“A business that makes nothing but money is a poor business.” – Henry Ford
Every business launched should be infinite and earn a profit ─ unless, of course it is a non-profit organization. Profitability has an impact on whether a company can secure financing from a bank or attract investors to fund its operations and grow its business. Continuous prosperity is earned most notably by tightly controlled financial management, including cash flow/liquidity, a methodical and lean operation, and a policy with emphasis on employee, vendor, as well as on a customer focused environment.
However, many businesses are not earning a decent profit margin or produced one for some time. Those companies are at a stage where they can be profitable anytime, but they prefer to invest money back into the company to keep the growth steady. However, there are also scores of them where they cannot survive without external debt or they are operating at a highly unsustainable business model such as selling merely on price with no unique selling proposition (USP) and instead, paying more attention at how fast they are growing.
How much profit should a business be earning?
A decent margin will vary considerably by industry and size of business, but as a general rule of thumb, a 10% net profit margin is considered average, a 20% margin is considered high, and a 5% margin is low. The industries with the highest average profit margins include:
Database, Storage & Backup
Financial services (non-bank)
Healthcare support services
Small to Mid-size Businesses (SMB/SME)
Lessors of real estate
Management companies including consulting
Orthodontic and dental offices
Computer software and hardware technical operations
Industries with low profit margins include airlines, grocery stores and automobile dealers as they are typical examples of low-margin businesses. Capital and labor intensive industries usually have low profit margins, due to massive investments with a low return or a long term return (ROI).
For a complete list of industries and average profit margins click here.
Popular newer companies with high values but no profit
Some notable relatively young companies across the tech and lifestyle sectors such as Airbnb, Uber, Wayfair and Peloton, to name a few, have yet to break even since their inception despite the justification for high valuations which are generally around the future prospect of earnings, among other factors. All highly hyped start-ups had great stories of scale, regardless of whether their stories have yet turned-out as predicted. In fact, many are actually losing millions every year during the first decade (think Amazon). Reasons for not making any profit include, in part, a large investment in sales and marketing, product development, technology and operations. Some are less efficient with scale. Consequently, to make money, they will need to re-engineer their business model and manage costs from running far ahead of revenues.
How to restore your business gains
There are several measures to take to make certain your business thrives, and profits are frequent, as well as attractive.
Your profit margins ought to be in line with your industry or better. Consider offering a premium product which will yield a better profit and reputation. Avoid markdowns as they are profit-killers. In addition, enhance your brand image and increase the perceived value of what you are selling.
Negotiate better pricing agreements with your suppliers to reduce the costs of goods and widen your margins. Negotiate for discounts. You may want to include free shipping or other offers such as receiving extra products for free. This works well when you are purchasing in bulk.
Reduce supply chain costs and inefficiencies. One way to accomplish this is by shipping product in less than a full truckload (LCL) as it is more costly when it is full (FCL). Making several deliveries each week is more expensive than just one.
Streamline your operations and reduce operating expenses. Automate specific tasks in your business such as putting repetitive activities on autopilot. This way, you can reduce the time, manpower, and operating expenses required to run your business. Cut overtime and excess staffing as much as it is feasible and control other expenses by implementing rigid budgets and needless expenses. If the purchase does not contribute to the growth and improvement of the business, it should not be made in the first place.
Avoid over leveraging as this entails having a significant amount of debt in use along with a debt service strain. While debts used to generate revenue can increase revenue and profit over time, excessive debt can inhibit profitability. Keep your debt on the wise and strategic side of things.
How often do you come across a company, either as a consumer or at a business relationship level, and realize how frustrating it is to deal with?
To understand and penetrate the corporate governing structure and “culture”, you need look no further than the upper echelon of the hierarchical tree. It is here that procedural decisions are shaped and executed. An entity’s leadership is expected to head the enterprise by governing its long-term growth and sustained wealth. Moreover, there is a constant search for the “right” human resources. Recruited and fresh talent must resemble the leadership in tone and style. Call it the organization’s DNA. Exceptional organizations are good at these types of corporate strategies, thus strengthening performance effectively.
