The Facts of Business Life: What Every Successful Business Owner Knows That You Dont
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Being competitive clearly doesn’t necessarily mean being the most aggressive. What it does mean is being the most competent, that is, displaying certain basic skills such as product knowledge, pride in professionally caring for customers’ needs, and enthusiasm when dealing with customers. In other words, competitiveness begins with your marketing and advertising and ends with your staff demonstrating how well they are trained by doing what you expect of them. This is the daily blocking and tackling of business, and how well this is executed will be determined by your company’s competitive DNA—the X factor.
Level 3: From Survival to Success
Being able to enter the war zone at Level 3 with a detailed plan of attack developed at Levels 1 and 2 gives your business an immediate advantage over a lot of your competitors. This is because you have prepared and planned, know the latest market facts (including some your competitors may not know), and have set your business up to attack a market opportunity backed up by well-thought-out internal processes. In other words, preparing in advance of entering the war zone not only enabled you to come out swinging and make sure your swings have an impact, it also made the chances of your succeeding much better. The importance of this concept cannot be exaggerated, nor should it ever be taken for granted. This is because the journey from the survival end to the success end of the spectrum can be a marathon, and it’s a marathon most businesses do not complete. And in almost every instance, failure can be attributed either directly or indirectly to a lack of appropriate planning and preparation for the realities of the war zone.
Some companies fail as a direct result of something that happens or doesn’t happen in the market. For example, a new business enters the market with a plan to undercut its competitors’ pricing because they believe the market is price sensitive and will react favorably to this strategy. A few months into the strategy, sales are a bit better than expected, but the business is losing money, and cash reserves are being depleted because of the continual losses. The problem, of course, is that lowering prices lowers gross profits, which affects the company’s ability to make money on the bottom line. The flaw in this business model is that the owner either misunderstood or underestimated the expenses the company would have on a regular basis and/or didn’t understand the overall effect lowering prices has on gross profits or how lower gross profits affect net profits. Obviously, better planning beforehand would have, at least in part, alleviated these problems. Sometimes, in situations like this, it’s possible to go back to Level 1 and start over, but the chances of being successful at it are not good unless the company has large cash reserves and the time for this new business model to develop and catch on in the market.
But companies also sometimes fail because they beat themselves. The war zone not only creates competitive pressure externally, as shown in the preceding example, it also creates pressure internally. And the problems that internal pressure causes generally come from a lack of preparation, planning, and process development, the result of which is chaos. And due to this chaos, the owner and his or her key employees are forced to concentrate on fixing the internal issues, which is never easy, and are seldom able to identify the core problem. The core problem, in turn, continues to resurface in a variety of guises throughout the business. Under these circumstances, because the owner is consumed with resolving internal problems, he or she has little time to focus on the external market, which means the company is less able to battle in the war zone.
Think of what would happen if the coach of a football team neglected to prepare his team for a game or plan for how it would attack its opponents. Without any predesigned offensive plays the coach would have to constantly be explaining what went wrong on the last play and wouldn’t have much time to figure out what to do on the next. And if this weren’t sufficiently chaotic, the coach would also be yelling at the players and the other coaches, the players would be yelling at the coaching staff, and in the end no one would have any idea of what to do. Business is just the same. Just as the onslaught of the opposing team in football exposes a team’s weaknesses, the pressure brought on by war zone competition does the same to a business. And the more weak areas there are, the more time the owner and key employees have to spend shoring them up instead of preparing for what happens next. In other words, it isn’t necessarily market competition that beats you—sometimes companies fail simply because of internal issues and pressures brought on by the war zone and by the lack of planning and preparation.
The goal at Level 3 is to become consistently successful. In order to do that, as we’ve discussed in other chapters, you have to develop a series of goals and objectives that will enable you to reach the point at which you consider the company to be a success. In the beginning, that is, at the survival end of the spectrum, your sales will be largely made up of “gimmes” due to your location, the fact that your business is new, and because people you know will buy from you. Some of your sales will also come from competitors whose operations are poorly run and who can’t hold on to their customers. However, it’s important to understand that as your business moves toward the success end of the spectrum, the realities of the war zone will in all likelihood slow your growth rate. As you work your way along the spectrum and grow your business, you will begin to challenge the better-operated businesses that have loyal and satisfied customers who will need good reasons to switch from where they are now to you. In other words, the more success and market share you attain, the more difficult it becomes to attain it. But just as planning is the key to successfully launching your business in the war zone, it is also the key to growing it.
