Honesty of the Successful Business Owner
Having the right mental state for success is largely about honesty. Honesty with yourself about how things are really going with your business. This one is a hard one for everyone: Is what I’m doing working? Is my business investing in growth or losing money hand over fist? Is this employee improvement plan truly working or just putting off the inevitable? The hardest part of being a business owner is differentiating between not working at all and not working yet.
Successful business owners take risks and give those risks a chance to play out. But not just any risks, they take calculated risks. Growing your business is no minor feat, you must take time to realize the gains you’re experiencing and then pivot if necessary. Pivots are an incredible innovation tool, but they can also be costly. If you pivot in the wrong direction and take too long to realize that you were going the wrong way, it can kill your business.
The Right Role for Your Successful Business
Why do businesses go out of business? While there are plenty of reasons why a business may have to close its doors, there are a couple of reasons that seem to be the most common.
- Lack of demand for the product or services
- Lack of cash to keep going
Without customers that pay (revenue) and a business model that works (is profitable at the correct scale), you do not have a business. You don’t even have a nonprofit if you can’t get someone to believe in your cause enough to give you the capital to continue doing your good work. Businesses must (eventually) make money to survive.
Building a successful organization is about finding the right role for your business and the right way to execute that role. There are tons of books out there about growing revenue, acquiring customer retention and building lean businesses, i.e. not bulking up your management team and overall costs too quickly, but are they worth your time?
The concept that I find lacking in a lot of startup books (probably because they were written by operations or salespeople, and also because the topic simply isn’t sexy) is the bottom line. If you read a textbook on starting a business the first thing they’re going to tell you is that you need capital (cash) to get a business started and after that capital investment—for a start-up this may be multiple capital investments over time—generate cash flow to keep going. It’s one of the basic tenets of business, but it’s often glossed over in start-up or get-rich quick books.
Successful Businesses Aren’t Built Overnight
The other thing mentioned a fair amount but not taken seriously enough, even by myself as an entrepreneur, is that durable businesses aren’t built overnight. We often hear about the eight-year overnight successes. That’s because it takes time to build customer trust and to pivot until you find exactly the right service or product for your customer’s true needs. Plus don’t forget finding the right people to provide those products and services can also take time! And the reality is, in order to survive eight years, cash flow is going to matter.
Even the most understanding of investors (or spouses) will question a lack of income over an eight-year stretch in the life of a business. So the target of any business from the beginning always needs to be to find a way to be sustainable (cash flow positive) in the not-too-long run. For all of the businesses I have started in my career (all of them bootstrapped) I have given myself a three-year timeline. If I’m not profitable within three years, I’m closing down the business.
Successful Business Owners Dig Into the Data
I’m not saying you have to be a math whiz to run a successful business, far from it. The key metrics that you need to focus on are actually pretty straightforward. See my recent post on what makes a successful business, you probably know a heck of a lot more than you think you do. But ignoring that pit at the base of your stomach due to fear of financials or avoiding them to the point where you refuse to look at the numbers because you don’t want to feel discouraged about your business (you know who you are), that’s not serving you.
Avoiding the worrisome indicator that your customers aren’t sticking around for more than a few months or that revenue has been slowly declining for years, isn’t serving you.
It’s time to rip off the Band-Aid, get the help you need to understand what you are looking at, and dig in.
Ready but don’t know where to start? Hiring a CFO is a great way to grow your knowledge and start working proactively on your financial future.