We recently held an international telecom discussing the key areas that businesses must focus on in order to sustain themselves. It was an interesting exercise, because it clearly emerged that not only are there business basics that every business should (and can) follow, but many companies have a tendency to forget the obvious.
Even medium-sized businesses are not immune. Forgetting the basics leads a business into chaos and, if not rectified, can mean a business slowly descends towards business rescue or worse, liquidation.
Here are the five rules that Sales Partners Worldwide came up with in terms of the golden rules of running a sustainable, profitable business:
- A company must have products and services
- Have a customer, not a user – a user buys once. A customer repeat buys.
- Always add value to your customers.
- Everything must be repeated again and again and again… thereby creating more with less.
- There is always a lag time; a time gap between start and finish. Make sure you account for it.
Finding the secret sauce
Let’s break each of these rules down into usable advice.
1. A company must have products and services
It would seem obvious that you must have a product or service or both. Without at least of these, you have no business. And yet, so many businesses forget to check if there is a market for what they are offering. If no one wants to buy what you are selling, then you don’t really have a product or service.
2. Have a customer, not a user – a user buys once. A customer repeat buys.
Having a customer instead of a user is imperative. If you can’t get repeat sales. It doesn’t say much for what you’re offering. Ask yourself what is going wrong. Quality? Price? Service? Wrong market? Wrong product or service?
3. Always add value to your customers
Always add value. Think of your customer as someone who is always asking, “What’s in it for me?” If you don’t know how you are adding value, neither will your users – and they won’t buy from you again.
4. Everything must be repeated again and again and again… thereby creating more with less.
Repetition is actually how we make money. If you cannot repeat you product or service, you don’t have a business. You have a pot luck situation or a lack of quality, which all equal unhappy users.
5. There is always a lag time; a time gap between start and finish. Make sure you account for it.
Cash flow, manufacturing, staff: There is always a difference between when you get paid, and when you need to pay your suppliers, production costs, salaries etc. You have to plan for all costs, which means keeping money in the bank. This is key to companies if they wish to grow.
By following these simple rules, understand that there are two life cycles to be implemented: The exchange cycle, and the money cycle.
The exchange cycle
The bottom line of any business is the cost of exchanging time, energy, products/services and money. The cost is where all risk starts.
The exchange ‘price’ always has to mitigate any risks you have taken. If you have not taken this into account, you are underselling your business and probably not making a profit.
Time, energy, products/services and money play a role in the exchange cycle.
The money cycle
This is the score card of the business. Your cycle of money is like the blood flow of your business. If you are bleeding money, you will die. If money does not flow ‘inside’ and ‘outside’ of your business, you will have to cut off your limbs to survive.
If money is contaminated by high business costs and/or poor compliance practices, you will foot the bill and the business could die.
Money has a time cycle that must be understood to create real wealth. The time of this cycle depends on the cycle of money exchange in any business and always includes the following:
- How money comes to be ‘inside’ the business. This is your sales and income revenue, although clients do not always pay immediately. You owed money, but it’s not in the bank.
- The flow of money from the business to ‘outside’ of the business. In other words, the paying of suppliers.
This cycle repeats itself over and over again. It may sound simple, but harnessing and using both the exchange cycle and the cycle of money are the real art of successful business owners. In other words, how your company makes money, and how it then manages its cash flow are the keys to creating wealth.
Without re-investing profits the company will stagnate and die, but spend too much money and there will be nothing left to run the company.