Is your business competitive?
One important component of assessing your business is knowing if your business is competitive. To reach any level of success, you must to be competitive with other similar businesses in your market. You also need to know where your business differs and where it is the same.
One important question to ask when doing your strategic planning is: Just how competitive are we? Objectively making this determination entails scrutinizing key factors that affect profitability, including:
Industry environment. Assess your industry as a whole. What factors could threaten your business. Consider everything from extreme weather that could slow delivery of services or products to your customers to an economic downturn. Do you have products nearing the end of their life cycle? Do you need to diversify or add products to your range of offerings? Then seriously evaluate how you would address these issues for a positive outcome.
Tangible and intangible resources. Competitiveness can hinge on the resources to which a business has access and how it deploys them to earn a profit. What types of tangible — and intangible — resources does your business have at its disposal? Are you in danger of being cut off or limited from any of them?
For example, do you own state-of-the-art technology that allows you to produce superior products or offer premium services more quickly and cheaply than competitors? Assess how suddenly this technology could become outdated — or whether it already has.
Strength of leadership team. As the owner of the business, you may naturally and rightly assume that your management team is in good shape and they will continue to produce at their current level. But what if your leaders are nearing retirement age or other life factors that may influence them to leave. Do you have a sound succession plan in place that will ensure that business remains competitive?
Also consider your workforce. Pay attention to employee interactions. Ask your managers whether underlying tensions exist and, if so, how you might improve morale going forward. There’s probably no greater danger to competitiveness than a disgruntled workforce.
Relationships with suppliers, customers and regulators. For most businesses to function competitively, they must rely on suppliers and nurture strong relationships with customers. In addition, if your company is subject to regulatory oversight, it has to cooperate with local, state and federal officials.
Discuss with your management team the steps the business is currently taking to measure and manage the state of its relationships with each of these groups. Have you been paying suppliers on time? Are you getting positive customer feedback (directly or online)? Are you in compliance with applicable laws and regulations — and are there any new ones to worry about?
Loss of competitiveness can often sneak up on companies. One minute you’re operating in the same stable market you’ve been in for years, and the next minute a disruptor comes along and upends everything. Business leaders need to constantly assess and prepare for internal or external factors that will reduce their competitiveness and thus their profits.
The Ciuni & Panichi team has been helping businesses succeed in Northeast Ohio for 45 years. We can help you assess your position in the market and make recommendations to help you stay there. Contact George Pickard, CPA, MSA, Audit and Accounting Principal, at 216-831-7171 or gpickard@cp-advisors.com more information and other profit-building ideas.
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