How to Assess Your Business or Department (Part 3)

assessment-pt3-1 (1)

This article continues from How to Assess Your Business or Department (Part 2) and is the final installment in this series.

Step 9: Review Your Financials

  1. How much do switching costs prevent your customers from changing over to you?
  2. If it costs too much to change, even if you have a superior product, how will you combat that?
  3. Does your business model produce recurring revenues?
  4. Do you earn before you spend? If you are constantly in the hole by just producing products or delivering services, you might consider changing your business model.

TIPS:

  • Do you take advantage of others doing your work? Facebook designed a platform that allows users to upload photos, videos and many other things. While the designers made the avenue, most of the work is done for free by the users. Is there a way for you to take advantage of this kind of free user-generated work?
  • Take the time to carefully go over your financials. You might not be the one in charge of the numbers, maybe you hired someone specifically to do that job for you. But you need to know what everything means, or you will not be able to properly plan for the future of your business.

Step 10: Review Your Market Assessment

  1. What are the trends affecting your current market?
  2. What is the Total Addressable Market?
  3. What about the Demand Generators and your ability to meet them?

TIP: Understanding your market is a key factor for success, this is an area where you should take the time and make the extra effort.

Step 11: Review Your Ability to Adapt

  1. How scalable is your business model?
  2. If you have the chance to grow your business, are you able to do so with your current model? What are the costs involved?
  3. Is your team capable of adapting?

TIP: Facebook started out only available to students as a way to connect to other students in their school. They started with a niche and completely dominated it, and then progressively extended their reach as their foundation was solid. This is the way to go, as opposed to attacking a huge market with limited resources, which ends up producing only a very small impact.

Step 12: Review Your Performance

Be especially honest here.

  1. How well does your business model perform?
  2. Is it surviving the tests thrown at it?
  3. Does it have the ability to sustain itself/continue making money?

TIP: Write down the “Pros and Cons”. Do not be afraid to be harsh.

Step 13: Create a Readable Assessment Format

There is very little point to making an assessment you cannot understand or is difficult for your management team to comprehend. Make your assessment clear, categorizing each step you took to come to your conclusions.

TIP: You might consider one of the following formats as well:

  • Asset Approach: How much value is there in your assets?
  • Market Approach: What are similar businesses worth?
  • Income Approach: How much income might your business generate in the future?

What’s the next step? Acting on what you’ve discovered, of course!