Seven pillars of success
Many small businesses start with a great idea and nothing to lose. But as they find success and grow, scale can be both an opportunity and a hindrance.
As Macquarie’s Head of Business Banking Dean Firth notes in our new Business Banking panel discussion video on Entrepreneurial spirit and digital distruption: “when you reach a point you have something to lose, you often become a bit safe. You may become complacent about the way your market operates, you may be encumbered by the environment you’re operating in.”
Adopting an entrepreneurial mindset is crucial in a fast-paced economy. But it can be challenging to balance that mindset with the needs of a growing enterprise. Where we’ve seen our own clients succeed, it’s because they have managed to achieve that balance and create an ‘entrepreneurial enterprise.’
Firth defines an entrepreneur as someone who “puts their own capital at risk with the hope of a future return.”
This is a mindset Macquarie understands instinctively, having opened its doors as a business of just three people 45 years ago. Today, Macquarie is a global business operating in 28 countries around the world.
A delicate balance between agility and rigour
Firth believes small business embodies the entrepreneurial mindset of Australia and the spirit of innovation.
“To grow sustainably, you need to balance the things you’d like to be able to do as a larger business with the things you already do very well,” he says.
Small businesses are agile and can achieve speed to market, but as you grow the potential risk of those quick decisions can be greater – and this causes tension.
It’s the pull between ownership and accountability, and operational efficiency. Between bold innovation and robust risk management, agility and scalability.
An entrepreneurial enterprise needs to find an even keel. Here are seven ways you can apply this thinking into your business.
1. Be patient
You need the foresight to persevere through short term challenges for longer term gains. Keep an eye on the bigger picture and stay true to your strategy. That may mean starting small and slowing down the pace.
2. Grow expertise by building your business organically
“When Macquarie provides small business owners with equity investment to grow into an adjacent market, we ensure they have expertise in that area first,” explains Firth. So if you’re considering growth in a new area, you may need to invest in specific expertise to avoid costly errors of judgment.
It’s worth spending time on careful, strategic organic growth as it could have a lasting impact. “A simple idea that focuses on client needs may eventually become a much larger part of your business,” he adds.
3. Be disciplined with cost management
It’s essential to be rigorous with the financial details, especially in the early phase of any new business. By keeping unnecessary costs to a minimum and always looking for the return on investment on any new investment, you establish a framework for efficient, focused growth.
4. Hire industry experts where needed
Firth says successful entrepreneurs are distinguished by their ability to actively seek out opinions that may contradict their own. “They understand they don’t have all the answers.”
Partner with the best expertise you can find or bring it in house.
5. Empower your people
Research has found human capital is more valuable than physical capital, and it’s essential to invest in your people, empowering them to become more productive and engaged.
“At Macquarie, our leaders don’t try to pick the next big opportunity,” notes Firth. “We ask our staff to, because they’re closest to their clients.”
He says relationship knowledge is just as important as sector knowledge. “Clients want to work with people who were there for the last transaction. So when you invest in your staff you’re investing in those relationships.”
6. Keep the essence of your business alive
Don’t lose sight of the things that have made your business a success. What are the principles you live and work by? “Remember why you first backed yourself,” says Firth. “That’s how you can keep the entrepreneurial spark alive.”
7. Stay on top of new technologies and innovations
As we discussed last month, digital disruption is changing the game in just about every sector of the economy. It’s human nature to fear the unknown, but approaching this with a positive mindset can make all the difference.
Consider how technology makes new things possible – what could your business become? Firth suggests taking a step back and thinking about how you’d do things differently if you were to start your business again today.
What characterises a ‘high impact’ entrepreneur?
- Market leading – look for growth through innovation
- Growth aspiration – interested in scale
- Flexible – can respond and evolve to changes in markets and as their life cycle changes
- Opportunistic – ready to seize new opportunities, stay on top of new technology and innovations
- Never stand alone – seek the right partnerships and advice. Hire industry experts and empower people.
1 World Economic Forum: ‘The Bold Ones – High-impact Entrepreneurs Who Transform Industries’ - September 2014