business improvement

If you’re trying to expand your business, missing critical elements can derail your efforts to grow. Entrepreneurs need to consider several important things before deciding to grow their small business. Listen to find out if your company is ready and fit to grow.

To listen to the episode hit the play button.

To download the episode, right click on this link  and choose Save Target As.  Go to the folder where you want to save the recording on your device and click Save or hit Enter.

Make it easier to get upcoming episodes by subscribing to the show on iTunes . Subscribing to the show will automatically download the episodes on your preferred listening device so you can listen to them when and where you want. And hey, if you like what you hear, please leave the show a great rating and review while you are there on iTunes.

Show Notes

In this episode we look at important things entrepreneurs need to consider as they decide to grow their small business to make sure that their company is ready and fit to grow.  Lisa uses her concepts of the 5 P’s, Planning, Practices, Process, People and Profit to explain how missing some of these pieces can derail a company during its growth phase.

Key Points

*Many companies find that what worked when they were smaller are no longer as effective in a larger growing company.

*Many of the growing pains companies face can often derail growth for a business that is not ready and fit to grow.

*Entrepreneurs often underestimate the impact growth can have on their people, operations and even their bank account.

*Having an overly optimistic mindset while valuable in start-up, often mask or downplay problems associated with the growth phase.

*One of the growing pains companies can face is allowing sales growth to destroy their brand and Lisa explains that in the episode.

*No one can be certain that they are ready to grow however entrepreneurs need to recognize that growth will change how they do business in many ways.

*Many entrepreneurs notice a change when their company reaches over 50 employees. These changes are especially noticeable in their operations, communication and need for specialization.

*Lisa uses an example of her experience in a technology company to explain the idea of specialization and more focused roles during growth periods.

*A way business owners can determine areas that need to be in place or improved in their business is to examine their company with a critical eye. This enable them to see the growing pains and work to correct problems as they arise.

*Lisa explains what she looks for in her work with clients to determine where they are falling short and the things that are holding them back from being ready and fit to grow.

Resources and Links

Sign up to take the Healthy Biz Quiz – Take the Healthy Biz Quiz and automatically receive your score along with tips and information that can help you create a business that is healthy and fit to grow. Follow this link to sign up.

You may also want to check out these helpful episodes:

Do You Have A Healthy Business?

How to Scale Your Business-Part 1

How to Scale Your Business – Part 2

 

 

Note: Links in this post may be affiliate links.  Lisa Roberts is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.

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Get all the updates and information Lisa shares from Business Rx and the Healthy Business Healthy Profits show! You’ll get information, tips and strategies on growing a healthy successful business. Don’t worry, I won’t bombard you with emails.  At most, you’ll get something from me every few weeks. You can sign up  Here

Lisa Roberts is a business operations consultant who advises growth company entrepreneurs in successfully managing growth and the challenges they face along the way. She has over 25 years of experience in operations, finance and administration and spent several years in executive roles at a high growth company. She recognizes that there is a fine line between success and failure in a growing business and that entrepreneurs need to focus on managing finances, creating a sound operation and employ good business practices to stay on track.   You can find out more about her here

How to Successfully Manage Uncertainty in Your Business

Ask any business owner, they’ll tell you that uncertainty in business is one thing that will never truly go away. Uncertainty is the one constant that was there, is there and will be there in the future.

There will also be something that will “upset the apple cart” and we as entrepreneurs must be ready to manage through it.

However, there are many factors that are out of our control and yes we have to manage those too!

Entrepreneurs can never know what the next thing is that creates questions and uncertainty in our businesses. Factors like the economy, politics, world events and technology have certainly created uncertainty in business a lot lately.

What Keeps You Up at Night?

That’s a favorite question that people ask entrepreneurs. You hear it asked by reporters, investors and anyone trying to get at the answer to the question – “what are your most pressing business problems’.

Entrepreneurs politely answer the question but we know that none of us wants to be kept up at night worrying about a problem, much less one that we have little chance of controlling. Those things like the economy, politics and changes in the world are for the most part not in our control and thus create uncertainty for us.

How Do We Manage Uncertainty in an Uncertain Business World?

Whether we want to admit it or not, uncertainty in business will never go away. The best thing to do is to admit it and move on.

