Many years of working with remodelers around the country has demonstrated to me the truth in the adage, “There are many ways to skin a cat.” Although I spend much of my time developing standards and processes to help company owners measure success, as time goes on it has become increasingly clear that no two definitions of success are alike.
I believe, however, that there are ways to identify common elements, and to then measure to what extent each of them comes into play for individual company owners. At its simplest, success includes these four ingredients:
- Sufficient net profit to cover overhead plus owner's salary (shown by the P&L)
- A comfortable cushion of cash and equity (shown by the balance sheet)
- Really happy clients
- Truly committed and happy employees
It looks simple, but here's the catch: Each must be predictable and consistent. For example, I don't consider a company successful if 2005 net profit was –3% (dismal), rose to 8% (respectable) in 2006, but is projected to be at break-even in 2007.
THE FIFTH ELEMENTThere is one more factor, perhaps the most important but certainly the hardest to gauge: owner “fit.” Simply put, it means that if you're doing what you love to do, you're probably doing it well and it's making you happy. Conversely, if you're not happy, you're either having a midlife crisis (don't discount the possibility) or you're simply not doing what you love best.
I can't help you with a midlife crisis, but I can tell you that a company's success is driven from the owner's primary interest. Successful companies are run by owners who do what they love best, and the culture shows it. In a small company, the owner strongly affects company operations, and the company reflects the personality and aspirations of that owner. So, for example, a hard-driving, never-satisfied, tough-minded individual is more likely to create a company that is bottom-line driven than an owner who is very interested in design and architecture. This phenomenon is present in businesses of nearly every size and age — there's still a lot of Walt Disney in Walt Disney Co., for example — and is very hard to eradicate or countermand.
The key, then, is to identify what excites you, whether you're the owner or the lead carpenter, and to do more of it. Start by sorting the job definitions in the table above into priority order according to which activities you like best. Focus on what comes out on top, but be sure that everything else is in capable hands.
For instance, if your rating is like the example above, you are sales driven. Make sure that all other company departments function predictably and consistently, then focus on sales and design. It's what you do best. —Judith Miller is a construction business consultant and trainer specializing in accounting, finance, and computerization. She lives in Seattle.