The outcome of business operations is the creation of value from assets owned by a business. Assets can be either tangible or intangible. The effort involved in creating value is what constitutes business operations cycles.
The primary goal is to implement a sustainable delivery of goods and services to the business’ customers. This should be done at a cost that is less than the funds acquired in exchanging products and services to produce profit. The income directly acquired by the business in exchange for the goods and services it delivers is the business’s revenue. The cost of developing, producing, and delivering these goods and services is the business’s expenses.
A business whose revenues are sufficiently greater than its expenses produces profit. Generating recurring “revenue” is not the main focus of operations management; what counts is management of the relationship between the cost of goods sold and the revenue derived from their sale. Efficient processes that reduce costs even while prices remain the same expand the gap between revenue and expenses and derive higher profitability. By detailing what is required from your operations to achieve your overall business objectives you will keep the business focused on the day to day events that are necessary to keep the business going. Your operating function is the core of your business and it’s extremely important to manage it effectively, while integrating all business functions into your planning. You can’t stay on top and stand still at the same time.
One of the most important issues you must decide on as an entrepreneur is how much to charge for your product or service. While there is not one single right way to determine your pricing strategy, there are some guidelines that will help you with your decision.
Pricing has to be consistent with market positioning; people really do hold strongly to the idea that you get what you pay for. Remember that your gross margin (price minus cost of goods) has to amply cover your fixed overhead in order for you to turn a profit. Many entrepreneurs under-estimate this and it gets them into trouble.
At one extreme, being the low-cost leader is a form of differentiation from the competition. At the other end, a high price signals high quality and/or a high level of service. In certain situations, such as a price war, market decline, or market saturation, you must temporarily set a price that will cover costs and allow you to continue operations. Pricing will help you create positive cash flow and build sustainable profitability. Pricing will always be the main design component for profitability.
All great businesses start with a single idea. The problem for many people is that they never fully develop the idea or simply have no clue how to turn their idea into a business. If you have thought of owning your own business or have a product or service that has a potential for profit, knowing the initial steps to take can help turn your dream into a reality.
While business objectives are ideally succinct and specific, developing them takes time and careful thought on what you want for your business, and on what you can realistically achieve. Every objective should be specific to a time frame and be flexible enough to change if you find the need to make adjustments.
As you move forward make notes of business strategies that have worked in the past and those that haven’t. Learn from failure. Look at your competitors, and if they are the market leaders then find out why they are more successful. If necessary make changes or improvements to your management team; making tough decisions will always be a part of the process. From the idea phase into business implementation the realities of business operations will define the structure of ownership.
The primary changes that have taken place in small business strategy have come as a result of changes within local economies. As the local marketplace has become increasingly volatile and competitive, companies have needed to adjust by reducing their time frames for responding to changing customer needs. Additional changes in business strategy have come in part because today’s workers tend to want and even demand more control over their work lives. The combination of these two factors has resulted in a new value being placed on employee participation in the strategic development process.
Many companies are now choosing to develop strategies through the creation of multifunctional teams. Combining employees from various functional areas in this way tends to promote strategic thinking, because the groups are able to focus on broad company goals rather than on more limited functional, department, or individual goals.
In addition to establishing cross-functional teams within the organization, some companies are beginning to solicit strategic input from their external customers and suppliers as well. The ever changing business market will always dictate to business owners what must take place within the internal operations structure. The market is always in control. Stay on top of changes outside and in; and keep your employees engaged.
English: Strategic planning barnstar (Photo credit: Wikipedia)
In the past, the formulation of business strategies was the responsibility of upper-level management. The traditional approach involved top managers coming up with a strategic direction for the company, setting it forth in an annual written strategic plan, and then disseminating the plan to various departments and employees, who were expected to contribute only within their own spheres of influence. This approach seemed to work fairly well for slow-moving companies in a stable external environment.
In recent years, however, the process of developing strategy has changed dramatically in response to changes in the overall business world. The traditional approach to strategic planning, formulated in a different era, is inadequate to deal with the rapid and continuous changes taking place in today’s marketplace; it also fails to take into account the increased demand for autonomy in today’s work force.