It’s hard to figure out in an uncertain world when to play it safe and when to get aggressive. For years due to the economy, technology and the geopolitical environment these things have made it harder for businesses to make decisions.

So why is it that some entrepreneurs manage uncertainty better than others?

Since we can’t control things like the economy or politics, we have to focus on what we can do in our own business.

Control What You Can

There are plenty of things that you can control in uncertain times. Two things to control are you and your management team. Maintain focus on the things you and your team can control and don’t waste time, money and energy on the things you can’t.

Focus on controlling your business; your finances and your operations. Know where you stand financially, fix what may be broken in your operation and make improvements to build an even stronger business in that can weather uncertain times.

Stay Current on Issues Affecting Your Business

I’ve mentioned things like the economy, politics and technology that can largely be out of our control, but not all of it. It’s important to stay up to date on issues that can directly affect your business.

Do your best to stay on top of the issues that affect your market and your industry. Whether it’s joining an industry association, doing research or just staying current in business news, it’s important to know what could impact your company.

Know What You Don’t Know

It’s hard to know everything there is to know about running a business. Entrepreneurs need the help of experts from time to time to help them deal with challenges and uncertainty.

Be honest with yourself about what you don’t know and get help when you need it. It’s okay that you are not the smartest person in the room. Experts can help clear up ambiguity or answer questions about issues your business faces. They can help you remove doubt and set you on a path to effectively manage the uncertainty.

Maintain Good Networks and Relationships

Having good networks will help you with knowing what you don’t know. Connecting with professionals like bankers, accountants, lawyers and other experts helps get answers to questions, lessen the uncertainty you’re feeling or can at least put your mind at ease.

Maintaining good relationships with your network as well as your customers, partners and employees is another way to successfully manage uncertainty. When things in your business are uncertain it’s good to have people you can rely on to keep your business steady and moving ahead.

Manage the Fear

Uncertainty and doubt are springboards for fear. It’s easy to let one emotion begin to control your other emotions. Fear can lead us to do things we ordinarily wouldn’t do. Don’t let the fear lead to making bad or irrational choices.

In addition, don’t let the uncertainty cause you to overreact and make kneejerk decisions. When uncertainty in your business rears its head, take time to analyze what is really going on and decide what impact it has on your business. It’s true you may not have all the answers but reacting for the sake of doing something about it isn’t always the right choice either.

Stay Calm

Uncertainty can create a feeling of overwhelm and downright frustration when you don’t know what to do about a given situation. Employees pick up on those cues and can begin to worry about what is wrong with the business. That worry can lead to an unfocused staff and things can start to slip through the cracks.

Be sure to remain calm in uncertain situations and communicate to your staff so they understand the issues you face. Your staff can be a source for ideas and solutions in uncertain times. They can also help you stay focused on the things that matter most in your business and help you stay on track running the operation.

Stay Positive

Managing uncertainty means that sometimes things aren’t going to go your way and can set your business back. It’s important to stay positive when your company faces an obstacle. It may be the first real setback you face but it probably won’t be the last.

Once again, your staff will take cues from you when your company hits a roadblock. They’ll react to your reaction and will follow your lead if you don’t manage it well. Stay positive and use the opportunity to make your business better. Instead of dwelling on a setback, just learn from it and move on.

Uncertainty is Here to Stay

There’s no way around it. Entrepreneurs have dealt with this for hundreds of years and will continue for hundreds more.

Successfully managing uncertainty means staying on top of what’s going on inside your business and in your industry, controlling what you can, knowing when you need help and managing your relationships and your own actions.

Find out which podcast episodes entrepreneurs are listening to the most!

This is a list of the top episodes of Healthy Business, Healthy Profits podcast from seasons 1 and 2.

Follow the links to listen here on my site or follow the instructions on the episode post to download them and listen to the episode later.

Subscribe to the podcast on Apple Podcasts so that you don’t miss an episode.  Follow this link to get to the show’s page on Apple Podcasts.

Don’t use Apple Podcasts, then join my email list and receive my newsletter, Prescription for Success. There you’ll get updates on new episodes and other important information and tips that I share every few weeks. Sign up to get it here.

