Good business control systems direct your attention to the right areas – areas with problems that need your attention. They help you achieve the goals you have set for your business.
Just what are control systems?
Control sytems could be compared to, say, an automated, intelligent air conditioner. Such an air conditioner would allow setting a desired temperature range as the standard. It would then compare actual room temperature to the preset standard and would heat the room if the temperature is below and cool the room if the temperature is above the range.
How do you set up a business control system?
The first step is to visualize what it is that you are setting out to achieve. If you have only a vague idea of what you want to achieve, you will be bumbling along. You would waste valuable resources and time, and might end up achieving nothing (except perhaps a very much thinner bank balance or a fat debt).
So think through things. What specific results would indicate achievement of your goals? Sales of £100,000 per month? Net profits of £20,0000 per month? Average growth of sales per month at 10 per cent? A reputation for high quality products and fair business practices?
Once you have crystallized your goals in this way, you can go deeper. For example, to achieve sales of £100,000 per month, how big a market should you cover? How would you distribute your products in this market? Which distributors should you approach to do this? What terms could you offer them? Are they getting better terms from your competitors now? Should you consider the option of selling to final consumers through sales outlets of your own?… You would soon get into the practical details of achieving your goal.
Don’t forget to document your decisions. Make a sales plan that lists the distributors or sales outlets. Against each of them indicate the sales they would bring in – month by month. Also indicate the expenses you would incur for the distribution – packing charges, handling & transport, sales commissions, and others.
Control is exercised by comparing the actual results agains these plans. How much actual sales did a particular distributor or sales outlet bring in April 2005? Was this lower or higher than the planned level? By how much? And more importantly, why? What factors caused the higher or lower sales? What should you do to improve the success or remedy the failure?
And how did the distribution costs compare with your estimates? If they are too high, how could you reduce them?
You would soon be deep into the business, learning things and acting on them. And your business control systems would have achieved their goal of putting you in charge of your business.