5 Ways You Can Improve Your Business
It’s easy to get caught up in the day-to-day operations of your business. After all, because it’s your business it’s natural for you to want to do everything in your power to make sure all is running as it should. Unfortunately, micromanaging the day-to-day can cause you to lose sight of the bigger picture. Take a moment to stop what you’re doing, take a step back and evaluate where your business is today and the direction it’s heading.
Keep reading to discover the five steps you can take to determine if your business is heading in the right direction.
1. Be The Leader You Want to Be.
As a seasoned business owner, you know your company inside and out – when there’s a problem, you provide a solution; when a ball drops, you pick it up. The best thing you can do for your business is to step out of your comfort zone. Stop working in your business and start working on your business. If you always find yourself in the middle of daily business operations, you’re unlikely to get out in front of opportunities that could maximize your company’s long-term value. Be the leader your company needs. Stop putting out fires. Instead, start making waves.
2. Tell Your Story, Invest In People.
Why should people work for your company? What makes you different? What are you doing in today’s competitive environment to retain and attract top talent? Start by being enthusiastic about your business, and share you mission and vision with others.
3. Embrace A Strategic Vision.
Every company should have a strategic vision. From financial objectives to operational goals, your strategic vision should provide your workforce with an overview of the company’s operational and growth initiatives. Formal plans should also address the company’s budget and financial forecast. Proper utilization of these plans will help you reap optimal results by providing you with the information you need to make better decisions. Below are initiatives you can include in your strategy to gain greater insight into the industry and to learn how you can better manage your current financial and operational objectives:
- Benchmarking. Benchmarking is a proactive way to stay in line with, or ahead of, the competition. Understand how your company stacks up against the competition and gain insight into current trends, future opportunities and potential risks.
- Key performance indicators (KPIs). KPIs are critical to the management of your daily operations. In order to deliver results, you and your management team must understand the resources you are working with and how you are affected. KPIs also provide management with insight into production and can alert leaders to potential areas of risk. Financial statements are not KPIs. Financial statements paint a picture of your previous month’s operations and are normally not completed timely enough to address issues in real time. KPIs should be developed and monitored daily or weekly to know if you are getting the results needed to successfully run your business. These KPIs should be developed around employee production hours, number of service calls, widgets produced daily/weekly, etc. If you know and understand what drives your daily or weekly profit, there should be no surprises at month-end.
- Cost structure. It’s critical to understand your cost structure. Understanding what it costs to make, distribute and sell each unit of each product line, for example, will give you a better grasp of how much you’re spending on material, labor and overhead. This knowledge will better equip you to allocate your efforts and resources. Unfortunately, many managers don’t understand the company’s cost structure, which puts the company at risk of losing money in the long run.
- Budgeting and forecasting. Now that you understand your cost structure, have benchmarked your past results against your industry and know what your KPIs are, now it’s time to budget and forecast. Do you know your break-even point? Do you know how a change in sales volume or price will affect your bottom line? Budgeting and forecasting can help you answer these questions and more.
4. Find a Trusted Advisor.
A common misconception in the industry is that anyone with a CPA certification can properly prepare a tax return. However, accounting industry regulations and tax laws are getting more complicated every day. That’s why it’s important to work with a trusted advisor who completes appropriate training and maintains the knowledge needed to maximize tax credits and deductions to minimize your tax burden, allowing you to reinvest the tax savings (allowed by the law) into your business.
A trusted advisor is much more than someone who can provide tax planning and compliance services. This person understands business; more importantly, they understand your business. They should be able to advise you in areas of business structure, business operations, wealth management, debt structure, capital budgeting, costing and all of the topics noted above. Ideally, you should be talking to and meeting with your trusted advisor throughout the year and not just at “tax time.”
5. Processes Are Important – Consider Going Lean.
The manufacturing industry underwent a significant transformation in the ’90s with the wide-spread practice of Lean Six Sigma, which helps companies become more efficient and effective by introducing better processes throughout the organization. Many companies outside of the manufacturing industry, however, have yet to incorporate Lean Six Sigma into their operations.
Much has changed over the course of two decades and new uses for Lean Six Sigma have been discovered as a way to improve businesses across all industries. Consider Lean Six Sigma as a way to become more efficient and effective in every aspect of your business. If you struggle to attract new talent, Lean Six Sigma may be just your company needs when you need to do more with less.
These are just a few of the ways you can begin to evaluate your business’s progress. If you own a company or if you want to explore ways to improve your business’s efficiency, effectiveness, profitability and risk management systems, email Rea & Associates. Our team is passionate about helping companies reach new heights, mitigate risks and attract and retain employees.
By Kyle Stemple, CPA, CGMA, CEPA (New Philadelphia office)