Many people ask the wrong question when they are trying to grow a business. New entrepreneurs often start with a good business idea, and then as the business grows, they ask questions such as "How can I get to 20,000 subscribers?" or "How can we grow revenue to $20 million?"
Those are the wrong questions. Revenue is easy. Just undercut everyone else, and you'll have revenue. But you won't last long. For most businesses, a better question would be, "How and when can we achieve a net profit before tax (NPAT) of $1 million?"
Or, better yet:
“How can we ethically and sustainably increase NPAT by at least 20% every year for the next 20 years?”
Achieving this 20% for 20 years is a tough hurdle. Few companies manage it year after year. At Citadel, we achieved it 15 out of 16 years, but that is exceptional. Flight Centre was one of the few Australian companies to achieve it, but recently they have been flirting with bankruptcy since COVID.
Here are my suggestions to grow a business:
Nurture your existing clients. Use spare capacity to slightly over-service them. Don't set expectations too high but provide little value add things such as an email tips, free webinars, and articles of interest. Existing clients are always the best business development people. This strategy alone will build a sustainable business.
Contrary (it might seem) to the above point, keep your boundaries. Every time a client asks for a change, make sure you charge them. I've made the mistake of 'being helpful' and providing minor changes at no cost. It just backfires, and the client becomes a pain who will expect everything for free. Give them value for free that they didn't ask for (as per my point above) but make sure they are changes that come from your end as a value-add. Perhaps you already know from experience what I mean.
Products are more powerful than hourly work. And essential for growth. If/when you end up with a bit of spare capacity (downtime), have a plan for it. Ask the existing team and clients for ideas on new projects that the team could work on in their downtime that could eventually sell as a product.
Work up a 5-year projection for costs and revenue, then work backward for how to achieve it. Use three sets of metrics on one spreadsheet (but in different columns). Base (easy target - P90 or 90% chance of achieving it), Target (achievable with effort - P50), and Stretch (possible with effort if everything goes according to plan - P10). The more granular, the better. Think about building an information memorandum to take on funding if the 5-year plan requires it. But keep a controlling percentage (even after potentially several subsequent fundraising).
Expand the shareholding to employees and clients. Include any suppliers that might be interested in swapping their goods (e.g., coding, rent, products) in exchange for a small percentage of equity. Start with shareholders who feel connected to the business and will tell the world about it.
Financial management. Be ruthless with cost management. Until you can afford a great CFO, keep your accountant close and connected with the business.
Focus on your core strength, such as any regional knowledge. For example, if you are in a country town, talk to the farmers. Farmers who can see a return on investment (ROI) for technology or services will be great customers. They don't want to outsource to someone they don't know on the other side of the world. Managing that process is a learning curve in itself, and most small businesses want to do what they do best. This is where you add value; provide them a clear ROI, and you'll get their repeat business.
Outsource some of your work. There are some great programmers, accountants, marketers in South America and Indonesia. A few in Eastern Europe as well. Of course, you can find great people anywhere, but managing an outsourced team is a great way to lower costs. That sounds at odds with the idea of building local jobs, but the best local jobs are (I think) to have high-cost local people managing client relationships and managing teams as a program manager. Perhaps also hands-on but leveraging the expertise of others and managing the overall outcomes is the real value-add.
Work fewer hours. You won't be more productive by working more than 50 hours per week. Nor by cutting holidays. Ensure that you and your staff don't work more than 40 or 50 hours per week and that everyone takes at least four weeks holiday each year (preferably in at least 2-week blocks to get a decent recharge and reset). Even as a CEO or self-employed consultant, I rarely work more than 40 hours per week. I'll take work home when I need to, pull an all-nighter, or work an 80 hour week if there is a clear short term requirement. But if you are regularly working more than 50 hours per week, it's not a sign of commitment. Frankly, it's a sign (I tend to think) that you're not managing your time well. Have you ever noticed how much output you get from part-time workers? My experience is that part-timers do as much in a 30 hour week as full-timers achieve in a 40 hour week (usually). They don't have time for long lunches or water cooler chat. I'm not saying that stuff isn't essential. If you're a CEO or founder, you need to make time for your staff, communication, team building, etc. But in that instance, it's part of your job. Going home at 5 pm is just a decision. And the power of constraint is amazing. You will cut the fluff out of your working week. And be more productive.
Invest an average of an hour a day to read. When I post this suggestion on a social media platform, I often get comments such as "You don't know what you are talking about!" or "No CEO has time to read an hour per day." Well, this CEO does. And so do all the successful senior managers that I know, almost without exception. If you can't find time for this, you're probably working inefficiently, and more importantly, limiting your success. If you do, you'll be able to read (or listen to) a book a week. Two hundred and fifty books in five years can make you an expert in your field. We all have time for it. Skip the news (or skim the headlines if you must) as people will tell you if something significant is happening in the world. I'm a big fan of Youtube, but I include Youtube above and beyond the one hour per day average (7 hours per week). Books are my go-to. You can find all the wisdom of the world in books. And no, reading articles and web-pages are not the same. A book is a coherent, curated, structured collection of thoughts that culminate (typically) in one big idea or a grouping of allied knowledge. An article is OK for information. But a book can change your life.
Out of all of the above, points number 1 and 10 are the most important. If you're in business already, you’re probably (hopefully) already doing all of the above. But if not, it's here for you to accept or reject.
And in terms of what to spend that one hour per day on, below are some books which could be game-changers for you, in order of priority.
Pre-suasion by Robert Cialdini. Hands down, my go-to book for business development and life in general.
The Ultimate Question by Fred Reichheld. You can google Net Promoter Score (NPS) for the gist of this, but the book has some good ideas on how this process can lead to business growth. Combined with Pre-Suasion and the other books on this list, it's powerful stuff.
The Obvious Expert by Elridge & Elridge. A bit old now, but lots of great actionable ideas.
Million Dollar Consulting by Alan Weiss. The basic idea is to do lump-sum consulting only but still worth a read.
Good to Great by Jim Collins. Worth a read, but take it with a pinch of salt as he’s looking at the businesses through a ’survivorship bias’ lens.
They also come as audiobooks making them great to listen to with a team for 30 minutes a day or one hour a week. And yes, the links are Amazon Affiliate links, so thank you for that cup of coffee if you do buy one or more of them. :-)
I hope that’s useful and wishing you the very best for the future.
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