In this episode, Scott Becker shares 15 essential lessons on building and scaling businesses.
Chapter 1: What are the core thoughts on building businesses?
This is Scott Becker with the Becker Private Equity and Business Podcast. Thank you for joining us today. This is a talk today on 15 thoughts on building businesses. It comes out of the book we wrote on the subject, The Entrepreneur's Edge, just a core book on concepts for building businesses.
Second, I have to give a speech on this on Wednesday, so I figured I'd do it as a podcast to get some prep for it. So hopefully you you enjoy this as much as I do. And thank you very, very much for listening. And thank you.
Just as an aside to Becker Private Equity Business Podcast, with that and the Becker's Healthcare Podcast, we've now passed 20 something, 22 billion downloads, trying to work towards 25 million. So thank you for listening. And if you have comments on this talk and 15 thoughts on building a business, feel free at any time to text Scott Becker at 773-766-5322. Thank you very, very much.
So everybody builds different businesses in different ways. These are my thoughts on building a business, whether you're doing it in software as a service, technology, or almost any kind of business. The two core businesses that I've built, but I've also served on the board of several and been an investor with several different private equity funds and lots of individual companies.
Some of those individual companies have recorded a zero, meaning a loss of everything. Others have done great. But the two corporations I've been involved in built a media company called Becker's Healthcare, separately built a law practice within a large firm called McGuire Woods, helped to build the healthcare, private equity practice and healthcare practice. So I've had those two experiences.
The muscles were on the boards of several companies. And that's where a lot of my background knowledge comes from. So the things we think about in building a business, we start with this concept that was a Jack Welch concept that you want to be in niches.
My niches have always been business to business and specifically as possible in those businesses, figuring out who you're trying to serve, what business you're trying to be great at. Can you be great at it? Can you win in the niche? Is the niche worth winning in?
In the media business, we're obviously in the healthcare media business, but then we're more specifically in the media business around hospitals and health systems and the media business around surgery centers and orthopedics and spine. In the law practice, well, the law firm is a huge law firm. The core clients that we served in the practice when I ran it were
hospitals and health systems, surgery centers and surgery center chains, and then private equity funds that invest in healthcare. And the more specifically you're targeting a niche and know who you're trying to target, the better off you are in both being great at what you do and building an audience or building a client base. So we're always a believer in niche centric. Jack Welch famously said,
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Chapter 2: How important is niche selection in business?
There's all this discussion today about being a solopreneur, solo entrepreneur versus being a team builder and building a team. I'm still a big believer that if you want to do anything significant, you better build a serious team and double down on great people and constantly trigger who your team is and sort them out. but that you could do a lot of things if you build great teams.
If you don't bother to build great teams, you're very limited in what you could do. I can't quite find my way to being the solopreneur as much as I'd love that as the last part of my life, being a solopreneur, but I just don't see it. Third is customer centric. And this is the concept.
It became clearer and clearer in my business career is that I have people on our team trying to take care of a very unimportant client or customer that And no offense, I know people take offense at that concept, but you could have one customer that pays you a million dollars a year, one customer that fights with you to pay you $300 a year.
And we would have people spending all their time in the $300 customer, and you can't do that. You have to constantly make value judgments, interior customers, and make sure your best people and your best service is going to your most important customers. It just is what it is. And it's not that you ignore growth customers. It's not that you ignore small customers.
Well, you probably should ignore small customers and just not serve them so you can put all your time and energy to great customers. But there's this constant concept of really being customer centric. and then tearing your customers. And you constantly have to make value judgments in everything you do in life.
I was on a podcast with a non-sponsored client, and my daughter called from the Middle East. By the second time she called, I had a boot on the podcast, let my producer handle it versus myself, because I got to make constant value judgments as to what's more important. Right now, my daughter calling from the Middle East, far more important than this podcast. That's not a paying customer.
And no offense to anybody, if it was a huge paying customer and my daughter texted me and said she's okay, I would have told my daughter to hold on a moment. But in that situation, we didn't. And Chanel's very familiar with what I'm talking about. Fourth is, in every business, it's this constant concept of finding product-market fit.
