4 Core Business Principles You Might be Overlooking

Growing your business is possible for every industry, but if your company has hit a plateau you could benefit from a refresh in your corporate strategy.

In Scaling Up, Verne Harnish gives guidance on the four simple principles that can help you become part of the four percent of top earners in the business world. These are patterned after the habits that the famous John D. Rockefeller, widely considered the richest man in modern history, used to successfully execute his growth strategies.

  1. People
  2. Strategy
  3. Execution
  4. Cash

1. People: Creating the right team to execute your growth strategy

The people you hire to lead your company must be capable of doing so. Scaling up your business begins with putting the best leaders in positions so they can do what is needed to move your growth strategy forward while staying true to the core principles of your company.

When you add people to your leadership team, the complexity of your company can increase dramatically, according to Harnish. That is why picking great leaders to fill key positions and providing them with team members with similar abilities will save time and energy. Your leadership will be set up to work with teams who are up to performing the tasks assigned to them.

Harnish also emphasizes paying people what they are worth instead of adhering to an industry pay scale or some other artificial method of compensation. Putting the best people in leadership roles and delegating responsibilities to them means paying them what they deserve – based on the value they provide to the business.

2. Strategy: Stick with what you know

Understand your company’s core values and stay true to them when creating a strategy to scale up your business.

For example, if you’ve had success with one location or franchise unit, you can grow that business by opening additional locations or territories. Since you’ve already invested in learning what it takes to be successful, you can apply those same principles in new growth. And once you open additional locations, it doesn’t require that you personally take on the management responsibilities. If you’ve set up the business efficiently, your management team from the first location can be given more responsibility for the second location.

By staying true to your company’s core values that made it a success in the first place, and by training your leadership team to implement and adhere to those values, multiple locations can be established with the same opportunities for success. Reward managers with generous bonuses and other incentives for meeting performance goals at the new locations, which will help ensure your growth strategies are implemented according to plan.

3. Execution: Keeping your leadership team on track

Every member of your leadership team who is involved in executing the strategy to scale up your company must have a quantitatively defined goal.

Quantifying your company’s objectives provides you with a means of measuring performance, and it makes your entire team accountable for performance. Harnish stresses that it’s impossible to determine if you’re on the right track unless there is some way to measure your results.

Next, these measurable goals must be clearly communicated to the teams responsible to meeting them. Scale Up emphasizes the importance of giving your team members a standard they must achieve, and a sense of accountability that can be instilled and maintained by your managers.

4. Cash: Success may depend upon how quickly your money returns to you

The final core principle in Scale Up deals with something Harnish refers to as the “cash acceleration strategies.” Making improvements in your operations to shorten the time between when you dispense money until the cash returns to you after delivery of the product and payment by the customer is critical.

The “cash conversion cycle” or CCC is an invaluable metric to calculate as part of this process. Since you don’t make money waiting to get paid, streamlining the process by which goods or services are created and delivered to the customer will help improve your cash flow more quickly.

Learn more about the cash cycle and how you can calculate this powerful business metric – your CCC.

 

financial forecast

Looking To Forecast Better In 2017? Handle The Process Differently

financial forecast

Leaders of growing companies know that planning is key for continued success. Now that we’re in the fourth quarter, it’s time to evaluate where your business is and where you want to take it in the year ahead.

Forecasting and budgeting tools simplify the process of planning for growth. Capterra is a free service that helps businesses find the right software solution for a variety of services – from barcoding to performance appraisal. Its list of Top 10 Budgeting and Forecasting Software will reduce the time searching for the best tool for your needs.

Also consider a different approach to how you’ve handled forecasting and budgeting in the past. On the hostanalytics.comblog, a recent post “A Call for Change: 6 Indicators You Need A New Approach to Budgeting” explains, “The first step in any budgeting process overhaul is to identify the need for a change.” Here are the red flags:

1.    The budgeting process is taking too long.

2.    You aren’t satisfied with your planning capabilities.

3.    You’re spending too much money on budgeting.

4.    Your forecasting performance is struggling.

5.    Your budgets and plans lack long-term visibility.

6.    Your budget isn’t providing the flexibility you need.

If you’re looking to develop a more aggressive budget you may need to forecast sales and expenses over a multi-year span. Along with reviewing sales and revenues from previous years, pay close attention to the comparison of sales to expenses such as rent, materials, and salaries. Are economic conditions in your industry and/or locale (if applicable) such that you can expect to achieve the same profit in the next year or more? Will there be a burgeoning demand for your product? Should you invest in equipment that enables your staff to work more efficiently? Is it time to add new products/services? Be realistic and weigh the negatives (e.g., new competition or unexpected loss/damage). Also consider whether an alternative financing solution could play an important role in your growth plans.

 

Recent Fundings – December 2016