The Benefits of Understanding the Marketplace War Zone at Level 3
Understanding the marketplace war zone fosters a sense of urgency rather than a laissez faire attitude in both you and your employees.
Understanding the marketplace war zone focuses your employees on what is expected of them, why, and what will happen if those expectations are not met.
Understanding the marketplace war zone establishes individual pride in accomplishing specific tasks as well as group pride in the company’s overall achievements.
Understanding the marketplace war zone helps you show your employees what they must do individually as well as what has to happen around them to keep the businesses moving forward.
Understanding the marketplace war zone enables you to not only make appropriate plans but also to make adjustments quickly if the market is found to be different than you anticipated.
Understanding the marketplace war zone makes it possible for you to anticipate changes and make proactive strategic moves ahead of your competitors.
The war zone is essentially about success or failure. And it’s not a friendly place, because you and your competitors both want the same thing—each other’s customers and gross profit. What that means is that your customer base is never secure, so you have to be constantly on the attack. But the battle against your competitors is not the only one you have to fight. You also have to constantly push your employees to improve because the market and customers’ demands competence, and the better your employees are, the better your bottom line will be. Neither battle is easy to win, but if you want to succeed, you need to win both.
The Products or Services You Sell at Level 3
The first rule of the marketplace war zone is: you can’t beat yourself. There are enough ways for your business to fail without committing suicide. That means you have to make sure you have as much control as possible over everything within your control, and that starts with the product or services you sell. Either can be a powerful weapon and can be used both defensively and offensively, that is, inside your company and outside in the war zone.
The defensive use of your products or services is essentially dependent on your planning, preparing, designing processes, and making sure those processes are executed by employees who are skilled, well trained, and ready to handle the action at Level 3. In other words, by setting up your internal processes to back
up your products or services, you are providing protection not just for them but for your entire business. Succeeding in the war zone is difficult enough without beating yourself, and since this is one of the few areas in which you can have control, it simply makes sense to exercise it. The offensive use of your products or services similarly depends on a number of factors. These include the skill of your employees in making sales, how competitive your company’s climate is, your pricing strategy, the demand for your product or service in the market, the aggressiveness of your business, and how well your product is delivered to your customers and how it meets their needs. Your offensive weapons are on display every day, but in order to be effective, they require consistency in the way your business operates.
But at the end of the day, it’s your products or services that customers come for and, hopefully, come back for. No matter how well your employees treat them or how efficient your internal systems are, if you don’t have something customers want to buy, you aren’t going to have much of a business, much less a successful one. A great example of this is Firestone tires. For years Firestone retailers had a reputation for quality, aggressive pricing, and selection. But in the late 1990s, Ford Explorers had rollover issues and it was determined that Firestone tires were a factor in the rollovers. As a result, Firestone’s business dropped off the cliff. Overnight, every Firestone dealer learned the importance of product and what the loss of customers and their confidence could mean to a business. Although this might seem like an extreme example, it’s unfortunately not all that unusual. It does, in any case, point out the fact that in the war zone, if you don’t have product power, you don’t have anything.
How Your Company Operates at Level 3
If you look at virtually any successful company, you will see that a great sales operation invariably goes hand in hand with a good business operation. That means that in order for a company to move from the survival to the success end of the spectrum, the internal business operation has to do its part in supporting what is happening on the front lines of the war zone. That is, internal processes have to be effective and, perhaps even more important, relevant to war zone participants and your customers. Moreover, your talent, and the talent of your key employees, is reflected in the processes you design and how aggressively and enthusiastically your employees operate them. Processes bring efficiencies and coordination to any business and eliminate the problem of the “left hand not knowing what the right hand is doing,” as well as the embarrassment and frustration that inevitably follow. Perhaps most important, how well your war zone processes operate is a major factor in determining whether you will achieve your net profit goal.
But having a well-run business is about more than just that, and the Firestone story provides a good example. The first casualties of the Ford Explorer problem were the Firestone owners who had sloppy business operations, and those who just relied on selling tires. Not surprisingly, the better operators were the ones who, prior to the emergence of the problem, not only sold tires but pushed their businesses to find other ways to make sales and gross profits, that is, those who diversified. In other words, the retailers who survived the storm were those who weren’t dependent on just one item but also sold accessories, provided car maintenance, or offered other products or services. The point is that if a business is well run, it can withstand unforeseen events as long as its owner has learned to be innovative with its products and continually find ways to expand its business and profits.