Lisa Roberts is a business operations consultant who advises growth company entrepreneurs in successfully managing growth and the challenges they face along the way. She has over 25 years of experience in operations, finance and administration and spent several years in executive roles at a high growth company. She recognizes that there is a fine line between success and failure in a growing business and that entrepreneurs need to focus on managing finances, creating a sound operation and employ good business practices to stay on track.

I just finished and mailed my holiday greeting cards to family and friends. This time of year everyone wishes people well and offers hopes for a healthy and prosperous New Year.

It’s also the time when we begin to really think about what we want in the new year. Those New Year’s resolutions or goals for the future. We think about trying to lose weight, eat healthier, or to accomplish that thing that has escaped us until now.

Running a business means a large part of your life is wrapped up in it.   We hope that our business stays healthy and prospers in the New Year with great results and few problems.

How are we going to make it happen?

I’m a big believer in knowing where you are at so that you can figure out where you want to go.

What can we do to set our business up to be healthy and make sure that we are on the right path to succeed next year?

Resolve to Take a Step Back Once in Awhile

If you make a resolution to lose weight without setting a target, you’ll never reach your goal.

Think about it.

If all you do is say I’m going to lose weight, are you done after you’ve lost one pound? You did lose weight, after all.

But does it matter?

Instead it’s more meaningful to know where you’re at first. Let’s say you’re 20 pounds overweight. Your doctor tells you that you’ll be healthier, your knees won’t ache and you won’t be winded when you walk up steps.

Now you have a real goal and you know how to measure it.

The same goes for resolutions in your business. A resolution is really a goal. Setting any goal won’t mean much if you don’t know where you are starting from.

Want to set a goal to increase the speed of your deliveries. Find out what your time to deliver is now.

If you want to set a goal say for profit make sure you know what your profit is now.

Resolve to take time to step back and really review and understand how your business is doing.

Resolve to Make Business Improvements for the Long Haul

In the first episode I did for the Healthy Business Healthy Profits podcast I talked about what makes a healthy business.

A healthy business isn’t really about one thing.

You can have great sales and still be unprofitable. You can be growing like gangbusters but still have miserable employees who are overworked and want to leave. Your business could be adding new customers left and right but have so many problems that you’re constantly late on shipments and making customers think twice before ordering again.

A healthy business to me is one that values employees, customers and the community, not just sales and profits. It’s one that consistently tries to be better at what it does. A healthy business is run by someone that sees value in being good but strives to be even better. It’s one that recognizes that when things aren’t going well and there is a problem, it wants to improve and fix it.

Resolve to Be a Better Business

Take the opportunity at year end to step back and look closely at your business and look for ways to make it even better. Think about all the things that may be holding you back from becoming even more successful.

When you figure out what’s holding you back, understand why it’s holding you back?

Some of the problems you have may go back to bad planning. If cash flow crunches rear their ugly head could it be that you are not managing your cash flow? Getting beat by the competition? As part of your marketing strategy how are you gauging the competition to get ahead of them and set yourself apart?

Some businesses are faced with employee problems. Is yours one of them? People problems can be some of the toughest to solve if you look at people as just bodies to get work done. Finding and hiring good people takes work and nowadays a lot more of it! Keeping them motivated and productive takes even more work. Make sure that your business has the right policies, procedures and processes to hire, develop and retain your employees to improve your business and therefore your results.

Processes might be holding your business back. This is a common problem many businesses face especially if you’ve grown. You find that things that worked when you were smaller don’t work as well when you become a larger business. Inefficiencies will surface as you handle more volume. Your old process relies on those few key people who now hold things up because they’ve got too much on their plate. Manual tasks just won’t work now that you’ve doubled your sales.

Other problems that hold your business back might be due to bad business practices. Business practices drive how things operate in your business especially what is accepted and unacceptable. Often these surround how work gets done, how people are treated and how your business gets results. Recently, some companies are certainly finding out the hard way that not dealing with sexual harassment is a bad business practice!

One area that you may want to improve is your profits or on the financial side of your business. If you’re looking at improving profits it’s more than just selling more products. Look at your costs, margins and pricing too. Make it easier to review your results going forward by establishing benchmarks to measure your performance and create a dashboard to quickly review them each month.

