5 Tips to Success in Business – Part 2

Lesson #3: Long-term Planning

The last lesson touched on this, but it’s important enough to reiterate. Taking the time to put together a long-term strategy is vital to your success in business. This means before you do anything else in your company, you come up with a plan, beginning with a reason for existence. Figure out your values; having these in place will end up shaping how others will perceive your business. Finally, lay out long-term goals and strategy. For us, this was to go high-end and focus on organic growth rather than a skimming approach (while our competition focused on grabbing as much territory as possible, we focused on penetrating the markets we were already in). Once these are in place, stick to it. One of our competitors, when reflecting on their business decisions, noted that they had initially developed a strategy which they had failed to follow. They experimented with different things, and doing so killed them.

Lesson #4: Focus

A Marketing 101 lesson (from freshman year Intro to Marketing professor Dr. Powell) is to stay focused; if you try to get too fat too fast, you’ll fail. We knew this, but failed to take it into account. Our initial product offering was diverse, and the consequence was, well, no sales. We corrected this and remained focused on our core strategies (back to the long-term planning), allowing us to do significantly better than our competition financially.

But at the same time, we were also able to recognize opportunity. While focusing on our core strategy, we realized that the only way to catch up to our competition (who were significantly ahead of us in market share at the time) was to slow them down. Therefore, we launched a new product in their primary product category (our primary product was in a different market than their’s), which succeeded in stealing market share and slowing them down (even better than anticipated). The quarter we launched this new product was the quarter everything changed and our growth skyrocketed (note here that this radical turn-around was a combination of the new product launch as well as having remained focused through quarter after quarter of struggle to get the right systems in place).

Lesson #5: Cash is King

Cash! The lifeblood of every business. I mentioned previously our struggle with cash flow. We had practiced careful cash management since the beginning, and it paid off. But the lesson we really learned came through reflecting on the actions of one of our competitors. This team came out badly at the end of three years of business. They ended up negative, thus losing their own investment as well as that of their investors. Part of the reason, as previously mentioned, was not sticking to their plan. But the biggest cause of failure was only taking the cash they needed when offered money by investors. They were offered $5 million (the maximum any team could get), but turned it down because they felt they only needed half that amount. The result: they burned through the cash and spent the rest of the simulation desperately trying to keep the business alive, rather than being able to focus on product improvement or stronger marketing campaigns. Only accepting the cash they needed sucked the life out of their company, which had, by the way, started out the strongest out of all the teams. The moral of the story is that you will always need more cash than you expect, and it is better to seek cash when you are in a position of strength than when you actually need the money.

In our business, these lessons enabled us to bring in an overall return on investment of 422%, crushing our competitors. Implement them, and you’ll be set for success.

5 Tips to Success in Business – Part 1

While finishing up the next book review, I thought I’d go ahead and share some lessons learned from running a business simulation last semester. This simulation was a three-credit, semester-long class that offered plenty of variety compared to the typical semester load. It offered the opportunity to launch a computer company (albeit in a world with no established competition), and served as an excellent tool for practicing teamwork. Of the three competing teams, our team (of four partners) started slowest but pulled out ahead at every level at the end. The reason for this success was because of several key lessons we learned early on.

Lesson #1: Pick your Business Partners Wisely

One of our key advantages was that our team worked well together. Our president, a friend of mine, and I sat down before teams had even been picked (even before we knew for sure we would be working together) and evaluated every person in the class to customize the ideal team. Of course, part of this was luck of the draw, as it sort of “just happened” that we picked a team that would learn to communicate well, work hard, and maximize each other’s strengths, but investing time up front to ensure that your team is able to rise to the level of your company vision is vital.

Lesson #2: Balance the “Manager” and the “Marketer”

While planning our final presentation and reflecting back on lessons learned, we realized that one of the vital things we had gotten right (again, without necessarily meaning to) was the ability to balance thinking like managers vs. thinking like marketers. The difference is that managers think short-term, about what needs to be done right now to keep the business afloat, while marketers think long-term, about what will bring the greatest benefit in the future. During our second year in business (the simulation was broken down into 12 quarters), we faced a crises. We couldn’t get our product design right (we spent four quarters fighting this battle), so couldn’t even begin to keep up with sales. We finally threw everything we had into fixing the product. But when we finally got that right, our cash was exhausted. We had hit a pit. Fortunately, our Board of Advisors (aka our professors) invested some funds in our company, but if we weren’t extremely cautious, it wouldn’t be enough to get us off the ground. The following two quarters or so were ones of extreme cash management; it was challenging, but thinking like managers saved our company.

Early on, we had set in place an overall strategy. At first, we slipped away from this strategy, but by the time we got our product development on track, we had figured out what we were doing. We planned long-term, and stuck to that plan. Sticking to the plan, despite the occasional temptation to try something different, allowed us to catch up and surpass our opponents both in product and market size. Thinking like marketers allowed our company to grow.