By: Prof. Enrique Soriano
Without clarity, any road will get you to where you want to go. Not having a goal, not knowing where you are going, it’s all the same. You end up going nowhere. In the end, you will never get “there,” because you don’t really have a destination. And without direction, without a destination, without a goal, it will be almost impossible to pick a direction nor choose a road nor plot a course to get “there.”
Right from the start, a business aspiring to last longer must be very, very clear with their vision and mission. When you are done crafting your vision, avoid the dreaded syndrome, “talk is cheap” by not doing anything. Success lies in putting words into action by way of crafting a business plan. It doesn’t have to be a comprehensive one, a concrete plan of action with milestones or timelines is sufficient enough to move forward. As what I always imposed on my MBA students, transforming a business plan to an actionable game-plan contains the SMART Principle: It must be Specific, Measureable, Attainable, Realistic and Relevant and Time-bound!
There is no single book to outline specific steps or rules in business. For this purpose, here are the following steps to make an enterprise stay solid and hopefully stand the test of time. For family owned businesses, it must make sure it transitions from generation to generation:
- Learn good cash management. Business owners should see to it that there is available cash flow on a monthly basis. In addition, I strongly encourage the discipline of initiating a once-a-week disbursement for easier monitoring of cash inflow and outflow. Setting up a solid internal control system can help ensure that cash is available whenever there is a need for it.
- Establish and maintain committed relationships with clients. According to experts, this refers to the ability to identify the needs, preferences, and buying habits of regular customers. Generally, business owners must commit to the specification/s of their loyal customers in producing goods and rendering services that measure up to quality standards.
- Control Inventory. The basic question is “Just how much is enough stock?” There is a constant need to know when to order and how much to order. There should be a need to distinguish between basic stock goods and seasonal goods since each kind is controlled in a different way.
- Maintain continuous supply of raw materials. Entrepreneurs must guard against running out of stock when he or she needs them.
- Be cost efficient. Costs refer to “All the money a business spends in making and selling its products or services” such as raw materials, salaries and wages, electricity, interest on business loans, etc. Consequently, the following are ways to reduce costs: subleasing, renting instead of buying, recycling etc.
- Maintain the quality, features and design of the product
- Involve or immerse all the partners or family members that are active in the business. This leads to mentoring the successors of the business on critical business issues. Mentoring can either be direct or indirect. Direct mentoring spells out the do’s and don’ts of the business to the everyone actively helping or engaged. A Code of Behavior or a manual of performance is important. For family owned and controlled businesses, indirect mentoring happens when children observe how their parents conduct business on a daily basis reinforced with science and best practices learned from consultants and professionals.
To be continued…
Prof Enrique Soriano is a World Bank/IFC Governance Consultant, Senior Advisor of Post and Powell Singapore and the Executive Director of Wong + Bernstein, a research and consulting firm in Asia that serves family businesses and family foundations. He was formerly Chair of the Marketing Cluster at the ATENEO Graduate School of Business in Manila, and is currently a visiting Senior Fellow of the IPMI International School in Jakarta.
He is an associate member of the Singapore Institute of Directors (SID) and an advisor to business families worldwide, a sought after governance speaker, book author and have written more than 200 articles and publications, including two best-selling Family Business books (Ensuring Your Family Business Legacy 2013 and 2015). You can read Prof Soriano’s business articles for free at www.Faminbusiness.com