We notice that in certain types of B2B transactions, there can be scope for unscrupulous behavior. One or both parties are tempted by “disservice” during their business exchange. Shortsightedness might lend itself to make this underhanded approach appear “profitable” on paper. Such relationships inevitably end badly because they are not conceived with trust or respect.
Success Breeds Success
Companies that foster the right attitudes and strategies put the firm on track for success. Examining their corporate histories, you can witness a trajectory of growth. They have a tendency to dominate their markets and “win” through competent talent, innovation, and an entrepreneurial mindset within the leadership at the executive level. These choices underscore the prosperity and rapid growth of the institution. An examination of Alphabet (Google) or Facebook shows this quite nicely. They are not built like “traditional” corporations nor do they act like them.
Organizational leadership is accountable for creating value for customers, employees and its owners/investors. When Bill Gates conceived Microsoft, he put the firm on track for providing constituent audiences with what nobody else could provide. Understanding “asset” management in an expanded meaning of the term guaranteed that Microsoft would succeed under Gates stewardship.
The opposite is equally true. When top executives lack knowledge or experience for board positions, they should not be promoted to these leadership roles. Some family owned firms run afoul here and this brings up the issues of sustainability and corporate governance. Another weakness in running an organization, in my view, is pushing for short-term profitability at the expense of solid planning. For example, with large organizations, competence is not the primary value but rather connections, politics, and clever tactics. Such “benefits” can usually compensate for incompetence.
No business can continue to prosper unless it attracts fresh and eager talent. Despite the dilemmas within the financial world, top organizations consistently lure new talent with lucrative compensation packages. It is easier for a firm such as Goldman to tap the “best” because of its reputation, size and success than a small local financial player. When Goldman recruits they know where to look, whether it is Harvard or the London Business School. Prospects will already contain the seeds of the corporate culture in their past. Given the “right” conditions, new talent blossoms. Qualifications are never enough. They are a starting point reinforced by attitude and values. The selection and screening process is designed by HR to weed out inappropriate candidates.
Established software companies’ interview process include quizzing candidates with challenging technical questions. This practice not only assesses problem-solving and knowledge ability, but also explores the ability to perform under pressure, which is a key skill required for software engineers to succeed in their intense work environment.
One thing is firmly certain ─ the best-managed companies have “one” factor in common: They are constant achievers in their respective industries. These companies exude managerial excellence. Financial performance is the result of this style of management. Consider companies such as Amazon, Apple and Cisco, among others, which thrive and ranked in 2019 by the Drucker Institute as America’s largest publicly traded companies according to Peter Drucker’s principles of effectiveness—“doing the right things well.”
Deeds Not Slogans
Companies with inept leadership usually fail in the first year or two, but even established companies can stumble badly when they outgrow the capabilities of the founding team. Research by the U.S. Bureau of Labor Statistics demonstrates that nearly 6/10 businesses shut down within the first 4 years of operation.
To be a successful entrepreneur is not an effortless task. It takes plenty of sacrifice. A new generation of young entrepreneurs think the road is smooth and a fast track to easy wealth. Not everyone will become Jeff Bezos. Obstacles and sacrifice are part of the deal. Harnessing opportunity and overcoming challenges daily to top the competition is constant work. These conditions are true no matter what the sector of business engagement or company size.
