First, I’m assuming that you want to grow. If not, you will lose what you have. Look at it this way:
If you have a business with revenues of 20,000,000 and profits of 2,000,000, a starting valuation of your company would be around 10,000,000. Yes, a 5 multiple of EBITDA (and that’s generous in todays economy). With inflation running around 10%, not growing your company will see its value depreciate to 9,000,000.
To maintain its value, you need to grow it at inflation plus economic GDP growth plus industry growth rate plus currency depreciation. It rounds up to about 15%. To grow it, add a few percent (depending on your ambition) and you’d need to close out 2023 with revenues between 23m-25m if you maintained the same profit margin.
To set yourself up for this outcome, here are 5 questions you’d need to answer to set yourself up for growth in 2023.
1. What is your destination? – 2 years from now, what does your company look like? If you don’t have a destination, much like a ship at sea, you will run out of food, water and fuel. A destination is a measured, specific outcome. Last week we spoke about building a business backwards, starting at a destination 5-15 years from today and seeing what needs to be done tomorrow to get there.
2. What business are you in? – lead with the need. It changes every time there are changes, and both parts need to change, commodity and commerce. Customer behavior is changing rapidly as the business environment changes. The way consumers are behaving today is very different to the way they did 2,4,6 years ago. Between then and now, trade friction and political uncertainty arrived, covid smacked us all in the face, a war broke out causing energy to spike, inflation and interest rates have subdued everyone and on it goes. The ructions and shifts in our world are unlikely to stop and return to a predictable calm normality. Understand your business not in terms of products, but problems and experiences that are constantly changing with the changes in the environment. , You need to constantly be responding.
3. What can we stop doing? – Simplify. A piece of research was done, around 2007 on multitasking. It showed an intellectual attention drop of 38% when you multitasked. Sure, you can get a job done but the noise, diminished attention and incompleteness of it often requires rework or revision to optimise the outcome. Simplicity is essential to scale, concentrate attention, accelerate learning cycles (per the point above) and give you a return on time. Dabbling will compromise you every time.
4. How can we increase dependability? This means both reliability and consistency. Understanding what business you are in offers you the blueprint of how to engineer and design your business to deliver dependable outcomes in marketing, sales, fulfilment, and administration. Don’t be led by urgent matters, be driven by important ones.
5. What is the shared team vision? Go with your team, not alone, including them in the 10-year, 2-year, 6-month, and monthly goals. An engaged, motivated team that is accountable and self-led. This is especially important in a world where skills are in short supply.