This Week@Work 86 established business owners voiced their big challenges at a scale-grow full day workshop.
What are yours?
This Week@Work 86 established business owners voiced their big challenges at a scale-grow full day workshop.
What are yours?
This Week@Work: Big event-based income generators consume you and the business for their duration and usually leave nothing in their wake. It’s high-risk and unsustainable beyond your involvement.
If your business is based on a few big projects, where do you look to find ways to build annuity income that will smooth out your revenue, capacity, and attract ongoing income from the same clients – as well as help to attract new ones?
In this article, first published in Elite Business, Pavlo Explores: Being wary of false prophets and white knights as you scale and grow your business
Exhausted, frustrated, driven business owners are vulnerable to false promises. We encounter various individuals claiming to have the solutions we seek, often leading us down costly paths. Let’s explore some of the most common pitfalls, look at how to avoid them, and design your business to scale and thrive.
One group to watch out for is software salespeople. We all have strengths and weaknesses when it comes to managing our businesses. Software solutions, like Enterprise Resource Planning (ERP) systems, promise to address our management shortcomings. However, it is crucial to approach them with caution. Many providers offer comprehensive solutions, but purchase, customisation, and training costs can be significant.
Before investing, we must map out our commercial system that marries and matches how you have positioned your company to provide an exceptional customer experience. That blueprint should guide your ERP decision, not the limitations and capabilities of the software itself.
Another common pitfall is hiring team members based on their charisma and passion. We are all vulnerable to slick promises that we can see could fill gaps in our capabilities or business activities when hiring new employees.
To make informed decisions, precede your hire with a clearly defined job function. Beyond asking ChatGPT to spit one out for you, design it yourself, aligning it to your positioning. Any and every job should shape up into a system of activities, and all should integrate to create a single customer experience across and through your commercial system.
It enables you to recruit more effectively, capacitate faster and turn this significant investment into a return more deliberately.
Collaborations and deals with external parties can hold great promise but also carry risks. Many businesses have fallen victim to partnerships that did not deliver the expected results.
Be clear why you are doing it.
A recent study indicated that around 84% of mergers and acquisitions failed to yield the value that seemed to justify them in the first place. And when partnering with someone or an organisation, besides first assuring alignment and non-compete parameters, dig into the detail of who does what, why, when and how. Then, dig further before inking an agreement.
Selling a business is a significant milestone but often fails. Flattering statements and attractive numbers from potential acquirers may grab our attention. However, conducting thorough due diligence ensures buyers’ credibility and protects our years of hard work. It’s an obvious, bland statement, but do it! Arm yourself by mathematically understanding your business’s value and securing a body of evidence to back that up. To secure a clean exit, negotiation must be pragmatically informed, not emotively driven.
Family and friends
While well-intentioned, relying on family or friends to solve business challenges can lead to difficult situations. It becomes particularly challenging to part ways with underperforming relatives or friends.
It is crucial to separate personal relationships from business decisions. By maintaining a clear delineation between personal and professional spheres, we can make strategic choices based on merit and the best interests of our businesses.
Building and growing a business takes time and effort. By being aware of your vulnerabilities and these common pitfalls, you can save valuable resources and maximise your chances of success. Trust your instincts and stay resilient on your path to business growth. With a proactive growth mindset and a systems-based approach to building out your business, you can build your business into your greatest wealth-generating asset.
In this article, first published in Elite Business, Pavlo Phitidis digs into strategies to achieve accelerated growth – how to get it right (and avoid getting it wrong).
Recently, I had the opportunity to meet a business employing 58 people, growing at a steady 18% annual compound growth rate. Given the smooth ride they enjoyed in achieving it, I asked why only 18%? Why not double it?
They confessed that they sought to accelerate this growth rate through an acquisition they were mulling over. The target was a smaller business in the same industry.
Whilst growth through acquisition has its place, it’s equally fraught. Globally, the stats suggest that around 86% of acquisitions fail to deliver the promised value. There are a host of reasons. I’ll share the few that changed their minds.
Paying too much
Once the acquiring leadership team gets excited about its potential, they will overvalue it. If the company being acquired can successfully feed the buyer’s imagination, they tend to become increasingly convinced that the acquisition will be a silver bullet that would double up their company value in a couple of years. Great for the company being acquired, but a few months into the acquisition, the buyers are usually less thrilled.
Mismatched customer base
Defining the business you are in should be about defining who your customer segments are, what problems your product or services solves for them, understanding how that problem comes about and the cost of that problem not being solved, and finally, understanding how that customer segment goes about solving that problem. It’s not uncomplicated!
