Depending on what data you chose to quote, something like 9 out of 10 businesses started fail within 5 years. I’m sure there are myriad reasons for those failures. Of interest to me are the ones that survive and how they fare beyond survival. Some businesses are decidedly “lifestyle” in that the owner/founder has no intention of growing the business past a certain point. The goal is to provide a comfortable lifestyle and interesting days at the business. Often, these are what I call Relationship Businesses. The purpose is to develop and keep relationships and the “numbers” are important only in that the company must be profitable if they are to continue the relationships.
Other founders intend to build a sustainable, long lasting and growing business. They are what I call an “MBA Business,” meaning that the numbers are an important focus and drive operating decisions. Good employee relationships are important in that they support the business and allow them to achieve the numbers. These two distinctly different “mindsets” for the leader each have a built in limit to growth. That is to say, the relationship business limits itself because they will not make the hard decisions around holding people accountable for their portion of the business. The so called MBA business tends to minimize the people part of the business and focus on achieving the numbers for the numbers’ sake. They lose sight of the “Why” of the business.
My view is that to build a sustainable business, one must develop leaders so that the operations can scale; and in order to make sure leaders are making decisions that are in keeping with the purpose of the business, there needs to be a clearly articulated and highly visible “Why” for the business – to use Simon Sinek’s terminology. With a clear understanding of the founding principles of the company and a clear understanding of vision and mission, leaders will usually make the right decisions. I see no other way of “scaling things up.” And I see no other way of building a sustainable business that will command a reasonable investment if M&A is in the cards as an exit strategy. Any purchaser will want to be investing in a company with a solid and fairly deep leadership bench.
To me, the other aspect of a sustainable business (and there are many, right?) is that even if it is a lifestyle business for me, meaning that I don’t necessarily want to grow it into a large public company, I would want to not be consumed by the business. If I ever want to take a vacation, or semi-retire or simply spend more time with family and hobbies, I need to have confidence that there are trusted leaders on my team who can make decisions without coming to me for guidance or direction. So the development of leaders should be a high priority for any entrepreneur, business owner or professional CEO.
So the question is: “Do you have a clearly defined “Why” for your business? Are you bringing or growing people who are leaders, willing to be held accountable, willing to develop other leaders? Are you the bottleneck in your company?”