This has saved so many companies from going bankrupt. And you may think, how can you go bankrupt if you're growing? It's because that growth requires capital. There are two main reasons why most strategies fail.

I'm going to walk you through what they are and how to avoid them so you're not jacking around, wasting time and money on ineffective approaches, and so you can build a company that's actually generating value. In other words, one that is spinning off cashflow. And who doesn't want more of that, right?

I've spent my entire career turning around and growing companies, generating over a billion dollars in value in the process. So if you're looking for some academic framework, sorry, you've come to the wrong place. This is what I've learned in the trenches, starting my own company, buying companies, investing in businesses, and growing a lot of organizations along the way. So check this out.

The reason, number one, why most companies fail is due to execution. No surprise, right? But that may be common knowledge, but the reason why is not so common. So let's get into that.

When it comes to strategy, this is what goes down. Typically a business leader, right? Maybe they're getting pressure from investors, from their stakeholders, from the board, whoever may be, or maybe they just have this inner ambition to grow the business. So they have some type of thing that's triggering them to think we need a strategy.

We need more clarity. The competition's beating us up. We're losing customers. We're seeing disruption in our marketplace.

So then they get their team together and they're like, all right, let's try to put in place a strategic plan. Error number one, because a strategic plan and a strategy are not the same thing. A strategy is all about making choices.

So you have to make choices about your market focus and position, your competitive behavior, which includes your structure, your operating model, and so many other choices. It also involves what types of resources will you need to execute the strategy and what type of returns are you expected to generate by following this certain option.

You're making choices about these things with the customer at the very core. All right. So that's a strategy.

Strategic planning, on the other hand, is after you have a strategy, you say, okay, this is where we're going to compete. This is how we're going to compete. This is how we're going to win. This is our customer. This is how we're going to deliver exceptional value to them. Now we're going to create a plan to execute that strategy.

Where most business leaders go wrong is they think a strategic plan or doing strategic planning is the first step. So they just jump in with tactics or initiatives or objectives or whatever it may be. And they're like, okay, what do we need to do this year? What are our strengths? What are our weaknesses? What are our opportunities? What are our threats?

They come up with a laundry list of things. They assign them to certain individuals. They put a timeline on them, and then they go out there and execute. And some companies can do that. And some companies are really good at execution.

But if it's just execution, if it's just a plan, how do you know if the plan is even right? How do you know if the things that the company is planning on doing are even focused in the right areas?

So that's where you need to take a step back and get your strategy right. So this is what causes execution issues right off the bat.

Also, business leaders, they think strategy is mission, vision, and values, SWOT, 7S's, EOS, traction, or some other type of framework. And all those things can be good in their own right. I'm not pooh-poohing them at all.

But when strategy doesn't get clear on what is the strategic problem the company's trying to solve, what are the initiatives that are going to help solve the problem while also creating competitive advantages, while also fostering innovation, while also delivering an exceptional customer experience?

What are those initiatives? And then what are the actions underneath those? And then what are the results we're going to measure in order to determine whether our strategy is working?

All that, that's what I call the IR framework. That's what we follow at Coltivar with our companies that we work with. Initiatives, actions, and results.

So you have to define what is the problem? What are your initiatives, actions, and results? That's part of your plan. And then that's how you translate the strategy into a plan to start executing on.

If you don't have this type of framework, you leave the strategy session. You're all excited because you're thinking about how you're going to double the business. You're thinking about all the innovation that's going to happen, all the sexy tech you're going to implement, whatever it may be.

Everybody's excited. Then they go back to the company and they're like, so how do we do this? What is our plan? How are we following up on it? How are we measuring results?

And that's when things fall flat and execution fails, right? So that's why the majority of strategies fails because there's no connection between the strategy room and the real world.

And I can tell you this as a business leader, as a CEO, as a CFO, I learned very early on. Number one, I had to be very specific with what our strategy was and I had to say it over and over and over again.

And you can never say it too much. I thought at the beginning, like, oh my gosh, I'm just repeating myself. They're probably getting so sick of me. But then I'd go up to somebody and ask them, what are our initiatives?

