Is your business dysfunctional?

Depending on how detailed or granular you want to go, almost every business can be broken down in to 8 core areas or “functions”.

 Our experience shows that most owners are good at 2 or 3 of them, adequate at 2 or 3 of them, and pretty poor at the rest!

This is where, often unknown to the business owner, significant dysfunctionality is present, causing frustration and limiting growth.

 If this related to your health, or indeed your car, you would take it to an expert for a diagnosis.

 So, we have built one for your business!

 Our Business Potential Diagnostic has been built up over many years, enhanced by hundreds of applications, with real world input from real life use cases. It examines over 150 business fundamentals across 8 functions to build back up to a plan of where improvements need to be made.

The basic premise is to analyse items for:

·        Systemisation

·        Evidence of that systemisation (or does it just exist in the owners head…)

·        Application – if it exists in any form, is it used?

·        Functionality – if it is used, is it fit for purpose?

·        Who “owns” it?

By understanding all this at an appropriate level you can quickly build up a clear and absolutely accurate picture of where a business is dysfunctional. In fact, it can only be accurate because all the inputs are from the Executive and it works because it challenges all the relevant aspects of a business.

It is truly sector agnostic and applicable to any business with 5+ staff, up to c￡10-15m in sales. It is appropriate where any kind of improvement is desired, be it recovery, growth or for a specific purpose like an exit strategy. A topical example would be a job description for a senior recruit, advisor or MBO / MBI candidate.

 The FIRST of the EIGHT functions relates to General Indicators of value

The most obvious metrics here are turnover and profit, but of course it is not as simple as that!

Here we challenge the factors that influence overall performance, looking at important aspects like the levels of control and analysis that are present – not just financial – along with the understanding of target markets and how important “softer” aspects like branding and culture are. These are just a few examples of the 15 aspects we consider here.

Our experience shows that most founders or owner-operators are primarily technical or operational in their business, and don’t really consider or appreciate the value of such things. This is a good example of our catchphrase “know most of the answers but aren’t always asking the right questions”!

The second of our 8 parts covers Leadership & Vision, a fascinating “soft” subject. 

In our experience many small business “leaders” are primarily technicians (in E-Myth speak), meaning in simple terms that they are strong in what they company actually does, also probably how it does it, but from what we see not always in the more commercial aspects of a business. 

We have had great successes with principals who are highly intelligent and qualified, usually hard working and determined. Often, however, no one has ever taught them how to turn make their chosen profession a viable entity. Dentists, solicitors and even accountants are great examples here.

If the leader cannot lead his team to a shared objective, then creating a decent business is going to be tough. In this section we analyse 23 individual areas covering things like the overall objective, plan to achieve this, and how it is communicated to and implemented in its community, internal and external. Management time, style and autonomy are fundamental here, as is clarity of purpose and the culture that all this creates.

Are the team working with you, for you or in spite of you? Good questions…

The third area is Personnel

Many small businesses don’t have genuine IP, copyrights or trademarks that can be legally protected. What they do have, often in vast quantities is "know how", “trade secrets”, goodwill and personal intellectual property, often wrapped up in the people, all too often wrapped up in one person, the Principal!

This area covers people. It’s a cliché but virtually all small businesses would be nothing without the staff. It’s also a key concern of a backer, acquirer or indeed customer that it might be vulnerable if too much of this lies with one person, or a very small number of people. 

Systems & processes help here of course but the real key is having good staff, well motivated, trained and led, properly structured with appropriate accountability against job descriptions. These are just a few of the headlines of the 18 areas we interrogate.

Lose that inner control freakery and see how to gain control by granting control!

Marketing is next, part 4 of 8

Sometimes what you don’t know can be more valuable that what you do. More specifically, how can these be addressed as opportunities? For the owner of a small business the answer is often to focus on what you’re good at and get someone else to do the rest.

Generally, along with Finance, Marketing is a weakness for many owner-operators. 

