Imagine you’re preparing for a long journey. Would you leave home unprepared without a map, food & drinks, a clear destination, your papers, car checked, and some idea of the landmarks along the way? Similarly, if you were building your dream house, would you hand over your life savings to a builder and say, “Just build me something nice”? I don’t think so. I guess you’d want architectural plans, regular updates, and documentation of materials used, costs incurred, and progress made. So, please tell me why you don’t do that when running your own business?

When it comes to business – a venture where many invest not just their money, but their time, passion, and dreams – it’s surprising how often the foundational elements, the ‘blueprints’ if you will, are overlooked. Just as you wouldn’t build a house without a clear plan, why would you build a business without one? Nevertheless, this is what we see happening time after time.

Recently, during a meeting with a seasoned entrepreneur, this very theme came to the forefront. We were discussing our approach and the current state of their business when I realised that, even after a decade in the industry, this entrepreneur hadn’t fully documented the core elements that underpin a thriving business. “It’s all in our heads, we know how we want to cooperate with each other and we take decisions based on gut feeling”, was his explanation. But it was clear he felt uncomfortable about the situation. And believe me, this isn’t a unique situation but rather a trend that’s more common than one might expect.

Learning about a company’s basics

When we start working with an entrepreneur and their company, we’ll begin with a detailed exploration of the present circumstances surrounding their business. Through this, we aim to understand the full picture of where your company stands today, uncovering potential improvements and growth opportunities.

To understand the company’s strengths and areas for improvement, we’ll focus on a number of key areas. Specifically, we’ll look into:

• Financial Overview: We’ll review the company’s financial statements to understand its financial health, profitability, and cash flow.
• Market Analysis: We’ll look at the company’s target market, its competitors, and potential for growth to get a clear picture of its market position.
• Customer Insight: We’ll assess the company’s customer base to determine its dependency, reputation and customer loyalty.
• Operational Proficiency: We’ll evaluate the company’s operations to identify areas for improvement and increased efficiency.
• Sales & Marketing Strategies: We’ll examine how the company attracts and retains customers to find opportunities for growth.
• Team and Culture Review: We’ll assess the skills and expertise of the team and compare this with the company’s culture and HR practices to ensure alignment with company objectives.
• Risk Projection: We’ll conduct a risk assessment to identify potential challenges that could affect the company’s success.

 Although our review won’t match the level of detail of a complete due diligence, it’s designed to lay a strong foundation, facilitating informed strategic decisions for the company’s evolution. As we journey through the project, our comprehension will sharpen, aligning our strategies with the unique requirements and openings of the company.

The Hidden Costs of Overlooking the Basics

In our face-to-face conversation, the entrepreneur disclosed their lack of documentation on several of the aforementioned points. However, he expressed confidence in their financial practices. This divergence in readiness was eye-opening to him. He admitted many business decisions are made by gut feeling (which I am not necessarily against) and that all the knowledge is in their heads. And as they know how to cooperate, many things haven’t been documented.

“If you can’t measure it, you can’t improve it.” – Peter Drucker

It reminded me of a recurring observation: numerous companies, even those with a decade or more under their belt, often neglect their foundational elements. Day to day duties dictate how the business develops. The entrepreneur is often soaked into his business, while he should be working on his business.

The fundamentals need to be in place

The fundamentals of a business are, in my opinion, the bedrock of any business because they:

1. Provide Clarity and Direction: Having clear documentation means that every team member, from top to bottom, understands the company’s direction. It eliminates ambiguity and ensures that everyone is on the same page.
2. Facilitate Growth: As businesses scale, the importance of having documented processes becomes even more evident. It ensures consistency, quality, and efficiency, even as new team members join.
3. Prepare for the Future: Whether you’re considering an exit, a merger, or even just bringing in new leadership, having your business fundamentals documented ensures a smoother transition. As we’ve often emphasised, including in my guide on mastering the art of exit planning, preparation is key.

A Moment of Reflection

In my journey first as an entrepreneur and now as a business coach, I’ve had the privilege of learning by doing and through guiding numerous entrepreneurs. And if there’s one piece of advice I’d like to share, it’s this: Don’t neglect your business’s foundational elements. They might not seem urgent now, but their importance becomes glaringly evident in times of change or challenge.

In the words of Peter Drucker, “If you can’t measure it, you can’t improve it.” Documentation provides the metrics and insights necessary for continuous improvement and growth. It’s not just about recording facts; it’s about setting your business up for future success.

Let’s Build Your Business Together

Recognising the gaps in your business’s foundation is the first step. Addressing them is the next step. If you’ve read this and see reflections of your own business, or if you’re simply curious about how to strengthen your company’s core, we’re here to help.

Our team is dedicated to supporting businesses in understanding, documenting, and optimising their foundational elements. Whether you have specific questions or are looking for a comprehensive review, we’re just a message away.

Don’t leave your business’s potential untapped. Reach out to us today, and let’s discuss how we can collaborate to strengthen and grow your business.

Picture credit: Image by WOKANDAPIX from Pixabay