Telltale signs of weak organizations can be traced to inept leadership. The following points highlight the deficiencies: • Poor customer service – slow or no customer inquiry replies – abysmal handling of sales and service complaints. Service is portrayed as a reward, not a right or benefit. • No Unique Selling/Value Proposition – Companies need to define and articulate their unique value proposition and deliver on it consistently. Create the platform for sustainable and competitive advantage. • Operational deficiencies – various ailments and no structure • Absence of or very little communication among staff and management – Divisions aren’t well-coordinated and do not function as a team. • No transparency – There is hardly any openness from management. • Unethical practices – short-term selfish objectives in search of market share. Top executives should promote social norms and principles as moral agents. • Lack of proper execution of decisions and with new products/services. • Productivity incentives should be implemented to boost results and employee morale. People must be given a reason to work hard and be efficient. • Creativity is practically non-existent – An absence of innovation and employee empowerment will hurt progress and stifle new ideas. • No clear vision/strategy – there needs to be a strategic vision that reflects a truly unmet need and has the commitment of a dedicated CEO. That means that there is a well-defined target audience with a distinct value position that is differentiated, meaningful, and deliverable. • A weak sales force along with an unattractive compensation plan. • Favoring nepotism and bias – promoting family members over other qualified employees often leads to resentment or, worse, prompts valuable non-family employees to leave the company. • Poor hiring practices – should hire for attitude and train for skills. • Slow/delayed decision-making process – too many layers – overwhelming bureaucratic structure. • High turnover, which leads to poor employee morale, reduced intellectual capital, lower service levels, higher operational costs and decreased productivity. • Management in a state of denial about their organization’s shortcomings – remaining with the dysfunctional status quo • No specific and/or stable channel strategy – Some companies focus on building a product, but don’t think through how to get it into the hands of customers. Even if your product is great, unless you can sell directly, you may be dead in the water without strong channel partners. • The hidden game – corporate politics – power plays by a handful of individuals for their own benefit to the detriment of their colleagues and the company. • Misrepresentation of brand(s) – too much hype – empty promises – not delivering on expectations – leads to dissatisfied clients who will alienate the brand. • Weak financial controls – cash flow dilemmas – over leveraged/undercapitalized (high debt-to-capital ratio) – not reinvesting a certain percentage of profits for future growth. • Absence of sound marketing program(s) and/or brand strategy – A brand is defined by how it behaves, from the products it builds to how it treats its customers, to the suppliers with whom it works. • Growing too fast and not staying on course as the company grows. • Lack or very little employee training & development. • Deficient in control systems – reactive rather than pro-active. • Lack of continuous improvements or complacent.
Top executives need to be accountable to the ownership or Board of Directors – whichever applies, or at least to an outside arm’s length and neutral party such as an adviser who can also play “devil’s advocate” when necessary.
Good Organizations Matter
The way to solve an organizational problem is to confront the structural issues with a moral sense of purpose and ethics. For its clients to receive stellar service, the firm must have its house in order. Besides structure and an efficient operation, employees should be trained and empowered to do their jobs efficiently.
Seth Godin, a renowned marketing strategist, stated succinctly: “If you want to build a caring organization, you need to fill it with caring people and then get out of their way. When your organization punishes people for caring, don’t be surprised when people stop caring. When you free your employees to act like people (as opposed to cogs in a profit-maximizing efficient machine) then the caring can’t help but happen.”
Companies that disrespect their employees and shut-out clients get willfully isolated and have a short life span through an erosion of market share and significant loss of revenue. A company’s goal should place emphasis on serving its people properly and fairly. Higher morale generates higher profits – though occasionally other priorities hinder that objective, for example, self-serving behavior by certain executives.
Enterprises spanning a wide array of industries, have earned distinction as “well-” or “best-” managed” by demonstrating business excellence through a meticulous and independent process that evaluates their management abilities and practices – by focusing on innovation, continuous training, brainstorming and caring for their employees’ well-being – as well as investing in meeting the needs of their clients.
In a nutshell: Well-run companies thrive no matter what by hiring the right people, taking good care of them, listening to customers and never ceasing to innovate and improve.
Whether you own a restaurant, retail, manufacturing or in the services domain, each definitely has its own challenges. However, all have similar things in common including protocols that must be implemented to control the spread of the COVID-19 virus, as well as cash flow, customer acquisition and marketing issues to deal with to name a few. COVID-19 is a systemic shock for every company around the world. The pandemic has changed not only economies but consumer behaviors and what customers value and demand moving forward. How should a savvy entrepreneur regain his or her best skills and eloquently move forward? There are five recommendations which will be addressed below.
