Building Great Businesses | Tracy Britt Cool

1. Prioritize Reputation Ruthlessly

Prioritize your reputation above all else, remembering that losing a shred of it is unforgivable, and apply the ’newspaper test’ to decisions: how would you feel if it were on the front page for your family to read?

2. Manage as Sole Family Asset

Approach business decisions by imagining it’s your family’s only asset and cannot be sold for 50 years. This embodies true long-term thinking and guides decision-making.

3. People-First Business Model

Start by focusing on people and culture, then define the business’s purpose and strategy, and only then focus on performance. This foundational approach drives alignment and ultimately creates the most value.

4. Embrace Long-Term Compounding

Value long-term thinking and compounding, and ensure your structure is set up to encourage this perspective. This creates significant value over time.

5. Build Role Scorecard First

Before hiring, create an in-depth scorecard for each role, outlining the mission, outcomes, and competencies required, and gain alignment with stakeholders. Skipping this step to save time upfront leads to costly mis-hires and wasted time later.

6. Hire for Integrity & Passion

Find and hire people with high integrity who care about their work, then provide them with the right incentives and encouragement. This fosters autonomy and high expectations.

7. Commit to Daily Learning

Engage in continuous learning and improvement every single day, as exemplified by Warren Buffett and the Berkshire ecosystem. This helps you get smarter and better over time.

8. Balance Short & Long-Term

While thinking long-term, ensure you also manage short-term fundamentals and immediate challenges. Neglecting short-term dynamics can prevent you from reaching your long-term goals.

9. Master Business Fundamentals

Prioritize doing the fundamentals well rather than solely focusing on grand strategies, as the best CEOs consistently excel at basic blocking and tackling. This is especially crucial in midsize companies with limited resources.

10. Evaluate with Five M’s

Assess business opportunities using the ‘Five M’s’ framework: Moat (competitive advantage), Market (growth and dynamics), Management (strong team), More Potential (unleveraged opportunities), and Margin of Safety (resilience to setbacks).

11. Adopt Integrated Business System

Implement a holistic, integrated business system, like those at Danaher or Toyota, where all components reinforce each other. This creates more value than isolated efforts.

12. Implement a People Calendar

Apply the same discipline to people management as to strategy or budgeting by creating a ‘people calendar’ focused on attracting, developing, and engaging talent. This ensures a holistic approach to supporting the organization.

13. Identify Mission-Critical Roles

In any business, identify the 15-30 mission-critical roles that create the most value and ensure you have the right capabilities for them. This helps assess talent needs and build necessary skills.

14. Proactive Talent Sourcing

Shift from reactive job postings to proactive talent sourcing, where hiring managers actively seek out desired candidates who may already be happy in their current roles. This helps find top performers who wouldn’t otherwise apply.

15. Augment Interviews with Assessments

Enhance the interview process with behavioral and cognitive assessments, case studies addressing real business topics, and in-depth ’top grading’ interviews that review every past role, outcomes, and manager feedback. This provides a comprehensive view of candidates.

16. Structured Panel Interviews

Implement a structured interview panel where each interviewer focuses on specific scorecard components like outcomes, functional competencies, or cultural fit. This avoids redundant questions and provides a more comprehensive assessment of the candidate.

17. Verify Manager Feedback

During top-grading interviews, ask candidates for their past managers’ names and roles, and explicitly state you will contact them for feedback. This often encourages more forthright and honest responses from candidates.

18. Seek Unprovided References

When conducting reference checks, seek out individuals not provided by the candidate, as these references are often more likely to offer insightful and unbiased information about a person’s character and performance.

19. Disarm for Honesty

Create an interview environment that disarms candidates and encourages them to be as honest as possible, recognizing that people naturally want to impress and may have blind spots about themselves.

20. Cultivate a Talent Bench

Maintain a talent bench of impressive individuals, including past interviewees and known contacts, for future roles or opportunities. This is a great way to cultivate talent and leverage relationships over time.

21. Define Employee Value Prop

Clearly define and communicate your employee value proposition, focusing on opportunities for learning, growth, and meritocracy. This attracts passionate talent, especially to businesses in need of transformation.

22. Ask ‘What Should We Do?’

Ask employees ‘What are we not doing that we should be?’ to uncover their innate engagement, excitement, and curiosity about the business, often revealing insights beyond their direct area.

23. Assess Fundamental Understanding

When evaluating talent, seek individuals who can clearly and crisply explain the ‘why’ behind their craft and business fundamentals. This indicates deep understanding, even if they don’t yet have all the solutions.

24. Tailor Communication Levels

Adapt your communication style and level of detail to the audience, recognizing that frontline staff excel at the ‘10-foot view’ of problems while leaders need the ‘30,000-foot view.’ This ensures effective conversations.

