- How to define and align your business’s Core Values, Mission, and Purpose.
- Techniques for developing a strong Employee Value Proposition to attract talent.
- Practical use of Key Performance Indicators (KPIs) for monitoring success.
- How to identify and implement Rocks to guide short-term business goals.
- Methods to evolve from a Start-Up to a Grow-Up and ultimately a Scale-Up.
If you want to be a successful small business owner, it’s not enough to just know your product and your customer—you also need to know the language of business strategy.
Understanding key terms and concepts is pivotal for the growth, management, and success of the enterprise.
These terms are not just buzzwords; they are the building blocks of effective business strategy that can mean the difference between stagnation and scaling up.
This comprehensive guide takes you through some of the essential business strategy terms every small business owner needs to know, from BHAG (Big Hairy Audacious Goal) to VTO (Vision/Traction Organizer).
Buckle up and get ready to delve into the A to Z of small business strategy.
|Pronounced B-HAG, this is your business’s Big Hairy Audacious Goal. This, along with Core Values, Mission, and Purpose(see below), is drawn from BE 2.1, Jim Collins’s and Bill Lazier’s Beyond Entrepreneurship. It’s a more memorable way of referring to your company’s mission.|
|Core Values, Mission, Purpose||These terms also come from Collins and Lazier. If the business does not already have a robust and healthy culture, you’ll need to work with your leadership team to make these three things explicit in your first year. Taken together, they define what, ideally, unites and inspires the people in your company. Of the set of things worth doing, what does it do best, and how can you use that to shape the company’s trajectory?|
|Core Values||What are the characteristics of your business that make employees get up in the morning? If they are not enthusiastic and proud of the business – worse, if they are cynical – you will have your work cut out. Core values should unite the people in the business who, long term, you want to keep with you. Core values cannot be changed once the decision has been made to adopt and communicate them. They are set in stone.|
|Employee Value Proposition (EVP)||Confusingly, this also gets called employer value proposition (they’re the same thing). It is what you offer your employees that is not easy for your competitors to imitate. It has four components: a material one (salary, benefits, flexibility); opportunities to develop skills; a sense of meaning and purpose; and connection and community.|
|Flywheel||This is a principle from mechanics that was adopted by Jim Collins in his book Good to Great. A flywheel is a very heavy wheel that requires great effort to start moving. But once it is rotating, its momentum makes the effort to keep it moving or speed it up less and less. Collins used the flywheel to illustrate the concept that a series of small, positive changes aligned over time will create a virtuous circle that is transformative.|
|General Manager (GM)/CEO||If you have taken over an owner-operated business, you typically do not plan to remain actively involved in its day-to-day for more than a year or two. When you step back, the executive role will be taken over by a General Manager (GM); in larger companies, this role might be designated CEO. The GM typically will be a new hire with industry experience and a salary of $100K or more. Acquira’s ACE Framework can help you transition from an owner-led business to a management-run operation.|
|KPI||Stands for Key Performance Indicator. Alternatively, people use the terms key metric and critical metric to mean the same thing. KPIs are used to measure the concrete achievements of non-management employees (eg., number of five-star ratings achieved; work accomplished without callbacks …), often weekly. They tend to measure the company in a “steady state”, rather than emphasizing growth. KPIs need to be SMART (see entry below). Also see OKR below.|
|Leadership Team||After the acquisition of an owner-operated business, it is imperative to assemble a leadership team of 3-5 people to help you drive growth. At a minimum the team will be made up of the new owner, a P&C Manager, and an Operations Manager (or equivalent). In larger companies, you may also have managers of sales and finance. You are unlikely to find all these employees within the company, but it’s still wise to watch any likely candidates for a few weeks before seeking a new hire. Acquira’s ACE Framework is a great resource for small business owners looking to develop an effective leadership team.|
|Meeting Cadence||Meeting cadence should be specific to employees’ roles, held on a regular basis, and highly disciplined in terms of their timing, agenda, and follow-up on commitments made. For more information on establishing a healthy meeting cadence, check out this article.|
|Mission||Like core values, the mission of the company will be set in stone once adopted – and so your management team will need to have reached a final consensus and agree that no further change is possible once the mission has been communicated. The company’s mission should be something that can be achieved within the next 10-25 years (for sure, a smaller company will be looking at the lower end), and will then be replaced by another mission.|
An example is Google’s mission: “To organize the world’s information and make it universally accessible and useful”. This has worked well for more than 20 years, but may be forced to change given the ascendancy of AI.
|OKR||OKRs stand for Objectives and Key Results. Like KPIs, they are a way of describing the goals of work done for a specific job and the extent to which an incumbent achieved those goals. But there are differences, too. OKRs are often used for more senior employees. They are broader, tied to mission, and describe “stretch” goals, which may be difficult to achieve but tend to stimulate great effort. Hence, falling short of a bold and aspirational stretch goal may still be a win. OKRs give KPIs context and communicate the direction the business wants to take.|
|Purpose||The purpose of the business is communicated to its employees (and perhaps the public) at the same time as its core values and mission. The purpose needs to be forceful and persuasive enough to last for 100 years, and the management team must constantly reference it.|
|Right People in Right Seats||Yet another Jim Collins concept. Two complementary ideas are present here: (1) do you have capable people who share the business’s core values? and (2) are they appropriate for the role they are in? Obviously, it is (1) above that is the absolutely necessary criterion, and so it’s desirable to find a new seat for someone who meets the first criterion but not the second. If an employee does not meet criterion (1) they should be encouraged to leave and, if necessary, laid off.|
It’s not quite the same thing but still very useful to ask yourself, for each employee: Do they get it (do they understand their role)? Do they want it (are they happy in that role)? And do they have the capacity to perform their role?
