Learn Lessons the Easy Way

Transcription

1 Learn Lessons the Easy Way Make Your Mistakes Cheaper Make Your Successes Bigger How mentors help business owners succeed PAGE 1 11

2 Copyright Copy this the right way. You have permission to post this, this, print this and pass it along free to anyone you like, as long as you make no changes or edits to its content or digital format. Please pass it along and make as many copies as you like. We reserve the right to bind it and sell it as a real book. Disclaimer We care but you re responsible. So please be sure to take specialist advice before taking on any of the ideas. This paper is general in nature and not meant to replace any specific advice. Bryan Worn Pty Ltd, its employees and contractors disclaim all and any liability to any persons whatsoever in respect of anything done by any person in reliance, whether in whole or in part, on this paper. PAGE 2 11

3 INTRODUCTION It is often said that small businesses are the backbone of the economy, small business is the largest employer. This may be true but the term small business does not reflect the reality for the owners. Their businesses are big to them. They have the same issues with growth, staff problems, cash flow as big business, or corporates, have. Most just don t have access to the same resources. The term small business should be changed to SME to use an acronym that covers the growth and aspirations of the owners and does not minimises their challenges or opportunities. LIFESTYLE Many people get into business for the freedom that they think it will give them, but they end up being prisoners in it. Relationships suffer because the owner is working harder and longer than was intended. This breakdown in relationships then affects the business and the problems spiral. Business owners need to constantly remind themselves of the purpose for which they got into business and understand that it is their business, not their spouse s business, nor their children s business, and equally that the goals they have are theirs, not necessarily family goals. RELATIONSHIPS PERSONAL AND FAMILY Success in business can come with significant personal, family and emotional cost. There is less time for socialising friends drift away. Some may even envy success. Life partners and children suffer often from the absence of the business owner. Many, when they are at home, are not present but thinking about their business. Some business owners delude themselves that they are doing it for the family. Their family did not ask them to start a business. They may enjoy material benefits in terms of lifestyle but the chickens always come home to roost in terms of what they were deprived of. The long-term effects of their feeling of loss or being ignored causes many business owners to have a retirement of regret. Those special years when the family is growing up can never be got back. PAGE 3 11

4 SORTING OUT THE PROBLEMS THAT MANY BUSINESSES FACE AFTER A START-UP PHASE Every business has its highs and lows, opportunities and challenges. Many business owners would not start or buy a business if foresight was as easy as hindsight. After a successful start-up phase is when the real problems surface. Missed opportunities are as costly as gross margin issues, cash flow and people problems. A lack of experience and/or training is often the causes of the issues that arise. Is it a business? Before deciding if you have a business problem you ve got to decide if you have a business. Many people start a business to escape the stress of corporate life, deal with unemployment or just have their dream of being independent in the workplace. The first sign of trouble is when, as Michael Gerber calls it, entrepreneurial seizure sets in. So the question we need to ask ourselves is do we have a business or do we have a practice? There are many criteria but they generally fall under the three filters of time, team and money. Sometimes people say they have a business, whereas in fact what they have is a job as their revenue comes from one source e.g. an IT contractor working as an outsource to one client. This table illustrates the main differences between a business and practice. BUSINESS PRACTICE SELF-EMPLOYED JOB Capital required Little capital required No capital required Saleable Usually not saleable Not saleable Employees producing Employees supporting No employees Not dependent on owner for revenue Dependent on owner for revenue Dependent on employer for revenue Profitability - varies Profitability - high Profitability - low Many customers Many customers ONE customer at any one time PAGE 4 11

