The second step in building a 100 million valuation company over 20 years is ensuring that the company is built with a system of delivery.
Over the next 20 years, the company will go through 4 phases that work into each of the 5 years: Start up, Scale up, Ramp up, and Value up.
What we said is that a business that will be able to achieve this has five layers, built in sequence, one on top of the next. The first layer is positioning, and that asks: Why do you exist? What makes your business special in the eyes and experience of your customers?
Positioning is about saying, “let me not be greedy”, let me understand what industry I’m playing in. Let me look at the universe of all clients and customers that make up the industry and then let me find three or four slivers of clients who have the same problem, emerging in the same way, that my product can solve.
Instead of saying I define my business by the features of my product. Let me rather say I define my business by those three or four niche little slices of customers who are similar in their behaviour around how my product can solve their problem; how they wish to learn about me; how they wish to be engaged with me, and when they do become customers, how they wish to be serviced by me. That is layer one – positioning .
In this podcast of the Money Show, Pavlo Phitidis unpacks the second layer of valuation in building a 100million business over 20 years;
The second layer of valuation, is about building systems, which is a process you must begin almost immediately. To give an example, Pavlo met with a business owner whose 40-year-old business specialises in brick laying. So how does this work? The business owner organises groups of people, often referred to as gangs. These are made up of three people; two bricklayers and one individual who does all the mixing of the cement. Depending on the building site that he enters onto, he will organise a gang or three gangs or seven gangs to get the job done on time. What was so interesting about this individual?
The fascinating thing about this business is that laying a brick is not just simply laying a brick, because there are various forms of bricks and the ability to lay these bricks in a fashion that works with the architect’s vision of what the home or the building looks like is vital.
Another interesting thing is that it’s a family business and the father has now bought his daughter and son into the business with a view for them to take over from him. T daughter has a quantity surveying qualification and the son is learning directly from the father about the business operations. However, for the succession of this business, there need to be systems in place and the business needs to be built on a system of delivery, which is essential for the success of the business.
Like the brick layer, building a system of delivery is essential for building your business. Start by listing all the activities you perform and note them down. In the first five years of the business you’ll be working on getting those lists right. Start with how you market your business to your customers, how, when they engage with you, you take them through a process of building their confidence that you can deliver the work. That’s what selling is. And when they eventually come on board, what is that process? What are the activities? What are the checklists that you need to build to make sure that you deliver the service as you promised? It takes five years to get those checklists right. And that is the first five years of the start-up period in building your system of delivery.
Once you have got those lists in play, you are a quarter of the way there. At that point in time, you’re now getting money in consistently because you’ve positioned your business smartly and successfully. You are now finding yourself working 15 hours a day because it’s you who is managing all the activities in the business.
And from there, you move to the next phase, which is where you scale up. Scaling up is where you identify those individuals in your team who’ve got potential and you give them those checklists showing how they must go about marketing the business, how they must go about signing and securing clients, and how they must go about delivering the service to those clients.
The checklists help to gain measured outcomes and are very useful in the early stages of effective delegation. To get that right takes time, because most of us in business think that we are delegating by issuing instructions to our team to get the job done. Effective delegation needs to be how you get the job done rather than just get the job done. And how you get the job done is going to be specified in those activities that make up the Systems. When you get to a point where you’re really gunning it in the market and getting a great response, those good customer experiences that you want to consistently deliver are supported by systems that your team runs and operates. Whether it’s one, two, three, five, fifteen, twenty or more Without those systems to deliver, bad customer experiences quickly erode the five, ten, fifteen, and twenty years of effort, risk, and love that you’ve put into your business