Tom Petrillo has a simple philosophy when it comes to growing his business: If he doesn’t know it, he doesn’t do it.
“I tend to not get into businesses that I’ve never been in before or ones where I don’t understand the business model,” says Petrillo, founder, president and CEO of The Salon People Inc. “Then I’ve got to rely on other people to coach it and feed me information and I don’t know if they are right or wrong.”
It’s not that Petrillo is unwilling to try new things. He just never wants to go into a new opportunity without a full understanding of what he’s getting into.
“My experience has told me that when I didn’t pass and I acted too quickly on a great opportunity, it never turned out to be a great opportunity,” Petrillo says.
By making smart decisions, Petrillo has grown from 12 employees six years ago to 140 employees in 2009.
Smart Business spoke with Petrillo about how to put yourself in the best position to experience healthy growth.
Follow a plan. You start by understanding the business model that you are in and comparing your business model against an industry standard. If you can get your hands on an industry standard business model, then you can understand what your gross margin should be, what your expense structure should be and what the capital infusion that you need should be.
When you understand that and you test sales projections, you literally live to that. If you end up with a good sales plan followed by a strong expense plan, meaning that you’ve thought out all of your expenses that drove you to profitability, you forward project what your business is going to do and what capital it’s going to require to do that.
It’s like looking through a rearview mirror in a forward way. We constantly look at trends and then adapt ourselves to that trend so we don’t get bit by hoping that trend is going to change. We monitor our trends and then look at our forward projections against those trends.
Understand the business sector you are in and what business models your competitors have in place. The more you understand about how they have built their business models and made good estimates about what it costs to put that business model together, the better you understand how you can compete in that sector.
Be selective. There are so many different opportunities that are sitting out there. I understand retail extremely well, and I understand product marketing extremely well. I’ve got to make sure whatever businesses I engage in that I could actually lead that company if I need to.
If you’re going to be a good coach at something, you have to understand the game you are coaching. For myself, I’m extremely disciplined in that I will only get into businesses that I understand fully.
For example, I would never get into the medical supply business because, at this juncture, I don’t know anything. I understand sales techniques and how to put marketing together, but I don’t understand that world. I don’t understand how the relationships are built in that world or what makes it move.