Monthly Archives: August 2016

Integral to farming success

To get an overview of some of the options available to farmers, we spoke to AIB Agri Advisor Patrick O’Meara about the current landscape and its effects on cash flow. He also provided us with some useful methods for cash flow planning and dealing with common cash flow concerns. Read on to find out more.

 

The Current Landscape

For all farmers, the outlook for 2017 depends on the specific sector you are working in. “Pig and dairy sectors are going through a positive period at the moment in terms of increases in market prices,” Patrick notes. “Both those sectors have come through a difficult period so it’s encouraging to see. In the beef and tillage sectors, there’s some frustration at farmer-level with prices and also concern around Brexit.”

Brexit will continue to throw up challenges for farmers and add a level of uncertainty, but there are some aspects of the changing economic climate you can plan for. “It’s difficult to know exactly what the effects of Brexit might be,” Patrick explains. “But in the short-term, you’ll need to consider the impact of exchange rates on output prices when planning.” In the medium term, he says, legislative changes will come into play: “You’re looking at the potential impact of CAP reform and you’re also considering tariffs and trade agreements that may be developed between the UK and Europe.”

While there are many uncertainties that are outside of the control of farmers, it is important to control what is inside the farm gate. “Improving on-farm efficiency and competitiveness is essential to managing risk and sustaining your business through any future potential challenges” according to Patrick.

There are positives to consider also. An increase in global population and the expansion of new markets offer opportunities for the industry. “There’s growing demand for protein foods in terms of meat and dairy products” Patrick says. “Ireland is among the most efficient producers of dairy globally and up there in the top five in terms of beef when it comes to carbon footprint.”

When it comes to cash flow planning and concerns, Patrick’s biggest piece of advice is to address them sooner rather than later. “The earlier someone comes in, the more options that they have,” he explains. “Those options can include increases in working capital and overdraft facilities. Other options to address cash flow issues include short-term loans and extending the term of a loan*.”

Again, Patrick notes, time is of the essence: “If someone thinks that they have impending cash flow pressure coming up, look at it early. First, consider what the root cause of it is. Ask yourself how much cash flow pressure there will be or how much will be needed to get you over that pressure. Then put a cash flow plan in place. We can offer support and there are more options the earlier you look at addressing it.”

If you want help right now, our cash flow planning tool offers a simple way to forecast and manage your cash flow.

Identifying your target market

A good way to determine who is likely to become your customer is to clarify the problem that your product or service addresses. For example, you run a housecleaning service. The problem that you solve is doing cleaning for people who cannot or do not want to do these jobs themselves. Upper income families, families where both parents work, and older people who no longer have the ability to do their own housekeeping, are all potential customers for your services.

Define your customer’s characteristics

Listing out the characteristics of your typical customer is another good step towards identifying your target audience. These characteristics need not be personal ones; they can pertain to lifestyle, income, geographical location, hobbies, and many other things. For example, for a gardening service, one type of target customer are people who live in neighborhoods with well-manicured lawns, attractive plantings and colorful flowers around their homes.

The business could also target corporate clients who want their office surroundings landscaped. For a business that specialises in home security, the ideal customers may be in a residential area that has a high crime rate and in high-income residential areas. Women living alone who worry about safety may be another potential target for sales. Listing out these characteristics allows you to zero in on your target audience accurately.

What is your primary market?

Many products and services address the needs of a variety of people but they still have a primary audience. These are the people who:

  • Gain the most benefits
  • Have the greatest need for these services/products
  • Have the ability to pay for them
  • Buy the biggest quantity of them on a regular basis.

Knowing who makes up this primary audience should be your goal when you are trying to identify your target market. For example, for a bakery, the local consumer may be a recurring source of business, but the icing on the cake (forgive the pun) may be local restaurants who buy breads and desserts in quantity to serve to their customers.

Build Growth Strategy on Your Business

Setting up a business is hard, but growing your business can be even harder. Have you got a successful business and aren’t sure how to plan for growth? Read on for some expert advice on devising a growth strategy.

