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8 Business Principles That Never Go Out of Style
Want trendy, flavor-of-the-month management ideas? You won't find 'em on this list.
Some business principles come and go.
A company I worked for started so many game-changing transformational programs and then, like a disgraced member of the Politburo, quickly abandoned and airbrushed them out of our corporate history so we could start yet another "business-critical" program that would be abandoned. We referred to them as the "acronym of the month."
Fortunately, there are some business principles you can use forever:
1. Look past the messenger and focus on the message.
When people speak from a position of position of power or authority or fame, it's tempting to place greater emphasis on their input, advice, and ideas.
Warren Buffett? Yep, gotta listen to him. Sheryl Sandberg? Yes. Richard Branson? Absolutely.
That approach works to a point--but only to a point. Really smart people strip away all the framing that comes with the source--both positive and negative--and evaluate information, advice, and input idea based solely on its merits.
If the guy who delivers your lunch says it, it should be just as powerful.
Never discount the message because you discount the messenger. Good advice is good advice--regardless of the source.
2. Focus on collecting knowledge...
Competing is a fact of professional life: with other businesses, other products, other people. It's not a zero sum game, but it is a game we all try to win.
Smart people win a lot.
Smarter people win even more often.
Continually striving to gain more experience, more experience, and more knowledge is the second-best way to succeed.
3. ...But focus more on collecting knowledgeable people.
You can't know everything. But you can know enough smart people that together you know almost everything.
And, together, do almost anything.
Work hard on getting smarter. Work harder on getting smart people on your side.
How?
4. Give before receiving.
The goal of networking is to connect with people who can provide a referral, help make a sale, share important information, serve as a mentor, etc. When we network, we want something.
But, especially at first, never ask for what you want. Forget about what you want and focus on what you can give.
Giving is the only way to establish a real relationship and a lasting connection. Focus solely on what you can get out of the connection and you will never make meaningful, mutually beneficial connections.
Approach networking as if it's all about them and not about you and you'll build a network that approaches it the same way.
And you'll create more than contacts. You'll make friends.
5. Always work on next.
It's impossible to predict what will work, much less how well it will work. Some products stick--for a while. Some services flourish--and then don't. Some ventures take off--and flame out.
You will always need a next: a new product, a new service, a new customer or connection,
No matter how successful you are today, always have a next in your pipeline. If somehow your current products or services or ventures continue to thrive, great: You will have created a bigger line of products and services and ventures.
That's how successful people weather the storm when times are tough, and become even more successful when business is booming.
6. Eat as many of your words as you can.
If you're always right you never grow. When you look back, one of the best things to be is wrong because when you make a mistake you are given the chance to learn.
(Don't worry. Every successful person has failed numerous times. Most have failed more than you. That's why they're successful today.)
Own every mistake, every miscue, and every failure. Say you made a mistake. Say you messed up. Say it to other people, but more importantly, look in the mirror and say it to yourself.
Then commit to making sure that next time things will turn out very differently.
7. Turn ideas into actions.
The word "idea" should be a verb, not a noun, because no idea is real until you turn that inspiration into action.
Ideas without action aren't ideas. They're regrets.
Every day we let hesitation and uncertainty stop us from acting on our ideas. Fear of the unknown and fear of failure are what stop me, and may be what stops you, too.
Think about a few of the ideas you've had, whether for a new business, a new career, or even just a part-time job. Looking back, many of your ideas would have turned out well, especially if you had given them your best effort.
Trust your analysis, your judgment, and your instincts. Trust them more than you do. Trust your willingness to work through challenges and roadblocks.
Granted you won't get it right all the time but when you let an idea stay an idea, you almost always get it wrong.
8. Learn about squirrel nests.
Yeah, you're hyper-focused. Yeah, you've got your head down and your blinders on. Yeah, you're a 24/7, take no prisoners, failure is not an option gal or guy.
Occasionally we all need to lighten up.
Example: There are acres of woods behind our house. It's like a squirrel paradise. Squirrels are always racing around the yard and scooting across the deck.
When the leaves fall their nests are visible high up in the trees. I've seen their nests for years and always wondered about stuff like what they're made of (besides leaves) and how many squirrels share a nest. One day I stopped wondering and took a break to check it out.
Stupid example? Sure. But it was a fun five minutes that made me appreciate my squirrel friends a little more--and sent me back to work with a little extra oomph.
Once in a while, take the time to learn a little about your "squirrel nests," whatever those might be.
Success is a marathon, not a sprint. Explore. Indulge a curiosity.
You never know where it might take you.
PUBLISHED ON: MAR 6, 2013
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The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
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The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
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This CEO Bet Big on Texas--and Helped His Food-Delivery Company Finally Turn a Profit
He was hired to scale the business. He didn't think it would play out like this.
