You have heard it all before, it’s time to hear it again: to give your business a competitive advantage, stop selling products and services and sell your vision and mission instead.

If you have ever started a business, you may have agonised over your vision and mission statements. The prevailing opinion seems to be that your business will fail if you don’t make powerful and world-changing statements to live by when running your business.

The web is littered with posts on “the most inspiring mission statements of all time”, “15 vision statements to change the world”, or my personal favourite: “1,550+ best company vision and mission statements”. It’s clear that the bar for “best” seems to be set fairly low.

With so much attention placed on vision and mission, why do so many small-to-medium-sized businesses (SMBs) post these to their About Us page, never to be referenced again, yet they still succeed? Are vision and mission statements even necessary and are they essential to success?

Yes, but not for the reasons you may think.

An SMB that doesn’t have a vision or mission statement will often succeed off the back of its founder leading the charge. Great founders impart their personal vision and mission onto their staff through action, role modelling and coaching. Founders encapsulate why we exist, what our purpose is and how we can role model the values that build team culture.

However, what happens if the founder is no longer available? This situation raises issues about who the team will look to for their ‘why’ and what they will do without their leader to guide them.

This is when vision, mission and values come into play. They are the glue for the business to continue and exist past a single leader’s contribution. Or, as the business grows, they are a way for the founder to communicate the ‘why’, ‘what’, and ‘how’ of the business.

Vision – what and why

We are a pragmatic bunch here in Australia. While inspiring rhetoric can be fun, not all businesses are built to save the world. Keep it simple and state what you see as the future version of the business. Visualise the end game and what it will look like when you have achieved all your objectives. Hold that vision in your mind, and then state why you put in all of that work to build your future business.

For example, your vision could be:

“To help customers transition to renewable energy as our contribution to lowering carbon emissions.”

Let’s break it down:

• Our future self: “We help customers transition to renewable energy”
• Why we do it: “Our contribution to lowering carbon emissions”

Taking another example:

“To make the tastiest pre-cooked meals for adolescents that are both healthy and convenient.”

Let’s break it down:

• Our future self: “We make the tastiest pre-cooked meals for adolescents”
• Why we do it: “both healthy and convenient”

In both of these examples, we are describing what we will do in the future and why we do it so that others who are aligned to the ‘why’ can jump onboard.

One final example:

“To unlock the full operating potential of our customers and maximise their business value.”

Let’s break it down:

• Our future self: “To unlock the full operating potential of our customers”
• Why we do it: “maximise their business value”

Don’t get hung up on whether or not you are achieving your vision right now. This is about informing the team and the world what your business will look like in future. The gap between the current and future state of your business informs your execution plan.

Mission – how

Personally, I think there is some confusion regarding mission statements, as many organisations use them as a target or goal. Once you achieve your goal, do you then have to change your business?

Here is an example of a poor mission statement:

‘Our mission is to be the market leader in renewable energy solutions.’

It reads well, and it sounds good to stakeholders, but what does it really say about your business other than that you will do anything to climb to the top? In addition, who benefits from you being the market leader?

I prefer mission statements that complement the vision statement with an explanation of how we are going to achieve that vision. Let’s take a look at some examples below:

Vision:
‘To help customers transition to renewable energy as our contribution to lowering carbon emissions.’

Mission:
‘Develop leading-edge renewable energy technology guaranteed to lower carbon emissions.’

When read together, we now know the ‘what’, ‘why’ and ‘how’ for the business.

Other examples are as follows:

Vision:
‘To make the tastiest pre-cooked meals for adolescents that are both healthy and convenient.’

Mission:
‘Use organic ingredients and prepare meals with recipes from industry-leading experts in nutrition.’

Vision:
‘To unlock the full operating potential of our customers and maximise their business value.’

Mission:
‘To help customers achieve operating excellence using NetSuite and NextService.’

Vision and mission are a decision-making tool

Together, the vision and mission set the stage for ‘what’, ‘why’ and ‘how’ your business operates. Making it the core of your marketing, sales, and operating plans will ensure that your organisation is always working towards realising that vision.

Every now and then, a stakeholder or opportunity comes along that tempts us to deviate from our original vision and mission. When making a decision, assess whether it fits within the vision and mission statement.

If it doesn’t, disregard the opportunity or re-evaluate the vision and mission. There is nothing wrong with a pivot, as long as it starts from the top and the entire business is aligned with the new direction.

Conclusion

People like to be part of a team. A shared vision, mission and culture are critical to creating well-functioning team dynamics.

Whatever your vision and mission may be, write it down and share it with all stakeholders. Make these a part of your decision-making process to build momentum in your desired direction. With momentum comes growth and efficiencies as your entire business is working towards the same goals.

Hopefully, we’ve provided you with some valuable takeaways from this post. Please follow or subscribe to receive more Klugo Briefing Posts in future.

