THE BIG FIVE OF BUSINESS
Having worked with numerous start-ups and turn-arounds, I have come to find a common theme with all of them. I refer these as my “Big Five Rules” or as an MBA in the palm of your hand. The Big Five Rules refer to the following, in order:
Above all, you must provide something of value (a product or service)
You must be able to sell it
You have to be able to deliver it and get paid
You must support whatever it is you sold
You have to be able to profitably replicate each of the steps above
If any one of the above Big Five Rules are violated (missing or faltering), you either have a business that won’t get off the ground or a business that may soon come crashing back to the ground. I have had the dubious privilege of working with businesses that have struggled at times with one or all of these.
A brief introduction to the BIG FIVE:
1. Provide something of value
This issue is by far the most complex and the most subjective. What you may value, others may not. Who’s to say if your brilliant idea or novel solution (product or service) is of value? Complex theories and fancy economic models abound, each taking a new an ever more Rub Goldberg approach to settling this question.
Me, I prefer to keep it simple. Only the market can tell you if what you are selling is of value. If the market is not buying what you are selling, then you are either providing something no one really wants or you have a sales problem. Most start-ups think there is a sales problem (addressed next). However, from my experience, sales is rarely the problem. More often than not, it is a ‘value,’ problem. I highly recommend spending some time here if you are struggling in your new endeavor. However, if you are a stable entity with declining sales, may I suggest skipping this Rule and moving to one of the following Rules.
2. Be able to sell it
Sales, more than anything else, is directly correlated with just two things: value and trust. Value is a simple factor of cost vs. benefit. Trust, while far more complex, relates to both the brand (company and individual reputations) and the buyer’s belief that the product or service will be able to deliver on said value.
Yes, of course sales and marketing professionals make a difference. However, most anyone can sell something if the value is right and the buyer trusts they will obtain the value they are purchasing. Here too, there are numerous books and theories on sales (The Economic Buyer, The Challenger Sale, Finding Why, Mastering the Complex Sale). These are all excellent. However, if the value and trust factor are missing or misaligned, even the best sales and marketing people will struggle.
3. Be able to deliver it and get paid
Sticking with the theme of keeping it simple, “deliver it” means “deliver value.” You might be able to sell a product and have it delivered to someone’s doorstep. However, when the buyer (or customer) opens it to find an item of inferior quality, fit, size color, smell, taste or otherwise, they’ll send it back and you will either not get paid or have to provide a refund. The same can be said for enterprise software and/or large CAPEX projects. If a project drags on or it continues to fail user acceptance testing, you have a problem. For the sake of clarity, when we speak of delivering value, it means the customer (in some cases this may also be the buyer) is satisfied that they have received value and would make the purchase decision again.
This rule works for retail and software as outlined above, but it also pertains to restaurants, large capital projects, software as a service, consulting and almost every other product or service sold. In short. Here is how this works:
Restaurant: If a meal or drink is returned, the customer will leave unhappy, leave a poor terrible tip for the wait staff and likely never return.
Capital project: These projects are typically milestone driven. The longer it takes to deliver upon each milestone, the longer payment is withheld, the more upset the customer.
Software-as-a service: The first year of these projects can be a loss leader or break even. Aside from the growing project costs and margin erosion, US GAAP states companies cannot recognize revenue until projects (or project milestones) have been achieved.
Consulting: This industry is much like the restaurant industry. One wrong step and it can spell disaster for project finances, payment dates, damages, and more.
When a company continues to struggle to deliver value, the following things happen…. First, it destroys margins. Second, it harms moral. Third, you often lose a customer. Fourth, that customer tells others, and your reputation suffers. Fifth, if this is not immediately addressed, the business will likely lose sales, existing customers, market share, key staff and so forth.
4. Support whatever was sold
This rule is as simple as it sounds. The trouble is many companies across industries do not feel it applies to them. Frankly, that could not be further from the truth. For restaurants, this is refilling drinks, bussing tables, and providing excellent service. For car dealers, this is ensuring you can get your new or used car looked at and repaired in a timely and cost-effective manner. For software companies, especially those in the software-as-a-service business, support in the form of user training and adoption are fundamental to a successful business.
Clearly put, support is all about snatching back victory from the jaws of defeat. Lapses in value, be it because of a late delivery, poor performance or otherwise, in the hands of a good support organization, can often save the day. Furthermore, when there is an issue with a customer, a great support organization can turn-around that violation and possibly lessen or negate any penalty (financial, reputation or other) that may come from it.