An exclusive article from Jon Rosling on how to grow a successful business, ahead of the launch of his new book ‘The Secrets of Seven Alchemists’.
I recently read a quote from Alastair Lukies, CEO of Monitise that ‘building a business is very much like a pyramid. Too many people focus on the top but don’t spend enough time on what is inevitably the dull but essential stuff [at] the bottom’.
Most of us want a business that will provide sustainable wealth and the freedom to enjoy it. What Alastair is saying is that getting the detail right is an absolute pre-requisite of this. Without doing all the dull stuff first you can’t innovate, grow and extend. And you certainly can’t achieve freedom.
So, what’s in the platform? The answer can look pretty obvious; cash, costs, assets, team and disruptions. But it’s amazing how many businesses miss out the vital part; that all this must be fully systemised so that the CEO is free to build, innovate and enjoy. If you don’t you are stuck on the hamster wheel for life.
The first requisite of any business is obviously cash. Managing cash is critical, as Guy Rigby points out in ‘From Vision to Exit’ ‘businesses don’t go bust because of a lack of profitability. They go bust because they run out of cash’.
Making cash should be your obsession at every stage of the business. Your cash platform must include systems to source, manage and service clients. The quality of your product should never be far from your mind but it’s important to systemise that obsession so that innovation is in the company’s DNA and not just something you personally drive. The business should be engineered to improve the product constantly. Having said that, even when no longer operationally responsible, most successful entrepreneurs I know never lose site of how the customer is experiencing their business. It’s their touchstone to ensure all is well.
To maximise sustainable revenue, your channel strategy is obviously key and this is closely linked to your customer experience. Understand what you are famous for. Having laser clarity on this helps to ensure your channels are constantly delivering for you. And most obvious among these are your existing customers. Get your proposition right and your customers do your marketing for you.
Your next focus must be on keeping direct and indirect costs under control – and under review – at all times. Ajaz Ahmed, Founder of global business AKQA maintains that ‘watching costs like a hawk is absolutely essential however big the company is. That comes right from the top.’ It’s vital to understand the complete cost structure of the business, including hidden costs that we can all become blind to.
For most businesses the key area of cost is, of course, people. To build your pyramid any higher it is clearly important to build a platform of aligned, committed and high-performing people. This is about creating the right culture but is also about creating systems that allows that culture of efficiency and performance to develop and be effectively deployed. The starting point is to identify which job functions are really needed and then allocating roles to the people who are most skilled for that job. The trick is create a structure that allows the business to leverage its people in an optimal way. A system that creates a truly functional business.
With costs and revenue systemized you have a great P&L-based business. What else? The obvious answer is the balance sheet. To quote David Molian of Cranfield School of Management, ‘a strong balance sheet is the best security for the future, so seize every opportunity to shore it up’. That obviously includes sensible levels of cash but also a proper control and protection of other assets; ensuring they are owned or contractually protected, fully recorded and insured. You can then begin to work out how to leverage your assets into the future.
Yet more important than all of the above in terms of your platform, is the quality of your management team. Without the right management it will require too much of your time to ever build your pyramid. Critical here is to link the quality of your team to your vision. The question to ask is not ‘do I have the team I need now’ but rather ‘do I have the team to get me to where I want to be?’ Looking with this lens, skills gaps, wherever they lie, need to be addressed urgently through reorganisation, training or recruitment. Train and support generously but ultimately, when looking at your team, be objective, however long they have been with you.
Now we have a strong cost and revenue base, systemized to be independent of you, a firm control of assets and the management team to operate and innovate all this into the future. What else should be in the platform? Well, the last part is a lot about you. It is also the one most damaging to the future value of your business if you get it wrong. It contains all the disruptive and damaging external risks economic, political and technological. This is also the area most outside of your control. The key watchword here is ‘awareness’. As CEO it is critical we are constantly aware of what is going on both in our sector and in the wider world; to be constantly asking the ‘what if’ question. To be asking what impact this political, macro-economic or disruptive technological shift could have on our business in 2, 3 or 5 years’ time and adapting and innovating accordingly.
The platform may be ‘dull’ but its impact is anything but. It is vital for the business to be systemized and effectively managed so that you are not trapped on the operational hamster-wheel. That gives you the freedom to be ‘out’ of the business looking for the threats that could kill your business and seeking the opportunities that will make it spectacular. It also allows you the freedom to have a lot more fun.
The Secrets of Seven Alchemists by John Rosling is published by Harriman House in August 2014.