Let’s continue our back to school lesson this week.
Which of these are you already doing and which can you implement to drive your growth?
INTERNATIONAL – Are you leveraging technology, communication, global payment systems, and the ease of marketing and building trust globally to expand your business?
JOB vs. CAREER – Many growing business hire quickly to fill a spot and then suffer the consequences of a poor hire and poor fit. By scoping your position for growth as part of a career, you’ll be able to hire more effectively.
KNOW YOUR NUMBERS – The larger the business, the more the management team knows their numbers. That’s not a coincidence. If you want to grow, know your daily numbers (see Flash), know your margins by product and service line, and know your profitability by customer.
LEVERAGE – There’s good debt that is used for capital expenditures (called Cap-Ex for short), for fast turning working capital, and for financing strategic acquisitions and growth. There’s bad debt that uses operating lines to purchase Cap-Ex where the funding source doesn’t match the life of the asset.
MARKETING – According to Seth Godin, we don’t market to people or at them, we market with them and involve them in a trust-building conversation. How effective is your marketing at building trust?
NIMBLE – Being nimble is a huge advantage for small/medium enterprises over larger companies. We can discuss strategy in the morning, go implement it in the afternoon, and discuss the results over dinner. Are you nimble?
OBSTACLES OR OPPORTUNITIES – If you help your customer or client to overcome their obstacles, this will create opportunities for both you and your customer.
PEOPLE GENERATE PROFIT – A huge advantage in a transaction-oriented world is to focus on the people’s experience on both sides of your interaction: your employees and your customers. How can you enhance the experience for both?
QUARTERLY REPORTS – Quarterly reports are even more important than annual reports because they create a culture of accountability and performance. By sharing a summary of your quarterly results vs. plan, and your plan for the next quarter, you’re sending clear messages to your team, your customer and suppliers, your bankers, and your shareholders. Before you say “no way” let’s clarify that it’s not scary to share your plans because you’re not sharing specific financial info, just your strategies and value proposition.
READING – This point is for Melanie, who asked me about some great books entrepreneurs should read. Here is a partial list:
- Deep Work by Cal Newport
- The One Thing by Gary Keller
- This is Marketing by Seth Godin
- The War of Art by Steven Pressfield, it’s on creativity and resistance.
- And one of my all-time favorites, The Effective Executive by Peter Drucker.
STRATEGY – Strategy is how you combine your resources to provide optimal value to your clients and customers. It’s about your client’s results; not your methodology. For example, my strategy is to quickly provide quantifiable business and financial results and positive ROIs to high-growth mid-market B2B firms.
TECHNOLOGY – Technology includes computer hardware, software, apps, analytics, artificial intelligence, robotics, and a lot more stuff in the future we haven’t thought about yet. How can you use technology to provide more value more quickly (that’s strategy) to your ideal customers?
UNDER-EMPLOYED AND UNDER-UTILIZED – What percentage of your team, do you think, is highly engaged and using their natural talents at work? There are five natural talents and we all have some combination of them. The key is to match our roles to our talents. The talents are:
- Tolerance for repetition
- Attention to detail
- Comfort with ambiguity
VALUATION – One of the keys to business valuation is financial performance, measured by EBITDA, or Earnings before interest, taxes, depreciation, and amortization. Other keys include:
- The owner not needing to be at their business because it runs without him or her, otherwise they have a job. This means the business needs a strong management team.
- Historical financial performance and stable returns.
- Recurring revenue as a percentage of total revenue, more is better.
- Diverse customers so no customer is more than 10% of your revenue.
- Effective use of debt.
- A strong balance sheet.
- A good reputation.
- A differentiated, sustainable competitive advantage in the market, which is your strategy.
- Your business culture.
WEALTH – Your business wealth includes:
- talent wealth (your people and culture)
- customer wealth (your knowledge of your customers’ operations and integration into their success)
- organizational wealth (how you do things), and
- shareholders’ wealth (the valuation and liquidity of investment).
X-RAY – X-ray your business to analyze the strength of the foundation and ongoing performance, including:
- Brand and market position compared to competitors.
- Pricing and margins.
- Overhead rates and cost efficiencies.
- Operational capacity including quality, speed, and responsiveness.
- Your people and your culture.
- Financial resources, especially the balance sheet, working capital, inventory turnover, return on assets, and retained earnings (don’t minimize taxes).
YEAR-END – In school, there is a clear promotion to the next grade. What does your year-end financial statement and, ideally, your annual report, tell you about your performance? Did you advance a grade or are you just repeating last year’s performance?
ZOO – Hey, there aren’t a lot of business words that start with Z. Zoos play an important role today in protecting some of the world’s most endangered species from extinction. How are you protecting what is most important in your business? Often, we take our most important relationships with our people and our customers and suppliers for granted, and then they leave. Be proactive to ensure these valuable species don’t become extinct in your business.
This concludes our ABCs. Class is dismissed.
There is no quiz. There’s just the ongoing, real-time report card of:
- your daily/weekly flash reports
- monthly financial statements (vs. budget)
- quarterly and annual reports
- and most importantly, the opinions and loyalty of your employees, customers, and suppliers.