When software development firm Eficode acquired Gerry Tombs’ company Clearvision, he received 98 percent of the purchase price up front.
It wasn’t an accident that Eficode, a Helsinki-based powerhouse in DevOps and the Agile movement, was eager to make the purchase. Tombs had scaled Clearvision, based in Southampton, England, from a startup he launched in his garage in 2005 to a tech consultancy with 100 employees in the United Kingdom and United States, US$104 million in annual revenue and clients such as Atlassian and GitLab.
Applying the Scaling Up platform, he focused on a people-centric big hairy audacious goal: climbing to the top of the Best Companies award in the United Kingdom. He aligned department leaders on the company’s strategy in weekly meetings, assigning each leader accountability for a key metric. Through consistent execution, the company built strong partner relationships, garnering awards such as Atlassian Partner of the Year for Dev Tools.
If you want to get everyone on the same page, you need the right pages to get them on.
Along the way, Clearvision built strong cash reserves. By the time of the acquisition in October 2022, he had already stepped back from his role to show that his carefully recruited leadership team was well equipped to run the company.
“A successful exit doesn’t happen by accident,” he said. “You have to be intentional.”
As Tombs understood, the number one job of an owner is to drive valuation. The CEO’s role is to support that by getting four key decisions right: People, Strategy, Execution and Cash. The Four Decisions are the foundation of Scaling Up, a proven framework used by tens of thousands of companies to grow exponentially. If these areas are not your strength, and you are both owner and CEO, you may need to fire yourself from that role and find someone who excels at it.
Let’s take a closer look at each of these crucial CEO responsibilities, starting with Strategy.
Strategy
The number one job of your CEO – whether it is you or someone you’ve hired – is to set strategy. This can rarely be done by committee. The CEO needs to be the final decision-maker.
You can’t just work on strategy once a quarter or once a year. You need to focus on it in a weekly session – one separate from the meeting where you set priorities with your executive team. We suggest setting it up as a “council,” (see Jim Collins’ Good to Great: Why Some Companies Make the Leap… and Others Don’t), assembling a small group from your leadership team who can think strategically with you and challenge you when necessary. In our company, I meet with our three CEOs and the president at 9am every Monday morning.
Keep in mind that “strategic planning” is a misnomer. Strategic planning is actually composed of two distinct activities and teams: the strategic thinking part, led by the CEO, and the execution planning part, driven by the COO.
To design your strategy, you need a design studio – a place to hide out and escape so you can do deep thinking. It needs to be somewhere you can work on the business without interruption, whether that’s a boat, a farmhouse or somewhere else.
People
Once you’ve addressed Strategy, your second-most-important job as CEO is to hire the right executive team, starting with your COO. Find the right senior team, and your life is golden. If you’re missing even one critical person, it will be less golden.
Founders who scale successfully often spend half their time recruiting and interviewing. I suggest members of your executive team pass three tests:
1. Do you need to manage them?
If you have to nudge, remind or encourage someone, you’ve got the wrong person.
2. They may have gotten you here, but can they get you there?
You may have to make some tough decisions and redirect the ragtag team from your scrappy startup days to an IP-creating initiative that will increase your valuation so you can stay focused on strategy.
3. Are they consistently wowing you?
In my early startup days, my part-time bookkeeper Claudia Smallwood pulled me aside and said, “I know you’re busy, but I’m seeing something here with your gross margins.” I was running a 42 percent gross margin, and it needed to be 55 percent – essentially growing broke. She knew to bring it to my attention. That’s what I mean by wowing.
Execution
Culture is the sum total of all the decisions and behaviors of your people. Culture drives execution, and as CEO, your third main job is to keep the culture consistent. You can have a brilliant team and strategy, but if you don’t have a culture that supports you in executing on it, it’s just a lot of hot air.
When it comes to building a consistent culture, a CEO’s most important tool is weekly (or daily) communication. You’ve got to over communicate. Execution fails not from lack of strategy but from insufficient alignment.
Your weekly message is your number one tool for communicating strategy. This is where you can nudge, influence and remind people to reinforce the decisions and behaviors you want to see.
Mark Zuckerberg has been known to hold a weekly Q&A session open to his entire team on Thursday afternoons. United Wholesale Mortgage, the top wholesale mortgage firm, sends its employees a daily message. That’s been a critical part of its scale-up to more than 9,000 employees.
Cash
Thanks to inflation, many companies are growing broke, particularly those that have experienced rapid revenue growth. Although revenue has been growing, cash is being consumed. Many CEOs don’t even look at a cash statement. They glance at the top line and bottom line but ignore gross margin.
If you want to get a better handle on cash, we recommend using the Cash Flow Story financial analytics tool. Co-founder Alan Miltz created the tool after building a platform to help banks decide where to lend.
Many CEOs lack real sophistication about capital allocation, but it is one of the most important jobs of the CEO. This is why entrepreneurs who put 25 years into their businesses are seeing the private equity firms that acquire them benefit the most from the transactions.
It is important to up your own learning curve, understand how cash moves through your business and master the seven levers you can turn to dramatically improve cash flow and valuation: price, volume, cost of goods sold, operating expenses, accounts receivable, inventory or work in progress and accounts payable.
Ultimately, if you want to get everyone on the same page, you need the right pages to get them on. To that end, we recommend that all CEOs use the One-Page Strategic Plan for Strategy, the Function Accountability Chart (FACe) for People, the Rockefeller Habits for Execution and the Power of One for Cash (you can find links to these Scaling Up One-Page Tools here).
Just as Gerry Tombs found, once your team is aligned, it’s surprising how buyers come knocking and valuation takes care of itself.
To master the four decisions that drive growth and valuation – People, Strategy, Execution and Cash – click here to connect with a certified Scaling Up coach who can help you turn the framework into measurable results.