For example, the company I met with recently refers to their customer segment as “SMEs”. The last time I looked, the companies that make up SMEs are widely, profoundly and deeply complex. Be it industry, size, age and capability of the owners, location, business model, sector trends and many other variables. A lazy or superficial definition of the customer segments you serve will create a torturous marketing and service fulfilment outcome that keeps you tightly knit in the daily-weekly-monthly operational activites of your business and collapse your productivity. Misaligned or misunderstood customer segments in acquisitions compound this trauma tenfold.
People are the heart of any business, and most stay at a company because of its culture. It is the glue that holds things together, especially in smaller businesses. How do you come to understand a company’s culture? If you rely on the values presented on the website or stencilled on the reception wall, you might find yourself in hot water. When two bodies of water with widely differing temperatures come together, they catalyse a thermocline, repelling each other. Mismatched cultures infamously poison the wellspring of most acquisitions.
Given the nature of this steadily growing business and its large span of control, which already had leadership too involved in operational activity, we opted to take another approach to double growth.
In 3 months, we created two management roles to release the time of the CEO to become an actual CEO rather than a general manager, the commercial director to become an actual commercial director instead of an operations manager and the head of business development to move out of operational sales into building a team. Today, we have ‘locked and loaded’ the company to eat their competitor’s lunch rather than buying it for them. Let doubling up growth begin!
In this article, first published in Elite Business, Pavlo Explores: Crafting a Strategic Growth Plan for Success in Today’s Economy.
The Ukraine invasion, global supply chains, chip wars, trade ‘wars’, COVID hangovers, access to skills and grumpiness have heavily impacted our economy. Add inflation to a grumpy mood, and you, not the state of the economy, will kill your business if you allow it.
Let’s prevent that!
Plan to plan, but no plan yet.
If you are stuck here, you will develop an irreversible aversion to risk and a mindset that only sees risk and reasons not to act. A year back, I met the owner of a second-generation family business in the construction sector. He enjoyed a reliable £13m annual revenue, up and down a few percent for the decade preceding covid. Since then he has wanted to regain his revenues and dividend flows. Still, it remains talk, unable to commit to building a growth plan. Perhaps a decade of comfort atrophied the muscles needed to act amid his competitors enjoying record growth over the last 3 years.
Should this be you, sell your business before its value erodes further or act now. Here are two options.
Act to sustain your value.
In February, I met the owners of a once beautiful £21m revenue business. In response to the strain of their overheads bearing down on them, both partners dove back into operational sales. Spinning rolodexes, bouncing between their digital platforms, CRM and debtors book helped find, win and hold customers. It’s an exhausting and chaotic strategy, and they are reclaiming their £21m.
It’s not sustainable, and it’s not enough.
To maintain their 2019 value, they need growth to meet the corrosive elements of business value. They include:
Inflation – at 10,1% in March, robust inflation is likely to overstay its unwelcome visit. As business owners, we should look to open our upside and protect the downside so let’s expect the promised 2% target to arrive only three years from now.
Currency – our currency’s value is driven by relative inflation and belief. Technically, the gap between our inflation rate and that of our peers drives the relative depreciation of our currency. This gap runs around 4% at the moment. It is then either depreciated or compounded by the belief and trust in Britain’s ability to grow and attract investment.
Industry Growth Rate – Industry growth rates are, at best relative and as speculative as any revenue forecast a business owner presents to investors. Many factors weigh in on this number. For the benefit of a simple calculation, let’s assume that your industry is expected to grow at 2%.
Adding up the numbers, to maintain the value of their company, they need to grow their £21m by 16,1%.
After running these numbers, the mad flurry of activity undertaken by the founders paused. They boldly and purposefully replaced it with the following plan.
Plan to scale, grow and dominate segments in your industry
While 16.1% feels like a considerable number, scaling, growing, and dominating a few segments in your industry needs more. At least add another 3-5% to boldly set your year-on-year growth at a minimum of 20-23%.
A tough economy rewards companies that respond on the front foot ahead of the changed lived reality that their customers and clients face.
Start by revisiting which customer segments you wish to dominate and reset your product-market fit to meet the new experiences demanded by these customers. Next, articulate these experiences into your commercial activities, processes and systems. Done with your team, not alone, helps create accountability and enables effective delegation.
The result will be a simple, relevant, crisp strategy defined against a well-defined market segment. It will be a commercial system honed to service that market, empowered and led by a purposeful team. It will generate organic growth and resuscitate the value and dividend stream you once enjoyed. Valuably, it will release your time to lead the 20-30% that this economy offers.
Yup, I know, I said 20%. However, done this way, 30% year-on-year growth is likely, so why not!
In this article, first published in Elite Business, Pavlo explores why a brilliant product or service is not enough to build a brilliant business.