5 THE TREADMILL SYNDROME Whatever the reason for starting or buying a business, many business owners find themselves working progressively longer hours and end up feeling like the hamster in a treadmill. The dream of freedom can become a nightmare prison. There is more to do than they imagined and they waste a lot of time doing things they do not enjoy or are not good at. The energy spent is not recovered so important things do not get done on time resulting in firefighting and even longer hours. THE ARTIFICIAL CEILING ON REVENUE When a business is started with the intention of just generating enough revenue to meet the owners living expenses and overheads this quickly becomes a habit. Businesses need to factor in a reasonable salary for the owner, the overheads of the future i.e. how they wish the business to look in two or three years time and an amount of profit. These three figures should be the target revenue and this should influence the pricing of hourly rates in the case of a business that sells time, for example a contracting business or technical services, and also the target sales gross profit margins for those that sell products. Obviously, the margin of gross profit will be affected by the competition s prices in a product market. PAGE 5 11

6 LEVERAGE PEOPLE If you cannot use robots, people must be employed to scale up a business. This will involve training new employees plus the business owner needs to delegate and manage properly to avoid causing confusion for staff and frustration for themselves. Business owners need to really question what they should be spending their time on. Anything that can be delegated should be. Position descriptions including KPIs should exist before a person is hired. DIFFICULT PEOPLE STAFF, CUSTOMERS AND KEY SUPPLIERS Running a successful business is about managing relationships. How the business owner relates to his staff (and the staff to each other), how staff and the owner relate to customers and key suppliers affects results. There are also situations, e.g. warranty issues, where suppliers must relate to customers of the business. Problems arise in all these relationships and a business owner must understand how to deal with them quickly before a spark becomes a bushfire. PAGE 6 11

7 PLANNING The old maxim failing to plan is planning to fail. The paradox is that plans are great until they re implemented. As Boxer Mike Tyson said everyone has a plan until they are punched in the face, so it s not the plan that is necessarily the most important thing but the planning process. In preparing for battle I have always found that plans are useless, but planning is indispensable. Dwight D. Eisenhower. That s how business owners become flexible in dealing with a changing environment. RESOURCES One of the key roles of business owners is to ensure that they have enough of the right types of resources in the right place at the right time. This applies to finance, inventory, equipment and most importantly people. Business owners must consider investing in staff before they fully need them, this is to ensure that they don t end up making battlefield hiring decisions and have a revolving door of appointments that don t work out. Businesses that are growing in sales need to ensure that they always have the right inventory when the customer needs it. Poor cash flow planning can result in businesses that are profitable becoming insolvent because they don t have enough cash to pay their bills or finance the inventory they need. There is an old military saying that amateurs talk tactics, but professionals talk logistics. PAGE 7 11

8 CHANGE AND DISRUPTION Change has been happening since time began but has escalated in the last 20 years. Many of the jobs that a business owner s children will have in the future will be in industries that have not yet been created. This dramatic change in conditions is currently impacting on many business owners and they do not realise it because they are so submerged in everything they do on a daily basis they are not watching the trends. Having the helicopter view enables business owners to mitigate or eliminate the effects of change because they see what s happening before it happens. FLEXIBILITY One the hallmarks of successful business owners is their ability to adapt to changing circumstances. This ability is sidelined or forgotten when a prolonged period of poor performance, issues with staff, family and relationship, or financial problems causes stress. A downward spiral ensues that can be fatal for the business. Learning to recognise shifting conditions, having up-to-date figures and understanding results is crucial to the thinking that ensures flexibility. Business owners need to be clear on whether a change is temporary or a paradigm shift. Getting and maintaining clarity about business conditions helps develop flexibility. EVOLUTION Value Business owners often fail to understand what industry they re really in and what that is evolving into. The classic case of railroads in America who didn t understand they were in the transport business and the telecommunications companies who didn t understand they were in communications not just telephony. Understanding the application of Charles Handy s Sigmoid Curve on the longevity of a business creates an awareness of need to have evolving strategies, products and services. The curve used to average forty years but in Handy s research it is now fourteen years. The curve is shown here years Apple is a classic example of a company that has managed the curve with innovative new products. PAGE 8 11

