Quote of the Week:
“As long as you are going to be thinking anyway, think big.” -Donald Trump
You should be thinking like a big business
There is a small business mentality in which you hire all your family members and are thankful just to be getting by. The company has a lack of talented staff and no vision, dreams, or goals. You should be thinking like a big business. Even if you are a small business owner you need to have great goals, which we shared in last week’s episode. If you are going to think like a big business, what do you need to do?
You need to be highly focused on numbers.
Another problem with small businesses is that when you ask them what their profit margin is, they have no idea. Ask them what their annual revenue is or how much they need to bring in every day to survive and they don’t know. They have no concept of numbers. They may know one number within the context of their business but they don’t know all the little numbers.
When you speak with a large business they know their numbers on everything: operating cost, how much it costs to produce each product, what they make per product, and regarding their services what their profit per person is. You need to become a numbers freak. That is what big businesses are. You need to be addicted to key numbers whether that is your annual profit or your cost to run your business per day. If you don’t know the latter, I ask that you make it your goal to find that out. What do you need to bring in every single day that your business opens the doors?
I found out that number for one of my businesses, which is why when my guys told me that it was snowing outside, I said, “Great, we still have bills to pay.” When you start finding out what it costs to run your business every day you aren’t going to close your business down as often. You will be very conscientious of what you need to bring in every day.
When it comes to customer acquisitions, I am fanatical about finding out how many customer contacts we have every year. I want to know where they came from and of all the customers that contacted us how many of them did we bring into the fold? You need to establish what your key numbers are. Again, think like a big business. Picture a dashboard. You need to have three to five key numbers that you can see at all times in order to tell whether your business is doing as well as it should be.
I get a sheet texted to me at the end of every single day. It looks like a dashboard of a car and it gives me four key numbers that I want every 24 hours from my staff. Then, at 4:30 in the morning I get an email from my accountant with all the key numbers from every single one of our business accounts. Within 24 hours I get two dashboards, one from my staff at my companies and one from my accountant who takes care of the money. Numbers are important to big businesses and they should become important to your small business.
You need to become growth minded.
Big businesses are always trying to grow and therefore you need to be thinking about growth. That means you are not content all the time. If you aren’t growing you are probably shrinking and are most likely losing market shares. Grow your market share. If you want to think like a big business one way of attaining growth is acquisition.
Last week I had a phone call with a business owner and afterward I told my business partners that I would like to buy his company. The owner was in his sixties and if he doesn’t have a transition plan his client list matches up with our client list. The culture that he has built would gel well with our culture. The point is that I am always looking for a business that I can acquire. I look for businesses that don’t have a transition plan in place. In other words, whoever is running the business is getting older and I am not sure how it is going to be passed on. Maybe I could offer them something that would be very appealing. Think growth. Big businesses are always making great acquisitions. This is called buying some market share and one of the quickest ways to do it is by buying the market share of some of your competitors.
Protect your market share.
There is a reason why Budweiser runs commercials during the Super Bowl. They want to remind you that they sell beer. You probably already know it, but they don’t want you to forget. That is why they have those beautiful Clydesdales going down the path at the Super Bowl. Even if you are five years old and don’t know that it is a beer commercial, you watch it and say, “That’s a beautiful horse, mommy.” They are implanting what they want. They want you to like their company early and then introduce you to their product later. They are protecting their market share. If you are not aggressively bringing on new clients you are not protecting your market share.
Become hyper-aware of your profit margin.
I previously talked about key numbers, but profit margin is different. You need to be obsessively aware of all the costs involved to put your product on the market or provide your service. This is a key indicator. This is the reason why General Motors needed government protection and a loan during the recession. They had a big campaign and lost track of what it cost to make their vehicles. They were spending more than they should have in contrast to the Japanese who have done a great job of producing very good vehicles at a lower cost.
You need to figure out what it costs to offer your product and you need to guard that number like oxygen. If anything, create margin. The more profit you make, the more money you make. The bigger this margin is, the greater the amount of money your company is going to make.
Know what your expenses are.
Big businesses always know what their expenses are. Don’t just spend money like it grows on trees. This is the problem with small businesses depending on lines of credit.
Big businesses are very aware of their debt. In my opinion, they take on too much debt, but they do have a ratio that they are comfortable with. Small businesses are very unaware of debt. I always say that if you are using debt to make payroll that is a problem. You need to manage debt very wisely. You need to look at what your interest rates are and you need to determine if you are making money on the debt that you are acquiring. What are you taking on debt for? Big businesses take on debt in order to create more revenue. Small businesses take on more debt in order to get by. That is a bad equation.
They leverage their assets.
Big businesses use everything they have to make money. If you have a large piece of property and your business only requires a small section of it, consider leasing the land. I was familiar with the owner of a miniature golf business who owned more land than he needed for his business. He worked out a deal for a storage unit facility. After that, the golf business didn’t really matter because he got such a good deal on his land. Look to leverage all your assets. For example, if you have additional staff you could take on some clerical or office work from additional small businesses.
Devote time and resources to research and development.
You always need to be figuring out how to offer your product for less and how to develop new products and services. You need to think about it even if you are a small business. Consider selling off divisions of your company that no longer interest you but may interest someone else. Last, think impossibility. Small businesses get trapped in a small business mindset or the survival mentality. Ask yourself, if your business was perfect in every way what would it look like?