I read the Economist and in August it gets noticeably lighter…I mean in weight, not tone. And so it is with Pearls. You will find that the next few Pearls will be shorter than normal. I like to think of them as leaner and firmer, but still approachable.
Jim Collins says, in Good to Great: Why Some Companies Make the Leap – And Others Don’t, that you must ask some tough questions about your business if you are going to achieve your goals.
So here’s 9 tough questions I’m going to ask myself over the forthcoming lazy, hazy days…
1. How do I make money (cashflow)? What do I sell and to whom? Why do they buy? How do I gain new customers? Those that don’t buy – why not? What do I sell that isn’t worth the effort? What’s my gross margin, operating margin, profitability and cashflow on everything I do? This is about gaining absolute clarity on my current position – no fuzzyness, no supposition.
2. Which relationships in business, both inside and outside my company, are critical to my success. Am I nurturing them accordingly?
3. Which relationships in business, both inside and outside my company, are holding me back sufficiently that I should terminate them?
4. Does my company routinely generate positive cashflow? There was a guy on Radio 4 the other day bemoaning the fact that he could no longer meet payroll because the overdraft he routinely used to fill his cashflow “gaps” had been withdrawn by his bank. He felt hard done to. Wrong. You’re bust pal. No cash flow = dead. It was only a matter of time.
5. What are my major avenues for gaining new customers? Are they fully costed? Remember, my time is my greatest asset. I meet lots of people who don’t value their time. That’s not true. They do value their time…they actually value it at zero. Time certainly has no cost (there is lost opportunity cost of course). But it does have a value. You should value your time at no less than £400/day (£100K pa) as an absolute minimum and probably much more. You might not earn that but you’re worth it, right?
6. What’s the average lifetime value of my customers? This tells me how much I can spend to find a new customer. How can I market without knowing this?
7. What’s the acquisition cost of a new customer? Once I have this answer, combined with the previous answer, the size of my opportunity is defined by the number of potential customers I have and my ability to generate cash from one existing customer to turn the next potential customer into a real one…and so it goes on.
8. If I was filmed 24/7 for a week by a BBC film crew what would I do more of, and less of, than normal. Self-management is critical. Am I taking positive steps to improve myself – read more, learn more, do more, take time to think, reflect and make changes? Am I productive, not just busy. Am I purposeful, focused and thoughtful at all times? Am I getting better (almost) every day? Do I invest in myself?
And, finally, the toughest question…
9. Do I find these questions positively challenging and exciting…or simply tedious?