The “new” normal or “next” normal
McKinsey & Co., a renowned business consultancy firm, declares that due to the business disruption caused by Covid-19, regardless of industry and sector, it envisions 7 elements which will be crucial in the shaping of the new normal. This includes:
Distance (social/physical) is back (technology continues to shrink physical distance, but in other ways, it could be set for a return);
Resilience & efficiency (combined – to come out of the crisis better than the competition, as well as the key to survival and long-term prosperity);
The rise of the contact-free economy (especially in regards to making payments – but in three areas in particular—digital commerce/e-commerce, telemedicine/virtual health, and automation);
More government intervention in the economy (step up to serve, or save, the private sector from economic disaster);
More scrutiny for business (with public money offered, there will be real effects on the relations between government and business, and between business and society);
Changing industry structures, consumer behavior, market positions, and sector attractiveness (should question whether existing market positions will be ongoing without much effort to reposition and respond to changes confronting various sectors as a whole);
Finding the silver linings (an opportunity for some positive outcomes and lessons derived from the coronavirus crisis).
Don’t panic, reassess and execute
Preparation, agility and resilience are three key ingredients to weathering any business storm with “Threats” in your SWOT analysis. Although Covid-19 has caused more havoc than anyone would not possibly anticipate, for optimists and the determined, it has offered a silver lining in regards to being much better prepared for almost any other peril which comes along in the future.
Cash flow: Since we know that cash is a crucial aspect of any business, a focus should be on price, volume of products or/and services sold, cost of goods sold (COGS) or cost of services rendered, operational expenses, accounts receivable timing, inventory control and turnover, as well as accounts payable terms and payment timing.
New and refined business model and strategy: Get creative and brainstorm different ways you can readapt your business and still deliver your service and/or products, including methods to boost revenues not considered pre Covid-19. For example, dining restaurants and lounge cafes are operating home-delivery and pick-up, as well as downsizing their seating capacity. Other types of businesses are considering mainly online and considering weekly or monthly subscription-style deals and other incentives helps to stay ahead of the competition.
Execution: Once the viable strategy is in place, implementing it requires several variables including: a) Everyone is onboard and constant communication is key; b) Include a timeline to accomplish the tasks; c) Select which ones will create the greatest impact to the goals of the organization; d) Frequently monitor and evaluate ─ verify progress against plan and make any necessary adjustments if necessary.
Finally, don’t leave any strategic planning elements without clear “action steps.”
Growth and innovation: The successful development and implementation of new ideas and refinements is crucial to a business so as to improve its processes, increase its efficiency, introduce/launch new and improved products and/or services to market, in addition to, improving its profitability. Encouraging and brainstorming new ideas, with all staff involved for maximum feedback, is a savvy consideration. Some ideas to consider are: adapting the business to meet changing customer needs, changes that solicit changes due to a “new” normal, and new, refined or discontinued products and/or service offerings.
Use of technology: More than ever before, exploiting technology at your disposal brings an added advantage in running an efficient business, plus navigate the challenges from the contagion and aid their recovery. Businesses should make a mid to long-term plan on technology and digital strategy. For example, process automation can increase efficiency. There are likely to be more opportunities for companies, among others, in sectors such as remote offices, online education, online medical care and online entertainment. However, adopting new digital or mobile payment methods, earning revenue from online sales and using social media for business purposes should be top of mind.
At the end…
John F. Kennedy once stated that “when written in Chinese, the word ‘crisis’ is composed of two characters. One represents danger and the other represents opportunity.” The assumption is sufficiently genuine: that a calamity presents a choice. This is especially evident today. In business, regardless of industry, alternative yet practical ways to operate exist.
What is for certain, is that the upturn caused by Covid-19 will be a terrific opportunity for growth ─ but only for those who embrace it and make the required and meaningful changes. No one can predict risks such as a pandemic, but it would be foolish to think they, and other types of risks, will not occur and affect them in any way.
