DEFINE (AND REFINE) YOUR BUSINESS’S STRATEGY
Before talking about what STRATEGY is, let me take a step back to understand it in the context of your business’s very existence and purpose. This is probably the most important part of the book, thanks to which my clients understand how to quickly scale their businesses up to multiples of seven figures.
Many people talk about the importance of business strategy but do so in vague terms. I’ve never seen anyone go further and actually define what strategy exactly is. So let’s delve where no one wants to go: the world of accuracy and comprehensiveness. You’ll know it all.
The goal of each and every business is to fulfill a need in the marketplace and, in turn, generate revenue. Right?
Wrong.
That’s a limiting mindset that unfortunately a lot of business owners develop. The real goal of a business is to fulfill a need in the marketplace and generate VALUE, not revenue.
You want the proof of that? There are a lot of businesses out there that generate revenue but have zero value. Those companies are generally very limited in their growth, and they’re called lifestyle businesses. They generally rely on one person, even if there are a few employees; and if this person leaves, there’s little to no value left.
On the other hand, companies that have value ALWAYS generate revenue and profit, with the exception of a few unicorns such as Uber, Pinterest, Spotify, or Slack. These companies are exceptions in the crazy world of finance. This’s not how business and economics work for 99.999% of companies.
So why is it better to prioritize VALUE over revenue and profit? Because revenue and profit are byproducts of VALUE!
When you create VALUE in your business, you unknowingly capture other metrics like revenue and profit.
Each and every business is a value creation process. It starts with an input and ends with a finished service or product.
What exactly is VALUE, and WHERE is it in your business?
I want you to understand the concrete value of your business; to look at it—and at ALL other businesses—through the lens of a high achiever. So what are we talking about EXACTLY when we talk about VALUE? There are only two things that have an impact on the value of your business.
The first one is your ASSETS. This is your WHAT.
The second one is your STRATEGY. This is your HOW.
Value = assets x strategy.
GOLDEN ACTIVITIES
Working On Long-Term Future: Months & Years
FIRST STEP: THE ASSETS
Before we talk about your strategy, let’s first focus on your assets—WHAT YOU HAVE. Especially in the beginning of your business’s life. Five- and 6-figure entrepreneurs, so-called lifestyle entrepreneurs, work to generate REVENUE. And when they do make six figures, most of them get stuck there forever.
That’s the direct result of the revenue mindset.
On the other hand, 8- and 9-figure business owners work from the very beginning to build assets. Such a philosophy has a tremendous impact on:
So WHAT is an asset? An asset is a RESOURCE that has been created or bought by the company, to increase its value by generating revenue. Let’s take a closer look at what an asset is, in real terms. Let me list ALL the assets a business can have, regardless of the industry. There are thirteen possible assets:
That’s it: an exhaustive list of all the possible ASSETS your business could have, with which you build real VALUE, generate REVENUE, deliver PROFIT, and produce CASH. By building each of these assets, and COMBINING them, you are building value and a real business. You’re building WEALTH.
Depending on your industry and how you set up your business, SOME assets are more important than others. Maybe you don’t own any real estate, and that’s not part of your plan. Maybe your business can be relocated anywhere, and your location doesn’t matter. Perhaps you don’t have a valuable partnership … yet. Maybe you don’t sell products, so there’s zero inventory.
You must concentrate your efforts on what matters for YOUR business! I have three exercises for you that will show you where your business stands versus where you want it to be.
1) List your assets in three categories
Take some time to list all the above assets in three columns:
Once you’re done with this exercise, you’ve got your ASSET CARD: that’s a CLEAR PICTURE of where your business stands.
2) Rate your assets’ potential
The second step consists of rating your assets. What stage are you at with each of them in relation to your goals? Look at each of your business’s assets and imagine them once they’re optimized. If, for example, you’re just getting started, and nobody knows your brand, mark it at 5%. If your business owns a piece of real estate, and you don’t plan to own any more, mark it at 100%. If the products or services you offer are up and running, and you don’t plan to offer anything else in the next eighteen months, mark it at 90% for example.
When you’re done, you’ll have a more ACCURATE view of your company: you’ll see where the value is today and where you want it to be in the future, that is, what you have to work on.
3) What’s in your business now?
There’s another exercise you can do to know WHERE the value of your business comes from, at this moment in time—what you really own. In other words, if you had to sell your business today, what are you EXACTLY selling? Let’s apply another set of PERCENTAGES to each of your assets, so that their amount totals 100%. For example, your EMPLOYEES might be your most valuable asset—let’s say 35% of the total value of your assets. Then there’s your CUSTOMER DATABASE which is, say, approximately 30%. Then you have some important PARTNERSHIPS that currently represent 15% of your business’s assets.
I’m just giving you some indicative numbers, but you get the point. Think about each of your business’s assets, give them a percentage value, and adjust as you add the other assets. Most businesses have 80% of their value concentrated in one to three assets.
To make it easier, I give you an example with one of my companies in the following video:
8FigureWorld.com/value
That’s how high-performance business owners look at companies—beyond revenue and profit.
Now you understand why oftentimes there are owners looking to sell their businesses, when in comes a buyer who tells them that they’re interested but they don’t need the whole business, they just want one or two assets. For example, they’re just looking for the IP; that’s all they need. Or the buyer only wants to buy the location, the database, or the brand. They identified the “Rembrandt in the attic”: expert buyers know exactly where the real value is in a prospective business, and it’s usually concentrated in a single asset, sometimes two. Rarely more.
By the way, when I was an investment banker, some of my clients didn’t want to sell their businesses anymore once I shared with them, among other things, The 400-Hour Workweek principles. Once they discovered their $10,000/hour activities, they chose first and foremost to double, triple or more the value of their companies, and then to sell them. This way, they increased the value of their businesses mechanically (because their profits soared), and exponentially (because by increasing the size of their companies, they also increased the multiplying factor used for their valuation). That’s how I became, by chance, a consultant and a coach for business owners.
