Why do most businesses not achieve the level of success that they should?
It’s usually a combination of reasons versus one specific reason. These reasons are, in no particular order: 1) an opportunity with little potential for gross profit and net profit; 2) a lack of knowledge of the important elements, or basic fundamentals which create success; 3) a lack of leadership knowledge of how to move a business “from here to there”; 4) a lack of knowledge of how to compete; 5) a lack of overall business knowledge (not to be confused with industry knowledge).
This is not a comprehensive list, but in my opinion from what I have seen they make up the vast majority of business failure or lack of success — and it’s rarely just one of these reasons. Instead it is a combination that can kill or seriously hinder the success of a business.
Your book outlines seven “facts” that successful business owners understand and utilize. We don’t have time to go into all of them, but how did you develop and choose these seven?
It probably wouldn’t surprise you if I told you these ‘facts’ chose me rather than me choosing them. By this I mean in all my years of business ownership these 7 facts were the ones which cost me the most money — either in not optimizing an opportunity or by not paying enough attention to a particular fact that ended up taking a big bite out of my wallet.
The ‘facts’ are really the basics or the fundamentals of business ownership. This is important to understand because improvement and lasting success will not occur if the business basics or fundamentals aren’t continually focused on, worked on, and improved. This is just one of those laws of ownership that can’t be escaped — it’s the way it is. These facts, or business fundamentals, give a focus to owners and their management by identifying and describing how each of theses fundamentals will be worked on.
One last element about the ‘facts’: they are sequential in nature, meaning they are listed in order of which one to focus on first, second, third and so on. For example, leadership always comes before management/control. This is true because leadership defines where the business is headed, what’s important to accomplish, etc. Without this type of guidance, management is left to figure out what should be managed, which leads to missed opportunities, frustration and chaos within a business. Or it’s hard to protect assets without knowing which assets need protection and why (leadership) or the expectation for assets potential without setting up and outlining management control. Or, it would be impossible to develop a plan without knowing what needs to get done (leadership) what is to be controlled and what the objectives are (management), or what assets are needed and how they are to be used and maximized.
The facts are every owner’s and manager’s reality, and how well they are understood and focused on separates the successful businesses from the struggling and the failures.
7 Facts of Business Success
Fact 1: If you don’t lead, no one will follow.
Fact 2: If you don’t control it, you don’t own it.
Fact 3: Protecting your company’s assets should be your first priority.
Fact 4: Planning is about preparing for the future, not predicting it.
Fact 5: If you don’t market your business, you won’t have one.
Fact 6: The marketplace is a war zone. Every company has competitors, and if it doesn’t and it’s successful, it soon will.
Fact 7: You don’t just have to know the business you’re in; you have to know business.
One of your concepts or “facts” is that “planning is about preparing for the future, not predicting it.” Do you think most teams prepare in the way you suggest in the book? How can they improve?
The first answer is No. Successful businesses all have planning as part of their core business philosophy or culture — it’s one of the reasons they are successful!
To be good or improve business planning, it’s important to realize several realities. The first is to realize planning is a skill, and because it is a skill the more you use and develop it the better you become at it. Secondly, planning is a marathon, so start simple by collecting important market data, which defines the market and your business place in it. For example, choose the appropriate course of action to move the business forward; create objectives with a time line; and then match expectations to results, fixing those which didn’t work and improving on those which did. And, then expand planning from there. Thirdly, planning, and how well it is done, and the discipline it creates, is one area which shows the owner’s willingness and dedication to make their business a success, their individual talent, and their passion for competing. The reason for this is because planning is hard to implement and track, and because it exposes weaknesses and forces accountability from ownership on down — and because it’s hard to implement and forces discipline, most businesses don’t do it — which gives those who plan well a great advantage in the market through market share gains, and for bottom line improvement.
What are the elements of a good business plans?
Just to clarify, seldom do businesses have the same market opportunities, available capital, product lines and culture, etc. meaning every business plan is different. But, having said this, every business plan has some commonalities:
1. Destination or vision– where is the business going, and what will it look like and when will it get there?
2. Mission statement (DNA or culture): how the business will operate on a daily basis and what operational processes will have to be in place in order to achieve the vision. The mission statement also includes how employees will work with other employees and how they will handle the customers.
