The System of Business

One of the many sayings of Dr. Russell Ackoff, an organizational management expert, is “a system is not the sum of its parts, it’s about their interactions”. Business is a system.

Business can generally be divided into 3 main sections: marketing & sales, operations and financials. Of course these sections have overlap and can affect each other. The main goal of marketing & sales is to sell goods and services. The main goal of operations is to fill the sales orders. The main goals of the financials are to determine profitability and cash flow.

Marketing & sales is really anything that is done in an effort to acquire and maintain customers. Actions and issues may include market research, company image and company brand. Traditional promotion like print ads, direct mail, billboards, signage, trade shows, networking and demonstrations are included. Also, online promotion like social media, websites, SEO and pay-per-clicks can be helpful. Of course, follow up marketing is a must.

Operations should be designed to work the marketing plan, fill the orders and satisfy the customer. Actions and issues may include employees, facilities, equipment, software, inventory, vendors, contracts, insurance and regulations.

Financials typically include such information as balance sheets, profit & loss statements, cash flow statements and projections. Financials may be required by taxing authorities, but also, banks and insurance companies. Financials can also be used to manage your company and make good business decisions.

Again, these sections may have overlap and can affect each other. For example, suppose you implement a great marketing campaign that you anticipate will increase sales. Are the operations (employees, facilities, equipment, etc.) in place to fill the orders and service the customer? If you need to hire more employees, did you not only consider the cost of wages & salary, but also payroll taxes, insurance, benefits, training and utilization? If a new piece of equipment is required, did you not only consider the direct cost of the equipment, but also installation, insurance, utilities usage, maintenance and training? What if the marketing campaign doesn’t lead to increased sales? Did you consider the risks and perform proper financial forecasting?

This is a simple example, but we encourage you to look at your business or organization with these 3 main sections in mind. It can help you in your decision making and allow you to be more successful and profitable.

If you need help with this analysis, please contact us today.