Critical Success Factors for your business
Focusing on the things that make the biggest difference to your future prosperity.
(Note, although this article was written in early 2002, it is totally relevant. Right now.)
About three weeks ago I was surprised by this headline in the morning paper:
“Fed says September 11th hurt economy.”
“What did I miss here?” Was this news? USA Today thought it was. I was shocked the Fed saw fit to announce it.
And this week, another one: “NBER Confirms Recession.”
Hey, Greenspan! Get out and talk to people. All over the country people tell me that if they break even this year, they’ll consider it a win. If that’s not a “recession”…
But have you ever wondered what it takes to end a recession? Not the textbook answer: two consecutive quarters of growth. Have you ever wondered what causes those consecutive growth quarters in the first place?
The economy turns up when enough people get tired of the economy being turned down.
Companies need things. They need new people or new services like marketing and sales. Some need new premises or new equipment. You might be saying something like “We really need this or that but we’re not spending another dime until the economy gets better.”
So we suffer from a cascade effect where you are waiting for someone else to make the first move — and the economy spirals downward — getting worse and worse — until…
Until people begin to say, “I’m tired of this,” or “I can’t wait anymore,” or “Let’s get going.” And as if by magic people start spending money again, and poof — the recession’s over.
I’m a growth strategist — I help people figure out the best way to build their businesses and make more money. I’d like to know when this recession will end, but I’m not an economist and that’s to difficult a question. Instead, I ask know how much longer can people sit on their duffs before they finally get so tired they have to act again.
I expect early next year people are going to reach that point. Although The Fed just made it official, many businesses turned down in the third quarter of 2000, and haven’t picked up since.
Aren’t you bored with all the do-nothing? Don’t you want to start building your business again? Of course you do. What do you think everybody else thinks?
(Side note: This forecast is right in line with the “professionals” who say the recession will end mid- to late 2002. That will only happen if entrepreneurs and consumers start spending early in the year.)
So what are you going to do about it? What are you personally going to do to end the recession?
What are you going to do to start making money again? (I agree with President Bush. You don’t have to put that flag away, but the most patriotic thing you can do right now is start spending money. If enough people take that leap of faith, the global economy will take off like a rocket.)
Are you going to be ready?
Now is a good time to prepare yourself for the next time when people decide to start “doing business” again.
Last month I outlined a way to polish and even rethink your business strategy. Here I will quickly review the critical factors which will insure your success.
A plan designed as a platform for growth and profits must consider each of the following critical success factors:
Money factors: positive cash flow, revenue growth, and profit margins.
Acquiring new customers and/or distributors — your future.
Customer satisfaction — how happy are they?
Quality — how good is your product and service?
Product / service development — what’s new that will increase business with existing customers and attract new ones?
Intellectual capital — increasing what you know that’s profitable.
Productivity — how efficient are you? How effective?
Strategic relationships — new sources of business, products and outside revenue.
Employee attraction and retention — your ability to do extend your reach.
Sustainability — your personal ability to keep it all going.
For each factor ask these three broad questions.
1. What can you learn from last year’s experience in this factor?
What did you do right? What worked? Always start with this question. Why? Because it’s positive. That’s why! It’s shocking how people naturally drift toward the negative. Even when I ask — verbatim — what did you do right, more than half the time people respond with something they did wrong.
How can you do more of those “right” things? How can you make them even better? How can you apply what you learned in this area to some other?
Only when you’ve exhausted this line of questioning ask, what did you do wrong? Not to beat yourself — to make sure you don’t repeat it and discover ways to repair or improve the process.
Next, ask what is missing. What could you add which will improve your effectiveness.
(Effectiveness can be stated as the ratio of OUTPUT to INPUT. Efficiency, on the other hand, is how many INPUT actions you take per unit of time. For instance, you can increase the number of calls you make per hour — that is an increased efficiency. You can increase the volume of sales for the same number of calls — that is increased effectiveness.)
Random examples of things that might be missing include consistency in marketing, new products or services, more sales people, a source of new leads, an employee (or a self-) development plan.
2. What are your goals related to this factor?
Setting new goals can, all by itself, transform your business. Your goals should be bold and dynamic — big enough to inspire you and everyone around you. Goals work best when they are objective and quantifiable. And you must believe they are achievable – regardless of how difficult or impossible they might seem.
Some examples of bold goals: dominate your market niche; double last year’s sales; top of the list in prospect mind- share; 100 percent customer repurchases; three new products developed and shipped by mid-year; customer problems solved in half the current time, a career path for each employee, sufficient cash to cover any business emergency.
3. How are you going to achieve these goals?
A successful plan to achieve your goals has several components:
Who will be accountable for each goal? Not you? then which executive? Which managers? What department?
Some factors map directly onto a specific department, like revenue is owned by sales and marketing. But factors like intellectual capital or customer satisfaction – they don’t fall clearly into one department.
Even so, someone still has to ‘own’ the factor. Figure out who. If no single person is accountable – guess what – it won’t happen.
Whoever accepts accountability for a specific goal should answer the remaining questions.
What strategies and tactics have a good chance to realize the goal?
If you’ve set bold objectives, you probably don’t yet know how to reach them. That’s what makes them bold in the first place. For now, you’re going to have to make up some answers and live with the uncertainty.
And while there are no guarantees of success, each target should have an identifiable path with a reasonable probability of getting you there. That path will define one or more initiatives and milestones you can put on a timeline.
What structural and procedural changes will you make relative to this factor?
Some examples are adding two salespeople, or a new assistant. Perhaps you will establish new reporting lines, eliminate paper memos, acquire a competitor, or having a monthly new business quota. Each structural and procedural change will spawn its own initiatives, which you will also time-line.
Does this initiative require new people? Do you need new job descriptions, or add managers? If you have to add people feed all the financial considerations back into your budget.
Taken together, all the factors, goals, accountable parties, initiatives, structural changes, timelines, measures and milestones add up to a strategic plan for the year.
Can you live without addressing every one of these factors?
Of course you can, but can you prosper?
Yes — you can do that too. But it will be harder.
Let’s face it: some companies sell the same product year after year without making any changes. Look at WD-40. They completely own the do-it-yourself lubricant niche –all they have to do is take orders and keep the shelves stocked. But their growth rate was negative 4.6% this past year. Obviously they are neglecting one or more critical factors.
So yes — you need to consider every critical success factor — even if you don’t do anything about it you have to think about it.
Increase sales but neglect service – what will happen to customer satisfaction? It will probably go down, which will affect repeat sales, your reputation in the market place, and ultimately new sales.
Improve product quality but neglect employee retention? What will happen to quality next year? Likely it will go down. And then what will happen to sales?
As you can see, each factor’s improvement synergistically contributes to your company’s survivability and prosperity.
Can you do everything at once?
Most businesses don’t have the resources for that, so something has to give — right…
Or you can create another breakthrough.
This time, create a breakthrough in planning — one which commits you to some level of advancement for every one of the critical factors.
This planning task is not as big as you might think from reading the above. Regardless, you may still think you can’t afford the time…
Look – any amateur can grow a business when the economy is going gangbusters, but it takes a purpose, inspiration, and attention to detail to increase profits while the rest of the world is in a recession. Having a strategic plan — one which considers all the critical success factors – is a sure way to improve the odds in your favor.