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Why a few companies make it

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 your competitors.  

There are over 28 million businesses in the US, and only 4% get over the $1M revenue barrier.  A mere .4% break the $10M revenue barrier. And a select several thousand break $50M. What’s happening?  Why do so few companies truly scale up?  

The easy answer, to quote Steve Jobs, is “business is hard”.  That’s why getting the right people, creating a truly differentiated strategy, driving flawless execution, and having plenty of cash to weather the storms is so critical.  

Let’s start with people. Seems easy enough.  Go 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. 

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. 

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, and deservedly so at times.  If the strategy that emerges from your strategic planning session is complicate, it is probably wrong.  You’ve nailed your strategy when 1) if what you plan to do really matters to customers, and 2) it differentiates you from your competition. 

Nearly every leader at one point or another states, “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.  The Scaling Up 1-Page Strategic Plan is designed to drive alignment, accountability, and focus.  

Strategy without execution is just a nice idea.  Execution is the feet on the street to move the plan forward.  And the key to execution is priorities – selecting a handful of priorities to focus on;  data – gathering quantitative and qualitative data daily to review weekly; and 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.  

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 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 how 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 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 BHAG (Big Hairy Audacious Goal 10 to 25 years out) and the base camps are a series three-year targets, broken further down into annual goals, and then into actionable steps to be taken over the course of the next few weeks.  

Scaling Up your business requires discipline and perseverance.  Dig in and start your climb.  

 

Tom is managing partner of Compass Point Consulting LLC in Bethlehem,PA. He is a certified coach with Gazelles International and a certified exit planning adviser with the Exit Planning Institute. Compass Point provides growth and business transition consulting to small- and medium-sized businesses, with a focus on family business. He can be reached at 610-336- 0514 or tgarrity@compasspt.com. 

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