The 20 Characteristics of a Well Run Business

Characteristic one – personal capacity and development

Most well run businesses are led by people who have high personal capacities including:

• Drive and energy.
• High levels of self-confidence and determination.
• Sense of realism regarding the difficulties encountered in Small/Medium Sized Businesses.
• Ability to see the “big picture”.
• Ability to gather data and interpret it.

Characteristic two – excellent customer knowledge and service

Well-run businesses have excellent customer relations. This requires you to:

• Know who your target market is?
• Do your homework on your customers - can you walk in their shoes?
• Do the things that other people don’t?
• Treat your customers differently to how everyone else treats theirs.
• Let your customers know how much you appreciate their custom.
• Specialise and be certain to always have that product on hand or always be able to deliver that service.

Characteristic three – excellent product/industry knowledge

• To be successful in business the business must have developed team members who have excellent product or technical knowledge.
• The owner/manager doesn’t have to have all of the knowledge.
• The successful business operator understands what is happening in his/her industry, knows what the key players are doing and is alert to industry trends and fashions.

Characteristic four – excellent systems

Well-run businesses have excellent systems that give them current information on cash flow, sales, amount owing by debtors, amount owing to creditors, stock on hand, stock analysis reports etc.

The system enables the owner/manager/chief executive to concentrate working “on” the business rather than “in” the business.

Characteristic five – excellent analysis of results

The following is a summary of some of the key records and information necessary so that a proper analysis of operations can be achieved:

• Daily bank balance.
• Weekly performance estimates.
• Monthly financial accounts
• Comparison of periodic financial accounts to budgets and cash flow forecasts.
• Key performance indicator figures
• Benchmarking.
• Use of budgets.
• Use of cash flow forecasts which are regularly updated.
• Regular team member meetings to analyse performance.
• Regular management meetings to review all aspects of the business’s performance.

Characteristic six – excellent cash control

If you are handling cash you must have a sound system of control including:

• Establish required amount of cash floats.
• Daily takings to be summarised on cash register summary forms, which include details of the cash register reading, unders and overs and banking.
• Ensure cash is banked intact daily.
• Insist that all sales are processed through the cash register.

Characteristic seven – excellent stock management

Stock management is a very difficult exercise. You can tie up considerable sums of money in stock if you do not have a strong stock control system.

• Utilise a stock analysis chart to highlight the stock “stars”.
• Highlight to your team members “problem stock lines”.
• Make sure they realise what the “dog lines” are.
• Determine a desired “stock turn” rate for each item of stock.
• Generate more traffic (potential customers) through better stock management.
• Conduct regular stock takes.

Characteristic eight – excellent work in progress control

If you are a trade, service industry or professional practice, you will find that a well maintained Work in Progress System will ensure that you have an excellent record of costs incurred, revenue earned and profit on the various jobs or projects that you have undertaken.

Characteristic nine – excellent debtor control

• Careful review of credit requests.
• Confirmation to your customers of your “terms of trade”.
• Detailed invoice preparation.
• Timely dispatch of invoices.
• Timely preparation and dispatch of statements.
• Prepare a detailed debtors’ aged analysis at least monthly.
• Immediately contact any debtor who is beyond your stated terms of trade.
• Stop supply of goods or services when accounts are overdue.
• Take early action for recovery.

Characteristic 10 – excellent cost control

• Detailed budget of costs.
• Examination of cost reduction strategies.
• Monitoring actual results on a timely basis.
• Communication with team members regarding cost control.
• Analyse purchasing procedures. Is old stock being used first?
• Be aware of whether expenditure is of a capital or revenue nature.

Characteristic 11 – excellent team members’ management, motivation and communication

The success of any business is determined by the attitude of its team members. Numerous surveys have indicated that salary is not the most important thing from an employee’s point of view.

The priorities of team members are as follows:

• Full appreciation of a job well done
• Feeling in on things
• Interesting work
• Job security
• Wages at a proper level
• Sympathetic help on personal problems
• Promotion and growth
• Personal loyalty to the worker
• Good working conditions
• Tactful discipline

Team members potential motivators - the work itself, formal training and development, team members skills reviewed, in-house training, professional development and job rotation
Potential team member demotivators - inadequate salary, problems with working conditions/status, job security, leadership.

