07 Dec How to Evaluate Your Business
An important part of getting where you want to go is knowing where you are starting from. Without a an honest understanding of where you stand, how will know what needs work?
Last week, I explained how to get clear on your vision for the next 12 months. This week, I’ll outline some steps to take a good look at where you are today.
Once you finish the steps in this post, you’ll know the starting point and (from last week) the ending point. Over the next 4 posts, we’ll work on how to plot your course between them.
Three Questions to Ask
We ‘re going to look at 7 areas of your business (more on those below). You will rate each area on a scale of 1 to 10, where a 1 means that you are very unhappy with how that part of your business is functioning, and a 10 means that you are thrilled with how it is functioning. For each of the areas of your business, you’ll write down the answer to three questions:
- What is the rating (1-10) of the current state of your business in this area?
- Why does this part of your business get that rating?
- What needs to change to make the rating a 10?
As you go through this exercise, remember that you need to be able to see your business for what it really is today – warts and all. It can be helpful to ask others for their input. These could be key employees, trusted advisors, or even (shameless plug) your coach.
The Seven Aspects of your Business
All the key issues in your business will fall into one of these seven areas.
Leadership is about understanding and communicating your business’ vision. Leadership is how you, the leader, drive the culture and set the tone for how you do business.
Some questions to consider when rating your business include:
- Do you have a clear purpose for your business? If so, does this purpose truly reflect your values and aspirations?
- To what degree are the values and purpose of your business embodied by your employees? By the way you do business?
- Do you communicate clearly and directly, even in difficult situations?
- To what degree do all employees have the tools and feel empowered to do the best work they can do?
Your business’ brand is how the world perceives it. This area encompasses how your market thinks and feels about your business, who you do business with, and how you conduct your business.
Some questions to ask yourself about branding:
- Do you have a clearly defined picture of your target market? Who they are? What they value? Why they buy your product?
- To what extent does every contact someone has with your business reinforce the experience you want them to have?
- How well do your employees understand the business’ brand? How well do they embody it?
- How effective is your marketing strategy at every step from creating awareness to closing the sale?
The finance area of your business focuses on understanding and managing the flow of money through your business.
Some questions to ask when rating your financial performance:
- Do you have financial targets? How often do you achieve them? What is your current level of revenue and profit?
- How organized are your financial records? Can you readily access reports about your finances? Are they measuring the financial metrics that matter?
- Do you have effective financial controls in place? Budgets? Tracking?
- How well can the business withstand a financial shock?
Management covers the people and the processes in your business. It encompasses all the systems for getting things done in the business and how you recruit, hire, train, and manage employees.
Some questions to consider:
- To what extent are the processes in your business documented?
- To what degree does the culture encourage employees to be self-motivated and empowered to make the right decisions?
- How effective is your hiring process at finding and hiring the right people?
- To what degree do you and/or your managers mentor employees?
Marketing encompasses everything your business does to attract customers.
Some key questions for Marketing:
- Do you know what channels are most successful at reaching your target market? To what degree are you using all those channels?
- How effective is your lead generation process? How efficiently do your systems move people through the lead funnel to a sale?
- How well does your marketing do to create well qualified prospects for your sales team to close?
- Do you have metrics that help you check the effectiveness of your marketing activities?
The sales area of your business is where you convert your prospects to customers.
- Do you have documented sales scripts and processes? How effective are they?
- Do your salespeople have sales goals? How challenging are they? How often are they met?
- How many referrals do you get from existing customers?
- How many of your customers are repeat customers? How many of your customers buy multiple products or services from you?
Delivery is how you treat people after they buy. This area covers how you deliver your product or service and how you provide support and service after delivery.
Some key delivery questions to help you rate your business:
- Do you have a long-term plan for how you develop new products and services?
- How well documented are your product/service delivery processes? How consistent is your delivery?
- To what extent are your customers satisfied with your level of service?
- How committed are your employees to consistently exceeding customer expectations?
Putting it all Together
Once you’ve completed this exercise, a picture of your business’ strengths and weaknesses will emerge. You will see some things that make you angry, frustrated, and motivated to make changes. That’s a good thing.
While the negative emotions can be a good motivator to change, don’t ignore the things you are doing well. You don’t want to lose focus on what is working – you want to reinforce and build upon it.
Look at those ratings. Think about what you wrote down in response to why and what needs to change. Look for patterns and common root causes to problems in different parts of the business. Often, a single systemic issue will show itself in different ways throughout the business.
Next week, we’ll put your work from this post together with the work you did on your vision. That is how we will plot the path from where you are today to where you want to be in 12 months.