|Rocks||Rocks were popularized by Gino Wickman and Stephen Covey. They are a vivid (and therefore memorable) way of referring to things that have to get done in the coming 90 days in order to realize your one-year plan. There should be three to seven of them in a given quarter.|
|SMART||This is a framework for measuring results in a way that is based on the acronym SMART. Results must be Specific, Measurable, Achievable, Relevant, and Time-based. Measurements based on these criteria are likely to be accurate assessments of the company’s health. In addition, employees will tend to see them as fairer and more under their control.|
|Start-Up, Grow-Up, Scale-Up||These are successive stages of maturity in a company’s growth, largely based on Acquira CEO Hayden Miyamoto’s work. Many companies in the home services space will not make it past the start-up phase, while a few companies will get to the third stage, scale-up, but often lose their employees’ energy and commitment in that transition.|
A start-up company is run by its owner-operator and has difficulty getting past the 15-20 employee hurdle. Growth may be seen as desirable, but there is no time for the owner to consider how to achieve it. The businesses you buy are typically stuck at the start-up stage, and you need to move them along to the grow-up stage.
A grow-up company is often in a sweet spot that may come undone if it grows further. Grow-ups have up to 50 employees, an effective leadership team with a clear plan for the future, and may have optimized their operational processes for efficiency.
A scale-up company has stars in its eyes as it aims at the big time. It probably has its own finance division and multiple locations, with a workforce in the multiple hundreds and way beyond. In home services, it has probably expanded into complementary industry areas. But it may be crippled: the days are long gone when everybody knew everyone else, replaced by a culture of stultifying bureaucracy that shifts blame between departments, along with a weakening of brand and the quirkiness of culture that was behind that brand.
In order to grow beyond the grow-up phase, we recommend instead creating a decentralized roll-up of grow-ups – not exactly a motivational name, but a structure that supports growth beyond the grow-up phase without sacrificing the intimacy, fun and enthusiasm of the grow-up.
For more information on moving past the start-up phase, and how that could significantly impact your bottom line when you go to sell, check out this article.
|VTO (Vision/Traction Organizer)||VTO is a way to plan for strategic growth, created by Gino Wickman. It allows a company’s leadership team to reach agreement on the company’s vision (or mission), by asking eight questions, that move incrementally from the general to the specific.|
These questions are: (1) What are our core values? (2) What is our core focus/mission? (3) What is our ten-year target? (4) What is our marketing strategy? (5) What does our three-year picture look like? (6) Dividing that three-year picture by three, what does our one-year plan look like? (7) What are the three to seven rocks we must contend with to achieve the one-year plan? And (8) what are our current issues (basically, a SWOT analysis) that will impact realization of that one-year plan?
Knowledge is power, and in the realm of small business, knowing the right terms can empower you to make informed decisions and execute effective strategies.
By now, you should be familiar with a host of strategic terms and frameworks, from Core Values to SMART criteria and from Rocks to Scale-Ups.
Whether you are in the start-up stage or looking to grow into the big leagues, mastering these terms will give you the insights needed to navigate the complexities of running a business.
These terms are a core component of Acquira’s processes, which makes them key knowledge for Acquisition Entrepreneurs whether they’re just beginning the business buying journey or whether they’ve already bought a business and have been operating it for some time.
For those eager to jump into the ownership, Acquira’s Accelerator+ Program will ensure you get to an LOI (Letter of Intent) within four months. That’s because Acquira’s team will conduct the search for you based on your unique investment thesis, we will then conduct the due diligence for you before negotiating the LOI and presenting it to you to sign.
After that, we can help you through the in-depth diligence and closing negotiations in order to bring you to the close. After that, we can help you grow it post-acquisition.
The program also includes our world-class MBA-level training materials and access to a robust community of fellow Acquisition Entrepreneurs (not to mention, Acquira’s team of acquisition experts!).
Act quickly, as space in the program is extremely limited. Fill out the form beneath to assess your qualification, and expect to hear from us soon.
- Mastering business strategy terms equips small business owners with the tools to effectively manage and grow their enterprise.
- The adoption of terms like BHAG and VTO can help clarify a company’s long-term vision and short-term focus.
- A robust Employee Value Proposition differentiates a company in a competitive labor market.
- Regularly updated Key Performance Indicators serve as invaluable metrics to gauge a business’s state and areas for improvement.
- Transitioning from a Start-Up to a Grow-Up and finally to a Scale-Up requires a different set of strategies and perspectives.
Acquira is a business acquisition in a box service. We help entrepreneurs buy businesses and we invest in them and their chosen businesses. We are here to help ensure that each business we work with is posed to make the biggest positive impact possible for its owners, employees, and community.