Route Norte LP

The game of baseball has an ontology to it that is strikingly similar to that of modern business. For starters, there is no parity in baseball. Historically, the richest baseball teams win the most games.   Teams located in big market economies can charge more for tickets, concessions, and merchandise. Big market teams have a stronger fan base, better media coverage, and more corporate sponsorships.  In 2009, the New York Yankees generated $441 Million in total revenue and won 103 games (the most in MLB in both categories). On the other hand, the Kansas City Royals generated just $145 million and won only 65 games (amongst league lows in both categories). The Royals are a small market team located in a small economy. Kansas City’s gross metropolitian product (GMP) [1] was $101.1 Billion in 2009, less than a tenth of New York City’s GMP ($1,259.7 Billion). Wealthy baseball teams like the NY Yankees can afford to pay higher salaries to better players, and better players win games. Business works the same way!

Cash-flow and Liquidity wins in Business

Companies with strong cash-flows and high liquidity ratios, relative to the industry averages, have more opportunities to improve and reach more customers. Not only can they afford better players (employees), but they can also invest more in research & development, social/traditional media, and technology. Focus on your Cash-Flow. Sit down with your accountant and periodically review your financial statements and liquidity ratios in order to gauge your business’ vitality.

Business At-Bat: Your chance to hit the ball

Ted Williams of the Boston Red Sox holds the Major League Record for the highest batting average in a single season. In 1941, Ted had 185 hits on 456 At-Bats. That means he hit the ball 40.6% of the time. That also means that he failed to hit the ball 59.4% of the time. Ted William once said, “Baseball is the only field of endeavor where a man can succeed three times out of ten and be considered a good performer.”

In business, it is hard to get a hit. According to U.S Small Business Administration SBA, over 50% of small businesses fail within the first five years. There are many reasons why businesses fail (i.e. inadequate capital and illiquidity). But don’t let statistics prevent you from swinging the bat. Hitting in baseball, and in business, is about recognizing the pitch, timing your swing (When is the right time to open your business?), and body control (Use a SWOT Analysis as an assessment tool). Pitch recognition can be equated to understanding your market and knowing your customer. Every business owner should be an industry expert in their respective area of business. You should know the regulations, trends, industry best practices, Porter 5 forces etc. And folks, what is the goal of every business?  If you said, “to make a profit” then you just got STRUCK OUT! The goal of every business is to get a Customer[2]. All businesses should be customer focused. If you don’t understand that, then you’ll never get to first base.

First Base

So you’ve gotten on base. Congratulations, but you’re a long way from home. If you’re on base, you are an expert in your business field; you know exactly who your customer is, and you know how to reach him. Now, how do you advance? In business, you advance through innovation. There are two ways that companies innovate, but remember, innovation always springs from knowledge of industry and knowledge of customer.

Companies can introduce new products and services. New products and services are an entrepreneur’s prospective solution to a recognized problem in the market. Identifying the problem is the first step to finding the solution. Your business, irrespective of its size and past successes, must always be looking to solve your customer’s problems.

Companies can find new ways to deliver their existing products and services. This is called, “process innovation” or “renovation.” Process innovation is all about efficiency. What is the difference between Amazon.Com and Borders? Although they both sell books, the two companies are night and day. Amazon.com is automated (efficient)–it is the most searchable and user-friendly shopping experience in internet retail to date. You get reviews, recommendations, deals, and advanced searchability all on this cool website with wonderful workflow. Borders filed for Chapter 11 Bankruptcy earlier this year, reasons cited: battered by online retailers and burdened by too much debt (inefficient). In 1997 when Amazon.Com entered the market, Borders Inc. was a major player in the industry, yet their failure to INNOVATE ultimately lead to their collaspe.

Second Base

In baseball, when you are on second base, you are said to be in scoring position. Scoring position can be equated to readiness in business. If you’re on second base, you understand the importance of innovation within the framework of your industry and relative to your customer.  You’ve got your product and service mix down cold. You are almost ready. The next step is to design and implement your accounting system.

Accounting is the language of business. Accounting is designed to give information to specific users in order to help them make a decision. Ask yourself these questions: Does my accounting system facilitate my decision making process? Does it give me the feedback I need to improve my business processes in order to better serve my customers? If you answered “no” to either of these questions you’ve got a serious problem.

Build your accounting system to help you make decisions. Your accounting system will encompass the budgets and reports you’ll need in order to measure the performance of your marketing campaigns and control your cost.

Third Base

Third Base is known as the “hot corner” in baseball because a lot of balls are hit in that direction. That’s where the action takes place. In business, the hot corner is the marketing department. Marketing can be broadly defined as all forms of communication and interaction with the customer. You are on third base if you understand how to market effectively in your industry. You know if you are marketing effectively if you are reaching new customers and learning from existing ones. You can reach new customers through traditional forms of media, social networks, and by doing such an outstanding job that you turn your existing customers into advocates for your business (Zappos.com Model).  You should also be learning from your existing customers. Review post sites like Angie’s Lists, Yelps.com, and Citysearch.com provide amazing feedback. Read the reviews that reflect negatively on your competition and your company, assess them, and improve if necessary.

Quick Recap: How to Score in Business

1)    Be an expert in your field and know your customer.

2)    Innovate: uses your industry expertise and knowledge of the customer to identify problems and come up with solutions.

3)    Set up an Accounting System that helps you make decisions.

4)    Marketing is communication and interaction with the customer. Learn from your customers, and reach out to them. Never squander an opportunity to strengthen your bond with the people that make your business possible.