[:en]Business Books for Scaling Up a Successfulish Startup[:]
[:en]When I started Nimonik in 2008 I had read some key books on business and software. Nimonik is my main occupation and our stated goal is to Improve the world by helping businesses comply with environmental, safety and quality regulations. We offer a software as a service and now help over 500 companies track and comply with both regulations and internal standards. Though we are doing well, the company is still in its infancy.
Many of my friends think I know what I am doing and they ask me about their business ideas or how to get started. To help, I thought I would discuss a bit of the knowledge I have acquired and that now helps Nimonik grow sustainably. Ten years ago, I blogged that books such as Good to Great and Getting to Yes were respectively helpful in understanding leadership qualities of great CEOs and negotiating tactics for getting deals done. Both of those books were critical to what we have done at Nimonik. Another key book that helped us start was the 37Signals book on developing software, Getting Real. The book and blog posts by 37Signals came to my attention prior to starting Nimonik and they had a major impact on our choice of the programming framework Ruby on Rails and our approach of building clean and focused software based on the user’s real needs. For anyone looking to start a software project, I think Getting Real is a critical book to read.
10 years after I first blogged about Good to Great, I have learned a lot and made many mistakes. Starting a business is one thing, growing it is way harder! Nimonik was a tiny and fragile operation between our start in late 2008 and 2013, we were focused on securing key clients and slowly growing our operations and our product. In retrospect, we probably underinvested in the company and this hampered our growth. When we started, my two partners and I put in $25,000 and started with two clients who provided revenues of about $40,000 per year. However, the counter point is that had we taken in more investment, we likely would have wasted more on the mistakes that we did make. Who knows!
Starting in 2013, the company started to pick up steam and we have seen a doubling of revenues nearly every year since then. In 2016 we acquired a Toronto based company that was both a supplier and a competitor and in 2017 we acquired a company in China that had good market penetration there. Both of these deals were primarily equity swaps and the book Getting to Yes and its companion book, Getting Past No, were instrumental in our negotiating tactics to obtain a fair deal for all the parties involved. This KMPG webcast, Why most Acquisitions Fail has been very helpful for our integration of the two companies we have acquired. These books were all critical to keeping us alive, but growth was another challenge.
Starting in 2015-2016 we started to have growing pains. Staff turnover was higher than we wanted and team members were struggling to adapt to a small organization that was growing. I must admit that I was underprepared for growth and struggled to figure out what type of leadership I should offer, what I should prioritize and how I could delegate responsibility. Happenstance is a critical part of life. I regularly play hockey and though I must admit to being a fairly poor player, I believe that everyone (and especially entrepreneurs) should engage in regular team sports – it really helps clear the mind and it sets a weekly pace with regular games. One day, in the hockey dressing room one of my teammates mentioned an entrepreneurs club he was part of and I explained some of my challenges. He recommended a book, Scaling Up.
I read the book fairly quickly after the meeting and it opened my eyes. For any entrepreneur who wants to grow their business, I cannot recommend it highly enough. In contrast to many business books, Scaling Up is very actionable and clearly explains the four critical parts of a successful operation.
Attract and keep the right people : People
Create a truly differentiated strategy : Strategy
Driving flawless execution : Execution
Having plenty of cash to weather the storms: Cash
Though we have not yet implemented everything in the book, we have clarified our mission, our values, improved our cash position and improved our retention by leaps and bounds. There is a good summary of the book here. Through the Scaling Up Newsletter (which I very highly recommend), I was put onto other critical books.
Confessions of a Pricing Man is an amazing view into the world of pricing. At Nimonik, we feel regular pressure from certain clients to reduce costs and with other clients we see opportunities to offer more services at higher prices. Our challenge has been how to price our services to maximize our profit and minimize lost opportunities. This book is a must read for anyone running a business. If there is one message it hammers home, over and over again, it is that you must focus on profitability – not revenues. This same message was passed along to me by one of my uncles a few years ago.
