As anyone who has ever run a business will tell you, one of the biggest challenges is finding the time to step-back and look at the bigger picture.
Far too many businesses get caught-up in the grind of day-to-day operations, focussing on the next marketing campaign, client problem or growth target instead of the strategic direction of the company.
But in taking this approach, a business runs the risk of becoming stagnant and unprepared. When something changes – demand shifts or the market expands unexpectedly – it could be caught flat-footed and not able to respond to the opportunity.
The early months of a new financial year, or Christmas break are the perfect periods to give yourself the time and space to pull back and review your entire operations. The end of financial year pressure is off, and you have a clear view of the 12-months ahead.
But what should this ‘spring-cleaning’ process look like? A good idea is to get away from the business and go somewhere offsite where you’re not constrained or interrupted by the demands of the business.
For bigger businesses, you’ll want to involve your leadership team in the process. Smaller operations should involve any partners in the business, or call on the services of a trusted business advisor. Where possible, avoid involving family members external to the business as they may not give you the independent, objective opinion you require.
Make sure you have data to draw on throughout the review. One of the biggest mistakes businesses make is to rely on gut feel alone rather than hard facts. Seek the data to support your decisions, and if you don’t have it, implementing systems to capture it should be a topic of discussion in the review.
Step 1 – Your budget as your roadmap
The starting point of any review is to look at your business plan and budget for the coming 12 months. Ideally, your budget should represent what your overarching business plan is, as this maps out your goals and how you will go about achieving them.
As a first step, look at the numbers from the previous 12 months and compare your budget against actuals. How have you performed and is there a reason for the underlying differences? Draw conclusions from this information and use it to feed into your budget for the coming year.
Once you have your 12-month budget in place, conduct some scenario planning or sensitivity analysis to test it. If sales were 20% less, what would be the broader impact on the business? If it happens, how will the business react? Work through different scenarios to prepare your business for both negative and positive outcomes.
Step 2 – Cash flow is king
In any business, having capital available to support your business decisions is essential. For this reason, you need to clearly understand your cash flow situation. What are the pain points for cash flow and in what circumstances will it be stretched? How do you minimise these risks? These are the questions you should be finding solutions for as part of your review.
Keep in mind that if you’re a business owner, you’re going to have your own personal cash flow requirements from the business, so make sure you take these needs into consideration. All this should be linked to your budget process.
Step 3 – Focus on a major system or process
It’s not often you get the opportunity to take a birds-eye view of the business, so this is your chance to carefully focus on a process or system that’s been playing on your mind.
It might be a customer relationship management (CRM) tool, or perhaps a quoting system that feeds into your CRM. Whatever it is, try to focus on something that’s going to make a big impact on the business, as this is going to give you the most value.
Over the next 12 months, stay focussed and make this the one project you’re going to implement. In business, it’s easy to get distracted by the latest crisis or issue, but it can take your eye off the systems or processes that really matter. This is your opportunity to put your priority front and centre.
Step 4 – Put your people first
Unless you run a completely automated business, there’s a strong likelihood that your staff help make your business what it is. They’re the ones at the coalface and behind the scenes, making it tick from day to day. For this reason, it’s important to allocate some time in your review to focus on your staff and how you deliver a better workplace for them.
Do you have appropriate KPIs for your staff at different levels, and does this drive your budget and business plan? It doesn’t have to involve monetary rewards if they achieve these. It may be as simple as committing to a more formal performance review process, or a new communication channel, but it should be something that’s going to build your employees’ commitment to the company and get everyone pulling in the same direction.
Step 5 – Value your inventory
For businesses that deal in tangible products, inventory management is crucial to success. Given your inventory’s immediate relationship with cash-flow, it can cause significant problems for your business if it isn’t handled correctly.
An annual spring clean gives you an opportunity to look more closely at your inventory management. If you don’t have a system in place to give you feedback on this important aspect of your business, think about implementing one. If you do, then look at what it’s telling you. Are you moving stock quickly enough, and can you sell at a higher margin? These are questions you should be able to answer by looking at your inventory management system.
Step 6 – What’s your market strategy?
The final part of your review should look at how you are taking your products or services to market. Are you seeing the return on your investment in marketing? Could it be more targeted? Are there more cost effective marketing channels, such as digital, that have the potential to deliver greater value?
There should be multiple channels for your business to generate leads and fill up the sales pipeline, these should be tied into performance targets for your sales staff and measured regularly.
It’s one thing to undertake a review of your operations, but you actually want to emerge from it with actions you can implement. This should be in the form of a plan with set timeframes – most likely 12-months. It doesn’t necessarily mean you have to achieve every item within that timeframe, but it should provide a roadmap to make incremental progress towards each goal. Pick the low hanging fruit so you get some early wins.
It’s also important to set some deadlines on the actions in your plan, as this will hold you to task and give you something to measure against at your next review.
Finally and most importantly, identify what you have the capability to achieve and where you need help either internally from your staff or external consultants.
If you need assistance putting your spring-clean in place, one of Bentleys’ experienced business advisors will be able to guide you through the process.