In the game of baseball, achieving a homerun may not be easy, but the concept is fairly straightforward. The batter must hit the baseball hard enough to launch the ball over the fence, thereby allowing the batter to safely reach home plate. Because it is a process of trial and error it is safe to say that just about anyone can experience hitting a homerun if they stay at bat long enough. Some are better and more consistent than others, but everyone can experience the moment when it all comes together and with a satisfying ‘ding’ the ball sails across the field.
When I was starting out in my first business about ten years ago, a serial entrepreneur told me that the secret to business success was to survive long enough to hit a home run. He told me that there will always be a day when everything comes together, but you still need to be in business to experience it. Small Business Administration (www.sba.com) statistics show that half of all small businesses are no longer in existence after five years, and that 70% of the failures are due to cash flow management issues. They never got to stay at bat long enough to hit a homerun.
Achieving a homerun in business is just as difficult; however, defining precisely what represents a homerun for your business is not as clear-cut.
In many ways, merely surviving in business long enough to become profitable can be considered a homerun.
The first two or three years of running a business can be very bumpy. You must get through a period of disjointed cash flow management in which your suppliers want their invoices paid now, but your customers prefer to pay more slowly, perhaps even by installments. You’re never sure when this period will end. The smarter businesses are the ones that have sufficient reserves of cash or credit to see themselves through this time. After you have gone through this, you can enjoy a sense of relief that you have weathered this difficult period and that your cash flow is positive. When your company is profitable, you can enjoy that moment of success, knowing you’ve just knocked one out of the park.
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Conceivably, each businessperson may have his or her own way of defining what it means to hit a homerun in business. It largely depends on the personality of the entrepreneur. For me, a homerun was always a successful exit, because I’ve never started a business without intending its end. That might sound odd, but I am a builder not a maintainer. I like to start things, build them up, and move them on. Other entrepreneurs are excellent maintainers, and I know they will do a better job than me. Their homerun may be a stable company that provides significant profit distributions every year.
With hindsight I know that the sale of my first company could have happened sooner. I made a key business decision – probably a little too late – maybe two years later than I knew I should have. That changed annual revenues from $6 million to $15 million with an EDITDA of >80%. It wasn’t long before suitors showed up to buy it. That’s a homerun for me. It felt great to hit it out of the park even though I knew I could have done it sooner if only I had taken a bigger swing at the ball.
I sold my second company last year in a somewhat convoluted deal that achieves several intentions at once. Again I felt I had done my bit to nurture it to survival, and now it is time to set it free with entrepreneurs more suited to its current stage of evolution. It felt like trying to hit two balls with a bat in each hand, but boy did it feel great when it came together.
I had already started two new companies, and with both I feel like I am swinging wildly through their periods of survival. I’ve had some base hits with both, but it will be a while before it all comes together. How far is it going to go? How long will it take to realize that success? I don’t know. But when I get there, that’s a homerun.
I truly believe that the goal of any company is to survive, and once you survive long enough, that will always feel like a homerun to anybody.