Updated: Sep 6, 2020
Create, Transform and Grow
Many of us reach that point in our lives when we simply don’t want to work for or report to another person. I got there late; many of my friends got there much earlier.
Regardless of timing, creating a business needs an idea, strategy and a business model, marketing and selling. To further develop the business, it needs to be progressively transformed looking to pivot (incrementally innovate) or shift (disruptively innovate) around adjusting or changing cost drivers and revenue dynamics. To grow the business, you need to have an idea of what our endgame is, know how to scale and how to finance.
It’s Like Developing a Garden
It’s a little like developing a ‘show’ garden: setting out with creative planning; transformation through adding different garden structures, plant species and planting; and encouraging growth through pruning and feeding.
There are three main factors in business creation: the big idea; strategy and modelling; and marketing and selling.
All businesses start with what we like to call ‘the big idea’. This initial idea may not be significant in comparison with any other company, but it’s your idea, you thought of it.
With an idea in hand you need to work out your strategy and business model. Your strategic challenge relates to your idea, which should solve a problem for someone or something. From here, you need to understand the competitive position of your business relative to the industry or service sector where it sits. Understanding your location enables you to develop your initial strategy, which provides the foundation for your first business model (the revenue dynamics and cost drivers of your business). Then it’s on to implementing strategy and monitoring results. The rests might lead you to reconsider the other elements of the strategy ‘mix’ we’ve just outlined; indeed, these are hints at aspects of the transform and grow phases of our primary model.
With the idea and strategy set, it’s on to the core skill sets of marketing and selling. At the centre of this sits the customer. How you attract, engage and delight them determines their transformation from strangers to prospects to customers and hopefully promoters of your product or services. That transformation is a function of education and communication.
When executed well, these three sets of interconnected processes should enable you to unleash the start-up and early development of a business. The question is, what happens as the business matures, even a little?
Two well-known and very conventional factors sit at the heart of transforming your business as it matures: costs and revenue. How you treat those factors governs your success in pivoting your business or radically shifting it.
We think of costs and revenue not solely as accounting terms, although that’s important too. We think the best way to think of them is as two collective sets of building blocks out of which you construct your business model, which we refer to as cost drivers and revenue dynamics. Think of them as the gearbox that runs your business.
Cost drivers, the critical components of a business’s cost structure include:
resources and assets required to offer and deliver value provided to customers;
processes that transform resources and assets into value provided; and
partnerships through which processes that outsourced or acquired outside the business.
Revenue dynamics drive a business’s revenue streams and include:
customer segments, who you sell to;
the value provided, the product, service, or product or service bundles that give customers gain or reduce their pain;
communications, distributions, marketing or sales channels; and
how you manage segments through customer relationships.
Transforming your business means adjusting these blocks. What we’re looking to do is drive the revenue dynamics up and the costs drivers down, while understanding that there are lots of interconnections between the different blocks.
The integration of the building blocks determines what is called ‘value innovation’, the foundation of all successful businesses.
We think that growing a business has three main components: understanding what your endgame is; your approach to scaling; and the big one – finance.
It might sound odd, especially to someone starting in business, but before you get too far in developing your enterprise, you need to understand what your exit strategy is – your endgame. You need to have a clear endgame if you want to maximise the money you get out of your business when you leave it or indeed if you intend to leave some sort of legacy; this is a particular problem for privately held family-owned businesses.
Having an exit strategy worked out in advance helps ensure that you like the answers to those questions and gives you some control over your business’s future. There are seven main exit strategies for companies to choose from, depending on the nature of their ownership: rapid liquidation; slow liquidation; family succession; management or employee buy-out; open market sale; sell to another business; or an initial public offering (stock market flotation).
Understanding your exit strategy should inform all of your decisions around growth.
Scaling up a start-up business is as much an art as it is a science. Scaling builds around having the right people and strategy, excellent execution of strategy and proper cash flow management. The critical word across these four elements is ‘discipline’ applied to decision-making, which enables you to leverage growth through people, strategy, execution and cash.
Financing is the single most significant issue faced by growth businesses. Funding a business out of cash flow can only get you so far. It’s a fragile funding source, as many companies in the 2020 coronavirus pandemic. Assured leveraged growth, of course, relies on cash flow, but it needs to be underpinned by well-structured investment across your business model. Other than revenue sources funding may come from personal savings, debt financing, friends and family, angel investors, venture capitalists or share capital from public offerings. The question is how to integrate funding from each of these sources.
Finance drives growth and growth enables businesses to improve more financing and to adjust the finance mix. Finance, of course, is the critical component of your exit strategy.
The Story of Education Centre of Australia
ECA owned by entrepreneur Rupesh Singh, has been through pretty much the whole cycle, starting out with little more than a credit card and a good idea. ECA is a diverse educational group that supports students (particularly international students) through their academic journey, through English language courses, undergraduate and postgraduate degrees, across a broad spectrum of disciplines.
After starting out in IT training, in 2006 Singh acquired the English Language School in Sydney (ELSIS), with the aim of improving English language training for international students. In 2008, ECA entered the vocational education and training (VET) sector, establishing Zenith Business Academy, as well as establishing a managed campus partnership in Sydney with Melbourne’s Victoria University (VU), so entering higher education. At the same EC strengthened its recruitment channels the supporting agents in the Philippines, China and Kenya. It also established its Professional Year Programmes in accounting and information systems.
In 2011, ECA deepened its commitment to higher education in acquiring its own higher education provider Asia Pacific International College (APIC). In 2013, Singh established a Melbourne campus, ECA India and EBA Global, with operations of the latter expanding to pathway programmes in 2014. Its professional IT commitment was expanded in 2015 through developing ECA College in partnership with the Australian Computer Society offering VET courses.
2016 saw the establishment of a Brisbane campus and the acquisition of an allied health VET provider. In 2017, ECA’s Sydney operation upgraded with a move to a prestigious new headquarters and teaching building. That years also saw the establishment of ECA Online and VU India/Ganpat University partnership and a planned expansion into Europe. 2018 saw a deepening of ECA’s commitment to higher education through partial acquisition of another provider and the establishment of a planned new health services college.
More is planned …
It’s Not Just Business Planning
Building your own business isn’t just about developing a plan. As we’ve seen it’s more involved than that. Our MBA Transformational Leadership and MSc Management Consulting programmes offer 12-month of intensive study of core skills in creating, transforming and growing business. Our DBA can take you even further. If you want to learn more, click here.