What Is Your Goal?

I just finished reading The Goal: A Process of Ongoing Improvement.   It was an assigned reading for an Operations Management class, and I wasn't looking forward to reading it.  After all, how interesting can a book about business operations be?

Turns out it was quite insightful.  Originally written in the early 1980s, it introduced the Theory of Constraints, a management philosophy that can help organizations to work toward their goal.  It made me wonder how many companies know what their goal is?  How many have identified their goal, but don't effectively work toward it?

Do you know what your goal is?  Are you doing everything you can to achieve it?

Money Talks; Bullshit Walks

On Monday I wrote a post about reviewing business performance, and I got lots of great responses in the LinkedIn groups where I posted it as a discussion topic.  There were many different ideas about what metrics are most important, including customer retention, employee satisfaction, and marketing effectiveness. 

Each of these measures are helpful, as are countless others.  However, for startups and small business with limited resources the measures that matter most are financial, specifically cash flows and operating profit.  Customer and employee satisfaction don't matter if your business isn't profitable (and low prices and high wages might be what made them happy!).  Even effective marketing campaigns mean little if you can't afford to pay for them any longer. 

Businesses need to have their finances in order before they worry about other success factors.  No other measure matters if the company can't stay in business.  Without cash everything else is just bullshit.

Reviewing Business Performance

The first quarter of 2010 is now behind us, and it's time for businesses to look back and see how they did.  There are typical measures of success that many companies use:

• Did we make our target numbers?
• Did we do better than first quarter of 2009?
• Did we do well compared to our competition?

All of these are valid questions and can give a company insight into their business compared to their projections, their historical achievement, and the rest of their industry.  But does that really indicate whether or not a business is doing well?  Should you be pleased your company is doing a little better than others in an tumultuous industry?  Should you be upset if you don't achieve budget numbers that were overly aggressive?  Is it really smart to gauge year-over-year success compared to the worst economic period in recent history?

As corporations report these types of numbers their shareholders will overreact as usual.  Good companies will see their stocks devalued because of slow growth, and share prices in a few mediocre companies will increase based on performing a little better than expected.

Small businesses, however, have the luxury of looking at the big picture.  Can you meet your short term obligations?  Do you have a product/service mix that satisfies your customer base?  Is your company well positioned for future growth?  These are the types of questions that monthly/quarterly/annual reporting should attempt to answer. 

Over-Planning Causes Inaction

Last week I wrote this post sharing my social media strategy as it is today.  I received a ton of great feedback!  Thanks to everyone who commented on this blog and in the group discussions it was posted in.  One reader, Mike Y, left a comment offering to review my LinkedIn account and my website.  I accepted his offer and we continued our discussion via email.

I had mentioned that I plan to rebrand my website in a couple of months after revising my business plan.  His response was to "rebrand now, while it is ripe and your efforts don't go to waste, the investment is minimal."  This really got me thinking about my current approach.  Perhaps I spend too much time planning and not enough time acting.  Don't get me wrong, I still think business planning is critical (I've written about it here and here, plus it's a service I offer as a consultant).  I just think maybe I need to move through my planning process more swiftly.

Has anyone else found themselves having to choose between careful planning and swift action?  Which do you tend to lean towards?

Oh, and if anyone would like to see what other insights Mike has on e-Marketing check out his latest blog post below.  I've looked at a few of his other recent posts and it's pretty useful stuff!

http://diywebjem.com/blog/2010/03/30/maximize-your-linkedin-profile-and-expand-your-web-traffic-and-business/

Outsourcing Should Be A Win-Win

My grandfather worked in the same factory for 30 years.  He worked his way up the ladder (and pay scale), and they paid his retirement benefits until the day he died.

Those days are long gone.  Retirement plans have given way to 401Ks.  Employee promotions are pretty rare.  Most companies view their employees as expendable.  Many employees see their employers as nothing more than a means to an end.

Employees often fear their job will be outsourced, and this can be very scary.  However, the best, brightest, hardest working people can see this as an opportunity.  Why should a talented worker be stuck in a dead-end job with company that doesn't care about them?  Instead the top performers can offer their knowledge and skill to a multitude of companies that are willing to pay for their expertise as an independent contractor.

When done effectively outsourcing should be a win-win scenario.  Businesses win because they have someone reliable handling their affairs.  Talented workers win because they work with businesses that understand the value they provide.

The only people that lose are the under-performers.

