Business Building

"You are what you measure".  You have probably heard this so many times that it has faded into the background as a cliché that is more of a nice idea than strictly relevant to your daily business success.  But how can you or your people ever make progress towards a vital strategic goal or milestone unless you are measuring the appropriate things and know whether you are on course and making progress or not?

Ultimately you need to have one person make a decision and then ensure that it is followed through on by everyone else involved.  This requires giving the person not only the responsibility, but also the authority to make the decision and the power to effectively allocate resources to ensure that it gets done.

Businesses also need to review their compensation structures to make sure that they are truly rewarding the behavior that they profess to be seeking.

I have seen Clients where there are multiple owners of the business, and due to the legal and financial structure of the business, there is no clear leader.  Hence all vital decisions get postponed, and watered down due to the concerns that a poor decision by a single owner will negatively impact the earnings of the rest.  Trust, support, long term goals and true teamwork (where the roles and responsibilities are divided up appropriately) are lacking in these instances.  Treading water in this way only exhausts the business long term, and makes it vulnerable to the various tides and currents that exist in the marketplace.

Appoint a leader, then follow and support them.  Be In Action, people!

This topic is far from a no brainer.  Like you, most business owners will agree that, in order to truly succeed in today's business environment, small and medium businesses need to have a culture that excels at "execution".

In reality almost all of them have no direct experience of about how to go about creating this.  It exists mainly in the "I'll know it when I see it" realm.  So there exists a significant chasm between the concept and the reality.

How can you tell if this is lacking in your business?  Well, you will notice a tendency to have and announce great plans and initiatives, but then, a while later everything is pretty much as it has always been - everyone is in the day-to-day survival mode and reaction driven habits that has the business get by, but there is rarely any significant progress made towards critical goals.  Maintenance mode and fighting fires is all very well, but growth - whilst more challenging - is so much more fulfilling for all concerned.

It is highly unusual to find a business these days that does not need up to date IT to run smoothly.  Anywhere there is an office environment there is IT.  Even if you sell gravel and aggregates for mending road surfaces, the most non-IT sort of business in the world, IT plays a role and will require an appropriate investment to keep functioning smoothly.

Even if you have never had to do this in your business before, no matter how much you resent taking on a new line item for expenses on your P&L, it does not change the business realities.  Just make sure that you get good advice, and that your expenditures are wisely budgeted and appropriate to your businesses and your industry's needs.  Just because you have been successful in business so far, does not mean that the same good fortune will always be extended to you.

Many businesses in the small and medium business market though, no longer need to have internal people to handle IT - these folks rapidly get out of date and can leave at any time with all of your systems knowledge in their head.  Dangerous.  Most businesses, even as large as 300-500 employees are now engaging external IT firms that offer Managed Services - remote management of your network and systems for a fixed monthly fee.  Some of these IT firms will even own all of the IT systems on their books and keep them refreshed on a regular basis.  Off the Balance Sheet and onto your P&L.  Finally, IT can now be something strategic that is a stable and predictable line item on the P&L statement!

Owners of business are often (understandably) focused on just keeping the enterprise running and trying to grow it - and this seems to take all of their available time and resources.  They do not have significant amounts of excess funds to pay for multiple advisors to keep them up to speed on the less immediate aspects of owning a business.  They also do not have appreciable quantities of time to mingle with their peers or research what areas of business ownership they may be ignorant of.

This almost Catch-22 scenario lends itself to the majority of business owners running a gauntlet of risk that is much greater than they would agree to take on.  Especially if they knew the whole range of scenarios that have played out in the businesses of many other owners who are just like them.  This is especially relevant to business owners that have made significant personal sacrifices to make it through the tough times – as they may not realize how much they are flirting with any number of disasters.

Many people though take an almost superstitious approach to risk.  They do not wish to delve into the details of the range of potentially negative scenarios, because to do so seems to almost invite these scenarios to manifest into their lives.  Instead they want to focus on the "upside", or "look in the direction that they want to go in", or focus their energies on what they want rather than what they don't want, …..and then they just hope that nothing devastating will come at them out of this self imposed blind spot.

