7 min read
According to the U.S. Bureau of Labor Statistics, most businesses are destined to fail. Data shows that 20% of new businesses fail within the first two years of operation, 45% in the first five years, and 65% during the first decade of operating. Just one-quarter of businesses survive to 15 years or beyond. When so many businesses cannot survive, any person who can successfully lead a business or, even more impressive, take a struggling business and turn it into success is a veritable miracle worker.
On this Path to Profit podcast, GrowthForce Founder and CEO Stephen King had the pleasure of talking recently with just such a person, Russ Hawkins. Hawkins is the current CEO of Agilence Inc. and has a proven track record of transforming struggling companies into success stories. Throughout his career, Hawkins has raised more than $100 million across three companies and turned the funds into successful sales numbers and profits, while developing business models that succeed. His experience is a goldmine of invaluable information for entrepreneurs and business leaders.
During the conversation, Hawkins shared some of the most valuable lessons he has learned and insights he has gained during his years in business leadership that could help transform your business, too.
Leading Struggling Companies to Financial Success: 5 CEO Insights for Business Transformation
1. Applying Strategic Vision in Business With a SWOT Analysis in Business Strategy
When Hawkins takes the help of a new-to-him company, the first thing he does is perform a thorough SWOT analysis, assessing the company's strengths, weaknesses, opportunities, and threats. While he says that data can be useful in this exercise, he believes that talking with people connected to the company is the best way to get a clear picture of the business's current reality. He not only interviews employees but also talks with customers and clients in addition to individuals working for and/or using the company's direct competition.
Hawkins explains that this SWOT analysis is particularly useful because, in his experience, technology companies are usually started by visionaries, people who have great ideas and great product ideas in addition to a clear understanding of how to execute their ideas. However, in his experience, Hawkins explains that most of these visionaries don't possess the other skills (like business management and people management skills) to effectively grow a business.
"My typical pattern," Hawkins says, "has been to come in and essentially do an analysis of the company, try to understand who their customers [are], who they're trying to sell, what is the value proposition they're trying to deliver, and then get down into the detail of what specific use cases they can deliver to those customers, understand whether the product has legs and can deliver on that value proposition and use cases. So, effectively it's a SWOT analysis of product market fit."
Hawkins breaks it down, saying, "It's not rocket science, at the end of the day, but what you want to do, of course, is focus on the strengths. If you've got strengths, let's focus on the strengths. If things are distractions or risky, then you want to minimize those things."
He adds that, perhaps, the number-one lesson he has learned is that, "You always want to keep your options open because if you don't have options, then you're going to be at the mercy of the financial guys, and they're going to eat your lunch."
In this first process, Hawkins says the essential task is to know your customer, know your product, and understand that product-market fit is vital. You also need a strategy for growth, and you must execute the growth strategy.
2. The Importance of People for Achieving Goals as a Team
According to Hawkins, people are the most important factor in business success. As he puts it, "We're all in the business of satisfying and hopefully exceeding the expectations of our customers. The only way to do that is to have a motivated set of people - whether you're in product development, customer success, [or] sales . . . Our job as a company is to delight our customers to exceed their expectations, and the only way to do that is to have a motivated sales team, a motivated customers success team, and a motivated development team."
Hawkins explains that the only way to motivate your teams is to provide them with a clearly communicated set of straightforward objectives. So, after performing the SWOT analysis, leadership must come up with a go-to-market strategy that supports the overall strategic vision of the business. They must then communicate the strategy to their people and get them on board.
He continues to warn business leaders about the importance of and challenges involved with getting people on board with a common vision and goal for the business. Some people are going to have their own agendas and want to do things their own way. Hawkins says that it is important to act decisively to weed out those attitudes. Business leaders should focus on finding people who buy into the vision and strategy because it's only those people who are going to make the business successful.
