Let’s get real about something that’s been buzzing around lately. People are going bananas over how Nvidia’s sales shot up from $27 billion in 2022 to a jaw-dropping $60 billion in 2023, with profits skyrocketing from $4 billion to $30 billion. That’s over a 500% increase. Naturally, everyone’s on the hunt for the next Nvidia.
But here’s the kicker: research by Anthony Pisano and others tells us that only about 25% of public companies actually see significant growth. Hitting a 10% growth rate is considered top-notch, and even that doesn’t last forever. As it turns out, about 75% of companies barely budge in terms of yearly growth.
Realistic Expectations and Strategy
The above results suggest several strategies that should be considered:
Consider that real potential for growth frequently gets overestimated.
Companies tend to forget that products have life cycles—sales can start strong, take a dip, and then drop after a peak (Peloton is a great example). Plus, we tend to miscalculate the math. Growing 20% yearly for five years sounds great until you realize maintaining that momentum is a Herculean task.
Companies can also overestimate growth potential of diversifying or adding products.
When it comes to diversifying or adding new products, more isn’t always better. Just throwing in more colors, models, or features often doesn’t do much. Diversification needs the same magic touch as your core offerings and can also see diminishing returns. Remember the 80/20 rule? It’s real—80% of your sales come from 20% of what you offer. And “stick to your knitting” isn’t just a quaint saying; it’s solid advice that often holds true.
Companies need to consider other growth alternatives to increaseeffectiveness.
Should companies pay more dividends and do buybacks rather than invest in growth strategies? Should efficiency and effectiveness be considered more than growth in strategic planning?
Pricing Strategies in the Mix
Pricing Opportunities Continue to Grow.
Increased tipping pressures are starting to reach backlash. Many grocery chains are adding prepared foods to capture some of the eat-in market and to offer an alternative to the high prices of dining out.
Amazon continues to loom large, not just with prices but with selection, service, and speedy delivery. For example, one day shipping can be a game changer compared to visiting a store with low inventory, poor service, and inadequate staff. This puts traditional retailers in a tough spot, especially when they’re cutting back on offerings and service to boost margins, making Amazon even more appealing.
“Free” is not a dirty word. The concept of “Freemium” is more than a business model. It’s also a pricing strategy. Offering something for free and then charging for upgrades is a proven model (think Google and Facebook). Ancillary aspects of the Freemium strategy include samples, blogs, demonstrations, contributions to charities, etc. — these can all create new opportunities.
The Power of Logistics and the Internet
Logistics, sourcing and distribution efficiencies can drastically increase sales and profitability.
Efficient logistics, sourcing, and distribution can significantly cut costs and boost sales. Fast shipping and direct delivery methods can also make a big difference in pricing and profit.
Embrace the Internet.
The internet is a game-changer. Google, Facebook, and Amazon are essential players, whether as suppliers, customers, or information sources. Using the cloud, analytics, email marketing, and online ads can significantly enhance sales and leads.
Culture and Intangibles
In observing organizations, I consistently find culture, expectations and excellence greatly affect success more than we acknowledge.
While skills, finances, competition, and operations are all crucial, it’s often the intangibles that set you apart. For example, embracing risk, fostering passion, and cultivating a collaborative environment can greatly enhance effectiveness.
In summary, chasing growth for growth’s sake can be a wild goose chase. Instead, focusing on sharp execution, exploring alternatives, and prioritizing efficiency and profits might just be the smarter move.
I’d love to hear your examples of how growth can be achieved through a variety of strategies. You can find me at Bshlensky@startupconnection.net or 914-632-6977
Dr. Bert Shlensky, President of www.startupconnection.net, offers experience, skills, and a team devoted to developing and executing winning strategies for your new or established business. Our strategies help you increase your bottom line, and includes clear steps, with access to over 150 free articles and templates, to help facilitate your efforts and guide your process to profitability today. We are here to help you get on track and stay there as you move forward with your business.
It’s easy to get started! Just email Bshlensky@startupconnection.net or call 914-632-6977.
“If you aim for nothing, you’ll hit it every time.” These wise words from the famous author, salesman and motivational speaker, Zig Ziglar, are precisely why we must set clear, specific goals. Nearly every plan, budget, and proposal start with goal setting and establishing focus. In business, the next recommendation is to make a profit. The rest of the plan then details the programs to achieve that end.
It seems simple enough, right? However, the process of setting goals is far more complicated and can facilitate the remainder of a planning process.
A key issue in developing business and personal goals are the parameters. Even in sports, where the general goal is winning, there are complexities. For example, the goal of minor leagues is more about preparing players for the majors than winning every game. And in little league, things like development, training, participation, and teamwork can be as important as winning.
