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Understanding how you yourself view your business in fundamental in how you approach grow it, solving problems, and making decisions.
If you haven't figured out how you view it, take some time to do this.
Here is how I view small business ...
If you haven't figured out how you view it, take some time to do this.
Here is how I view small business ...
1. I view it as a giant process consisting of 3 main machines.
Thinking in terms of machines leads me to these perspectives:
a. they take inputs, do something, have outputs
b. you can tweak the output through changing inputs and what the machine does (or how it does it)
Thinking in terms of machines leads me to these perspectives:
a. they take inputs, do something, have outputs
b. you can tweak the output through changing inputs and what the machine does (or how it does it)
c. when there is a problem, my job is to figure out what went wrong, and fix or replace that component. The fix or replace decision is a crucial insight.
d. machines can be documented, improved, and rebuilt. I love the myth of Theseus Ship for this https://en.wikipedia.org/wiki/Ship_of_Theseus
d. machines can be documented, improved, and rebuilt. I love the myth of Theseus Ship for this https://en.wikipedia.org/wiki/Ship_of_Theseus
e. thinking in systems and machines sets the business in a framework that comes packed with consequences, tools, and theories that often fit business creation, growth, problem-solving and decisions.
2. The first machine, and the one I enjoy the most, is the operational machine.
This machine is setup to create and deliver value.
This machine is setup to create and deliver value.
3. Second machine is Sales.
Its how we communicate what ops can do, and is doing for others (value proposition, and social proof).
Sales feeds into operations and is fed by operations if done correctly.
Its how we communicate what ops can do, and is doing for others (value proposition, and social proof).
Sales feeds into operations and is fed by operations if done correctly.
4. Third machine is Finance.
This is how we can leverage our operations for better returns.
This too feeds operations, as well is fed by operations.
This is how we can leverage our operations for better returns.
This too feeds operations, as well is fed by operations.
5. Once I have my framework for how I view the business, I can then more easily structure decisions and solve problems.
Example, based on my view of a business, my first three hires are going to be
1. A finance person (CFO)
2. An Ops person (COO)
3. Sales person (CRO)
Example, based on my view of a business, my first three hires are going to be
1. A finance person (CFO)
2. An Ops person (COO)
3. Sales person (CRO)
I also know that I want my
- Finance person to be great at capital acquisition, decision making, and cash flow management.
- Operations person to be a tinkerer, innovator, and problem solver
- Sales person to be a great communicator.
- Finance person to be great at capital acquisition, decision making, and cash flow management.
- Operations person to be a tinkerer, innovator, and problem solver
- Sales person to be a great communicator.
By understanding how I view the business, it sets me up to better make decisions as I move the it forward.
Take some time, and layout how you view your business.
I love the "one page" plans for this as they really help solidify how things work, and where the holes are!
Take some time, and layout how you view your business.
I love the "one page" plans for this as they really help solidify how things work, and where the holes are!
This perspective also feeds how I do financial analysis.
I never use GAAP statements.
I never calculate ratios as is.
I always divide every line item, every entry into
1. Finance
2. Ops
And then use GL accounts to help measure impact on sales.
I never use GAAP statements.
I never calculate ratios as is.
I always divide every line item, every entry into
1. Finance
2. Ops
And then use GL accounts to help measure impact on sales.
When I'm done I end up with
1. a p&L/balance sheet for the ops
2. a type of Return metric for the leverage finance is bringing along with P&L and equity/debt sheets
3. An ROI breakdown for sales and marketing efforts.
Each machine has its own statements, its own metrics.
1. a p&L/balance sheet for the ops
2. a type of Return metric for the leverage finance is bringing along with P&L and equity/debt sheets
3. An ROI breakdown for sales and marketing efforts.
Each machine has its own statements, its own metrics.
