If you’re anything like me, over the last couple of weeks you’ve probably received numerous emails encouraging you to make 2020 the year of growth. Of course, the senders are presuming that you’re the typical Business Owner. The messages are almost always about selling more, growing the top line and getting bigger. That’s a bigger business, not a bigger me!
Of course, you are now saying in your head:
“Turnover is vanity, Profit is sanity” or something similar.
With my accountants’ hat on, I would have to agree. But then I would also add that’cash is King!’
So, let’s bring those sayings together into a concise meaning…
‘Go for profit growth and positive cashflow.’
It’s a bit clunky but you get the meaning. And that’s where most typical Business Owners would stop. In fact, profit growth with positive cashflow is probably a great end result for the typical Business Owner.
But what is typical for most owners of small businesses?
7 Things Typical Business Owners Do
Here’s a list, based on the analysis of over 40,000 completed Value Builder assessments, of what typical Business Owners do.
1. Prioritise sales growth – sell first then sort out production or delivery later.
2. Sell lots of things to a few customers – thinking the customer relationship is the critical thing, when actually it’s the product or service that’s your strength
3. Being the boss in the middle of everything – the hub supporting the spokes of the wheel. Great, having your finger on the pulse of everything? What about your own pulse?
4. Reactive customer satisfaction – they must be happy if they don’t complain. The anecdotal feedback seems okay.
5. Having transactional sales – all customers make one off purchases and you rely on loyalty for them to keep coming back for more.
6. You treat the business as your personal piggy bank – it pays for personal expenses, covers your home cash-flow.
7. You give equity to your managers as a form of reward or motivation – yet the equity is not liquid and you control dividends and share allocation.
Not all these features will apply to you and your business, but do any feel a bit close to home?
If they do, then you will have a business that is not producing the value it should be. You are missing out on profit, working too many hours and the business will be harder to sell.
Going back to these 40,000 Value Builder assessments, what are the most valuable businesses doing?
7 Things Value Builder Owners Do
1. Prioritise business value – the combination of net profit and the best profit multiple the business can be. This focus will increase profit, release your time in the business and give you the choice to sell the business sometime in the future.
2. Sell a few things to lots of customers – stick to what the business is good at and widen your customer base. Then you are less reliant on any single customer.
3. Build a company that can thrive without you – have standard processes and a management team.
4. Proactively measure customer loyalty and look for customer referrals.
5 Focus on creating recurring revenue that creates a future pipeline of income – make business more predictable.
6. Obsess on creating positive cash flow.
7. Protect your equity and reward key staff with bonuses and commission.
Are you a typical business owner or a value builder owner?
I see the latter type of owner as being on a long-term mission to maximise their value. Their goal is not necessarily to sell the business but rather know that they could.
If you want to be in that position, but aren’t sure if you’re there yet, take the Value Builder Assessment. Don’t be typical be a business owner!