Many consultants over the years have put forward a host of different business models to small and medium companies to follow for success. Well I am of the view that one can really fit all. This model is used by some of the United Kingdom's largest successful companies and I cannot recommend it highly enough for small,medium and large companies across all sectors. It goes as follows.
Financial Health = Operational competence + Marketing performance
Financials would include cash in hand, debtor and creditor days, gross & net margins, liquidity ratios etc
Operational competence relates to output per machine or person, age of equipment, down time in factory processes, absenteeism, staff morale and turnover, staff training, defect rates, customer services and business systems and any performance advantages you may have versus the competition.
Marketing includes new customer acquisition programmes, customer retention, repeat business, market position,brand perception of both competition and customers, selling effectiveness, time it takes to get new products to market and return on your advertising spend amongst others.
What is fascinating is how the vast majority of companies score themselves so similarly out of ten for each of these business measurements. Experience says that most firms put themselves in the region of sixes and sevens for financial health. In other words, not bad but definitely room for improvement. However, virtually without exception, all companies appear to think they are very good at what they do as you will rarely see a score below 8 for operational competence. Ego would appear to sometimes play it's part! Marketing normally witnesses the lowest score around five or six. This would appear to highlight that if companies are going to dramatically improve their financial positions, by far their largest opportunity lies in getting better at marketing their product or service.
What score would your organisation receive in the current climate? Opportunity knocks!
