Take five: how to understand a business

Sometimes I read articles which are full of insight; often I keep them, knowing or thinking I might want to refer back to them, other times I hope that I will remember their principal points.

One recent article really impressed: so much, that I want to share it, and comment on it. Firstly, the disclaimer: I have known its author, John Timpson, for many years, being lucky enough to be professionally associated with him and his eponymous business (well known for its pioneering employment of ex prisoners and for support of adoption, amongst other things); and I have read his books (reading his first one long before getting to know him); and reading his Daily Telegraph columns for more years than I can imagine. The beauty of his writing is that it is always clear and common sense. The unusual thing about his writing is that common sense is anything but common. I don't always agree with him, but predominantly do, and I would recommend his books and his articles to anyone wanting to learn about business. Over time, a young person reading them is bound to soak up a lot of business knowledge. A more experienced person will sharpen or refresh their thinking, too.

Now the article.

I love his suggestion to answer five questions.

How does your business make money?

What will your business be like in 20 years time?

What are the three biggest challenges, and three hardest decisions you face?

Who are the key people in your business and how would you replace them?

How do you spend your time?

John quite rightly says that these questions may have to be flexed. Personally, having thought about what he wrote for the last week or so, and considered how it could be applied to my old firm, my clients, and my current roles (I have started applying it to my charity trustee roles- the 'how do you make money' needs to be morphed to 'how do you succeed in your charitable aims', for instance), I would actually add a sixth

Who are your key suppliers or what are your key resource needs?

Probably there is nothing new in John's article. But his articulation is excellent, and it is either a reminder or a lesson to concentrate on key questions. Each question will have greater or lesser importance for different businesses. My sixth is (for instance) because one of my clients is dependent on timber prices; another needs access to copious amounts of water; in other cases, a key factor is risk of change or new legislation. (So, maybe, it should be John's five plus a flexible further one).

Personally, for more years than I can remember, and even in my previous career as a tax partner, I have habitually used a combination of PESTI, Porter's five forces and the BCG cash cow/star etc matrices, to help my understanding of clients' businesses, partly to help inform myself about their businesses, partly because insights gained can help with the giving of informed tax advice. Now, I have a new weapon in my armoury, John's 5+1 questions. I recommend people give them a try: I already have.

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