CWB Canadian Western Bank

Key business planning insights

For your company’s high performance and longevity 

CWB Branch ConversationEntrepreneurship requires initiative, foresight and a healthy dose of grit. Strong business planning from the beginning is critical, however, it’s also equally important to apply sound management principles towards maintaining your business as it grows over time. To help you get off to the right start and also keep your business on the correct course as you evolve, Jeff Bowling, Senior Vice President and Regional General Manager (Prairie Region) of Canadian Western Bank, shares some of his insights gathered during his career in the banking industry.

 

Getting started on the right track

When you’re contemplating embarking on your new venture, developing a solid business plan is a crucial first step. Bowling stresses the importance of keeping your reader in mind when creating a business plan. For example, a business plan written for shareholders and investors would be slightly different than writing a business plan from a bank financing perspective in terms of risk valuation and return objectives. “Sometimes we’ll read a business plan and it’s very difficult to figure out exactly what they’re asking for – it’s more focused on the success, the opportunity, but not necessarily what risks it presents a lender and why the risks are mitigated.”

The business planning timeline is an essential element as well. Bowling also advises setting out a five-year horizon with yearly updates built in along the way.


Key considerations in the beginning

Bowling highlights a number of important considerations that need to be taken into account early on in your business. These include:

 

Risk tolerance

How much are you willing to put at risk for your venture? These questions can help you think this through:

  • Are you willing to consider a personal guarantee?
  • What is the collateral that you’re offering as worth to an institution?

Often entrepreneurs come in and the business plan looks great. But there hasn’t been a lot of thought in terms of their collateral and what the incentive is for the bank to lend money given that the bank’s return is somewhat limited compared to what an investor would make on a business plan if it were successful,” says Bowling. 

 

Human resources

This is a critical factor in the early stages of your business. “We’ve seen a lot of businesses really challenged at the outset because they underestimated the qualifications they needed for certain key positions within their company,” says Bowling. He advises asking yourself some of these questions to ensure you have the right people for the job:

  • How are you going to compensate?
  • Where are you focusing your resources?
  • Which positions are key that you need to focus on retaining and would be a real business risk if you lost that particular person?
  • Which positions are not as key and easily replaceable?

Bowling adds, “Take the bank for example. If we hire someone, and we put them through six months of training and they’re starting to make a contribution and then leave for somewhere else, it’s a huge step backwards. In an organization like ours, we can certainly absorb that; it’s the cost of doing business. However, in a smaller business starting up, employee turnover can be a real setback, especially early on.”

 

Funding

It’s important to ensure your company is adequately funded. This includes contingency capital for a best and worst case scenario. “Don’t assume that your best case, or even your medium case, scenario is going to unfold,” says Bowling. “Ask yourself these questions:”

  • What if the worst case happens – how are you going to fund that?
  • How long are you prepared to put up with start-up costs losses? And where is that money going to come from?

 

Managing future growth

CWB Manage Your Business Growth Infographic PreviewBigger is not always better. “There needs to be a key evaluation done to determine if expanding is worth it,” says Bowling. “Growing for the sake of growth just isn’t the right strategy. And I think people get too fixated on that. You can be the best at what you do, and be more profitable than others by avoiding similar mistakes that they’ve made.”

According to Bowling, if you’re expanding just for the sake of expanding – and you won’t end up making the same return that you were as a smaller entity – you have to ask yourself ‘why?’ It takes capital and resources to grow a business after you start it, so consider:

  • Do you get the return on capital from the investment you’re going to make to expand?
  • Is the business risk you’re taking on by expanding worth the incremental return?
  • Do you understand the pressure that’s going to put on your staff?
  • What additional staffing requirements are needed?
  • Does your growth strategy align with your company’s values and mission statement?
  • Are your company’s key people on board with your strategy?
  • What will be the impact on employee engagement?

It’s important to take a step back and assess your risks when charting your course for expansion. Analyze all of the factors, as one wrong move can have a large impact. And when in doubt, seek outside counsel and support to ensure you make the right decisions.

 

Evaluating performance

Bowling emphasizes shifting your focus to profitability rather than revenue. “You can have all the sales in the world, but if you’re not making any money that’s an issue,” says Bowling. “Some business owners are so top-line focused and that is really a dangerous predicament to get into.” He also notes that reducing employee turnover and increasing engagement are important for your business’s long-term effectiveness.

In closing, Bowling mentions, “We’re involved with a lot of businesses and have lots of experience working with a broad variety of industries, so we can provide feedback on your business plan and cash flow forecasts, giving you a realistic and sober second thought.” From a financing perspective, Canadian Western Bank can provide access to not only a range of resources but also other funding sources whether it’s for business development or organizing a non-standard financing arrangement.

Interested in learning how Canadian Western Bank can help support you as a new business owner or seasoned entrepreneur? Get in touch with one of our relationship managers today to find out how we can support you every step of the way.

 

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