There are four decisions every company needs to get right in order to scale up: people, strategy, execution and cash.
Get these four decisions right and your likelihood of scaling up successfully is three-fold that of competitors.
There are more than 28 million businesses in the U.S., and only 4 percent surpass the $1 million revenue barrier. A mere 0.4 percent break the $10 million barrier, and a select several thousand break $50 million.
What’s happening? Why do so few companies truly scale up?
The easy answer, to quote the late Apple guru Steve Jobs: “Business is hard.”
That’s why getting the right people, creating a truly differentiating strategy, driving flawless execution and having plenty of cash to weather the storms are so critical.
Let’s start with people.
Seems easy enough. Hire who you need, tell them what to do and everything should work out just fine. But anyone in business knows that is the furthest thing from the truth.
The single largest barrier to growth in any company is the inability to staff/grow leaders throughout the organization who have the capabilities to delegate and predict. If the CEO is the smartest person in the room, the company is in trouble.
Every business is more valuable to the degree it does not depend on its top leader. Business is a game of attracting and retaining the right people.
EXAMINE EXTERNAL RELATIONSHIPS
You also need to evaluate all of the key relationships surrounding your business.
Would you keep all of your existing customers? Are you happy with your bank? Are vendors supporting you properly?
Are advisers – accountants, attorneys, consultants and coaches – the best fit for the size of the organization and its plans?
Some of the toughest decisions to make are when a company has outgrown some of these relationships and you need to make changes.
SIMPLE YET POWERFUL
Can you state your company’s strategy simply? And is it driving sustainable growth in revenue and gross margin?
Strategic planning sometimes gets a bum rap, deservedly so at times. If the strategy that emerges from your strategic planning session is complicated, probably it is wrong.
You’ve nailed your strategy when:
If what you plan to do really matters to customers.
It differentiates you from your competition.
Nearly every leader at one point says, “We need to get everyone on the same page.”
And they do.
But to do that, you need “one page,” not a bunch of slips of paper in desk drawers throughout the organization, or some binder sitting on the bookshelf.
ACT, LEARN, REPEAT
Strategy without execution is just a nice idea. Execution is the feet on the street to move the plan forward.
The key to execution is having priorities:
Selecting a handful of priorities on which to focus.
Data: Gathering quantitative and qualitative data daily to review weekly.
Rhythm: Establishing an effective daily, weekly, monthly, quarterly and annual planning rhythm to keep everyone in the loop and accountable.
Good strategy and execution are an iterative process – think, plan, act, learn … repeat.
STAY ON TOP OF CASH FLOW
Finally, every organization that is scaling up needs oxygen – it needs cash.
It’s easy to get caught up in the revenue and profit growth game, but if you don’t have cash, you’re out.
It is vital to pay attention to structuring deals with suppliers, customers, employees (think bonus plans) and banks.
The quickest action is to have your CFO give a modified cash flow report every day detailing the cash that came in and the cash that went out the past 24 hours, and some idea how cash is looking the next 30 to 90 days.
This will keep cash top-of-mind and give you a good feel how cash is flowing through the business.
NOT BUILT IN A DAY
Scaling up your business is much like ascending Mount Everest. You don’t do it in a day.
You create a plan. You head out with passion and determination to the summit.
Along the way, you aim for a series of base camps, normally marking a significant change in the terrain. Then you plan for the following day, making adjustments as needed for weather and mountain conditions.
It’s about pushing to make one more calculated step.
Your business is no different. The summit is your big hairy audacious goal 10 to 25 years out, and the base camps are a series three-year targets, broken down further into annual goals and then into actionable steps over the next few weeks.
Dig in and start your climb.
Tom Garrity, managing partner of Compass Point Consulting LLC in Hanover Township, Northampton County, will conduct a Scaling Up workshop – based on the Verne Harnish strategic plan to drive alignment, accountability and focus – on March 13. To register, visit www.scalingupbethlehempa.com. Compass Point provides growth and business transition consulting to small- and medium-sized businesses. Garrity can be reached at 610-336-0514 or email@example.com.