I’ve read a good number of headlines and articles lately that proclaim 2012 to be the year of the start-up. I suppose there are optimistic and cynical ways of viewing why that might be, but I thought I’d use this as the inspiration for putting my thoughts down in some blog posts aimed at the newer business.
Decide, Design, Deliver
We do a wide range of work, sometimes with long-established businesses, sometimes with start-ups. Our approach splits business improvement into three areas:
- Commercial Imperative – what’s the case for doing it – the “why”
- Planning Improvements – the what, where, how of action/change
- Taking Action – the who and when to make change happen
Building Your Case, Making Decisions
The Commercial Imperative has three components – profitability, risk and differentiation.
For a start-up business, you have to be creative to figure out how life will go with these three for the first 6-18 months. It’s definitely worth doing though, because we see a lot of mature businesses which have lost the clarity they once had on these things. I’d love for you to avoid some of that pain right from the get-go.
Simply put, your profitability is your ability to maintain a (positive!) difference between your income and expenditure. Reduce costs, increase prices. But it’s rarely that black and white. Get a sheet of paper, your iPad, whiteboard or whatever, and start writing down all the things you can think of that affect your profitability, and its cousin – cashflow. What do you need to spend, when, why? How does what you spend clearly link with money coming in? How will you set prices (see also Differentiation below) that people will pay? What will you do if someone needs a refund or return? If you grow really quickly, will you not have enough profit to pay increased production costs – how will you get more cash? How can you charge a premium for your product or service? Can you complement one with the other – a maintenance service that goes with your product, or a product that makes more of your service? Could you re-sell someone else’s product or service so they have the production pain?
We’re looking to get a list of things that could make you more money, and a list of things that could cost you. Plan to do more of the former, and fewer of the latter…
It sounds like a lot of stuff to worry about – but remember, we’re not necessarily looking for all the answers here, just a list of things to think about to make sure you’ve at least thought about how they could affect your business. This leads nicely on to…
Risk is basically “what do we not know and/or not control” – and how do we stop little bad things turning in to big bad things. Think of it this way – you have motor insurance and a mobile phone so that a car accident doesn’t turn into a