Resolve to Make Reviewing Your Business a Standard Operating Procedure

You can only know where you’re going if you know where you’ve been” – James Burke

It’s a lot easier to lose 20 pounds when you know what you weigh now. It’s also easier to stick to a resolution to improve the health of your business when you know where you’re at and then set goals for what a healthier business looks like a month, quarter or year from now.

When I was in my corporate career, we looked at certain things on a weekly basis, some on a monthly basis and others on a quarterly basis. It was standard operating procedure for us.

It took a little work until it became easy to do- a habit – just like many standard operating procedures. It also gave us great insight into where our business stood against our revenue and profit targets as well as the operational goals that we set.

Reviewing our business regularly helped us take steps to make major improvements to increase sales, lower costs and design more efficiency in our business.

If we wanted to improve gross margins, we had to know what margins were now. To increase our response rates to customer calls, we had to know what our average response time already was. We developed software, so to lower the amount of bugs we had to know what they were and where in the process they occurred. Then we took steps to make improvements.

Our first hard look at our business was a like a SWOT analysis. What are we doing right, where were we stumbling and what opportunities did we have to improve. We dove deep into things like planning, practices, people, process and profit to look for those opportunities. We performed a check-up on our company – a business physical if you will.

Start a new habit in your business next year. Give your business a physical. Review your results and your goals for the upcoming year. Set a plan to measure them throughout the year. Take a look at it each month or quarter to make sure you’re staying on track and take action if things go wrong.

Resolve to build a better healthier business in the New Year!

Entrepreneurs know that one critical aspect to running a business is a good level of cash flow. Listen to hear the first 14 tips to improve your cash flow.

To listen to the episode now hit the play button above.

To download the episode to listen later, right click on this link  and choose Save Target As.  Go to the folder where you want to save the recording on your device and click Save or Enter.

Get upcoming episodes by subscribing to the show on Apple Podcasts . Subscribing to the show will automatically download the episodes on your preferred listening device so you can listen to them when and where you want.

And hey, if you like what you hear, please leave the show a great rating and review while you are there on Apple Podcasts.

Show Notes

Entrepreneurs know that one of the most critical aspects to running a healthy business is to maintain a good level of cash flow.  In this the first part of a two part episode, Lisa will give you several tips to improve cash flow in your business.  She also stresses the importance of staying on top of cash flow to run a healthy business for the long-term.

Key Points

*Entrepreneurs rely on a healthy level of cash flow to finance growth and avoid problems in their business.

*You’ll hear ways to manage and maintain the billing and collection function in your business and steps to take to set yourself up to collect on outstanding accounts.

*Lisa shares tips on ways to manage payment methods and payments terms to ensure that you are collecting your cash in a timely manner.

*Lisa and Winnie discuss the positives and negatives of changing your standard payment terms especially with long time customer and what you can do with slow or non-paying customers.

*Hear ways that you can use financing to enhance and supplement cash flow in your business.

*Lisa discusses ways to generate additional cash in your business that can streamline and enhance cash flow.

*Many of the tips shared in this episode on focus the receipt of cash side of the business like sales, receivables and payment methods.

*In Part 2, Lisa will share tips to improve cash flow on the payment side of your business. So subscribe to the show and  look out for Part 2!

Resources and Links

Other episodes referenced in this episode:

Insider Secrets for Success in a Family Business

Cost and Pricing – What You Need to Know

Have questions about cash flow in your business, set up Quick Care Consultation with Lisa to learn how some of these tips could work in your business.  Learn more here

About Lisa Roberts

Lisa Roberts is a business operations consultant who advises growth company entrepreneurs in successfully managing growth and the challenges they face along the way.  She has over 25 years of experience in operations, finance and administration and spent several years in executive roles at a high growth company. She recognizes that there is a fine line between success and failure in a growing business and that entrepreneurs need to focus on managing finances, creating a sound operation and employ good business practices to stay on track.

