Being around other entrepreneurial CEOs is invigorating and a great way to step back and think about the basics of your business. At the Inc. GrowCo conference this week, there were plenty of reminders about the fundamentals of building a business.
Whether you are creating your first a start-up or are a Fortune 500 CEO, getting the basics down usually results in a profitable business.
Here are three fundamentals that you have to get right to succeed. If you don’t, you’re likely to fail:
1. Make the right investments. We were reminded of this at GrowGo by, of all people, two politicians: Former President Bill Clinton and New Orleans Mayor Mitch Landrieu. Both talked about the need to make infrastructure investments to create growth in the economy, which is not unlike the capital and people investments we make in our businesses. (Fortunately, entrepreneurs are much better at it than governments.) Mayor Landrieu talked about the fact that, after Katrina, New Orleans didn’t rebuild the old city as it was, but as they would like it to be.
In our view, many large businesses have trouble creating sustainable growth because their CEOs are financially incentivized to make quick fixes rather than fundamental infrastructure investments. We spoke with an entrepreneur, Kate Morrison, who is building shopmilitaryfirst.com, an e-commerce site aimed at military families. She is dealing with fundamental investments in her business – such as brand, customer experience, and the basic customer value proposition – that, if done right, will pay dividends down the road.
This is something an entrepreneur must do to survive. Big companies can avoid it for a short period of time, but the lack of investment will become apparent in the long run.
2. Build a clear business model. We often tell our clients that it’s important to identify the highest-value growth opportunities in their business. But, it’s even more critical to first define a clear business model. Without one, investments have little chance for success. At the GrowCo conference, we were reminded of this fundamental issue by Alexander Osterwalder, who has a great framework for defining a business model (www.businessmodelgeneration.com). A basic business model gives you the elements you need for success, but truly “invincible” companies, such as Google, Apple, and Southwest Airlines, create inseparable linkages within business models and across business models that create a real competitive moat.
3. Build the best team. A CEO’s primary job, bar none, is to build and support a quality team. Tom Walter of Tasty Catering told Karl that this focus on hiring is to “screen for skills, but hire for attitude.” After hiring, the CEO’s most important job is to build a culture and support structure to ensure that the team thrives, personally and professionally. Tom, having built a number of businesses over the past 30 years, gives himself the title of “Chief Culture Officer.”