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December 2009
No Time To Go Wobbly
By John Blair

     Obscure, deliberate and problematic research begun decades earlier continues today to develop a strain of wheat that will sustain humans, can be established without tilling the soil and be perennially maintained without using chemicals.

     Aware that developing such a strain during his lifetime was remote, the prominent scientist who initiated this research, and conducted it during his entire professional life, did so because he believed that wheat production methods currently being used were unsustainable.

     When asked why he decided to take on such a difficult effort, he replied that if solutions to problems can be found during your lifetime, you’re not thinking deep enough.

     Really!

     An unflattering interpretation of this notion is that most of your problems are superficial. But while many of the problems you confront in your business require prompt solutions, given the unprecedented financial challenges of 2009, it is undeniable that “deep thinking” is also germane to the future success of your business.

     First, accept these unassailable facts: operating a thriving business involves continuously overcoming challenges, constantly contending with competition, and frequently suffering with varying levels of anxiety.

     To operate a business is to be undaunted. As Margaret Thatcher might say, there is no time to go wobbly; you must not let the faint hearts grow in strength.

     Second, dedicate sufficient time to determine what actually happened in your organization this year and how it compares to what was expected. In other words, look internally.

     Precisely what this will entail depends on your business activities and size. However, it’s not necessary for your organization to have the capability of, say, measuring the difference between sales volume on a Wednesday when it does or does not rain.

     Conversely, simply comparing gross sales, gross profit, operating net income and total debt over several years can only highlight whether in general your business is prospering.  Doing so will not identify a process that requires improvement or a product or services which are being sold at a loss.

     Specifically examine the correlation between your business’s inputs to assess whether they are consistent with your expectations. If they are not, determine whether your expectations were correct or whether there is problem that you need to address.

     Third, remember that your customers do not buy your product or service because you want to sell it, but because it provides benefits to them for the cost. All other things remaining equal, the lower the sales price or the better the quality of your product or service, the greater the benefit your customer reaps.

     To stay competitive, look externally by obtaining key measures and relationships, called benchmarks, calculated for your industry and for organizations in your industry of equivalent in size and compare them to those for your organization. This effort will provide you with an objective means of measuring performance.

     Dr. Carla O’Dell, president of American Productivity & Quality Center asserts, “Benchmarking is the practice of being humble enough to admit that someone else is better at something, and being wise enough to learn how to match and even surpass them at it.”

     Walter Chrysler was said to have disassembled the different Ford models as they were introduced to understand what components they contained, what it cost to make it and how it was manufactured.

     Use benchmarking data to identify a process, product or service that is underperforming. Then formulate and implement appropriate actions to improve, eliminate or replace it.

     Two sources from which you can obtain benchmarking data are trade associations or BizStats (www.bizstats.com), a private organization that sells benchmarks for numerous industries.

     Keep in mind that interpreting variances between benchmark data and the results of your organization is not an exact science. Benchmarks are based on organizations that vary in size, years in existence and obviously location from your organization.

     So, consider factors unique to your business when interpreting variances. Moreover, study trends. If over several years, for instance, your business is increasingly underperforming relative to the benchmark, it indicates there is a problem.

     Finally, keep in mind that analyzing historical data tells you what has happened. Next year presumably will be different; this year should be evidence enough that the past does not predict the future and that in a week’s time what was certain to occur can suddenly become improbable.

     Furthermore, it is important to never let creativity be stifled by analytics. Except for those that are regulated or deemed too big to fail, innovation and risk-taking are requirements for all businesses.

     John D. Blair Sr. is a managing partner at Blair, Bohlé & Whitsitt, PLLC., a CPA firm that provides accounting, assurance, tax compliance and planning services in addition strategic planning and tax minimization strategies to privately held businesses. Contact him at 704-841-9800 or visit www.bbwpllc.com.

John D. Blair Sr. is a managing partner at Blair, Bohle & Whitsitt, PLLC.
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