Traditional approaches to strategy development have been criticized for being too rigid and authoritative. As a result, new approaches have emerged that no longer relegate strategy to top management; instead, the strategy formulation process involves all individuals in an organization, particularly those who are in direct contact with customers Strategic planning is evolving due to the increasingly urgent need for responsiveness to market changes. As markets continue to rapidly change every business owner must adapt and improvise. In today’s economy you can be left behind in a blink of an eye.
A budget is a comprehensive, formal plan that estimates the probable expenditures and income for an organization over a specific period. Budgeting describes the overall process of preparing and using a budget. Since budgets are such valuable tools for planning and control of finances, budgeting affects nearly every type of organization—from governments and large corporations to small businesses—as well as families and individuals.
Intelligent budgeting incorporates a thorough business review and analysis of past trends and data related to the business. This information assists a company in decisions relating to:
- running and growing operations
- the amount of money to be invested
- the type and number of employees to hire and
- the marketing strategies required
In budgeting, a company usually devises both long-term and short-term plans to help implement its strategies and to conduct ongoing evaluations of its performance. Although budgeting can be time-consuming and costly for small businesses, it can also provide a variety of benefits, including an increased awareness of costs, a coordination of efforts toward company goals, improved communication, and a framework for performance evaluation.
A small business generally engages in budgeting to determine the most efficient and effective strategies for making money and expanding its asset base. At the end of the day everything that happens within your business will be measured in terms of dollars.
- Top 10 Apps for Budgeting (techterrain.blogspot.com)
Business forecasting methods and levels of sophistication vary greatly. It involves the collection and analysis of hard data, and their interpretation by managers with proven business judgment. Every forecast will be used to assess future situations that will affect the business’ efforts either positively or negatively.
It is important to analyze a broad spectrum of economic, demographic, political, and financial data for indications of growing and profitable markets. Individual departments such as sales, and divisions such as manufacturing, also engage in the process of forecasting. Sales forecasting is essential to setting revenue goals.
With the objectives and forecasts in place, management decides what actions and resources are necessary in order to bring the forecast in line with the objectives. The basic steps management plans to take in order to reach an objective are its strategies. Strategies exist at different levels in an organization and are classified according to the level at which they allocate resources. The overall strategy outlines how to pursue objectives in light of the expected business environment and the business’s own capabilities.
From the overall strategy, managers develop a number of more specific strategies for each business function. Although forecasting is a function of looking to the future it is really about everyone working together.
We are excited to share our news! After identifying a need to help businesses move forward as the economy starts to show some slow growth, we started a new initiative called the Community Investment Program.
As a company we have committed to completing 500 hours of free consultations this year. Our way to accomplish this is by offering free business seminars using our curriculum The Process of Business Development. Anyone interested can register and attend. They will receive 3 hours of training, a free consultation and business review.
Saturday, June 29th was the first session of our Community Investment Program here at BDN.
But there is another part to this: to help us achieve our goal of 500 hours we are offering it to anyone interested outside of the seminars as well. Call us at 800.300.8218, option 1 to schedule!
As many of our other posts have identified, a successful business doesn’t happen accidentally. The idea behind any functional business model lies in employing financial/human resources to exploit various business opportunities to produce profitability.
If the profits are consistent, a company may purchase more assets and, therefore, expand its base of wealth (which is the goal of your business). To do this effectively, a company undertakes the budgeting process to assess the business opportunities available to it, the keys to successfully utilizing these opportunities and the goals and objectives the company must establish. The company must also plan long-term strategies which define its overall effort in building market share, increasing revenues, and decreasing variable costs. It must also create short-term strategies to increase profits, control costs, and invest for the future.
Every company must produce control mechanisms incorporating performance evaluations and financial metrics which measure operations and profitability. Good business judgment for making modifications in operations and planning is a necessity. Business markets will change and business models must do likewise in order to thrive and survive! Faith, hope, planning and action will always produce the desired outcome.