How do you know if there is a problem in a business?
The Two Big Symptoms That Indicate Serious Problems In A Business
The two main symptoms:
- Profitability Is Bad
If your business is making little profit or losing money, there is clearly one or more underlying problems in the business and they need to be fixed.
If this is a problem for you, you should look at my Quick Profits Coaching service.
- Cash Flow Is Bad
This may be a short term or long term problem but cash flow issues create massive stress and worry for the business owners and managers. The issue can dominate so much that it’s hard to think through actions that can help relive the symptoms, let alone tackle the root cause. When the cash runs out, the business stops.
If this is a problem for you, you should look at my Cash Flow Coaching service.
The Causes Of The Problems
Many issues can lie behind the profit and cash flow symptoms.
These can be explored using a Theory Of Constraints Thinking Process like the Current Reality Tree.
This is a chain of causes and effects that work back to a core problem.
I haven’t written about the Current Reality Tree yet but you will find this Wikipedia article helpful
The language in the TOC thinking processes is a bit daunting but the ideas are powerful. If you want to know more about the techniques I recommend you read:
The ideas were introduced in the business novel
I have created a list of 21 common business problems that I’ll be addressing in this blog and you can read the original article.
These look at business issues across three different areas:
- You, the business owner and how your actions and decisions impact on the business
- The business itself
- The market the business trades within
The Core Business Problems
It can be dangerous to generalise without doing the specific work of tracing back symptoms and effects to causes but my experience has suggested two core problems that lie beneath many others:
- The failure to properly differentiate the business in a meaningful way that creates value for customers without incurring excessive costs for the business.
I help solve this problem with my USP Coaching.
- The failure to create a performance and results culture which holds people accountable for what happens and rewards them for success.
I help solve this problem with my KPI Coaching
For example, if you have problems with your employees and you can’t keep the good ones but the people you’d be happy to leave tend to stay, the underlying causes may be:
- The staff don’t feel they work in a business that they feel proud of and which gives them a sense of shared purpose. Because they are good, they are able to get another job that gives them a more meaningful purpose. (The Differentiation Problem)
- The good employees don’t receive recognition or rewards for the good work while they see lazy, poor quality employees get away with levels of performance that they’d never dream of allowing. (The KPI and Accountability Problem).
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