One of the greatest business management books of the last 20 years is called “Good to Great” by Jim Collins. The book explores what makes average companies become great, and a number of the conclusions translate just as well into the world of small business. In particular, I have seen time and time again with clients, friends, colleagues and in my own business that what Jim Collins refers to as the “Hedgehog Principles” are the absolute foundations upon which to build a Fun Business (and a business that sustains you for years to come).
The Big Question of Small Business: Purpose, Passion and Profit
I call it The Big Question of Small Business: Why does your business exist and why would anybody care? The answer is all about the three Ps: Purpose, Passion and Profit.
Jim Collins in his book talks about the simplicity and single-mindedness of the hedgehog.
In order to stay alive, hedgehogs do one thing really well: roll up into a spikey ball when under attack. They do this over and over again, never tempted to vary their approach. The Hedgehog Principles state that a long-term successful business must be able to answer three questions unequivocally and, like the humble hedgehog, never waiver from its commitment to the answers. The three questions are about Purpose, Passion and Profit and together they combine into the one big question I mentioned above, The Big Question of Small Business and
Many businesses can answer one of the three, some can answer two, but very few can satisfy all three. Long-term sustainable success is absolutely dependent on there being complete clarity for all three questions at once.
1) Purpose: A Fun Business Strives to be the Best in the World at ‘Something’
Question 1: What will we strive to be the best in the world at, day in and day out, without fail?
In the 21st century, it is simply not good enough to answer this question the way most business owners do:
“I give really good customer service.”
“My prices are fantastic.”
“I provide great products and services.”
Why? Because all of your competitors are saying exactly the same thing. Customers want to know what makes you different to everyone else. If you don’t clearly communicate the answer to the first Hedgehog Question, you are essentially leaving it in your customers’ hands to work out what sets you and your competition apart.
Oh, and I know it might feel a little unrealistic to aim to be “the best plumber in the world”, but you can sure as hell strive to be the best plumber in your world (perhaps your suburb) and for your narrow niche or sub-speciality.
Remember, customers always want to know what’s in it for them.
2: Passion: A Fun Business is Passionate About That ‘Something’
Question 2: What are we absolutely passionate about and will happily jump out of bed for, day in and day out, year after year?
Many business authors have written about the importance of this question:
“People don’t buy what you do, they buy why you do it.” – Simon Sinek (It All Starts with Why)
It’s Not What You Sell, It’s What You Stand For – Roy Spence
There is no doubt that there is deep truth in these statements. People want to know what you stand for: your core values and beliefs. It is this information, more than anything else, that helps them decide to do business with you over your competitors.
You can be passionate about so many things in relation to your business: making people smile, being a trendsetter, helping people achieve their dreams, building partnerships, or even seeing people improve their diet. These are passions that can be clearly connected to and expressed in the purpose of your business, and customers will understand why they’d want to do business with you.
If you don’t care about your business then your customers certainly won’t either, so you must honestly consider what gets you out of bed in the morning and how that relates to what your business does. Oh, and let me give you a hint: your passion for making money won’t do as the answer to this question (sorry!).
I promise, if your passion and your business purpose coincide, you will find it so much easier to take the next steps to building a Fun Business that sustains you for years to come.
Remember, it’s not what you sell, it’s what you stand for.
3: Profit: A Fun Business Makes Sustainable Profits from That ‘Something’
Question 3: How can we create a long-term sustainable economic model around the answers that we gave to questions one and two?
This question is actually more complicated than it seems, and most businesses never really sit down to work it out properly.
Firstly, just because we are passionate about something and we are the best in the world at delivering that something doesn’t guarantee we can build a business out of it: Is there enough of a market to win consistent work in your area? Do you need to expand into other complementary services or build a flexible team that can manage peaks and troughs in demand?