Recently, a vociferous and highly talented founding team convinced me (and themselves) that they had built a globally competitive product. Yet, sales were stalling, and the grind needed to land a new client was bleeding their and their team’s passion dry. As exhausted as they were, so was I until the penny dropped: A great product does not build a great business.
Sometime during the late 19th century, a moment of inspiration came to Ralph Waldo Emerson, the American founding father, essayist, and poet. After witnessing a mouse escape a botched mousetrap, he wrote,”Build a better mousetrap, and the world will beat a path to your door”. In the late 19th century, he was probably right. There were relatively few products, and of those in the market, quality varied magnificently.
Emerson’s ghost visited me recently. It was the central thought in my brain as I listened to one of the founders give his take on why their product was exceptional, innovative, and globally competitive. Another founder shared her take on the market problem as one of education. “How do you convince customers of the value of our product when they don’t even know about us or understand how brilliant our product is?” she bemoaned.
It’s a common problem that many company owners contend with. Understanding why and how this problem occurs is essential to scale, grow and dominate niches within your industry. It’s vital to distinguish your brand and build your business into an asset that you can monetise through a premium exit in the future. And a great, world-class product is not enough to get this job done.
Every business has two fundamental parts to it. Both must be optimised, linked and integrated to create the complete experience any winning business offers. One without the other will fail your efforts repeatedly and eventually drain the passion and optimism that feed the drive and commitment that growth demands.
The first part is your product or service suite. And Emerson’s quip remains constant here. Every industry is overcrowded, and out of necessity, most of your competitors have built solid products and services. Trying to attain a product advantage by creating more features for your product or service won’t last or get you into a market on a sustainable basis. The primary job of your product is to solve a problem. A drill that cannot drill a hole will not build a world-class business!
Solving a problem needs tighter definitions in competitive markets. It requires a solid understanding of whose problem you are solving. For example, a drill used by an urban, single professional for hanging the odd picture needs a different proposition to a drill that aims to solve the problem encountered by a professional handyman.
This brings us to the business’s second half, which is essential to scale, grow and dominate. The product or service that solves a well-defined problem for a well-defined market segment must couple with a commercial system led by a motivated team to create relevant, well-defined customer experiences.
The question is, what creates a great experience? This, too, will differ depending on who you serve. Back to the drill. How a young, urban professional wants to learn about a drill, understand its capability, match that to the problem they want the drill to solve differs dramatically from the professional handyman. Additionally, how the engagement, buying, fulfilment and administration process works to deliver the product would differ between the two customers to create a complete and ideal experience.
Curating this experience requires a deep understanding of which customer segment you want to own. Then, narrow it further to understand precisely what experience they want to select your service above the many contenders. This creates the blueprint for your second half. It guides how you design, optimise and integrate your commercial functions into a repeatable, predictable experience. It is the key to accelerating your products and services to that market. This half of the whole business is arguably the hardest to build and the essence of a scalable service platform. Without it, scaling, growing and dominating a segment or three in any industry is a dream.
I recently reached out to Emerson’s spirit to update his coined phrase. “When everyone has a good mousetrap, you’d better beat the path to your customer’s door”. I’ll let you know his decision as soon as he responds. Meanwhile, the founders and their 48-strong team took it to heart. While it has taken some time, they are on a 17.6% annual revenue growth run rate, which seems unlikely to slow anytime soon!
In this article, first published in Business Leader, Pavlo looks to the white ant or termite to make a point about how inflation eats away at your business’s value.
The white ant, otherwise known as a termite, it’s a formidable little creature with an impressive set of jaws. They eat wood at a voracious rate and do so through the inside, not on top. Spotting them at work is only discovered when your foot lands on a floorboard and crashes through. It earned the term “white-anting”, analogous to how unforeseen forces unravel and disassemble efforts to create, build and sustain whatever it is you are doing.
White-anting aptly describes the corrosive impact of inflation on a business. Having last seen sustained inflation levels, in tandem with their ugly partner, rising interest rates, over 44 years ago, most of us would be far too young to remember the antidotes and counter strategies we can deploy across our business to sustain and, in fact, grow during such periods.
In this series titled ‘The inflation white ant‘, I’ll share six practical strategies to counter the corrosive effects of inflation on our companies and our state of mental well-being. I’ll draw the insights from companies I work with and share practical strategies and tactics to counter the value destruction inflation brings and the growth opportunities it opens.
It anchors you in the reality of the economy rather than a wait-and-see hopeful one. It also lets you see, feel and understand the changes inflation ushers into the economy, allowing for inspired and bold action.
