Saturday, May 29, 2010

8 Steps to Managing Your Business for Success

I spent a day recently with a couple of business partners whose grasp of their business was really impressive. They were absolutely on top of every key success factor in the company, a mid-sized professional services firm. Here's their 8-point formula for success:

1. They Plan -- These guys actually have a written strategic plan (and have had for 6 years). Objectives define where the company is going, Strategies define the big-picture initiatives and Action Plans establish the what, when and by whom of getting the plan accomplished. The plan is revisited and formally updated at least every 2 years. It's a collaborative effort, including minor partners and employees, as well.

2. They keep excellent financials -- They've worked diligently to get their costs and revenues aligned month-by month, so they can tell exactly where they are in growth and profitability at all times. Committed costs for work done by subcontractors are accrued each month, so they don't kill the income statement the month the bill comes in. Bonuses are accrued each month, despite being paid quarterly or annually. They manage their business on accrual-basis numbers, so the timing whipsaw of receivables and payables don't obscure their operating results. They watch their Balance Sheet, forecasting cash needs well in advance and they use a Line of Credit to absorb the variability in timing of receivables and payables (rather than leaving a lot of cash in the business for working capital).

3. They forecast backlog -- On a monthly basis, the partner managing operations forecasts each project's revenue and manpower needs month-by-month, going out almost two years. They see months where they'll be covered up and months that will be slack well in advance so they can push and pull project schedules or outsourcing to level out workloads.

4. They forecast bookings -- A recently-added forecast now tracks their prospecting pipeline, anticipating project size and month secured. As confidence levels rise on a given prospect, some of those make their way into the backlog forecast (identified, of course as "anticipated).

5. They forecast staff requirements -- They have a keen sense of revenue to headcount, so the above forecasts allow them to plan recruiting of both entry-level and senior people. They've matured to a mostly "grow your own" strategy as far as internal leadership is concerned, and they have developmental plans in place to meet the leadership needs of their future growth plans.

6. They work on the business, as well as both working in the business as billable resources. They set aside time to plan and they also execute.  With good financial instrumentation and good forecasts, they can focus on crisp execution, rather than fighting surprise wildfires. They get things done, both short and long-term.

7. They're accountable -- The partners are accountable to each other for doing their parts in the day-to-day operation and the long-term strategies of the company. In large part, this is due to having a collaboratively-developed plan that they've all had a hand in and bought into.

8. They use outside help -- They realize they need expertise beyond their own trade and experience, and they engage external resources, regarding those costs as an investment in their success.

If you're looking for a model by which to steer a mid-sized company, I'd encourage you to consider these guys' "8-step program". It's working for them, building a valuable company, and throwing off some enviable cash flow, as well.

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Terry Weaver

Chief Executive Boards International

Chief Executive Boards International: Freedom for business owners & CEOs -- Less Work, More Money, More Freedom to enjoy it

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