Secondly, a business must make money to survive. How much money the business needs to make is a complex question to answer. Your business will likely need to provide for your financial needs, and it will also need to make enough profit to provide a return on investment to the shareholders or investors (even if that’s just you and your financial input). A business also needs funds to grow – actual cash that you can use to pay your bills. Businesses in a growth phase will be particularly thirsty for cash and the best way to quench it is by having profits.
Thirdly, it’s important to think about your business’ ability to generate steady long-term profit and cash flow. In other words, if you don’t think about the sustainability of your business model, you might end up with a flash in the pan. A good rule of thumb is to ensure that your business is not reliant on one customer for more than 10% of its revenue.
Finally, the last reason why a business must make profit: Making money is a lot of fun. It is simply a heap of fun to make money and to see the balance sheet grow!
Remember, a business that doesn’t generate profits and cash is a hobby.
Your Homework (The Fun Kind)
If you make sustainable profits from doing something you are passionate about and committed to being the best in the world at, all the steps towards building a Fun Business will fall into place – I promise. And the way I see it, if you are not in business to have a lot of fun then I suggest you find an easier way to make a living!
Still eager to stick with this messy-and-tricky-yet-incredibly-fun entrepreneurial stuff? Ask yourself the following question today:
What first steps can I take in the next few weeks to focus my business on the three Hedgehog Questions?
Bang crash! Watch out! Duck! Hang on! Oh no! Here we go again!
My life as a business owner feels like a roller coaster ride, I’m hanging on for dear life half the time… How can I slow it all down a bit and take control of my business and my life?
Running your own business can feel like a constant juggling act and most of the time, all you do is hold on for the ride and try to make sure you duck at the right time.
But it doesn’t have to be like that. Running your own business is never something you should because you want to have an easy life, because it’s never going to be easy. But you can make sure the business works for you rather than the other way round.
The Big Question of Small Business
It all starts with this question, The Big Question of Small Business:
Why does your business exist and why would anybody care?
Most business owners can’t answer that question clearly, in a single power sentence. And if you can’t answer that question, there is one really important thing you can never do, with confidence and clarity, and that is to say NO.
Saying NO is probably the one, most important thing that you have to learn to be able to do well in your business in order to to get off the roller coaster and to take control.
I’ll give you an example from my own experience that happened to me only last week.
That question, the Big Question I talk about above: Why does your business exist? My answer to it is this:
I help small business owners feel great about themselves and about their business, by helping them discover and build their own unique Beautiful Business and Life
That’s what I get up to do, each and every morning.
So last week I received an email from the health and wellbeing officer of one of the Big Four Banks here in Sydney. This person is running a personal wellness program for the entire staff of the bank in Sydney and she was looking for a coach to be involved with the program. The opportunity was enormous. This bank employs thousands, if not tens of thousands of people in Sydney alone and being offered a sponsored opportunity to get in front of all those employees is incredible… For the right person.
I wasn’t the right person for the job
And there’s the rub. I’m not the right person for the an opportunity. I work with small business owners, not with employees in the corporate world. Now I’m sure I could have done something for this wellbeing officer and made it work and I would have done a good job, I have no doubt about that, but I actually know someone who is much better equiped to take on this project. She specialises in working with employees in the corporate world to help them feel better about themselves and advance in their careers. So I thanked the Wellbeing officer and I introduced her to my friend and two days later, my friend had signed up the gig. There’s a good chance that this is the best gig my friend has landed in years and I am absolutely sure she’ll lay them in the isles… She’s brilliant at this kind of thing.
I didn’t get the gig, I won’t make any money from the gig, but I also didn’t get the stress from doing something that wasn’t absolutely in my area of expertise. I’ve learnt over the years, that I’m really good at some things and not others, and I need to stick with those. My friend is really excited and will have a lot of fun with the project, probably make a lot of money and do really well. What’s more, she’s super motivated to return the favour and I have no doubt something will come my way at some stage that’s right up my alley.
Learning what to say No to, and do it in such a way that means everybody is happy is absolutely a core skill if want to get off the roller coaster and take control of your business.
