By Sunil SrivastavaFor most small & medium business owners and their management team, it’s often a challenge to take the time to stand back from the daily business operations and be able to take stock of their performance and long-term strategic issues. It is however imperative that they review their progress and understand how to get the best out of their business & implement the steps necessary to make them profitable & prosperous.
What makes a business tick?
Businesses that understand ‘what makes them tick’ are the ones that are most successful and profitable. They also do not develop complicated development strategies. They understand that the best strategies are usually the simplest as they are easier to communicate, understand and implement.
The simpler and easier it is for everybody to understand what delivers profit, the easier it is for them to align and support the strategy. The ability to identify and crystallize the most important performance metrics is a simple & effective way of communicating strategy. It also ensures that everyone is focused on a simple model that drives profit in a consistent & repeatable way. These businesses know the main business drivers and use the most important success metrics to monitor their performance against these drivers, and they use this information to ensure they have:
- winning products or services that people want to buy and will continue to want to buy
- clear objectives simply set out and communicated to all staff to motivate them
- a dedication towards continual improvement
- effective management information and financial control
- efficient services and distribution
- dedicated management with the right information & business responsibilities
- Compliant with regulations and minimum disruption to routine.
Business Ownership & Organization Checklist
Selecting the right business structure is a very important decision for a business owner as it affects personal liabilities, taxation and levels of control in the business. The wrong business & financial structure can act as a constraint on the development of your business and cause problems. Hence
having the right information should enable you to determine the right structure for your business.
Businesses can be Sole Proprietorship, General Partnership, Limited Liability Company, Limited Liability Partnership, C Corp, S Corp, etc. Make sure you talk to an Attorney / CPA to determine the right fit for you.
Use this checklist to determine if the business structure is right for you.
Management & Governance Checklist
A Business owner has to understand the value in their proposition to customers, including the tangible and intangible benefits their products or services provide.
Businesses must establish and manage the process for setting vision, mission, strategy and direction in order to achieve superior performance. These then need to be translated into plans, projects and actions throughout the organization.
Use of this checklist will help you understand the importance of clarity of vision, mission and values in a business’s offering.
Are You Creating Value through Your Business?
Your business has to add value. Make sure your selling price covers all your costs of production and promotion. You cannot sell below cost for very long without going bankrupt. Remember also that working more closely with your customers and suppliers can bring competitive advantage. Understanding the value drivers in your business is essential for maximizing your company’s
Use this checklist to look at the factors that can improve or destroy value for your business.
Are You Proactively & Effectively Managing Innovation?
Innovation is all about continuously moving ‘up the value chain’ and adding value in each and every product and service. Successful businesses understand the importance of innovation and incorporate processes into every aspect of their operation to innovate continuously. Innovation is essential for business survival in today’s highly competitive markets where it is increasingly difficult to differentiate between products and services.
This checklist covers the areas that you should consider to ensure your company manages innovation effectively.
Do you know your Business’s Financial Health?
A mix of daily earnings, equity, long-term/short term borrowing, creditors and lines of credit funds a business. It is important that the right balance is struck between these. Each has a cost and you have to be sure that you understand it and are able to pay it.
Understanding your financial position is an important step in evaluating the health of your business. Cash is the life-blood of any organization and must be closely managed to ensure the business can survive and grow effectively. Understanding the basic concepts of cash flow will help you plan for any unforeseen eventualities that may occur.
This checklist will help you analyze the financial health of your business and help you calculate the financial ratios that you need to know.
Do you know your Business’s Physical Health?
You have invested in physical assets such as machinery and equipment. It is essential that you get the most from your investment, but you must also keep an eye on replacement. Technological change is rapid. You should not allow your processes to become non-competitive. Effective asset management helps to improve productivity and performance and reduce costs. This checklist covers the areas that you should consider to optimize your company’s use of assets.
This checklist will help you analyze the physical health of your business.
Do you know your Market Dynamics?
Information about your market and your competitors will enable you to plan your business
strategy and your business structure better. While it may be difficult to build up a complete picture, you should seek to obtain as much information as you can from your customers, trade bodies, suppliers, competitors and the media. Getting a good understanding of how your market is expected to develop is essential if your business is to make the most of its opportunities and remain competitive.
