When you’re immersed in the startup world, it’s easy to get consumed by the here and now. You’re focused on rapid growth, scalability, and turning a profit. But once you’ve latched on to success, it’s important to think about the long-term viability of your company.
A recurring theme in recent discussions with our portfolio companies is what it will take to survive — and thrive — throughout the next decade. To find the answer, you have to start by asking the right questions.
Here are a handful of questions we’re considering to prepare for the future:
1. What is the singular, uniting focus of the business?
“Concentrate your energies, your thoughts and your capital.” — Andrew Carnegie
All businesses have roots, but most merely see the branches and leaves. While the branches and leaves are product lines or new projects, the roots are the core that is capable of sustaining the company even during drought conditions. Understanding your company’s core expertise and client base will help you understand where to put emphasis under what conditions.
2. What are we doing to delight our current customers?
“There is only one boss: the customer. And he can fire everybody in the company, from the chairman down, simply by spending his money somewhere else.” — Sam Walton
Acquiring customers is expensive, and making new relationships is largely unprofitable. Only when a customer becomes loyal can your business get the gross profit margin to drop to the bottom line.
In fact, increasing customer retention by a mere 5% can increase profits by 25% to 95%. (Yes, you read that correctly.)
3. Are we creating our future or waiting to be disrupted?
“In three years, every product my company makes will be obsolete. The only question is whether we will make them obsolete or somebody else will.” — Bill Gates
There are two ways to look at a company: One way is to view the business as the aggregation of its products. The other is to view a business in light of the value it provides to customers.
The first way results in a Kodak situation, where the company was in the film and physical photography business. But what would have happened if Kodak had been in the “remembering moments” business? Digital would have been a natural transition. Perhaps it would have created Facebook or even Instagram. Instead of bankruptcy, Kodak could have rivaled every social network and tech company that exists today.
4. How would we fare during the next economic downturn?
“There will always be a business cycle, and white-collar workers will get hit in the next recession like they always do in recessions.” — Robert Reich
The next economic recession is not a question of “if,” but a question of “when.” In the next 10 years — perhaps even in the next five years — we will experience another economic downturn.
Where does your business stand in the value chain? Are you easily cut? Is your value quantifiable? Is your business a luxury or a necessity? These are the tough questions that will help guide your preparations. Taking precautions now may lower your profits leading up to a downturn, but it will allow you to still turn a profit when one occurs.
5. Are we operating as a bunch of individuals or as a team?
“Individuals don’t win [business]; teams do.” — Sam Walton
Teams are built on mutual respect, shared values, common goals, personal responsibility, and complementary skills. If your company is a group of individuals, that’s an area to start improving.
Tough questions can bring up even tougher answers. In most situations, the problems can be addressed. But occasionally, the damage is beyond repair. As Warren Buffett once said, “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”
This post was originally published on Forbes.