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��
Starting a new business has a tremendous upside but there is an equal,
if not higher, risk of failure and loss. As noted many times in our material,
statistics show that 80% of new businesses fail within the first 5 years. Due
to this statistic, we stress a well designed and thought out business plan
coupled with an enormous amount of research and planning and use of that data
in the implementation of the start-up business.
��
Lately, life has been little better for existing businesses which are
failing at an alarming rate. Of course this is due to the unique economic and
banking conditions that currently exist. Most business owners have not
experienced similar economic issues and could not recognize the signals prior
to the damage. They kept operating as they always did, never stopped to evaluate
the environment around them nor did they take timely action when the obvious
was upon them.
��
When businesses come to us for consultation they expect an immediate
answer to their problems. Yet they typically do not have an analysis of the
situation for us to review, they just give us the symptom and request a
solution. This is immediate proof that there is not�nternal company
analysis or evaluations being performed on a regular basis, if at all. Once we
suggest that an analysis must be done prior to being able to help them with their
problem the expense of that is objected to. Our response is always two fold;
- We request the time and support to prepare an
assessment from which we then attempt to carve out a solution. When one is
sick and they call the doctor, do they receive a prescription or treatment
option over the phone, of course not. There first must be an examination
after which the prescription or treatment is prescribed. There must always
be an assessment of where one is and what the options are. Too many
businesses never perform this and if they did they probably would not need
us to diagnose the problem. - We then explain that every business is perfectly
designed to produce the results that are being attained. In other words,
bad production, poor quality, inadequate response time, etc are all a
direct result of the systems in place or lack thereof. When things go
wrong, one must first look internally rather than blaming the economy or
the competition, there is usually a solution within the organization.
��
When starting a new business these same concepts must be adhered to in
the design of the business plan. In other words, you must design systems into
your organization in order to make it run efficiently and then you must
continually evaluate the systems. Even a "one person" operation needs
organization and a system; otherwise things are not done in a manner to assure
consistent results.
��
We point this out to discuss the topic of self analysis. Many of the
problems in large and small businesses exist in the organizational elements of
the company and are not looked into because these systems were typically put
into place by the owner and the owner can never be wrong. Alternatively, many
times the owner may be willing to change but time is never taken to sit down
and perform a routine assessment. Egos and failure to self evaluate are common
reasons of small business failure. Pride and passion are assets that the
business owner must have but they cannot be placed ahead of good business
practices. A great example is the business plan. This is usually written by the
owner and is designed to promote the company and obtain investors or bank
financing. With that as the rationale for its drafting, many times the data is
skewed in a more positive light than reality and/or detailed research is not
done for whatever reason and glaring holes exist in the plan itself. Thus many
small businesses are started and are doomed to failure before the first widget
is produced. Therefore, one must be diligent to be realistic when doing the
business plan and then assess the good and the bad. View the project in
realistic terms, not in terms of hopes or goals. If the plan shows poor cash
flow or multiple year losses, redesign it or terminate the project.
��
Another example is the failure of companies to hold annual or
semi-annual strategy or assessment meetings to examine not only the external
forces affecting the business but the internal personnel and systems. If you
were lost in the woods would you simply keep walking in hopes that you might
sooner or later find your way out? Well we hope not. It would be wise to stop,
look for landmarks, your surroundings, the weather, your food and water supply,
and your physical situation and then design a plan that fits the results of the
assessment of your situation. This gives you the best hope of getting home
safely, as compared to the random and unplanned attempt to just keep walking
and hope for a good outcome.
��
To properly assess your company to find its weaknesses we suggest that
the company's senior management ask themselves these questions.*
- How clear is the direction of the company?
- How well do you understand the critical opportunities
and steps needed to take the company to the next level? - How well do people understand the strengths and
weaknesses of the organization? Why? - How effective are changes in only one part of the
organization without understanding or considering changes to the whole?
��
These questions and the thought process that they will hopefully
stimulate are the initial steps of "Assessing Your Organization for High
Performance"*. These same questions must also be considered when designing
the business plan of a new company. The systems will interact and therefore the
different systems must be designed properly.
��
To understand the concept of business systems we will need some
definitions. A system is defined as an arrangement of interrelated parts.?
Attributes of business systems are*:
- Each element of a system has an effect on the whole
- The various parts of the system are interdependent
- The sum of the parts is greater than the whole
- An organization is a living system, dependent upon its
external environment for survival - As a living system, an organization is "open"
to influences and transactions with its environment
�?
Into this system go energy, raw materials and/or information. The system
processes this input and then produces products or services. The recipient of
those products or services as well as the participants in the system then
should give feedback to keep the system healthy and alive*. As importantly, the
managers of that system must constantly monitor the external environment and
use that information to also help upgrade and improve the system.
��
Our next blog posting will take these concepts and put them into an
analytical tool to help you understand how you can use these concepts analyze
your organization. We will look and explain the Transformation Model* and how
using that model can help you critique and assess your organization.
*These
concepts and principles were formulated by and set out in the "Assessing
your Organization for High Performance" , The Center for Organizational
Design, Inc/360 Solutions LLC, Waco, TX.
Article Tags:
Business Plan
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