Sasha Kerins is a tax partner with Grant Thornton in Kildare. With over 16 years of experience in tax advisory roles, she has also advised businesses in areas including e-commerce and construction. We spoke to Sasha to get her expert opinion on devising a growth strategy for your business – and some of the pitfalls you need to watch out for when expanding.

Every Business Needs a Growth Strategy

“Strategy in business is really important from the point of view of focus. To identify what your strategy is, you’ll need a business plan in place. The business plan identifies the milestones that you need to hit to achieve that growth.

One of the key questions in any plan or strategy is: where are you adding value? What is the proposition of your business that’s going to differentiate it from everyone else out there? Asking those questions is a key element of any strategic process.  That will identify where the growth is in the business, be it nationally, within Europe, or internationally.”

The Importance of a Constantly Evolving Business Plan

“The business plan should be a constantly evolving document. Remember, it’s both an operating tool that you can use internally within the business and a marketing aid externally – from a funding perspective when you go to talk to the bank, from a grant perspective when you go to talk to various different government bodies and from a third-party investor perspective.”

Factors to Consider When Growing Your Business

“When you have a strong existing sustainable business and you look at growth there are two important questions that you need to ask:”

  1. Where is the growth going to come from? If it’s a manufacturing business you may need to scale up production or outsource. You may need to take on new employees which has its own cost. With growth, is it going to add to your margin or are you going to have to sacrifice some of your existing margin to achieve it? There’s no point in growing the business for the sake of growing it if it’s not going to give added value and add profit to the bottom line.
  2. How is it going to be funded? Cash is key to all businesses. You need to consider whether you’re going to use existing cash within the business to fund the growth or use external providers. The real risk is that you could end up being in a position where you’ve used funds from the existing business or you can’t fund what you’ve planned to fund over the period.”

Preparing to Look for Growth Funding

“When you’re looking at external funding you need to consider what kind of external funding you want. Debt and equity are very different sources of funding from the point of view of what they mean to the business.”

With debt, there’s an existing upfront cost – you have to repay it with an associated interest cost on an agreed repayment plan. There are obviously some conditions that the funder will look to satisfy – your ability to fund those debt repayments, the cashflow in the businesses and the future growth projections. The numbers are very important from that perspective. With debt, they really have no interest in the business and they really have no direct say in the business and the ongoing business operations.

Equity is slightly different. Somebody puts in funding today and gets share capital or preference share capital. The business is getting a direct injection of cash today but with no direct requirement to make any agreed payments. However, you’re now giving up an element of your business to a third party. You will now have someone who has more of a say or more of an involvement in the activities of the business on an ongoing basis.”

Influence business around the world

Irish people can sometimes be guilty of overestimating our influence around the world, but when it comes to business, it’s most certainly a trump card.

And if anyone should know, it’s Bobby Healy, founder of Ireland’s most valuable tech company, CarTrawler, which facilitates airlines, online travel agents and accommodation providers by connecting their customers with car rental, private transfers and rail connections all over the world.

Before CarTrawler – long before, in fact – Bobby founded travel software firm Eland Technologies as a young twenty-something back in Mexico City back in the 1980s.

Speaking on The Capital B podcast about the rise of Eland Technologies in Mexico over 30 years ago, Bobby said: “There was no Internet, there were no mobile phones, we had a real tangible business that was selling magic. No-one knew what software was, but we were making millions of dollars selling stuff to them.”

Asked by host Nick Webb about how he grew the company, Bobby explained that getting the right talent was the most important thing and how he discovered just how much of an advantage being Irish really was.

“The same applied back then, nearly 30 years ago, as it does now,” Bobby said.

“It was getting really good technology people that sometimes aren’t the best at vocalising their abilities or commercialising them and forming a team with really strong tech people”.

“I think what was unique about me and us at the time, was that we were able to commercialise it. It’s something I would always say that the Irish, for whatever reason, we’re accepted, like American Express, in every country; we’re just universally accepted and that is an inherent cultural advantage we have.”

“My company, everywhere we’ve been, we’ve always seemed to capitalise on that.”

A fascinating character, in an excellent interview with Nick Webb, Bobby also spoke about being held at gunpoint in Mexico, losing millions after 9/11 and being dressed up as Willy Wonka while Northern Irish rockers Ash, performed in his back garden.