 

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Prescription for Success

Get all the updates and information Lisa shares from Business Rx and the Healthy Business Healthy Profits show! You’ll get information, tips and strategies on growing a healthy successful business. Don’t worry, I won’t bombard you with emails.  At most, you’ll get something from me every few weeks.  Sign up  Here

Lisa Roberts is a business operations consultant who advises growth company entrepreneurs in successfully managing growth and the challenges they face along the way. She has over 25 years of experience in operations, finance and administration and spent several years in executive roles at a high growth company. She recognizes that there is a fine line between success and failure in a growing business and that entrepreneurs need to focus on managing finances, creating a sound operation and employ good business practices to stay on track.   You can find out more about her here

Controlling costs is difficult in a growing business.  Your company culture can impact your success in managing costs find out how.

To listen to the episode hit the play button.

To download the episode, right click on this link  and choose Save Target As.  Go to the folder where you want to save the recording on your device and click Save or Enter.

Make it easier to get upcoming episodes by subscribing to the show on Apple Podcasts. Subscribing to the show will automatically download the episodes on your preferred listening device so you can listen to them when and where you want. And hey, if you like what you hear, please leave the show a great rating and review while you are there on Apple Podcasts.

Show Notes

Trying to control and manage costs is always difficult in a growing business.  Your company’s culture can affect how your organization approaches spending and cost control.  As a business owner who wants employees to “think like an owner”, he or she needs to set the example when it comes to managing costs in the business.

Key Points

*Cutting costs in bad times are evidence that a company doesn’t regularly manage and monitor costs.

*Companies sometimes treat cost cuts with an “anything and everything” approach. Lisa refers to the ax approach.

*When companies make cost reductions, they need to take time to understand the impact of cuts on the business.

*Regularly monitoring financial information and managing costs can help avoid some those types of approaches to cost control.

*Keeping some perks or nice-to-haves at the expense of essential costs sends a bad message to your staff.

*Having select people in the company responsible or only certain areas impacted by cuts can also have a negative impact.

*Ignoring long term savings opportunities is another way entrepreneurs can get cost control wrong.

*Culture is a company’s approach – what it believes, values, and how it behaves to get work done.

*Culture can influence cost control both positively and negatively.

*Lisa explains how bias can impact how you approach costs and also impact the culture as well.

*Process improvement initiatives with a teamwork approach can benefit both culture and cost control efforts over the long term.

*The entrepreneur can positively impact a cost focused culture by being consistent in the way he manages costs and reinforce cost conscious behavior.

*Creating a cost conscious culture – or any cultural attribute – entrepreneurs need to make sure that it lines up with his or her own beliefs, behaviors and values and lines up with his or her actions.

Resources and Links

Struggling with this in your own business?  Set up a Quick Care Consultation with Lisa Roberts here https://www.bizrx-advisors.com/quick-care-call/

Sign Up to Get Updates

Prescription for Success

Get all the updates and information Lisa shares from Business Rx and the Healthy Business Healthy Profits show! You’ll get information, tips and strategies on growing a healthy successful business. Don’t worry, I won’t bombard you with emails.  At most, you’ll get something from me every few weeks. You can sign up  Here

Lisa Roberts is a business operations consultant who advises growth company entrepreneurs in successfully managing growth and the challenges they face along the way. She has over 25 years of experience in operations, finance and administration and spent several years in executive roles at a high growth company. She recognizes that there is a fine line between success and failure in a growing business and that entrepreneurs need to focus on managing finances, creating a sound operation and employ good business practices to stay on track.   You can find out more about her here

One of the bigger problems entrepreneurs face managing a growing company is having the amount of money you need to continue to grow and expand. It is often difficult to get the financing you need, when you need it. One of the most important things you need to pay close attention to is your liquidity and having the money you need to operate your business. A key component to measuring your ability to generate the funds and liquidity you need to operate your business in a healthy way is working capital.

Let’s take a look at working capital and look at the ways you can monitor, manage and improve it in your growing business.

Working Capital – What is It?

Working capital or the working capital ratio is a basic ratio to evaluate the short-term health of a business. It measures whether you can pay your bills, pay for assets like inventory and how long you can withstand a downturn and still meet your current obligations.

The working capital ratio is also known as the current ratio. To calculate take Current Assets divided by Current Liabilities. As an example let’s say you have current assets of $200,000 and current liabilities of $130,000.  Your working capital ratio would be 1.5 ($200,000 / $130,000).

