In spite of the frequent bad news about the number of small businesses that fail, thousands of small businesses are learning what it takes to survive and thrive, and are growing into successful enterprises. You, therefore, need to understand what you may be doing, right or wrong, with the levers of business success.
What is a lever? A lever simply refers to something that reduces the amount of effort needed to get work done, something that makes the work easier. In building a business, there are four levers its owners and managers must get right, namely, People, Strategy, Execution, and Cash. Let’s examine how each of these levers can make or break a business.
- People: A business is as good as the people who own and/or run it. Just as a fountain cannot rise higher than its source, a business cannot only grow according to the vision and capacity of the people in it.
The success of a business depends on attracting and hiring the people who would be responsible for bringing about its success. Successful business owners understand the importance of hiring and retaining the right people, eliminating the wrong and ineffective people, and providing the resources that people in the business need to do their work.
- Strategy: The strategy of a business is reflected in the decisions and actions which assist it in achieving its specific objectives. It is the master plan that the management of the business implements to compete in the marketplace, carry on its work, and satisfy its customers. The strategic direction of a business must be thought, spelled out, and documented, even if it is a one-page plan. Its essence is to provide a guide that defines and drives the behaviors and activities of the business and its people. In the absence of a strategic plan, the business will run on whims, without plan or purpose.
- Execution: Execution distinguishes one business from the others. The ability of a business to efficiently and effectively execute its strategic initiatives is a critical determinant of its failure or success. There is no value in formulating strategies to move the business forward if they cannot be converted into desired results. A successful outcome of this process can only be achieved by the people who manage and operate the business who, through co-ordinated decisions and activities, act together to ensure the success of the business. Execution focuses on the people side of the business, backed by a clear map of the road. It ensures that employees understand the priorities of the business and how to implement them, connect their personal successes with the strategies and priorities of the business, and demonstrate the skills required for achieving excellence.
- Cash: Cash is King. It is the lifeblood of a business. A business must generate enough cash from its activities to meet its expenses and have a surplus to grow the business and repay its owners. Beyond generating cash, a business must manage its cash, to ensure that it has the right amount of cash for its immediate and long-term needs.
Cash management is critical to business success and encompasses how a business manages its financing activities. Managing cash includes accounts receivable, accounts payable, and inventories. These help a business to determine the creditworthiness of its customers, follow up on late payments that could weaken the inflow of cash. It also helps the business to manage its unpaid bills, like paying suppliers later rather than earlier. The business also manages its cash by not tying too much cash in inventories while having enough inventories for the immediate needs of the business.
There you go. You have four needles on your dashboard. A close examination of your business will reveal what your business is doing right or wrong, and enable you to adjust and correct its course.