I know from my own experience in running a business that sometimes I want to see things the way I would like them to be rather than as they are.
To cross that line and take a deep hard look at things requires a particular disposition which, as I have indicated in the past, is the ability to move from denial to openness.
So here we go with my simple checklist for those who want to pursue the rather intimate process of examining their business in a disinterested and objective process.
1/ The starting point is to really want to know the real as against the perceived facts, no matter how hard it might be to accept them.
You cannot move forward unless you know where you are. No matter what stage of the business, you are always at the starting post. And unless you know where that is, it isn’t possible to identify where you want to go.
The cold hard facts of the business determine the starting point from day-to-day. The ability to frequently look at these facts, digest them and respond to them positively is critical to success and growth.
2/ To get the facts it is necessary to have a rich relationship with the other people in the business, commonly called “employees”.
They acquire an enormous amount of data in an osmotic process that often goes unnoticed, even to them.
However, by creating an atmosphere of listening and responding to feedback from employees, communication about real issues as against perceived issues is likely to emerge.
You will be the first to know that someone is contemplating leaving rather than the last. You will be the first to know about customer dissatisfaction before it shows up in the order book rather than the last, and you will be the first to know what your competitor is up to rather than finding out when a customer has defected.
Without this close relationship of mutual trust, the danger is that you will discover the bad news from the balance sheet or order book, which is too late.
It is almost certain that people in the organisation will know what is going to happen before the figures are recorded in the books of accounts of the business.
3/ A serious consequence of not maintaining this relationship of mutual trust with employees is a risk of high staff turnover, which can be an immeasurable cost to a business.
Studies have consistently found that about 67% of employees who leave a business voluntarily do so because they felt that the business didn’t care about them.
4/ Product relevance is critical to survival and growth, and there are plenty of ways of measuring this.
Unfortunately, one way is to look at the order books, but once again this is a history book.
When a problem occurs, the order book records that problem. The fact is that the problem has already occurred and the order book is just telling you. That can be too late.
Just as it is important to maintain mutual trust with employees, it is equally necessary to develop the same relationship with customers so that if customers are having difficulty with the business, they will feel confident to tell you so that you can respond to their difficulties.
5/ A serious consequence of not maintain a relationship of mutual trust with customers is the risk of high customer defection.
And as we know it is much more expensive to get a new customer than to sell to an existing customer.
Studies have consistently found that about 67% of customers defect from a business because they feel that the business didn’t care about them.
6/ Positive cashflow is critical to the survival and growth of a company.
This is such an obvious fact that people might wonder why on earth I would dwell on it in a blog. Everyone knows that.
This is undoubtedly true but the fact is that different people have different ways of interpreting it. Orders for future delivery are not cash. Debtors are not cash. There is often a temptation to look upon debtors as cash, because that is the way the taxation office likes us to do business.
Generally speaking, a profit and loss account for a business is calculated on what is called “an accrual” basis of accounting.
That means that the moment we make a sale, even though the purchaser is not going to pay for some time (and it is interesting that at the moment, payment time for debts has increased to almost two months) but in the meantime, the amount of the sale is treated as income from which costs are deducted to calculate the profit.
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