Every single business has its winners and losers. Pareto’s principle (the 80-20 law) says that 20% of companies are going to be really good and the other 80% mediocre to failure. Let’s take a look at why and what you can do to make sure you are part of the 20%.
We know what reasons are NOT key contributors to failure and success: capital, intelligence, education level, ideas. All the business studies conducted over the last 50 years show that none of these are the cause in cause and effect of business success.
Here it is: Best Business Practices are the key determinants. While this is a huge catch-all we will break down some of the more important factors over the next couple of posts. But as long as I have you reading we might as well get started with some of the details.
Jerry Mills is the founder and CEO of my company (B2B CFO®) and he wrote a book called Avoiding the Danger Zone. In it he describes three types of people at each organization: Finders, Minders and Grinders. The Finders are the principles of the company. It is their vision, their energy and their persistence that leads their company to success – as long as they are engaged in finding activities (to be explained later). Minders are the managers of the company: the warehouse foreman, the customer service manager, the controller. And the grinders are the production workers: salesmen, accounts payable and receivables clerks, fork lift drivers.
In Avoiding the Danger Zone, Jerry Mills talks about the successes when the owner is engaged in finding activities. That is making deals on new product lines, taking the biggest customers out to dinner, closing a deal on a new prospect. In this scenario, the Minders are making sure all the work is done: cash flow is good because people are vigorously collecting receivables, the banks are happy because financials are turned in on time and are accurate and there are no regulatory threats. This is how it is supposed to be; this is what leads to success.
So our first best business practice – and the most important one – is the owner of the company has to be engaged in finding activities and only finding activities. If he is drawn into the day to day problem solving of taking care of an irate customer, dealing with bankers that are mad because the financials are late, fixing computers because the IT guy is not available the company will struggle. Every single employee of the company has to perform his job duties in a great way.
What’s the biggest threat to achieving this first and most important of best business practices? The owner himself – his belief that he is the only one to do many of the jobs – or he is the one that can do everything the most successfully. Even if this were true, he/you have to come to grips that this is not the highest and best use of your time. What have the best most successful business owners done? They have given in to the idea that their company will be most successful when they are working on finding activities to the exclusion of all else.
Most of us (be definition of the 80/20 rule) are not the most successful business owners. How do we transition to this? First, it is attitudinal. Every one of us has to believe with everything we’ve got that this is the best and only role for us. We cannot be involved in the day to day activities of our company. We will explore how to do this in future blog posts.
Have a great day. Tom