Perform an operational review to see how well your business is running

However, business owners can also benefit from conducting similar evaluations on their own companies to gain valuable insights.

It's advisable to scrutinize your company’s financial and legal health, especially if you suspect issues. But even if everything seems fine, the beginning of a new year is an ideal time for an operational review.

Purpose of an Operational Review

An operational review serves as a practical assessment to determine if your company is efficiently managing its day-to-day activities and achieving its strategic goals.

Consider a business that depends on excellent transportation logistics for competitive edge. Such a business must regularly verify that it has the appropriate personnel, vehicles, and technology to maintain its market position. In a fast-changing world with constant disruptions and technological advancements, staying current is crucial.

Start by convening your leadership team and pondering over essential questions like:

• Are our IT systems current and secure, or do they need significant updates for data safety and competitive edge?
• Can our production facilities manage our projected output for the upcoming year?
• Are our staffing levels across departments adequate, or will we need to adjust our workforce?

Engage with your leadership and frontline employees to understand their confidence in the company’s operations and address any concerns promptly.

Key Areas to Focus On

Similar to how buyers in M&A scrutinize a company, you can assess these primary areas:

1. Production/Operations: Evaluate vital functions like technology updates, supply chain efficiency, procurement processes, customer response times, and distribution speed. This involves checking production sites and talking to employees to identify performance gaps, cost-saving opportunities, and productivity enhancements.
2. Selling, General & Administrative Expenses (SG&A): This analysis helps understand whether the company's operational expenses, including sales and administrative costs, are appropriately balanced.
3. Human Resources (HR): Review organizational structures, staffing levels, compensation, benefits, and employee incentives. Assess the quality of HR's communication with staff to determine the reasonableness and sustainability of these aspects.

A Thought-Provoking Question

Would you invest in your own company if you weren’t already the owner? This might seem odd, but an operational review can objectively reveal how efficiently and effectively your business is functioning. This process can help in gathering and analyzing relevant data to make informed decisions.

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