Diversify, Diversify, Diversify…
•Descargar como PPTX, PDF•
2 recomendaciones•864 vistas
A Key Growth Strategy for Small and Mid-Sized Firms
Recomendados
Recomendados
Más contenido relacionado
La actualidad más candente
La actualidad más candente (20)
Destacado
Destacado (12)
Similar a Diversify, Diversify, Diversify…
Similar a Diversify, Diversify, Diversify… (20)
Más de BDC
Más de BDC (20)
Diversify, Diversify, Diversify…
- 1. 1 | Diversify, diversify, diversify… DIVERSIFY, DIVERSIFY, DIVERSIFY… A Key Growth Strategy for Small and Mid-Sized Firms Pierre Cléroux Vice-president Research and Chief Economist
- 2. 2 | Diversify, diversify, diversify… DIVERSIFYING YOUR BUSINESS Is diversification a good strategy? Where are we now? The challenges Winning strategies.
- 3. 3 | Diversify, diversify, diversify… WHERE ARE WE NOW? THE CHALLENGES
- 4. 4 | Diversify, diversify, diversify… $35 $45 $55 $65 $75 $85 $95 $105 $115 USD/bbl West Texas Intermediate spot price (Jan. 2014 to present) OIL PRICES HAVE DECLINED DRAMATICALLY
- 5. 5 | Diversify, diversify, diversify… $0 $2 $4 $6 $8 $10 $12 Suncor Canadian Natural Resources Cenovus Husky billionsofCAD Operating expenditures, 2014 Q2 and 2015 Q2 2014 Q2 2015 Q2 -26%-26%-18% -33% Source: Thomson Reuters Datastream RESOURCES SECTOR SPENDING HAS DECLINED SIGNIFICANTLY
- 6. 6 | Diversify, diversify, diversify… WHAT ARE WE DOING? Innovate to reduce cost Diversify BDC $500 million to oil & gas sector
- 7. 7 | Diversify, diversify, diversify… IS DIVERSIFICATION A GOOD STRATEGY?
- 8. 8 | Diversify, diversify, diversify… Financial impacts 998 Alberta businesses Diversification levelsBDC’S SURVEY
- 9. 9 | Diversify, diversify, diversify… DIVERSIFIED FIRMS OUTPERFORM fully diversified businesses have strong revenue growth undiversified businesses have strong revenue growth 7 in 10 2 in 10
- 10. 10 | Diversify, diversify, diversify… of mid-sized firms with strong revenue growth are at least modestly diversified100%
- 11. DIVERSIFIED FIRMS ARE MORE OPTIMISTIC of diversified resources firms are optimistic about their future of undiversified resources firms are optimistic about their future 53% 29%
- 12. 12 | Diversify, diversify, diversify… TOP FIRMS ARE THE MOST DIVERSIFIED 17% 35% 45% 47% 49% 69% Undiversified Diversified in one way Diversified in two ways Diversified in three ways Diversified in four ways Diversified in five ways Portion of firms with strong revenue growth
- 13. 13 | Diversify, diversify, diversify… EXAMPLES OF DIVERSIFICATION Sell internationally 5 Have clients or a physical presence in more than one city4Operate in more than one sector3 Have multiple product or service lines2Don’t rely heavily on a single client1
- 14. 14 | Diversify, diversify, diversify… HOW ARE ALBERTA BUSINESSES DOING? operate in only a single sector7 in 10 rely heavily on a single major client4 in 10
- 15. 15 | Diversify, diversify, diversify… RESOURCES SECTOR RISKS AND OPPORTUNITIES 13% 37% 38% 43% 47% 63% 81% Physical presence in more than one country Operate in more than one sector Sell internationally Physical presence in more than one city Rely significantly on a single major client More than one product or service line Have clients in more than one city
- 16. 16 | Diversify, diversify, diversify… resources firms with clients in more than one city have strong revenue growth7 in 10
- 17. 17 | Diversify, diversify, diversify… WHY SOME BUSINESSES DON’T DIVERSIFY 8% lack of funds 27% no need or no interest
- 18. 11% for survival 25% for growth WHY SOME BUSINESSES DIVERSIFY
- 19. 19 | Diversify, diversify, diversify… INTERNATIONAL DIVERSIFICATION IS A MUST “You can’t just grow indefinitely in any one market.” - Blake Patras, President, Miquelon Meter Services
- 20. 20 | Diversify, diversify, diversify… WINNING STRATEGIES
- 21. 21 | Diversify, diversify, diversify… WINNING DIVERSIFICATION STRATEGIES Work with partners Pursue small contracts Fully harness existing assets REMEMBER The purpose of diversification is not only to grow, but also to manage risk.