3. Goals. What will be the major goals to achieve in order to achieve the vision.
4. Analysis. Includes understanding the internal business strengths and weaknesses, where it is in the market in relation to competition, size of market, and how the business stacks up against others.
5. Strategies. Developing an action plan based on the above realities.
6. Objectives. Short term in nature and shouldn’t be overwhelming in number but are set based on the goals in number 3 above. If they don’t match up, then more work has to be done on the above elements until they do.
7. Summary and communication. Sharing the plan and objectives with those who are responsible for executing and implementing them
8. Implementation. The rollout of the plan in an orderly manner
9. Review. Look at the expectations and review against the actual results. Fix what is necessary and improve on the strengths.
In order to plan effectively these nine elements have to be present, and each element has to work with others in order to be effective. Plans are constantly in flux and change because not everything happens as expected, and it’s the leader’s responsibility to change the plan when both outstanding and unfortunate results happen.
How important is culture to business supertinent
I defined culture as DNA in the book; to me they both mean the same thing. Without DNA, there will be no operating procedures — just chaos. There will be no accountability, no internal direction for improvement, or guidelines on how to treat other employees or the customers. In other words failure will result — and fairly quickly.
Control is something you discuss at length. You say “if you don’t control it, you don’t own it.” You say that “more companies go out of business because there is too little control than because there is too much.” How does “control” fit with the concept of “empowerment”? When is the balance right?
That’s a good question. In my mind control and empowerment are two concepts parallel to each other rather than position opposites. This is because the reality of business is that processes operate the business, and employees operate the processes. Processes are developed and designed for creating expected outcomes as well as used as quick alerts to possible problems. It’s the processes which must be continually controlled, watched over, improved, and created as a business grows and keeps up with customer expectations and demands. These processes are critical to success and add value as do the results from control of how these processes are working. Control is watching over these important processes — which protect the business, and add value to it — and the results are continually sent to the highest levels of the company and acted on at the highest level when there is deviation. Control is watching, developing and improving processes within the business — and making sure they are followed, and expected results from these processes get sent to the highest levels.
Empowerment, in my mind, is simply giving an employee who has earned the right to be trusted more responsibility and accountability. Within the parameters of the processes empowerment isn’t giving up control; it’s having someone else watch over it for you.
Where do most businesses struggle when putting a strategy together?
I think the struggle comes three ways. First, having the correct and pertinent
information to be able to create a meaningful strategy. Second, having the ability to be able to “read” the tea leaves, so to speak, and develop a reasonable plan of attack. And third, having the discipline to implement the strategy, and the leadership ability to be persistent, disciplined and flexible in order to make it happen.
You say that knowing business is what matters, not the particular industry or business you are in. Would you elaborate on your thinking?
This is a good point, and thanks for bringing it up. Knowing business is fact number 7, and is the last of the business basics, or as I describe them the facts of business life. The context is you always have to know the business you’re in as indicated in the previous six Facts of Business Life, but Fact 7 is one that deals more with the macro, meaning expand your horizons, see how other industries handle the same business issues you have, and learn more about business overall, like financial statements, leadership, motivation, reward techniques, and so on. Ownership is a profession, and as in any profession, the more you learn and know, the better you and your business will become.
I love the art of the turnaround, and you’ve successfully fixed some ailing businesses and made them profitable. Tell me more about your experience. What is the first step you take when you assume responsibility for a troubled business?
First I identify why the business isn’t operating well. This is more of an internal study than an external examination. Then I always begin — before anything else — on day 1, by reassuring the employees their jobs won’t go away. I explain to them that we are in this for the long haul and expect to grow the business — thus creating opportunity for employees to grow with the company. The purpose of this is threefold: First it relieves employee anxiety and relaxes them about their employment situation. Second, employees in troubled businesses have had worries about their future and look for assurance the business will get turned around — and they can be part of it. And, third it gives them an immediate first impression of the new owner. This is an important step, but so is finishing the meeting by creating a “line in the sand” on an ethical position, which is the springboard to creating a new company culture. For example, I always finished these first meetings by making the same statement: “In this company we do not lie. if you lie to a customer, if you lie to an employee, if you lie to anyone connected with this company, including vendors — you will be fired. To this there is no compromise.”
And thus begins the building and creating of the company’s DNA. No conversation about sales expectations, threats, or false bravado, just a simple message, but one with an unexpected punch.
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