When I give a presentation, I often start out by asking the audience the following question: “If you had to choose one word that is critical to the success of a business, what would that word be?” Typically, people will respond with words such as “motivation”, “planning” or “innovation”. Obviously, all of these words are important elements in the success of a business. However, if I had to choose just one word, it would be momentum. We learned in high school physics that momentum = mass x velocity. For our purposes, in business, mass is comprised of the people working in the business, the capital invested in growing the business, and the utilization of technology to foster growth. Velocity is the rate at which the business grows and the direction in which it is moving.
Momentum = Mass x Velocity
The value of a publicly traded stock goes up or down based upon the perception of the momentum in the business. If a company reports that its revenue will not meet projections in the next quarter, the market usually reacts negatively and hammers the share price. When you do not know where your next sale will come from, or what your revenue will be over the next year, your business is likely losing momentum. Your biggest challenge in growing your business is to control the growth trajectory of your business. In other words, your greatest challenge is to grow your business in a predictable manner, maintaining business momentum.
The problem is that this is easier said than done. Only a very small percentage of entrepreneurs learn how to make their revenue and profitability predictable. Entrepreneurs who master the growth in revenue and profitability of their business become the best in their chosen field, maintain business momentum, and excel through the entrepreneurial journey.
Let me give you an example. Terry is a business owner whom we started working with a number of years ago. At that time, Terry had grown his business to generate a high six figure revenue. However, for the previous five years, his revenue remained flat. The business was not growing. To regain business momentum, the starting point was to revisit his direction. The future drives the present, not the past. The clearer you are about your future direction, the more likely you are to achieve it.
Terry did not have a clear vision or direction for his business. As a result, he fell into the diffusion trap. He invested his time, money, energy and creativity into a number of areas. His brother-in-law wanted to get involved in a pizza franchise, so Terry became his financial partner. Some friends began to invest in real estate, so Terry got involved. His lack of focus and broad range of interests took its toll on his business. His revenue was flat and his expenses were increasing. Terry’s income and the profitability of the business began to suffer. At the same time, his various investments were not doing well. They also suffered from a lack of focus.
The solution to Terry’s problem was quite simple. He needed to redefine his vision to regain business momentum. Rather than treating his business as a cash cow to fund his other activities, Terry decided to invest in the area he knew best, his business. He redeployed capital back into the business. This allowed him to hire the right people to support him and to invest in marketing initiatives that increased sales to existing and new clients. Over the last five years, his business has grown at a compound rate of over 30% per year. He has become the #1 salesman with his major supplier. He is growing his business in a predictable manner and has gained mastery over the growth trajectory of his business. Even more important, he is having fun again and is passionate about building his business.