Is your business model firing on all cylinders? These questions will help you determine if your business needs a few tweaks to keep humming along smoothly.
Last week, Avondale senior leaders met as a team to set our growth goals for the coming years. In the course of these meetings we examined our current business model performance in great detail.
Although we have grown aggressively and profitably in recent years, we wanted to be sure that our business model was hitting on all cylinders before we committed to further aggressive growth. After all, it is pointless to hit the accelerator if the engine is misfiring: At best, we under-deliver vs. our goals, and at worst, the engine breaks down entirely and we grind to a screeching, unprofitable halt.
Here are six questions we asked ourselves to decide if the business model needs a tune-up. The questions (and the follow-up questions that each drives) address every important aspect of our business model. This type of "zero-based" approach enables us to take a fresh view of the business.
1. Who is our target customer?
What types of companies and management teams are most valuable to us?
How do we recognize and priorities customer opportunities?
2. How do we gain and keep customers?
What is our approach to marketing and pipeline development?
How do we convert relationships into profitable clients?
How do we retain the customers we have gained?
3. How do we serve customers?
What is our staffing model? How well are we executing that model?
What is our plan to build on the intellectual capital we have and continue to build more capital?
4. How do we price our services?
When should we sell services at a discount, and toward what end?
How do we price our services in fee-based vs. equity-based relationships?
5. How do we attract and retain talent?
What type of people do we want to hire (skills, cultural fit)?
How do we recruit and hire effectively and efficiently?
How do we develop our team and grow their capabilities?
How do we manage the team?
How do we retain the valuable members of our team? What are the right culture and incentives to drive retention?
6. What investments should we make in adjacent growth opportunities?
What bandwidth do we have as a management team to take on additional opportunities?
Do we have the right talent within the firm to pursue those opportunities?
By working through these questions together, and having done our homework in advance, we had a robust debate on our business model. We were able to agree as a team on which parts of the business were humming along quite nicely and which parts need a tune up. We also have agreed on a path forward to address our tune-up challenges over the coming months so that we can really put the pedal to the metal.
We will be holding these types of sessions periodically going forward. Like a car engine, a business needs regular tune-ups to run smoothly.
KARL STARK AND BILL STEWART are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree. @karlstark