Current Assets are things that can be turned into cash in a short period of time like accounts receivable, marketable securities, prepaid expenses, inventory, other liquid assets and of course cash.

Current Liabilities are short term obligations like accounts payable, accrued expenses and short-term debt.

What Should Your Working Capital Ratio Be?

Negative working capital is a ratio that is less than 1 and indicates that you do not have enough to meet your current obligations. A ratio over 2 suggests that you may not be investing your money well like having too much in inventory or not investing excess cash into investments that offer a better return for your business.

A good ratio would fall between 1.2 and 2.0 for most businesses and shows a good level of liquidity.

Managing the Big Three in Working Capital

There are things you can do to improve your working capital position and the most obvious is spending less than you take in. However, that’s pretty simplistic.  Of all the components of working capital, for many businesses the three biggies are Accounts Receivable, Accounts Payable and Inventory.

How can you make improvements in the Big Three to help improve your own working capital?

Accounts Receivable

When customers purchase “on account”, your business provides goods or services in exchange for a promise to pay later. While your business could avoid this by not allowing customers to buy on account, that is not always practical.  Here are 3 things you can do to manage working capital in accounts receivable:

  1. Set and consistently apply payment terms to customers that are reasonable. Keep in mind; if you have to pay your own vendors in 30 days, but you give your customers 60 days to pay, you are already 30 days behind in your cash flow position. Your goal is to set terms that allow you to convert receivables into cash as quickly as possible.
  2. Collect consistently. If a customer account is coming due, make sure you receive payment on time. Follow-up quickly on unpaid invoices. Be consistent in applying your collection policies to customers so they understand that they need to stay current in order to continue to do business with you. Remember, a sale is nothing until the cash is in your hand.
  3. Get payment sooner. You may be able to collect cash on a sale sooner by taking down- payments, progress payments, or offering small discounts for early payment.

Accounts Payable

The second item of the big three in working capital is on the liability side with payments due to vendors and suppliers in accounts payable. In this instance, your suppliers have allowed you to purchase “on account”.  Here are a few things you can do to improve working capital in accounts payable:

  1. Get the best payment terms you can and use them. Keep in mind what I mentioned under receivables, if you are collecting receivables every 30 days but you have to pay vendors in 15 days, you are behind 15 days in cash flow. Negotiate the best terms you can without incurring additional fees or charges and use the payment terms you’ve been granted. If you don’t have to pay for 30 days, then don’t pay in 10.
  2. Monitor what you spend with vendors. If you spend a large amount with one or two vendors, you may have some leverage to negotiate with them for a better price, volume discounts, shipping discounts or even longer payment terms.
  3. Consider early payment discounts. From time to time, a vendor may offer your business a discount if you pay before the normal payment term. This may make sense depending on your cash flow situation.

Inventory Management

The last item in the big three of working capital is inventory. Properly managing the amount you have in inventory can help you improve your working capital. Having too much in inventory can cost you working capital because money invested in unsold inventory isn’t making you money.  However, having too little in inventory may cost you money too – the cost of lost sales.  Here are some things you can do to manage your inventory better:

  1. Understand your inventory turnover. Inventory turns are how many times a year you sell items in inventory and have to replenish them over a period of time. Compare how your turnover rate is against your own industry and try to, at least, match the average for your industry. Carrying the right amount of inventory will help you improve working capital; having too much or too little can cost you.
  2. Maintain good inventory tracking. This involves not only tracking what you have but also what you need to replenish. In addition, having inventory clean, labeled and organized will help you avoid mistakenly ordering more of something you don’t need or getting caught with too little of an item.
  3. Understand and monitor your costs associated with inventory. Make sure that you understand and track costs associated with managing inventory. There are costs other than the cost of purchasing inventory that can add up. Here are a few to keep in mind: warehousing costs, shipping costs including expedite fees, slotting costs , obsolete inventory and losses due to theft.

It’s a good idea to have an emergency fund in your personal life and a good working capital position in your business. You will be happier and less stressed because your business will be healthier and able to withstand those dips and downturns that can sometimes set you back. Make sure that reviewing and improving your working capital is part of your monthly business management review.

Measure and improve picA favorite business quote of mine which has been attributed to Peter Drucker, the management guru, is:

“If you can’t measure it, you can’t improve it.”

