Over the Last 9 weeks I have provided my thought process and guide towards managing a small business. While the term small is relative to a certain extent, it is applicable to any business regardless of size. The reason I categorize it towards small businesses, I routinely find the small business owner is actually a former worker within the business sector or even the very same company, or in some cases, someone who possessed a skill set or a simple desire to step into the self-ownership platform. In other cases it could be a person taking over from an older legacy company that the current aged ownership desired to step out of. In all of these cases, my philosophy provides the most benefit if there is a desire to refine and sustain, and even to grow the business, from its current state. This management philosophy which I have been reviewing will work to sustain a business long term and mentally stage the ownership to understanding what it takes to keep a business going, more than just using luck. If there is only a desire to maintain the status quo, and the general feeling is things are already good, the risk of failure for sustainability is quite a bit higher and hopefully luck will stay on your side to keep the business going.
I began the series by initiating the key firs step and the most important step of getting on the same page. Think Globally within the Organization is the key theme. Set the expectations at a higher level knowing the staff will ultimately rise only to the lowest standard of expectation and establish the culture to facilitate efficiency and growth. It is important to have everyone pushing against the same wall to move a force forward. Establish living documents for the business, financial, and marketing plans. This means they need to be under review and updated on a routine basis, typically annually. Communicate to the organization the vision, goals, and intent of the organization. You can then step into componentizing the business. Understand each segment within the organization and connect the linkage and interdependencies. Determine the drivers for success and consider every facet or step of completing a product or service. Determine and document how work flows through the organization. Target the major steps first then break down each major into minor, or sub steps. Each component should have their own process but dont be surprised when new components arise. Capture them and work them into the documents. The work and process flows are also considered living documents and should be reviewed at least annually, but in some cases more frequently, with updates as required. Again, it is most important to communicate to the organization.
Pricing is key to sustainability and can only be determined if there is a clear understanding of the total costs related to running the business. While this is typically done with the accountant or CFO, it is important to fully understand each component has a cost. Having this itemization in detail allows for adequate quoting. Understand the desired profit margins and develop a robust pricing structure. Allow flexibility for market changes and competition. Consider the many potential variable costing changes in materials, utilities, etc. Clearly communicate these changes to the organization. The level of detail will depend solely on the culture and trust within. Know the true health of the organization by tracking and measuring processes and components on a routine basis. Value added reporting is key to continuous improvement. Some measurements will be weekly while others are OK to do monthly or even longer durations. Start top line at first and transition to componentize as needed to understand the report drivers. Determine a course of action if the report shows less than desired results. Be realistic and fully understand what the report is presenting. Determine the root causes but dont over react for anomalies. Dont waste time running reports that no one looks at or reacts towards. Again
communicate to the organization.
The goal is to improve efficiencies and reduce costs. Think Globally within the Organization. Dig in to one component at a time and understand what slows production flow through the organization. Target low margin areas, negative reporting, high cost areas, etc. Employee input will deliver the best solutions as they have a vested interest in their personal frustrations. Be objective and filter out noise. Fostering a culture of non-threatening communication and non-threatening job sustainability will uncover things they see but wont tell without being asked. Be willing to test new ideas and provide realistic feedback. For larger changes, understand total project implementation to include initial costs, and the transition period. Measure progress and adjust where needed. Reward true success and communicate to the organization.
A few areas I did not dig deeply into were internal politics and detailed marketing. One of the biggest deterrents within an organization is internal politics. This is the process where something is activated or given primary status simply on the basis of personal connections as opposed to value added analysis or statistical merit. These are very sharp knives and can cut the organization very quickly and stymie growth and improvement. In many cases, these cause resentment leading to inefficiencies. Ive stressed throughout the series, the best approach is objective and non-personal thought processes. The most inefficient companies are high on internal politics and make decisions on whimsical, more than objective, opportunities. While no one likes to hear it personally, I can tell you without any doubt
youre not always right! You just may not have all the information needed to make an informed decision. Oh, and in case youre wondering, no one is always right! As for marketing, you can soak a lot of money very quickly into marketing and advertising. The key is balance. The shot gun approach will get to a lot of people very quickly. The rifle approach will hit only a select few. The key is to find someone you can trust that truly knows your market segment and target audience. They need to analyze your business and attack it with explainable and understandable justification to you as the business owner. And yes, sales staff can have goals and be measured in more ways than simple commissions.
Know your level of expertise and seek help where needed. You would be surprised how a reasonable investment for external expertise can produce a quick ROI. This is the last of the Improving My Business series, but certainly not the last of the business improvement and commentary. I will be picking topics adhoc and writing about them weekly. If there is something you would like me to write about, please send the topic to my email for consideration.