What must every SME business head know about his business?

As we are working with more SME organizations, we are observing two kinds of business heads or owners.One type of business owners involves themselves almost full time on managing all aspects of operational activities on a daily basis and not giving much focus on the business aspects of profitability and growth.The other type of business owners or heads delegate entire activities to second levels and not much familiar with business aspects. In both types of personalities, we see benefits and drawbacks as well. Only a few smart business heads able to balance the priorities between survival and growth-related activities.

The point is irrespective of the personal style of management, the business head must know some of the aspects of the business at a macro level, and in a fixed interval he must review along with his team. His macro level business acumen and reviews will help the organization to prepare proactively for any uncertainties or opportunities which impact profitability and growth.

The following business aspects the business head must be familiar and review frequently.

1. Profitability
2. Cash flow
3. Capacity constraints 
4. People capability and development
5. Next level growth plan 

1. Profitability :

He must have a practice of reviewing P&L once in a month along with the team. Reviewing P&L will give a fair idea about the healthiness of the organization regarding cost, product mix, and pricing

Also, he must be aware of his cost structure or value chain and its impact on the profitability.

He must have a clear idea of the product mix or customer mix which gives maximum profitability. This clarity will help him to focus on customer or product rationalization

2. Cash flow : 

One of the pain areas for most of the SME organization is poor cash flow management result into affecting day to day operations, sometimes, finding difficult to pay even salaries on time. This delay seems to be a regular event from the management point of view as multiple transactions happening across the supply chain, but from an employee point of view, these delays some time affect the morale and engagement. Better cash flow management is required to avoid hand to mouth situation of cash flow.

The business head must know his breakeven point, cash flow transactions, and payables/ receivables outstanding in a regular frequency through MIS so that he can intervene at right time with right people to mitigate the risk before it occurs

3. Capacity constraints : 

One of the competitive edges for the organization is speed and delivery flexibility, and this is going to be a major expectation from customers. The business head must know his organization constraint points and work continuously on debottlenecking or improving the capacity to stay ahead of the competition. The constraints could be anywhere in his operational and business processes.

Meeting the customer’s expectation on time must be one of the key performance indicators of business head

4. People capability and development : 

Today one of the significant challenges for SME’s is people management. It includes selecting the right people, compensating them at par with industry and retaining them. As most of the organizations realize the cost of replacement and training the new entrants, it is one of the critical priorities for business head to identify the people talent on time and develop them for cost efficiency and future fit point of view.As a business head, he must continuously invest in people capability development initiatives. 

5. Next level growth plan  : 

Since most of the team members in SME’s are working on operational issues and someone must think about sustainability, the growth of the organization. It is the responsibility of the business head to think ahead and work on the growth opportunities. To work on growth, he must be aware of the external environment, trends, customer’s expectation.

Organizational profitability and growth depend on the amount of time, the energy the business head spends in all aspects of business !!!