Step 2 - Evaluate

The next step is to take a deeper look at each business operating unit that has less than the desired effectiveness and efficiency to determine what specific elements within that business operating unit need upgrades, modifications, or changes.

In our evaluation we will take into account that there are primarily 4 ways to increase profit.

1.      Increase you number of clients.

2.      Increase the frequency that your clients buy.

3.      Increase your number of offerings and/or price to increase the average transaction size.

4.      Decrease your operating costs.

 

 

 

Below is an example list of questions I ask when I take your company through the evaluation phase of my 5 step process:

 

  • How much money it is costing you to perform each function or produce each product?
  • Separate each function or product into a cost center or a profit center for your business?
  • If is it a cost center, do you NEED to have it, and if you do need to have it, have you minimized the ongoing cost of this business element.
  • If is it a profit center, are you making profit on it?  If not, abandon it or make it more efficient so that it makes you profit.  This needs to be done with a timeframe and plan to make it profitable.
  • If is it making you a profit, can you make your system more efficient so that you can make more profit on that product or service at the same price point?
  • Can you increase the price of the product or service?  What is the price elasticity or inelasticity?
  • Is the return on investment in line with the goal you have set for a minimum required return on investment?  Have you set a goal for this?
  • Can you expand your offering, build off it, or create spin off products out of it, etc.?

These are just some of the basic questions I will be asking you to make a proper evaluation of you company.

Then once each operating unit is broken down into its elements, we need to determine if it makes responsible business sense to spend money, time, and energy on that specific element to make it more efficient and/or profitable.

Remember, even if you are only losing one penny on each product or service you sell, you will eventually go out of business because “you ARE losing money with each sale”.  It’s amazing how many small business owners think, well I am only losing 1 penny per sale on this item so it is not a big deal.  It is a big deal!  Every profit center must make you money, or you should not have it in your product line up.  The only exception to this is if the product or service is not a profit center, i.e. it might be part of a free give away promotional product or service.  In this situation, you must evaluate it as a cost center.

Next, we determine which elements of the operating units will get attention and which will not.  Then from that we prioritize a list of all the elements we are going to work on, determining which we will work on first, second, third, etc.

This prioritization will take into account the importance of working on a specific business element, and any budget and/or time constraints.

So how do you prioritize?  Well first you:

 

  • Make a list of all your potential ideas
  • Then you rank them by "A’s", "B’s", and "C’s", making sure that each comprises 1/3 of you list of potential ideas.
  • Then you rank the "A’s", one, two, three, four, etc. 
  • Then you rank the "B’s' the same way.

Below I have shown examples of business operating elements that we will be evaluating.  However, please understand this is not an exhaustive list, but rather an example list.  Moreover, to get the specific business operation elements for your company, I will be going through a process with you to pull all of these together. 

  • Sales
    • Outside Sales
    • Inside Sales
    • Sales Support
    • Sales Management
    • Sale Training - People/Communication Skills
    • Sales Tools
    • Results Based Compensation
    • Events:
      • Conferences
      • Trade Show
    • etc.
  • Marketing
    • Marketing Tactics
    • Print Marketing
    • Ads
    • Public Relations
    • Press Releases
    • Internet Marketing
    • Branding
    • Referral Marketing
    • Networking
    • Affiliate Marketing
    • Fusion Marketing
    • Marketing Management
    • etc.
  • Shipping and Receiving
    • Types of Shipping
    • Packaging
    • Ordering
    • Quality Control
    • etc.
  • Accounting
    • Accounts Receivable
    • Collections
    • Bad Debt
    • Accounts Payable
    • Accurate Billing Statements
    • etc.
  • Human Resources
    • Hiring
    • Codes and Regulations
    • Personnel Issues
    • Payroll
    • Training
    • Benefits
    • etc.
  • Client/Customer Service
    • Responsiveness
    • Proper Attitude
    • Making your company look good to your client.
    • etc.
  • Information Technology
    • New Hardware
    • New Software
    • Internet Security
    • Data Storage
    • User Support
    • Updating and customizing software
    • etc.

Now on to the Plan