Most successful CEOs are driven, decisive, hardworking, and intellectually curious, but beyond that it’s important to have “go-to” principles you use every day as you build your business.
My personal rules have helped me start, build, and sell companies over the past 20 years. They are universal rules every CEO can apply:
1. Never confuse activity and progress. It’s very easy to feel like you’re working hard because you’re busy, but hard work is not always smart work. If you’re a sales person, I don’t care if you’re living out of a suitcase and running all over the country. My question is are you actually closing deals? If you’re head of R&D, it’s not impressive if you’re working 100 hours a week if we do not have a pipeline of innovative products. CEOs need to distinguish between activity and progress because it cuts through excuses and moves the organization in the direction it needs to go.
2. Only decisions made under pressure reveal character. Almost anyone can do a good job when things are going well, but that doesn’t show true character. Watch for those who rise to the occasion when the company gets hit with a huge lawsuit, or when a key engineer resigns, or when the cash runway is down to 60 days. The No. 1 signal that someone is a superstar is that they can make great decisions and perform under tremendous pressure. This is true in business and in sports. When you’re just fooling around, it’s easy to make free throws or sink a putt. But if you want to be in the big leagues, you need to be able to do it while everyone is watching and the game is on the line.
3. It’s all about the people. In his book, “The Hard Things About Hard Things,” Ben Horowitz writes, “We take care of the people, the products, and the profits — in that order.” This is a very deep statement about building a business; if you don’t get the people part right, which is by far the hardest of the three, the business is dead. Don’t get ahead of yourself with details about your product or profits until you have the best possible team.
4. Know the numbers. Every company needs a good CFO, but the CEO should also be able to spit out gross margins, growth rates and market sizes, along with any other key numbers important to the traction of the enterprise, on the fly. Numbers are the language of business, and if the leader isn’t comfortable using numerical metrics to make informed, strategic decisions, the competitor will win.
5. Target big markets. When launching a new venture, many people avoid looking at the largest possible markets because existing players who have massive resources intimidate them. But this is a huge mistake — small markets are every bit as competitive as big markets. By attacking bigger markets, you at least have the chance of huge dollars if you succeed. Small markets offer all the same competition but less upside.
6. Always have a price. When you are the CEO of a growing company, inevitably you get buyout solicitations from brokers, bankers, and competitors. Most the time, these inquiries are not serious, but sometimes they are, and you need to be prepared. No matter how much you love your business, and how much future growth you expect, always have a price in mind that you would sell at. This exercise forces you to determine what your intrinsic value is. It doesn’t matter if you want 20 times that figure, just have a number ready, because it helps guide your thinking.
7. Embrace the difficulty. Starting a business is gut-wrenchingly hard, and anyone who doesn’t agree with this hasn’t started one. And it never gets easier. Your competition will only get more vicious. Your margins will continually get pressured, and your product might be made obsolete at any time. Oh, by the way, your company may also destroy your personal life. But here’s the secret: If you want to win you need to love the difficulty. Why? Because the difficulty is what makes building a successful business great; if it were easy, everyone would start a business.
8. Life is short. After Steve Jobs tragically died a few years ago, many people went back and re-watched his famous 2005 Stanford commencement speech where he talked about death in a surprisingly positive way. Jobs said once you understand that our lives are very limited in time, you will focus on doing only things that are important to you. Look in the mirror each day and ask, “If today were my last day alive, would I still do what I am about to do?” When the answer is “no” for too many days, you have to make a change. Leaders know when to walk away.
9. Anything is possible. If you have been lucky enough to have started and sold a business in the past, you have a key advantage as you look at the future: You know anything is possible. This may sound trite, but when you have created something from nothing and made it flourish, you’re filled with tremendous confidence about new ventures that others may lack. This attitude can be the difference between success and failure in any area of life, and is a powerful antidote to negative thinking.
Ravin Gandhi ⇒ is the CEO and co-founder of GMM Nonstick Coatings.