PEOPLE, STRATEGY, EXECUTION AND CASH
In New Zealand, we have around 500,000 businesses. Only 2.7% have reached $5m in annual revenue, and less than 0.3% have reached $50m. We have plenty of businesses that start up; the problem is that not enough scale up.
Why is this? The truth is that it’s very difficult to scale a company successfully. The barriers to growth change at each stage, and business leaders need to adapt and respond accordingly. In the words of Marshall Goldsmith, what got you here won’t get you there.
So how do you grow your business and avoid getting trapped in a ‘valley of death’ along the way? Put simply, there are 4 decisions you have to get right; People, Strategy, Execution and Cash.
People
Ask yourself, ‘What proportion of my team is actively engaged and contributing to the growth of the business? And ‘If I could choose right now, would I enthusiastically re-hire everyone on my team?’ People issues directly impact your happiness at work, and can either be a source of energy or an emotional drain. If you have unresolved People issues, you probably won’t have the time or headspace to focus on the other decisions. You need to start here.
The starting point for attracting the right talent is to discover and articulate your core values. Then set crystal clear accountabilities and KPIs across the team. High potential team members will embrace this. They want to be able to objectively measure and improve themself, rather than have their performance evaluation based solely on the subjective opinion of their boss.
Strategy
Can you state your firms strategy simply, in a sentence or two? Is it driving sustainable revenue growth? Can all members of your team do the same?
Strategy is all about choice: choosing what not to do is as important as choosing what you will do. Start with a clear understanding of yourself. What are the unique competencies that differentiate you as a business? How can you build on these to really stand out in the market? How can you use these to deliver products/services in a way that makes an emotional connection with your customers? Who is your ideal core customer, and where are the profit pools in your industry?
Execution
Are all your processes running without drama, and driving industry-leading profitability? Or do you rely on “heroic” staff members working long hours to keep the wheels from falling off?
Here’s a riddle. 5 frogs are sitting on a log. One decides to jump off. How many are left on the log? Answer: 5!
Deciding to so something is not the same as doing it. Best intentions are easily derailed by unclear priorities, a lack of focus, or good old-fashioned procrastination. Execution is about putting in place the routines and habits to systematically bring your strategy to life though disciplined action. Nailing your execution will dive a relentless repeatability in your business, that increases profit margins while freeing up your time.
Cash
Do you have consistent sources of cash, preferably generated internally, to fuel your growth? Growth sucks cash, and many seemingly successful companies have “grown themselves broke”. A great exercise is to gather you team and map out your Cash Conversion Cycle. That’s the time it take for a dollar you spend to find its way through the business and back into your pocket. You may find you don’t have the data readily at hand to do this accurately, which probably shows where you should start.
Which of the 4 Decisions will you focus on right now, to get ahead of the game?