This checklist looks at the competitive dynamics in your market.
Do you continually improve your business?
Quantity without quality could ruin your longer-term market prospects. Quality is a measure of your ability to meet the needs of your customers in a more cost-effective way than your competitors. Be careful to avoid ‘over quality’. Your products and services need only meet your customers’ needs and what they are prepared to pay, not exceed them.
Best value requires businesses to ensure continuous improvement in their performance,
and to demonstrate a commitment to sustainable development.
This checklist looks at the factors affecting quality in your business to examine where there may be opportunities for improvement.
Is your Team Optimized for Success?
Management is all about achieving success through people. Manage them properly and enable them to maximize their own contributions to the success of the business. Good people management is at the heart of achieving a successful, high performance business.
This checklist looks at the key criteria for achieving success through people.
Are you ready for Growth?
Consider whether you want or need to grow. If you decide to grow then do so in a manner that the business can sustain. Appraise the time it takes for you to bring a new project on stream. Match the market with all the resources necessary to achieve your objective. As markets mature, companies need to find new sources of growth. Businesses that are not growing through new product and service introduction are likely to be in decline, as their existing sales portfolio inevitably matures.
This checklist examines the key drivers for growth and managing growth.
Are you in compliance with Rules and Regulations?
Don’t let regulations put you off. An integrated approach to information will mean that many of the demands of the tax man and others can be met from the same information source that enables you to run your business better. It is important that you comply with statutory and other regulatory obligations. Non-compliance is costly and could put you out of business.
This checklist covers the key areas of compliance that businesses need to be aware of.
In summation, the on-going economic downturn means that now, more than ever, small companies need to take a good look at the fundamentals of their businesses, and understand how they can improve performance, strip out any unnecessary costs and focus on the right strategy to survive and take their businesses forward.
When times are tough, knowing exactly what you are facing and being realistic about what needs to change will put your business in better shape to respond quickly to further changes in the market (be they positive or negative) as they occur. Using these checklists will place you in a better position to understand areas of weakness in your business and your potential exposure to the downturn. However, the key thing is prioritizing which areas require immediate attention
and identifying appropriate actions to deal with them.
Suggested actions you could take:
- Improve your decision making – With all the information & insight you have gathered, value creation & creating a competitive advantage should drive all your business decisions.
- Seek fresh perspectives: Business owners and managers are often so close to the action that they lose objectivity. It might help to talk to a trusted professional such as your CPA, Accountant or mentor.
- Evaluate your Strategy: Now that you have access to more current and relevant data, evaluate your strategy and see if it aligns with your mission, vision and core values.
For most Small & Medium Business (SMB) owners and their management team, it’s often a challenge to take the time to stand back from the daily business operations and be able to take stock of their performance and long-term strategic issues. It is however imperative that they review their progress and understand how to get the best out of their business & implement the steps necessary to make them profitable & prosperous. This is especially true if there have been recent changes to their business, their market or the economic environment that they operate in. SMBs often fail because owners are unaware of the many aspects that can prevent their business from growing and being successful as the business is organized around the owner’s specific area of expertise, such as marketing, accounting or production and they are not able to see the big picture.
In the first part of this article, I am going to discuss the importance of a business audit, the importance of understanding your business, how & why to develop a business plan and the role of performance metrics. In the second part I will be sharing a number of checklists which will help you analyze your business and benchmark performance standards for the future and also suggest possible next steps.
HOW TO USE THIS AUDIT
If you want to get the maximum benefit from this audit, please make sure that you read through all the material and honestly answer all the questions, with an “Yes” answer indicating no problem and a “No” answer indicating a problem in that area.
This audit is more than a simple audit about management or finances. It provides an overview of the core aspects of your business including its soul i.e. Vision, Mission & Values. Apart from that, the type of organization you are, value proposition, innovation capability, physical assets, marketing, advertising & public relations, financial planning, human resources, growth plans and governance & compliance are also covered. Once the audit is complete, you must & analyze each section of the audit to develop an action and next steps.
A healthy & successful business is well rounded and all the core areas are well balanced. The audit will help the business owner/manager identify the areas that need to be worked on and regular audit will help the business become more adaptive, efficient & prosperous.
