How to Build a Business that Stands the Test of Time

Hey, guys, Matt Paulson here. In this video, I want to talk about building a business that stands the test of time. We all know that running a small business is an incredibly risky proposition. They require work, they require capital, and they require time. And there's just no guarantee that your business idea is actually going to work. You could find yourself in a position three years into your business where you. You have no profit, no cash, minimal revenue, and the business just didn't work. That is the unfortunate reality of running a small business, is that they're hard, they might not work, but that is the risk that you take if you want to take a stab at doing your own thing, being the master of your own domain, and really kind of stepping out and maybe building a really successful business. Most businesses, the reality is they just don't last within the first couple of years of starting small businesses. About 20% of them fail. About half of businesses fail after the first five years, and about 70% of businesses fail after their 10th year in business. Those numbers from the SBA, by the way. I guess our company, Mark and B, you know, we've been around since about 2008, and we're a relatively young company in the grand scheme of things, but we're already doing better than about 70% of small businesses just because we've made it to our 10th year of operations. So if you, you know, you want to build a business that really lasts, go to a company that stands the test of time. Go to a company that's made it into their 10th year of operations. I've got four kind of topics or four ideas that I want to run by you today that will maybe help you think differently about how you build your business and give you ideas to build your business in such a way that it truly does stand the test of time. The first idea that I want to kind of discuss is that you should be the designer of your business. Don't be the operator of your business. So when you go into a McDonald's or Burger King or Culver's or whatever fast food you like, how often do you see the owner of the franchise frying French fries, working the cash register or making sandwiches? The reality is, you probably never. They are more than likely working in the back office somewhere. They might not even be in the store, but they're probably working on financials, maybe making deposits, maybe they're working on marketing, maybe they're planning their next door. Who knows? But they're not the frontline employee. They're not working to cash register. They're not even overseeing the person networks cash register because they have a manager for that. Ultimately you as the business owner have to be the person that designs the systems and the team that operates your business. Because if you are the person that designs the business and runs the business day to day, eventually you're going to get burned out and you may quit early on when you're first getting started. It is kind of unavoidable to be the day to day person in your business. But over time, your long term goal needs to be to design systems, processes and a team to run your business for you. Most people that work in your business is as employees, they work too much and they just live unsustainable lifestyles. So you really want to get to the position where eventually you can take a step back from the day to day. That way you can go on vacation, that way you can pursue other interests and that way your entire livelihood is not stuck in your business. Or so really think about what systems can I build, what processes can I build that a team can follow? How can I start building my team? And that way somebody that's not me is mostly running the day to day of the business. The second idea that I want to talk about today is to be the best at exactly one thing. Focus is critically important in small business. If you try to do too many different things at once or move in too many different directions, you're going to become unfocused and ultimately probably not successful. One of the key reasons that people come to your business and keep coming back to your business is that you're just the best at what you do. Here in Sioux Falls, there's a brand called Stetson Family Farms. They're a local dairy producer. They produce probably the best locally produced milk and ice cream and other dairy products. And that's what they're known for. And that's really all they do. They stay focused on their one thing their brand is known for and they just work to be the best milk producer and ice cream producer in the region. If you want regular milk you go to Hy Vee, you go to Walmart. But if you want the best milk, you go to Stenson. They're not trying to branch out of dairy and do cage free eggs or organic beef or who knows what. They stay focused on dairy. And by doing so they make the best product they possibly can and have developed a brand around their expertise producing dairy products. By staying focused, they're able to do that one thing that they can do better than everyone else. They become known for that, and then that helps their business become sustainable because it's something people want and something people are going to keep coming back for. The third idea I want to discuss is that you should develop a war chest of cash. You want to have a lot of cash in your business, just sitting around waiting for the unexpected bumps that are bound to happen. You could get hit with a lawsuit like I did in the first year of my business, one of my businesses. You could face an economic downturn and have half of your customers just disappear overnight. Maybe there'd be a fire in your business and you'll have to rebuild from the ground up. You could say something unfortunate, have it blow up all over social media, causing a backlash from your customers. You just don't really know what's going to happen with your business. A key vendor could just decide not to pay you because they themselves are out of cash. I have no idea what kind of unexpected bump in the road is going to hit your business, but the reality is there are going to be unexpected bumps in the road, and you do need to plan accordingly. Eventually you're going to have some kind of unexpected event, a catastrophe, who knows what. But that's going to interrupt your regular flow of customers. Revenue will decrease, and the only way to survive, thrive through these business interruptions is to have cash on hand so that you can weather the storm. Your first goal probably should be to have about three months of cash in your business. So three months of operating expenses. The way that you kind of do this is to set aside a small percentage of earnings that you get in every month, say 5 or 10%, and kind of put that into a separate savings account. And that will kind of be your buffer account, your retained earnings account, your war chest of cash, whatever you want to call it. But by having all that money sit over there, you'll be getting a buffer that protects you. So if revenue falls by 30% one month and you can't cover your expenses, you can take money out of your retained earnings account and use that to cover your expenses. And that way you can live to fight another day. And the fourth idea I want to discuss is be willing to change with the market. If the market moves in a different direction than what you're doing, you really have to move with it. Most industries are constantly evolving. What worked 20 years ago probably won't work today. As patterns and trends change in your industry, you have to be willing to change with them. If you are a taxi driver in 2019 and you're not willing to drive for Lyft or Uber, you're probably not going to be able to continue to be a taxi driver for very long. The likelihood that the yellow cabs on the streets ten years from now, probably not not going to be the case in my industry. 20082009 during a great recession, the stock market fell in half and just the appetite for financial news and information was pretty much decimated. Nobody wanted to pay for any research tools or services or newsletter because they lost half their money in the stock market, at least on paper. So everybody knew in the industry that you really had to cut cost if you wanted to survive and kind of weather the downturn and make it to the next bull run when people are interested in your products and services again. And the companies that produced print newsletters that they mailed to their customers and they couldn't cut their costs by making the leap to digital, they weren't able to survive. The market by necessity shifted from print newsletters and magazines to digital because the cost structure made more sense and the companies that weren't able to make that shift went away. And the companies that did make that shift from print to digital, they're largely still around. So you have to be able to shift with the market. So keep an eye on industry trends. When things are changing in your industry, you should be the person kind of leading that trend. Don't be the person following it or being the person being unable to make the trend or being unable to follow that trend. Because if your industry moves over here and you're still over here, the customers are probably going to go with the industry. So you have to be willing to move and make adjustments as trends in your industry change over time. So Those are the four ideas. 1. Be the business designer. Don't be the business operator. 2. Become the best at exactly one thing. 3. Develop a war chest of cash and 4 be willing to change with the market. So if you have business ideas about how to stand if you have ideas about how to build a business that stands the test of time, feel free to comment them below in the comments. I'd love to hear what your guys' thoughts are on this. Thanks for watching.