So: Why does your business exist, and Why would anybody care about that?
What’s the most important skill of a business owner?
This is the fourth post in the series of The Ten Priorities: Laying the Foundations for a Great Business and Life. The fourth Priority is about learning to say No. The introduction to this series on The Ten Priorities is here.
What do you think is the most important skill for business owners to master?
You’re probably thinking, financial management, or delegating, or sales or something like that.
Important skills, obviously, but the answer I’m looking for is this:
Knowing how and when to say NO, clearly and respectfully.
As I’ve talked about in the introduction to the Ten Priorities, the life of a business owner is one where there is never enough time in a day. And so, you have to decide, every day, what to say NO to and what to say Yes to.
Saying NO is hard, much harder than saying YES, but it’s a skill you can learn and get good at. (more about saying No here)
The Big Question of Small Business
Learning to say NO starts with becoming absolutely clear on the Big Question of Small Business:
Why does your business exist, what’s it on this earth for and Why would anybody care?
If you struggle to answer that question, clearly, in LESS than 20 words, there’s a good chance your business will get stuck.
Here’s a few beautiful examples of answers to that question:
From Disney: Create Happiness
From BMW: Create the Ultimate Joy of Driving
From an electrician, I worked with: You’re in Safe Hands
From a Retail fitout company, I worked with: More Bang, Less buck
From an Architect, I worked with: Architecture that Inspires.
Answer the Big Question of Small Business with complete clarity, and you won’t get stuck in your business… I promise you
How to grow your business is the most enduring of The 7 Big Questions. All of us business owners have felt frustrated at some stage in our journey to building a Beautiful Business The business feels stuck at one level and we are not sure how to get it to the next level.
So many misunderstandings and myths about business growth:
I have written about the general topic of business growth in many different places. I think there are a number of misunderstandings about business growth that are not helping us, as business owners, to feel better about ourselves. The first article is about that (and you can also read about the misunderstandings about growth in my book: The Ten Truths for Making Business Fun):
I believe that to grow a Beautiful Business that Stands the Test of Time you must be able to answer the question: Why does your business exist and why would anybody care? Most business owners can’t answer that question succinctly and powerfully. That’s bad, because if you don’t know why your business exists, your customers certainly won’t be able to tell, and then all it comes down to is price. Competing on price is a dog’s game, unless you’re Aldi, where price is your Purpose. The second reason you need to be able to answer the question clearly is that if you can’t, you will never master the greatest skill of effective business owners, namely the ability to say “NO”.
We’ve all heard that to grow your business you must start with Goal setting. But effective Goal setting is more complicated than you might think. Most Goals we set for ourselves and for our businesses are at best ineffective and at worst actually hinder our progress. Goals are often arbitrary, unrealistic, and unrelated to what really matters in our lives. A Goal to make $2 million revenue is an arbitrary and meaningless number, why $2 million? why not $1,956,384.13, or $2,163,927.46 for example? And so what when you reach the goal? Will you be better off somehow? What if you fall short? By $100, or by $1,000, or by $100,000? Does that mean you are a failure? Goal setting really makes a difference, as long as you understand that Goals are like a compass, they provide a direction on your journey, they are not the destination.
Marketing is about creating opportunities to sell your stuff. As such, I fervently believe that:
Marketing is everything and everything is marketing
And it is. To grow your business you have to look at every aspect of your business. Marketing is about advertising campaigns, and social media and designing your logo and your website, but it’s also about how you answer the telephone, about your pricing policies, about ensuring that your customers are happy with what you sell them. It’s about how you dress and about how you present your quotes and about your Public Relations strategies and about your warranty return policies. One of the greatest marketing strategies is a relentless focus on quality in everything the business does, in order to “Create Raving Fans”, because if your customers are all Raving Fans, they will actually do your marketing for you.
