The Facts of Business Life (40 page)

In the marketplace war zone there are generally four types of business operations. The first has a poorly performing owner-operator who is selling or servicing a limited-demand product or products. This company's likelihood of success is nonexistent. The second has a good owner-operator who is selling or servicing a limited-demand product or products. This kind of company can survive, but it will be a constant battle. The third type has a poorly performing owner-operator selling or servicing a high-demand product or products. This company's likelihood of success is average. That is, it will probably succeed but never attain its full potential. The fourth and final type has a good owner-operator who sells or services a high-demand product or products. It is only this kind of operation that's likely to not only be successful but, potentially, dominate its market.

This reality, however, raises the question of exactly what a well-run business is. That is, what traits does an efficiently operated company have that others do not? This is important because unless you know exactly what you're trying to create, you won't know how to create it. Ultimately, this is something you have to decide for yourself. To my mind, however, a well-run business is one in which the owner:

• Understands the importance of customers and communicates it to his or her employees.
  
• Values the importance of gross profit and manages the business accordingly.
  
• Is willing and able to explore alternative ways to add sales and gross profit.
  
• Establishes processes and trains employees to operate them.
  
• Works to make sure that every department supports the overall goal of creating and keeping customers.
  
• Understands the Facts of Business Life and applies them appropriately to the company's operation based on which of the five levels the company is on.
  

These are obviously not all the things the owner of a well-run business has to do, but you can use it as a starting point for creating your own list. Of course, creating the list is just the beginning. Once it's done, the next step, as is always the case at Level 2, is to develop the processes that will enable you to make sure your business does in fact operate this way. How your business operates is obviously a DNA function. So unless you have thought through how you want your company to run, and developed processes that are manageable and focus on results, your business will never operate the way you want it to. It's that simple—and that complex. And whether you like it or not, it's a reality of the war zone.

Some people refer to the X factor as the “great intangible,” and to a certain extent doing so isn't entirely unreasonable. The competitive spirit that makes some companies successful can appear to be something of a mystery. At the same time, if you want to compete successfully in the marketplace war zone, it cannot remain a mystery. That is, you have to make sure you know what it is and build it into your company's DNA. It's only by establishing this kind of firm foundation that you will be able to enter the war zone at full speed when you get to Level 3. But doing so requires you to take three steps.

The first step is to educate your staff about the level of competition in the market; what it will take to attract, sell, and keep customers; the necessity of being better than your competitors if you want to become successful and remain that way; and the part they must play if it's going to become a reality. Doing this makes it clear to them that you are serious about what you're doing, while at the same time showing them that the business won't succeed without their front-line knowledge of both the overall market and your competitors' actions.

The second step is to explain to your staff exactly why you have chosen the weapons you have to compete externally and how you're going to use them. This is because if the weapons are going to be effective, they must be backed up by your employees' actions. If you're trying to develop a professional image, for example, it is essential that your employees make sure your premises are clean and that they dress, act, and exhibit their product knowledge appropriately. This will enable them to understand that the business will have to be a coordinated machine in which they play an essential part.

The third and final step is to make sure your employees understand which skills you expect them to have and the tempo at which you expect them to work when dealing with both customers and each other. The reason these two items are so important is that if every one of your competitors is well run, and has equivalent products and prices, it's your employees' skills that will make the difference. The best way to bring this about is to explain the role processes play in the company's operations and the reason they are so important. At the same time, you should tell them how their performance will be measured, the benefits of performing well, and the disadvantages of performing poorly.

Being competitive clearly doesn't necessarily mean being the most aggressive. What it does mean is being the most competent, that is, displaying certain basic skills such as product knowledge, pride in professionally caring for customers' needs, and enthusiasm when dealing with customers. In other words, competitiveness begins with your marketing and advertising and ends with your staff demonstrating how well they are trained by doing what you expect of them. This is the daily blocking and tackling of business, and how well this is executed will be determined by your company's competitive DNA—the X factor.

Being able to enter the war zone at Level 3 with a detailed plan of attack developed at Levels 1 and 2 gives your business an immediate advantage over a lot of your competitors. This is because you have prepared and planned, know the latest market facts (including some your competitors may not know), and have set your business up to attack a market opportunity backed up by well-thought-out internal processes. In other words, preparing in advance of entering the war zone not only enabled you to come out swinging and make sure your swings have an impact, it also made the chances of your succeeding much better. The importance of this concept cannot be exaggerated, nor should it ever be taken for granted. This is because the journey from the survival end to the success end of the spectrum can be a marathon, and it's a marathon most businesses do not complete. And in almost every instance, failure can be attributed either directly or indirectly to a lack of appropriate planning and preparation for the realities of the war zone.

