Are You Working On or In Your Business?
Early in the life of the company most CEOs find that generating revenue and managing cash drive every decision. When revenue eventually starts to flow, it can be exhilarating. You reach breakeven, then turn slightly profitable, and at this point it’s easy to believe that just turning the crank on sales is the key to success. Wrong!
Of course, addressing operational issues and keeping sales humming is vital, and wise cash management will keep the doors open. But this point in the life of your business represents a critical tipping point. Learning how to work on the business and not just in the business is critical to long-term success (my friend Steve Kirchoff refers to it as the CEO Dilemma). CEOs must balance (at least) six in-the business and on-the-business areas to continually increase shareholder value:
- (in) Keep accelerating sales to provide the oxygen (revenue) needed to fuel growth
- (in) Manage cash wisely so that you optimize the burning of that oxygen
- (in) Address operational issues so small problems don’t become big ones
- (on) Enhance market awareness so customers and influencers know your company
- (on) Create a vision for growth that moves the company to exit-readiness and keeps it there
- (on) Establish productive partnerships that support and enhance your growth vision
If you’re like most CEOs, it’s as easy to remember to work in the business (first three) as it is to put off working on the business (last three). If you continually allow the urgency of daily concerns to occupy all your attention, the paramount issue of increasing shareholder value is addressed haphazardly; while the company may stay in business and even grow a little, it won’t reach its full potential.
So how do you work on growing the business? Here are three “on-the-business” ways:
Enhance Market Awareness
The most critical element in marketing success is often lacking: a clear statement that describes your business. I’m surprised by how often a CEO has a hard time articulating what the company does and why should anyone care about it. Known by many names, a strategic positioning statement can be expressed in two sentences:
<Company or Product> is a <Category> that helps <Primary Audience/Target Customers> achieve <Primary Benefit>. Unlike <Competitor>, that <Competitor Weakness>, <Company or Product> has <Primary Difference(s)>.
If you can readily fill in the italicized terms (and if your key staff members can too), then you’re ahead of most companies and you’re equipped to enhance your market awareness.
Create a Vision for Growth
The second on-the-business issue is a vision for growth. But can you increase the value of your company without dropping the ball on daily operational issues? Here are three proven ways:
- Allocate time each week to think about your vision for growing value. Don’t put it off, until you ‘have things under control.’ If you do, the attraction of urgent issues will be too compelling and you’ll procrastinate.
- Think about growing value deliberately. Develop a mental model that depicts how you’re growing. For example, create a framework for seeing value through the eyes of potential acquirers. What constitutes value to them? You’ll find that having a clear picture provides context that simplifies otherwise complex decisions.
- Test your ideas with friends and advisers. Don’t wait until you have developed a perfect plan before you tap other brains. Input from outsiders can help stimulate your thinking in unexpected ways.
Now you might be thinking, “I’m not ready to start developing an exit strategy. All I want to do is build a great business.” You may be surprised to learn that “staying exit-ready” and “building a great business” go hand in hand.
By considering how potential acquirers view your company, you’ll learn why mutual customers see your company as valuable. Identifying the gaps in your products and services that make you less attractive to acquirers can point to road map adjustments and potential acquisitions. And the whole process provides the right context for answering critical questions like “who should I partner with?”
Establish Productive Partnerships
Many CEOs balk when the subject of partnerships is raised. “We’ve tried partnerships before, and all that happens is we issue a press release and then we never get anything out of it.”
Partnerships that result in the attitude above may be driven by two enthusiastic salespeople with different companies, who’ve convinced their respective CEOs ‘this is a no-brainer!’(often literally true), and thus resources are spent with little or no return beyond an initial SEO bump from the press release. Successful partnerships require thoughtful planning.
If you’ve spent time understanding your company’s position in the market and you’ve created a growth vision that identifies the value of your company to others, then you’re poised to consider whether the right partnership can help your company achieve higher value much faster than going it alone.
- Do more than manage sales, operations, and cash if you want a successful company.
- Set aside daily time to think about “important” issues rather than attending only to “urgent” ones.
- Develop a context for daily decision-making based on your vision for growing the value of the company, and then use it.
Bob Barker is a Texas-based industry veteran with a passion for helping CEOs maximize the value of their companies. www.2020outlook.com
You are dead right! The successful companies I know are able to juxtapose time spent on operational and execution with marketing, alliances and vision. Indeed, many in my view focus more on the “on” aspects than on the “in” – and much earlier than at break-even. With good departmental and fiscal controls, the “in” company efforts are much easier to get right those “on” the company .
As someone who spends time on alliances for many entrepreneurial companies in central Texas, I can’t agree more that the “no brainer” sales-drive alliance is by no means a measure of the value of strategic alliances. Indeed, in the the market we’ve seen over the past 10 years, with M&A exits being the dominant way teams extract value from their efforts over time, focus on alliances is critical to maximizing that outcome! Timing of exit, real choice of acquirer, conditions after the exit and ultimately price are all driven from a successful strategic alliance strategy.
Of course, one can be lucky, but most CEOs I know would prefer to be in control of the outcome!
For an early stage company CEO, the question in your article “who should I partner with” is particularly critical as it relates to investor partners. Savvy investors are very familiar with the concept of “exit readiness” and many venture capital firms have helped orchestrate dozens of successful exits. Certainly the venture firms with the most enviable exit track records have well established investment criteria and also great instincts for selecting companies with strong potential for becoming category leaders in attractive markets… But the right investor partner will provide much more than good instincts and financial capital.
The leading firms also contribute the intellectual capital of their own organization and also the considerable resources and wherewithal of their industry networks. They can help act as a catalyst for growth and bring value enhancing initiatives to portfolio companies like access to industry thought leaders, strategic partners and complementary technology or even key customers. In addition to expertise in the areas of strategic planning, developing the business plan and raising additional funding, a collaborative investor partner may contribute organizational assistance like senior executive recruiting.
As you point out, “the right partnership can help your company achieve higher value much faster than going it alone.” This is particularly true with investor partners.
Thanks Bob for the great article. I enjoyed it.