Think about it.

We track and measure lots of things in life. We have batting averages, Usain Bolt has his 9.58, mutual funds have rates of return and lately we have meteorologists constantly tracking weather information to predict the next storm.

If you think about the second part of the quote, you can understand why there’s batting practice, workouts, investment research and shifting weather models and forecast tools.  These are just a few examples of how things are tracked and measured to look at things to improve; in these examples it’s averages, times, returns and accuracy.

Many companies track and measure the obvious ones in their basic financial statements. The Income Statement tells them how much they sold, spent and profit that was made.  The Balance Sheet shows them what them what they have in assets, what they owe in liabilities and what earnings they’ve retained in the business.  Some businesses will pay close attention to their Cash Flow too.  It shows them how they got cash, where they used it and whether they made more or less of it during the period.  But there are many other things you can measure in your business to look for ways to become more effective and improve business performance.

Awhile back I wrote an article that described how you can grow a healthy business by looking at your people, processes and systems. You can look back at that on my blog by clicking here if you like.  One part of your business systems, should be to build a tracking and measurement system to gauge how you’re doing, in order to see how you achieve better results in your business.

In some of my work with business owners, I use a tool called The Business Physical which looks at 10 areas of a business. One thing we use the tool for is to gauge what steps the owner is taking to track and measure components of their business.

Let’s use four of the categories from The Business Physical to illustrate some examples.

Ways to track and measure results in your business.

Customer Service –Want to know how happy your customers are so you can measure customer service?  Then ask them. Run a survey, ask them to complete a comment card or like you on Facebook.  Want to know if you’re responding to customer problems quickly? Then measure response times or if you use trouble tickets measure satisfactory closure rates.

Marketing – Want to see how your latest coupon offer is going? Then measure your redeem rate against your distribution rate.  Want to measure customer loyalty? Measure repeat purchases from existing customers. Want to check the performance of your latest advertising campaign? Then track new leads generated from it.

Operations – If you want take a look at the quality of your products, then track product return rates.  If you have a service and want to measure quality, then track customer complaints or service recall rates. If you want to improve your order turn-around times, then measure and review the various steps in your order fulfillment process and so you can look for ways to make it more efficient.

Financial – If you want to set a goal to improve your account collections, then measure your average collection period on receivables. If you want to measure how you’re managing inventory to keep you holding costs in check, then calculate your inventory turnover.

Think about what you can measure and improve in your own business. Remember, if you can’t measure it (or you don’t), then you can’t improve it. Consider making tracking and measurement part of your overall business strategy.  Tracking and measuring can help you see how you’re performing so that you set goals and can make improvements to get to where you want to be.

 

It’s common for a business to periodically hit a wall, have to regroup and figure ways to climb over or go around the wall.   As companies grow they are continually faced with new problems and challenges that they must face.  Growing a business can become a continuous process of remaking and redefining it to fit the ever-evolving circumstances.  Usually, you will have to look at your people, processes and systems to match your ever changing company.

 

With Growth Comes Challenges and Problems

Even though a business may have started with just a few employees, modest sales and expenses and a local concentrated customer base, it will become very different as it grows.  A company with 5 employees becomes very different when it later has 25 employees and still different as it becomes a 150 person company.  In the same way, a company with 20 customers has different challenges from a company that has 300. While the company grows, the owner must manage through the problems and challenges that go along with it to make sure he is running the business and the business is not running him.

 

Sometimes it’s a good idea to step back from the day to day and review your business to see if you are on track and your business is healthy.  By reviewing different areas of your business, you can determine where you are versus where you want to be.  For example, if your company values customer service as an important area that differentiates you from the competition, but you do don’t have to right policies and processes to support that goal, or you are getting bad feedback from customers then,  you may not be where you want to be.

 

One way to look at your business is to look at the functional areas that work together and are made up of people, processes and systems.  This combination of  elements will ensure that the business operates for its intended purpose and does so in a way that serves its customers, provides a good living for its employees and creates a profitable result for its owners. While there have been variations of the following concept, it is important that a business owner understands he needs the right people, doing the right things with the right tools in order to be successful.

