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Four Questions to Improve Your Business – Part 2 - FocusCFO

Written by woodchuck | Mar 5, 2020 8:12:16 PM

Four Questions to Improve Your Business – Part 2

by Greg Gens

4 Questions to Improve Your Business is a 4-part series for business owners. Super short read.  Here’s Question Two!

What is your Blueprint?

Now that you have articulated your Vision or your “why”, how do you make it into a plan? Some have used the concept of building blueprints as a metaphor for the organization’s basic plan.

To start that plan, begin with the end in mind (Stephen Covey) and work out the details. Start with a rough plan at first and then begin to fill in the details. Just like the blueprints for a house, if your overall business blueprint doesn’t make sense on paper – it won’t work in the real world either. To make sure that your blueprint has the necessary structural strength to hold up, include these things:

To start that plan, begin with the end in mind (Stephen Covey) and work out the details. Start with a rough plan at first and then begin to fill in the details. Just like the blueprints for a house, if your overall business blueprint doesn’t make sense on paper – it won’t work in the real world either. To make sure that your blueprint has the necessary structural strength to hold up, include these things:

 

  • Cash flow & working capital management. Plan to make your Operations a source of funds not a use of them, by establishing targets that are achievable. For example, If a company ran larger lot sizes because the scheduler wanted to reduce costs, that might cause an issue lowering inventory turns and increasing obsolescence.

  • Business risk management. Financially, consider Interest Rates and Credit Availability. For your Operating Systems and Processes, what can internally be done better? What external factors are changing? What macro-economic forces (e.g. Employment pool and Commodity pricing) – impact your business? Do you have concentrations with customers, markets or vendors? Managerially, do you have a team that will lead you into the future?

     

  • Growth and Value enhancement. What does your plan look like? Projections and Forecasts can help you consider alternatives without actually going down the rabbit hole. Again, if it doesn’t work on paper it isn’t going to work in real life. So have a growth plan for cash, personnel (how many heads and what kind of training and experience), facilities and equipment

     

  • Succession planning is essential, particularly for a family business. What does the company look like after an ownership change, who will do the key functions is it still family?

    Without a blueprint even “good news” can go bad. I worked with a $5MM business that landed a contract with the largest customer in the market. It represented $1MM in new business – GREAT NEWS!!, but not if you can’t deliver product on time and lose the customer! (Which is exactly what happened). A comprehensive blueprint would have shown that with current equipment and facilities the company needed 120 days to prepare to achieve those sales levels. Or better yet, 6 months to install and implement an Information System to handle the additional scheduling and logistics required.

    As your company grows these factors will change, so review your blueprint periodically for opportunities to improve it.

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