Is your small company ready to do business with the big boys? One researcher has concluded that many are ill equipped to perform in the big leagues. Take this quiz and see if you make the cut.
Large companies can make great customers -- if you're ready to play with the big guys. Gerald Udell, director of the Center for Business and Economic Development at Southwest Missouri State University, in Springfield, Mo., is betting that you're not. When Wal-Mart hired him to rate small companies as potential suppliers, Udell found that many were ill equipped to perform in the big leagues. One entrepreneur he talked with innocently said, "Tell me what button I have to push."
Whether you're talking about the U.S. government or a major corporation, all large buyers have at least one thing in common with Wal-Mart: they expect more -- a lot more -- from their suppliers. Yet when Udell assessed 2,200 small companies, most came up woefully short in critical areas of management. It's significant that many, for example, "failed" finance and accounting. A whopping 68% did no cash-flow analysis at all, a deadly shortcoming when large sums of money pass in and out of a business.
So would your company pass the major-league-readiness test? Or would you be booted back to the minors? To find out, answer the four questions that Udell uses in his "venture assessment," below.
In our company, accounting is
a. We have no need for an accounting function (1 point) b. Informal and performed by trained accountants (3 points) c. Informal and performed by our bookkeeper (2 points) d. Formal and performed by full-time trained accountants (5 points) e. Formal and performed by part-time trained accountants (4 points)
We update our cash-flow analysis
a. Monthly or less (5 points) b. Quarterly (4 points) c. Semiannually (3 points) d. Yearly (2 points) e. We do not use cash-flow analysis (1 point)
We update our budget
a. Monthly or less (5 points) b. Quarterly (4 points) c. Semiannually (3 points) d. Yearly (2 points) e. We have no particular budget-update cycle (1 point)
Our financial planning is
a. Formal and performed by full-time trained financial managers (5 points) b. Formal and performed by part-time trained financial managers (4 points) c. Informal and performed by whoever is available (2 points) d. Informal and performed by trained financial managers (3 points) e. We have no need to engage in financial planning (1 point)
Total points _________
SCORING 18-20 points: Good prospect for the major leagues. 16-17 points: You've made it to second base but need work to get home. 5-15 points: The odds are not in your favor. You need to make major improvements. 4 points: Four strikes and you're out.