- 22. 22 | Diversify, diversify, diversify… Follow us: BDC BDC_News @pierrecleroux THANK YOU BDC Entrepreneur bdc.ca/economist
Notas del editor
- Introduce presentation This presentation has three parts: We’ll start with an overview of where we are now in terms of challenges for businesses. We’ll talk about diversification and whether it’s a good strategy to cope with the impacts of today’s economic challenges. Finally, we’ll talk about diversification strategies that may help your business.
- Is diversification a good strategy to deal with the current economic challenges? At BDC, we wanted to find out. We did a major survey to answer that question. The results were a little surprising, even to us...
- The present situation is challenging and uncertain. The price of crude oil has declined by 60% since last year. I wish I could tell you the price will come back soon. But it is more likely the price will remain depressed for a while. The worst strategy would be to wait for the price to come back. The price will eventually increase, but nobody knows when and how much. Where will the new price equilibrium be? We don’t know.
- Resources companies have cut back on spending. As the oil price has fallen, resources companies have significantly cut operating expenditures.
- How are businesses responding? How is BDC responding? In this tough environment, companies are innovating to reduce costs. Some are seeking to diversify. At the Business Development Bank of Canada, we are Canada’s only bank devoted solely to helping entrepreneurs. We see the challenges every day as we talk to our thousands of customers in Alberta and across the country. Earlier this month, we pledged $500 million in financing to support the oil and gas sector and related businesses. We are also offering advisory services to this sector to diversify and adjust their operations to better weather the downturn.
- Is diversification a good strategy to deal with the current economic challenges? At BDC, we wanted to find out. We did a major survey to answer that question. The results were a little surprising, even to us...
- Our study involved a survey of 998 Alberta small and mid-sized businesses. We studied businesses of different ages, sizes and sectors. We looked at their levels of diversification and their financial results. The results show that many businesses face diversification risks, but that there are also some promising opportunities available.
- Diversified businesses financially outperform those that aren’t diversified. Nearly seven in 10 fully diversified businesses have strong revenue growth... (We define that as 10% or more average annual revenue growth in the past three years.)
- For the resources sector, we found that a key opportunity is having clients in multiple cities. This is the strongest predictor of revenue and profit outperformance for resources firms. Seven in 10 resources companies with clients in more than one city have strong annual revenue growth in the past three years. Meanwhile, just three in 10 companies with clients in only one city have strong revenue growth.
- Our clients appreciate the affordability of our services and the fact that they are tailored to their needs A study by Statistics Canada found that BDC Financing clients had higher sales growth than other businesses BDC clients using both financing and consulting services performed even better than non-clients, with up to 25% higher sales growth NAME OF THE STUDY Measuring BDC’s impact on its clients (July 2013) - A report published by Statistics Canada Available at : www.bdc.ca/smeresearch (External Studies)
- The more diversification a company has, the stronger its revenue growth. (Again, we define that as 10% or more average annual revenue growth in the past three years.) The fastest-growing firms are those that are the most diversified. Undiversified companies are the least likely to have strong revenue growth. What’s also interesting about this chart is that it shows even modest diversification has a major impact. Take a look at the companies that have the most modest level of diversification (that is, those diversified in just one way). They are more than two times likelier to have strong revenue growth than companies with no diversification at all. What are some of the ways companies can be diversified? [Go to next slide.]
- Here are the most common ways the companies in our survey are diversified. [Go over each bullet.] So how do Alberta companies do in terms of being diversified?
- For Alberta companies, we found some clear risks... but also areas for improvement that offer opportunities. One major risk is that 70% of firms operate in only a single sector.