Following three decades of personal business experience in three countries, as well as through constant observation of successful businesses, for products or services to increase the rate of triumph, they should perform at least one of the following:
Solve a problem: Whether for the B2C or B2B market, focus should be on building a “must” have not a nice to have product. Consumers are overwhelmed with a plethora choice on daily basis. Attention spans are getting shorter and only few products are getting noticed. As a result, a product or service should be doing something different and better to succeed by being in demand.
Examples:Amazon simplified online buying and selling. Poo-Pourri solved the stinky bathroom problem, Spanxsolved the comfort of leggings.
Also consider inventing any product in the health & wellness sector which diagnosis and prevents any potential diseases such as colon cancer etc., or in the privacy & security domain protecting consumer data on personal devices.
Make lives easier – offer convenience
Examples: The invention of the GPS (replace paper maps), wireless charging (did away with power cords), voice-command devices such as the TV command remote (eliminated having to use a plethora of buttons), smart wireless home (remotely control various factors of the home environment), Blue Apron (a meal experience that customers create with the original recipes and fresh, seasonal ingredients that are included in every box.)
Fintech: “Computer programs and other technology used to support or enable banking and financial services.” It is “one of the fastest-growing areas for venture capitalists.” According to Forbes, examples of Fintech-related companies or products include: Payment infrastructure, processing and issuance such as services provided by Square and Stripe; Stock trading apps from TD Ameritrade and Schwab; Alternative lending marketplaces such as LendingClub, and OnDeck.
Also, urban farming — growing commercial ready fresh, sustainable and local vegetables with no pesticides. Examples are La Caverne in Paris, Badia Farms in Dubai or Lufa Farms in Montreal to name a few.
Disrupt an existing well-established business/product/service. Disruptors create a way of doing things which displaces the existing market leaders (a product or service), and eventually replace the original players in their sector.
Consider Uber (taxi industry), Airbnb (hotel space), iRobot (vacuum cleaning chores), Beyond the Meat (looks like and tastes like real meat though plant based).
Sell hope – after using these products and services, lives will be easier, better, and changed somehow.
Examples: Cosmetics, skin enhancement injection services and products such as Botox, financial planning products for a comfortable retirement.
Offer a lifestyle enhancement
Examples:Red Bull (“gives you wings”/vigor), Vans sneakers, Apple products, and recreational lifestyle pharmaceutical products such as Viagra and Cialis.
Provides a social status: Think (authentic) luxury products and services or green products.
Examples:American Express Platinum charge card, Business and First-Class on airlines etc.
Green status products may include the Prius hybrid automobile and the Tesla (ditching the ubiquitous internal combustion engine with its use of fossil fuel).
Offer a better version of an existing (generic) product or service (“Premium”) – upper mid-to high price range appealing to discerning/very demanding consumers. This business model seeks a higher profit margin on a lower sales volume. Services and subscription models are a much more sustainable than physical products.
Example:Nestlé has its Nescafé line (various types) of coffee but also offers its top of the line Nespresso line (a separate company division).
Sell niche, exclusive or viral products online:
-Reach an audience with a shared identity regardless of location.
-Exclusivity has its devotees and offers the illusion of scarcity.
-There are several factors that influence the virality of a product and they range from the emotional impact to the visibility that the product delivers.
Examples: Keto(genic) foods, vegan foods, Matcha tea, all natural pet food and/or accessories with a fashion statement, bamboo toothbrushes, yoga/health retreats, specific branded apparel and footwear are just a few good ideas mentioned.
In addition, if choosing to deal strictly with B2B, what is recommended as businesses are:
Act in a capacity of a Consultant or Broker (services, with no inventory to purchase, store and sell) but preferably with unique knowledge and exclusivity respectively;
Be a wholesale supplier of specialized raw materials, parts or ingredients rather than focus on the retail space (CPG or CE domain). Building a brand in the mind of a consumer is a lengthy and costly affair.