Employees who buy into the vision create happy customers who return to spend more money. This makes happy shareholders, and happy shareholders keep the people happy by raising salaries, giving bonuses, and providing a positive work culture. As CEO, it's your responsibility to facilitate this virtuous cycle that results in achieving common goals as an enterprise, team, and community.
3. Cash Is King
Hawkins warns entrepreneurs of a common mistake that he has observed business leaders make repeatedly: "They think the game ends when they've raised the money . . . They get kind of money happy or money drunk."
Of course, it's natural to celebrate raising funds and having investors believe in your vision, your business, and your abilities. It's essential that raising the money isn't viewed as the ultimate success, though. Running the business and becoming profitable is true success.
Download: The CEO’s Guide To Improving Cash Flow
While it's important to present an optimistic future vision to investors, business owners and managers cannot put themselves on the wrong side of the equation. They need to walk a line between being conservative with cash and optimistic about the future. Yes, you need to spend money to make money, but you need to make prudent decisions about money, what you do to get money flowing into the business, and how your money is flowing out of the business.
"I don't mean that you shouldn't invest in startup companies," Hawkins says. "Certainly, small, venture-backed companies are expected to lose money at a certain point. That comes back down to your vision, mission, and understanding when you are going to break even and ultimately [be] profitable."
Hawkins touts the importance of balance in entrepreneurship. "You need to be visionary, but you also need to be pragmatic about the burn and keep it down."
4. Investors Are Not Your Friends
While Hawkins celebrates and uses investors in his businesses, the interview made it clear that he views investors and engages with them with great caution.
As he puts it, "[Investors] are not your friends. They want to be your friends. They want to appear to be your friends. They want to have friendly relationships."
While it's nice that investors want to be friendly with their business partners, Hawkins reminds entrepreneurs and business leaders that investors are in business to make money - not to make friends.
"They're going to hold you to a high standard, and they're going to take advantage of you if they can because that's the business they're in."
There's a reason why investors are referred to as "sharks," and Hawkins says it's because investors are going to eat whether you eat or not. So, it's essential to manage your business's cash well (see above) to keep your business in a position of strength. It's also smart to be careful about the number of investors you bring in and to be mindful of their alignment and goals.
"One of the mistakes I made early on," Hawkins says, "was thinking that all investors thought the same. Well, they don't."
Hawkins wants that investors often have conflicting agendas, and so business leaders need to be very wary of who they partner with to ensure alignment and avoid the inevitable drain on management and the business alike.
5. Entrepreneurial Insights and the Effective Use of Data in Business
Understanding your business's reality, investing in your people, managing cash well, and partnering with the right investors are all critical to running a successful business. You must also know your numbers and use them to make data-driven decisions.
The problem with data, according to Hawkins, is that business leaders are drowning in data. "Every system that you use, every application that you bring into the fold, every tool that you're using is spinning out some kind of data. It gets overwhelming, and it's very hard to figure out where the germs of growth are without some way of managing [the data]."
Hawkins says that the trick to effectively wrangling and using your data is to make sure you have enough of the right, useful data coming in. You also need to be sure it's comparable with data streams from all aspects of your business. Ultimately, however, your data must be usable, meaning it needs to be accessible, readable, and understandable to the average manager.
Your data should be presented in a way that, according to Hawkins, "allow[s] people to ask questions the way they're used to asking them, get information quickly, and make better decisions as a result. If [people are] making better decisions, profits will go up, revenues will go up, and costs will come down."
Actionable Data at Your Fingertips: The Power of a High-Functioning Back Office
To perform a thorough SWOT analysis, keep a close eye on your cash, implement a human capital management strategy with a positive ROI, and make the most of your company's funds, you absolutely must have an effective and efficient way to keep track of your financial data. This means that you need a back office that works for you, rather than creating more work for you to do.
In small, medium, and mid-market businesses one of the most effective and affordable ways to optimize your back office is through outsourcing paired with advanced automation technology and a knowledgeable team that can help you learn to identify the metrics that mean the most to your business, read and understand your financial reports, and make data-driven decisions to improve your business.