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Tips for 'Bulletproofing' Your Business
CINCINNATI -- "How can I improve my business?" is the most frequent question heard from chief executives, owners and entrepreneurs, according to Brad Forsythe, author ofBulletproof Your Business. He believes three key management control levers small business leaders and entrepreneurs can pull to improve success: Improving Profit Margin, Increasing Asset Turn, and Improving Financial Leverage.These levers are built into the following business tips that Forsythe says are practical for use by every small company, empowering them to make more money and enjoy a more rewarding business experience. "They are simple -- just like great companies," Forsythe notes. "You need only focus, passion and common sense to use them well, and risk management is at the cornerstone of these tips."They are as follows:Keep your business simple and focused. Every success begins with a simple, focused strategy. Even with 100 or more employees you can only deliver one or two product or service lines with excellence. You probably based your original business plan on a single product or service concept and focused all your resources on that one thing. Then reality arrived and distractions pulled you in a dozen different directions.Distractions are the kiss of death for small businesses, scattering focus on those few activities that truly make your money. Risk, which comes from employees, suppliers, clients, and financial stakeholders, is your most common distraction, arriving in the form of threats and off-focus opportunities.Hold fast to your simple, focused strategy. Control risk and distraction by implementing a proven risk management business process specifically designed for small companies. The benefits of risk management aren't reserved just for the Fortune 1000 anymore. Excellent, cost-effective, simple risk management models are now available to small businesses and are relatively easy to implement. Well-managed risk relates directly to the management control lever called Improving Profit Margin. A recent University of Southern California study shows up to 100% increases in Return on Assets for companies that effectively manage trouble before it arrives.Culture is magic -- and you are the culture. No matter how many hours you put in, your employees still will do most of your company's work and serve most of your customers. Each employee is a precious and expensive key to your success. Before hiring a new employee, clearly communicate your corporate culture by explaining which behaviors will be rewarded and punished. Then follow through without fail or you will confuse the message.Mixed messages create enormous, profit-robbing confusion. Equally important, never forget that you are the culture. Employees will emulate your behavior. Smart employees don't listen to what you say; instead they watch you and follow your behavioral example. If you are an example of superb execution of your work process, then you have every reason to expect them to produce consistent, high quality and profitable work.Rarely do you find employees who naturally think and act like you -- you must teach them and carefully manage their work. Managing employee-related risks is critical. Use proven business models to recruit, hire and train your employees, assess their performance and quickly terminate those who fail. Consistent use of good process assures quality control, greatly reducing your risk of employee problems and resulting legal expense. Improving employee management efficiency relates directly to the management control lever of Improving Profit Margin.Keep your promises. Many customers, suppliers, financial stakeholders and employees will initially grant the quality of integrity to you and your company. This invaluable quality will be yours to lose -- but can rarely be recovered if you blow it. Without integrity your culture is dead and your company will follow close behind. Make integrity a cornerstone of your culture. Keep your promises in a public way so that employees, customers and suppliers see it. Integrity will draw and ally the best customers, suppliers and employees with you. My experience proves that customers will pay a little more to deal with high integrity companies, related directly to the management control lever of Improving Profit Margin.Speed is life. Identify those few activities that truly make your money. Then make them happen flawlessly and quickly -- ever more quickly. Speed delights your customers, frustrates your competitors and makes it fun for the best employees to work with you.Speed translates directly into the management control lever called Increasing Asset Turn -- the second of those three key levers. Two vital clues to increased speed are to strip away every business element that isn't necessary and manage risks that waste resources and slow your speed. You're never fast enough -- so never be satisfied with the status quo.Innovate, don't hesitate. Yes, innovation is risky and difficult. But failing to change and improve is almost certain to kill your company. Innovate before competitors force you to do so. Manage the risk by keeping most of your innovations close to home; advancing directly from the critical lessons and core resources you've already developed to deliver your current business plan. Focus your best resources on innovations that will truly make a change in customer buying behavior, while tasking all your people to find improvements in speed and cost control.These tips are all about making your business less risky and more profitable. The best customers and commercial lenders are increasingly attracted to your company as your risk drops, because you also lower their risk of dealing with you. Attracting these two groups lets you use the third management control lever called Improving Financial Leverage. Better customers buy more, pay reliably and have substantially lower maintenance costs.Better banking deals increase your access to more capital at a lower cost and strengthen your cash flow. Risk management is the cornerstone for realizing all three of these fundamental management control levers.Brad Forsythe is founder of Best Practice Advisors LLC, which teaches risk management for companies with 500 employees or less.Visit the author's Web site: www.bradforsythe.comThis article is new this week in The Business Journal's small business how-to section. To see what else is new, click here or click on the "how-to" tab at the top of The Daily Business Journal Online home page."