Some companies fail as a direct result of something that happens or doesn't happen in the market. For example, a new business enters the market with a plan to undercut its competitors' pricing because they believe the market is price sensitive and will react favorably to this strategy. A few months into the strategy, sales are a bit better than expected, but the business is losing money, and cash reserves are being depleted because of the continual losses. The problem, of course, is that lowering prices lowers gross profits, which affects the company's ability to make money on the bottom line. The flaw in this business model is that the owner either misunderstood or underestimated the expenses the company would have on a regular basis and/or didn't understand the overall effect lowering prices has on gross profits or how lower gross profits affect net profits. Obviously, better planning beforehand would have, at least in part, alleviated these problems. Sometimes, in situations like this, it's possible to go back to Level 1 and start over, but the chances of being successful at it are not good unless the company has large cash reserves and the time for this new business model to develop and catch on in the market.

But companies also sometimes fail because they beat themselves. The war zone not only creates competitive pressure externally, as shown in the preceding example, it also creates pressure internally. And the problems that internal pressure causes generally come from a lack of preparation, planning, and process development, the result of which is chaos. And due to this chaos, the owner and his or her key employees are forced to concentrate on fixing the internal issues, which is never easy, and are seldom able to identify the core problem. The core problem, in turn, continues to resurface in a variety of guises throughout the business. Under these circumstances, because the owner is consumed with resolving internal problems, he or she has little time to focus on the external market, which means the company is less able to battle in the war zone.

Think of what would happen if the coach of a football team neglected to prepare his team for a game or plan for how it would attack its opponents. Without any predesigned offensive plays the coach would have to constantly be explaining what went wrong on the last play and wouldn't have much time to figure out what to do on the next. And if this weren't sufficiently chaotic, the coach would also be yelling at the players and the other coaches, the players would be yelling at the coaching staff, and in the end no one would have any idea of what to do. Business is just the same. Just as the onslaught of the opposing team in football exposes a team's weaknesses, the pressure brought on by war zone competition does the same to a business. And the more weak areas there are, the more time the owner and key employees have to spend shoring them up instead of preparing for what happens next. In other words, it isn't necessarily market competition that beats you—sometimes companies fail simply because of internal issues and pressures brought on by the war zone and by the lack of planning and preparation.

The goal at Level 3 is to become consistently successful. In order to do that, as we've discussed in other chapters, you have to develop a series of goals and objectives that will enable you to reach the point at which you consider the company to be a success. In the beginning, that is, at the survival end of the spectrum, your sales will be largely made up of “gimmes” due to your location, the fact that your business is new, and because people you know will buy from you. Some of your sales will also come from competitors whose operations are poorly run and who can't hold on to their customers. However, it's important to understand that as your business moves toward the success end of the spectrum, the realities of the war zone will in all likelihood slow your growth rate. As you work your way along the spectrum and grow your business, you will begin to challenge the better-operated businesses that have loyal and satisfied customers who will need good reasons to switch from where they are now to you. In other words, the more success and market share you attain, the more difficult it becomes to attain it. But just as planning is the key to successfully launching your business in the war zone, it is also the key to growing it.

The Benefits of Understanding the Marketplace War Zone at Level 3

• Understanding the marketplace war zone fosters a sense of urgency rather than a laissez faire attitude in both you and your employees.
  
• Understanding the marketplace war zone focuses your employees on what is expected of them, why, and what will happen if those expectations are not met.
  
• Understanding the marketplace war zone establishes individual pride in accomplishing specific tasks as well as group pride in the company's overall achievements.
  
• Understanding the marketplace war zone helps you show your employees what they must do individually as well as what has to happen around them to keep the businesses moving forward.
  
• Understanding the marketplace war zone enables you to not only make appropriate plans but also to make adjustments quickly if the market is found to be different than you anticipated.
  
• Understanding the marketplace war zone makes it possible for you to anticipate changes and make proactive strategic moves ahead of your competitors.
  

The war zone is essentially about success or failure. And it's not a friendly place, because you and your competitors both want the same thing—each other's customers and gross profit. What that means is that your customer base is never secure, so you have to be constantly on the attack. But the battle against your competitors is not the only one you have to fight. You also have to constantly push your employees to improve because the market and customers' demands competence, and the better your employees are, the better your bottom line will be. Neither battle is easy to win, but if you want to succeed, you need to win both.

The first rule of the marketplace war zone is: you can't beat yourself. There are enough ways for your business to fail without committing suicide. That means you have to make sure you have as much control as possible over everything within your control, and that starts with the product or services you sell. Either can be a powerful weapon and can be used both defensively and offensively, that is, inside your company and outside in the war zone.

The defensive use of your products or services is essentially dependent on your planning, preparing, designing processes, and making sure those processes are executed by employees who are skilled, well trained, and ready to handle the action at Level 3. In other words, by setting up your internal processes to back up your products or services, you are providing protection not just for them but for your entire business. Succeeding in the war zone is difficult enough without beating yourself, and since this is one of the few areas in which you can have control, it simply makes sense to exercise it. The offensive use of your products or services similarly depends on a number of factors. These include the skill of your employees in making sales, how competitive your company's climate is, your pricing strategy, the demand for your product or service in the market, the aggressiveness of your business, and how well your product is delivered to your customers and how it meets their needs. Your offensive weapons are on display every day, but in order to be effective, they require consistency in the way your business operates.