Top 5 Functional Areas for Successful Startups:
Twenty percent of new businesses are operational after 5 years because the owner created and implemented a plan that addresses 5 key functional areas. All successful startups, regardless of industry or size, require the following functional areas or departments:
- Human Resources
Production is the process of convert ideas or raw materials into a final product or service for the purpose of adding value.
All successful startups have something to sell:
- A Product
- A Service
- A Combination of Product and Service
Customers must see your product or service add value to their life or they will move on. Adding value is vital to attracting prospects and creating long-lasting relationships with customers.
There are many types of processes used to create a product. For example, does your company assemble and manipulate raw materials to produce products such as pottery, clothing, knickknacks, or eBooks; or is your product a service such as technical repair, personal coaching, or consulting?
Production has a close relationship to what the customer needs or wants. This process converts the needs and wants into a product that adds value.
To properly plan for production, plan for how you will produce your product features and for the quality your customer desires.
Below are examples of production questions to ask yourself that you need to be managed.
PRODUCT: For example, if your product is candy…
- What is your recipe?
- Do you use milk chocolate or dark, exotic chocolate?
PRODUCT: If you produce clothing…
- Do you include a silk lining?
- Do you add topstitching?
SERVICE: If your product is a coaching service…
- What topics do you coach?
- How many coaching sessions are included in your offering?
- How long is each coaching session?
- Do you include any other product or service with your offerings like an eBook or group coaching session?
The Finance functional area is the lifeline of a business.
This function is responsible for paying for suppliers, employees, and the needs of the other functional areas mentioned. Entrepreneurs often focus on this area of the business plan because this provides vital information on the company’s profitability for investors.
To properly plan for this functional area, detail the expenses of each functional area.
How much will it cost to create your product? After creating a budget for expenses, calculate potential, realistic revenue.
Operations support any company activity needed to deliver value to customers in the form of a product or service.
This functional area basically is responsible for the logistics of making sure you have the items you need to make your product or delivering your service. It reverse-engineers the product to provide the raw materials needed to create the product.
- What equipment do you need?
- How often will you produce the product?
- Where will you store the raw materials needed?
To properly plan for operations, review what items are needed to produce the product to customer specifications, and then manage the supply chain and the production process.
Marketing is your revenue-generating function that is often coupled with Sales that identifies what product or service the company offers.
Many entrepreneurs make the mistake of first developing a product or service then attempt to sell it to a vaguely defined customer demographic. If you provide a service, you may need to perform market research (such as to conduct a survey) to determine what services your prospective customers need; or if you produce candy, you may want to offer product samples and record customer comments.
What determines what product a company offers? How much do you make and how often? Before you update your website or create a squeeze page for a product funnel, make sure there is a customer for your product.
To manage the marketing function, you must first identify what products your customers need
Good employees are the backbone of any business.
Human Resources can be considered part of Operations. If you are a solo entrepreneur, you still need to plan for this functional area.
Will you hire an Assistant or use a Virtual Assistant? Will you hire consultants to help you with your other functional areas such as an Accountant? What is your work schedule? What holidays does your company observe? How will you get paid? Salary? Commission?
To properly manage Human Resources, establish a culture of attracting and keeping top talent, which includes you!
Create a work environment that encourages a balanced lifestyle and manages stress.
Starting a new business is very exciting for many entrepreneurs. But many get consumed with the “fun” part of the business, like creating websites or product offerings that they neglect the most essential part of starting a business, which is how to be a profitable business. Understanding the purpose and interaction of the 5 key functional areas of production, finance, operations, marketing, and human resources, and managing them well, can ensure a prosperous and ongoing business.
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