- We also looked at various specific sectors. In the resources sector, companies are doing well in some areas, but... They also face some significant diversification risks... And they have opportunities to improve. We found that most resources businesses are well diversified in terms of having clients in more than one city and multiple product or service lines. But nearly half rely heavily on a single major client. And even fewer are present in multiple cities or abroad, sell internationally or operate in more than one sector.
- For the resources sector, we found that a key opportunity is having clients in multiple cities. This is the strongest predictor of revenue and profit outperformance for resources firms. Seven in 10 resources companies with clients in more than one city have strong annual revenue growth in the past three years. Meanwhile, just three in 10 companies with clients in only one city have strong revenue growth.
- Why don’t businesses diversify? This is interesting as well. The single most common explanation given is “no need” or “no interest.” That is the explanation given by over a quarter of Alberta businesses. Perhaps surprisingly, a lack of funds isn’t a common explanation. This was cited by just 8% of the businesses. The findings are interesting because they suggest there’s no real obstacle to diversification for most businesses—except a lack of will or interest. But our findings also show that these businesses should give diversification a second look—especially in this tough economy and amid the uncertainly about the future of energy prices.
- Our clients appreciate the affordability of our services and the fact that they are tailored to their needs A study by Statistics Canada found that BDC Financing clients had higher sales growth than other businesses BDC clients using both financing and consulting services performed even better than non-clients, with up to 25% higher sales growth NAME OF THE STUDY Measuring BDC’s impact on its clients (July 2013) - A report published by Statistics Canada Available at : www.bdc.ca/smeresearch (External Studies)
- I’d like to speak to you about the experiences of Miquelon Meter Services. They’re a manufacturer of gas and liquid measurement equipment in Edmonton. For their president, Blake Patras, diversification internationally is a must for growth. Close to 50% of their sales now come from outside Canada. Their biggest growth market today is Southeast Asia. Miquelon has partnered with provincial and federal government trade missions and Export Development Canada, which have helped open doors. Expanding abroad isn’t easy and requires multiple trips abroad and a lot of perseverance. But without diversification, this company wouldn’t be thriving the way it is.
- Is diversification a good strategy to deal with the current economic challenges? At BDC, we wanted to find out. We did a major survey to answer that question. The results were a little surprising, even to us...
- Our study also identified successful diversification strategies. Here are some of them: 1) Harness existing assets: When looking at how to diversify their business, entrepreneurs should start by asking if they are fully harnessing their existing assets. Can assets such as offices and other buildings, machinery and staff be used for other purposes without adding costs? How can you capitalize on skills you have already developed? 2) Pursue small contracts: Obtaining big contracts can be time-consuming and costly. It is generally easier to land small contracts, especially with new clients. Expanding gradually through small contracts also allows a business to manage its growth more effectively. 3) Work with partners: Diversification is much easier with a partner. Possible examples include businesses in related sectors, universities and technical schools interested in helping with product development and government programs and agencies that provide grants or financing for new product development. As we saw earlier, nearly half of resources firms rely heavily on single customer. What kind of strategies can work for them? We generally suggest that resources firms should rely on a single customer for no more than 20% of revenue. While sticking to this limit can be difficult, proven strategies include: seeking new relationships with key project or procurement managers; expanding the range of products or services offered; and taking on subcontracting work from firms that already provide the same services as you do but on a larger scale. Finally, keep in mind: The purpose of diversification is not only to grow, but also to manage your business risk.
- And on that note, I’d like to mention that at BDC, we have a very experienced team of consultants who can help you with projects like diversification, planning an acquisition, operational efficiency, e-commerce and Internet marketing. We’re in the business of helping Canadian entrepreneurs succeed, and we are on your side—so you can be confident that our advice is objective. Please don’t hesitate to contact us. If you want to learn more about e-commerce, I encourage you to download our free eBook. This presentation was partly based on the book, and it really is a great resource. You can find it by searching our website at BDC.ca for “e-commerce eBook.” Also look for our forthcoming eBook on operational efficiency, which should be available [later this month? -CHECK]. And with that, I’ll open the discussion to any questions you might have. Please don’t be shy.