Why do some businesses succeed, other struggle and some fail? According to a study by Robert Morris and Associates (who analyze thousands of business financial statements a year), in nearly every industry segment, the top 25% of businesses make 2X – 3X more money than those in the next 50% and 6X – 8X more money than the bottom 25%. Here are my observations as to why businesses struggle:
1.It’s a Tough Job.
•The job of a CEO changes as the company grows.
•The skill set for a $1M company is much different than that of a $3M company or of a $10M company.
•Most businesses will grow to the CEO’s ability to manage people and money.
•Being a CEO is one of the most challenging and lonely jobs in America.
•Planning is critical to success in business and most growing business owner don’t spend enough time in planning where the company is going. Most business owners spend more time planning their annual vacation than they do planning for the businesses future.
•Planning formulates the future. The planning process allows the people in your organization to anticipate and, therefore, shape the future.
•Planning motivates people. Everyone wants to have a part in determining their future.
•Planning establishes the organizational structure of a company. The planning process will clarify what people issues need to be resolved in a company. (Jim Collins – Good To Great).
•Planning promotes communications. For each area of a company to achieve their respective goals, they must cooperate and communicate.
•Planning established standards and goals.
3.Inadequate financing: lack of financial knowledge and lack of financial planning.
•It takes money to fund growth.
•Growth will stall when resources (cash flow) dwindle.
•Owners don’t understand or utilize their financial statements.
•Understanding the balance sheet is one of the keys that un-locks future growth.
4.Lack of Profit.
•Profit is the leading indicator of future revenue growth.
•Majority of business owners have little focus on profit.
•Tax accountants don’t understand business growth.
•No benchmarking of financial performance against peers.
•Target market not identified.
•No Unique Selling Position.
•No marketing calendar.
•No marketing tracking.
6.Hiring the wrong people.
•The right people enable revenue to grow.
•The wrong people will stall revenue growth.
•No system to evaluate, test and interview prospective or existing employees.
•No training/mentoring program for new hires and managers.
7.Miscalculating the competition.
•Know your competition.
•Know your competitive advantage.
•Know what is happening in your market.
8.Believing you can do everything yourself.
•You cannot know and do everything.
•Growth is a function of effectively managing people.
•Each stage of growth requires a higher level of sophistication and knowledge.
Growth & Profit Coach, Financial Strategist, Cash Flow Doctor, CEO Mentor