In the end…
…with any or several categories of the above recommendations, as an entrepreneur, your product or service has a great shot at profiting in a competitive market. A contrarian with innovation tendencies can make a difference. Never think short term and always consider adding value if you want to truly succeed in business.
“Panic” and “chaos” are not what one should undergo in business. Unfortunately, many entrepreneurs are caught off guard more often than necessary when operating their business. In his book “The E-Myth Revisited”, dynamic author Michael Gerber states that a business person ought to work “on” his/her business, rather than “in” his/her business.
Start-ups have a leg-up if they launch and persevere on the “right track.” The appropriate definition of these two words together imply following a proper course of action. The analogy which can be applied to a business well-being is our own personal state of formidable health comprising of a healthy diet, frequent exercise and undergoing an annual physical. The objective is to be proactive, rather than reactive.
Remaining diligent and active as opposed to reactive
Entrepreneurs may be quite well versed with the products and/or services offered, but not necessarily with running their business including a bucket list of daily administrative tasks. Most notably, sales, marketing and finance/accounting undertakings. This is where honest consideration should be given in either bringing in a partner to complement the entrepreneur’s weaknesses or an external adviser and/or mentor to guide him/her. A sounding board should not be dismissed as prohibitive, thus solely for larger organizations. Seeking professional help is an important way to avoid or plan for business challenges.
Moreover, when drafting a business plan as the road-map, include a SWOT (Strengths, Weaknesses, Opportunities & Threats) matrix and “what if” scenarios — which will reveal and prepare one in avoiding the pitfalls of running a business, as well as coping with various challenges which can arise. In addition, consider plotting a business model as a prelude to the business plan. It makes you think through your business plan, which in turn communicates the business model. Both should synchronize. Make certain a short term (less than 12 months), medium term (13-30 month), as well as a long-term plan (30-60 month) have been conceived.
Savvy business people – whether new or seasoned entrepreneurs or CEOs of large corporations possess:
Insight and foresight;
Strategies and execution competence;
Alternative plans with an exit strategy in case situations turn awry;
The perception to take “calculated” risks rather than dive into the abyss;
Openness to third party advice;
Focus and consistency to achieve their goals and objectives;
The ability to see opportunity before their competition does and act upon it in a timely manner.
Negligence with current enterprises
Growing pains in any organization require a formidable administration to keep the business operating efficiently which includes customer front & center, profitability and more than adequate cash flow. Telltale signs of weak organizations can be traced to inept leadership. The following points highlight the deficiencies:
Poor customer service – slow or no customer inquiry replies – abysmal handling of sales and service complaints. Service is portrayed as a reward, not a right or benefit.
No Unique Selling/Value Proposition. Companies need to define and articulate their unique value proposition and deliver on it consistently. Create the platform for sustainable and competitive advantage.
Operational deficiencies – various ailments and no structure
Absence of or very little communication amongst staff and management. Divisions aren’t well-coordinated and do not function as a team.
No transparency. There is hardly any openness from management.
Unethical practices – short-term selfish objectives in search of market share. Top executives should promote social norms and principles as moral agents.
Lack of proper execution of decisions and with new products/services.
Productivity incentives should be implemented to boost results and employee morale. People must be given a reason to work hard and be efficient.
Creativity is practically non-existent. An absence of innovation and employee empowerment will hurt progress and stifle new ideas.
No clear vision/strategy – there needs to be a strategic vision that reflects a truly unmet need and has the commitment of a dedicated CEO. That means that there is a well-defined target audience with a distinct value position that is differentiated, meaningful, and deliverable.
A weak sales force along with an unattractive compensation plan.
Favoring nepotism and bias – promoting family members over other qualified employees often leads to resentment or, worse, prompts valuable non-family employees to leave the company.
Poor hiring practices – should hire for attitude and train for skills.