The shock of our stubbornly high current inflation rate and the ongoing litany of dire economic news feeds uncertainty in decisions and actions. Yet, he who hesitates is lost, and the decision, no, the discipline of maintaining a growth mindset, yields inspired positive actions. It’s the difference between leading or following and stepping boldly into this economy on the front foot with the advantages that it brings.
Inflation erodes what you have at a compounded level. Hesitating to invest in growth today means the same investment will be more expensive tomorrow. Add to that the opportunity cost of hesitation or indecision.
I recently met a business owner considering investing in a new lathe. We ran the numbers, and the acquisition would collectively increase productivity by almost 7%. That increase lent itself to more competitive pricing, improved quality, and the opportunity to outbid competitors and grow market share. At that time, the media was filled with dire forecasts of Russia’s invasion of Ukraine, further driving energy and food costs. Doomsday Sayers weighed in heavily, accurately forecasting the inflationary prices we’d all have to bear. Hesitating, this business owner opted to wait for a more certain economic forecast.
March forward eight months, interest rates rose, and any possible debt funding dried up. The lathe’s price, including transport and commissioning, has increased by 15,8%.
They opted to invest in a new fleet of delivery trucks. The numbers showed us that the new fleet would increase productivity by an estimated 6% due to increased fuel efficiency, amongst other gains. It would also improve the company’s “green rating”, opening doors to EU-based clients that required such accreditations before accepting them as a new vendors. Nine months on, productivity improved by 4%, and they landed five new clients.
The differences between these two business owners are stark and lie in their mindsets. Both business owners live and breathe in the same economy. The growth mindset saw the future economy as an opportunity to act and grow in the face of the rising costs customers would face by getting ahead to improve productivity. As costs rose, he maintained pricing off the back of his reduced cost base. It earned him new clients, many at the cost of his competitors, that had to raise pricing. Literally ‘across the road’, the hesitation of the passive mindset lost the productivity gains that the investment would have ushered in time to meet the demand for improved pricing from customers under pressure.
A growth mindset is half what you need to thrive in an inflationary economy. The other half is a growth plan designed to capitalise on it.
When it comes to business growth, it’s important to shift our focus away from revenue and profit as mere indicators of success. Rather, revenue and profit should be seen as crucial triggers and indicators of change in a business’s development lifecycle. This is especially true if your goal is to build an asset, not just a job.
So, what are the criteria for building an asset? First and foremost, leadership plays a pivotal role in this regard. You need to understand what you want to achieve, why it matters, and how you can direct your resources to make it happen.
But how do you position growth within this framework? One way is to ask yourself the following questions: When should you pursue growth? Why is growth important to your business? What kind of business are you in? Let’s explore these questions in more detail.
Positioning Growth: When, Why, and What
Figuring out what business you’re in is essential for understanding how to grow. Take the example of Jack the Baker. Is he in the business of selling croissants or or providing a solution for fresh baked goods 356 days a year? Once you’ve determined the answer to this question, you can start to focus on the right kind of growth.
In this phase, revenue growth matters most, not profit
For businesses that are just starting out or looking to establish themselves, revenue growth should be the primary focus. It’s a crucial indicator of demand for your product or service and can help you build a solid foundation for profitability down the road.
Organic Growth: When, Why, and What
Organic growth is all about creating time to focus on growth without getting bogged down in daily operational activities. The goal is to achieve steady-state revenue growth that matches profit growth and tracks with it over time.
Accelerated Growth: When, Why, and What
Accelerated growth is all about dominating your positioning within a well-defined segment. This requires a strong understanding of your target market and a focus on profitability within that segment.
Next Level Growth: When, Why, and What?
Next level growth is all about de-risking your business by scaling profitability. It’s not just about profit quantum; it’s about ensuring that profitability is sustainable and that you’re not relying on one-time windfalls to achieve growth.
Capital Growth: When, Why, and What?
Capital growth is all about raising capital or looking to exit through a sale. It requires a focus on both profit volume (as a risk indicator) and profitability (as a growth indicator) to ensure that you’re building a strong, sustainable asset that’s attractive to investors.
When it comes to growth, it’s essential to understand the triggers and indicators that drive change in your business. Revenue and profit are crucial indicators of change, but they should be seen in the context of building a sustainable, scalable, and profitable asset. By positioning growth in this way, you can achieve long-term success and build a business that lasts.
This Week@Work Pavlo met with a large construction business who tried to smooth out their lumpy project based revenues by developing an out-of-the-box designer hut solution. Great idea, right? Then why hasn’t it worked?
Watch as he shares what went wrong and what we can learn from it about staying true to who we serve and how we serve them.
Watch to gain insights into the 4 types of growth that need to be put in place to build and lock the value in your business, and a suggestion on what to do beyond that, to secure your legacy.