Why a Few Companies Make It – and Most Don’t

There are over 28 million businesses in the US, yet only 4% make it over the $1M revenue barrier.  A mere 0.4% of businesses break the $10M revenue barrier.  And even less will reach and exceed $50M.Why do so few companies truly scale up?  The easy answer, to quote Steve Jobs, is “business is hard”.  

 

Accelerating profitable growth requires a results-driven methodology implemented over time. Driving growth requires specific 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 3 times that of your competitors.  That’s why it is so critical to have the right people, create a differentiated strategy, drive flawless execution, and have plenty of cash to weather futurestorms. 

 

People 

Let’s start with your biggest asset – people. Seems easy enough. Hire a person to fill a job, tell them what to do, and everything should work out just fine – right? Now anyone in business knows that is not how it works out. The single largest barrier to growth in any company is the inability to grow leadersthroughout the organization who have the capabilities to scale ahead of the company’s growth.   

 

If the CEO is the smartest person in the room, the company is in trouble.   

 

Every business is more valuable to the degree to which it does not depend on its top leader.  Business is a game of attracting and retaining the right people.  

 

In addition to employees, you need to evaluate all the key relationships surrounding your business.  Would you keep all of your existing customers?  Are you happy with your bank? Are your vendors supporting you properly? Are your advisors – accountants, attorneys, consultants, and coaches – the best fit for the size of the organization and its future plans?  Some of the toughest decisions to make are when a company has outgrown some of these relationships and you need to make changes.  

 

Strategy 

Strategic planning sometimes gets a bum rap, and deservedly so at times. If the strategy that emerges from your strategic planning session is complicatedit will not get executed.  Can you state your company’s strategy in one sentence?  Is it driving sustainable growth in revenue and gross margin? Does your team know how to execute on that strategy? 

 

A 1-Page Strategic Plan drives alignment, accountability and focus.   

 

You have nailed your strategy when: 

•  if what you PLAN to do really matters to customers, AND… 

•  that PLAN differentiates you from your competition.  

 

Nearly every leader at one point or another states, “we need to get everyone on the same page,” but to do that you need “One Page”. Yet, instead of a simple executable plan, there is an overwhelming binderof consultant-speak sitting on the bookshelf gathering dust – or worse, no plan at all.  

 

Execution 

You have a clear one-page plan. Now you need to take actionExecution is feet on the street to move the plan forward. Strategy is what drives revenue.  Execution is what drives bottom-line profit. 

 

Without execution, strategy is just a nice idea. 

 

Execution needs three things to create momentum  

 Prioritiesselecting a handful of priorities that are measurable, actionable and realistic to focus on 

• Metricsgathering quantitative and qualitative data that informs decisions and actions 

 Rhythm: establishing an effective daily, weekly, monthly, quarterly and annual planning rhythm to keep everyone in the loop and accountable.   Good strategy and execution is an iterative process – think, plan, act, learn…repeat.  

 

Cash 

Finally, every organization that is scaling up needs oxygen – and that oxygen is cash.  It’s easy to get caught up in the revenue and profit growth game. Having revenue and profit doesn’t mean you have cash. It is vital to pay attention to structuring deals with suppliers, customers, employees (think bonus plans) and banks.   

 

If you don’t have cash, you’re out of the game. 

 

The quickest action you can take is to have your CFO give you a modified cash flow report every day detailing the cash that came in and the cash that went out during the past 24 hours, and some idea how cash is looking over the next 30 to 90 days.  This will keep cash top-of-mind and give you a good feel ofhow cash is flowing through the business.  

 

Scaling up your business is much like ascending Mt Everest.  You don’t do it in a day.  You create a plan.  You head out with passion and determination to reach the summit. Along the way, you aim for a series of base camps, normally marking a significant change in the terrain.  At each benchmark, you pause toplan for the next one, making adjustments as needed for weather and mountain conditions.  It’s a series of calculated steps.   

 

Your business is no different.  The summit is your BHAG (Big Hairy Audacious Goal  10 to 25 years out) and the base camps are a series of three-year targets, broken further down into annual goals, and then into actionable steps to be taken over the course of the next three months.   

 

Four Decisions – people, strategy, execution and cash – stand between you and the summit.  Dig in and start your climb. 

 

If you are interested in more information on implementing the Four Decisions, click here. 

 

Cheryl is a senior business advisor at Compass Point Consulting LLC in Bethlehem, PAAs a certifiedGravitas Coach, Cheryl guides business owners and their teams through the challenges of growing afamily businessShe can be reached at cdoll@compasspt.com or 610-336- 0514. 

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