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There is no question that financial numbers are the critical scorecard of a business' performance, whether they show a significant profit, mere survival status, or that it's time to throw in the towel. Business owners who start companies are risk-takers who are taking their life and financial future into their own hands. And they should all be congratulated for taking that step; it is the foundation of what makes this country great.
However, financial numbers are just the output of a whole lot of actions taken over a period of time. They are not the driver of the business. Do the numbers explain why one business owner is struggling and another business owner is booming in the same business category, in the same town, and in business about the same period of time?
The numbers will show what the results are but not why those were the results. The real success of a business will come from the leadership, enthusiasm and passion that lead to actions by the business owner as the "why" of business success with the "numbers" simply providing a pragmatic measuring stick of success.
An owner who focuses just on the numbers will usually tend to be a "cost cutter," but more successful business owners will look for the market opportunity and will have an investment focus that reflects their level of confidence in their planned commitment to be successful over time.
Success will be driven by leadership. The foundation for success in building a business is set long before the numbers are achieved; success is set by the establishment of the vision for the business, the goals, the action strategies, and then the financial forecasts that reflect successfully executing this plan.
The numbers can then determine the level of success because there is a target to measure results against. These numbers then become valuable because adjustments to the operations of the business can be made progressively as the numbers are compared to expectations (budget), with actions being taken to correct variances rather than waiting to see the year-end numbers to determine the level of success.
There are some key leadership guidelines that will help to drive results that can then be measured by the "numbers" scorecard to confirm the level of success as measured against the goals of the business for a specific period of time:
- Establish a vision for the business that has specific goals for a period of time that have clarity, that are congruent and that are consistent with your own vision and goals for your personal life as the business owner.
- Identify the specific target audience of customers who have a need for your products and services and be specific about the communications that uniquely differentiate your business from everyone else in your business category -- the reason they have to consider your products or services compared to your competition. And spend more time generating revenue instead of reducing costs.
- Build a team to achieve more with synergy by employing only those who have the specific skill sets to execute the functions of your business needed to achieve the operating goals.
- Provide operating efficiency through systems leverage including organization structure and staff skills training, the application of technology and computers to speed up systems, and the use of operations and communications flow charts. Use appropriate financial management to maximize resources management.
- Build your operating culture on a customer-centric focus and identify opportunities to build your business with referral-based marketing strategies. Create "raving fans" to drive a growing business. An outstanding book that demonstrates the power of the customer to drive business growth is "Building The Happiness-Centered Business" by Dr. Paddi Lund (published by Solutions Press).
Be forward looking, operate in the "present-future," and don't get bogged down in the "past-present." In a recent No. 1 business best-selling book, "Good to Great," author Jim Collins emphasized this approach when he said, "Enduring great companies preserve their core values and purpose while their business strategies and operating practices endlessly adapt to a changing world.
This is the magical combination of "preserve the core (the present) and stimulate progress (the future)."
Success is created by planning and hard work, testing and measuring, fortitude and resilience, and a passion for what you do as the business owner. And as Colin Powell said, "There are no secrets to success. It is the result of preparation, hard work and learning from failure."
The numbers are not the key to success; instead, they are the scorecard of your success.
Reprinted from Capital Region Business Journal, Madison, Wisconsin, October 2006 issue.
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