Recognise good performance publicly.

Try and talk to your team members even if only very briefly on a daily basis and hold regular performance reviews with them.

Characteristic 12 – excellent marketing expertise/the ability to assess market place opportunities

• It is necessary to understand the prevailing economic and industry conditions.
• Analyse the demographics of your customer base.
• Plan promotional schedules around specific activities that are going to affect your customer base.
• You need to identify your unique selling proposition and centre your marketing strategies around it.
• If you are using media advertising or promotion, gauge the success of that promotion.

Characteristic 13 – ability to change with market conditions/prices review

• Successful businesses operators need to be able to monitor changes occurring in the market place and respond accordingly.
• A successful business continually reviews prices and price packages being offered to customers.

Characteristic 14 - excellent assessment of competitors

• To be successful you need to know what your competitors are doing.
• Analyse their strengths and weaknesses.
• Try to understand what their strategy is so that you can determine your strategies to successfully compete against them.

Characteristic 15 - capital base

• To successfully run a business, you need to have some capital to introduce into the business.
• Banks are reluctant to lend unless the business operators have some “hurt money” in the deal.
• Before expanding your business you need to determine whether you have sufficient of your own capital or approved borrowed funds to finance the expanded business

Characteristic 16 - use of professional advisors: accountant - banker - solicitor

Well run businesses have systems in place to ensure ongoing advice is received from selected professional advisors including regular meetings with your accountant; regular board of directors or advice meetings to determine policies and strategies for the business; quarterly meetings with your banker to keep your bank informed of your business trends and an annual “legal review meeting” with your solicitor.

Characteristic 17 - networking

Successful businesses have developed extensive networks involving suppliers, similar business operators (normally in other locations), other business people and expert advisors

Characteristic 18 - excellent planning

Establish written procedures for all activities of the business from the opening of the front door at the beginning of the day’s trade to the closing of the door at the end of the day’s trade.
Establish procedure manuals for emails, telephone calls, telephone messages, facsimile messages, correspondence in, correspondence out, ordering of stock, receipt of stock, stock takes, cash control etc.

Characteristic 19 - excellent quality control

From the planning phase, the development of internal manuals to cover all operations of the company is essential.

It is therefore necessary to ensure that the standards outlined in the planning phase are implemented and regularly reviewed to ensure that the organisation is able to present the highest quality of product or service.

This can be implemented by establishing quality control procedures and making a team member responsible for ensuring the adherence to the various manuals that have been established so as to ensure that the products that are being sold and the services that are being rendered by the organisation are of the highest possible standard.

This will ensure that the board of directors and management’s policies are faithfully implemented at all levels of the organisation so that the stakeholders in the organisation, shareholders, management, customers and staff all receive satisfaction and pride from a job well done.

Characteristic 20 - excellent management/administration

A well run business is administered by a group of persons who have taken into account the items that have been listed in characteristics one to 19 and then administer the business in such a manner that the standards and ideals called for in the characteristics can be delivered by the organisation in a harmonious, efficient manner.

To enable an excellent administration system to be implemented it will require:

• Employment of appropriate team members at various job levels.
• Training of team members.
• Giving management’s support and co-operation in the implementation of the various systems.
• Making team members’ communication work.
• Regular planning meetings.
• The development of a business plan and action plan for the business.
• Regular review of the business plan and action plan.

In conclusion, if you are currently applying or plan to start applying the above mentioned 20 characteristics to your business there is no reason why you cannot enjoy the benefits of having a well run business sooner rather than later.

And if you want our assistance in helping you implement the necessary characteristics of a successful business, please contact Gary Graco on ggraco@nexiaasr.com.au or 03 9608 0109, Philip Grant on pgrant@nexiaasr.com.au or 03 9608 0105 or Mark Hammerschlag on mhammerschlag@nexiaasr.com.au 0r 9608 0165

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