Phil’s Profit Point 150 – The Three Growth Factors

Welcome to Issue 150. We’re pleased to have been writing this weekly newsletter for three years and providing you with pragmatic and powerful tips to grow your business and your wealth.

The Three Growth Factors

Over the last two decades, I’ve worked with hundreds of business owners, executives, and managers of high-growth companies. There are three key growth factors that the most successful mid-market and small businesses have in common. They are:

  1. A clear strategy that focuses and aligns their internal resources on providing maximum value to their ideal customers.
  2. A management team that is empowered to make decisions and has access to real-time information so they can make better decisions, faster.
  3. Working capital and financing to fuel their growth.

Figure 150.1 Critical Growth Factors

Strategy

When my family owned Clear Lake Lodge, our strategy was to provide our guests with a great experience so that they would come back and also tell their family and friends. In the days before the internet and Trip Advisor, this strategy worked well. Yet, many growing businesses are chasing top-line revenues instead of their focusing on their best customers or, worse yet, trying to be all things to all people. This isn’t strategy; it’s the absence of strategy.

I define strategy as:

  • the intentional focus and alignment of your resources (time, people, money, energy, enthusiasm, culture) …
  • to provide maximum value (measurable economic results and/or emotional value) …
  • for your ideal customers (the ones who appreciate your value, treat you like a strategic partner and pay on time).

Given this definition, how would you describe your strategy? How would your employees and customers describe your strategy? Ask them: this can be a valuable and enlightening exercise. It will also provide you with an opportunity to refine your strategic focus for what is most relevant and important to your customers.

As your customers and competitors are continually changing, what should your optimal strategy be to position your company for significant growth in the future?

Management

An empowered management team can hire and fire and they can spend money, within their budget parameters, of course. Is your management team empowered to run their divisions and departments with autonomy? Are those divisions aligned with your overall corporate strategy?

All managers need real-time information so they can make decisions that can impact and improve your results. They need information on sales lead times, production speed and quality, and financial performance. Which information does your management team have access to on a regular basis? Do you openly share company-wide information with all of your managers? Are your managers working together to increase company-wide results or competing with each other for scarce resources while they try to outperform each other?

One of the most powerful pieces of information that we help our clients to create is a Daily Flash Report that highlights ONE critical piece of operational information. In a service company, that may be billable time percentage, if you charge by the hour or person, or it might be safety or production. There are many important metrics in all businesses. Identifying the most important daily metric can help to drive significant growth by focusing everyone to improve performance.

In business, like in life, a week is an optimal unit of time to set goals and measure results. Therefore, another important piece of information is the Weekly Business Scorecard. In addition to reporting on the daily operational numbers, it includes the status and progress of your sales, production and financial results. This is a powerful way to keep your management team focused and to hold them accountable for results.

If you’re only using an accounting system to measure historical results, you’re lacking a lot of critical pieces of the business puzzle. That’s like trying to drive your car by only looking out the rear view mirror to see where you’ve already been.

In most business, monthly financial statements are lag indicators that tell what happened from a financial perspective. Although financials are important, you managers need real-time information to grow your company. What are your key weekly metrics?

Cash and Working Capital

Working capital is like the fuel tank in your car. If you’ve got a large tank, you can drive a long distance before you need to stop for fuel. In fact, you’ll probably be stopping for snacks and breaks long before you need to gas up. But if you’ve got a small tank or burn through fuel quickly with a larger tank, you need to stop for fuel frequently and there may not even be a gas station available. That’s when you’ve run out of gas. You’re not going to travel very far with a small fuel tank.

I’m frequently brought in to help highly profitable companies that don’t have the fuel supply — the cash — to continue to grow their businesses. They’re running out of cash long before they’ve run out of customers or capacity. That’s a great problem to have because it’s fixable! That’s also the significant difference between profit and cash. Profit is an accounting creation and cash is real. You need cash to grow.

We helped one company generate cash internally by improving their Total Days to Cash, that is, speeding it up, by ten days and this generated over an additional million dollars of working capital. How much cash could you generate from internal improvements?

We’ve helped many companies obtain the right type and amount of financing for their future destination. That means that you need the right banker to fit your company. The best bankers don’t have the lowest interest rates; they have the best financing facilities for your future needs and they want to be a strategic partner to help you grow your business.

As an owner or manager, it’s critical to develop a powerful strategy that is focused on creating measurable results for your clients, empowering your management team with decision-making power and real-time information, and ensuring you’ve got lots of cash to fund your growth.

Tough Questions

How effective is your strategy at attracting new clients and delivering measurable results for them?
What results has your management team created for your company yesterday, last week and this year?
How fast can you grow your business with your current working capital?

From the Vault

Focusing solely on top-line revenue growth can make your business topple over from a lack of management to handle the growth and a lack of financial fuel to sustain the growth.

Growth Audit Offer

We’ve worked with privately held companies for over two decades and have lots of great ideas to help you grow your business. If you are the owner or manager of a qualified mid-market company, we’d like to offer you a free Growth Audit for your company. We’ll quickly assess the two most significant factors—speed and leverage—that control your growth. Give us a call or send us an email and we’ll have a quick, confidential conversation about your business!

Free Offer:

Thanks for subscribing to Phil’s Profit Points. In appreciation of your support, we offer you a free download to our audio book The Four Pillars of Profitable Growth

Future Events

Attention: Business Advisors

Phil will be speaking on Consulting to Small and Medium Enterprises at Alan Weiss’s Consulting Convention in Atlanta on March 11 – 13, 2015. This is one of the most cost effective events where you can spend three days with Alan, a group of his elite consultants, and special guest speaker Martin Seligman. Here is the link to Alan’s site: http://www.alanweiss.com/growth-experiences/million-dollar-consulting-convention/

More about the SME AdvisorSM services.

Who is this service for?

The SME Advisor has two distinct programs: one for elite owners of privately-held businesses (and their boards), and one for advisors to SMEs including consultants, accountants, lawyers, bankers, financial planners, insurance advisors, family offices and wealth advisors.

Our Offer:

For more information or a free SME Advisor assessment to evaluate your business, please contact me by email at [email protected]

Our Services

For more information on how to maximize your abundance thinking and increase your wealth, explore our Wealth Builder® services or give me a call at 306-992-6177.

SME Business Wealth Builder Resources

For more free information to help you grow your business and your profits, please click here.

If you’d like advice on how to dramatically increase your profits, give us a call at 306-992-6177.

Have a profitable week!

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.