The Four Aspects of Building a World Class Business

Building a great business involves many variables. As an entrepreneur, you need to understand the variables. In this article, I will look at just four of these aspects. It is important to note that banks and investors do not invest in products or services. Investing in products and services is your job as the entrepreneur. Unfortunately, the adage money follows ideas is not quite true. It should actually go more like “Money follows people that have good ideas and are doing something with them”. Banks invest in people who are building a business. Even so, the majority of entrepreneurs with great ideas, products, and even business plans, have great difficulty in attracting the kind of money they need. I am going to look at some of the reasons why this is the case.

Why?

The painful truth is that, as a rule of thumb, investors invest in well-put-together and well-run companies that clearly demonstrate potential to generate sustainable profits in the future. If the company has created and is selling a great product or service then even better. Generally, even if your company is selling something as mundane as sweets or paper profitably, and can demonstrate that it can do so in the foreseeable future, while also growing market share, then chances are you will be pushing away financial suitors for your business.

The problem is that most entrepreneurs start and end their businesses with their product or service and then wait for the business to grow. Granted, a great product will take you a long way but in the final analysis for a company to shake off its 'startup characteristics', its founder-owner or chief executive officer, must look beyond the product and market. However, some startup characteristics are good to keep as the business grows. Technology company, Apple, is said to operate like a startup. And we all know how great they are performing.

The man who coined the term: "Marketing Comes First!", was very right but he forgot to add: "But many things come after it!!!”. Entrepreneurs find it is easy to imagine and visualize products or services. They even produce and sell them, but very few manage to actually build world class companies. This is because to build a world-class company, you have to be able to do more than dream up, produce, and sell a service or product. You also need to be able to put together and manage the resources that can replicate your creations. Then you must be able to sell them at a scale that is larger than you ever could do in your personal capacity. Now that is not an easy thing to do.

Building a world-class company that will attract investment capital in whatever form will need you to pay careful attention to four very critical aspects of running your company. The four aspects are as follows:

1. the companies' operations;

2. financial management systems;

3. human resource policies;

4. the company’s chief governing body i.e. the board of directors.

In fact, the biggest reason that most companies fail to emerge from the typical start-up phase of growth is that the founder entrepreneurs often ignore or find it difficult to balance these four aspects with creating, selling services or products. They may struggle to bring in the right people to help them run their board of directors.

Aside from the company’s products' market potential, these are the other four aspects that investors look at when making investment decisions that will help in building their business.

Operations

They look at a company’s operations to make a judgment call on its ability to scale the operations to higher levels if it should receive a capital injection.They also want to determine whether your operational strategy gives your company a competitive advantage over other companies that are serving your target market. You must pay attention to the daily tasks in your company operations. These can make or break a business. They can attract or discourage an investor.

Financial Management Systems

They look at financial management systems to determine whether the capital they invest in your company will be safe from fraud, misappropriation, as well as poor decision making. Therefore you need to have robust financial management systems that will give investors the confidence that their investments will be safe. Remember that an investor is looking for a return on their investment. They will compare the way you are building your business with other entrepreneurs. At the end of the day, you also want to run a profitable business. The difference between a business and a hobby is that a business actually makes money. The money you make is the reward for the professional way in which you are building your business. This includes robust and transparent financial management.

Human Capital

They look at the human capital in the company and the policies used to recruit and manage employer-employee relations to be certain that the company can deliver what is in the proposal and also that the risk of human capital flight can be mitigated. This for me is one of the most important aspects of building a business. You need to work with people who can articulate and implement your vision. An investor will gain the confidence to invest based on the calibre of the people you have recruited. As the owner of the business, your personal capital is crucial in attracting investors.

Board of Directors

They will look at the members of the board to be assured that the company has the right leadership to guide towards achieving its strategic objectives. This aspect is as crucial as the human capital. The board of directors is also human capital. You must have a board of reputable individuals who can be trusted to oversee the building of the business. The investor must be left in no doubt that their investment will yield dividends.

If you want to be successful at building a business that attracts investors, then you need to pay attention to the four aspects I have described above. The list is inexhaustible. Which of the four aspects are you incorporating in building your business? What challenges are you encountering in meeting them? Have you failed or managed to attract investors? Let me know in the comments below, or add some other aspects that you find useful.

Leo Gaviao is SME Strategy & Training Consultant at CrowdFund working together with entrepreneurs to build world class companies.