And we talk about these four core things, niche-centric, customer-centric, people and team-centric, and product-market fit all the time. But this fourth concept on product-market fit is this concept of are you doing something that your customers really want?
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Chapter 3: Why is having a strong team essential for success?
So for example, we started this latest business with selling sponsored podcast, you know, and we've sold a lot of them and people want them, but not at the rate that they want sponsored webinars. So we had to focus more and pivot more towards hitting the market where they are, what they want to buy, what they want to sponsor versus what I'd like to sell them and what I want to want them to sponsor.
So, you know, more and more majority of what we do is specialized business to business webinars versus, versus, you know, the podcast, but it's similar to every single business. It's constantly trying to fit. What does the customer really need? And are you serving that?
I mean, so many software businesses talked about ad nauseum are built around a founder's belief or a software engineer's belief as to what they think is cool. but you actually need something that a customer also thinks is cool, it needs, and it's that overlap, that Venn diagram of what you're doing and what they want that is the winning solution for product-market fit.
And you're constantly going to evolve. When you start off, really, you're going to constantly be working to get that product-market fit. Fifth concept is scalability. And one of the things that happens is, The law practice is more or less a business that it's somewhat linear.
You're building, you're building, you're adding great clients, you're adding great people, but it's somewhat linear, somewhat one plus one equals two and going and going. And professional services are often like that. So that's why so many of the big professional services are,
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Chapter 4: What does customer centricity mean in business?
firms move towards technology implementations where that's a little bit less one plus one equals two and one plus one could go a lot more because the price tags are bigger and you're not necessarily adding so many more people for that price tag the investment banking business is less of a linear business and more of a scalable business we're doing bigger deals with the same amount of people and a lot more money similar private equity businesses the whole idea is to leverage your people
30 people managing a multi-billion dollar fund versus 30 people managing a $300 million fund. And just the returns could be bigger and bigger. But you're constantly looking for businesses where there's some scalability. So I saw for businesses recurring revenue businesses where for every additional thing that you're selling, you don't need more people are so attractive to investors.
The sixth thing we talk about in business is clarity of goals. What are you really trying to do? What are you really trying to accomplish? And again, there are periods of life in businesses where I feel like I'm so good at this and so clear, and other times not as much so, but I can tell you, far more effective when great clarity about what we're trying to do.
The seventh thing that we talk about in business is focus. And it goes back to an old Ben Stein adage, and many people don't remember that name, but this obsession with business and greatness, if you actually want to be great at something, it's probably going to take serious work to get good at it, to get great at it.
It's almost like, you know, I think it's Malcolm Gladwell, famous director about the 10,000 hours thing. And there's all kinds of studies on why that's right and that's wrong, but there is this constant need to to really get better and better at what you're delivering.
Apple is probably the great example of our lifetime of a company that's constantly trying to get better at what they do, and so they're constantly fixing, constantly improving, but they've got to have that ongoing obsession with greatness built into the organization.
Epic and Judy Faulkner, I always forget if it's Judy Falk or Judy Faulkner, very similar, that obsession with constant improvement, constantly getting better. It often takes that if you really want to be great as a business. The eighth thing we think about in building a business is the evolution of the leader and founder. And we often talk about this evolution in three stages.
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Chapter 5: How do you determine product-market fit?
The first stage of most businesses, it's not necessarily a Peter Thiel type business or a big Elon Musk type business, but if most businesses is the founder, the leader, doing everything. They used to talk about being the cook, the bottle washer, the chief this, the chief that, doing sort of everything. That's sort of the first evolution. And you're very limited in the business at that point.
The second evolution is you've hired people to start to handle a lot of different roles that you have. And that's sort of number two evolution in the business. The third concept is you've not only hired people, but those people are better than you. And one of the phrases that I hate is this is where the magic happens.
