Understanding the key drivers of your business
- July 1, 2019
- Posted by: Ganesh Babu
- Category: Business Head, Business Transformation, CEO
As a business head, you may be spending your time, effort, and energy in many activities of your business. The more you effectively spend your time in critical elements which impacts your business, the more your business prospects.
You need to understand the fundamental of your business drivers and the depth of your management on those drivers will bring profitability and growth.
Key drivers of your business:
As one of the appreciating assets in any organization is PEOPLE. However, one of the challenging area for most of the business head is managing people.
Manpower Planning for existing and future
Attracting Right People
Engaging in organizational goal and culture
Providing Growth opportunities and learning
When you are not spending your time on this “People” factor, it costs the organization regarding losing the skill, high attrition, loss in delivery, quality, problems.
From my experience with small, emerging organizations, most of the chronic problems in the organization are due to “non-availability of right people in the right positions.”
One of the critical aspects of sustaining any business for the long term is ” Profitability.”Only when the business generates a sufficient cash reserve, the business can survive and look for growth opportunities. As a business head, you must know how the business does generate profits and the factors contributing to or affecting the profitability of the business.
To know the causes or sources of profitability, you must be aware and have a depth understanding of the following factors
- Understanding your value chain or cost stack up in your products
- Your pricing methodology and relevance with reality
- Product portfolio and profit margin in each segment
- Building cost consciousness culture in the organization
- Your sensitive analysis on volume and variety or product portfolio mix
As I have observed in some organizations, even with high profitability, the organization struggles to meet the working capital requirements, and the business head spends most of the time in managing the cash flow issues. The reason is lack of understanding on the aspects of from where / when / how much money comes in where/ when/ how much money goes out.
The business head needs to know the fundamentals of money flows irrespective of his background, financial illiteracy. He must know to balance the payables and receivables so that the business can run smoothly.
Growth is essential to sustain and increase profit. Beyond some point of effectiveness, increasing profit is difficult. If a business wants to generate more profit, then one of the ways is looking for growth in business topline revenue.
This growth is possible in multiple ways as follows
- Increasing share of business or volume from existing customer base or product lines
- Expanding into new product lines from existing customers
- Expanding to new customers or new demographic locations
However, managing the growth phase is more challenging rather than running the existing operations with effectiveness. It calls for the marketing effort, new product development capabilities, competency building inside the organization to cope with growth challenges regarding technology, infrastructure, management processes or practices, people, and capital.
Careful planning and execution are required to migrate the organization towards next level growth.
Operational effectiveness & Flexibility:
To ensure profitability and sustained growth, maximizing the internal operational effectiveness is a must on a continuous basis.
When we say effectiveness, it is all about Equipment / Asset Utilization, People efficiency, development, and product quality.
As operational effectiveness has a direct bearing on the profitability and flexibility to the customer’s requirement, your time on driving the organization towards ” Lean way of working ” as a culture is critical.
One of the differentiators among the competitors is your organizational culture on continuously improving your operational effectiveness.
A customer is a center point of focus for any organization. The existence of a business is only due to the presence of market and customer to buy from your organizations.
You need to understand the real reason for the customer to come repetitively to you for doing business. The reason could be
your delivery flexibility
your locational advantage
your attitude and approach towards them
your service quality
once if you understand the real reason for your customer comes to you, you need to think in terms of
- sustaining those factors and their feasibility
- leveraging those factors and sustain it
Maintaining a quality relationship with customers will help you in the long term.
To sum up,
the above factors are key drivers of your business, and how much time you spend on nurturing those factors determine your business sustainability and growth on a long-term basis!