The 10 KPIs or “Slices” That Make up an Ideal Business “Pie”
How do you create, shape, and expand a business that truly works for you and the people you love? What formula can you follow to enjoy a business that enables your ideal lifestyle? To answer these questions, first, let’s ask this.
What is an Ideal Business?
Here’s a little background about my early years as a business owner. In 1994, I got into my first major business with a friend of mine. It was a precast concrete manufacturing business. Because I was young with little experience, I followed a basic ABC formula:
A + B = C
Wherein A is “start a business”, B is “make a lot of money”, and C is “have a great life.”
In just four years, what started on a small plot of land became a business with annual revenue of $12 million with 100 employees. On the surface, it may have looked like an “ideal” business, but it was challenging in many ways. It had so many issues like:
- Factory costs and leases
- A large number of employees
- Poor cash flow
- Payments
- Impacts of poor weather
- Unions
- An industry with low ethics
- Many variables
- Tight margins and schedules
This was a business that felt like a massive weight every day. Day by day, I had to keep pushing forward with the hopes that we would eventually break through and things would get better. Having put everything on the line, it just had to succeed as there was no other option.
We had to keep going because there was too much at stake to stop. As a result, I felt trapped in the business. Sounds familiar?
This is a concrete example of what is NOT an ideal business. In contrast, an Ideal Business is a business that works for YOU.
An Ideal Business by Design
At the time of writing, thirty years have already passed, and I’m now in the middle of another travel adventure with my wife, Robyn. We’ve been doing more exploring, camping, and getting as much out of life as we can. There’s no time limit to how long we travel or where we go.
This way of life is not by accident but by design. It’s possible because we’ve built several Ideal Businesses that enabled us to live our best life. An example of this is our Property Inspection Business, Resicert. In just 13 years, Resicert has become a multimillion-dollar operation and the most successful property inspection company in Australia with an 8-figure valuation.
Following are a few key facts about how this business works and why it’s ideal for me:
- Built Resicert from scratch with no capital investment or debt.
- Grew Resicert to one of Australia’s largest inspection businesses within 5 years – kicked off in 2009.
- Currently operate this multimillion-dollar business with a few part-time employees
- It has been profitable and cash flow positive every year since kick-off without exception
- It has no premises and is paper-free and fully cloud-based. It can be operated from any location in the world.
- We have delivered over 65,000 inspections during this period all over Australia.
- We have over 14,000 client testimonials with an average satisfaction rating of 94%.
- I had the business independently valued in 2020 – the base multiplier relating to the business was 5.77 as a minimum.
- It is the only ISO 9001 business – quality accredited business – within our industry.
So these are great business stats, but the truth is, it’s one thing to build a successful and profitable business, and it’s another thing to build a company that enables your ideal lifestyle. What makes Resicert even more ideal is its powerful impact on my personal life.
With this business:
- I have 100% control over my time and my income cash flow.
- I have been married for more than 36 years and have a great relationship with my wife, Robyn.
- I have great relationships with my 3 kids (adults now), Tessa, Carissa, and Dante.
- I am fortunate enough to have traveled extensively all over the world on my own, with my wife, and with my family.
- In the last 5 years, I have taken 62 weeks to travel all over the world visiting 26 countries.
- Currently, I am not involved in the day to to day operations of the business. My involvement is less than 4 hours per week
Ideal businesses like Resicert work like machines. They run without you and deliver exactly how you expect and deserve.
And the good news is, you can create your own ideal business or transform your existing business. You can turn it into a vehicle that delivers the quality of life you want and deserve. But to do that, first, you must identify what makes up an ideal business.
What Makes Up an Ideal Business?
If you’re currently growing your business, you might be asking how ideal it is. To answer this, you need to look at the 10 KPIs or “slices” that make up an ideal business.
The 10 KPIs or “slices” that make up an ideal business
- Risk
- Cashflow
- Efficiency
- Scalability
- Independence
- Adaptability
- Flexibility
- Resilience
- Exchange
- Leverage
After working with several ideal businesses in the past three decades, I’ve looked closely at a business in its ideal form from the perspective of a business owner. From there, I’ve discovered the 10 KPIs or “slices” that make up an Ideal Business. Let’s discuss each KPI below.
Risk
The probability of problems occurring within the company is called risk. It can also refer to the possibility of financial loss. Determine your acceptable level of risk and see if it matches your current business environment. Your assessment should take into account cash flow, fixed operating costs, and level of debt.
Cashflow
Ideal businesses are often built on stability and peace of mind. Yet, cash flow remains to be a key challenge for many business owners. To maintain an optimal cash flow, your business model must implement an effective cash management system.
Efficiency
A highly efficient business delivers an optimal level of profitable service to clients while ensuring the team is not overstressed. This requires a high level of systems, automation, and effective outsourcing.
Scalability
To extract ourselves from the business, there must be a minimum level of scalability. This can be achieved through strategic planning, effective business forecasting, automation and adopting a leverageable business model. It’s also crucial to take note that as your business scales, the expense base must also stay the same, or it must only increase after the revenue increases.
Independence
It is essential that you only spend time on what is the absolute best use of your time. For this to occur, the business must have a high level of independence. When we kick off a business, we are everywhere. But the reality is that we are only good at a few things. More importantly, we only enjoy certain roles. Hence, the more independent your business is, the more ideal it becomes.
Adaptability
In today’s world of business, things change quickly and often. This is one thing that the world of COVID reinforced again. A business model that can adapt quickly with minimum disruptions and stress will be able to respond to the changes not just to survive but thrive. Too often you hear about businesses that were built over many years just to get wiped out in a very short time frame due to either internal or external factors. This is often a result of the lack of the ability to not only adapt but do it quickly and effectively.
Flexibility
This not only relates to you but all team members that operate within your business. Many businesses have a very traditional view of how team members need to work and operate. However, the ability to offer flexibility to all team members will enable you to attract top talent and retain them as you expand your business.
Resilience
Having built a business and taken the necessary risks, you must ensure that there is a high level of resilience to protect your investment. To establish a sustainable and long-term business, it’s crucial to integrate resilience into your business model.
Exchange
Exchange is the act of giving one thing and receiving value in return. It’s important to remember that for a business to thrive and expand, the exchange must happen. The quality of this exchange will dictate your business’s level of success and profits.
This exchange doesn’t end with just your customers, this can also apply to your team members, suppliers and partners.
Leverage
Effective and significant expansion of any business requires leverage of some sort. With the right leverage model in place, it is possible to expand at a scale that is at least a multiplier of 10, 20, 50, or beyond. This is one benefit of an effective license or franchise model. Having a form of leverage in place allows the business to have a built-in growth driver.
Final Words
As you can see, there’s no mention of profit or sales among the 10 slices. This is because once you’ve achieved the right level in the 10 items listed above, you’ll naturally have the right business model in place. In essence, profit naturally becomes the product.
You can do a simple exercise. Go through each of the 10 items and give your business a score between 1 and 10. Score it in relation to how ideal your business is for each criterion. This will give you a good indication of how ideal your business is currently and what areas need some attention and focus.
If you want to follow along my story of how I redesigned my previous business into an ideal one that allowed me to live the quality of life I wanted, sign up for our newsletter: https://idealbusiness.invizbiz.com/newsletter.