The right settings for growth - Part 2: Best foot forward: Deloitte Private blog | Deloitte Australia has been saved
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Every outstanding business starts with the fundamentals. We sat down with Carlo Pasqualini and Megan Field, coaches for Deloitte Australia’s Best Managed Companies program, to uncover the importance of strong governance and financials in Australia’s top private businesses.
Entrepreneurs are known for their ideas. But more often than not, it’s something much more fundamental that determines the success or failure of their businesses: getting the basics right.
As Megan Field, partner at Deloitte Private, says, “If they set the right foundation, businesses are easily able to grow – it sets them up for the future. But a growing business with a shaky foundation will come unstuck.”
While it’s obvious that finance is critical to a business, it can be easily neglected. Looking at the shortlist of Australia’s Best Managed Companies, successful private businesses keep their finances and governance structure in constant check, as a day-to-day function of running their company.
“They need to have a strong balance sheet. Sometimes these private companies are competing against large multinationals,” Megan says. “Contenders need robust financials to take on global players.”
What lessons can we draw from Australia’s Best Managed Companies when it comes to maintaining strong financials and rigorous governance?
Knowing your goals – and stretching them
Carlo Pasqualini, partner at Deloitte Private, says having the right goals from the outset is critical for growing businesses. While it’s tempting to list milestones you know you can reach, the best businesses place greater importance on setting ambitious targets.
“This doesn’t mean having unrealistic goals or trying to become a billion-dollar company in a year,” he says. “But it is important to focus on growth. Every year you need to be moving ahead, because there is only so far you can get if you’re going backwards or stagnating.”
Megan agrees in the importance of aspirational KPIs, saying businesses that push themselves tend to see the greatest payoff for their efforts.
“The best ones balance financial discipline with investing in the future,” she says. “If they’re challenging their return, questioning their margin and continue to adapt, they’ll be set up for success.”
Setting the right metrics is one thing but you need to be prepared to be flexible, especially when promoting out of the box thinking in your organisation.
“Someone in your business may try something different, put a target on it and not quite get there,” Carlo says. “It’s not about criticising someone who takes a risk. If all the right behaviours were there and the numbers didn’t flow through, that’s fine. If people feel that it is safe to fail, that makes a big difference.”
Carlo applies a similar perspective on business as a whole.
“The other aspect of a really well-managed company is calculated risks. It’s a natural ingredient of success,” he says. “The only reason entrepreneurs are successful is because they’ve failed before. No one gets too far if they’re not going to take an element of risk.”
Inside and out
It’s critical to know your business inside and out, but metrics are meaningless unless you have the context. Megan cites the example of an outstanding private business where the founder knows his important numbers like the back of his hand.
“He knows exactly what his margin is on every product and the return; he understands the industry and what the other players are doing in the market,” she says. “You need a well-rounded context, rather than just being in your bubble.”
Focus on culture
Any goals or KPIs need to be communicated clearly, so staff understand what they’re working towards.
“Even if it’s just at the divisional levels, communication of the metrics is absolutely critical,” Carlo says. “You need to provide metrics that are relevant to those staff members so they feel they can make an impact.”
But being comfortable sharing these important numbers comes down to what Carlo calls the key feature of any Best Managed Company: a transparent and cohesive company culture.
“Obviously the numbers are important but if you get your culture right the numbers will come,” he says. “Culture is the key.”
Megan Field is currently the Market Leader for Deloitte Private across South Australia, Northern Territory and Tasmania responsible for leading 280 people across Assurance and Advisory, Tax and Advisory and Commercial Advisory. Megan is responsible for growing Deloitte’s Private Sector strategy across South Australia, Northern Territory and Tasmania and is a member of the Executive Management team. She has also recently been appointed to the Deloitte Private National Executive. Prior to this Megan was lead Partner of the Tax practice at Deloitte across South Australia, Northern Territory and Tasmania. She has over 25 years’ experience advising private, government and not-for-profit sectors, with clients including ASX listed companies, Australian subsidiaries of multinational corporations and family owned businesses through to domestic and multinational high-net-worth individuals. Megan has experience on a diverse range of transactions and is a specialist in long-term tax planning, structuring and compliance with particular focus on corporate restructuring, M&A transactions and tax strategy reviews. With a passion for leadership and mentoring Deloitte talent, Megan also leads the Deloitte Diversity and Inclusion Initiative across South Australia, Northern Territory and Tasmania. She is also an active member of the Deloitte Private People Council nationally. Megan is a passionate supporter of a range of professional and charitable organisations and previously served as Vice-President of the South Australian Heart Foundation Board, Treasurer of the South Australian Heart Foundation division and Member of the National Heart Foundation Finance Advisory Committee. She is also currently a Director of the St Andrew’s School Inc and Chair of the Finance and Audit Committee and member of the Selection and Remuneration Committee.
Carlo is an experienced practitioner with over 35 years of experience in audit, assurance and advisory related services for private, middle market and small/mid cap listed companies. Carlo is a partner in the Audit & Assurance Private division of Deloitte and serves as a lead and audit partner for clients across a range of sectors including Retail, Technology, Consumer, Industrial Products and Professional services and has also assisted a number of clients going through an IPO process and other exit events. His years of experience in servicing the middle market has provided him with a commercial approach in dealing with his clients. Carlo is also the NSW lead for Deloitte’s Best Managed Companies programme.