The closer you are to a product or service the more difficult it is to become objective about it. It’s like a Funny Looking Kid (FLK) – the parents will always love him (or her) even if the rest of the world thing that he has a good face for radio (apologies to all the FLK’s and their parents – I myself am no oil painting).
You may not realise it, but subconsciously you currently perform at least one review a year. This is typically around tax time and looks at how profitable or not you have been the previous financial year.
Is this review frequency adequate? Absolutely not. If this is the only review that you perform then you significantly increase your chances of failure, or at the very best, you lose the ability to act on business intelligence such as your profitability lines, your areas of loss, new opportunities, and you miss potential areas of resource efficiency.
If this is your only strategy then I hope luck shines on you, because this is the only thing that can save you.
The actions you take post review will be very much dependent on the type of review that you perform. Excluding some obvious differences, such as product or service lines, all businesses share a number of functional blocks.
These can be broadly broken down into: Administration Financial Performance Infrastructure Opportunities Customer Experience Staff and Management
Services and Products Some of these reviews can be performed internally, some are better performed by external entities, some can be grouped together, and some need to be performed more frequently than others. The reason for the reviews and a review schedule is because things change. We are generally change adverse, so looking for change is not something that is usually a natural thing for us to do. Looking for change needs to be learnt. We need to want to look for change opportunities, not for change sake, but to achieve an advantageous goal. Using the 7 categories above is one way to train yourself to look for change and to time when you look for change. The general points that will be covered are GENERAL only. It will certainly not cover everything because it is way too difficult to cover every business type, customer profile, environment in 800 to 1000 words. There will hopefully be enough pointers to get you started.
Administration Sometimes referred to as the boring part of the job. Administration exists to ensure that your supplies and staff are paid, so that orders are processed, so that health regulations are adhered to, etc. For most small businesses the largest administration component might be the bookkeeping or accounting package. Sure this can be outsourced, and many people do. Businesses are either too small to outsource and hence perform this in-house, are busy enough to justify handing a shoebox worth of paperwork to an external once a month, or are too big or busy that this function returns home. Outsourcing is easy – it just costs you money. In house bookkeeping on the other hand needs to consider a number of factors, including the ease of use, how well it integrates with other applications, your POS, cloud or local, backup (remote, online, nearline, offline). Because it is such an important aspect of your business, it would be highly advantageous to obtain professional impartial advice on how to correctly set this up.
Although business administration is the function most removed from frontline services offered, it is the single biggest influencing function that an organisation needs to get right. Financial reviews, tied into the accounting system, are as important to business health as is sourcing the correct service or product.
Financial Performance A quick scan over your accountants paperwork 2, 3, or months after the end of a financial year is a grossly inadequate timeframe to review your P&L. Knowing how your business is travelling is needed to ensure that you can make the correct decisions and adjustments so that your future trading periods are able to meet targets. Knowing how you are financially tracking will provide tax-valuable insights before deadlines close; for example, there may be tax advantages to stockpile product this financial year, however this may be difficult to do if you are unsure of product sales trends, or if you have the available funds to cover the expenditure. Review regularly; quarterly is just adequate; monthly is ideal. Plot your financial indicators so that you have a visual representation. Keep this information as lenders absolutely love this sort of record keeping.
If it is difficult to produce this data, then refer to Administration above and invest in an electronic bookkeeping package. The reports and analysis you need is available at the press of a button.
Opportunities Opportunities are everywhere. You just need to look for them. Associated with opportunities are threats. Start looking for one and you will see the other. Ignore or don’t look for opportunities and your threats will bit you – and it might be difficult to recover from that.
Customer Experience You have a good product or service. You have worked hard to ensure that your business administration is in place, you have reliable financial data to base decisions on, but your last personnel hire is being argumentative and generally not providing the customer service that you expect. Sure you will eventually find out and then implement some retraining and hopefully get the business back on track – the risk is if you do not actively gauge customer experience then you may find out long after significant damage has been done to the business. It’s a fact that we tend to pay the least to the staff that are the main customer touchpoints. This is a risk that needs to be managed.
Staff and Management Aka Human Resources. Look at the largest successful businesses around that employ staff– anyone of them. Then have a look at their HR performance review policy. Without fail a program is in place to ensure that staff performance is regularly reviewed. These reviews are there to ensure that staff meet their employment obligations, but it is also there to ensure that they are adequately trained and that they have appropriate professional development opportunities. A common argument that I hear all the time is that if you invest resources in upskilling your staff then they will leave you for another employer, and you have lost your training investment. This happens, but you will be surprised at how infrequently it happens. The flip side is that staff become unwanted and unloved because they receive zero training – this is actually the trigger for the majority of at level staff movements. You, of course run the additional risk of negative customer experience impacts whilst you persist with untrained staff.
Services and Products You have a great product. It’s all yours and has served you well for a long time. Do you change it? Do you persist with it? Both good questions and both ones that I cannot answer. What I can say is that the same applies to a product that you may have developed and are passionate about, but has failed to take off. This is the reason for a product and service review. It will answer the above questions. It will also identify where improvements can be made, if the market is still accepting of it, who has copied you, who is competing against you, is there product better.
This blog has looked at the review process. It has identified some key areas and has made some suggested review cycles. The review process for your own organisation will identify the cycle and, more importantly, it will assist in helping you identify competitive risks. It will also identify your own failure or potential failure points. So far I cannot see a negative of doing any of this.