Now, more than ever, businesses need to make sure that they are:
· Headed in the right direction
· Competing in the right markets, with the right products and/or services
· Optimizing their market situation - performing better than the competition
· Using the right mix of assets, skills, finance, infrastructure and relationships that enables them maximum value to their customers
· Minimizing the costs that do not add value to their business or customers
· Aware of external environmental changes and are building the capability to respond quickly to new opportunities or threats
· Measuring their performance continuously so that they are always aware of their current performance and the successes or failures of their strategic initiatives.
Two recent articles, Rich Entrepreneur: The Wealthy Aren’t Job Creators, Middle-Class Workers Are by Bryce Covert & The Next Social Contract by Michael Lind that I read have quite succinctly point out why the American middle class is struggling while the top 1% is better off than ever before in history and also call out the fallacy that "the Super Rich (1%) are the job creators".
Bryce Covert writes that "Entrepreneur and self-described one percenter Nick Hanauer warned Congress that rich people like him aren’t the engines of the economy. In a testimony before the Senate Banking Committee, he explained why, in fact, middle-class workers are the economy’s real job creators:
In the same way that it’s a fact that the sun, not earth is the center of the solar system, it’s also a fact that the middle class, not rich business people like me are the center of America’s economy. […]
As an entrepreneur and investor, I have started or helped start, dozens of businesses and initially hired lots of people. But if no one could have afforded to buy what we had to sell, my businesses would all have failed and all those jobs would have evaporated.
He described what he calls a “virtuous cycle” in which middle class consumers have money to buy goods, which increases demand and therefore hiring. The rich, on the other hand, don’t fuel the economy with their consumption in the same way. “I earn 1,000 times the median wage, but I do not buy 1,000 times as much stuff,” he noted."
On the other hand, inspite of record corporate profits and sky high CEO compensations (which only recently are seeing a downswing), as per a New America Foundation report, minimum wage has changed little in the last 50 years. Come on, 50 years and the majority is still making what they did a half century ago? Prices for everything are changing as they are keeping pace with the changing times, then how come we don’t have a "Living Wage"? Shouldn't the minimum wage keep pace with the changing times?
In the op-ed “When Capitalists Cared”, author Hedrick Smith states that “In 1914, not long after the Ford Motor Company came out with the Model T, Ford made the startling announcement that he would pay his workers the unheard-of wage of $5 a day.
Not only was it a matter of social justice, Ford wrote, but paying high wages was also smart business. When wages are low, uncertainty dogs the marketplace and growth is weak. But when pay is high and steady, Ford asserted, business is more secure because workers earn enough to become good customers. They can afford to buy Model Ts.”
He goes on to note that “Other executives bought his logic, and just as important, strong unions fought for rising pay and good benefits in contracts like the 1950 “Treaty of Detroit” between General Motors and the United Auto Workers.
Riding the dynamics of the virtuous circle, America enjoyed its best period of sustained growth in the decades after World War II , from 1945 to 1973, even though income tax rates were far higher than today. It created not only unprecedented middle-class prosperity but also far greater economic equality than today.”
When Hedrick Smith talks about the “virtuous cycle” he is pointing to the fact that employers like Ford, GM, Chrysler, etc. at that time understood the importance of paying their workers a livable wage. A wage from which a worker could raise a family, save for the future and hope to live a virtuous life, meaning they did not need to depend on anybody else’s pity or handout. And he also points out that even though taxes were higher then, than today, it created a very prosperous middle class and thereby upward mobility & greater economic quality.
We now seem to have the case of the “Vicious Cycle”. This phenomenon started quite a while ago and one of the earlier instances were seen after the 2001 dotcom crash. Even during those times, Wall Street Executives & CEO’s got huge salaries & even bigger bonuses. It did not even seem to matter that those same companies are laying-off massive number of employees. The New Straits Time (September 3, 2001) reported that even as companies laid of tens of thousands of employees (CISCO- 8500 Dell- 5,800), their CEO’s John Chambers & Michael Dell made roughly US$157 million & 201 million respectively. And that was just the beginning. A similar scenario was repeated during the 2008 financial meltdown. Even while the whole economy was crashing, massive layoffs were taking place and the Lehman Bros were imploding, senior executives at firms such as AIG, Goldman Sachs, Chase, BOA, Countrywide, etc. were giving themselves huge salaries & bonuses. This transition from “Virtuous Cycle” to “Vicious Cycle” over the past 2 decades has not only led to major layoffs but overseas shipping of most of the manufacturing and support jobs, salaries cut across the board, health benefits & 401Ks decimated.
