Monthly Archives: December 2013

Two Crucial Planning Steps for Small Business Decision Making

In a prior small business planning blog, Use Critical Success Factors for Small Business Planning I shared how one of our clients narrowed down their potential list of new initiatives, projects or tasks from 20 tasks to 7 in only two short hours. They were able to do this because they first identified their Critical Success Factors.

They needed to reduce their possible action item list because as I shared in the blog “How to Use Your Small Business’ Limited Small Business PlanningResources Wisely” a small business has limited resources in the form of its time, money and talent so it must choose to utilize their resources on initiatives that provide it with the largest and most immediate payback.

So how do you use the above mentioned Critical Success Factors as a tool that to assist and guide you (like a park ranger) with this decision making process. Since your Critical Success Factors are the things that will either make or break your business, that is, they are the things that your business must absolutely do, and do correctly, in order to be successful you want to sift all of your possible projects or initiatives through this sieve.

Your Critical Success Factors are the actions or objectives that are indispensable in order for a business to accomplish its Vision. The first step in determining your Critical Success Factors is to analyze your business and look for things that must be done correctly. If not, your business will fail—they are indispensable to your business’s success.

These are not just nice things to have or do in your business; they are the things that will either make or break your business. That is, if you accomplish your business’s Critical Success Factors and everything else in your business “falls apart,” will you still be successful. If it is not a make-or-break item, it does not belong on the list. For instance, re-doing your reception area most likely would not be Critical Success Factor whereas developing and implementing a comprehensive marketing plan could very well be a Critical Success Factor for your business.

Once you have developed your list from step one, the second step is to review the list and look for the things that you must do well every day in order to be successful. You want to eliminate this from this list items that do not impact your business very consistently, even daily. With this step in mind you might remove “Have an annual company holiday party to build morale” but leave on “Build a team environment where each employee truly feels that they are important”. This step does not mean that you may eliminate your annual company holiday party, but you would only do that if you have the resources after you had tackled your Critical Success Factors, Together these two steps will guide you to your Critical Success Factors.

The Six Separate Areas of any Large Business or Small Business

If you look at any business, no matter how large or small they are, a start up business or a Fortune 100 business, you will see that they have six separate and distinct areas of their business, namely:

• Vision and Leadership

• Marketing and Sales

• Production

• Finance and Administration

• Human Assets

• Information Technology

Small Business PlanningWhen you analyze and complete the above two steps you want to look at all six of these areas of your business to identify your Critical Success Factors. However, for a small business the four most important areas of a business for which Critical Success Factors must be identified are:

1. Marketing – How are you going to market your products/services (part of your Marketing and Sales area)?

2. Sales – What will be your sales process (part of your Marketing and Sales area)?

3. Production – How are you going to produce what you are Marketing and Selling?

4. Financing of your business – How are you going to finance the start and growth of your business (part of your Finance and Administration area)?

I will continue discussing how to use your Critical Success Factors to guide your business in my next blog, Targeting the Use of Your Small Business’ Resources Properly.

As a result of using this Critical Success Factors small business planning you will now have a systematic tool for determining what areas of your business are candidates for devoting your limited resources to and which items on your action item list will yield the greatest impact on your small business.

 

How to Use Your Small Business’ Limited Resources Wisely

As a small business planning firm one of the consistent questions that business owners ask us is, “I have limited financial resources for my business where should I invest them?” This occurred recently when one of our clients, a heating and air conditioning contractor said to me, “George I want to expand my business significantly this year, what actions do you suggest?”

We then had about a two hour discussion on the 15 to 20 items that he was considering in order to grow his small business. By theSmall Business Planning end of our discussion he had crossed off a number of items from his immediate to do list. The items that were removed from his list either did not have the assurance of a significant payback to his small business or the timeframe of receiving a benefit from these actions was way down the road. His final action list for this year was boiled down to these 7 items:

  • Significantly increase his advertising
  • Add an additional inside salesperson
  • Do the research to determine if he should carry a different brand of heating and air conditioning systems
  • Do the legwork of trying to find a source for the financing of his customer’s purchase of their of heating and air conditioning systems
  • Add a two more installation trucks and two additional installers
  • Send his installation and maintenance staff for additional training
  • Invest in a new computer system that would enable him to run his business in a better and more efficient way

As we chatted about these various actions he could take I asked him if he had calculated whether he had the resources to do all these things at the same time or a close succession to each other.  He said, “It would be quite a stretch but I think I can financially afford these efforts”.  I shared with him every business has limited resources and you have to choose which initiatives you are going to tackle and the order in which you will undertake them.

A Large Business or Small Business Has Limited Resources of Time, Money and Talent

When the question of having enough “resources” is considered small business owners many times strictly look at their financial resources, however a business actually has three resource limitations:

1. Time

2. Money

3. Talent

Time – This includes the business owner’s personal time and the time that the employees of the business would spend on a certain project or a certain area.

Money – This is the resource that business owners most often consider and this financial resource can come from the business owner themselves, loans from outside sources is or it could involve internally generated capital.

Talent – Talent consists of and involves the focused thought, energy and skill sets of the business owner and the employees that are involved in the effort.

Small Business PlanningThese three resources of time, money and talent are limited in both the total amount it can be spent as well as the timing of the expenditure of this time, money and talent.  What we have found that assists small business clients in making these decisions is to take a step back and look at the things that you as a small business owner must absolutely do in order to be successful. See Small Business Planning Steps for Growing Your Business for related resources.

This involves determining the things on which you must focus your business’ limited time, money and talent in order to create a successful business. Otherwise it is easy to fall into a knee-jerk reaction and undertake actions that might solve some short term pressing issue, but in the long term may not move a small business owner closer to their goals for their business. See The Payoffs and Payback of Small Business Planning for more information on this topic.

Besides the money that an initiative will utilize consider how much of your personal time the action will take start and to supervise through its completion. Next take into account how much time that all of the tasks related to the initiative will consume from your employees workday. Also, determine how the project will affect your small business’ overall focus and how much of your business’ global energy will be expended. Lastly, ascertain if you and your employees have the skill sets to successfully complete the effort.

As a small business planning firm we have found that urging a business owner to consider how a possible action would consume their business’ limited time, money and talent can greatly assist a small business owner to ferret out and identify the initiatives that will truly be beneficial to the business owner as compared to just using up their resources.