Does Your Business Need A Diet, Or Is It Just Bloated?
Top 3 Ways To Determine “Business Waste-Size” In Your Company;
When our bodies grow, we try to determine if it’s good growth. We’ll see if the added size or weight is from a concentrated effort to increase, or if it’s that we need to focus on our diet or source of bloating. It’s usually a little easier to recognize on our bodies, due to our increased “waist-size”.
In your business, it might be a little more subtle and difficult to recognize. Many times, we view growth in our business as a good thing. But, like our bodies, was that growth due to a focused effort...or do we need to focus on our business diet and bloat. We’ll call this our “Business Waste-Size”.
Regardless of the industry, the proper business size and structure can help assure that your company remains viable, agile, and profitable.
Three of the Most Common Causes of Waste:
Wasted Cash Flow.
The Three Defined:
1. Wasted Expansion: Slow, steady, planned growth wins. Dependable, predictable growth is vastly superior to spurts and jumps in volume. It's hard to believe that too much business can destroy you, but the textbooks are full of case studies. Going after all the business you can get drains your cash and actually reduces overall profitability. You may incur significant up-front costs to finance large inventories to meet new customer demand. Don't leverage yourself so far that if the economy stumbles, you'll be unable to pay back your loans. When you go after it all, you usually become less selective about customers and products, both of which drain profits from your company.
2. Wasted Output: Eliminating waste is at the heart of the Lean Business methodology. The goal of Lean is to spend more of your time creating value for customers by reducing or eliminating everything else - the waste. Several common types of waste are the “8 types of waste, including the additional "waste of human potential" or "waste of talent". To be critical of your own operations may be difficult. In the short-term, consider hiring Subject Matter Experts [SME]. This provides the business opportunities to benefit from a short-term alliance, to gain long-term advantage...without committing to legacy costs associated with full-time hires.
3. Wasted Cash Flow: Accounts payable and accounts receivable create a two-way dynamic that it unanticipated by many new businesses. This tug-o-war at your cash can pull you down if you fail to plan for it. In short, many start-ups have their Financials managed by the same person or outfit that was with them since day one. Just like the waste issues noted in other areas, not recognizing the limitations of your financial department may cause the death of the company. In this scenario, a short-term SME may be exactly what is called for to evaluate the situation. Many leaders don’t consider both all the financial burdens on the company when determining how much cash they will need. Again, this is usually due to a lack of expertise in the area of Finance.
Subsequently, it’s the “Leader’s Attitude”; not believing you can do everything yourself: One of the biggest challenges for Leaders is to share the lead. The attitude that you must have hands-on control of all aspects of the business is actually detrimental. Allowing shared-control will allow for leadership to concentrate on the most important problems or issues facing the company. Letting others help out is a big step for most, but it doesn’t have to be. This can be taken on in small steps, through the use of temporary hiring of SMEs.
Top Recommendations to Improve a Business Diet and Reduce Bloat:
Have a Business Plan
Ensure the Business Plan addresses Customer, Core Business, and Growth
Know Your Limitations
Realize the Limitations of your Team, and be ready and willing to ask for help, even if that means going outside in the short-term
Assure you have a competent leadership team, to support the current state of the business
Understand your Finances
Make sure decisions consider financial impact, short-term, long-term, and protect cashflow
If your company is in need of a SME for any of the areas discussed in this article, don’t hesitate to contact our team at Smart Business Doctor. We have support personnel for every segment of business, and we specialize in the diagnosing, prescribing, and rehabilitation of challenged SMB’s. We can also assist in the financing, with favorable rates and terms.