It’s a well-known fact that only 3 percent of businesses that get started, get sold. Most business owners who start businesses fail to capitalize on the time and effort they invested in building them. So, what can business owners do to ensure that the business they are building becomes an asset of value and a legacy they can leave for the next generation?
As a business coach, I know that there are four key decisions all business leaders must make to build a commercially profitable business that can run without them.
To do that, business owners must master the following four fundamentals in their business:
People – the right team
This first decision is about finding and keeping the right people in your team. You need to attract and keep the committed and passionate team members who know what the rules of the game are in your business and then act consistently with them.
Personally, I believe it starts with finding and empowering the right team members to help grow your dream business; those who share your passion and vision for the company. Too often I find, people are put in positions just because they need somebody urgently. Here I would recommend that you formalise a proper recruitment system, that you recruit against a job specification and follow a proper interview and selections system. The costs of incorrect appointments are extremely high for any business, whilst getting it right will help grow the team and the business faster.
Strategy – your unique value proposition
Creating a truly differentiated strategy is the second fundamental for success. Business owners must remember that strategy must pass two tests. First, the need that you satisfy for your customers must truly matter to enough potential people to ensure you can grow a sustainable business.
Secondly, the strategy you select must truly differentiate you from the competition in the market. When driving the strategy, it’s always better to ensure your offering has a real customer value proposition. As a business, you want to steer the ship away from all the price competition towards the blue ocean where the price is not the only focus. Remember that those who live by price, die by price!
Execution – taking action
Our third fundamental is all about driving great and flawless execution. As the business owner, you need to set a handful of priorities for the team, and then keep them accountable.
Business leaders must ensure that the important KPI’s are measured daily, weekly, and monthly whilst at the same time ensuring that the business has an effective meeting rhythm to promote communication and keep everyone in the business in the loop.
Feedback loops in successful businesses typically range from daily, weekly, monthly, quarterly, and annually. Remember that Verne Harnish states in his book Scaling Up: “Those who pulse faster, grow faster.” Drive clear communication, with SMART goals.
Cash is King
You must have enough cash to ensure you can weather the storm. Covid has taught us that. A business cannot run out of cash, it’s the bloodline of business.
In tough times, you must pay as much attention to how every business decision affects the cash in the bank, as you would to revenue and profitability. In great businesses, the leaders know how much gross profit they make with every sale. The truth is that every leader must have consistent sources of cash, that is generated internally to fuel the business growth. Verne says it best: “Growth sucks cash, it’s the first law of entrepreneurial gravity.”
Some of the key questions business owners should get answers for include:
- Are the customers, employees, and other stakeholders happy and engaged in the business and would you rehire them?
- As a leader, can you state your firm’s strategy simply and clearly, and is it driving sustainable gross margin growth?
- Are the people and processes in your business driving industry-leading profitability?
Things change quickly when your business is growing and scaling up whilst lots of “things” will compete for your scarce resources. Not only should you be prepared for it, but you should also realize the importance of safeguarding your business values. Remember them as they’ve helped you get where you are today.