About Klugo

NetSuite + NextService

Klugo’s vision is to unlock the full operating potential of our customers to maximise the value of their business. We do this by helping our customers achieve operating excellence using NetSuite + NextService, the world-leading cloud ERP and FSM business platform for small-to-medium-sized businesses.

Understanding your business growth type will impact strategy and profits.

Recently, I was fortunate enough to work with a rapidly growing business that grew by over 100% compound annual growth rate (CAGR) over three years. Anything over 40% CAGR can be considered hyper-growth, so this was incredible to witness.

Being in a hyper-growth company can be an exhilarating ride. Lots of new customers, new employees and new international markets to tap into – it was a whirlwind of globetrotting, Zoom meetings and fighting to stay alive. We scrambled for every dollar, and we always felt like we were just a few months away from losing it all.

I learned a few things about the relationship between growth and profitability.

Hyper-growth

This type of growth is normally experienced by young businesses (or industry disruptors) as they mature through the scaling phase of business development. Defined as the steep part of the growth curve, counter-intuitively, this type of growth is high-risk. The cost of new customer acquisition and onboarding multiplied by growth rate will always exceed net operating margins, meaning there’s a lot to potentially gain, but you’re also teetering on the brink of losing it all.

For these businesses, new customers significantly exceed existing customers and recruitment within the customer success team lags new business. This can lead to bad customer experiences, which ultimately increases customer churn and slows down new sales.

Typically, this type of growth will attract funding as an investment in operations will resolve the scaling issues for a post-revenue business with proven customer fit and sales conversion.

So, once we secure funding, we build the team and the profits will flow, right?

Not necessarily. Depending on the type of business and market reach (is it global?), the business may remain unprofitable for many years if the CAGR remains high. The business will continue to attract funding on the promise of profits being realised at some point in the future.

It’s common for listed start-ups to rapidly grow and lose money for decades before they become profitable.

So, when does this type of business achieve profitability?

The answer: When growth slows.

At some point, the business will achieve optimal market penetration (slowing growth rate) and operational efficiencies (reduce costs to acquire and service customers). Slowed growth with increased profits indicates maturity. Depending on the type of business, when it matures, it may enter a phase of profitable linear or episodic growth.

Linear growth

Growing organically and prioritising profit will lead to a straight-line growth graph (it’s normal to have less than 20% CAGR) that mitigates the risk of over-investment and competitive activities which threaten market share.

Achieving 20% CAGR will more than double your business in three years, while a 10% CAGR will take over seven years to achieve the same result. This will feel like rapid growth for many small-to-medium business (SMB) owners if it continues in perpetuity. In reality, the business development curve for many SMBs tends to have an incrementally declining growth rate until it reaches a plateau.

If your growth has plateaued, it can be an indication of a declining business even when profits are high. A business that under-invests profits back into the organisation will negatively impact new business and destabilise operations through attrition or customers and loss of resources.

When low growth profits are eroded by inflation, maintaining a growth rate above the inflation is critical to maintaining stakeholder value.

Episodic growth

Episodic growth can occur due to seasonal markets or large projects, and in such cases, it tends to be well understood. Profit forecasts take into account slow periods and flexible resourcing agreements, allowing for business expenses to be adjusted up or down as needed.

However, episodic growth can also occur due to inefficient sales and marketing activity. Build-up of activity around common discounting periods (like end of financial year) creates clumping of sales and leads to an artificial peak in demand.

This creates peaks and troughs in the business operations that do not allow for flexible resourcing. While the business may be growing, there can also be a reduction in profit due to operational downtime. Smoothing out the episodes by filling the troughs (reducing downtime) or reducing the peaks (fewer customers could in fact be more profitable) will lead to more consistent growth and profitability.

Conclusion

Personally, I think linear growth with a slow build in sales and operational momentum is preferable to hyper-growth. There are so many examples of start-ups that never make it to profitability regardless of the significant growth metrics.

Who wins: the tortoise or the hare?

Intriguingly, linear growth can occur together with episodic growth when a mature business maintains organic growth and plans its growth by acquisition or by bringing new products to market. Understanding how the two growth strategies play out in that scenario can mitigate the risk of one impacting the other.

Many companies that I have been involved in throughout my career are focused on achieving growth, but they may not understand how to create it. The most successful businesses have been the ones that make growth a central part of their business plan.

Understanding the type of growth your business is experiencing and its impact on profits is the first step.

We trust we’ve provided you with some valuable takeaways in this article. Please follow or subscribe to receive more Klugo Briefing Posts in future so you can benefit from more insights to help you grow your business sustainably.

About Klugo

NetSuite + NextService

Klugo’s vision is to unlock the full operating potential of our customers to maximise the value of their business. We do this by helping our customers achieve operating excellence using NetSuite + NextService, the world-leading cloud ERP and FSM business platform for small-to-medium-sized businesses.