What to Obsess About in a Maturing Business

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Not survival.

You found a viable product or service. Then you grew the business into a stable, healthy profit-generator. Now what?

A company owner approached me a couple months ago to get help with his business. When we talked it was apparent his business had grown to a nice size, providing a good income for him and his employees.

When I asked what he wanted to accomplish in our one2ones he said, “I need a reason to keep going. I’m making good money and the business is doing a few million a year, but I can’t seem to grow it, and don’t seem to have the clarity I need to move forward.”

Make Meaning, Not Money
The Industrial Age taught us the lie that if you got money, that money would naturally give you a great lifestyle. “If I just had a million bucks life would be great.” No, it wouldn’t. Business owners who work to make money rarely make a lot of it because making money is not an empowering vision. Those who chase something bigger than just making money are much more likely to make a lot of it. We call that a Big Why. A Big Why moves you from Survival right through Success to Significance.

Significance Rocks
Startup and growth are about viability and money, sacrificing time and present significance to get there. This was my sixth business (I’ve started another one since). When I started it, I worked seven days a week the first year, then six the second, then five the third. But once we had a viable product and the money was coming in, I wasn’t done. It was now about ensuring that the business created both time and money for me (and others in the business), because it is the combination of these two resources that set us up to create Significance in the world around us.

The Poverty Mindset
Survival is a very strong instinct for starting a business. I’ve got a mortgage to pay. The fascinating thing is that most business owners live in survival throughout their entire 40 year career – poverty mindset – always living at the end of their two main resources – time and money.

They don’t have a Big Why, a reason to grow their business, so if they happen to make money, they just buy a bigger house or more toys to ensure they are completely out of time and money, and then the need to survive kicks back in to help then grow the business to support the new poverty level they’ve set for themselves.

The Big Why Mindset
Business Owners with a Big Why take paying their mortgage as a given, it’s just background noise for getting something done much bigger than making money. A Big Why is so motivating that it makes you want to get out of bed even when you’re not making money, and it drives everything you do.

Another client of mine said, “I knew when I had my Big Why, because it had me.” He went on to explain that once he had something much bigger than just making money to drive him forward, that he found himself making every decision, from buying a copier to opening a new location, based on whether it would get him to his Big Why or not.

The Big Why – something you can never check off as done
A Big Why is a goal you can never check off as completed – being the best parent, solving poverty, giving every month to a charity, making an ongoing impact in the world of technology (Bill Hewlett’s Big Why for starting HP). Those who have made the biggest impacts always do it with a Big Why, not with a desire to make money.

What is Your Big Why
What is your Big Why, that motivator that you can never check off as completed? Every great business owner has one. If you’re wondering why your business is stagnant or that you’re just going through the motions, don’t look “out there”. Look inside and ask yourself, “What is my Big Why”?

If you do that, you’re much more likely to grow a very successful business that leaves a legacy that will endure. If you don’t get Utter Clarity on your Big Why, you’re likely to stagnate and go through the motions.

Run and grow your business with a Big Why. It’s a lot more fun.

What to Obsess About as You Grow

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(not profit)

Startup is all about proving you will make a profit someday soon. Once you prove it, you need to forget profit and focus on other things. If you don’t, you may stagnate or go out of business, ironically by focusing on profit.

Too often I see business owners who have worked hard to build a profitable business who never get off the treadmill. The problem is that when the business finally makes money, the founder too often hunkers down and protects their profit, when what they really need to do is move to a new stage – forget profit for a time and focus on growth.

At startup, if you don’t focus on proving your product or service can be profitable, you’re employing the Random Hope strategy of business. But once you’re there, if you want to grow, profit will shrink. It almost always does. Growth usually erodes profit significantly. If you’re focusing on profit, you’ll never want to grow, and you’ll never build a sustainable business.

When growing, here’s some things you should focus on instead of profit.

