Business 101: Think and Lead Like a CEO
Is the work you are doing today creating or eroding value in your business?
Once you understand how your business makes and loses money, you increase your ability to influence and contribute to business change, growth, and performance. This is both good for your company and for your career!
Here are six business fundamentals that every employee in a growing, profitable business ought to know.
Customers.
A business will succeed when it solves significant client problems, meets or exceeds client expectations, and anticipates clients’ future needs. What problem is your business solving? Is the work you are doing today making a significant difference for your customers? Is your business growing through repeat business from satisfied customers and additional business from current or new accounts?
Products and Services.
Customers pay for products and services that make a difference in their lives. Do you understand what your customers require? Do you design, engineer, and deliver products that meet client expectations? Do you simplify your design and eliminate features that do not add significant value for customers? Is your work evolving and adapting to changes in your customers’ lives? Are your products reliable and defect free?
Sales Revenue.
Sales are fuel that powers a business. Sales revenue reflect and validate the value clients believe they receive from your products and services. All customers matter but some customers matter more than others. Are your sales trends positive? Are you meeting or exceeding sales forecasts? What are your current sales from key accounts? How well are you pursuing and winning sales from new customers?
Cost/Expenses.
Over time, most successful businesses reduce the cost to produce products and increase the efficiency of resources required for services and administration. These efficiencies are achieved by economies tied to higher volume of production and through relentless ongoing cost improvement initiatives. What are you doing today to increase your own productivity and efficiency? How could you accelerate improvement and innovation in business systems or processes to achieve significant efficiencies or cost reductions?
Gross Profit = Sales Revenue – Cost of Goods Sold.
Gross profit is the profit a business makes after deducting the direct costs of making and delivering its products or services. To increase gross profit, a successful business could: increase prices; reduce the direct cost of goods sold; reduce scrap, waste, or unsold inventory; sell a greater quantity of more profitable products; introduce new, more profitable products. What are you doing to help your company increase its gross profit?
Cash Flow.
Cash flow is the net amount of cash moving into and out of a business on a daily or periodic basis. Positive cash flow enables a business to pay its bills, settle its debts, reinvest in its business, and pay its shareholders. To assure and improve cash flow, successful businesses: reduce cycle time for production; ship and deliver product on-time; invoice promptly; offer favorable pricing or discounts for early payment; manage inventory to eliminate slow-selling products and accelerate turnover. What are your doing to help your company improve its cash flow?
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One CEO of a small business I coach taught these principles to his workforce and achieved $3MM+ in annual employee-led cost savings.
