If you inherited a business that you knew very little about and had 2 years to make it successful, where would you start? There are so many different things that need to be addressed. What should be tackled first, second, etc. Here's my list. I encourage you to weigh in on the subject.
1. Cash Flow – no business can operate without cash, so my first priority is to understand and project cash flow for the business.
2. Compliance – is the business in compliance with all federal, state, and local laws governing that business, including licenses, permits, insurance, taxes, etc? If a business has cash, the next biggest risk is the government shutting them down due to non payment of taxes, no licenses, etc.
3. Sales/Profitability – Are they selling the right products @ the right price? Do they understand the cost structure of their products/services and are they priced correctly for the market? We all know the danger of selling things at too low of a margin or even below cost. It links back to the focus on cash and revenue stream.
4. Expenses – does the owner understand their cost structure and how to control expenses? What benchmarking information is available for comparison? Out of control expenses are the quickest way to burn through cash.
5. People – Are the best people doing the right jobs? Are they compensated fairly? Are they a cohesive team? Do they hold dear the same values and business ethics as the owner? Do they compliment the owners strengthens and weaknesses? Numbers are numbers, but you can’t run a successful business without people. Having the right people can mean the difference between getting by and excelling in business.
6. Sales/Marketing – Is the owner actively marketing the business? Do they have a sales and marketing plan? If not, then create one and implement it ASAP. The best way to increase cash is to increase sales.
7. Assets – Does the owner have the right amounts of inventory and equipment? Is there too much cash tied up in non working assets or old inventory? Do they have controls in place to evaluate and assess what the correct levels are? Do they have idle equipment or are there bottlenecks that will prevent them from growing?
Wow, I was going to stop a 5 items, but I kept thinking of more and more things that are important to making a business a success. I could have kept going, but I didn’t have time nor do you probably want to read a book at this point. So what do you think, what would be your priorities and why…
The first thing that i would look at would be if the business is in compliance with all regulations. If the licenses and taxes are not paid then that would pose a big problem for the company.
ReplyDeleteNext I would look at the cash flows to see if the business is paying their bills on time. I would have to say that profitability would fall under cash flow because the business will have to have some type of budget or balance sheet statement about the company. By looking at a balance sheet then I would know where the company stands within the year and past years. I would also have to say that the expenses will have to fall under this category as well.
Then I would have to look at the assets the company has. How liquid is the company if for some unforeseeable reason the company goes under, will the company have the money to sustain itself during that process.
Then I would have to look at the marketing the company is doing to promote the business in generating revenue.
Then I would look at the people that are working for the company to see if they are compliant with the companies protocols and procedures.
I'm sorry but if the first thing you look at isn't the customers then you just don't have a wholistic view of busienss management. If you don't have any customers then fine, look at the rest of it, but if you aren't in touch with your customers then I don't see how you can analyze anything else in your business.
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