At this point, you should now:
SECOND STEP: THE ACTUAL STRATEGY
Let me remind you the formula:
Value = assets x strategy.
Let’s focus on the second component of your business’s value. Unlike your assets, this is something that doesn’t appear anywhere on your balance sheet: this is your STRATEGY. This is your HOW.
NOTE: it’s what I refer to as a macro how, not a micro how. A micro how is about the tactics, whereas a macro how concerns how you manage your assets and deploy them. Just to be clear, there are two major elements regarding the management of growth within an organization. I’m sure you already know this, but as a reminder, there’s: (1) your strategy, and (2) your tactics.
Remember the famous “Art Of War”, where Sun Tzu wrote that “Strategy without tactics is the slowest route to VICTORY… But tactics without strategy is the noise before defeat.”
If you’ve followed me so far, you’ll know that your company needs both strategy and tactics. The more your company grows, the more time you should personally spend on the former and delegate more of the latter … until you spend your time only on strategy and DELEGATE all the tactics.
At one time, when I was working in my low 6-figure business, I often wondered, “What software do they use for this? And what do they use for that? Where do they put their ads? What’s the copy?” I was focusing on the tactics, the micro how, until the day I realized that I had to model the STRATEGY, the thinking, the macro how, and not the tactics. When I realized that tactics didn’t deserve 100% of my attention, for me, that was an 180° paradigm shift.
Look around you - People that are stuck below $100k/year always talk about tactics … because they devote most of their time to tactics. Who are the people who buy books or courses about running Facebook or Youtube ads, the best way of blogging, setting up email campaigns or optimizing Instagram accounts? At 90%, they are 5-figure business owners and 10% are at low 6-figure.
That’s why you have big proponents of Facebook ads in one camp, and YouTube ads proponents in another, as well as SEO promoters, and webinar defenders, and organic traffic advocates. The reality is that ANY tactic works fine when it’s well done and appropriate to your strategy. People become dogmatic in their reasoning and become precious about their choices in a way not too dissimilar to car owners. For instance, there are those out there who swear by Mercedes, and there are those who assert that an Audi is by far the best, while others will tell you BMW is the only brand they’d ever buy. The reality is that they’re all reliable and will all take you from point A to point B, with a comparable at the same speed and comfort. It’s down to the idiosyncratic needs of a person or business which affects their decision.
I haven’t personally implemented any tactics in any of my businesses for almost fifteen years, because I don’t need to. It’s a waste of my time. I leave it to the experts, those who spend ALL of their time on Facebook, YouTube, fiddling with automation software, creating funnels, and running ads. I’m not in the business of marketing, I’m in the business of business. The same goes for ALL the high-performance business owners I know. To be in the business of business, you need to have a solid strategy. That’s how the business world works, at least at the 8-figure echelon and above.
The first mistake entrepreneurs make is to jump right into the tactics, without any semblance of a strategy. Without a framework. The second mistake they often make is that they switch tactics as soon as it’s not working right away, instead of testing, tweaking, and improving it for a designated period of, say, six months.
Your strategy evolves with time, but from the startup phase, you must have a solid strategy that will allow you to deploy your assets INTELLIGENTLY. Generally, you start with your own knowledge, some equipment, some savings, maybe some inventory or raw materials (if you sell products). And then what do you do?
HOW do you penetrate the market, reach the right customers, establish your brand and expand your business’s notoriety? Do you have a technological advantage? Do you have a great supplier that you can leverage? Do you have a revolutionary concept? Do you buy real estate? Do you look for joint ventures and partnerships? Do you adopt a cost-leader strategy or one of differentiation? Do you plan to meet the needs of a smaller specific audience?
What STRATEGY have you planned? More specifically, what do you do with your assets? Having the right strategy means doing the right things with your assets.
As a business owner, working on your business’s strategy is actually INVESTING your time. Remember in the first section when we discussed “plan your time”? You have important decisions to make from the beginning, to create your initial launch strategy. And then you refine it over time, especially if your business is in its infancy.
But once you reach a certain threshold, usually around six figures in revenue, and you decide to shift your marketing strategy or launch a new offer, you won’t need to do it yourself. You’ll have the capacity to delegate the execution of it. And there are two main benefits of that:
So what’s your plan?
Will you sell products or services? Will you use your savings to build a partnership with someone who can manufacture your products in Asia? Will you hire someone upfront with specific skills and work with them, at a specific location where you know there will be clients? Will you run some ads to make your business better known? Will you release some viral content?
Then as you grow, you’ll need to work on other strategic questions, such as the positioning of your business; the creation and development of new products or services; the approval of new policies in your company; the establishment of ongoing training for your leaders; the new resources you need to grow your market share.
Not forgetting, above all, working on your business’s CULTURE, that is, the core values that you’ll convey to your employees and customers. (Remember Section 3!)
That’s the SOUL of your business.
Working on your business’s culture is an integral part of your strategy … to some extent. When surpassing a certain threshold, during your business’s growth, your CULTURE will be mature enough to prevail over your strategy.
SHIFT YOUR MINDSET
The COMBINATION of your strategy and your assets creates long term VALUE, that translates into revenue, profit, and cash. Now you get the right FORMULA, and above all, you get the right mindset: the same one that drives the entire 8- and 9-figure business owner community. Just switch your mindset from one of revenue generation to one of VALUE CREATION, by clearly identifying your ASSETS and deploying them wisely. Doing so will ultimately define your STRATEGY. That’s a game-changer that very few business owners know about.
Start working like this, and let me know here how it worked, in the 8 Figure World Facebook group: