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Blog posts tagged profitability
Has your business got the X Factor?
June 07, 2010
In business, as in the popular TV show X Factor, more people fail than succeed. If this can be attributed to luck, some people seem to have more luck than others. So it’s reasonable to ask if there is such a thing as the ‘business X Factor’ or is it all about being in the right place at the right time?
Make your own luck
I guess I should know all about luck. I co-founded ecommerce supplier Actinic and we managed to float our company on the London Stock Exchange during the dot com boom, raising £25m and valuing the company at £100m, despite at that point having never made a profit.
Looking back, it is all rather ludicrous, so we were definitively in the right place at the right time. Having said that, we didn’t get there by accident. I had carefully looked at technology trends for several years before starting the company, concluding that the internet in general – and ecommerce in particular – offered a tremendous opportunity. At the time, even Bill Gates wasn’t a believer.
Know where you are going
Simon and Amanda Walker sell specialist pens online. Their original target was people who are interested in unusual pens, so they knew that to interest these people, they would have to provide a massive range. That’s why their website states that they offer the “widest choice of pens on the planet” – more than 6,000 at www.cultpens.co.uk. They understood the customer requirement; they created a plan that would satisfy it; and now they have a highly successful business. Textbook stuff.
Be profitable to survive
There are a variety of reasons for starting a business. Some start because they want to get rich, others want to change the world, but no one wants to fail. Avoiding failure means making a profit. Profit is the oxygen of business. Even if the principle objective isn’t about money, you still must make a profit. There’s no need to worry about the X Factor if you don’t make a profit – you won’t be around long enough to find out whether you’ve got it or not.
Focus on customers
One of my company’s customer’s grew his business from a front room start up to a business with £23m sales. Chatting to founder Steve Hanbury recently, I was reminded of how important his total commitment to customer service and value was to his success. Customers pay the wages; if we forget this we’re in trouble. All successful businesses need to focus on their customers.
Avoid rigidity
The press delight in stories of hapless travellers whose satnavs took them up a track or to an impassable river. The drivers thought that they knew where they were going, but more attention was required. It’s no different in business; when disaster is imminent it’s critical to be flexible and not insist on sticking to the business plan.
The true X Factor
It’s worth asking yourself whether practising the business virtues mentioned above comes naturally. Focusing on customers, setting a plan yet remaining flexible to change and also enjoying yourself while doing it seems a big ask. Are these the key to success?
It’s unfashionable to admit to watching X Factor, but I hold my hand up and say that it’s interesting to note that many of the talented contestants are sometimes hesitant about their capabilities, while those with least talent are often convinced they have great ability. The best are generally humble and are looking to improve. The true X Factor might be a willingness to receive input, take it on board and strive to get better.
Chris Barling is CEO of ecommerce software supplier Actinic
The problem with money (too much)
December 17, 2009
Last month we talked about starting a business on very limited resources. This time, I would like to think about the problem of having too much time or money.
Having too many resources can distract you. In contrast, when money is tight, you’re focused on just doing what is truly important. In any start up situation, you should only care about discovering two things:
- What customers want and your capacity to deliver it.
- How to get it into the customer’s hands at a cost that makes a profit.
Cracking the above two points and then becoming cashflow positive is the surest route to business success. Failing to focus on this is the surest route to failure, whatever the bank balance. I speak as someone who has not only started their own company, but who has invested in a variety of start ups, some with tremendous success, and one that has been an abject failure.
Two of my investments (actually the ones with the most potential and both of whom have raised millions), are also teetering on the brink of failure. The reason? Too much money, with one having raised more than £10m over several funding rounds. Having too much money encouraged both to try and tackle multiple markets before they had fully established themselves in one. It made them feel that becoming cash positive was an optional extra. After all, they could always raise more capital. And they seem to pay enormous salaries, far above what I pay for higher caliber staff in my own business.
In my opinion the lesson is simple. Focus your efforts on providing what is wanted. Then deliver it at a profit. Don’t do anything else. Becoming profitable as fast as possible makes long term success much more likely.
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