Jag Bath.MATT RAINWATERS
Jag Bath, an e-commerce veteran of Gilt Groupe and RetailMeNot, became CEO of the Austin-based on-demand delivery service Favor in 2015, fully prepared to execute the Silicon Valley playbook of growth at any cost. But it wasn't until he made a series of painful decisions, and took a much different approach, that the company really succeeded. --As told to Tom Foster
In 2014, around $4 billion of venture capital--that's $1 billion a quarter--poured into the on-demand app industry. That's not including ridesharing companies like Uber. It was food delivery, grocery delivery, housecleaning, dog walking--you name it. No other industry came close. And it didn't peak until the third quarter of 2015, when a little more than $2 billion was raised.
That's when I joined Favor as CEO, with a mandate to scale the business. It's also when fundraising went off a cliff.
Going into 2016, we needed to raise more money. We had launched early in our space--in 2013--but we were losing our advantage to better-funded competitors in Silicon Valley. Those companies were expanding rapidly into more and more cities, which is expensive, especially if there are multiple companies trying to do the same thing. When you enter a new market, you have to get your name out there. The best way to do that is to spend more than the other guy. And our pockets weren't as deep.
Tech startups have swung toward the idea of growth at all cost: "Let's conquer the world, and then we'll figure out how to make money." It's a trap. Companies then start to treat how much money they've raised as a key metric, because that money fuels their growth. But if you don't have a good underlying business, it's irrelevant.
Investors were starting to see that the economics were upside down for on-demand delivery companies. Those businesses brought in lots of revenue and were adding lots of users, but they lost money. That's why funding had taken a nosedive. We were trying to raise money--spending a lot of time in hotels in California--but there was a cloud over our sector. Investors were questioning whether any of us were viable. Eventually, you realize you have to do something different.
Our largest competitors were focused on first-tier cities--New York, Chicago--because that's where the population is. We were playing in some of those as well, but mostly we were in second- and third-tier cities--like Austin, where we started. Around the middle of 2016, we decided to pull back from the first-tier cities. We were in about 25 cities at the time, and pulled out of five.
But we still needed to raise money, or face the possibility of not making payroll. And all around us, smaller competitors were folding or getting acquired for pennies. By the end of 2016, our mindset had shifted from thinking strategically to thinking about survival.
I had a lot of sleepless nights. You're thinking about all of the employees who gave up whatever they were doing to put all of their effort into a startup. But then you start thinking about the business the way you should have been from the very beginning: It has to make money.
More than 90 percent of our deliveries were in Texas. The unit economics looked really good there, and they looked atrocious in every other state, where we weren't as well known. Yet we were spending the vast majority of our time, effort, and capital in those states, because that's where we thought we had to grow.
I realized the way to survive was to close all markets outside of Texas and double down here.
It was the hardest decision I've ever made. You worry a lot about the people you have to let go, but you also worry about the people who stay, because you have to continue to motivate them. The hardest thing to communicate was that deciding to close all these markets didn't mean we were deciding to stop growing.
Investors were questioning whether any of us were viable. Eventually, you realize you have to do something different.
We started talking about three examples that everyone here knows. One was H-E-B, the $26 billion Texas-focused grocery chain. Another was In-N-Out burger, which spent the vast majority of its history in California. The third was Alamo Drafthouse, which became very successful in Texas before expanding.
We also announced that our first priority would be to become profitable within a year. With the new strategy, we did it in six months, and turned a profit for the first time in July 2017.
The irony was that funding for on-demand delivery companies started to open around then. It takes one player to hit profitability to unlock an industry. We were the first. Later, a couple of international companies became profitable too. When VCs saw that, they started investing again. Suddenly, we were getting a lot of attention from investors and competitors interested in acquiring us. DoorDash, Postmates, Uber, Deliveroo--they all called.
We also started getting calls from more established companies. One was H-E-B, which we'd held up as a model internally--and which acquired Favor in February 2018.
At that time, we were in 50 markets across Texas. Today, we're in 130--all in Texas. We had 130 employees then, and we now have more than 300.
A lot of venture-backed companies have reached massive scale and raised hundreds of millions of dollars--sometimes billions--but aren't profitable. They reach a size where it's very difficult for anybody to acquire them, so they look to the public markets to pay back their investors. Once they go public, the scrutiny comes in: What's the line to profitability?
At that point, and at that scale, it's a lot harder to make necessary changes than if you'd focused on it earlier.
Which we're all seeing play out in front of us right now.
Delivering a Win
Favor was founded in 2013 in Austin by Ben Doherty and Zac Maurais, but it struggled to grow like its better-funded competitors. Favor raised $34 million, while DoorDash has raised $2 billion and Postmates has raised more than $680 million (and at presstime was readying IPO paperwork). Those two companies rapidly escalated an expensive race to dominate as many markets as possible, and fend off Uber Eats, which launched in 2014. Meanwhile, countless smaller on-demand startups arose to deliver everything from dry cleaning to prepared foods. Many soon shut down: Two key competitors in the latter niche--Maple and Sprig--folded in 2017; that year, the U.K.'s Jinn folded too, unable to compete with the far-better-funded Deliveroo. So Favor redefined its game, by focusing on Texas markets and ceasing operations everywhere else. Profitability, and a big sale to Texas grocer H-E-B, followed. Sometimes, the way to win big is to think small.
FROM THE NOVEMBER 2019 ISSUE OF INC. MAGAZINE
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
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