But this is where growth can happen, and it's not linear to what you're doing, because now you've hired people that are expanding and growing the vision. I work in a media company. I was great in the content side, but it wasn't until several years in that I hired a person, Jessica Cole, who was able to commercialize everything.
It didn't require me to tell her what to commercialize, but saw it and did it and ran with it and made it happen. And it's when you start hiring people that are better than you in that third stage, that a founder really becomes a different level founder because he's built a better team and the business is able to grow at a whole different pace and accelerate.
So that's the evolution of the leader and founder. The eighth thing or ninth thing that we talk about, and it often goes back to this concept today Are you liked or respected? And in today's world, you sort of have to be both. And we talk about this with the gratitude foundation. Gratitude, greatly appreciating your customers, greatly appreciating your teammates and your staff and your leaders.
You better actually truly appreciate them. You tend to appreciate them. You have to realize I cannot do it without them. So I better love them and appreciate them. And that's the concept when we talk about gratitude in building a business.
The 10th concept we talk about is, and I've seen this over the years, the best operators of businesses, the best leaders of businesses, the best CEOs of business, they really know their own business. And it doesn't mean they have to be micromanagers, but they've really got to know their own business and what they're doing and what they want to do with it and how it works and how it operates.
What are their strengths? What are their weaknesses? Where do they make money? How do they make money? Do they know where the revenues come from? Do they know where the sales come from? Do they sort of know all those things and really well? So number 10, the 10th point in building your own business is really, you know, knowing your own business.
the 11th thing we talk about is i i don't really believe in free floating at some point you need to have a clear plan and then as you evolve it's being open to pivots and then once you understand what really works putting a lot of resources into what really works in building a business as you get that clarity you get those systems really doubling down on those you're going to make pivots periodically but you sort of have to start with a plan and then adjust from there the 12th thing we talk about in building a business
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Chapter 6: What role does scalability play in business growth?
is the 80-20 rule as to customers and people. And again, not always a popular thought, but a much repeated thought is this concept that 20% of your customers probably generate 80% of your revenues and profits. So you better take care of those first and foremost. Same with your people.
I always view it as 20% of your people are the most important, and you better take care of them if you want to build something for the long run. It's constantly looking at how do I constantly double down on my best people, my best customers, and grow a business from that perspective. The 13th concept we talk about is there's all this discussion today about
but how there are no bad ideas or everybody should have an idea. Everybody should bring a new idea to the table. We should be asking everybody for ideas. And yes, there's a beauty to that. But at the same time, you better operate your business and do what has to be done to take care of things. And you can't get distracted by every new idea that comes across the chasm.
There's this old adage in school, there are no dumb questions. And in some ways, there are no dumb questions. I don't disagree with that or agree with that. within reason. But at the end of the day, you have to focus on executing in your business and knowing what works and doesn't work.
Yes, open to new ideas, but you better be 80% focused on what you're actually trying to accomplish versus constantly exploring with new ideas. When I find people that are constantly exploring with new ideas, usually they're getting no place and they're constantly distracted. And that's not, that just is what it is from my perspective.
The 14th thing we talk about in businesses is a core fundamental for businesses is it's all about great systems and great people, great technology and great people. People talk about the healthcare system. We can fix it all with technology. Well, good luck with that. We better have great technology, great systems, and great people. It's really both, not one or the other.
And so we constantly look at this and building great systems and great people and Great systems make people better. Great people use systems well. You need both. Great systems, great technology, great people. Finally, the 15th thing we talk about in business is You have to know your core competencies as a company and really build and stack all your resources around them.
We used to talk about surgery centers that wanted to have one of every different specialty. This is a disaster for surgery centers. You'd really much rather have two or three specialties and be deep in those specialties. And it's very similar in business. If you're trying to build a great sales team, you better build it. a great sales team. You don't want one sales person.
If you're trying to build a great production team, you better have your operations team or production team stacked and great, great people. What you don't want is one of everything. And then outside of the core companies you're trying to build, again, one of our companies, we outsourced accounting forever, at least until we got really big.
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