6 simple steps to a better business
How often does the sexy stuff like attracting new customers, corporate image or customer satisfaction take all the airtime when you talk about growing the value and profitability of a business? These topics are extremely important but often what gets overlooked, at least initially, is truly challenging what’s already in our own backyard. Ask yourself these questions:
- How profitable is the business that you already have?
- How can you improve return on the investment you have already made?
- Can you achieve a better result from the resources you have already deployed?
Business owners will often get caught out thinking that the only way to grow profit is to grow sales, but there is so much getting left on the table in many instances. If the issues that cause this underperformance aren’t addressed, the reality is the problem will only get worse if you grow customer numbers – you are simply masking the problem!
The good news is that this is an opportunity. Attracting new sales can be expensive – improving what you already have is usually a time investment (particularly in a service based business) with a substantial reward. Following are my six steps to getting more out of what you already have.
Get your starting point: The first step to getting a better result is to understand where you are now. You need to identify some measurable efficiency indicators so that you can work out your starting point. This can be a daunting exercise as you may not like how the numbers come out, but in order to make the shift, you need to truly understand where you are right now. There are countless indicators out there, but some examples that might be relevant for you are – job turnaround time, average hourly rate, profit per person, inventory turnover, response time, lock up, units per day, build time, retention rate and the list goes on.
Identify strategies: Once you have identified the indicators that are relevant to your business, the next step is to do some brainstorming of some strategies that you could implement that would effect change in performance that you are looking for. For example, if your indicator was profit per person, what could you do in your business to increase this number? If it was job turnaround time, how could you make it quicker? The more strategies you come up with at this stage, the better you will be placed as this part is all about quantity of ideas which can be refined later.
Set some new targets: Now that you know where you are, and have some ideas as to what you can do to improve your current indicators, it’s time to think about what those indicators would need to look like for you to be happy. It’s good to have someone external help with this process as they are not as emotionally attached to the business as you and are better positioned to challenge the thinking around what is possible. Try not to limit the targets to what you know based on prior performance – it’s really important to challenge yourself. Ideally the targets would be a stretch but still achievable and if you think there would be a benefit to breaking them down into smaller pieces, set some milestones along the way.
Work out the upside: The fourth step is probably the most important. Take the new targets that have been set and overlay them into your business forecast, without this step you will never know the direct impact on cashflow, profit and value. What are you currently leaving on the table? This is the slap in the face moment where you see that what might appear to be a highly profitable business could be a whole lot better or where you see that a loss making business could be making a significant profit. This is the part that will make you do whatever it takes to make these changes.
The action plan: Refine, prioritise, allocate and set timeframes on your identified strategies. ie turn them into an action plan. Make sure someone is accountable for every action and that they truly understand what it is that they are responsible for, why they are doing it and when it needs to be done by.
Implementation: Following that is the critical step that will determine if you take your business to bigger and better things, or if you’ll open up the doors tomorrow and do the same thing you did today. This is implementation (See my implementation post HERE).
If you want to see the results you identified at step four, you need to take your action plan and begin implementing the strategies that you have identified. If you need help from the people around you to make it happen, ask for it. If it makes sense to pay incentives to team members to get them implementing for you, pay them. If you need external help to get it done, send me a note. Now is not the time to run away from the plan, to make excuses or say you’re too busy – this is where the change happens.
A lot of the strategies that come out of this type of exercise will be based around your systems and processes and making sure that they are not only structured in a way that gets you the best outcome, but also updated as appropriate and consistently enforced. A process that is not enforced might as well not exist – do you have any of these in your business?
Not all of the benefits will be seen immediately in your bottom line as the thing about efficiency improvements is that often, rather than produce additional profit, they create additional capacity - from there, we go back to the sexy stuff to work out how to fill it and get a supercharged result.