Goals also operate within the context of other needs. What are the opportunity costs of other activities? What are the costs, investment requirements, and rewards of an effort? What are the social, legal, and environmental considerations? How important are issues like innovation, time, safety, culture, and the whole group in an effort?
Here are some recommendations to consider in developing goals:
Exploring and understanding profit can add dimension to your goal setting. There is more than one description of profit. Some include: long-term profit, short-term profit, cash, present value on investment, profit before or after depreciation, interest or other factors, and expected value discounted for risk. Understanding profit and investment requirements also differ for service, retail, manufacturing, technology and other types of companies.
To compare varying goals, let’s look at small business entrepreneurs and venture capital investors. The small business entrepreneur is mostly concerned with earning enough cash to pay bills and stay in business. (If you recall, 90% of small businesses go out of business within five years.) Venture capital firms are looking at multiple investments and expecting that enough will make significant profit in a few years to more than cover the unprofitable ones. Even the venture capital business has changed dramatically in the last few years. Initial investments are smaller and for shorter periods, profit expectations are more carefully reviewed, and growth expectations are more reasonable.
Measurement is a critical aspect of goal setting. What, when, how and criteria of how we evaluate an effort are critical in decision-making and goal setting. For example, we debate the potential and impact of a recession. However, there are several different ways to measure it such as length, type, impact, etc. Measurement can also be considered from an absolute or relative perspective. In little league, showing up is frequently considered excellence. Improvement from a weak team can also be considered excellence while winning a championship is expected from the best teams. So, knowing what your measurement parameters are is key. Consider cooking, for example. We know measurement is critical, but when a recipe calls for a pinch, dash, shake, and smidgen… what exactly does that mean? It seems like only grandmothers really get it right.
Don’t forget about bias. Bias is, perhaps, the biggest culprit in distorting the development of goals. For example, when evaluating performance, profit can reduce the importance of variables like quality, customer service, logistics, etc. Bias can also cause issues because many non-quantitative goals are more difficult to measure. For example, sports teams generally focus on winning rather than development, culture, or team concept, which may be more important. Look how many teams in various sports have failed by trying to hire super stars and ignoring other requirements for winning.
Timing and time parameters are crucial. Long-term versus short-term is the most frequent difference. However, periods of time are also important. For example, the stock market has been highly volatile in recent years. 2020 and 2021 saw significant gains, 2022 saw significant losses, and 2023 appears to be regaining much of those losses. Goals will vary depending on whether you need cash immediately, are saving for your retirement, investing for inheritance, or any number of other needs and the timeline they require.
Flexibility is key. Businesses are subject to more radical change and need to build adaptable mechanisms into their processes. As we face more uncertainty and instability, we need to focus on changing and simplifying processes to reduce the risks, and our goals must align accordingly. Strategies like pivoting and develop/test/measure/adapt need to be built into our organizations.Examine alternatives and change when necessary. Reevaluate a system that isn’t working and set new goals that will yield worthwhile measurements.
Human and cultural factors must also be considered. How important are excellence and change in our processes? How much innovation effort is in our programs? How complex or detailed are our goals? And keep in mind that customer, supplier, and employee satisfaction can dramatically affect results.
The debate of pursuing improved excellence versus change is affected by a number of issues. We need to understand how problems affected by goals versus tactics can require different solutions. The most frequent issue with change is insufficient support and operations. For example, excellence in quality, delivery, and customer service are even more important during periods of innovation. As change is inevitable, organizations simply need to understand their new environment and execute fundamental change.
Make goal setting a priority and communicate your goals to those involved. Be certain to understand the varying needs of different situations. Use clear and simple measurement tools, and be sure to utilize the process for improvement, rather than criticism. And remember, we set goals to make progress, and even if we don’t achieve what we set out to accomplish, we still end up further along than where we started. So, stay focused on your goals, make them work for you, measure your growth, and keep moving forward.
Dr. Bert Shlensky, President of www.startupconnection.net, offers experience, skills, and a team devoted to developing and executing winning strategies. We guide your plans for business success and unlock your profits.Our strategy includes clear steps, and over 150 free articles and templates to facilitate your efforts and guide your process. We’re here to help you get on track and stay there as you move forward.We welcome comments, suggestions, and questions. You can write us at: bshlensky@startupconnection.net or call at 914-632-6977
What is success? It’s abstract, really. For some, it could be money and status. For others, it’s finding happiness. In business, we tend to measure success starting with profit.
In talking to entrepreneurs, I am always fascinated with the different perspectives of success. In general, they believe their ideas are incredible and the obstacles they need to overcome are constraints like finance, resources, marketing, and competition.
