How To Successfully Manage A Business

To successfully run a business, management must first:

1) predict what is going to happen,
2) measure what happened against the predications,
3) analyze the differences,
4) adjust the process, the assumptions and/or the evidence used in making the predictions
5) repredict what is going to happen.

Management must look at every variance between what was predicted and what happened (ranked by the percentage difference) so as to constantly lower the differences until management is consistently in control of the business. To do otherwise means the business is controlling management.

Inherent in the process is to use the same presentation for both predictions and results so that the percentage calculation can be automatic and that it can be done quickly (within 10 days after the time period measured.) If possible do this comparison and reprediction on at least a quarterly basis. The predictions should look out a rolling 6 to 12 months.

The level of detail predicted and measured should be based on management's needs and the people resources available to capture the results and provide the comparison in a timely manner. One should start with revenue centers and then move down to components within same.

Essential to the process of predicting is the use of evidence, or assumptions to support every number. When numbers are supported by guesses they should be so identified. The objective is to use the results to verify the assumptions and evidence and to eliminate the guesses.

An important ingredient in the process is that the predictions be created at the lowest level of management and then passed up for questioning, agreement between management and the person charged with producing the results. Success in lowering the percentage difference should be a key element in compensation and deciding who gets more responsibility and when.

The second step in becoming more successful is to use a technique I call "What If".

Make certain the financial statements include the percentage of each item is to the whole. With this information in place management should then consider the possible impact of every change it is considering (on a one-at-a-time basis) by running the hypothetical change against the present information.

For example, assume advertising is 3% of sales. What if management changes the percentage to 5 %?

Assuming that the same ratio of sales divided by advertising holds - sales should go up to a correspondingly higher number. Now run that sales number as the start of a hypothetical P & L and look at each line item to see the impact.

Suppose that increase (which could be put in place immediately) produces a level of sales higher than the company has personnel or inventory or credit capacity to handle? That information might be the key to lower the change or delay it until the other needs have been supplied

The problem with financial statements is that they are usually presented to management in conformance to GAAP which is great for the CPA and the IRS, but not necessarily the best for decision-making by management.

Gathering the data is easy figuring out how to turn it into actionable information is tricky.

Art Consoli's unique background and skills allow him to speak and write about how someone with limited experience can do a self-evaluation which will let him decide which business opportunity is best, how to evaluate opportunities and gain control over the one which offers the greatest potential and then manage that business to success. Readers of his book call and write to tell him how much his book has helped their lives and improved their business. The author can be reached at www.businessstrategyartconsoli.com.