By Dennis Stearns
Feb. 23, 2012
What are the most successful private companies doing to plan for 2012? As part of Stearns Financial’s ongoing research and work with private business clients, we recently completed a report, Small Bets and Super Trends, which details how many top entrepreneurs are finding ways to grow despite the uneven economic recovery. The report includes ideas from hundreds of Inc. 500 CEOs who have maintained above-average growth and profitability despite the tough economic conditions.
The CEOs cited six areas of focus that they considered key to their company’s success. The first five were the typical answers (maintain good expense controls, keep and train the best people, look for ways to maintain and expand sales to existing customers) but the sixth was something different. Many of the CEOs said they are “making small bets in new areas to find new customers and markets.”
Entrepreneurs who have mastered the small bet approach understand intentional congruence. This is the classic business concept that anything you do beyond your “core” business should have a high level of congruence or synergy with what you already do well. This often includes experimenting with new products or services or acquiring small “bolt-on” companies that utilize key strengths of the existing company, benefit from similar customers (providing cross-selling opportunities), have a low risk of polluting the core if the “small bet” fails and ideally add areas of strength the core company can use to enhance its existing sales efforts.
Most successful businesses don’t invent anything new out of “whole cloth.” They find ways to take existing products or services and make them better or more useful to someone who has the means and interest to buy them. They experiment with small bets, rather than bet the farm on one big idea and hope it will turn out as planned.