9 HAVING A PLAN FOR LIFE AFTER BUSINESS When business owners know what their exit strategy is and that can include retirement, it is more motivating for them to grow their business and also deal with the day to day problems that bog them down. Being very clear about why they re in business helps them focus on developing, maintaining and having a succession plan. ACCOUNTABILITY Who is your boss? This question sometimes gets asked by young children of a business owner. Given the breadth and depth of issues that a business owner has, not being accountable to someone can lead to planning without execution or execution without thinking. CEOs of large companies have a board of directors and a chairman that they report to. Business owners benefit from advisory boards and someone who will challenge them. PERSONAL & PROFESSIONAL DEVELOPMENT The saying What was good enough to get us here will not be good enough to keep us here is true for business. Many business owners struggle to find the time or allocate the money to learn what they need to learn. The very smart ones learn on the job with help from advisers and mentors. Janine Allis of Boost Juice says I keep my ears open and my mouth closed most of the time, because you never know when you will find a gem. Successful business owners engage different consultants for different reasons in their businesses. One of the most important is often an external counsel, mentor or chairman. They perform the role of a boss and hold the owner accountable for doing what he or she promises. AWARENESS Effectively dealing with challenges and taking advantage of opportunities moves a business and its owner to the top of this ladder. When we are in crisis and completely overwhelmed our focus is inwards. We engage in a huge amount of activity that gets us nowhere and the impact on the business is zero. The self-pity starts then. Feelings of inadequacy, fears of letting our family down possible bankruptcy, even divorce, can set in to such an extent that we cannot see any way out of situation. Confusion is the state we are in when we are trying different solutions but cannot see the wood for the trees. Our focus is on staying afloat. Paying the bills, hoping that things will get better but not knowing exactly what will make them better. A lot of work has a very small impact. When we get clarity a certain amount of calmness comes to us. The reality of our situation is clear. Things are generally not as bad as we thought they were. Possible solutions appear and our focus is on building our mental strength again to implement solutions. The impact on the business and us is at least twice the effort we are outing in. PAGE 9 11

10 We are now in control again and we focus on the efficiency of ourselves and others. The impact of this leads to even better results. As the results improve the feeling of confidence returns and our focus is then on moving forward. The impact here is much greater. Once momentum builds up our minds start compounding and we focus on growth the returns in this state can be exponential. Major impact for little effort. SOLUTION Business owners need always to have great clarity about what it is that needs to be done over what they feel like doing. Many, particularly in the early years of the business, perform many of the functions in the business that will ultimately be given to new employees as the business grows. The juggling act they must perform every day, depending on their behavioural style, can lead to a lot of time wasting and important things not being done. PAGE 10 11

11 Sometimes people are proud of their multi-tasking abilities (as they see it) but they have not realised that multi-tasking is a myth and is watering down their efforts. By being clear about what needs to be done business owners can quickly work out what it is they are not good at or don t like doing and that is the trigger to start looking for people to carry out those functions. In your effort to attend all things, everything gets short changed and nothing gets its due. determined by what you don t. What you see is Great businesses are built one productive person at a time. The One Thing by Gary Keller. Getting the right advice on offloading functions to employees (or outsourcing if appropriate) after the start up period can prevent the chaos and confusion referred to earlier. When business owners make themselves accountable to an external party, such as a mentor, it avoids or mitigates many of the issues that affect profitability, business value and success. Mentors watch for the signs of procrastination, overwhelm and paralysis etc. that lead to many of the people problems, family and relationship issues. Running your own business can be a bit like the person who, having no plan for dinner, just goes to the supermarket on the way home with no list and ends up not getting all the ingredients they need and then must go out again. WHERE TO FROM HERE? To learn more about how you create balance between your family and the family business and then sustain it speak with Bryan Worn. ABOUT THE AUTHOR Bryan Worn has, in different capacities, advised SME s (Small & Medium Sized Enterprises) for over forty years. He has owned and operated his own businesses (and practice!) and has experienced the challenge of managing them and the stress that goes with the ownership. His passion is to help businesses to get to where they want to go without making avoidable mistakes along the way. Telephone: Website: bryan@bryanworn.com PAGE 11 11