I don’t mean to imply that online marketing is somehow something different from all other forms of marketing, it isn’t. But it is useful to pay special attention to online engagement and marketing to build and grow your business, because it has become such an important aspect of any marketing strategy. Whether your business is a cafe or a building company or a law practice, or it imports widgets or makes whatsits, you can not ignore a bunch of different forms of online marketing. Email marketing, content marketing, Search Engine Optimisation, Search Engine Marketing, Social Media Engagement, Social Media Marketing, online PR, online reputation management (The ubiquitous star ratings), video marketing. The list is near endless and constantly changing.
You could easily argue (and I have in one of the articles I refer to below), that the principles of marketing haven’t changed, we’ve just got a bunch of new tools to do it with. And at one level that’s true, people still want to get to know, like and trust you before they will do business with you. But on another level things have changed drastically. Ten years ago, you’d give someone a business card with your web address on it and they would immediately want to know if you also had a bricks and mortar store. These days they want to know you’ve got a high functioning web presence and that you’ve got a presence on Facebook and on Google local and ideally a bunch of 5 start ratings on Yelp and Trip Adviser. Whether or not you have a bricks and mortar presence, simply doesn’t matter anymore. Online engagement in all forms must be part of your marketing strategies or you will not be taken seriously.
That’s a quote I saw hanging on the wall at a big office once, many years ago. And it’s true. No business growth, no business, without sales. No matter how great your product is, how beautiful your logo is, how smart your website is, or how wonderful your employee conditions are, if you’re not selling, the business will cease to exist.
Sales is often seen as a subset of marketing, but I’m giving it it’s own section here, because I think of marketing as getting the customers to your door and sales as actually getting them to hand over money. Lead generation v lead conversion. Sales is about skill and it’s about mindset and systems and above all, it’s about making it easy for people. And this last word is the key to the whole shebang. It’s always about people. The old saying is:
People do business with people they know like and trust
You must always remember it’s about people first and foremost and in small business especially it’s about people in both directions: People do business with people. Your whole approach to sales, especially in small business, all aspects of it must be built on a people to people philosophy.
A business without a Plan achieves everything in it
Nothing in other words. Your business growth depends on planning. No human endeavour ever amounted to anything without a plan. Yet planning is guessing. It can never be anything more than guessing, because we can not know the future. So if planning is guessing, why does it matter so much and how can we do it so it works? There are two important answers to those questions:
1) You must understand that there are two entirely different types of business plans: Internal Plans, and External Plans. External plans are designed to impress others about your business and form part of the documentation to obtain a loan or other form of funding or make a proposal to a third party of some sort.
Internal Plans are documents designed to help the business focus. They are combined with meaningful goals (see above) and they help people in their day to day decision making processes. Internal and external plans have different functions and are presented quite differently as well.
2) Planning is a verb. It’s not static, it’s an activity that never stops. As soon as one plan is created, we start again. John Lennon said: Life’s what happens when we’re making other plans. Planning is like that, we make a bunch of assumptions and plan our actions accordingly. Then we go ahead and check reality as it unfolds and make changes to our plans to suit the new realities, every day, every week, every month and every year. Business Plans that work, that make a difference, are living documents.
Customer service is also a subset of marketing of course, if done well it leads to more business from those customers, and as I said above, everything is marketing and marketing is everything, but it’s worth mentioning separately, because of the concept of Raving Fans. Ken Blanchard wrote a little book that said it best in the title: Create Raving Fans and have your customers do your marketing for you. It’s a great little book and there’s a link below to get yourself a copy of it.
The principle of Ken Blanchard’s book is that your business should always be working to do one better for your customers than they expect. If you do so, your customers will become your advocates (Raving Fans) and advocates will go out of their way to help your business grow. They will talk to their friends about you, they will drag their colleagues to your door. They will defend your business against the competition and best of all, they won’t quibble about price. If your business focuses on turning it’s customers into Raving Fans, you will be able to slash your marketing budget in half, over time, for a better result.
