Have you ever taken a basic dance class – swing, salsa, tango? The class starts out with everyone in a line learning the same 6 or 8 beat step over and over, adding some variations to it until you finally get to try it with a real person. By the end of the class, you feel pretty good, and if no one got hurt you consider the evening a success!
And then the open dance starts and people who were not in the beginning dance class step out onto the floor and start dancing – and supposedly they are doing the same dance that you were just doing, but you can’t see that basic 1,2,3,1,2,3 step anywhere. They are moving faster and with what looks like total abandon but still moving together – how are they doing that?. Where did the basic step go?
Well, the basic dance step is still there – often indistinguishable but allowing for any amount of improvisation – it is driving the dance. It allows two people to dance together and improvise and move from step to step and stay together and get back on track if they get a little off track and to have the freedom to move away from the dullness and repetitiveness of that basic step. But the basic step is still there. Without that basic step underlying the dance, the dancers can’t dance in harmony, have to worry about stepping on each other’s feet and don’t know where they are in the dance.
This same principle applies to running a business. If the basic steps are in place – structures which maintain sound operations – a business owner is free to improvise, to innovate and to take the company to the next level. If the basic steps of a sound business model are not in place, the owner will spend all of their time bumbling along, figuratively looking at their feet, making sure that they don’t step on toes or that there toes don’t get stepped on – watching cash, checking operations, looking over their staff’s shoulders, wondering what’s going on, where are they in this business? – trying to keep in control of a situation that seems out of control.
So what are the basic “steps” in a business?
- Vision – why are you in business and where are you going? What does success look like?
- Seaworthy business model: Are you operating in a way that is geared to make a good profit AND maintain positive cash flow?
- An accounting system that supports the business model: Do your financial statements tell a story about the company’s operations?
- Metrics and management reports which compress lots of data into useful information that allows you to steer the company by looking at trends and variances. Useful metrics are industry-specific and it’s important to be watching the right ones for your industry and company: Which direction is your company moving – is it getting stronger? getting weaker?
- Projections: Once the building blocks and interrelationships of the company are understood, then the question can be asked: Will the current or proposed business model take you where you want to go?
- Understanding of BreakEven: Where are the edges – how close can you go to the edge without falling off?
- Processes and systems to guide behaviors and bring the information to decision makers when they need it: Where are the bottlenecks?
With the basic steps in place driving your business, the business owner can relax and then, let the dance begin!