Marketing is a distinct skill and is very different from sales (a typical strength), so a good area to ensure there is a competent team, supplier or both.

It’s a massive area and can be very complicated, which all too often leads to it being ignored. A sizable proportion of small businesses have no proper marketing plan, certainly not a strategic one with adequate resources behind it. 

Here we start off with understanding the strategy and the clarity of USP’s, all the way through a clear budget and communication process, and understanding of the entire “eco-system”.

Growth comes from increased sale of course, but where do the increased sales come from. You got it!

Sales is part 5

Our experience shows that selling is a strength of many Principals, probably because they are passionate about what they do. And they own the Company. And they are very focused on bringing in cash.

All this is great, until they don’t want to be there, or when they run out of bandwidth!

A major concern any buyer (or “supporter” generally) of a business is the reliance on one or a small number of people. If that one person no longer wants to be there – for example when he sells up to retire – and he is the main selling resource, then there is a problem.

To alleviate this the sales function needs to be delegated, outsourced or rely on a robust process, all of which is obvious and easy to talk about, but harder to implement.

We identify the critical steps and actions by challenging the existing scenario with a knowledge of what good solutions exist. Applied intelligence means these can also be implemented AND make a difference.

We look at 19 areas underpinning a good sales function from acquisition cost, lifetime value and profile identification, to some simple metrics like concentration, repeat & referrals.

Sell more whilst doing less!

Remember though, selling more is not always the right answer, but selling better probably is!

The sixth of the 8 areas on our Diagnostic covers Operations and Activity – quite a broad subject.

This is of course different implications for every business, even those that are broadly similar. Owner-operators tend to have expertise in this area as they are first & foremost “technicians” as opposed to commercial for example. This is the area where they imprint their personality in everything the business does, which is (usually) a good thing. It’s also (often) a bad thing as it tends to be the bit that is about them, not delegated, and not well systemised, but has subsequent implications that are obvious to all but themselves!

In this area we look at simple process driven items like stock control, WiP & scheduling, through softer areas – supply chain security and source of innovation – through to mission critical factors like KPI’s, quality and contractual implications.

Get this bit wrong and failure is inevitable, the reverse is also true (if you’ve got your numbers right)!

Do you know yours? 

Next comes the elephant in the room, Finance, the 7th of 8 areas interrogated in our diagnostic.

This really is the most important and usually the elephant in the room. A good understanding and processing of financial systems and metrics will underpin - or indeed undermine – any venture.

It often represents the greatest weakness and opportunity, but it has its challenges. Why is that?

1                    Most owner-operators are not good at the financial side

2                    Most owner operators think they are good with their finances

3                    It is the area they are often most reluctant to delegate or outsource

4                    It is hard for them to acknowledge what they don’t know

5                    Many rely on simple “cheque book accounting” (what an anachronism that is!)

Our Diagnostic analyses everything from the understanding and use of KPI’s, reporting and systems, through to benchmarking and the “ownership” and management of all debt, personal and debtors for example.

Cash management – and cashflow – is the real king, treat with the respect it deserves and you will be rewarded with gold!

Do you know how your financial function looks from the outside? 

The good news is that is an obvious solution that is very good value. If you don't know the answer, ask us!

Systems is the last of our 8 “business fundamentals”

 Easy to neglect but important for many reasons, namely efficiency, control, management information, integrity and, most importantly, removing it from a human (especially if that human happens to be the owner!)

Why then, are these often issues in small businesses? With a hint of cynicism, we would suggest that the owner likes neither change, nor letting go, probably not the investment in time and money either.

We cover 23 aspects here, from compliance and statutory record keeping, through policies and procedures to business critical systems like cash management.

All of these things will come up if your business is challenged for any reason, a due diligence exercise for example.

Get them in place under your own timetable before there is duress or urgency – you may not be aware of what you are missing but we can find it!

So there we have it. All this knowledge can be yours for a small investment in time & ￡'s. Check out our free online short version at https://businessassessor.co.uk/, or drop me a line on LinkedIn.