I argue that their potential barriers are actually achieving excellence in developing and executing great programs. Why do I think this? Well, 90% of new businesses fail withing five years, and that includes IPOs and venture capital efforts.
Consequently, there are several issues that need to be addressed in order for entrepreneurs to reach their full potential. When an entrepreneur thinks about starting a business, there are two distinct concepts that pop up time and again: Passion and Reality. These are both critical to success.
Passion was best described by Steve Jobs when he said, “Because the people who are crazy enough to think they can change the world are the ones who do.”
Reality is understanding the problems, limitations, and constraints associated with any undertaking. As Thomas Edison said, “A vision without execution is hallucination.” Passion is what gives us the drive to overcome these obstacles. It is the excitement and energy that drive a start-up. It is crucial to balance these two concepts if you want to execute a successful business.
You also need more than a good idea—they’re a dime a dozen. Your best friend might have the next million-dollar App idea. Ideas are great as they are the true engines of innovation. However, an entrepreneur needs to determine whether they can execute the idea and, ultimately, make enough sales to earn a profit. New businesses frequently fail because small (yet critical) issues are overlooked.
Here are some recommendations to help increase potential:
Plan smartly. Think of planning as a long arduous test with lots of work, incorrect assumptions, and missing analysis. For example, 2022 financial markets haveclearly made prior economic and financial assumptions in any plan highly uncertain. The solution is to make plans simple, flexible, and solely for the entrepreneur and not outside parties. It should be a guide, not a fixed template.
Keep plans current and active. A business plan is not a document to be stored on a shelf; it should establish parameters and be developed, tested, and continuously revised. Even with a “perfect” business plan, there will be hiccups and failures along the way.
Learn from failures. This is a critical component of the ongoing planning process.
Focus on passion. This will keep you going through the failures. Additionally, a successful business plan should express why you think the business is a good idea and why it will succeed. If you need to dress it up in a suit and tie to show to investors, do that later. A business plan should be YOUR vision.
Set realistic goals. While time frames, levels, and processes can vary, you need a plan to show profitability: the when and the how. You may do what you do for a number of reasons (passion, fun, fulfillment), but at the end of the day, a business needs to make money if it’s going to last. Make sure that you set your passion aside for a moment and make sure you’re on the path to profitability. What resources do you have and need? Many entrepreneurs follow guides related to large venture capital ideas while most small businesses earn less than $1 million per year. Be pragmatic in these matters.
Take risks. This is a critical part of every entrepreneurial win. Frankly, I think we all need more of it. We tend to think of risk as a taboo concept and it’s really not—once you understand it. In order to benefit from risk, you need to define what risk is to you. Some people view risk as the potential for harm or hazard (think bungee jumping). I view risk as an uncertain circumstance in which one manages to maximize the gains. But, how do accomplish this?
Utilize analytics. More analytics in sports is creating opportunities to assess strengths/weaknesses and create new winning strategies. It has enabled athletes to take more three-point shots, hit more home runs, longer golf drives, and score more touchdowns. More knowledge = more informed decision = less risk.
Consider value and probability. These should inform your goals and processes. For example, winning the lottery has an extremely high reward, but also has low probability. Purchasing investment bonds has lower return than buying stocks, but the risk and volatility of buying stocks is higher.
Be flexible. There are a lot of moving pieces involved in a business plan. And curve balls are inevitable as our world is constantly changing.
Remember it’s an ongoing process. It takes time, dedication, and consistent effort. Peloton, which was one of the hottest companies in the country, recently experienced over a 25% decline in sales. So, we need to constantly compare goals, risk, and the potential of alternatives.
Listen to your gut. Sometimes you just have to go for it. We tend to overthink things or let fear stop us from challenging the status quo. But, if your intuition is telling you something, it’s usually worth listening.
Just as there is no single definition of success, there isn’t a certain path to achieve it either. But, you can set yourself up to increase your chances by creating clear goals and understand the risk, the rewards, and the importance of developing a smart business plan. And don’t forget your passion—the reason you started your business in the first place. Success isn’t fun if you’re not enjoying what you’re doing.
Dr. Bert Shlensky, president of Startup Connection, prides himself on his ability to define what is unique about each and every business. He works closely with individuals to develop a personalized approach that targets specific areas of concern and offers solutions based on his 40+ years of experience. His expert team will address your particular needs while working to save you time and money.
When you want to stand out, reach out to Bert for the tools that will build your “sticky” brand. My focus is on understanding and analyzing your dilemmas and challenges, so your company becomes profitable faster.
Call (914) 632-6977 or email me at bshlensky@startupconnection.net. Don’t leave without signing up for our useful free eBook!
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