Grow your business with systems and quality improvement
My clients often ask me to help them grow their business, and I often tell them to stop worrying about that. Getting more customers is actually the easy part. The hard part of business is:
To deliver what you say you will
By the time you say you will
For the price you say you will
At the quality you say you will…
With a smile
If you can do that all the time, the customers will come flocking to your door and you won’t have to spend much money on marketing (for one thing because you’ll be creating Raving Fans, see the previous topic). And right now, you may well be doing all those things, with a smile, but the trick is to be able to keep doing that as the business starts to grow.
I can’t tell you how many businesses I have seen struggle and fail in my years in business who couldn’t maintain their product or service quality and dependability and price, at scale. Once the business starts to grow and you, yourself, are no longer in charge of every step in the process, things start going wrong. Quality becomes inconsistent, delivery times become unreliable, prices go up or profitability suffers and your smile starts to disappear. Once the rot sets in like that, your reputation starts to suffer and customers start to look elsewhere.
There are only two answers to this dilemma: Either, don’t grow, stay small, learn to say NO and say it all the time… Or systematise. Developing systems for all aspects of the operation is the only answer. Systems for how the phone is answered, systems for estimating, systems for quality checking, systems for calendar management, systems for inventory management, systems for callbacks and warranty repairs. Systems for marketing, systems for hiring and firing etc etc. Above all, systems allow you to create Continuous Improvement Loops into your organisation. And continuous improvement is the Holy Grail of business. It’s what made companies like Toyota great.
Inventory management is a big specialised topic, and it’s really a subset of the systems section above. There are whole management libraries written about the various philosophical approaches to managing stock when building and growing a Great business that Stands the Test of Time. My earliest lessons of inventory management came from the owner of a big hardware store I dealt with a lot in my days as a builder, Colin. One of the reasons I bought so much of my material from Colin was that he always had everything in stock. Colin clearly knew what it took to create business growth, because his business was booming.
I asked Colin once if keeping such high stock levels of everything a builder such as myself might need from time to time was economical for him. I imagined that it was a very expensive way to run a business, having all that money tied up in timber and hardware and bits and bobs. His answer was:
If I don’t stock it I can’t sell it.
I have often thought about that statement in the years since, now that most operations run on the principle of “just in time”. Supermarkets have made an art form of stocking just enough and not a jar more than required, to minimise shelf apace and inventory cost.
I don’t know what the answer is, but I know that Colin got all my business for 20 years and most Sydney builders had an account with him, because everything we needed was always ready to be picked up.
Grow your business with hiring, firing and engaging people
Michael Gerber in his famous book “The E-Myth” wrote that it’s impossible to manage people and hence great businesses focus on systems, and manage those instead. And that’s certainly what grew McDonalds into the enormous business it is today, no argument. And as I’ve written elsewhere before, if you set out to make as much money as possible from selling restaurant food, it is undeniably the case that the McDonald’s model is the one to emulate. But, I can’t tell you how happy I am that not everyone in the restaurant industry wants to build McDonalds, because the world (and my palate) would be the poorer. The same philosophy can be applied to any industry.
If you’d like to build and grow a unique business, a business with an individual character, you’re going to have to manage people. You’re going to have to get good at putting the right people on the bus, sitting in the right seats, facing in the right direction and also know which people to get off the bus. If you don’t learn how to find and keep the right people and get them to do great work, your business will always struggle.
That means developing hiring policies, being prepared to hire people who might be better than you are at certain things, learning how to do great interviews, implementing induction and development training programs. It means learning how to coach your people, encourage them and hold them accountable. And it means learning about effective delegating. It means doing the HR admin and compliance effectively, writing job descriptions and doing performance reviews. It means learning what it takes to be a leader and it means being prepared to take the tough decisions when required, and take them quickly and respectfully.
