development and systems improvement.

Focusing on cutting costs shifts focus away from growing revenue. Revenue growth with good margin discipline will ultimately lead to far higher profitability rather than focusing on cost cutting.

There is a common sales pitch that is used by business coaches to secure work from business owners and it runs along the lines of, "if you do what we tell you, you can get your business into a position where you'll only need to work 40 hours per week and you'll be able to take 6 weeks holiday per year". Well this may be true for the business owner approaching retirement and looking to wind down but for the hungry business owner who is looking to build his business, 40 hour work weeks & 6 weeks annual holidays is probably a pipe dream.

Here is a great example of what it takes to get to the top. Bill Gross, CEO of Pimco, the world's largest bond investment firm maintains a punishing schedule, arriving at work daily at 5.00am and working through into the evening and on weekends takes home hundreds of pages of reading material that he filters down into something more manageable for his team.

It is worth remembering that every business has competitors and if those competitors are able to work harder, longer and smarter than you are they will win market share.

There are a number of ways to value a business with most specialists regarding discounted net present value of the future cash flows as being the most realistic method. This method estimates what free cash is available to the business owner each year for five years, adds a terminal value (a discounted value from the following five years) at the end of five years & then discounts all the five years worth of cash back to a dollar value in today's terms. After all, a business owner is really only interested in what he can take from the business.

Given that we want the value of the business as a stand-alone cash-generating machine, we must incorporate a reasonable value for salaries of the operator into the normalised and adjusted earnings. An easy comparison of a cash generating machine for a business owner is to put his or her money into a term deposit and earn interest at the prevailing rate and not have to work, therefore in order to compare apples with apples a stand alone business would have salaries associated with managers.

Now as you can imagine, knowing what those future available cash flows is going to be is difficult so we model out various growth/decay scenarios for the business into the future and include expected capital replacement requirements. If we model future growth, then we also need to incorporate growing working capital requirements. Growing businesses divert cash away from the owner and into larger stock & debtor carries. Less cash coming out the tap makes the business less appealing.

Finally, to get these future cash flows back into a dollar value in today's terms we need to use a discount rate. This rate is associated with the riskiness of the business and the reward expectations of a buyer. For example, an investor may buy a term deposit for $100,000 from a bank for 1 year with an iron clad guarantee that he will earn $7,000 from that deposit and get all his money back at the end the life of the deposit. A business purchaser faces many more risks and therefore would want much more than $7,000 from 1 year of owning a business that he/she paid $100,000 for; how much more is the big question. This question can be answered by considering the riskiness of the business. For a low risk business, an investor may be satisfied with merely two or three times what is paid by a term deposit. For a high risk business the expected return could be many times the rate paid by a term deposit.

By now you can see that valuation is a hazy non-precise endeavour that requires many assumptions about the future of the business and expectations associated with rates of return. For this reason, a valuation should take into account many different scenarios associated with these variables to build out a whole range of possible values.

Another method of business valuation that is used quite frequently is to assess the future maintainable earnings of a business based on past earnings and then apply some multiple to those future maintainable earnings to derive a valuation. If this method is used, it is important that the business has a relatively stable earnings history. To suggest that the future earnings of a business will be like they were in the past is very naive especially if the past was unstable. Stability in the past provides some small confidence that there may be stability in the future.

Where do you then get your earnings multiple to multiply your calculated maintainable earnings by in order to derive a value? Well as it so happens, share prices for listed companies are readily available together with those companies earnings. With the enterprise value of a listed company and its EBITDA (Earnings Before Interest Tax Depreciation & Amortization) it is a simple matter of deriving an earnings multiple that is backed by the marketplace.

If you can find a listed company that operates a business that is the same as yours or similar then you might consider applying the earnings multiple from the listed company to yours in order to derive a value. Given that a listed company is probably orders of magnitude larger than a small privately owned business with more opportunity for growth and more economies of scale it is worth reducing the earnings multiple of the publicly listed company to apply to the earnings associated with the privately owned business in order to derive a value. Here again, it is worth ranging the discount of the publicly listed companies' earning multiple.

There are two more very important points to consider when using the earnings multiple of a publicly listed company. Firstly, use the appropriate earnings multiple. Earnings to market capitalisation gives a ratio that associates earnings to equity. An earnings to enterprise value gives a ratio that associates earnings to the value of the actual enterprise or business. Market capitalisation of a business is different to the enterprise value of a business by the debt carried by that business. After all, equity or market cap is equal to assets less liabilities. It is equity plus debt that supports the assets of a business and enables the business to generate future maintainable earnings. Secondly, this method of calculating a business value is really more useful in comparing values of like for like businesses rather than providing a true value. After all, market caps are a moving target on stock exchanges and can shift dramatically in even a few days as markets twist & turn.

From 1 March 2010 the Australian Federal Government has put in place a new set of legislation that will ensure that within two years, all bookkeepers who engage in preparing the books or the BAS reports for businesses must be BAS registered. BAS Registration entails meeting certain training criteria under the direction of a registered training organisation.

The government are implementing this legislation to improve the reliability of the data that is used to populate the BAS forms.