My uncle was a mid-level manager at a company in France. The company built and sold systems for train navigation to the French national railway company (SNCF) and to many metro systems in France. He worked there for many years and at a certain point, the owners of the business wanted to retire. It was a family owned business and my uncle, having been a manager and having raised a family did not have a large investment fund he could use to acquire the business from the owners. However, he had made a critical insight into the business, the French rail and metro companies were tied to this supplier. This supplier’s products were the best on the French market, having been developed by the French military and it would be very challenging for the French rail companies to switch suppliers. This meant that the rail navigation supply company he worked at had pricing power which it was not using. My uncle ran around and gathered as much money as he could and even then it was not enough. He explained to the widowed owner of the business that he could not pay the price they wanted, but that he could pay out of future earnings. Remarkably, she agreed.
After the acquisition, my uncle simply went to their customers and informed them of a substantial price increase. Of course, they objected and fought. He held firm and informed them that they could simply purchase other products if they wished, knowing full well they could not easily do this. Eventually, the customers agreed and overnight, the business became highly profitable. He then went on to sell the business a few years later and he intelligently played two potential acquirers against each other. He leveraged the French-German rivalry of the acquirers to get them to outbid each other and he increased the purchase price of his company by over 50%!
Of course, this all sounds very easy in retrospect, but it took good timing and smart moves. He had worked at the company for many years and so he knew the industry and the owners, he was at the right place at the right time and he had the courage to increase pricing overnight. My uncle always told me, “Profits are all that matter, not revenues.”. Confessions of a Pricing Man propounds the same message and offers fascinating examples of different markets, businesses and strategies to improving the profitability of companies.
The last book to mention is Mastering the Complex Sale. This book outlines what it takes to make sales to large companies with committees, competitive bidding and complex and imperfect decision making processes. At Nimonik we sell mostly to mid and large organizations – L’Oréal, FedEx, Bosch,… and though our contracts are relatively small – $5,000 – $80,000 per year, we are faced with complex decision making and conflicting priorities from our clients. Our sales strategies and tactics have been developed mostly by trial and error and gut feeling. We tried more and less aggressive tactics, more or less phone calls, more or less email, and a variety of permutations in between.
To date I have been responsible for most of the larger deals we have signed at NImonik and as I tried to scale our sales operation I kept hitting a wall with the sales team. They could land smaller contracts, but the larger, more complex contracts kept coming back to my desk. It was partially domain knowledge, but I could tell it was more than that. I tried training, explaining and doing problem shooting with the sales team, but it did not stick. They kept asking me questions like, “How do I gain the client’s trust?”. This question baffled me, I would simply reply, “By being trustworthy!”, but that was not enough. We needed a how-to guide for the sales team.
The book, Mastering the Complex Sale is the best framework for larger complex deals that I have found and we are starting to implement it at Nimonik. Here is an excellent summary of the book here, which states,
A smarter way to sell transforms the conventional sales pitch that customers must endure into a high quality decision-making process that customers value. It transforms salespeople from predators into valued business partners in the customer’s mind. It transforms the sales process from premature presentations to a process of mutual confirmation. And it transforms the conventional solutions-based, seller-first approach to sales into a diagnostic-based, customer-centric approach. In fact, a smarter way to sell, Thull [the author] persuasively argues in Mastering the Complex Sale, is to stop selling in the conventional sense and adopt a practical proven approach called Diagnostic Business Development (or the Prime Process).
There are other great business books that I have read recently, such as Double Double, High Output Management, Only the Paranoid Survive and Epic Content Marketing. However, if you are in a decision making position at a company, whether it is your own or someone you work for, I think that the three books mentioned above are the most powerful and actionable business books I have found so far. My colleagues, who completed MBA programmes at prestigious schools agreed that they probably could have skipped MBA school and simply read those books – it certainly would have been a lot more cost effective!
[:]Published on November 26, 2017