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Do You Know These 3 Rules for Business Success?

Several years ago, I read a fabulous article in the Harvard Business Review about a study done by Michael E. Raynor and Mumtaz Ahmed.  These two gentlemen had set out to discover what it was successful companies were doing that was the source of their business success.  It is no surprise to me that their findings turned out to be three fundamental principles of business.  The great news for you is that fundamental principles are universal and can be applied to any business at any stage in starting or growth.  This means they can be applied to YOUR business.

The authors were looking for companies that were truly exceptional and looked at the more than 25,000 companies that had traded on U.S. exchanges any time from 1966 to 2010. They measured performance using return on assets (ROA) as the metric to demonstrate strong, stable performance and found several hundred that had done well enough for long enough to qualify for their study to determine the why and how of business success.

What they discovered was “something startling.”  They found that while these companies used various competitive strategies, in the end there were only three simple, fundamental rules for business success:

  1. Better before cheaper—in other words, compete on differentiators other than price.
  2. Revenue before cost—that is, prioritize increasing revenue over reducing costs.
  3. There are no other rules—so change anything you must to follow Rules 1 and 2.

(Read the full article here:

better before cheaper business success

Many businesses struggle trying to be the cheapest without focusing on business success, but this is not what they found.  Some businesses do make being the cheapest their priority (i.e. Walmart) but think about their competitor, Target.  What does Target offer that is different?  A goal for them is often seen as style and design.  For a small business looking at better business success, look at your competition and think about what your niche is apart from your competition and how you can be better in the eyes of the customers you compete for – perhaps you are a service provider like a plumber and the ‘others’ offer limited hours, so you build a team available 24-hours/day.  Think about how you can do it better before you think about how you can do it cheaper to achieve business success.

For #2, they are talking about not cutting your quality, like swapping out to the cheapest flour around at a bakery.  Always seek ways to increase your revenues first.  So, if you do have a bakery, look to find ways to increase the price of your cakes by making them more elegant, more flavorful, or even themed before your think to use cheap flour and ingredients.  This is the better path towards business success and customer satisfaction.  Do you really want to be known as the cheapest in town and all that that implies?  Today’s consumers are more savvy than ever and are looking for quality and customer service more often than cheapest price.

These rules are fundamental principles for business success which thousands of companies have used to build greatness.  Don’t wait.  Start using them today to guide your daily business decisions and activities.  Use them to help your business to deliver exceptional performance.


Lorna Whiteaker

Lorna Whiteaker is a San Luis Obispo business consultant and coach dedicated to helping business owners get the results they want. Lorna has over 30 years of experience working with small businesses, working as an administrator in the legal industry and as an independent business consultant helping hundreds of entrepreneurs. With clear and realistic expectations of just what a business owner must deal with in running their business, big or small, she has worked with firms making 7 figures and start-ups with little more than elbow grease and a dream.