To build and grow a Great business that Stands the Test of Time, you can’t afford to be left behind. The pace of change and innovation is relentless and what was ok even a few years ago is no longer ok now. Not long ago it was still fine for a cafe to have a sign saying “cash only”, but in 2018, you’ll lose a lot of business if you don’t accept cards in payment. Even in a business as simple as mine, people expect me to be able to accept online bookings. Cloud computing combined with smart phone technology and advanced GPS systems mean that customers now expect to be informed that their plumber is on its way and can be expected to pull up in front of their house in 13 minutes.
You don’t need to be Uber or AirBandB to implement new technology and come up with new ways of doing business. I just bought a house in a different state of Australia. The real estate agent gave me a private showing of the house via Skype. I engaged the conveyancer, the building inspector and a surveyor all without setting a foot in the house or the state.
A client of mine with a creative marketing agency has a team of designers and copywriters and marketing assistants all over the world and she rarely even meets her clients face to face. Another client with a small supermarket chain has technology in his stores that allow him to see what’s going on in any part of any store and to get live access to each of the store’s Point of Sale systems. He’s also just implement a bunch of tablet screens in his stores allowing people to find dinner recipes incorporating the fresh vegetables he has on special.
And all this stuff is only the beginning. It won’t be long before artificial intelligence is integrated in doctor’s surgeries and lawyer’s offices, and copywriting agencies. If you think that technology and innovation isn’t going to have a massive impact on the way you do business and how to create business growth, you are kidding yourself.
The – absolute – undeniable – must have – rockbottom – can’t do without – believe it or not …
Top-10 Secrets of:
Sustainable Small Business Growth
In good times or bad
When your favorite small business coach started devising this article and blog i had 10 secrets in mind, but as I was writing it grew to 21 secrets and maybe it will even grow some more, so now I will be delivering them to you in installment over the next few weeks… here are the first 7. (More about business growth strategies here as well)
PLEASE!: Take a few minutes and let them sink in. If you are not sure about any of them, drop me a line or call me or argue with me or shout me a coffee and pick my brain, but whatever you do, don’t just glance over them and put them aside!
PLEASE!: Do something with each and every one of these secrets. This is important stuff… believe me, I know what I am talking about here.
Follow these secrets and the ones I will reveal over the coming weeks andtrue sustainable small business growth beckons sure as night follows day…. I personally guarantee it (and to prove it I will even Twitterabout it so…it must be true!)
Here they are:
Know what you are in this business for… and check in with yourself at least monthly that you are actually heading there.
Decide what you are really good at, focus on it, get better at it, strive to be the best at it and do it again and again and again. (And please stop doing what you are not so good at!)
State with absolute clarity to all and sundry what the truly inspiring thing is that your business is about (e.g. “We make the worlds most beautiful tables” or “Our plumbing installations are just plain sexy” or “We provide the best accountancy advice money can buy” or “Every customer smiles when they leave our shop” or “Our dresses will put you in the centre of the room”)
Ask yourself: Are we a “dream come true” for your clients?
Who exactly, precisely are those clients… ? and then become known to those specific clients as a true specialist and expert
What precisely is the benefit those clients get from doing business with me?
State with absolute clarity and conviction precisely what your business stands for (e.g. “Our customers are in safe hands”, “Never do anything to decrease our sense of pride”, “we are never more than 5 minutes late”, “Our installations are thoroughly tested for 24 hours, before handover”) publicise it widely and allow everyone to keep you and your staff acountable to that.
Those were the first 7 secrets…. in about a week the next bunch will be revealed…. in the mean time PLEASE…do something with these… and if you want to talk to me or email about them I’d love to hear…. I am sure that we can have some great discussions about this stuff and I am happy to explain to you in more depth what the meaning of the secrets is…..but whatever you do: Don’t just put it aside to do something with at some other time… Do Something Different…
Hope to hear from you soon.
New Perspectives Business Coaching
“Take Control of your Business and Your Life”