Slow/delayed decision-making process – too many layers – overwhelming bureaucratic structure.
High turnover, which leads to poor employee morale, reduced intellectual capital, lower service levels, higher operational costs and decreased productivity.
Management in a state of denial about their organization’s shortcomings – remaining with the dysfunctional status quo.
No channel strategy. Some companies focus on building a product, but don’t think through how to get it into the hands of customers. Even if your product is great, unless you can sell directly, you may be dead in the water without strong channel partners.
The hidden game – corporate politics – power plays by a handful of individuals for their own benefit to the detriment of their colleagues and the company.
Misrepresentation of brand(s) – too much hype – empty promises – not delivering on expectations – leads to dissatisfied clients who will alienate the brand.
Weak financial controls – cash flow dilemmas – over leveraged/under-capitalized (high debt-to-capital ratio) – not reinvesting a certain percentage of profits for future growth.
Absence of sound marketing program(s) and/or brand strategy. A brand is defined by how it behaves, from the products it builds to how it treats its customers, to the suppliers with whom it works.
Growing too fast and not staying on course as the company grows.
Lack or very little employee training & development.
Deficient in control systems – reactive rather than pro-active.
Lack of continuous improvements or complacent.
The way to solve an organizational problem is to swiftly confront the structural issues with a moral sense of purpose and ethics. It must also have preventive systems in place in anticipation of issues which may arise.
For its clients to receive stellar service, the enterprise must have its house in order. Besides structure and an efficient operation, employees should be trained and empowered to do their jobs efficiently.
Companies that disrespect their employees and shut-out clients get willfully isolated and have a short life span through an erosion of market share and significant loss of revenue. Thus, a company’s goal should place emphasis on serving its people properly and fairly. Higher morale generates higher profits – though occasionally other priorities hinder that objective, for example, self-serving behavior by certain executives.
Operational prevention: Implementation of systems and risk management
To preventing operational problems before they even occur requires anticipating them through operational intelligence. The purpose of risk management is to identify potential problems before they occur. To do so entails early and in-depth risk analysis through the collaboration and involvement of all parties involved in running the business. It’s where brainstorming occurs about potential problems regarding the product(s), service(s), market(s) etc. to search for and foresee issues, as well as create solutions in advance – eluding the element of surprise at some point in time. Risk management is comprised of: 1) Identifying, outlining and analyzing potential risks; 2) A course of action in handling the identified risks, as well as the implementation of risk control/elimination plans when/where necessary.
Business leadership should contemplate allowing constant flexibility to adjust strategy when necessary if the initial one isn’t effective.
There should be continuous checks and balances – especially with regards to internal financial controls through various procedures implemented to reduce errors or possible embezzlement by staff. Trust but verify ought to be the organization’s mantra and actual implementation.
Perhaps you can consider a risk analysis software such as a SAS platform whose practical use offers best practices to help the company establish a risk-aware culture through various enterprise risk models and forecasting. We note examples of aircraft pilots who diligently prepare prior to a flight – or ship captains making their plans prior to voyages at sea.
When all is said and done – avoiding pitfalls
Companies with inept leadership usually fail in the first or second year, but even established companies can stumble badly when they outgrow the capabilities of the founding team. According to statistics, as the latest available numbers from the two U.S. government statistical agencies responsible for providing data about new businesses illustrate, The Census Bureau and the Bureau of Labor Statistics, five years after new establishments were founded (1995, 2000 and 2005 respectively), 50%, 49 and 47 percent of them (correspondingly) were still in operation.
To be a successful and sustaining entrepreneur requires vision, strategy, execution and constant diligence – along with plenty of sacrifice. A new generation of young entrepreneurs think the road is smooth and a fast track to easy wealth. Obstacles and sacrifice are part of the deal. Harnessing opportunity and overcoming challenges on a daily basis to top the competition is constant work. These conditions are true no matter what the sector of business engagement or company size.