 

People

The people that make up the business, the owners and employees, are key components for the organization’s success.  The owner and management provide the leadership and strategy to drive the company’s purpose and set goals for the business.  The employees and the team work that they use provide the effort toward the common goals that were set by the leadership of the company.  The people part of the equation answers the questions do you have the right people and are they in right positions.

 

Process

The process part of the equation answers whether your people are doing the right things.  In describing process, we are considering process in the traditional sense – the interconnected activities that transform inputs to outputs.  More specifically it is the procedures a company uses to develop, market, sell, produce and ship to and service its customers.  In addition, the policies that the company follows to support that are also part of the process equation.  Whether its policies on how the company deals with customers, employees and vendors or how the company conducts and records its business transactions, the policies support the process and procedures to ensure that employees are doing the right things.

 

Systems

Finally, systems are the last part of the equation.  The systems that support the business can be viewed in two parts: (1) the high level organizational levels such as sales, marketing, operations, and finance and (2) the actual tools that these organizations use such as sales management and compensation methods, marketing and promotional techniques, operational plans and budgets and accounting and reporting systems. All of the systems used to support the business answer the third part having the right tools.

 

Many problems that a business faces can be tracked back asking this question. Do we the right people, doing the right things with the right tools.  Stepping back, looking at the bigger picture and analyzing the people, processes and systems in your business can help you target the problems, analyze the challenges and make the necessary improvements to grow a healthy business.

 

I’m pretty sure that you’re asking, what do lessons learned have anything to do with groundhog day.

Well, let me explain.

There was a funny movie in 1993 starring Bill Murray called Groundhog Day. The movie’s main character, Phil Connors, relives the same day over and over until finally he tries changes in behavior to find out what works and what doesn’t work.  Phil learned that if he made a change then he may get a better result.

Business owners can learn something from Phil. None of the business owners I know like to run into problems in their business. But, if the problems you face are systemic, they will almost always occur again until they are fixed.

Problems Equal Opportunities

Problems can actually be opportunities! Some of the biggest inventions were created by problems or mistakes that turned into opportunities for companies; think Post-itR Notes, ScotchguardTM and Penicillin.  Some problems can create other opportunities such as ways to increase efficiency, save time and as a result, money, or increase customer satisfaction.

Take a Tip From the Field of Project Management

There is a practice called Lessons Learned that is often used in the field of project management.  A definition of Lessons Learned is: Knowledge derived from reflection, analysis and conceptualization of experiences that has the potential to improve future action.

The goal of a Lessons Learned is to maximize success and minimize failure.

So how can you use Lessons Learned in your business to maximize success, minimize failure and create the potential to make improvements?

Think back to something that may be happening in your business that could be an opportunity to make a change for the better.  It may have been a project that you implemented, a problem that keeps surfacing or an operational breakdown in your business.  In order to get to the bottom of things and learn from it, try the Lessons Learned process.

The Lessons Learned Process

The first step is to work with the people directly involved in the project, problem or breakdown. If you’re a small business owner, this may be you and your employees. The conversation should be a free and open discussion to allow people to be comfortable to express their thoughts and opinions. It is not to lay blame or to judge but to allow you to address issues head-on and search for solutions.

Work through the following questions and record the answers.

1)      What worked well and what were the biggest successes?

2)      What went wrong and what was the biggest failure?

3)      What could be done differently?

4)      What could be improved?

5)      Takeaways

As you go through the questions above, consider factors like effectiveness and efficiency to identify areas for change and improvement. Asking questions like what worked well and what was successful should be looked at in order to find ways to further capitalize on those successes.

Exploring what went wrong, while painful and maybe even embarrassing, should be viewed as opportunities to find better solutions, avoid mistakes in the future and paths toward improvements.

If done well, the takeaways will be actionable information and opportunities to make changes in the way your business operates so that these same problems do not crop up in the future.

Don’t Be Like Phil

Don’t get caught up in your own Groundhog Day.  Take a little time to learn from the problems you confront and try tackling systemic problems in your business using the Lessons Learned process.

Like to learn more?

Check out this podcast episode Cost of Solving the Wrong Problem for more information about problem solving in your business.

Editors Note:  This post was updated from its original version for small edits, format and addition of related links.

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