I have seen owners build businesses to a decent size only to find out that their company name has since been adopted by so many others in the same or a similar industry that they have no brand to speak of.  I have seen business owners die and their business partners suddenly find themselves in business with the surviving spouse who has no relevant business skills or industry understanding, yet the other partners had put in place no means through which to buy the person out in case of this eventuality.

A hugely popular scenario, and a very understandable one to find yourself in, is to be over dependant on one customer, or one industry or geography.  What would you do if 50-75% of your revenue disappeared almost overnight because something changed?  It is one thing to be aware of this risk, in principle, and to know that you really should get around to do something about it.  It is entirely another thing to actually do something about it, and then find out that your enterprise is all the stronger for having done it.

What a tragedy – to sacrifice and do everything that it takes to build the business, expecting and hoping that it would all be worthwhile one day …only to have some unexpected event take it all away from you….

Perhaps the most misunderstood small business sales tool is networking.  I have seen competent and capable sales people waste away by spinning their wheels in unsuccessful attempts at networking and all the while believing that they were keeping busy and keeping their schedule full of activity that was bound to pay off.

What it takes is focus.  I mean, how do you get married?  Not by dating everyone in town and dedicating only on one or two occasions to each.  You focus and commit and dig in over time.

This is sales, not sales avoidance.  It takes putting out before you expect anything back.  Above all it takes time - and often company sales managers or owners are not willing to take the risk that a new sales person is doing this.  Why?  Well, how long does it take to find out if they have been doing the right thing?  For a long sales cycle business it can be about 6-12 months.  Or more.  How much salary and benefits has that cost them?  Tens of thousands.

These decision makers fall into two groups - Those who are over eager to cut and run at the first suspicion of an investment that has not paid off.  The others are those who will ride the losers all the way to the poor house in the mistaken belief that time will tell and the harvest is just around the next corner (they themselves are scared of losing).

This topic is the King - for holding people (whether business owners or managers) accountable and for finding out if they are being intentional, or whether they are winging it and then blaming “circumstances”.  It is also good for finding out if you are (frankly) kidding yourself about being on track for achieving the results you have aimed for this year.

The topic is “how you use information in your business”.  First questions first though ….do you even have the relevant data in your business?  Many businesses operate in perpetual chaos, lurching from one month to the next, and as long as the cash balances in the bank seem to be roughly within expected ranges then they are happy.

Others capture and record meaningful data in some areas of their business, but have not made the time or seen the reason to make it a priority in other areas of their business.

Next are those businesses that have great financial records and clean Profit and Loss statements and Balance Sheets, and they think that they are at the head of the class.  But they still only have half the picture.  They have not yet made meaningful use of the data and had it become useful business information.  You know that you have “useful” business information when you can look at the information about an area of your business and clearly identify an area for action, execute on what needs to be done, and have a result that benefits the business.

The most critical area neglected by most businesses is their sales data:

Customers – How many do you have?

What types of customer are they? (you choose the categories)

What are the average revenues per customer per year that your business has achieved in the last few years?

What are the products or services that are most purchased?

How seasonal is your business?

How do the spending habits of different accounts vary over time – are there any annual patterns?

Is there any correlation between the buying of one product/service by customers and the buying of another product/service?

Are these products/services bought together or in a particular sequence?

How about your margins?  Not just annually, but by product/service line?  By customer type?  By quarter?

How about the ratios of your other expenses?  What channels of marketing do you get a return on?  How do you know? (or are you just guessing?)  What is the return and how are you measuring it?

Many small businesses (a huge number) just claim that they are too busy making ends meet each month to put these numbers together.  Well, the sign of a professional business is in not accepting such excuses, but in acknowledging what needs to be done in order to put you in a position to have this data – where you can then use the information that you then pull out of it.  Then going ahead and doing what needs to be done.  Being too busy and/or overwhelmed and under resourced is not an excuse … it is a symptom of a disease deadly to business - keeping busy and blindly hoping that things change and luck just goes your way.

Well, going to the casino is a more enjoyable way to lose your money.  You will also impact less people, such as employees, customers and suppliers.

If you say that you are no good with numbers and systems then find a decent strategy consultant and a “small business intelligence” professional.  If you do not know one then post a comment and I will see if I can help connect you with one.