Small Businesses Need Business Plans Too

One great thing about small businesses is their ability to produce results.  They don't have to worry about many of the things that slow down corporations like stock prices and endless reporting.  With less administration needed they can spend more of their time generating revenue and growing the business.  But how should the business grow?  Where should the business go to find new customers?  What products or services can be included to help the company succeed?

These questions (any many others) should be answered by creating a business plan.  Business planning is critical to any business's success, but all to often is overlooked by smaller companies.  It's also important to review your business plan on a regular basis (monthly, quarterly, annually, etc.) and make revisions as needed. 

Below are links to a couple of great (and free) resources to help start the planning process.

http://www.sba.gov/smallbusinessplanner/plan/writeabusinessplan/index.html

http://www.entrepreneur.com/businessplan/

Nobody is Great at Everything

I spent some time this weekend working on a SWOT Analysis for my consulting business.  I've done them before, both as an undergrad and as a grad student, and I've always found them easy.  But this one has been particularly difficult.

It's tough to analyze ourselves because it forces us to admit there are things we aren't so good at.  That's never fun on a personal level, and it isn't fun for a business owner either, particularly when it's a one-person business.  But it's necessary to recognize the things we don't do well so that we can structure our businesses accordingly.

If you're bad with finances hire a bookkeeper.  If you don't understand technology hire an IT professional.  If you need help with marketing hire a consultant (like me!).  If you are really good at performing a specific function (like a doctor, lawyer, plumber, etc) but have no business skills maybe you should consider taking on a partner.

It's best to determine your strengths and weaknesses up front so you can plan your business accordingly.  As for my SWOT Analysis, I still have plenty of work to do.  I think I'll need to outsource a few things (like web development) so that I can focus on playing to my strengths.

Startup Advice In Exactly Three Words

I was browsing discussion topics and news items posted in my Linked-In groups yesterday and this article caught my eye:

http://onstartups.com/tabid/3339/bid/11539/Startup-Advice-In-Exactly-Three-Words-StartupTriplets.aspx

It's a collection of 50 pieces of advice for start-ups, all of them three words (as the title suggests).  I think it's worth a look.  Some of my favorites:

• Defer renting space.
• Sell something today.
• Respect your competitors. 
• Cancel unnecessary meetings.

My least favorite:

• Avoid business plans.

Check it out and see if any are right for your business.

Clients Don't Want Advice, They Want Results

In doing some research this weekend (the not so glamorous life of an MBA student) I came across an interesting bit of information about strategic consulting:

Recent trends have shown clients to be tired of strategy in itself.  They have become increasingly sophisticated consumers of strategy consulting services, and are looking for results that can be implemented quickly.  Clients have become more results-driven with the result being a greater desire for compensation to consultants being tied to these results.

The above is from the Business and Company Resource Center, a proprietary database that I can't paste a link to (check out your local library for access).  It's a short excerpt from a much broader industry analysis, but I think it makes two notable points:

•  Clients want to be able to implement changes quickly.  They have a problem, and they want to hire someone to fix it ASAP.

• Clients are more inclined to hire a consulting firm whose compensation is based on achievement of predetermined goals. 

Both of these points can be good for clients.  They force the client and consultant to determine what their objectives are up front, and they ensure that incentives are aligned accordingly.

However, both of these points have their drawbacks.  Being held to a rigid time-line and agenda limit a consulting firm's ability to advise.  Consultants that are paid to complete a specific task will complete it, even if it is not in the client's best interest.

Keep Yourself and Your Employees Well Informed

One of the things I like most about small businesses is that they can be much more flexible than larger companies.  There are fewer layers of management to convince, no board of directors or shareholders to placate, and far fewer regulations to consider.  Because of this fewer resources are wasted on generating mountains of reports and a never-ending series of meetings.

But some reports and meetings exist for practical purposes.  All companies need to have insight into their business.  Every business should be able to answer some basic questions:

• Are we making a profit?  
• If we are not yet profitable are we doing the right things to become profitable?
• Do we have enough available cash to run our business?
• What are the amounts in our Accounts Payable?
• What are the amounts in our Accounts Receivable?

There are countless other questions that should be asked regularly.  Most large businesses so this automatically as part of their month end closing process, and small businesses should do the same.  It is important to do this every month to catch problems early and ensure that the company is moving in a productive direction.

It's equally important to make sure everyone in your company knows how the business is doing.  While you don't necessarily want all employees to have full access to your financials (unless you have an open-book management policy), make an effort to let everyone know about your successes and failures.  A quarterly or semi-annual meeting with everyone is a great way to keep employees informed, and it can also be an forum to receive valuable feedback.