Business Self Analysis

Physician, heal thyself! Does this wonderful phrase apply in business? It is easy to be critical of others and their organizations, but do you really look at your own operation in detail to see where you are headed?

The hardest part is always getting started. An acronym that is useful in business analysis is FOG, financial, operations, and growth.

In the financial area, start with your income statement, comparing income with expenses, and the cash flow statement. Next, look at the projected income statement and cash flow statement for the next year by month for at least a year. You may choose to look at years two and three by quarter and years four and five in the future by year. The next year is vital, so focus on that first. The question to be addressed is whether your business is viable.

Other questions to be asked are:

  • Is your inventory optimal? Excess inventory is evil; it will cost money through carrying costs, shrinkage (loss due to lost, obsolescence, damage, pilferage, etc.), space, and handling cost. What is the turnover rate on inventory and how does this compare to others?
  • Do you have the ability to attract the cash needed in your cash flow projection?
  • Does your return on investment meet the owners’ needs? This may be your own needs and expectations.
  • Are your prices right? Are your total costs right?

Next to be reviewed are your operations. First, do you have a written vision statement of what you want your organization to be in five years? In other words, what is your dream and can you articulate it? Do your employees buy into it? What barriers are in the way of reaching your vision?

What published values do you have to guide you and your employees in their decisions? Is this business worthwhile? Do you take pride in it? Do you enjoy what you are doing? Is it high risk and are the rewards commensurate?

Other operations questions are whether marketing, distributing, and support operations capable? Are legal, political, and licensing factors to be considered?  Location is always important; is labor in the area adequate and are transportation issues manageable?

Next look at the flow of production. Is it orderly and smooth? Chart it to see if time and motion can be lessened and the work process improved to eliminate waste and rework.

The final review step is growth. It seems you can never stay still; you are either growing or shrinking. Is your market growing? Have you identified a niche in which you dominate? In mature markets, there is usually room for two companies to thrive, one to just eke by, and the rest are in trouble. That is why it is necessary to focus efforts on a niche in the market in which you can be one of the two thriving organizations. Are you positioned to lead? Have you done market and competitive studies? Is the timing right for your offerings? Will it be right in three to five years? Is your marketing capable of adjusting to all of the changes in marketing techniques?

The most obvious article to review in an analysis is the business plan. The answers to the above questions are found in a good business plan but it needs to be constantly updated because the world is not standing still. You should have a dynamic business plan with, especially, the financial projections updated monthly.

You will undoubtedly never be satisfied with your answers but that only means you have discovered opportunities to improve and progress on the road to your dream. Benefit from your own wisdom.