The Ford Mustang is arguably the most iconic American sports car of the past 50 years. Some of its popularity is based on how the car looks, but for many people, the Mustang is a must-have because of the engine, the core part of the vehicle that isn’t seen but makes the vehicle go from 0 to 60 in 4.3 seconds.
Why do we bring this up? Because in many ways, entrepreneurial businesses are just like the Mustang. It is easy to have a flashy website and say you are an expert in the latest trend, but in order to become a sustainable power in a fast changing world, you need to have a powerful engine that drives the performance of your business.
And just like a car, when it comes to optimizing your business’ performance, it’s critical to frequently look at the heart of your company and examine your core principles and practices.
So, let’s take a peek “under the hood” of your entrepreneurial business. When we pop the hood of successful entrepreneurial businesses we see three “pistons” that power their performance engine:
- Piston #1 – People
- Piston #2 – Value
- Piston #3 – Profit
In order to grow your business, you need to have clarity around these three ‘pistons’ including how they are aligned. By constantly evaluating each, you can make the necessary adjustments to ensure the business is producing its desired results.
Let’s examine each piston:
Piston #1 – People
Your people piston consists of the positive motivations and incentives you put in place for your employees as they support and implement your overall strategy. Beyond that, this piston includes how you hire and onboard employees, how you establish job descriptions, what types of employee development you offer, and how you evaluate and reward your employees.
In order for your employees to offer the support you need, it is essential for you to first clarify, communicate and operationalize the following:
- Mission statement: You need to provide clarity around a compelling purpose statement that states why the company exists
- Vision: You must define and communicate where the business is going
- Core Values: It is imperative you share the irrefutable behavioral foundations required of your team
Piston #2 – Value
Your value piston simply means the benefit your clients receive from purchasing your product/service, minus what they pay for it. Therefore, to increase the value of your offerings, you can either increase the benefits your clients receive, lower your costs or a combination of the two. Value is also relative to what your competitors offer.
The following exercises will help your business determine how to increase the value of your product/service:
- Strategy canvas: Identify the differentiating factors between you and your competitors, including how customers make their buying decision. From there, you can determine whether to change any factors to help you further stand out in the marketplace.
- Ideal Customer: Company’s that achieve repeated success in the marketplace are crystal clear when it comes to who their ideal client is. These companies build their value piston around that ideal client. It hires, develops and rewards people who serve that ideal client. This clear distinction leads to greater profit levels. Do you know who your ideal client is? What do they want? What are their values? What do they need from you?
- Sales Positioning: When you are pitching a client, you need to understand not only what a client ‘wants’ but you need to go deeper to understand and quantify what your client ‘needs.’ By knowing that, you can better demonstrate how your services could increase your client’s business outcomes in a quantifiable way.
A deeper understanding of your unieque differentiators, clarifying the characteristics of your ideal client, along with what they need, value & want from you, and well thought-out & implemented sales positioning will enable you to put together a compelling value piston that demonstrates to prospective clients the powerful return on investment that comes purchasing from your company.
Piston #3 – Profit
Determining profit at the end of a month is easy – revenues minus the cost of production and delivery. But do you understand the business drivers that will ensure at the end of a month you will hit your desired profit levels? Are you constantly calculating and analyzing the leading indicators that predict whether or not your business will make a profit this month, quarter and year?
Every industry has different key metrics that drive those kinds of businesses. For example, our friends at Summit CPA have identified 4 key metrics digital agencies and consultancies must calculate and analyze frequently: cash, utilization, capacity to contract, and profitability.
What are the key analytics you need to capture and analyze for your business? Monitoring these key performance indicators allows you to get real time information on how the business is performing and identify what to adjust in the ‘people’ and ‘value’ propositions, to achieve your company’s profit goals.
All Three Pistons Must Be Optimized
To the extent one of the three pistons is not operating optimally, your business will not produce the results you desire.
How are each of these three pistons operating at your entrepreneurial business? What needs to be done to improve the performance of each piston, and the business overall?
As you consider the answers to these questions, remember the Mustang. Ford is not shy about the car’s iconic status. Front and center on the Mustang website is this phrase: #1 SPORTS CAR FOR OVER 45 YEARS
Embrace popping the hood on your business and evaluating how your people, value & profit pistons are performing. By doing that, you too can strengthen your entrepreneurial business’ performance engine.
About The Author
Tom Barrett helps entrepreneurial leaders focus & grow their business by implementing the Entrepreneurial Operating System (EOS), facilitating StratOp strategic planning workshops and coaching teams to operationalize their plans. He is the co-founder of Navigate the Journey, a consulting firm that helps entrepreneurial leaders break through the barriers that are holding them back at the company, team and individual leader levels. For more information and to schedule a call visit NavigateTheJourney.com