Taking your business from good to great

Posted by Tait Walker LLP on 05/12/17

Finance

The management book “Good to Great: Why Some Companies Make the Leap… and Others Don’t” by Jim C. Collins was first published over 16 years ago.

The book describes how companies become great. “Greatness” is defined as financial performance several multiples better than the market average over a sustained period. It finds the main driver is starting to become niche and focus on resources on their key areas of competence.

WHAT DEFINES 'GREATNESS'?

We find that great companies are more likely to achieve their fundraising or shareholder exit aims compared to many good companies.

We would probably define greatness a little differently in the North East. The following six examples would typically make a business “great” and therefore more attractive:

1. A strong management team team not built around one individual alone and not reliant on its owners to drive the business.
2. National or international presence rather than only regional. This shows that the business has evidenced its greatness by expansion or scale up and is no longer dependent upon a local reputation.
3. A wide customer base demonstrating a company’s ability to repeatedly sell and market itself. It also makes the company resilient to the loss of a single customer.
4. Deep data knowledge with strong financial control. This allows the board to review complex information and make the right day to day and long term strategic decisions.
5. Profits regularly in excess of £1m. A significant proportion left in the business and reinvested in capital equipment, people and research and development.
6. Intellectual property which the company to create its own niche products and services and generate higher profit margins.

Whilst markets continue to change due to credit crunches and Brexit, the principle of having the ambition to become great does not.

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