In last weeks post, we discussed the first driver of the business plan, Business Context. In today’s post, we will be discussing the second driver to your business plan, organisational responsibility and identifying what it means to you, and also how to delegate responsibilities appropriately.
Driver 2: Organisational Responsibility
Marketing? Operations? Administration? Which hats do you wear in your business?
You may wear these hats and many others as you move from responsibility to responsibility within your business. What you may not realise, though, is the more reliant your business is on you (the owner) making all the business decisions; you are increasing the risk to a potential purchaser that the profits aren’t sustainable if you’re not in the picture. This will potentially lower the value of your business.
To address this you need to look at what’s stopping you from delegating responsibilities. Is it a fear of not having someone you can delegate to? Or are you worried that the wrong decisions will be made?
The three step approach you should take in overcoming any fears about delegating day-to-day decision making, which will ensure:
- Responsibility and accountability
- Consistency in decision making
- Management of behaviour which aligns with your business core values
You should also ask yourself which of the 5 Drivers of Revenue below you are passionate about, play to your strengths and build a team around you that supports the responsibilities you would like, and the areas you can delegate to others:
- Product: what you sell. Do you enjoy creating the product or service?
- Marketing: lead generation. Do you thrive off generating the product lead?
- Sales: converting the lead into revenue. Do you enjoy the sales side of things?
- Operations & Delivery: Would you like to make the products and deliver them to your client?
- Client Relationship Management: Would you like to manage the client experience so they buy again?
To work out what aspects of your business you are passionate about and your strengths, consider what you love doing? What is your ideal “to do” list? What is your ideal day/week at work?
First and foremost, you need to understand that your decision making structure should align with how you make your profits.
Profit = Revenue – Expenses
Revenue will drive Cash Inflow
Expenses will manage Cash Outflow
Managing expenses & day-to-day decisions
Most small and medium sized business owners spend too much time managing their expenses and making day-to-day decisions about the following ‘systems’:
These system areas are essential components required for your business to open its doors every day and operate effectively so it can deliver its products and services. These areas are often despised by business owners. If you don’t like doing something, you will be frustrated managing it and not give it the attention it deserves. Most business owners prefer to be generating revenue and developing business strategies, not approving an order to replace printer cartridges or calculating weekly wages.
You should start by removing the systems area of your business from your day. Develop a strategy so the activities and decisions around the systems area of your business are looked after by someone else who is passionate about those things. You still need to set guidelines, manage the people you put in charge of these areas, set budgets and approve action plans. And most importantly, you need to make sure you hold these key people accountable for the decisions they make.
This brings us to the end of today’s post, however please join us next week when we will be discussing, in more detail, the 5 drivers of revenue.
For more information on how we can help you become financially well organised, please visit our website at www.elliottsgroup.com.au or call us on +61 7 3833 3999.