How Your Business Competes—The X Factor—at Level 3
To succeed at Level 3 an owner obviously has to demonstrate his or her competitiveness to the market. That’s a given. But an often neglected and important aspect of success is getting your employees to be equally competitive. The customer who walks in the door, calls on the phone, or sends an e-mail should be your employee’s main focus. All owners want this to happen, but in practice it rarely does. And the reason it happens so infrequently is that your employees’ performances are more important to you than they are to them. But there is a way to change that. It’s called internal competitiveness, and it’s another element of the X factor.
Virtually all professional athletes exhibit internal competitiveness. In fact, professional teams have it down to a science—the science of statistics. Statistics are fundamental to sports because they enable players to measure themselves and then work to become better, that is, more competitive. And it can work as well in business as it does in sports. By focusing on results versus expectations, both employees and their managers can see where the employees are strong and where they can improve. And since most employees want to improve, if you show them how to do it, they will repay you by becoming more competitive.
Another particularly good way to get your employees to be more competitive is to be more competitive yourself. Competiveness is like measles—they are both contagious. What this means is if you show your employees that you like a market showdown, and show them what and how they can improve, most of them will become enthusiastic and step up their game. At the same time, it’s important for you to remember that, for an owner, being competitive doesn’t come cheap or without risk. If you want more sales and profits, you have to be willing to take chances. For example, in order to increase sales, you usually have to increase your marketing and advertising budget, add more personnel, add to your inventory, or spend accumulated profits on equipment and other capital expenditures. In other words, becoming more competitive costs money, which increases your risk as well as your possible rewards. To my way of thinking, though, if you have an accepted product, a well-run business operation, and especially competitive employees, you should be “pushing the pedal to the metal.” And there are a number of ways you can do that.
Among the less risky efforts you can make is to offer specials on certain products, expand your inventory and create a well-designed sale, or target a specific area in your market where sales have been weak in the past and you know you can improve on them. You can also become more aggressive in pricing and/or advertising on a product you’re well known for in order to capture more market share, which will in turn draw more customers and give your staff the opportunity to sell them related products or services. However, if you are willing to take a chance—and you should be—there are more aggressive, and potentially more rewarding, efforts you can make.
One of these is expanding your business or adding new products or services. Expanding can mean adding another location or enlarging your current facilities, but either way you will give yourself the opportunity to increase sales, which in turn can get your employees excited about possible promotions, and raise their confidence level not only in the business’s future but also about their place within the company. In fact, you can even get your competitors’ employees—particularly the good ones—thinking about your company as an employment option. You can also add new products or services, like the Firestone dealers who sold accessories to go with the tires and offered additional services to their customers. The bottom line is that while expanding your business does mean added risk, it also tells both the market and your employees that you’re a force in the market and that you’re dialing up the competition.
Another, more aggressive way of increasing sales is to buy a competitor. In fact, this might be the most aggressive competitive move you can make. It is a strategic way to quickly add market share, customers, and, hopefully, some great employees. And if purchasing a competitor provides you with economies of scale, you can become more efficient overall and make both companies exponentially more profitable. It also means, though, that some competitors will step up their game to meet your challenge in whatever ways they feel comfortable, whether it be with price, selection, quality, service, or other means. Some of those competitors will be able to keep up, but some will fall behind. Even those who fall behind, though, can provide you with an advantage. Not only can you target their customers, their weakened states could make them additional opportunities for ownership.
Level 4: Maintaining Success
You will have attained Level 4 when your business has consistently achieved your net profit goals over a period of time. And when it does, you might think you can lie back and rest on your laurels. Unfortunately, you can’t. The fact is that you still have a challenge to meet. That challenge is no longer trying to become successful but, rather, trying to remain successful. And this is a formidable challenge, because the trappings of success will more than likely have changed both you and your company. That is, the drive for success both you and your employees once had will begin to fade, so much so, in fact, that you could find yourself back at Level 3 fighting not for success but for survival. Unfortunately, there’s nothing particularly unusual about this—it’s a natural tendency. The constant fear of failing you once had will have been replaced by the satisfaction success brings. But as a result, the aggressive, competitive, fast-moving company you had when you were approaching the success end of the spectrum at Level 3 is not the same company you have now. In the war zone, though, your business is always under attack because competitors want your customers, just as you want theirs. And that means that you have to keep fighting, albeit with some different weapons.