In working with entrepreneurs from different countries and sectors, I have observed that they are often affected by the same problems, regardless of geographical location or company size. Only the magnitude and impact of these problems on their organizations vary.
Chaos and inefficiencies are inherent to human nature. Therefore, it is necessary to constantly analyze and review a company’s actions. An external perspective from coaches or consultants, who are not influenced by the day-to-day operations of the company, can provide an objective view of the change needed as well as advice on how to incorporate methods, systems and strategies to achieve maximum efficiency and profitability.
In this article, I will explore three of the most common problems I see entrepreneurs experience while managing their businesses, all of which affect viability, and I will present recommendations for improvement. In future installments, I will cover other problems.
1. Lack Of Long-Term Strategic Planning
I find that the majority of companies operate without a defined, organized and consistent strategic plan. The future of the company often remains uncertain and subject to fluctuations in the entrepreneur’s mind. It is crucial to work on defining a strategic plan with a time horizon of no more than two years, as longer periods are speculative.
The highly competitive and ever-changing business environment requires a flexible structure to adapt to market conditions and shift the direction of the company when necessary. Teams feel demotivated and lack involvement when they are unaware of the company’s strategy, which negatively impacts productivity and efficiency.
I recommend conducting SWOT and Canvas analyses with the management team and, when appropriate, involving an external advisor unaffected by the day-to-day business operations to establish goals and the company’s immediate future. Subsequently, these ideas can be translated into action plans for each department.
Understanding market trends, the current competition, product or service differentiation, and the challenges and opportunities posed by global markets and the emergence of artificial intelligence will be vital for effective analysis. With this approach, the company gains clarity on its direction, and teams can work cohesively, motivated to achieve these goals. Combined with monitoring and control of the action plan, the company can become more competitive.
2. Lack Of Liquidity And Poor Cash Flow Management
This is a significant weakness that I often encounter: Poor forecasting and control of cash flow, along with a deficit in using tools and protocols to improve collection times, lessen the gap between inflows and outflows and manage delinquent payments. Even profitable companies with deficient treasury management may end up shutting down.
Companies that successfully implement these controls can improve their cash flow. Therefore, it is essential to monitor this vital aspect of the business with great caution and attention, using the latest treasury control tools and achieving rigorous control of outstanding payments.
3. Lack Of Profitability
A lack of sales and/or low profitability of the same is a common issue. In many cases, I find a deficient commercial policy with multiple negative aspects. First, offering products or services that the market no longer demands due to changes in consumer trends, preferences or usage. This results from not having communication channels and market observation that allows adaptation to real demands.
Another crucial negative aspect is not creating products or services that are clearly differentiated from the competition, leading to low profit margins that jeopardize the company’s viability. A poorly trained or unprofessional sales force, alongside a failure to utilize new technologies and online selling techniques, further increases the difficulty of achieving sales.
Therefore, I recommend conducting a rigorous market analysis, studying the competition, understanding the real market needs and then offering something different to avoid competing solely on price and narrow margins. Implementing a solid commercial plan supported by both offline and online sales forces can help overcome these challenges.
To summarize this first installment regarding the most common problems and inefficiencies encountered in companies, I conclude that in this rapidly changing environment, it is more than necessary to create a simple and straightforward strategic plan with a time horizon of less than two years, clearly outlining the direction of the company.
This document should emphasize the significance of meticulous treasury management to mitigate risks, as well as the ongoing monitoring of business profitability margins and consistently offering products and services that are genuinely in demand in the market.