Enterprises spanning a wide array of industries, have earned distinction as “well-” or “best-” managed” by demonstrating business excellence through a meticulous and independent process that evaluates their management abilities and practices – by focusing on innovation, continuous training, brainstorming and caring for their employees’ well-being – as well as investing in meeting the needs of their clients.
Well-run companies thrive no matter what and learn from their mistakes – making certain they don’t repeat them. However, never give failures a second thought. There are no dress rehearsals in business either.
As we closed the year 2013, I have rounded up the ten most read articles of 2013 by my readers. The following ten articles captured the most attention. See them all below in descending order. Your views are always encouraged.
THANK YOU for your readership and look forward to feeding your mind with much more business food for thought which can be applied for timely results.
Forget the cynicism. Businesses exist solely to make money while serving a need. Profitability is everything and cash is king. In public companies, shareholder return is considered essential. Operating from this mindset determines and measures whether the business in question is a success. If an entrepreneur is to increase the chances of triumph from the outset, he/she should consider seven key principles. These keys have been forged in the fire of my personal experience based on long-term practice and common sense seasoned with a touch of academia.
1) A VIABLE PRODUCT OR SERVICE WITH THE RIGHT BUSINESS MODEL AND A PASSIONATE PERSON BEHIND IT
It should fulfill a need, offer a benefit, be innovative and differentiate itself. It’s also imperative that the entrepreneur is passionate about the product/service, empowers his/her staff, as well as practices/conveys business ethics. To excel in the business, the entrepreneur must have the right mindset and attitude. This includes drive, perseverance, tenacity, and an undying belief in himself/herself and the value he/she adds. Must also be willing to embrace the concept that he/she takes complete ownership for his/her results. He/She can’t blame the marketplace, the economy or the employees for failure. In the end, it’s the entrepreneur making the decisions.
Critical and can vary depending on the size of the undertaking. Start your capital search with a good business plan that shows investors and lenders your company’s potential. Furthermore, Take advantage of any government loan program created for start-ups.
Expect to realistically invest about 30% of your own money based on the total value of the project. Last but not least, cash-flow is the lifeblood of your business if you’re going to sustain the operation financially.
3) MARKETING & SALES
Advertise, publicize, be first, different, daring and memorable. Deliver on those promises and constantly remain customer focused.
Sales, on the other hand, is part of the marketing function. It includes business development and account management. Sales is crucial to business because it is the bottom line, whereas marketing is about getting a product known. However, at the end of the day, it’s about the need for a constant stream of new business which brings in the necessary cash flow.
Don’t simply HIRE well educated and experienced people but most importantly MOTIVATED, dedicated, coachable and with interpersonal skills. Moreover, make certain that the people you hire fit-in with your corporate culture. Your organization should also foster an atmosphere of Innovation and creativity through leadership. Work for staff should be meaningful rather than a chore. These conditions can’t help but breed success. Implement an orientation workshop for new recruits and an occasional training program – invest in your key employees.
5) SYSTEMS – STRUCTURE
Consider publishing an “Operations Manual” and continuously enforce its procedures. Without any structure, the chances of failure increases. Everyone should be on the same page and embrace best practices for quality results with consistency.
6) STRICT INTERNAL FINANCIAL CONTROLS & CASH FLOW
Watch them closely, borrow wisely and don’t overspend. It doesn’t matter how much you have coming in if most of it is going out. Watch your financial ratios and yields (where applicable). The success of your business is, in many ways, measured by the bottom line. Even if you hired a full-time accountant, you would still need to have a fundamental knowledge of accounting, how it works, and how to apply its basic principles in order to run a flourishing business.
7) CONTINUOUS IMPROVEMENT, INNOVATION AND SUSTAINED GROWTH
This is by no means a one-time event but rather an on-going process.
Innovation encompasses offering distinguished and improved solutions which meet or exceed market requirements and expectations from your customers ‒ whether offering a desirable product or upgrading a service experience.
CONTACT ME to request for the FREE slide presentation on “The Seven Key Principles for Business Success.”