My most recent blog post touched upon the notion that marginal improvements in performance can collectively add up to big gains – inspired by Team GB’s gold medal success at the London Olympics.
That’s fine, but what about the big things? The bigger, more complex questions you might occasionally wonder about on a long car journey or in the shower or, indeed, while doing both at the same time in a motorhome.
While every business is different, ultimately the laws of commercial gravity apply to us all. So, if there were a theory of everything for small businesses, what would the variables be? As the proposer of such a theory I’ve decided to limit the number of potential variables to seven, one big thing to ponder every morning of the week in the shower.
Here are my suggestions for the seven things you need to wonder about…
1. Is my website actually working for me?
The hard truth for a vast majority of small businesses is that the answer is probably an emphatic “No”. In fact, not only it is very likely that your website isn’t supporting your business very well, it may actually be toxic enough that it’s actually working against you. Unfortunately the phone never rings when someone chooses a competitor over you because your website stinks, so we’re naturally inclined to regard the effectiveness of our online presence optimistically on the basis of the business we know it generates, but if we’re honest that might only be half the story. Or worse. Before I panic you into contracting London’s finest ‘rock star design agency’ to fix your unwitting aberration, do some basic research yourself. Amazon is packed full of books about what constitutes an effective business website, and work out what you actually want your website to do for you. If you’re reading this thinking, I don’t need a website, or it doesn’t apply to me – think again. Your website is your primary face to the world today.
2. How do we really compare with our competitors?
Unless you’re in the business of supplying second-hand Alpaca wool tea-cosies, you’ve probably got competition. How you stack up against your competition is a tough, often subjective puzzle to solve. There are two schools of thought here; ignore your competition and just to the best job you can do, or gain some understanding of your mutual strengths or weaknesses and adapt accordingly.
The former approach has some merit in a Zen kind of way but it’s probably not a great idea and it also assumes that all your customers are satisfied that you’re trying your best and ignores the fact that you might not actually be delivering your best. Depending on what kind of business you are, you could just casually ask your customers for feedback or you could invest a little more time building a simple but structured online survey for them to complete. Paralysis by analysis should be avoided at all cost, but a little insight might go a long way and it could be just as easy as picking up the phone.
3. Are we going fast enough?
In my twenties I used to imagine that running a business which enjoyed triple digit growth would be like winning the lottery, or something, and pretty much a license to swan around the office patting people on the back while lighting cigars with fifty-pound notes.
I’m now in my forties and while triple digit growth is a lot of fun, there are no cigars and all success is relative. 100% year on year growth is nice and all, but should it really be 200%?
Regardless of how many digits are in your growth rate it’s easy to think of growth in the same way we think of website effectiveness; too thankful for small mercies.
The single best person to speak to about your relative performance versus your potential performance is your accountant. Accounting firms enjoy the privilege of having the fiscal inside leg measurements of hundreds of small businesses. And without breaking client confidentialities they’re perfectly placed to identify things that might be holding you back, and to work with you on fixing them up.
4. What is my cash flow?
Tracking the movement of each and every penny in and out of your business is not likely to be every small business owner’s core strength. Ignorance is bliss for a while, but if we’re honest, not really.
Once you’re over the shock of knowing just how close to the wind you’ve been sailing all these years, who knows, you might actually get the odd pleasant surprise at discovering a nice monthly financial buffer you never knew you had, and which might go some of the way to funding that next phase of expansion. If you’re not a financial whizz, a good bookkeeper or accountant should be able to pull together a basic cash flow forecast for you without much effort. It might not always be good news, but with a little luck and planning, you might at least sleep a little easier.
5. Where to next?
Speaking of planning, it’s very easy for small business owners to get so heads-down on running the day to day business that they don’t lift their heads often enough – if at all – to check that they’re still heading in the right direction. For some people it might be sufficient to just put a monthly planning appointment in their calendar to remind them to take time out to check, think and plan. But it’s a lonely job at the top, regardless of the size of your business, and getting a mentor or confidante is probably a good idea, too. This could be someone you trust from earlier in your career, an old manager perhaps, or again your trusty accountant is probably a great mentor in waiting. Either way you should at least try to sit down with someone at least once every few months to think strategy.
6. Is my team working well?
Small businesses don’t enjoy the big business privilege of having different people to do different jobs and rely much more on people wearing multiple hats. It’s an unavoidable necessity, but over time things can change and you could have someone covering a key function just because they’ve always done so, but which might not make much sense today if you started over. As with a earlier points, don’t assume – ask. You’ll probably discover a bunch of things you didn’t know and might identify opportunities to do things differently.
7. What’s my exit strategy?
Whether you’re in for the long haul or out to make a quick buck, ultimately we all part company with our companies sooner or later. This is probably the toughest question to approach generally, but it’s definitely worth having some kind of ideal scenario lined up, even if that’s just to run your business gracefully into retirement and a nice pension.
If you’re thinking more short term then it makes sense to consider how you might maximise the value of your asset in readiness for your exit. Metaphorically speaking this is a little bit like selling any kind of property. You wouldn’t expect to get a top-of-the-market valuation for a home or car that looked like it had seen better days, had no service history and looked like it might collapse if the wind happened to change direction suddenly.
On the other hand you will certainly maximise your valuation if you’re able to provide potential buyers with accurate and well-kept financial records that present your profitability accurately and portray the most accurate and hopefully best outlook for the future of the business. Even if you don’t plan to sell your business soon, maintaining a high standard of record keeping and management reporting are great habits to get into.