In today’s transport industry, where the only constant is change, there is a magic formula business owners can use to drive success, Matthews Steer Associate Nidal Mazloum told attendees at the annual Victorian Transport Association (VTA) Conference in March.
With the introduction of a raft of new regulations and road-user charges, there is much business owners can’t control in the transport industry, but Mazloum advised conference attendees to examine the inner workings of their businesses and identify what they can improve to best embrace the changes they are going to have to navigate.
“People, processes, customers and financials are the four pillars of any business and the foundations on which any successful business is built,” Mazloum told conference attendees. “The first three drive financial success but it is the fourth, the management of financials, which often presents pitfalls for business owners.
Without an annual budget in place it’s not possible to set financial goals and it makes it very difficult to measure your progress throughout the year, Mazloum told conference attendees. “This is one of the most common mistakes we see with poorly-performing business.”
He recommended that instead of setting an annual budget that is a percentage increase on the previous year’s performance, transport business owners start by identifying the profit they want to make in the next financial year.
“The traditional method of budgeting can be a little deflating, so why not reverse engineer the whole process,” said Mazloum. “Start with the profit you want to make, then input all the costs you expect to incur until you come to a revenue figure that you need to generate to achieve your desired profit.
“This is called bottom-up budgeting and it’s the approach that really successful businesses undertake every year.”
Well-managed financials, with a clear budget in place, enable business owners to measure their performance regularly throughout the year, which in turn means their year-end results aren’t a foregone conclusion, said Mazloum.
“Transparent, accountable budgeting gives you the opportunity to tweak areas of your business and take corrective action if you start to veer off track, and it gives you peace of mind when everything is ticking along nicely. It may feel confronting and highlight some challenges, but at the end of the day, wouldn’t you rather know than not know,” he asked?
Acknowledging that the management of finances isn’t everyone’s strong suit, Mazloum recommended transport business owners focus on their strengths, and don’t get bogged down with accounting inefficiencies.
“Don’t spread yourself too thin, don’t try to do it all yourself, and understand your limitations, he said. “Focus on what you do best, educate yourself about government funding that’s designed to help transport businesses, and surround yourself with people who maximise your skillset and can help you take your businesses to the next level.”
With the impacts of the Coronavirus being felt globally, and many Australian transport companies being involved either directly or indirectly with the Chinese market, Mazloum said cash was more important than ever before.
“Lots of businesses make the mistake of looking at their revenue figure as a measure of success and believe more revenue equals more cash,” said Mazloum, “but revenue doesn’t necessarily equal cash.
“Cash is king and a lack of cash impacts your decision making, and shifts you from a play-to-win to a play-not-to-lose mentality, which isn’t the best when you’re making decisions because it makes you too risk adverse.”
And Mazloum said even if business owners have no intention of selling their business in the short to medium term, they should always be building their business to a point where it is ready for sale.
“A business with strong cash flow, great profitability, loyal customers, good people, and solid systems and processes – and a business that works just as well without the owner – is the magic formula and the key to success,” he said.
Themed ‘Managing Increased Demand’ this year’s VTA Conference took place at Phillip Island from March 2 to 3. Mazloum was one of 36 speakers and panellists – drawn from state and Commonwealth governments, industry regulators, operators and other stakeholders – to address the conference over two days, at a time of unprecedented change for transport operators.
If you attended the VTA Conference and would like to take up a complimentary one-hour risk review of your transport business, or a consultation on your fuel tax credit and/or depreciation claims, please call Nidal Mazloum on (03) 9325 6300.