1) Product development – make it better!! Don’t settle for what worked to get you into business. Be relentless in developing an even better product or service. This could cost you some profit. It’s worth it.
2) Great people – great people are not an expense, they are an investment. Forget your profit, take a lower salary yourself, and get a couple great people. They will help you build a sustainable business, and you will grow much faster with a few key people doing things you’re not good at doing anyway. This will sacrifice short-term profits.
3) Logos, website, marketing materials. Too many businesses make the mistake of focusing on these things when they start (see last week’s post on why that’s a bad idea). But once you know you’ve got something, build a consistent face for your business.
4) Infrastructure (software, leased space, conveyor belts, computers, a bigger truck, etc.). When we cripple along and “make due” because we don’t want to hurt our profits, we are not thinking straight.

Focusing on profit, instead of growth, simply mortgages our future for short-term profit. We sacrifice much higher profits in the future because we’re not willing to take a break from profits to build the business.

The profits you were making early on need to be re-invested in the business in the form of a continually improved product, great people to build around, good messaging and marketing to expand the reach of your business, and infrastructure to support the growth.

Principle #1
Ask yourself this question: “Are you making decisions based on where you are, or where you want to be?” If you are making decisions based on where you are, where do you expect to be next year, or five years from now?

Principle #2
Don’t “go” into business, but “grow” into business.

Don’t spend money on the above things until you know you have a product or service that has proven it will be profitable. Don’t take loans out to build something early on that you haven’t proven has legs. But once you have proven it, then it’s time to make the investments that will take you from short-term profit, to a long-term sustainable business that makes money while you’re on vacation.

Prove profit. Then shift from profit to growth, and know that growth will cut the heart out of your short-term profit so you can build a long-term profitable business.

What to Obsess About at Startup

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And why

Most business owners obsess over the wrong things at the wrong time, costing time, money and even the business itself. What should you obsess over? When?

At startup we obsess over three things we shouldn’t:

1) The beauty and design of our product.
2) The beauty and design of our marketing (logo, business card, complex website, wrapping our van, etc.).
3) Focus groups, or other outside opinions that don’t involve someone’s wallet.

These are not things to obsess over at startup. They come later (in a future post we’ll discuss when these things become more important).

What should we obsess over at startup?
1) Sales – Are people buying right now, without fancy marketing, fancy packaging, or a fancy logo? Sales is NOT a focus group of people SAYING they would buy it, but cash actually exchanging hands. If this isn’t happening, don’t bother with a logo, website, focus groups or making the product prettier.

Nothing matters if people aren’t willing to buy the product long before it’s perfect. If the basic product isn’t enough to draw people in, then all you’ll be selling once you make it pretty is – “it’s pretty”. Google, Facebook, Basecamp, the automobile, cell phones, printers, TVs, radios, movies, cosmetics, you name it – none of them were very good when they came out, but sold anyway because the basic idea was really good. They got pretty later.

Focus first and foremost on selling a first generation product or service. If it doesn’t sell without the bells and whistles, the bells and whistles are very unlikely to make it sell more.

2) Close Ratios – How many Connections become Buying Conversations become Customers? Do I know the “close ratios” of Connections to Conversations to Customers? If I don’t know these numbers early on, I have no clue how to grow my business. After “Does it sell?”, nothing matters more than your close ratios. Knowing these defines all of your most important activity about how you will find customers in the early stages.

Example: I need 10 new Customers a month, which means I need 30 Buying Conversations (33% closing ratio), which means I need 90 Connections (33% ratio). If you don’t know how many people you need to reach to make a sale, you’re employing the Random Hope strategy of business. Good luck, because luck is all you’ve got.

3) Profitability – not “Am I profitable right now?”, but “Will this product/service be a profitable business?”

I worked with one client who I encouraged to make a few prototypes quickly, and take them out and see if they would sell. Instead they did focus groups, spent tens of thousands on product design, focused on product name, logos and branding, and put together a highly complex integrated marketing program with a great website, email campaigns, social media, etc. The product did not sell.

Marketing is what you do AFTER you have a viable product that sells on it’s own merits. Marketing will not make it sell, or will only make it sell nominally enough to fool you into staying in business.

When I started Crankset Group, for almost the first year I had no business card and a simple billboard website (1/2 page-no scrolling, almost no info, one email address), just to prove that most businesses don’t need marketing at first. They need to sell something.

