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This is the time of year that many business owners are scrambling to put together their receipts and paperwork together so that they can file their income taxes before the April deadline.

Unfortunately, for many owners, a once a year tax return is only formal performance evaluation they receive. If the profit is large, the owner likely thinks they had a good year, if not, they had one that was less so.

Running a business is about the numbers, but it is not only about having great numbers. Many companies have had horrible years where profits were nonexistent or minuscule followed by solid years because those in charge took the time to step out of their business and set a course for change. What those leaders did was to set aside the focus on the money and instead look at evaluating their skills so that they business would be on more solid footing going forward.

In order to be successful for the long term, it is essential to have competencies in more than just one functional area, it is necessary to understand all aspects of what a business entails. Here are the five key areas that every owner should formally evaluate themselves to improve their business for the long term:

Strategy
Do you have a written three to five year plan that defines the direction of the business? Does your company have a BHAG (big, hairy, audacious goal)? Is there a written mission statement? Are the values of your company visible for clients, vendors and employees? Do you have in place a one year operational plan, a sales plan and a marketing plan? Rate yourself on a scale of 1 to 10, one being poor and 10 being great.

Sales and marketing
How do you rate your skills in marketing to your core targets? How comfortable are you selling face to face? What have you done to create a successful marketing plan? What are your current revenue streams and are they profitable? Rate yourself on a scale of 1 to 10, one being poor and 10 being great. What about Website Marketing?

Financial management
Do you know the difference between cash flow, profit and loss and the balance sheet? What are your daily, weekly, and monthly breakeven numbers? Are your financial statements issued in a timely manner? What have you done to reduce costs? What can you do to increase profitability? Do you have a credit and collections policy to maximize cash flow and minimize risk? Rate yourself on a scale of 1 to 10, one being poor and 10 being great.

Operations
Do you have policies and procedures in place for daily, routine activities? Is your organization current and in compliance with all governmental regulations, including those related to human resources? Is there a quality control plan in check? Rate yourself on a scale of 1 to 10, one being poor and 10 being great.

People
Do job descriptions exist for every position in the company? Are the job descriptions tied to measurable, tangible results? Is there a formal performance evaluation system in place? Is every employee formally evaluated on a regular basis? Does every employee have the tools they need to do their job right? Are managers evaluated by their employees as well as their supervisors? Rate yourself on a scale of 1 to 10, one being poor and 10 being great.

If your total score of these five critical areas was between 40 and 50 points, chances are you are doing all the right things; whether or not you are doing them right is another question.

If your total score was between 30 and 39 points, it is likely that one area is weak and more focus needs to be spent there in the year ahead.

If your total score was less than 29 points, you need to prioritize the area that was weakest and focus on that area. Consideration might be given to taking a workshop on this topic to gain a better understanding of it or consider finding a vendor that can perform the task for the company.

An excellent book on business management worth reading is “Taking Your Business to the Next Level” by Michael Kind and Mitch Evans. It addresses many of the topics in this article.

Here is an “extra point” question for you: What is one thing that, if implemented, would make a significant, immediate positive impact on your organization?

(Annie’s Mailbox is the continuation of “Dear Ann Landers” that is a syndicated column that runs in many newspapers in the US. After I read a “Dear Annie” letter and the response in the paper, I stepped in to provide my own advice).

Dear Ken Keller:

Thank you for your letter offering advice to one of our readers. We would like to print an edited (for space) version of your letter on Friday, August 3, 2007, along with your name and city. Here is what it will look like:

Dear Annie: “Sayre, Pa.” wrote about her struggling restaurant business and said she was depressed. You told her how to find counseling, but you didn’t give her any business advice.

To help ease her financial pressure, she can:

1. Raise prices. Inflation is running close to 8 percent and this is one of the reasons she is feeling pinched. She should plan on regular quarterly price increases. Her customers buy food at the grocery store and understand prices have gone up.

2. Negotiate better terms with her suppliers. Or find new ones.

3. Make it easy for her customers to pay her by taking credit cards, cash and perhaps personal checks.

4. Revise her menu to eliminate items that take too much time to prepare, are seldom purchased, or are otherwise not profitable.

5. Develop a customer loyalty program so regular customers will come back more often.

6. Meet for free with representatives from the local Small Business Administration

About fifteen years ago the number of chain restaurants operating in America surpassed the number of independent eating and drinking establishments. Since that time the gap between multi unit restaurants, franchised and corporate owned, versus independents, has dramatically widened.

I have traveled all over the country, to large cities and small towns, and this trend away from independently owned and operated businesses is going to continue. It doesn’t matter if the business is a gas station, a manufacturing plant, a hospital, a non profit, a motel, or a local retail outlet.

Why this trend is taking place is simply stated: chains have standards of performance that are enforced.

As an example, the other night I stopped at a local independent restaurant to pick up something for dinner. This particular establishment provides good food at reasonable prices and I have been a client for years. The vast majority of the business it does is done during the business day, as it is near many commercial and industrial facilities.

There were four employees working behind the counter when I placed my order. I paid my money, received my change and turned to find a place to wait in the seating area. The eating area was not horribly filthy, but there were some napkins on the floor, several tables needed to be wiped down and the beverage area needed to be straightened up and refreshed. I am sure it wouldn’t have hurt to have the floor mopped either.

Perhaps all of this is not such a big deal after all; it was at the end of the business day, so perhaps these shortcomings could be excused. Maybe I am over reacting. Maybe so, but it was well after 7pm, there were four people standing behind the counter, talking with one another and the dining area was in need of attention. My visit to spend money was, on second thought, an interruption to their conversation.

On the way home I stopped at a unit of a well known national chain to do a comparative visual analysis. I did not see the same things in need of attention there.

Could my visit to this independently owned restaurant be an isolated incident? Could it be that I visited the restaurant on an off day or an off time? Could I be unduly harsh on this restaurant? I don’t think so. My observational research suggests that chains have in place standards of performance that are enforced at the local level, during all hours of the day. This restaurant may have similar standards, but I don’t know for sure. If they exist, they were not enforced at that time by the manager on duty.

Why have standards of performance? Why set expectations? The primary reason is to have the business live up to its potential.

Take Southwest Airlines versus any of their competitors. The expectation is that you will enjoy dealing with the flight attendants who will do what they can to make the trip fun. Compare that with a recent US Airways flight I was on where one of the flight attendants should have been sent to charm school. Compare the financial results of Southwest to any other competitor and you can verify which airline does consistently better.

Not having clear and measurable expectations is, in my opinion, the primary reason so many organizations under perform. Without clear and measurable expectations people do not know what to do specifically (what, when, how, why and to what level) and when I say people, I am writing about individuals at every single level from the highest to the lowest; from the owner to the receptionist and everyone in between.

People want to know that they will be measured. It all comes back to getting a report card. With clear expectations, people know what to do and how they will be evaluated versus objectives. It takes the guesswork out of evaluations.

Expectations help leads, supervisor and managers become better at managing people. They no longer have to wonder if people are doing their assigned tasks or not. It positions the manager as someone who verifies that the work is being done as expected. Note that the manager is not doing the job; they are making sure that others do it according to specifications.

If you wonder why things are not getting done in your organization they way you’d like them to, start by asking what the expectations are for answering the telephone. In most organizations, something as basic and yet critical to the success of the organization has never been discussed as needing a standard of performance. Yet, this may be the most used method of communication for prospects, clients, vendors and shareholders communicate with the organization.

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