When we assess a business for financial security and sustainability the following is what we look for.
The big one is recurring revenue
Else you’re just flipping burgers. Someone said to me once that a terrible way to live your life is to get out of bed on the first day of each month and have to go out and chase revenue from scratch.
Businesses with recurring revenue, especially revenue locked in with contracts, are much more valuable than pure sales based ones. The internal focus of the organisation changes too, away from sales, and towards service delivery.
Sales staff are expensive to employ and often you have to employ three to find one that works out. Almost every time I hear someone say that they think a salesperson will solve their major headaches I try to talk them out of it. Sales support sure, but not sales, that’s usually down to the boss (up to $20M)
Revenue contracts are usually more difficult to win than one-off sales, hence why sales support is often a good idea, but they should be more valuable in the long run and help form barriers to entry for competitors. In other words, it makes you better than the other guys. And if your focus is on service delivery rather than sales you should be better at keeping the clients.
2nd one is healthy margins
Look to see what the average margins are for your industry and try to understand where yours are different and if that might be a strength or weakness, it can sometimes be both.
Try not to have an unhealthy focus on just cost and overheads. It can be a recipe for misery for the people in your business and prevent you from ever taking off. Especially for creative and professional services businesses. Even Henry Ford wanted to pay workers a wage so they could buy one of his cars. Even Henry Ford!
Don’t skimp on benefits. Supply healthy food in the office, fitness classes, etc.
Instead, focus on productivity. Don’t focus on picking up the coins on the floor while the dollars are being handed out on the table.
3rd – good people that are treated well
You can usually tell that pretty quickly when you visit somewhere. The vibe is usually obvious.
I have a theory that it’s how well firms treat juniors that is often a good way of telling how they aligned they are with sustainability. Are they thinking about the next generation, supporting and making use of everyone talents, regardless of their “status”?
Last, and critical to sustainability, is really solid project management, elegant performance reporting, as well as bulletproof billing procedures and systems
Many a business has failed because of these things. There is no alternative.
And they are not “just admin”, they facilitate the lifeblood of your business. They allow you to stay in control. Get it right and you can avoid a world of pain.
Photo by Eddie Kopp on Unsplash