The personal cost of leading a standard of excellence

Resurrection is a very long, five-season series about the establishment of the Ottoman Empire. The central character, Etugrul, faces unbelievable ordeals to seed the Turkish State. It’s set in 1200 AD and cleverly presents the many, many challenges the hero must overcome to make it all happen. Among all the bloody battles energized by corrupt, nefarious characters, the toughest was his discipline of his childhood friend and closest, most loyal confidant, Bamsi.

Etugrul directed Bamsi to hold a position in a battle and then followed him to conclude the main battle. In the chaos, Bamsi decided to chase the Mongols who intended to kill their horses, which would have left them all trapped in the Mongol territory. He saved the horses, but Etugrul faced a major battle without backup.

Back at his tent, Etugrul stripped Bamsi of his rank and title. It was painful and dreadful to watch. As a leader, he had to communicate through this action the principles and standards that he had set, his tribe stands for justice. Walking the talk came at a high cost.

Listen to this podcast from The Money Show where Pavlo Phitidis unpacks excellence in business.

Can you afford not to set a standard of excellence?

It depends on how you see your life. The only things we control are the present moment and the future, and it’s all a personal choice. Many businesses generate income for their owners and create a good lifestyle. Few become truly excel despite having the potential to.

It’s a tough call to make.

A lifestyle business can certainly give you just that, a good lifestyle. As it suggests, work is work, and play is play. A balanced life is how it’s sold and very often actively and widely supported and promoted, challenging you with questions such as “how much is enough?”. It’s a subtle but determined intention to keep you at the collective level, since surpassing that collective level might imply comparative failure for those who don’t. Striving for excellence is equally a choice, and it’s far easier to make it if you love what you do and do what you love. This sounds ideal, but it’s not.

How do you set a path toward excellence?

Excellence needs to be superceded by a vision of what you want to achieve and why you want to achieve it. The cost of excellence becomes an investment in excellence and your life if it has meaning for you. And meaning can be fragile. If you find it, attach to it and don’t share it too widely. People will challenge it jealously, and on the tougher days, you can waver and allow doubt to erode it.

Next, you need to establish a standard of excellence. For example, in competitive sports, you measure your team against many others. What then sets your standards of excellence? Is it the number of clients or the rating from clients?

Motivating and engaging your team is essential to setting a path to excellence. If you have your leadership team inspired, and they in turn inspire their teams, you can, for example, challenge your team to raise the standard of their team by 3% per month. Twelve months later, that team is functioning at a 36% higher level of engagement. Three years later, your expectations have risen by more than 100%. Make the number 3% your mantra!

Succession

In family business succession, excellence is tested to the extreme. How do you involve your family in the company? Should you? If you bring an incompetent loved one into your business, what does this say about you, your vision, and standards? And how does it make your team, especially those committed to excellence, feel and rethink their futures with you?

Dealing with a rock star

Does a commitment to excellence allow you to have rock stars in your business? Top performers always want different treatment. The thing with standards is that they create the framework against which reliable, consistent, and dependable decisions can be made, and therefore leadership ones as well. Do you demote your Bamsi when the fragile principles and standards that everyone has come to rely upon are compromised in your journey to excellence?

“A 3% increase in standards per month adds up to 36% improvement in a year, and in 3 years you can raise the bar 100%!”

Succession Success

In business, handing over your role is a key imperative to growth and wealth creation.

It means the transfer of responsibility of parts or all the business from yourself to another person or team.

Continue reading

wealth

Creating wealth through your business

Wealth describes an abundance of a desirable thing. It could be friendship, love, money, access to a foodstuff and so on. From the context of a Business Owner, what does wealth mean and how do you create it? In conversation with Bruce Whitfield on 702 and CapeTalk, Pavlo Phitidis defined the three components of wealth creation in the context of a private business.

BEFORE WE BEGIN, THINK ABOUT MONEY AS WATER

You are simply the custodian of it for a period. When you make it, you either store it or use it. Stored water eventually evaporates or stagnates. Used money is either wasted or generates more value for you.

In this context, a business should be built as a perennial spring. Well designed and built, it should produce water consistently. Your use of that water should be well considered. Fertilise and feed productive lands that bear fruit. Bad investment decisions see the money made lost like watering barren soil with old seed.

MAKE MONEY

Money in a business takes two forms:

FREE CASH

Money in a business sustains and grows the business. the money made needs to cover all your expenses. Thereafter, you pay yourself a salary to sustain yourself and your family. Any money left is profit, which should come to you as dividends or be used to invest in the business to accelerate money-making. This free cash can also be used to deepen the value of the business to generate future money. This happens by increasing the value of the business’s equity.

EQUITY OR CAPITAL

Equity holds the promise of money. It is in the value of the business should you decide to sell the business. Built right, a business can be sold and for a premium value to generate a capital gain. This will be the difference between the cost of your initial investment to establish the business and the price you sell it for.

As a business owner, you can build a business to either make money or grow equity or both. To get this right, you need to build your business into an Asset of Value. This is a business that has the following criteria:

  1. It has a good strategy that sets it apart from competitors
  2. It generates steady, reliable sales
  3. It has a well-organised delivery capability
  4. Its people are purposeful and motivated
  5. Banks and funders love it. It’s saleable at a premium price on a clean transaction

Building your business into an Asset of Value will see revenue grow at a higher rate than your costs. This gap generates the free cash to make money in the business.

GROW YOUR MONEY

With money made, you need to now make it work for you by growing it.

You can grow it in your business. by making smart investment choices. This might mean an investment into plant and equipment or people and software etc. Many business owners make their biggest mistakes here. Knowing how to invest in your own business is not as easy as it sounds. You can also invest outside of your business into stocks, bonds, shares and other assets. In all cases, these investments must make money for you.

PROTECT YOUR MONEY

Get smart with insurance and tax management. Insurance, as annoying as it can be, protects you from probable and improbable risks. Imagine, for example, your fleet of trucks gets written off in a fire, without insurance to fund the replacement fleet. It will set you back years if not permanently. Also, some investment products serve to protect money drains like tax. You can legally manage your tax rate down on a personal level by investing in retirement annuities for example.

Wealthy people did not get there in a single generation. Nor did they get there through one activity. Sure, we read about some business people who cracked it and got lucky in a single generation, but they are, by far, the exception. Strategy and habit are what builds wealth. Strategy means being clear on how to make, grow and protect your money. Habit is doing and behaving in this way ove

 

© 2003-2021 Aurik
Aurik and Asset of Value are trademarks of Aurik