Take a Strategic Inventory of Your Organization

After 29 years, Jeopardy is still the number 2 game show on television and enjoys 25 million visitors each week. What is the secret to their success? I am sure there are many reasons but one that I believe to be a factor is that the host provides an answer and the contestants must give the correct question. My belief is that it is more difficult to ask the proper questions than it is to respond with the correct answers. This applies to business and for this reason, I have collected useful questions to ask when analyzing a company.

1.    What is the purpose of your organization? This is sometimes called the Mission Statement or the reason for your business to exist.

2.    What is the key message or phrase that describes your organization? What business are you really in?

3.    Where do you want your organization to be in five years? Dream of what you want your operation to look like if you could eliminate all barriers. This is your Vision statement.

4.    What will conditions be like in your organization when you reach your answer to question #3? This is a list of the ideal conditions of your organization when you reach your dream.

5.    What do you do best? Understand your own strengths and how that can be best utilized to reach your dream.

6.    What part of your organization would your competitors most like to emulate? By truly knowing what your competitors value, you can better make the most of that resource.

7.    What parts of your operation do you most fear to lose? Protect your flanks at all times.

8.    Where are you weak in the eyes of your customers? By understanding their view, you can better react to meet their needs.

9.    Where are you vulnerable in the eyes of your competitors? Good competitors help us succeed by exposing opportunities for us to improve.

10. What are the 3-4 things that your company must do well to succeed today and in the future? Focus on the “vital few” areas to improve.

11. How do you measure “those things’? How do you know that you are improving?

12. What would be the ideal number? What do those measurements need to be to reach your dream?

13. Where are you now? Ouch! You may have exposed some areas to address.

14. What is stopping you from reaching the ideal number? Why can’t you fulfill your dreams? What are the barriers that must be overcome?

This is a simple little checklist that helps to take inventory of where we are, where we want to go, and what we have to do to get there. These questions are the hard part, now all you have to do is come up with the proper answers to move your organization toward your dream of the future.

Business Self Analysis

Physician, heal thyself! Does this wonderful phrase apply in business? It is easy to be critical of others and their organizations, but do you really look at your own operation in detail to see where you are headed?

The hardest part is always getting started. An acronym that is useful in business analysis is FOG, financial, operations, and growth.

In the financial area, start with your income statement, comparing income with expenses, and the cash flow statement. Next, look at the projected income statement and cash flow statement for the next year by month for at least a year. You may choose to look at years two and three by quarter and years four and five in the future by year. The next year is vital, so focus on that first. The question to be addressed is whether your business is viable.

Other questions to be asked are:

·      Is your inventory optimal? Excess inventory is evil; it will cost money through carrying costs, shrinkage (loss due to lost, obsolescence, damage, pilferage, etc.), space, and handling cost. What is the turnover rate on inventory and how does this compare to others?

·      Do you have the ability to attract the cash needed in your cash flow projection?

·      Does your return on investment meet the owners’ needs? This may be your own needs and expectations.

·      Are your prices right? Are your total costs right?

Next to be reviewed are your operations. First, do you have a written vision statement of what you want your organization to be in five years? In other words, what is your dream and can you articulate it? Do your employees buy into it? What barriers are in the way of reaching your vision?

What published values do you have to guide you and your employees in their decisions? Is this business worthwhile? Do you take pride in it? Do you enjoy what you are doing? Is it high risk and are the rewards commensurate?

Other operations questions are whether marketing, distributing, and support operations capable? Are legal, political, and licensing factors to be considered?  Location is always important; is labor in the area adequate and are transportation issues manageable?

Next look at the flow of production. Is it orderly and smooth? Chart it to see if time and motion can be lessened and the work process improved to eliminate waste and rework.

The final review step is growth. It seems you can never stay still; you are either growing or shrinking. Is your market growing? Have you identified a niche in which you dominate? In mature markets, there is usually room for two companies to thrive, one to just eke by, and the rest are in trouble. That is why it is necessary to focus efforts on a niche in the market in which you can be one of the two thriving organizations. Are you positioned to lead? Have you done market and competitive studies? Is the timing right for your offerings? Will it be right in three to five years? Is your marketing capable of adjusting to all of the changes in marketing techniques?

The most obvious article to review in an analysis is the business plan. The answers to the above questions are found in a good business plan but it needs to be constantly updated because the world is not standing still. You should have a dynamic business plan with, especially, the financial projections updated monthly.

You will undoubtedly never be satisfied with your answers but that only means you have discovered opportunities to improve and progress on the road to your dream. Benefit from your own wisdom.

The Make-up of a Basic Business Plan

The most often question I hear from people who want to start a business is, “Where can I get the money to fund it?” A friend says the only free money comes from the three “Fs”--families, friends, or fools. I submit you are in endangering your relationships if your dreams do not come to fruition. The truth is, there is no free money. If the business is not successful, you can expect a financial cost and/or a relationship cost.

For other sources of funds such as banks, you will need a sound, complete business plan. This is where the rubber hits the road; it demands that you think. The hardest part is getting started.

A good source to find guidance is to go to www.score.org where you can download business plan templates for either startup or existing businesses.

The business plan according to SCORE should consist of a combination of narratives and worksheets organized into sections. They should look something like the following:

TABLE OF CONTENTS 

This is done simply to make it easier for the reader to find the section of most importance to them.

EXECUTIVE SUMMARY

This section should be written last after the thought has gone into developing the other sections. It should be concise, one page preferably, and positive.

GENERAL COMPANY DESCRIPTION

This defines the business that you are in, its industry, your vision, mission, goals, objectives, and why you are positioned to succeed. It will detail the strengths and core competencies of you and your company. It will also include the type of ownership.

PRODUCTS AND SERVICES

Included here are details on what you plan to provide, what need/want that it serves, competitive advantages, and pricing logic.

MARKETING PLAN

No matter how good your service or products are, you cannot succeed without effective marketing. The field of marketing is changing rapidly, so you will need to do market research. Include both what you learn from studying data from industry reports, library, etc. and what you learn first hand from talking and listening. The economics of the industry should be detailed including size of the market niche, your target percentage and how you are going to become a market factor in that niche, growth potential, barriers to entry and how you plan to overcome those barriers. Detailed information on your competitors, strategy, promotion of your products/services and distribution channels, and sales forecast are required.

OPERATIONS PLAN

Included here are your plans for how your products/services will be produced, your location, legal environment, and personnel.

MANAGEMENT AND ORGANIZATION

Here you will talk about the company personnel and their credentials, board of directors or advisory board, attorney, insurance agent, banker, accountant, and mentors.

PERSONAL FINANCIAL STATEMENT

This is key; any investor will want to see the extent of your commitment.

STARTUP EXPENSES AND CAPITALIZATION

These are usually much higher than expected, so plan accordingly.

FINANCIAL PLAN

The financial plan consists of a 12-month profit and loss projection plus 2 years by quarter. In addition to revenue and expenses, predict cash flow. This will probably prove the most effective management tool that you will have if you update it every month and make it a rolling 12-month forecast. You will be able to predict what will happen to your cash flow if you make a change or alter plans along the way.

APPENDICES

Include bulk items such as brochures, studies, contracts, and any other materials to support the assumptions made in the plan.

Always remember, the real value of creating a business plan is not in having the finished product; rather the value lies in what you learn through the process of researching and thinking about your business in a systematic way. The act of planning helps you to think things through thoroughly, make sure of your facts and assumptions, and look at your ideas critically.

Knowing that you have done your homework and have a sound plan, you will have the self-confidence to lead the organization to a successful endeavor.