Ten Essential Business Functional Areas
When designing a business it is critical that all aspects of the business be addressed. It will not work to concentrate on sales or production or any other part of the business and ignore other parts. So, what are all these other parts that you should address?
The Vision for a business. The vision for a business is a description of the business as a finished product. The vision defines business. It will describe exactly what business is when complete including: incomes, fringe benefits, insurance coverage, type of people involved to work with, preferred work schedule, involvement of the owner’s family, and when they will leave this business and with what. The Mission describes in detail how the business will relate to its six stakeholders.
2. Business Entity
The entity is the legal vehicle that will contain the business. Selection of the proper business operation entity to allow for appropriate distribution of profits and control of the business and personal taxes, and the completion of maintenance of all internally required documents for set-up and maintenance of the entity.
3. Support Teams
Realizing that building a business is not a one-person process, can you develop the two sets of teams to build and operate a business; an outside team of advisors and an inside team for development and operations. Part of the development of this building block is understanding of exactly how each team will or does contribute to the building of the business.
4. Strategies to Define Structures
This area is where the plans are developed for the operation of the business to meet its Vision and Mission. Every business is built around four basic strategies or plans to deal with certain aspects of the business: the Entrance/Exit strategy; the Marketing/Growth strategy, the Operations (production/delivery) strategy, the People (management) strategy. All of these strategies are interrelated and must work together and should be based on systems to control results.
5. Stakeholder Relationships
All businesses must deal with six stakeholders: Customers; Vendors; Workers; Community; Lenders; and Owners. It is of utmost importance that relations with all of these groups be clearly defined, especially between the owners and workers and between owners. We recommend that these relationships be defined by clearly written agreements and policies that detail the expectations of both sides.
Products/services are the reason for the existence of the business, they are the fuel that drives the business vehicle. The incomes for all businesses are dependent upon the set of products and/or services the business markets. This is not just a list of business outputs but is a definitive written description of the products/services, how they are produced, how and why the customers use the product/service, and how they are informed about your product/service and why they are best served by your business.
7. Marketing and Sales
Customers are the source of all business income, customer needs are the focus of the marketing-sales process. Marketing is the process of developing awareness of the business and its products/services in the world. Sales is the contact that allows the customer to buy. Together these activities must include all aspects of the business’ relationship with its customers, including; prospecting, contact, presentation, sales, delivery, and follow-up. Marketing will always require maintaining a customer database for follow-up and possible future sales. In addition, the marketing system must constantly monitor the market to detect the need for product/service changes to meet changing customer wants. Every business should have a written marketing plan/system that is tracked for results.
8. Production and Delivery
The production process is how the business produces the product or service that its customers are buying. If the business is not able to produce the product or service in a timely manner it will lose its customer to competitors, and the produced product or service must meet customer expectations. Even if the product or service can be produced it must be delivered to the customer. So this functional area is concerned not only with the production of the product/service but with its delivery.
9. Systems Development, Tracking and Maintenance
All businesses operate through systems designed to produce certain results. Most times these systems are informal (unwritten and untracked). The business itself is a system composed of many sub-systems. All of these systems are developed from the defined goals of the business and must be tracked. The systems used throughout the business are not truly systems unless they are tracked. Tracking includes all forms of tracking needed to determine if results are being achieved. Most small businesses are aware of only one tracking system, the one that tracks financial activities, usually to satisfy the banker or the taxman. In fact, all aspects of your business activities are being tracked in some way, usually by what is referred to as “seat of the pants.” Reaching success of the business means developing tracking for all systems.
10. Finances and Risk Management
Finances is used here to encompass all areas of the business finances, including: owner’s equity, loans and other financing, cash flows, taxes, key financial indicators, cash management, financial projections and budgets, etc. Once a goals has been defined for the business the business will need to make financial projections to identify; available resources, timing of incomes and expenses, worker needs, fixed asset needs, and other cash requirements. These projections result in operating plans and budgets and tip you off to possible additional financial needs.
Related to financial success is risk management. Risk management includes planning for all possible adverse events that could damage the business or its owners.