What differentiates rich entrepreneurs from the average ones? Why do some businesses make their founders very wealthy while others make their founders struggle each month to make ends meet? Some people say its sheer luck -- trying something at the right moment in the right place with the right people. And in part, there’s some truth to that.
However, there are some important things that average entrepreneurs ignore, and in the end this not only causes them stress but sometimes even their entire career trying to make a business successful.
As an agile software development company with decades of experience, we’ve had the opportunity to learn a lot by working with successful entrepreneurs. Here are three things we’ve noticed that successful companies tend to have in common.
3 Things Many Successful Companies Share
1. A focus on the right type of growth.
According to Robert Kiyosaki there is a difference between being a self-employed business owner and super successful entrepreneur business owner. Kiyosaki explains that a self-employed business owner owns a job not a business.
Some examples are: the mechanic that opens at 9 am and some days has to stay until 10 or 11 pm working because he has many cars in line. Another example is the entrepreneur who starts a neighborhood market and becomes a slave to the business working 12 or more hours a day because he or she has to have everything under control. These types of entrepreneurs often end up getting burned out by their business.
These entrepreneurs tend to focus on internal growth. You hear these types of business owners saying: “this year our company grew 5%”. Their growth strategies focus on things like cost control, finding cheaper suppliers, or selling a little bit more.
Successful business owners with superfast growing companies tend to focus on external growth.
American businessman and author of “Your First 100 Million” Dan Peña is an expert in growing companies geometrically. According to Peña, there is no way that you can grow a company internally as fast as you can externally, and the only way to grow a company externally is through acquisitions.
Peña started Great Western Resources with a leased fax machine and an $820 investment in his newborn son’s bedroom. He quickly began making acquisition deals, buying other businesses in his same industry. After purchasing several smaller businesses and making a conglomerate he went public eventually making $450 million.
Look around at many of the big companies today. You’ll notice that initially many were start-ups that gained early traction by purchasing other businesses, finally becoming successful conglomerates.
Have your heard of Virgin Group? It’s a conglomerate with more than 38 companies inside. Owner Richard Branson clearly knows a thing or two about external growth.
Have you heard of Warren Buffett? One of the richest men in the world started buying stocks from different companies and now his own company Berkshire Hathaway is involved with nearly 100 companies.
Why would an entrepreneur want to grow 10% or 15% internally when it is possible to grow 100% or more externally?
2. An Understanding of Compound Interest.
Jeff Bezos, the owner of Amazon and the richest man in the world with a net worth of over $100 billion collects a normal salary just like any other CEO.
Why would a person with $100 billion receive an annual salary of less than $100K? Because he understands the power of compound interest. High speed growth is often the outcome of reinvesting profits into a business. This reinvestment can include: developing new products or services, technological innovation, expanding operations to different countries, and focusing on growth.
Warren Buffett lives a similar simple and frugal life, with a focus on reinvesting his dividends in new stocks, acquiring more stocks from many different companies and developing the large conglomerate mentioned previously.
3. An Ability to Harness the Power of Technology.
Remember the old cab companies that you had to either call or hail on the street? That is a thing of the past with technology companies like Uber transforming everything. Technology enables people across the world to request transportation in a convenient way, knowing who will come, what license plate and vehicle color/make/model to expect, etc.
How was Uber able to grow from being a simple cab concept to a $70+ billion company? The company leveraged the power of technology. Every business, regardless of the industry, should consider how to grow leveraging technology as an advantage.
As an information technology company with many years of experience, we’ve helped hundreds of clients leverage technology to become more efficient and increase profits. Interested in learning more? Let’s connect. Send us an email or give us a call and we can get the conversation started.