All businesses activities can be sorted into four main categories. In larger organisations you might have a division or department dealing with each. But even as a small business it can be helpful to think in terms of theses departments. These are:

• Research and Development
• Production
• Sales & Marketing
• Finance

These are the parts of the business that add value. The functions that support these activities are usually the ones that cost your business money. These include all of your administration functions. These can range from your book keeping to purchasing, but they would not exist if it were not for the four main departments.

Each department uses its own ideas and models to try to improve your business. If you need someone to help you use these, then please drop us an email, use the feedback form or browse through our courses and coaching pages. If you know the name of the model or concept you are looking for, then please try the index. This contains links to all of the concepts and models that are currently available.

So lets have a look at what is in each department and how they add value to your business.

Research and Development

Traditionally we think of R&D as being new product or service development. However it should cover more than that. Right at the very start of a business's life we should be writing the business plan. This plan is the repository for all the information that you have been able to gather about your business idea, how you will produce it, who you will sell to, how you will deliver it and how you will finance the business.

The first piece of R&D you will need if you are going to build a business is your business plan. When you produce your SWOT analysis, a PEST analysis, a competitor analysis, Porter's five forces, Boston matrix, Competitive Web, market research or any number of other tools, you should be storing this information in your business plan. This plan is a living document, it is not just something you need to get a loan or other finance. It is the document that details your strategy. It will therefore be written at a high level - the helicopter view as us MBAs like to call it.

The more traditional R&D covers your product or service. Is it a new product or service? If it is your R&D will have to be far more robust. Perhaps you will need to develop prototypes, do field testing or use new combinations of materials. If you are delivering a service, you may care to improve your knowledge about your particular field. Research how existing suppliers of your type of service deliver theirs. Do some Benchmarking if that is appropriate.

Getting the product or service right is the most important way that you can add value to the business. A bad product launched into the wrong market can quite literally make your business go bust. Once you have identified your product or service and decided the market that you are going to target, it is time to move on to Production.

Production

Production is an extremely wide area. Your approach will depend firstly on whether you are offering a product or a service. The key to both however is repeatability. Your aim in production is to develop a production system that can produce the same result time and time again. If you do not have repeatability, then you do not have a product or service.

This is the difference between being an amateur or being a professional. The best way to understand the difference is to look at the world of actors. An amateur will sometimes produce a performance that is outstanding, but other times die a death. A professional will always produce a performance that is at least adequate for the job, irrespective of personal feelings at the time.

Translate this into your product or service. As you start your business you will be enthused by your product; it will be your driving passion. As time goes by however you will find it hard to maintain that initial level of passion. Nevertheless, you need to keep delivering your product to your customers at the same quality as you did at the start. With a service, it can be even harder, because quite often you have to deliver the service personally.

You need to develop a specification for your product or service. Ideally you will have done this during your R&D. Next, you need some method of ensuring that your output consistently meets your adopted specification.

For a product this will involve some form of production control. There are many to choose from. Most involve some form of Statistical Process Control. In order to use this effectively, a good understanding of systems thinking can be useful. Services can be slightly harder, but the requirement is no less important. Use flowcharts to map your service delivery.

For both products and services you will need some form of customer feedback. If you are relying on getting a repeat order, then you better be sure that your customer was happy with the last order. The feedback can be used to determine if you need to alter your specification (through R&D) and then make changes to production in order to meet the new spec.

The most obvious way that production adds value is by having something to sell. But there are other factors to consider. Reducing your manufacturing costs adds money directly to the bottom line. Vertical Integration can bring suppliers and retail outlets in-house. Their part of the margin then becomes yours. Sourcing cheaper materials, improved production efficiency and reducing waste can all add to your bottom line.

Sales & Marketing

Sales and marketing is determining how you will let your potential customers know of the existence of your product or service, and how you will then get your offering to your customers. So within this simple looking title lies a whole raft of skills and activities that are needed to make you business successful.

If marketing is concerned with getting knowledge about your products and services to your target market, then the most important part is defining your target market. This is fundamental to determining whether or not you have a viable business. Hopefully you have done some market research as part of your R&D activities. You will know what the makeup of your ideal customer is, where they live, what they read and how much money they have. You need to determine which marketing tools you intend to use. There are many to choose from: advertising, direct mail, telesales, e-commerce, affiliate programs and referral systems, to name just a few.

You also need to know about your competitors. Again a good competitor analysis is essential and is another R&D task that should form part of your business plan. Perhaps you will have done a Porter Analysis on your industry. You will have got some independent market research done or looked at Industry reports. By the end of all this you will understand your market fully. You will know who your ideal customer is and you will know about your competitors that are after the same customer. Most of all, you will have decided how you are going to let them know that you exist. For it is by letting your target customers know that you exist that adds the value to your business.

Once you have achieved effective marketing, sales becomes easy. They know about your product and services. They understand the benefits to them of those products and services, the perceived value is greater than the cost, so they want to buy. All you have to do is make it easy for them to do so! Is that retail outlets, one to one sales force, on the internet or by mail order. You choose, but make it easy for your customer.

Finance

The Finance department is concerned with all the ways that money comes into and goes out of the business. It may sound obvious, but it is amazing how often money matters are not related to the finance department. It should control your pricing policies, customer credit facilities and revenue collection. The finance department is responsible for raising capital for the business, and ensuring that it gets paid back when appropriate. More importantly it is responsible for financing the business at the cheapest possible rate. every penny you spend on paying interest is a penny reduced from your profit.

We also need to look at the credit terms you give your customers and the credit terms that you get from your suppliers. These two factors can have a devastating effect on your cash flow. And it is not profitability that destroys businesses, it is cash flow. Do not confuse cash flow, turnover and profit. They are related, but they are also very different. Doubling your turnover could actually reduce your profits - not increase them. Getting a huge order that you will have to deliver, but not get paid for until another two months could actually put you out of business. So think carefully if an order is much bigger than your normal capacity.

Look carefully at how you deal with expenses. Sometimes it is better to pay a mileage allowance than to supply a company car. and if you do provide a car, which is the best way to finance it; a loan, buy outright or lease? Finally finance should be constantly looking for ways to reduce your cost base, without affecting the quality of what you provide.