Marketing is not the key to selling your product. Producing something that people want to buy before it’s beautiful is the key. If they will buy it when it’s slightly rough, they’ll love it when it’s refined.

At Startup, Profit Potential is Good
And don’t be fooled if your product or service sells like hotcakes right out of the gate without good marketing. Check your pricing and make sure this business will be profitable.

A few years ago in the TV series “The Office”, Michael Scott started his own paper company. He was able to pick up a lot of clients very quickly, seemingly proving he had a great business. Then his accountant told him that his pricing was too low and the more clients he landed, the more money he would lose.

Top line revenue is not profit. Profit is the number at the bottom after you pay for everything else. Because you may have startup expenses, you won’t actually see profit right away, but the profit potential must be very clear from the outset. Get outside eyes on this (i.e., accountant). Like Michael Scott, you almost certainly will be clouded, believing you see profit potential where there is none.

Sales, Close Ratios & Profitability Potential
People buy great marketing only once. If your product isn’t sellable without great marketing, it will die quickly. Word of mouth is the most powerful marketing you have. Make something people want, and serve them as they buy it. If it sells and it will make you profitable, then you can employ marketing to expand the reach of a product that is already viable.

Next week we discuss what to obsess over after you begin to grow.

Every Business Owner Should Have Freedom Days

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Do you?

The business owner’s game: “How do I make MORE money in LESS time?” Profit AND Freedom. The practitioner only gets Profit (at best). The business owner gets both Profit and Freedom Days. What are Freedom Days?

The Industrial Age gave us great toys, but stupid ideas about success. The Industrial Age assumption was that if you made money, you somehow would magically get time, too. “If I just had $10 million dollars, I would have a great lifestyle.” It never happens. Never.

You get what you intend, not what you hope for.

If you intend to make money and hope for time, you’ll only get money. I know a lot of very rich people who bought the Industrial Age assumption that money would buy them time, and they never have any.

What is a Business Owner?
I reserve the title “business owner” for those who intend to have both time and money, not just money. Money makes you rich, but only time and money together makes you wealthy. Freedom is the ability to choose, and it takes both time and money to create freedom (wealth). Without time, you don’t own the business, the business owns you.

If you have time, but no money, your choices are very limited. If you have money and no time, you’ll never have the life experiences you “hoped” money would buy you.

Most conventional wisdom would consider a business that continues to produce more revenue every year “a good business”. But unless it also produces more time, it’s just a fancy hostage situation.

You get what you intend, not what you hope for.

Any Business Owner Can Do This
We’re seeing business owners all over the world changing their intentions and throwing out the Industrial Age assumption that money would buy them time. They are now very intentional about their business producing both, and they’re getting both.

When I started this, my sixth business, I was tired of not having time. This time I intended for Crankset Group to make me both time and money (wealth, not riches). In order to get both, I decided I needed to be ambitiously lazy, which means I would have to be willing to work really hard on the front end to get more time on the back end.

A Day a Week, A Week a Month, A Month a Year
I worked 6-7 days a week the first year, 5-6 the second year with a handful of Fridays and two weeks off, five days a week the third year with a lot of Fridays and a number of weeks off, and in the fourth year almost every Friday off and six weeks.

In the fifth year of the business I get what I intended – every Friday is a Freedom Day – I can choose what to do with it. The fourth week of every month is a Freedom Week and once a year we take a Freedom Month as well – a day a week, a week a month, and a month a year.

Bonus – I didn’t intend it, but I also get a couple Mondays a month and the 13th week of each quarter. Add it all up and it’s about 60% of the work days in a year.

Freedom to Go On Vacation, or Whatever
What do I do with that time? Somebody might use it all for vacation, but that would never work for me. I use a lot of it to do productive things outside my regular business – running a second business in Africa, writing more books, traveling and doing keynotes and workshops to build 3to5 Clubs around the world. Over half of the work year I can choose (freedom) to either travel and help other business owners with their business, or take that time off.

Get What You Intend
In my first five businesses all I got was money. That’s all I intended to get. In this business I intended for the first time to get both time and money – I now get both.

Freedom Days rock. You get what you intend, not what you hope for.

What do you intend to get out of your business? You’ll get that.