State of the Business Owner Report 2014

By EMyth
Pos i ti vely Geni us!
We begin with a mystery: why do some
companies grow, while others dont? This
single question is at the core of millions
of hours of effort every year as
entrepreneurs around the world search for
the right formula to grow their businesses
successfully.
In our search for an answer, we decided
to talk to the people who know better
than anyone what a successful business
looks like: business brokers. After all,
who better to talk to about your business
than the people who sell businesses for a living? Our informal survey of business
brokers narrowed successful businesses to two groups:
1. Growing revenue more than 10% a year (and faster than their industry)
2. Growing net prot more than 10% (and faster than their industry)
Based on these criteria, we went back through the hundreds of different questions
we had asked our respondents over the last three years to see what, if anything,
could predict both of these outcomes.
The results surprised us.
The two most important days of the week (and its not the
weekend).
More than any other factor, the answer to a single question predicted how quickly a
company would grow: How much time do you personally spend on marketing and
sales for your company?
Business owners who spent at least 40% of
their time on marketing and sales for their
companies grew their revenue 60% faster
than those that did not. We call this the Two
Days for Growth rule. Even more
dramatically, these companies grew their
prots at an even faster rate. It seems that
the stereotype of the sales-focused
entrepreneur who sells based on promises
they cant keep is mostly a myth, and
owners with a growth mentality intuitively
understand protable versus unprotable sales and marketing opportunities.
Critically, this question encompassed the full range of skills in growing a company:
sales AND marketing. There was no one formula for the balance in our results:
some owners spent most of their growth time on sales, and others on marketing,
and some used a balance of the two. Building
on your individual skill set, its important to
nd the right mix for your growth mentality.
The hardest thing is to keep your foot on the gas pedal. It may
be cliche that if youre not growing, youre dying, but its
absolutely true.
Business Owner, Nigeria, 38
Cultivating a Growth Team
The condence trap
The business owners in our survey were
extremely overcondent in their ability to
control the future. Some studies have even
argued that an irrational overcondence is
necessary to persevere and build a company.
But theres just one problem: we found that
the stronger an owners belief in their ability
to control the future, the less protable their
business was. In other words, the more you
believe you can control the future, the less
it is true.
This lone wolf tendency to believe you can control everything yourself is a major
occupational hazard for entrepreneurs, since, as well see, ultimate success in
business comes from building a team and learning how to gain control by growing
that team.
I nally accepted that after a certain point, you no longer
control the success or failure of your companythey do.
Business Owner, Mexico, 43
Heres what youll be talking about in a year
Despite the natural tendency to drive
change by themselves, most business
owners arent getting the results they want.
While some companies grow, and reward
their owners with money and personal
meaning, many dont. We tried to get to the
heart of what made the difference by asking
what were the best and worst decisions
made in the past year. A clear pattern
emerged: the best and worst decisions were
usually those involving personnel.
When we analyzed our data to see what
qualities in a team lead to success, we
found that the most important factor was
that the owner believed that their teams
ability to generate innovative ideas was a
competitive advantage. We called this
Building a Growth Team.
Having a growth team was a major
predictor of protability, cash ow, and an owners personal satisfaction
showing that when it comes to money and happiness, you can have your cake and
eat it too.
So what does it look like to have a growth team? Think back to the incredibly high
degree of self belief that is required to become an entrepreneur. Is that matched by
an equally high degree of belief in others? Is your behavior creating a team of
leaders, or a team of followers?
The importance of team building is
substantiated in Liz Wisemans book
Multipliers: How the best leaders make
everyone smarter. She suggests that leaders
who are Multipliers, get so much more
from their people that they can effectively
double their workforce at no additional
cost. Contrast this with Diminishers such
as micro managers, tyrants and know-it-alls
who under-utilize talent and resources, and
you can see the importance of building a growth team (and being able to believe in
the abilities of those you hire).
Following a Growth Framework
The Price of Inexperience
One of the enduring takeaways in our study over the last three years has been the
one factor that better predicts success than any other. Quite simply, it boils down
this this: have you owned at least one business before your current business?
Business owners who answered yes were like the annoying student who always got
straight As: they were just better at everything. Compared to owners on their rst
companies, they:
Had sustained rates of growth over the last ve years three times greater
than rst-time owners
Grew faster than their competitors in 2013
Were more protable than their competitors in 2013
Had a greater sense of meaning and control from their business
So whats a rst-time business owner to do? We found the answer in one of the
greatest studies of all time: Herbert Simons studies of expertise, popularized by
Malcom Gladwell in his book, Outliers. Simons ndings showed that experts
literally see the world differently. The same way that you dont have to think of
all the letters in a word to say it or read it, experts could organize pieces of
information into larger chunks and see patterns that amateurs could not.
Expert Entrepreneurs
In honor of this concept and their successes, we dubbed owners who had owned at
least one business prior Expert Entrepreneurs, and their peers as First Timers. First
Timers lagged far behind Expert
Entrepreneurs even when they had
been in business as long as 30 years.
So our quest became to understand what
Expert Entrepreneurs are doing
differently. After all, they do many of the
same things as First Timers: they search
for customers, they work to improve
quality, they struggle with hiring and
managing people, they professionalize
their company by implementing systems,
and so on. But we found that one key
factor separated them from their peers:
they run their business on a framework. The difference doesnt exist in any one
individual behavior, but rather in the belief that there is a critical set of best
practices that must be aligned to maximize your chances for success.
In your rst business you think its your
technical expertise that matters. The second
time around you realize that its your ability to
run a business that matters.
Business Owner, Canada, Female, 52
Build a Framework, not a Cofn
A framework is not an attempt to strangle the creativity and agility out of your
business with an endless list of
processes and micromanagement. In
fact, Expert Entrepreneurs were only
moderately more likely to have any
given best practice in place than First
Timers. But they were far more likely to
have certain connector best practices
in place, so that their business t
together into a coherent whole rather
than a series of disconnected parts.
Expert Entrepreneurs had a clear idea of
how they all t together around 3 key
questions:
1. What is our vision and our regular strategic planning process to adjust our
progress?
2. Who is our most protable customer needed to move towards that vision?
3. How will we turn sales and marketing into a single unit that works together
to attract that customer?
The biggest thing I learned is to run my business on a tried and
true framework. I regularly see inexperienced entrepreneurs
getting excited about adding some tool or process to their
business, but they dont see how it ts into the whole ... and it
often ends up hurting more than helping.
Business Owner, USA, Male, 40
Reinventing the Wheel
So whats the best way to put a framework
in place? Its simple: nd one that someone
else has already built. Thats the whole core
of the entrepreneurs challenge: our high
self belief leads to us to think that we can
do everything better on our ownand that
includes building a framework.
Regardless of the source, youll know you have a great framework when you start
to see how everything in your business is connected, from Leadership to
Marketing, team-building, and everything in between.
Conclusion: The Growth Blueprint
The path to growth mirrors the evolution that an owner should follow in his or her
career: creating the right behaviors in yourself, creating the right behaviors in your
team, and creating the right framework to scale. The Growth Blueprint is as simple
as that.
But dont think that these are isolated, individual components. They are heavily
intertwined behaviors that reinforce each other.
Following the Growth Blueprint may not always be easy either. As Thomas Edison
said, Opportunity is missed by most people because it is dressed in overalls and
looks like work. Hopefully weve reminded you of the path. Now lets go put on
some overalls!