Building a sustainable business takes time and willingness to commit for the long haul.
Building a successful business sounds easy on paper: Make something that your customers want or need, sell it at a high enough price to make a nice profit, put the right people in the right seats, and reinvest a percentage of your profits into marketing, sales and product development. It helps if the overall economy is growing, your underlying industry is growing, and you have access to capital at reasonable terms. It would also help if the competition would act nice and sit still. The reality is that our economy seems to be prone to booms and busts, most industries mature faster than ever before, access to capital is uneven at best, and the competition is fiercer than ever.
Access to Capital
Large corporations usually have much easier access to capital, through commercial bank lending, asset sales, stock sales or other means. Small businesses, on the other hand, often have trouble just getting a small credit line, never mind the kind of growth capital they really need. Small businesses are also much more at the mercy of economic and industry ups and downs, and usually have far more competitors, on more fronts, than the giant corporations. There are exceptions of course. The fast food industry today is like the wild west, with new competitors popping up like mushrooms after a heavy rainfall in the forest.
“Quick sale” vs. Long Term View
Unfortunately, our entire culture seems to have shifted away from building truly sustainable businesses — the kind that used to last 50-100 years — in favor of fast growing businesses that are really designed for a quick sale. Think of all the venture capital crazes over the past 10-15 years: bagels, giant pet food stores, grocery delivery giants, social media platforms, etc. Sure, a few actually made it through the eventual crash, but the vast majority were either bought on the way up, or died a quick death on the way down.
I have been around long enough to see more than my fair share of successes and failures. I worked for a few dotcoms, and even started one myself. As a business consultant, I would say at least 30% f the calls I get are from people who have absolutely no interest in building anything sustainable. They just want to get the business going and then flip it for a huge profit.
Ideally, a sustainable business pays attention to the three P’s: people, planet, profits.
You have to treat your people right. You have to pay attention to the environment and think about what you are producing and how it will affect the natural world. And of course you have to make a profit. But the key here is that profits don’t necessarily come first, and they are not the ONLY thing that matters.
Our process for building sustainable businesses.
At Ground Floor Partners our focus is on building sustainable businesses, not quick flips. Even though they aren’t considered sexy by banks, venture capitalists and most private investors, we still like them. But sustainable growth requires a different mindset. Instead of trying to double revenues in 3-6 months, we typically aim for something closer to 18 months. Sometimes a little faster, sometimes a little slower – the devil is in the details. But in my experience, 18 months is usually achievable. By tech standards, this is unbelievably slow. But by historical standards, looking back over 50 years or so, it is actually quite fast.
Tens of thousands of pages have been written about “sustainable” businesses. It can get quite complicated if you get into the weeds. But at a high level, it is really quite a simple concept: building a business that lasts a long time.
Sadly, very few businesses are truly sustainable. Everyone can do better. But if we at least think about what we’re doing and make a conscious effort to improve, we’ll make progress.
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