I think I am safe in saying that the ultimate goal of every business owner is to one day either sell their company for a maximum amount of cash or to pass on their company to family members or others. Therefore, the top priority each year of a company’s existence is to consistently do those things that increase and build value. By value I simply mean the company’s market price. Below are four qualities that characterize companies that continually increase value and these qualities must receive attention yearly.
The leadership I am talking about is the company owner. Everything else in the company is a direct reflection of the company CEO. The CEO must be continually investing in himself and growing in leadership qualities, product and service knowledge, and customer relation skills. Everyone in the company will take their cue from the top and will only grow and be as effective as their leader.
A top priority each year is to have a team of A players in key positions. My definition of an A player is one who does not need to be supervised but instead acts like a company owner. To have a team of A players hire only those people who have the talents, motivation, and drive to take the company owners place if need be. Put the incentive systems in place that reward A players.
By sales quality I am not talking necessarily about growth even though that is a key element. Instead, I am talking about two specific characteristics of sales. First, sales diversification. Continually seek to ensure that a majority of your sales is not concentrated too heavily on just a few customers. Spread sales out and seek to have as diversified a sales customer base as possible. Secondly, strive for reoccurring sales. Some segment of sales should be reoccurring instead of having to continually “kill it and drag it home.” Make it a goal to have these reoccurring sales a significant percentage of your total sales.
There are two major areas on which to focus, measure, and continually improve. Cash flow and profitability. Business owners should know how profitable their companies are monthly, if cash flow was positive or negative and why. They also should know where cash flow is headed for the foreseeable future. They must know these measurements and not be operating their business under any illusions. Ideally, cash flow should at least equal net profits or be exceeding profits.
If the above four qualities are in place and are top priorities for improvement yearly, an owner can be sure that their ultimate goal will be achieved.