Right after I presented the strategy to the team and they couldn't even repeat it back. And I'm like, if they don't understand what the strategy is on a grassroots level, how can we expect them to execute in their role?

So that's the key. So that's the first reason why strategy breaks down. And now you understand some of the nuances that exist behind the scenes that have to be fixed in order to ensure stronger execution.

The second reason why strategies fail is because there's no connection back to finance. This is what makes strategy or effective strategies more difficult to pursue because you need to have two different strengths.

You need to have strategic capabilities in your business and financial capabilities, but they have to tie together. Right?

So this is why a lot of companies work with us is because we have expertise in these two areas. Now, whether you do it yourself or whether you hire somebody else, it doesn't matter. You just have to make sure that these two things combine, because if not, you have a strategy and you outline all these things, but if you don't tie it back to the numbers and determine, okay, what is our return on invested capital?

What's going to be our cash burn? What is our LTGP to CAC, which is lifetime gross profit per customer compared to customer acquisition cost? What is that ratio? If we pursue this market based on our approach, right? To go get customers.

If you don't understand some of these things, then you're going to go down this path and sure, you may execute your strategy, but is it really creating value?

And that's the whole point of strategy is to help you to earn superior value compared to what you would normally earn. If you just did business without a strategy, because otherwise what's the upside?

You could just go out there, work hard, try to get customers, try to deliver on your promises and have a business.

But a lot of companies do this, and this is why 65% of companies fail within 10 years. And when I talk about cashflow and finance, 82% of small businesses fail because of cashflow. If you have cashflow, you stay in business, even if you have a terrible strategy, right? You stay in business if you have cashflow.

So strategy has to be connected back to the financial performance of the company, right? That's really critical. There's also, when it comes to strategy, there's a sustainable growth rate that you need to know.

So I was working with a business leader years ago and he's like, Steve, I want to put the gasoline on the business and grow this thing. And I was like, cool, before you do that, let me figure out what your sustainable growth rate is.

And I did. And I came back to him and I said, here's how fast you could grow. I can't remember the exact number, but let's just say it's 20%. He's like, well, I want to double. I want to grow 100%, 200%, 300% in the future.

I'm like, you could do that, but you need to go get more debt capital, or you have to give up more equity to bring cash into the business to sustain the growth.

And he's like, well, I can't go get more debt. Our line of credit's maxed out. We can't take on any more debt compared to our profit. And I don't want to give up more equity.

And I was like, if you grow at this rate, you will grow yourself out of business.

So that's why this calculator is so critical at Coltivar.com. Our team created the four-part growth roadmap so you could get it for free. So just go to the website or look in the description down below. I'll provide a link.

If you click on this, it's a guide. We spent a ton of time on it. It has checklist. It has your path forward. It has a calculator, has everything you need to know in order to start your path towards growth in the calculator.

This is probably the most critical thing. I love this calculator. Plug in a few numbers. They'll spit out your sustainable growth rate.

And it'll also tell you based on your growth goals, how much capital you're likely to need.

If you do go down this path, this has saved so many companies from going bankrupt. And you may think, how can you go bankrupt? If you're growing, it's because that growth requires capital.

Think about shark tank. My wife and I, we like to watch shark tank. And it's interesting because a lot of business owners come onto the tank and they have profit and they have growth, but they're willing to give up so much equity in their business.

And it's like, why it's because they need capital because as the business is scaling, the business is also chewing up a lot of capital in the process. And that's the same thing with growth.

So if you put in place the right strategy, your business is going to grow. But if you don't connect the finance side to it, you're going to grow yourself out of business, or you're going to go down a path.

You're going to work harder. You're going to task everybody with more initiatives and more actions. And then at the end of the day, you're going to look at your financial performance. It's going to be dismal, and everybody's going to be so discouraged.

And you'll lose credibility in your business because your team is going to be asking themselves, does this guy or girl even know what the heck they're doing when it comes to leading the business?

All right. So you're making choices about how do you know if the things that you're doing is, how do you know if the things that the company is doing is. So that's what I wanted to talk about today.