25. Diagnostic for Co-Creation

Utilize a diagnostic to assess an organization’s sophistication in areas like talent, strategy, and KPIs, then collaboratively build a roadmap based on shared understanding. This ensures a tailored and effective partnership.

26. Provide Strategic Frameworks

Serve as a strategic partner by collaboratively assessing opportunities and then providing the necessary skills and frameworks to execute those plans.

27. Address Midsize Business Gaps

Focus on solving common midsize business challenges: ensuring the right people are in the right roles, building strong culture and engagement, developing effective strategy, and driving accountability for execution.

28. Implement Systems Incrementally

When implementing new systems like KPIs, start with the executive team to ensure understanding and alignment, then roll it out incrementally to subsequent levels. Rushing implementation to the entire organization can be a huge mistake.

29. Provide KPI Problem-Solving

When introducing KPIs, provide employees with problem-solving training and guidance on how to achieve them, rather than assuming they will figure it out independently. This makes implementation more effective.

30. Build Trust Before Feedback

Before implementing 360-degree feedback, ensure the organization has established trust, psychological safety, strong communication, and transparency. Without these foundations, feedback can be unproductive or defensive.

31. Continuous System Improvement

View business systems as living and breathing, constantly improving them through reflection after each partnership and learning from others. This ensures they remain effective and adapt to new challenges.

32. Conservative Leverage Approach

Adopt a conservative approach to leverage, typically two to three times, to maintain a margin of safety and avoid situations where everything must go perfectly. This prevents undue pressure and short-term decisions.

33. Invest in Inflation-Resistant Moats

Seek businesses with strong competitive moats that allow them to pass on inflation costs to customers, making them more insulated from economic pressures.

34. Boost Productivity Annually

Combat inflation by consistently improving business productivity by two to five percent annually through disciplined efforts. This helps offset rising costs.

35. Focus on Business Fundamentals

Avoid trying to predict or invest based on macroeconomics; instead, focus on finding high-quality businesses with good fundamentals at reasonable valuations. This approach helps absorb dynamic market changes.

36. Target High ROIC Businesses

Seek businesses that generate a high Return on Invested Capital (ROIC), with great businesses typically achieving 50% or more. This quantitatively indicates a strong competitive moat.

37. Prioritize EBIT Over EBITDA

When assessing earnings, primarily use EBIT (Earnings Before Interest and Taxes) because depreciation and amortization are real costs, and relying solely on EBITDA can give false confidence about a business’s true cash generation.

38. Seek Low Capital Businesses

Identify businesses that do not require a lot of capital to support their earnings, as these often represent the best businesses.

39. Analyze Market Attractiveness

Assess market attractiveness by analyzing its growth rate relative to GDP and understanding its dynamics, such as fragmentation, presence of dominant players, and opportunities for consolidation.

40. Reinforce Your Business Moat

Regularly assess your business’s competitive advantage and actively work to reinforce and strengthen its moat, especially in the face of disruptive forces like AI.

41. Three Ways to Use AI

Utilize AI in three key ways: enhance internal efficiency and productivity, identify industries and businesses where AI strengthens competitive moats, and within portfolio companies, apply it to structured management aspects and improve productive workflows.

42. Gain Operating Experience

To become a better investor, actively operate a business to gain hands-on experience beyond just boardroom discussions. This provides a rare perspective on what it takes to grow and sustain companies.

43. Cold Outreach for Learning

Write letters to CEOs and experienced professionals, especially as a student, to ask for their time and pick their brain. People are often willing to help young individuals, providing access and learning opportunities.

44. Start Small, Learn Business

Engage in small business ventures, like a farmer’s market stand, from a young age to learn fundamentals of supply, demand, pricing, and building repeatable, scalable systems. This improves odds of success and provides valuable learning experience.

45. Foster Foundational Skills

Create environments, like a farm, for children to learn work ethic, commitment, and problem-solving skills from a young age. This provides valuable life lessons and independence.

46. Assess Job Fit Regularly

If you’re not having fun four out of five days in your work culture, it’s likely not the right fit, and you should consider moving on. This ensures commitment and engagement in your role.

47. Demand Cultural Alignment

Leaders should clearly set culture, expectations, and an operating system, then require employees to align with it or choose to leave. This ensures a committed and engaged team focused on results.

48. Beware Quarterly Reporting Pitfalls

Understand that quarterly reporting, especially in public markets, can be a net negative, fostering short-term thinking and incentivizing decisions aimed at immediate results rather than long-term value.

49. Cautious Public Political Stance

CEOs should be very thoughtful and cautious before publicly expressing political opinions, especially on divisive topics where customers or employees may hold differing views.

50. Leave Things Better

Define personal success as leaving everything you touch—companies, people, and family—better than you found it, building impactful lives and creating value for yourself and those around you.