If you think about the health of your business like the developmental milestones of a human being, you’ll have a good metaphorical framework to consider what your business will need at each growth stage. Growing your business can be painful. It can and WILL stretch your resources. In order for you to see it grow in the most predictable and sustainable way, you’re going to need to understand where problems might show up.
Growth stretches the capacity of your people
Your business will need different skill sets at different stages, and you won’t be able to bring everyone along for the ride. It’s simply unlikely that everyone in your organization will be able to develop themselves personally and professionally to adapt to ongoing and evolving challenges. And it is beyond the capacity of the organization to nurture and develop 100% of its home grown talent. Improving your business by 30% or 50% or more might require new ideas, and technical skills and interpersonal savvy in managing people.
It’s easy to forget that organizations don’t run on technology and workflows alone. They require leaders and technicians who can innovate and optimize everything around them to make both monumental, and incremental improvements.
Action Steps for Making Sure You’ve got the Right Human Capital
Start with your goals, rather than your people
The more clarity you can find about your goals, plans, challenges, and timing (GPCT), the easier it will be to line up the human capital you’ll need to get there. If you know that your business will require more complex cost accounting capabilities, you can figure out whether or not you have the team in place to manage it. If you break down your organization into 3 core functions: Operations, Finance and Marketing (OFAM)- you can start breaking down your big-picture sales goals into the OFAM components.
Add yourself to the list of replacements
As a business leader, you have to be aware of your own limitations. Don’t be afraid to empower a solid number-two (“Make it so”) to take the reins and lead. Your responsibility is putting the right people in the right place. If you need interpersonal development, experience or knowledge – go get it. A coach is a great accountability resource to keep you on track and to help expose you to best practices in your own development and that of your organization.
Don’t be afraid to make yourself obsolete. If you’re an owner, there’s more time for doing the things that you love and more time to look for an exit strategy. If you’re part of the team, that means that you can take on new challenges, or even leave the organization for brighter horizons.
Ask yourself one question when hiring
Will this person bring up the average performance of the team?
Every hire should theoretically be an improvement. Make sure that each additional person raises the bar, just a little, and don’t settle for any lateral moves.
Think about it this way. There’s no reason whatsoever to gather up all of your belongings on an international flight and pay extra to move from one coach-class middle-seat to another. If you’re going to make a move, at least get to coach-plus, or business class.
You can’t Grow Without Investing, Financially
Unless you have extra-deep pockets and you’re endlessly funding your business, you’ll need financing to expand your business. Even though there are a number of creative financing options, you’re probably considering borrowing it or you funding your growth from existing operations. Before you go out and take another loan, you’ll want to ask yourself “how much growth can your existing business invest in?” What’s the value, in terms of free cash flow, of adding just one additional customer? This is an important question.
The metric is customer lifetime value (CLV), which is such an important forward-looking metric because it helps you understand the real availability to invest in your growth. Here’s how it works. Each additional customer is worth X amount of average revenue. If we use our data to better understand how that type of customer has behaved in the past, and we have a good understanding of our profit margins, we’re almost there.
We can calculate the value of all future cash flows from a typical customer in today’s dollars, because we know what they buy, how frequently, in what quantities, and we have a good understanding of how long they will remain our customers. As a business leader, CLV can help you figure out whether or not you might increase your prices, or how much you will have available to invest in your own growth. By calculating CLV accurately (t, you can model out different scenarios and figure out the best course of action.
Most businesses are funded by existing operations, but many of them fail to grow and thrive because they don’t understand the value of adding new customers. The end up being so risk-averse and hesitant, that they never achieve the financial growth that was available to them, if they could have just taken the risks to invest.
Your business will need to optimize its operations
Technology is disruptive. The ways that your business delivers value to your customers is always changing. A competitor with newer, or more agile, or a more flexible way of leveraging the operational resources needed, might be able to enter your market and offer a competitive alternative to yours.
Questions to Answer About Finance
Do you have favorable financing relationships to borrow at very low rates?
Straighten out your insights about investing
Measure everything that you can
Make each of your leaders responsible for a few metrics. Meet regularly to discuss them and together start to synthesize a story about how the business is performing. You will start to see the interaction between employee sick days and the number of days it takes to collect receivables. Your business is a complex ecosystem of interrelated widgets and there’s a connection between everything. When you measure your business, you’ll be able to better manage it.
- How long does it take you to collect money? (Days Sales Outstanding)
- What does it really cost you to acquire a customer? (Cost of Customer Acquisition)
- What are your profit margins? Break it down by product, service, or customer type?
- What’s your breakeven point? At what point does your revenue intersect with your real costs?
- What are your sales trends? Are they increasing, decreasing, or flat?
- What’s your net promoter score? Your NPS is a measure of your customers intended behavior – to refer you to new prospects.
Prioritize according to your goals
When you start with your goals, you’ll be able to consider the highest priority metrics that will help you manage them most effectively.
Increase your marketing capacity
Without improved marketing capacity, none of this would be possible. If you consider marketing with a rather large footprint, you’re watching the competition, incorporating your customers’ voice in your brand. You’re building new technologies to improve your ability to personalize experiences for your customers and capture who’s interacting with your brand.
What kinds of marketing capacities do you really need?
You need content because your customers are asking questions. How will you answer them? Remember that they’re not just asking questions about your products and services. They’re asking questions about their careers, their industry, and things that they can do to perform better in their jobs. Being a good marketer means not only good prospect-targeting but having enough empathy to recognize what your customer is going through.
You’ll need technology to enhance your relationships with customers by monitoring and measuring how they are interacting with you. But that’s not all. You can use technology to execute sequences of activities, based on some behavior of the prospect like, being referred by LinkedIn, or looking at a particular page on your website. Humans may have designed the strategies around how to approach customer interactions, but it’s AI that offers the biggest bang for your buck.