Determining What Business You Are Really In

As a business owner your personal skills, values, and objectives all have an impact on your business. Now that you understand what you personally bring to your business you can begin a similar process of understanding your business — where it is today and your vision for its future.

Before doing anything else it’s important to understand just what business you are really in. Many small business owners define their businesses by the products or services they offer. Theodore Levitt coined a term for this called “marketing myopia.” He meant that owners fail to recognize the broad scope of their businesses because they lack a marketing orientation. They unconsciously limit the scope of their business because they fail to look at it from a customer’s point of view.

An example of marketing myopia is a railroad company that considers itself to be in the “railroad” business. A customer oriented description of the business would be “we are in the transportation business.” With a marketing and customer focus, a cellphone company becomes a communications company and a movie company becomes an entertainment company.

As you decide what business you’re really in, be sure to keep the description broad enough not to limit yourself or your future. Make sure the description is oriented toward the customer, not the product or company.

Alfred Hitchcock recognized that he was in the “goose flesh” business. Charles Revson, founder of Revlon Cosmetics, also understood this concept. He said, “In the factory we make perfume; in the store we sell hope.” This thinking process requires you to consider what it is the customer is buying, not what it is your company is selling. Customers buy benefits, not features.

Take a few minutes before continuing to think about what business you’re really in and write down the answer. The answer to this question will impact your entire strategic planning process.

TAKE ACTION!

Determine What Business You Are Really In

 

Determining Why You Exist as a Business

Now think about the specific need that your business meets. As a business owner, you had personal reasons for going into business for yourself. You also had reasons for selecting the particular business you chose to go into. Whatever your reasons for selecting the business you did, that business exists to fill a certain need in society. Identifying that need and answering the question “why do we exist” are important steps in developing your mission statement and strategic plan.

TAKE ACTION!

Determine Why You Exist As a Business

 

Determining Where Your Business Is Today

Before deciding where you want to go and how you’re going to get there, you need to understand where your business is at today. The difference between where you are and where you want to be is called your performance gap. The strategic planning process is designed to bridge that gap and take you to where you want to be.

This process is often called a gap analysis, because you’re comparing the current state of your business with the desired state, which identifies any gaps between the two. Once these gaps are identified, you can develop an effective strategy or action plan to bridge them.

Desired Business State

|

Performance Gap

|

Current Business State

Analyzing your business in these terms provides a comprehensive view of where you are and where you can go. It identifies areas that need improvement, as well as potential opportunities.

The first step in conducting your performance gap analysis is to determine the current state of your business — what you’re doing right and what areas need work. Perhaps you have quality control problems or an unusually high absenteeism rate. Perhaps there is a morale problem or lack of teamwork. Perhaps you’re facing a cash flow problem and can’t make ends meet. Perhaps the business is too dependent upon your presence for smooth operations, and you’re not able to take needed vacation time.

There are two types of analyses you will need to do to complete your strategic plan. One is an internal analysis of your company’s strengths and weaknesses. The other is an external analysis of opportunities and barriers that will impact your ability to achieve your vision.

Strengths: What aspects of your business are in firm control? What qualities does your business possess that give you the unique ability to address specific needs or opportunities?

Weaknesses: What aspects of your business are not efficient or are out of control? What limitations keep you from moving forward or achieving success?

Opportunities: What opportunities exist outside your company that you should prepare to take advantage of?

Barriers: What threats or barriers exist that could derail, distract, or in some other way keep you from achieving your purpose?

 

Identify Business Strengths and Weaknesses

There are many functional areas that need to operate smoothly for your business to be successful. Ask yourself what you’re doing right in each area and what needs work. Examine every aspect of these functions and ask yourself and the employees responsible for each area what works and what doesn’t.

Ask yourself questions like:

 

• Is cash flow adequate to meet current needs?
• Is cash flow adequate to take advantage of opportunities?
• Is profitability at targeted levels?
• Are accounts receivable collected in a reasonable time frame?
• Are employees well trained and able to do their jobs?
• Are interviewing and hiring procedures adequate?
• Are production deadlines regularly met?
• Are inventory levels adequate to fill orders in a timely fashion?
• Are phones and emails answered promptly?
• Is turnaround time for customer requests adequate?
• Is current advertising effective?
• Are marketing materials impressive?
• Are our salespeople effective?
• Is sales volume adequate?
• Are complaints handled quickly?

 

Partial List of Areas to Examine

Product development Production Purchasing Materials handling Shipping/receiving Distribution Inventory control Quality control Project scheduling and control Engineering Personnel forecasting Hiring Performance appraisals Compensation management

Training Media buying Advertising and promotions Communication Vendor negotiations Sales Customer service Sales management Financial management Financial budgeting and forecasting Developing employees Motivating employees Computer or online systems

 

You need to identify the strengths and weaknesses of your business before you can begin taking corrective action and pursue new opportunities.

Answering the questions, “What are we doing right,” and “What areas need work,” are important to the strategic planning process and the success of your business. But they aren’t the whole process, and you want to make sure you don’t get so caught up analyzing the present you don’t move forward to define the future. The old saying that a chain is only as strong as its weakest link applies to business as well. Every link must be strengthened for your business to run at its optimal level.

TAKE ACTION!

Determine the Current State of Your Business