Business has five areas:
- Accounting and finance
- Human resources
- Information technology
- Marketing and sales
You need to know how well your business performs in each area. It’s obviously important you spend sufficient time to ensure your product or service is high-quality, which falls under “Operations,” but if your accounting is in disarray and your computers are always down, this will eventually affect the quality of your product or service. And your bottom line.
For your business to operate at peak effectiveness and efficiency — for it to maximize its potential — it has to score 20 points in each area, for a total of 100 points.
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If you have the best product or service in the industry, scoring a 20 in Operations, but your business scores 10 points each in the other four areas, your score is 60. And your business grade is a D.
Accounting and finance
According to Michael Welbes, a certified public accountant, “Every successful business has two elements: good accounting and good people.” You have good accounting if your financial statements are accurate, timely, and reflect where your business position is on a month-to-month basis. If your accounting is good, you can use this data to quickly make sound business decisions.
Here are a few criteria:
Daily expense tracking
Employee with accounting education and/or experience
Ensure you’re properly financed
Generate monthly financial statements
Have a backlog of business
Have as little debt as possible
Know your margin
Know your competitors’ margins
Third-party advisor who reviews your accounting system objectively
Up-to-date accounting software
Human Resources is more than hiring applicants. Lots more. You need to hire qualified applicants, you need to train your new employees well, and you need to retain them.
Be involved in every new hire
Enforce rules fairly and consistently
Ensure prospective employees fit business’s culture
Hire employees away from other companies
Use an electronic HR system
Use non-financial rewards to motivate employee
IT helps in several ways: allows you to develop business relationships with customers and reach more potential customers, operate more efficiently, and provide better service. Most small-businesses focus exclusively on cash-flow and payroll, so they fail to create an all-important strategic technology plan. This plan should be re-evaluated whenever you take a strategic look at your business.
Back-up your business data
Develop a disaster recovery and business continuity
Ensure your inventory system is automated
Extend business identity to e-mail
Integrate all your processes
Protect your computing environment
Use business-grade hardware
Use up-to-date hardware and software
Marketing and sales
Ask lots of questions
Evaluate your marketing
Have a “How can I help my customer” approach
Have a social conscience
Know your market
Market every day
Reach-out to each prospect five times
Use a diversified, integrated approach
Use social media
View things from your customers’ perspective
Document your operating process
Ensure each employee understands your process
Get feedback from your employees
Hire the right people
Look ahead and plan for changes in the future
Set expectations and hold employees accountable
Don’t compare your business to other small businesses: Compare it to the largest, most-successful businesses in your industry. They are the industry standard. If your method of recruiting talent and screening prospective employees is only half as thorough as the methods used by the largest businesses in your industry, your grade is a C. The industry leaders’ grade is an A.
When you measure your business against the best you’ll know how well your business performs. The only way to realize your business’s potential — and maximize profit — is to score 20 in each area. You may think your business does everything well, but if its overall grade is less than 100, there’s room for improvement.
Marvin Carolina Jr. is a Vice President for JE Dunn Construction. He can be reached at email@example.com.