- Tech & Gadgets
- BRW. lounge
Published 23 August 2012 04:53, Updated 23 August 2012 05:49
In this challenging time for business, there is an unusually high orientation of business owners to be looking for the next big thing.
While innovation and evolution is an imperative part of any great business, the core hidden assets are often undervalued by business owners.
By this I mean, the core services or products, which while they may not be the most exciting part of the business, are often the most stable and reliable parts.
I have been working with a great retailing client who has been successful for many years. Their business meets the needs of its customers; it matches the pricing of its product with the value assigned to it by its space.
When things got difficult in the retail environment for the business, it stuck to its core products rather than chasing the next new thing.
This has seen it get through and remain stable through this challenging time for the retail sector.
These guys have been smart enough to hold off chasing growth so as to protect their core business, which now gives them incredible strength to gain market share because of the confidence and strength that they justifiably have in their long-term business.
We hear the saying “take your eye off the prize” all the time but the real thing business owners are confronted with now is what actually is the prize?
From two points of view, is the prize to continue growing at 20 per cent a year or is it to ensure survival, to live to fight another day?
One of my long-term clients taught me when I was very young that same equals same, meaning that if we do our business the same way that we did last year, with the same people and the same products that we as business owners should expect to get the same results.
Admittedly I was taught this in the 1990s which was coming off the recession and bounding into strong economic prosperity.
The way the saying worked was that if you don’t change, you will get the same results as what you did the previous year.
However, in a tough economy, if you did well the previous year and there is risk of regression, then the theory of same equals same can actually be a haven for businesses sticking to what they know and not risking the core of the business to always be chasing growth when the foundations may be shaky.
The trick is to know when to go for it and when to hold back and this is not easy; particularly as most business owners are emotional about their business, which clouds their judgement. Modern day key decision making is all about this.
I was given a great article to read on “burning platforms” recently. It’s a Harvard Business Review article that has been amplified over the past 20 years.
The thinking I’ve described is in alignment with this article because it deals with the decisions that a business leader must make and the speed with which they must act on the presumption that they are standing on a burning platform. If they do nothing, the result is certain failure.
I am all for opportunity and seizing it, but there is little point putting work into the roof of a structure, if the foundations are not secure.
Here’s a step by step set of questions that I ask myself at almost every business advisory strategy session that I undertake for clients.
1. Will the choice made deliver immediate positive cash flow?
2. If point one fails, how much available working capital and security is available until it can be made good?
3. What increments to enterprise value should take place as a result of the choice?
4. What is the impact on the business if we don’t go ahead and keep the status quo?
5. Do I have everything in place to support the decision I make (staff, product, and resources)?
If the answer to any of the above is a conscientious no, then that is reason enough not to proceed with any changes in your decision analysis.
Next week: Freelancer.com founder Matt Barrie