Entrepreneurs are always concerned about knowing the right things to improve their operations, grow their business, and maximizing profits. The secret to achieving all this is shared in an article by Louis Mosca, an active contributor in Small Business Strategy.
He says that the American Management Service uses an efficient and effective system, also known as the closed-loop management approach. This system uses a series of stages to reach the desired business outcomes.
The Closed Loop System
Each of the stage of the throughout the closed-loop system affects another. Mosca explains how this closed-loop system works and can help you achieve your desired business goals.
The elements of these closed-loop systems include:
- Metrics, and
- Structure of Accountability
The initial step is in implementing the business plan. This includes determining what the business is aiming to achieve in the coming year.
Don’t wait for the Profits
The standard way to calculate the profit is to wait until every expense of the company is paid off. The amount that is left over, in this case, is said to be the profit. This is also known as the “Residual Method” and is considered as wrong.
The best way is to set aside a certain percentage of every profit you generate. The concept is simple, but it requires a higher degree of discipline, pro-activeness, and training.
One this is done, and the profit plan is prepared, it is recommended that you implement a flash reporting which is the next step of the closed reporting system.
Identify the True Cost of Business
The correct implementation and use of the closed-loop will cover the accountability of two standards for you and your business. These standards are operational and financial. However, it depends on the weather if you can accurately define your true operating costs.
You can determine the cost of your operation once you put in place all the flash reports, the accurate measures of your moving parts (people, assets, management methods, organization, operations, and the overall system of reporting), it will become easy for you to calculate overhead, operational cost, equipment utilization, and your desired gross profit.
Develop a Growing Company Environment
The best business culture is to keep everyone involved in the business on the same page. Re-evaluate the staff by ensuring that everyone in the team knows your, as well as the goals of the company. The key is to communicate with the company on a regular basis and develop a culture that promotes a healthy and progressive work environment.
Taking regular advise from the peers and the team members shares ideas from a different perspective. Also, asking for opinions helps the staff members to stay motivated towards working on complex issues. Involvement of the staff members also helps to identify and correct the prevailing issues that are present within an organization.
Employees who are held responsible and accountable towards a board of trusted advisors help the company survive through the struggling phases of the journey.
Reward your Employees
Employees who successfully execute a plan and achieve success as per the plan must be rewarded. If the profit generated by them exceeds expectations, the employees must be appreciated. Using the flash metrics is one of the methods to conduct evaluations and praise for the good work they have done.
It is one of the important parts of the closed-loop system and will definitely affect the other aspects of the business. Having the right approach employee appreciation will help the company to achieve its overall business goal.
Make an efficient plan to maximize profits for your business. Research more on the closed-loop management technique and know how you can change your businesses process to achieve greater success.
Source – Forbes