What makes certain businesses take off and others falter? While market factors are critical and luck unquestionably plays a part, some companies have discovered a set of winning strategies for building profitability. In fact, a survey of 10 of the U.S. Small Business Administration's "Small Business Person of the Year" winners for 1998 points up four strategies that these owners have used to increase their collective company earnings from $2 million the first year of operation to $170 million today.

Strategy 1: Do the absolute best for your employees.

"Take care of your employees, and your employees will take care of you," advises Eddie Flores Jr., president of L&L Franchise, Inc., Honolulu. Since 1988 Flores has expanded his L&L Drive Inn operation by offering franchises with built-in financing assistance to his employees, enabling them to become their own boss while their intense dedication and hard work have allowed L&L to grow from one to 36 profitable restaurants. Flores has sold most outlets to the franchisees, who've increased their sales by 50 percent annually despite Hawaii's continuing recession. "The key is decentralization," Flores remarks. "When employees run the restaurants on their own, they make them successful."

Flores isn't alone in focusing on employees. "The most important thing is people-attracting and retaining the best talent," emphasizes David Steward, president of World Wide Technologies, Inc., St. Louis, Missouri. "We invest time, service and energy into their development and give them the opportunity to pursue a purpose and make a difference." Accordingly, Steward offers training to update employees on the newest technologies, along with fully-paid family health care ("the best plan we could find") and dollar-for-dollar matched contributions to 401(k) plans. One measure of Steward's successful investment in employees is that World Wide Technologies, which earned several hundred thousand dollars its first year, projects earnings of $300 million in 1999.

Scott Lewis, president and CEO of Lewis Landscape Design, Las Vegas, whose revenues have jumped from $450,000 in 1990 to $17 million in 1998, also underscores the connection between human resources and profitability. "The most critical factor we can attribute to our company's success is that we've built a strong team around us," Lewis explains. "Everyone sets his own goals for the year for the area of profit he's controlling; everyone knows he has a place on the team. Without our people, we're nothing. The team comes first, then our clients."

Patty Koehler, president of J.R. Custom Metal Products, Inc., Wichita, Kansas, whose sales rose from $12,000 in 1974 to $6.5 million in 1998, is another proponent of teamwork. "Every year, my management team and I set goals to meet for the next year. Then we have quarterly meetings to review how we've done-how much of our action plan has been met. I started out as a micro-manager," she adds, "but a big part of success is delegating and allowing others with expertise to help you grow the company."

Strategy 2: Keep close track of money.

"Keep outgo to an absolute minimum while you're growing, and know what's going on in your company no matter how big you get," recommends Eleanor Andrews, CEO of The Andrews Group in Anchorage, Alaska, who constantly scrutinizes margins, cashflow and receivables and reviews every payable personally. "Stay in sync with your budget and make sure no project is failing and drawing reserves," she counsels-vigilance that has helped her earnings shoot up from $50,000 in 1987 to more than $14.5 million today.

Cassie Farmer, president of New World Security Associates, Inc., Dorchester, Massachusetts, whose revenues climbed from $380,000 to the current $5 million in just six years, attributes her success to conservative spending-extending to her own modest salary-plus a good CPA, professional payroll specialists and strong account management to ensure that all accounts sustain themselves and none represents more than 25 percent of her portfolio. "The most important thing to remember is that everything affects your bottom line. So establish your budget," she advises, "and live by it."

Linda Valdez, executive vice president of Regnier, Valdez and Associates, an advertising and public relations agency in San Antonio, Texas, advocates a team approach to financial oversight. "A lot of expenses aren't obvious, like salt and pepper on restaurant tables," she points out. "So everyone working on an account, not just the top level, knows the budget and tracks the expenses."

Another team approach was developed by Judy Nagengast, CEO of Continental Design Company, an automotive design firm in Anderson, Indiana, who has boosted revenues from $300,000 in 1989 to more than $15 million today. "You've got to track all your different areas to know what builds and what detracts from profits," Nagengast explains. So Nagengast, with a consultant, develops an annual budget as a "roadmap" to project what income and expenses should be. She and other key executives then meet monthly to review the past month's cash-out, gross and net profit statistics (broken out by profit center), to see what is and isn't making money. "Everyone's looking at profits and understands they have a stake in them. It's time-consuming and a pain," she concedes, "but it's the only way to spot problems and fix them before they get bad."

Strategy 3: Find a concept that distinguishes you in the marketplace.

"A concept's got to work," points out Eddie Flores Jr. "Our concept-plate lunches with large portions, food cooked to order and reasonable prices-is so widely accepted that we can compete head-on with the big chains. If you give people a bargain," he continues, "and ours is double McDonald's amount for the same price, they'll come back again and again."

Similarly, Sally Fegley, president of Tom and Sally's Handmade Chocolates, Inc., in Brattleboro, Vermont, has learned that quality alone isn't enough. "New products must also be exciting and stimulating," she reports. "We find the more clever the packaging, the more playful, witty and different the concept, the more profitable the product." In fact, a novelty chocolate product developed for just $2,000 accounts for 40 percent of Fegley's total sales, which have risen from $98,000 in 1989 to more than $1 million now. "We watch late-night comedy," Fegley adds, "to keep our finger on the pulse of society and come out with products that play on the issues."

Ron Walker, president of Ron Walker Construction Co., Inc., in Stillwater, Oklahoma, developed another distinctive concept: one-of-a-kind crafted homes provided as turnkey products, from lot to finished house. It's a concept that has propelled gross sales from $80,000 to $3.1 million in seventeen years-and produced clients so satisfied, they re-hire the company years later to update their Walker-built homes. "You have to know your cost and your market," Walker points out. "You also have to think long-term and build up a customer base of happy customers and employees, rather than make a killing on a few jobs."

Strategy 4: Stay focused. Above all, you need a determination to succeed.

"You've got to stay focused," advises Linda Valdez, "setting goals and objectives early, doing the planning and not getting pulled away. We've been fortunate in our success, but we've also worked hard and stayed focused on being successful."

Echoes Scott Lewis, "Follow your passion, and don't let roadblocks that look insurmountable get in the way. If you've got the drive and incentive to work for yourself and pursue your own destiny, and if you've hired people who think like you, you can do anything you desire."

Adds David Steward, "Have faith in your dream. Keep the vision, and maintain a positive attitude about your business. When you're going through tough times, continue to have the same level of energy, drive and stick-to-itiveness you had at the beginning. But understand your priorities: your spiritual life comes first, your family second and your business third."

To sum up, profitable businesses require leadership-leadership expressed in a viable concept, a resolve to succeed, an attention to financial detail and an ability to delegate authority to a trusted staff empowered to develop that concept and make it happen.

Excerpted with permission from Small Business Success, Volume XII, produced by Pacific Bell Directory in partnership with the U.S. Small Business Administration.