When employers devalue a workers work and pay them lesser than what they were being paid for the same work even an year ago, what did they think was going to happen? When the worker can only pay for the essentials, their disposable income goes down and they start cutting down on other expenses and this leads to even lesser services or cheaper products from businesses as that becomes the new normal. With cheaper products or poorer services, the workers make even lesser money and in return they can afford even less and hence cut further back on their spending. The bankrupting race to the bottom continues and the “Vicious Cycle” continues until the only ones left are the very rich or the very poor. That scenario cannot be good for the economy. And that’s why squeezing the middle class is not good for the economy.
Does David Brandt hold the secret for turning industrial agriculture from global-warming problem to carbon solution?
—By Tom Philpott
)CHATTING WITH DAVID BRANDT outside his barn on a sunny June morning, I wonder if he doesn't look too much like a farmer—what a casting director might call "too on the nose." He's a beefy man in bib overalls, a plaid shirt, and well-worn boots, with short, gray-streaked hair peeking out from a trucker hat over a round, unlined face ruddy from the sun.Brandt farms 1,200 acres in the central Ohio village of Carroll, pop. 524. This is the domain of industrial-scale agriculture—a vast expanse of corn and soybean fields broken up only by the sprawl creeping in from Columbus. Brandt, 66, raised his kids on this farm after taking it over from his grandfather. Yet he sounds not so much like a subject of King Corn as, say, one of the organics geeks I work with on my own farm in North Carolina. In his g-droppin' Midwestern monotone, he's telling me about his cover crops—fall plantings that blanket the ground in winter and are allowed to rot in place come spring, a practice as eyebrow-raising in corn country as holding a naked yoga class in the pasture. The plot I can see looks just about identical to the carpet of corn that stretches from eastern Ohio to western Nebraska.
But last winter it would have looked very different: While the neighbors' fields lay fallow, Brandt's teemed with a mix of as many as 14 different plant species.
The tricky task of balancing work and personal life is an art form for most small-business owners. Feeling pulled in every direction? Learn some ways to achieve balance in your life.
Yes, business owners, small or big should be concerned with data breaches. In today's digital world, where almost all the business is being conducted with the help of computers, loss of data can bring your business to a standstill. It can also lead to loss of intellectual capital or competitive advantage over others.
Below is a great infographic that will help you protect your business and your future against data breaches & privacy issues.
Small businesses play an essential part in powering our economy, but only if they can achieve success. Below are a list of common mistakes made by Small Business owners – do any of them look familiar to you?
Review the below infographic below to learn more on how to prevent the most common mistakes for small businesses that lead to failure. Help your business achieve the success that it deserves.
For many marketers, the new age tech & tools that are available for marketing are almost as exciting as a trip aboard the USS Enterprise (obviously nothing can equal that experience). Modern marketing & marketing teams have gone through a paradigm shift in their roles, capabilities, and new worlds to explore that marketers could have only dreamed of just a few years ago. Below is an infographic that highlight the ways in which the marketing discipline is changing and the futuristic new technologies marketers currently have at their fingertips.
Every business, especially start-ups, need new customers and hence spend a great deal of their limited time engaged in prospecting. The most common mistake they make is depending overtly on "cold calling". It is definitely one of the ways, it is absolutely not the most effective one. In fact, as stated below, there are quite a few other ones out there. A better idea is to mix them up and see what works best, because converting a "cold prospect" into a "warm client" is not an exact science but rather an art that is perfected over years of trial & error .
1. REFERRALS - MAke friends & influence people.
2. CONTENT MARKETING - Educations based marketing.
3. NETWORKING - Meeting people & promoting your product / service.
4. eMAIL MARKETING
7. SOCIAL NETWORKING
8. FOOT PROSPECTING - Going Door to Door
9. ADVERTISING - When you do have the money
What do you think? Do you have a better approach you would like to share? If you need help acquiring new customers or retaining the existing ones, feel free to contact us.