Every business deserves to be run efficiently, effectively, ethically, and profitability. And understanding the following 6 Business Basics is essential for managerial competence.
1] CONCEPT:
With so many business; books, degrees, courses, professors, advisers, consultants, etc., it is easy to think that the business concept is very complicated. Well, thankfully, it’s not. Basically, the business concept operates on a very simple equation; Revenue – Costs = Profit and once you understand this you understand what business is all about. It’s that simple.
All business roads lead to:
Revenue – Costs = Profit.
2] PROCESS:
The business process, with its large number of variables, is a bit more complicated but it is still grounded in this simple equation. And once the company is profit orientated, every part, or part of a part, of the business process rests on this equation. Consequently, everything can and should be challenged, with two simple questions: What is its cost? What is its benefit?
Everyone understands + and (-), it doesn’t require an MBA.
3] CULTURE:
Management and staff should embrace the equation so that it becomes the lens through which they instinctively view every variable and every component of every variable.
This practice doesn’t require university education or long training courses it only needs the equation to be highlighted, supported and reinforced by management until it becomes part the company’s culture. Customs, traditions and values make a company unique.
Company culture and values can drive competitive advantage and profitability.
4] PERFORMANCE:
The business process can also be explained by a basic equation; Efficiency + Effectiveness = Higher Profitability. Let me explain, for a business to be truly successful it must be efficient and effective.
Effective means doing the ‘right thing’ and efficient means doing ‘things right’. (Peter Drucker. Innovation and Entrepreneurship 2006).
Business can survive being effective without being efficient but not the reverse.
5] LEADERSHIP:
The leaders of a business have many responsibilities but none more important than the profitability and survival of the business. It is fundamental to their existence. But they are often side-tracked by the complexity of the business process and lose sight of their primary objective.
A simple solution is to regularly ask the following:
Redoubling effort having lost sight of the primary objective is wasted effort.
6] SUSTAINABILITY:
Business does not just happen it is created by human ingenuity and it is important for all entrepreneurs and managers to understand that with each creation comes an obligation to operate it efficiently, effectively, ethically, and profitably.
Ethical management includes obligations to operate business within the principles of sustainability and to satisfy the triple bottom line of: profit, people and planet.
Profit optimization, shared value, and sustainability, can and should be complementary.
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Frank Fitzpatrick B.A., M.B.S., H.D. Mrkt. Mngt., H.D.E., M.M.I.I.
F. A. FITZPATRICK & ASSOCIATES: Helping Small and Medium Sized Businesses to Grow and Develop: www.fafitzpatrick.ie