Confessions of an Entrepreneur: Keeping that Business You Started Going (and Growing)
March 11, 2020 | By Mark Zweig
Entrepreneurship experts remain fixated on start-ups. Sure, start-ups are important – nothing good can happen if someone doesn’t actually start the business. But once you are successful with that, and you not only get your business up and going but also profitable, the next challenges are how to keep it going and how to keep it growing.
Survival and growth are never assured. Even the best idea can quickly fall out of favor with customers. And cancer can develop from within. Bickering between partners. Different ideas about direction can develop. Or the external business environment can be affected by recessions, wars, pandemics or governmental regulatory changes, and the business may not respond as it should.
Fifty-plus percent of businesses fail in the first five years. Fewer of those will ever become true growth companies and create the value founders and investors dream about. Only .00897% make it to 100 years old – think about that!
So how can you keep your business going and growing? I have done it more than once. I have also witnessed periods of stagnation in businesses I was a part of and literally a thousand or more other businesses over the past 40 years. Here are my thoughts on what it takes:
- Purpose is paramount. Recent studies have shown that purpose is more important than passion when it comes to keeping people engaged with their work. It is especially important to younger people who want meaning in their work. I also think it is important to older people – those who have achieved some degree of material success but have realized they want more from life. Having a worthwhile mission is crucial to your long-term success.
- Planning has to be part of the culture. Not only start-ups need business plans! Getting everyone involved in the planning process – monitoring the external environment – and making sure that every decision made is consistent with the mission, vision, goals and strategies is something any business that wants sustainable success has to do. Sharing progress toward goals consistently helps everyone feel like they are on the same team and gives warning when things are starting to go off track.
- Innovation and improvement have to be an obsession of management. “Breaking what may not be broken” and “good enough isn’t good enough” should be mantras regularly repeated in the halls because achieving excellence means there has to be a relentless pursuit of improvement. If the organization is going to remain competitive in the markets it serves it must keep improving every single aspect of everything it does.
- Cooperation and flexibility have to be baked in to the employees and the structure. As the organization changes and evolves, so must the roles and responsibilities of the people who work there. Employees who are too rigid and expect concrete job descriptions may not be the best types to have on the team. Accounting and incentive compensation schemes need to reward cooperation versus create unhealthy internal competition. Cooperation needs to be recognized and rewarded and be part of the firm’s culture.
- The employees have got to feel that it is their business. Involvement in the business planning process, open book management, shared rewards and lots of communication from management are all critical elements that must be there to create “psychological ownership” in all employees in the firm. Not to mention the fact that there is nothing keeping management from actually selling small amounts of ownership to anyone they want to. While I’m not a huge fan of ESOPs (employee stock ownership plans) for a number of reasons I won’t cite here (good subject for a future post), real ownership can be a powerful motivator and help to create a second generation that is capable of running the business over the long haul – making it more sustainable over time.
- Marketing has to be viewed as an investment versus an expense. This is one of the single most important things any company that wants sustained success can do – spend money on marketing consistently – more money than its competitors – so it builds a brand dominant in the markets it serves. Every single Inc. 500 company owner I ever met at their conferences had consistent and high marketing spending as one of their core strategies. Learn from them. Learn, too, from big companies such as Coca-Cola that outspend all of their competitors on marketing and advertising in spite of being the dominant player in their field.
- There has to be really good accounting and outstanding financial management. Management must know exactly where they are at all times from a cash-flow standpoint with accurate forecasting tools. Management also has to know exactly what their costs are, and who and what is making money and what isn’t making money. Doing more of what makes money and less of what doesn’t make money is crucial. That said, management must be careful to not cut offerings that lead to sales of other more profitable offerings. Sometimes it is necessary to sell certain things, or provide certain services, so customers or clients don’t go elsewhere for everything else they need. This is always a challenge.
- Clients and customers must be treated like gold. You cannot put a price or value on the benefits of great customer service. Creating that buzz in the marketplace of clients or customers who have been treated extraordinarily well can do so much for your brand and reputation. Conversely, negative stories of bad experiences circulating of unresolved problems or brusque treatment by employees can do lasting damage. Great customer service takes process, training, communication and an understanding of the lifetime value of the customer by everyone in the firm. The “lifetime value of a customer” is something I teach all of my small business students in my classes. A fast food restaurant that loses a $10 sale from bad customer service could in reality be losing a $5,000 customer if that person would have eaten there once a week for the next five years. Employees all must understand this because few businesses can survive without returning customers.
- Top management has to have a very clear idea of what they did that lead to success thus far so they don’t accidentally throw it out or lose it some other way. As time passes and management transition occurs, the tendency of second-generation management to want to “make their mark” and create their own success can often result in critical strategies that were instrumental in the firm’s early success being dropped or modified. Not to say that the odds are that strategies and methods will not need to change over time – but not being able to properly discern which ones are fundamental and which need to change can lead to big problems over the long haul. Founders have to properly coach, mentor and guide their successors to avoid critical strategic blunders that hurt the business.
I could go on but won’t. Let me know your thoughts or additions to these points above via email at email@example.com!