Creating long-term value with limited resources is a huge challenge for entrepreneurs, but it’s hardly a novel one.
BY FAISAL HOQUE
My grandmother, who lived in a remote village in Bangladesh, was barely five feet tall, skinny as a rod, and very soft-spoken. She could barely read or write and never had a formal education, yet she successfully managed a farming and sharecropping business, overseeing a network of farmers, merchants, and seasonal workers, all while raising nine children and keeping a household in order.
To do that, she needed to create long-term value from the work she directed without exhausting the finite resources at her (and her community’s) disposal. Even though circumstances are very different for modern entrepreneurs, the fundamentals of sustainable growth remain the same. Here are seven of them.
1. AUTHENTIC PURPOSE
Every company needs to pin down “why we do what we do.” That’s the company’s North Star, guiding every aspect from recruitment to customer management to product development and sales.
A strong purpose drives growth and profitability. For instance, an investment in the Stengel 50 (a list of the world’s 50 highest-performing companies) over the past 10 years would have been 400% more profitable than an investment in the S&P 500.
In order to achieve sustainable success, companies must repeatedly reexamine their sense of purpose and make sure the organization serves it well. An authentic and inspiring purpose allows for:
- A constant, consistent sense of focus
- A strong emotional engagement both within the company and with its customers and partners
- Continuous, pragmatic innovation
Sales and marketing experts often talk about “unique selling propositions,” or “USP,” which Entrepreneur defines as the “factor or consideration presented by a seller as the reason that one product or service is different from and better than that of the competition.”
A company’s authentic purpose gives rise to its USP. When a business has a clear vision, it’s easier to create products and services of value. Revlon founder Charles Revson, for instance, always used to say that he sold hope, not makeup.
2. A POWERFUL BRAND
If you want to create a scalable business, you have to understand how crucial it is to build brand equity and emotional connections with customers. It’s those attachments that link customers to your products and will keep them returning to you. Building a brand is about developing and sustaining those relationships over time.
Here are some basic rules to connect, shape, influence, and lead with your products and brands:
Connect with the public. Make your audience feel an emotional attachment to your brand that’s grounded in confidence in your products.
Inspire your customers. A simple, inspirational message is far more influential than one that tries to highlight too many product features, functions, or ideas.
No marketing plan can rescue a brand identity that isn’t fully formed. Don’t have much marketing budget to speak of? Create compelling content for publisher and social media sites to start generating awareness among target customer bases, and build up.
3. PARTNERSHIP AND COLLABORATION
Doing everything yourself can be tempting in the beginning when funds are few and ambitions high. While there’s nothing wrong with a hands-on approach, taking on more than you can handle, especially in areas where you lack experience, can be damaging. In the era of the global freelance economy, it isn’t difficult to find talented expertise, but you have to know where to find them.
There are now dozens of websites and online marketplaces that provide specialized resources from design, development, and sales to finance, legal services, and banking. The best part is that you can try small projects at low investments. The trick is knowing exactly what you want done and putting resources towards accomplishing tangible goals.
4. CUSTOMER RETENTION
As Emmet and Mark Murphy write in their book Leading on the Edge of Chaos, acquiring new customers can cost an organization around five times more than retaining current ones. In fact, a 2% increase in customer retention can have the same effect as decreasing a company’s costs by 10%. To put it another way, reducing customer defection rates by just 5% could increase profitability by 25% to 130%, depending on the industry.
- The average business in the U.S. loses around 50% of its customer base every five years.
- Companies are four times more likely to do business with an existing customer than a new customer.
- The likelihood of selling to an existing customer is 60-70% whereas it’s just 5-20% for a new customer.
Successful retention starts with the initial contact a business makes with a customer and continues throughout the lifetime of the relationship. Bain Capital has even estimated that for certain industries, a 10% increase in customer retention is roughly equivalent to a 30% increase in a company’s value.
A business ecosystem is an economic community of organizations and individuals that interact in countless ways. These ecosystems encourage companies to evolve their capabilities competitively.
Sometimes an ecosystem can sprout up around a product, like the range of cases, headphones, and other paraphernalia for mobile devices. Similarly, ecosystem thinking has become a cornerstone of web publishing—a broad swath of unpaid contributors create content for popular outlets in exchange for growing their own readerships and developing personal brands.
Ecosystems are crucial to sustainable growth because they provide the structure that surrounds and supports the businesses within them. They spread “stakeholdership” out from the business and into society, like it did for my grandmother with her farming community.
6. REPEATABLE SALES
Creating a unique product and brand isn’t enough. It takes repeatable sales processes to create a scalable business. It’s one thing to sign up a few customers; it’s another thing to design and implement sales processes that can be successfully deployed again and again at ever greater scale.
You’ve created a scalable sales model when:
- You can add new hires at the same productivity level as the entrepreneur or the sales leader.
- You can increase the sources of your customer leads on a consistent basis.
- You have a sales conversion rate and revenue that can be consistently forecast.
- The cost to acquire a new customer is significantly less than the amount you can earn from that customer over time.
- Customers get the right products in the right place at the right time.
A repeatable sales model builds the platform to scale. But it can take a lot of experimentation and intensive research before you hit on one that’s truly sustainable.
7. FLEXIBLE, ADAPTIVE LEADERSHIP
To continue growing, entrepreneurs, managers, and business owners must become the leader the business needs for each particular stage of growth. And since a company’s needs change at each stage, its leaders need to keep evolving at the right pace. That requires introspection, self-awareness, and a keen sense of strategy—both in the short- and long-terms.
I believe that an adaptive, flexible leadership style comes from being mindful. Our individual,
interpersonal, and working lives are all interconnected. By being mindful, we understand those relationships and how best to utilize them to create, innovate, and lead.
And that allows us to arrange our lives and our organizations in a way that leads to long-term value creation. Indeed, the most sustainable way to create value is to continually invest in our capabilities, both as individuals and as organizations.
Entrepreneur Faisal Hoque is the author of Everything Connects: How to Transform and Lead in the Age of Creativity, Innovation, and Sustainability (McGraw-Hill). Use the Everything Connects leadership app for free.
[Photo: Flickr user Ekaterina]
Original article @FastCompany.
Copyright (c) 2018 by Faisal Hoque. All rights reserved.