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The uneasy truth for those in business

It’s that time of year for many businesses, where the last fiscal’s results are analysed and renewed focus is given to organisational goals or, if you are coming up to your year end new goals may be set. It isn’t unusual for an employee (partner / sales force) kick off meeting to take place to present the results and analysis and set the plan out for the forthcoming period.

This would all be great business practice if the analysis went further than the financials and yet research suggests that a lot of SME companies are failing to do this.

According to the Small Business Association, 30% of businesses fail in the first 2 years of operation, 50% during the first 5 years of operation, 66% during the first 10 years and only 25% make it to 15 years or more. It is suggested that the number one reason for business failure is that organisations are failing to consistently conduct sufficient research and apply the basic fundamentals of business success – namely continuing to scan the environment in which the business is operating and addressing the factors which may affect it.

I have been long promoting the practice of conducting annual business MOT’s. After all we do it for our cars, our boilers, our bodies. Surely our businesses deserve the same care and attention in order to continue to serve us?

This seems to be more of a problem for SME’s than larger organisations. Possibly because there are less resources available and, as I know from experience of running my own business, SME business owners are often required to spend so much time in their business that focus on the business tends to drop to the bare minimum – the financials! Even ten years ago this was almost acceptable as environmental change was much slower and more predictable. With the rapid advances in technology and expansion into Global markets however change is much more rapid and organisations that don’t do a thorough review of their position annually risk being left behind.

The figures speak for themselves: –

 

UK Incorporations and dissolutions from 1979 to 2019             

 https://www.gov.uk/government/publications/companies-register-activities-statistical-release-2018-to-2019/companies-register-activities-2018-to-2019 [accessed 6th January 2020]  

Public sector information licensed under the Open Government Licence v3.0.

The statistics taken from Companies House Register 2018-2019 indicate

Total register of companies at March 2019: 4,202,044

Total incorporations between 2018 and 2019: 672, 890

Total dissolutions between 2018 and 2019: 508,865 = 12 %

Average age of company: 8.5 years 

And yet many organisations operate with their blinkers on, thinking that their financial position and their management team feedback gives them all the information they need. That they are sufficiently close to their customers that they know them well. That they make sure they are well connected to the industry they are in and have a good awareness of the climate. However, I would argue that (financial accounts aside) the information being used to make fundamental decisions by so many (too many organisations) is subjective and not based on data and is not sufficient in the 21st century.

Whatever spin organisations try and put on it, the figures don’t lie.

 

Age profile of companies on the total UK register for 2019

https://www.gov.uk/government/publications/companies-register-activities-statistical-release-2018-to-2019/companies-register-activities-2018-to-2019 [accessed 6th January 2020]  

Public sector information licensed under the Open Government Licence v3.0.

 

It doesn’t have to be this way – a simple yet rigorous Business MOT that is proven to strengthen businesses

Any Business MOT will start with the assumption that you have a clear and compelling long-term vision for your organisation and that you have identified the resources you will need when operating at this level.

Once this is in place you will need to: –

  1. An environmental analysis (anything that could affect the business from a political; economical; sociological; technological; environmental and legal factors). This should be covered at a MESO, MACRO and MICRO level.
  1. A customer analysis. There are different checks depending on whether the business is B2B or B2C. If we take B2B as an example I would usually recommend this includes the companies top 5-10 customers and for each customer, there is a full review of what products and services were purchased over 12 months (which business assets were used); total profit earned from each of the product/service types (by element/area/discipline) once total cost of sales, delivery and acquisition costs have been taken into account; Payment terms and debtor record; client satisfaction rating; other opportunities within the clients organisation; challenges the client is facing in their industry; review of client persona (what do they read; who do they follow: what social channels to they engage with)
  2. A competitor analysis. (this should include your direct competitors – i.e. those who service your customer markets). You are looking to identify their size; geography; the point of parity and points of difference with your business; their clients; industry positioning; the marketing tools they use and their list of followers
  3. Creation of a Market positioning Chart. Show your top 5 – 10 competitors rating their competency (from 1-10 against the top 6 key elements your clients/target market have identified as being the most important to them). By creating a chart, you will be able to find your USP – either you are already there or you can find a gap and it isn’t a stretch for you to move into it 
  • Marketing assessment What on-line and off-line activities have you undertaken in the last 12 months; where have you marketed and what has your content been geared around? I find that so many organisations (in B2B) spend a lot of their time and money marketing to people in their own industry and a lot of that time is spent talking about themselves and their accolades. Few in fact market to the industries they work with or talk about those industry problems and how they might be able to solve them. 
  • SWOT analysis taking into account all the information you have about the external environment; your competitors; what your customers want – you will need to have an honest appraisal about your strengths and weaknesses as a company and which of the results are opportunities and threats that you can negate/capitalise on. Your SWOT analysis should include a Skills Matrix and Resource Gap Analysis

Once you’ve completed this analysis, and have identified opportunities and strengths (internally and externally) that you can capitalise on and weaknesses and threats that you can minimise (internally and externally) you will create a stepped plan. This will be broken into measurable steps, with each discipline in the organisation creating goals that will lead towards these step targets being reached over the course of the next measurement period. This will make your pdrs; department meetings; board meetings; company kick off and update meetings meaningful and powerful – with all your focus being on delivering the outcomes agreed. 

 

Sounds like a lot of work?

The initial MOT does take slightly longer as you are starting from scratch, but this doesn’t haven’t to be compiled by one person. Indeed, the external research can be conducted either by your own marketing team, or an external marketing consultant. And your management team (more senior employees) are ideally placed to conduct the internal research. Key is that the research is rigorous and that you are provided with real data, not subjective opinions, from which you can make decisions.

Once the analysis has been conducted and a gap identified between your current position and your vision it needs to be communicated to the whole tea. Its suggested that the whole team together devise the ‘how’ and ‘come up with steps the organisation can take to move towards this. They will work together to quarterly goals in each of the areas of Finance; Marketing; ITC and Digital; HRM; Operations; Sales; Procurement. By including all areas in creating goals, you will be minimising potential later friction between departmental competing goals.

And, of course, this doesn’t mean that business as usual will stop. It will still carry on as usual but with a focus on the chunked goals – with all working together to ‘solve’ the same problem.

 

But you do need to keep on top of the pace of change

By doing this annually it is easier to focus on making tweaks and continual improvement over time, rather than realising 5 years down the line that your HR manager isn’t sufficiently qualified to develop your staff or that your processes are creating blockages that are costing you productivity and most likely affecting staff motivation and morale.

Annual reviews will increase your opportunity to innovate as you spot opportunities and gaps to be exploited and can learn from others’ innovations.

With mergers and acquisitions increasing at an alarming pace in most industries, it makes sense that you use all the tools in your arsenal to protect your business and enable it to flourish in line with your goals and aspirations. Conducting an annual business MOT – is one of the best investments you can make to help you do this. I’ve created a Blueprint that you can download here, that you are welcome to use/follow/tailor for your own business. To your success!

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