Many entrepreneurs often act by putting out fires. The feeling is that problems are being solved. But as time passes, the pile of problems only increases. This is because a business diagnosis it was not done before. It would help the manager know where to focus before starting to run.
In this article we will talk about:
- What is a business diagnosis
- Benefits of making a diagnosis in your business
- What is analyzed in a business diagnosis
- How to make a diagnosis in practice
The business diagnosis is a methodology of company valuation that allows an in-depth analysis of the main areas of management of a business. With a deeper understanding of the organization, it is possible to solve problems in a practical way and directed to what really matters and without spending time on little relevant items.
In LUZ, we use a method of questions, answers and feedbacks to evaluate the 5 main areas that every business has:
- Human Resources
Even knowing what the business diagnosis is, you may still be wondering how this method really will help you.
That is why I have decided to bring the main benefits and results that a manager will have when implementing this methodology in the day to day of your business. Basically, the diagnosis will help you to:
- Understand which areas are most important to your business - not everyone realizes this, but each company has more important areas and, depending on this importance, it must create action plans and strategies based on what is most important.
- Compare your current performance - There are usually two very useful comparisons here, with your minimum recommended performance and the minimum you want. The ideal is that you are always above both, but understanding each of these levels can direct what needs more attention and what can wait a little longer.
- Discover the degree of maturity of your company - understand if you are on a very amateur level or if you are already mature enough to pursue new goals. This understanding can greatly help in establishing business strategies and purpose.
- Understand what needs to be done and where - just knowing the overall performance of your company may not be enough, but with the business diagnosis it is possible to know exactly where the errors are and what your company is failing to do to reach a new management level.
But a question that can arise when thinking about all these benefits is in relation to how to obtain an analysis that is as close as possible to the reality of your possible business?
This will depend on business to business, but in general, there are some items that need to be analyzed in any business or reality because they are part of the 5 large areas of management. I am going to separate which are the main areas and sub groups (within those areas) that we analyze in our business diagnostic worksheet:
- medium term
- long term
- environmental analysis
- financial control
- financial planning
- contribution margin and profitability
- financial indicators
- marketing planning
- online media
- offline media
- customer relations
- Human Resources
- recruitment and selection
- training and development
- retaining talent
For each of them, we use a structure of some standardized questions, answers, and feedback that we have created for each of the 4 possible answers, see:
Above we have a question "Does the company have planning and budget control?" From the financial area, sub financial planning group. According to the response that the company does not have a plan, the business diagnostic worksheet already gives feedback and adds that note to the total note of that area.
Now that we understand the mechanics and functioning of a business diagnosis, I can list the key steps you need to take, regardless of which tool you use:
- Step 1 - Ask the right questions (according to the reality of your business) - this is one of the advantages of using a ready-made business diagnostic worksheet, you do not have to think about the entire structure of questions and areas. Below I show an example of questions for the HR area, sub recruitment and selection group:
- Step 2 - Answer the questions in the most honest way possible - the paper and spreadsheet will always accept any response you give. So the more realistic you are, the better it will be for your analysis and for the action plans that will be created from it.
- Step 3 - Analyze your result - see the most important areas, making a good comparison between your current score, the recommended minimum and the desired score.
- Step 4 - Develop strategies and action plans - to optimize those areas and sub areas that need more attention (urgency) and which are performing worse.
I believe that this is the best way to go and if you need help or have no time, I recommend our business diagnostic worksheet, which already has a structure ready and gives you the results automatically according to the answers given to each of the large areas of management.