Mastering the Four Decisions: The Key to Scaling Up Success

Posted in Cash on April 9, 2024
By Ted Sarvata

By Assured Strategy Coach Ted Sarvata

As you scale your business, you must make key decisions in four areas: People, Strategy, Execution, and Cash. Strategy is how you generate revenue. Execution is how you turn revenue into profit. Cash is the fuel you need for your growth. People is how you get it all done.

Let’s start with Strategy. When you start your business, your focus is on selling. You sell anything you can to whoever will buy it. And that works for a period. At some point, however, you need to get more focused. Who is your actual core customer? Who are you serving, and what is it that you’re providing them that is unique in the marketplace and valuable to them? Then, align operational activities with this strategy and ensure it all fits together!

Let’s use IKEA as an example. They decided they weren’t serving the general furniture market. They focus on serving young, urban, mobile people – young people in their first apartment after college or young couples. They don’t want to be burdened with an heirloom. They might have grown up in a family where the dining room table belonged to great grandma. These young people don’t want to be saddled with all of that. So, for that core customer, the fact that IKEA furniture is disposable is a positive, not a negative. This is part of how they become unique in the marketplace, with affordable, hip furniture and a side of Swedish meatballs as a reward for navigating the maze like a rat. Notice how all of their activities fit together, from the locations of their stores to the fact that everything is in the warehouse, meaning you don’t have to order, you know they’re not going to be out of stock when you’re there, free childcare because you’re going to be there all day, and then you have to go home and have to put it together yourself. Anyone could copy these activities, but others choose not to because they are unwilling to make the tradeoffs IKEA has made. That’s strategy.

Now, let’s turn our attention to Execution. If you are not executing well, the best strategy in the world will not help you. You are funding waste, and the market will punish you for it. You need efficiency to turn that revenue into profit because your revenue could be growing double digits a year, and you could be growing yourself out of business if you’re not profitable and you’re not watching your cash cycle.

Are your processes driving consistent results? You need to gather feedback from your customers and employees and process that feedback in your weekly leadership meeting. Another aspect of execution is prioritization, which we’ve covered in previous articles.

Now, let’s turn to cash. As they say, “Revenue is vanity. Profit is sanity. Cash is king.” Cash gives you options. Without Cash, your Strategy really is just to make payroll, stay in business, or get out of debt. Once you have Cash, you can fund your Strategy.

Many business leaders find it counterintuitive that you can grow yourself to bankruptcy. Let me explain. In 99% of businesses, you’re spending money before you’re taking cash from customers. For example, if you are a retailer, you need to buy inventory to be able to sell it. If you are a manufacturer, you need to pay your salespeople to go sell, and after a sale, you need to buy inventory and you need to pay your workers to build your product, all before you invoice your customers and wait for them to pay. If you are in a service

business, you have a similar dynamic of needing to pay for marketing, sales, and payroll for the service providers before collecting from your customers. And because you must spend that money before you get money back from your customers. This is how you can go bankrupt even when your financials show you are profitable.

When you are clear you have enough cash for growth, then you can fund the changes you need to make in the business to make your strategy real and be unique in the marketplace.

People is the last of the Four Decisions in this article, but People needs to come first in many ways. You need to have the right people in the right seats, doing the right things right. How do you know you have the right people? You must have clear Core Ideologies: your core values and your core purpose. Hiring the right people means you have specifically interviewed individuals based on these Core Ideologies. And if people don’t believe what you believe and behave the way you behave inside your company, they cannot stay. If you hold them accountable to core values they don’t align with or are not committed to, they will self-select out, or if it comes to it, you need to let them go.

Your culture should allow people to make decisions without running everything up the chain of command for higher-up decisions. Your people should be able to make decisions themselves because they know who you are as a business. They know what you believe. They know how we act around here. They will make autonomous decisions if they know they’re the right people. Not all those decisions will be right, but when they make wrong decisions, great people can learn from those mistakes and, therefore, grow their capacity to make more decisions over time.

Paradoxically, your leaders should make fewer decisions over time. They should empower and develop their people so that those closest to the customer can make more of the decisions.

The other key aspect about people I want to highlight here is the team’s ability to engage in healthy conflict. Healthy conflict is only one of Patrick Lencioni’s five dysfunctions of a team, but it’s the one that matters the most. It allows your team members throughout the company to say what needs to be said without fear of reprisal.

Bad ideas should be encouraged because bad ideas lead to good ideas. We don’t execute every idea, but if everybody is free to share their ideas, our brains can create even more.

That’s part of how the Strategy comes out right: getting the data from different parts of your business, having people feel free to share the data, whether it’s good news or bad news, and knowing that healthy conflict is part of how we do things here.

Watch any successful sports team when somebody screws up on the field or on the court. Somebody’s yelling at them, but not to tear them down, to build them up, to get them back in the game. We need all the contributors from everybody on that team and that’s the same in your team.

In summary, when you are working on the Four Decisions, you are working on all four at the same time in a system called Scaling Up (see Scaling Up, by Verne Harnish). Then, every part of the system is undergoing self-improvement or, shall we say, continuous

improvement quarter after quarter after quarter. It is a system of continuous tweaking and modification that ends up transforming your business and leading to long-term sustainable business success and growth.

Want to learn more about how Assured Strategy can help you grow your business?

We can help you assess your current business model, identify your BHAGs, and develop a plan to achieve them.

In addition to the tips above, here are a few other things to keep in mind:

Growth is not a one-size-fits-all solution. What works for one company may not work for another.
It takes time and effort to implement meaningful change. Don’t expect to see results overnight.
But if you are committed to growing your business, you don’t have to do it alone.

Phone: (817) 400-0028

Email: [email protected]

Assured Strategy is a Business Strategy Coaching Firm that focuses on Strategic Coaching, Executive Coaching, Performance Coaching, and Leadership Training throughout North America with the experience to help companies succeed and grow. Assured Strategy’s coaches educate and mentor CEOs and executive teams in people, strategy, execution, cash, leadership and team building, and the company has represented more than 280 businesses. Assured Strategy offers business strategy coaching, workshops, webinars, leadership groups, employee assessments, and business process improvement services to empower its clients to think strategically and effectively execute their business objectives. For more information, browse our website or call (817) 400-0028.

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