Let’s buckle up.
Can your business take a punch?
The Corona Virus. This is when you find out if your company is built to last. There are some companies, like those in the cruise industry and airline industry, that I think just because of the nature of this epidemic that we have, that are going to have significant difficulties. I don’t even know if you could build a company that’s able to withstand what’s getting ready to take place in those markets.
For 99.9% of the other businesses, I want to ask you a question. Can your business take a punch?
I love what Mike Tyson said: “Everyone has a plan until they get punched in the mouth”, and that’s true. You might think you have a durable company and then you go through the collapse of 2008 and you’re going to find out if your business can take a punch, or you go through this coronavirus. When I was doing a study of Jack Welch for a lesson I gave on him a few weeks ago, I came across his quote: “Change before you have to”.
I am old enough to understand this. Your goal as a business is to create a battleship. You want a vessel that is so formidable that unless you hit an island or an iceberg, you’re pretty well set. But as a start-up, you’re more like a speed boat or maybe even a kayak. It could flip easily, but it needs to be extremely nimble and have the ability to adjust quickly.
How do You Build a Business that Can Take a Punch?
There are two commandments to that.
1. It Is a Durable Business Idea
So it’s not a trend. Trends typically will die when they get hit. Typically, trends are not something that people will commit to buying. They’re cute when there’s a financial overflow, but it’s not a core or it’s not a commodity that they must have. I always ask myself when I’m starting a business, do I see people buying this 10 years from now, 20 years from now? I’ve had three companies that have reached their 20 year anniversary. Does it start out as a durable business idea and not a trend?
2. It Aggressively Feeds Reserves
I never felt like a business owner until we were putting money in reserves. And secondly, I am putting money aggressively into growth initiatives, innovation, and new areas of profit that can feed my reserves
Now we get to the components needed to build a business that can take a punch.
1. It needs to repeat customers.
Unless you’re selling islands or airplanes, you typically are going to need repeat customers. There are very few things you can sell once. I want a business that has a big stream of customers. I’m always looking at the lifetime value of a customer. I want to see that this customer can buy from me again.
2. Have a product or service that fills a need or solves a problem.
Problems typically repeat and many people have the same problem. For example, you still need tires on your car or your car in working condition during a virus pandemic. You will still have to get things fixed at your house. They may be delayed a little bit, but there’s going to be some things that have to be fixed immediately. It doesn’t matter if you sink stops working, you’re going to get it fixed immediately.
3. I like businesses with automatic revenue.
You can do this through memberships, auto-pay subscriptions, etc. That’s automatic revenue and you can build that into your business model, like Harry’s razors.
4. Staff with great capacity
What I want all my staff to be able to do is two jobs. I tell them that I’ll pay them for one and a half when they can do two. Why do I want to staff with a great capacity that allows them to do multiple jobs? In a financial crisis, the strong survive and the weak get laid off. That’s just reality. So in a pinch, let’s say my company is 50 employees; can I run it with 35?
If I had to start this business over again and I had to cut it in half, who would I keep? It’s an exercise I do every year between Christmas and New Year. It would allow you to conserve money in an economic downturn because each person on staff would have the ability could do two or three jobs in the office. That’s the type of staff I want. The Patriots organization works this way. They are very creative with their personnel.
Can your Business Take a Punch?
Can your business take a punch? This is relevant right considering the state of the world economy in relation to the coronavirus. Many companies are going to face tremendous economic challenges and some will survive and some will not. If you build your business to take a punch if will be more likely to last.