Sometimes when I am coaching the owner of a medium-sized company, I will remind them how Jack Welch of General Electric said If we dont systematically destroy our own business, our competitors will. The big question Once the boss gets over the initial shock, we review each part of the enterprise, asking If you were not already in this business, would you enter it today, knowing what you do? Pruning dead wood leads to a stronger business. Good investments give good returns As you consider your investment in machinery and buildings, look realistically at what use they are to you. The more you use them, the more return they should give you. Where your business only creates marginal value, your returns might be better on a high interest savings bank account. When to walk away Some assets are not easy to liquidate or move, so you may have to abandon that business systematically: making all further investment decisions on a zero base (ignoring investments sunk so far); selling bits off when you can; and milking the unsaleable parts for income without further investment. Minimising people pain Of course these decisions will impact your employees. Some jobs may need to go now to enable you to employ more people later. If you treat people with care and consideration and talk about your plans, they might suggest ideas for improving the business that you would appreciate. Choosing to invest or divest If you have several businesses, you could rank them by earning power and market potential. By selling the lower-earning businesses, you increase average returns of your portfolio. You also get a better focus, and your growth trends improve. You need courage to walk away from a business that you have grown yourself but this can help your other businesses to grow faster. So my question to you is "How can you destroy your business creatively so that your business grows in the long term?" |
