A solution to every problem!
How you can get the most out of your business!
In this edition, I will cover some of the key solutions that big businesses use to stay ahead of the curve and why you should think big too!
But first, I want to say a huge thank you! to all of you who read my first edition and provided awesome feedback which has made this edition even more powerful for our readers.
To recap my first article, which covered the topic that has been reported by a number of sources; – “that over half of Australian business owners will not have sufficient funds in retirement”.
Additionally, there will be an influx of businesses for sale in the next decade or so, and for many they face the grim possibility of selling their businesses for much less, or even have to close shop due to lack or interest, or value in the business to begin with.
We also covered the traits that distinguish successful business owners from the ones that struggle, namely the attitudes of the owners themselves whom:
- See investment in their business as a cost that is taking funds directly out of their pocket and not as a seed for future growth and profitability.
- Are too hands on, and often limit the size of the business due to what their capacity within the business is, in contrast to leveraging and delegating to grow, and become the single point of failure.
- Are Procrastinators, and therefore look to excuses like they are too busy or don’t have the budget to growing the business.
The reality is that there is a solution for every problem, well almost! But the bad news is that it’s virtually impossible for me to cover every solution in this article. So I will attempt to cover the majors in a little more detail, and provide a direction for some of the others so that at least you know where or who to turn to, to find the answers. It is also important for me to state that the content in this article is general, and recommend that you seek specific advice for yourself and your specific situation from a professional who knows your circumstances intimately and can provide advice accordingly.
The whole purpose of this document is to create a mind shift in you and awareness that these solutions exist and that there are actions you can take to alter your destiny, and give you a real chance of achieving your goals and aspirations.
Now for the awesome insight that you all have been waiting for… what are those things you could do right now to transform your business, that will give you the financial freedom that you work so hard to achieve, well it all starts with YOU!!
The first thing I recommend to all business owners is to invest in yourself, if you do nothing else then this alone will transform everything you do from this point onwards, why? because as we have established that the only thing preventing you from achieve great success is your mindset!
There are many ways you can start the change, but I highly recommend getting one or all of the following:
Recruit a Business Mentor and/ or Business Coach… having someone to speak to on a regular basis alone can change the way you approach everything in life. So what will a Mentor and Coach do for you and what’s the difference between them you say?
Business mentoring can be a highly effective way to improve business performance. A business mentor is “someone whose hindsight can become your foresight”. They are there to share their experience and be a sounding board for your ideas and strategies, and even provide guidance on how to deal with your day to day challenges. Hence, your mentor is someone that has a lot of experience and helps you make the right choices and provide the “check” in the “check & balance” equation!
Business coach is a process used to take a business from where it is now to where the business owner wants it to be. A business coach will assist and guide the business owner in growing their business by helping them clarify the vision of their business and how it fits in with their personal goals. Hence is there to ensure you follow through and execute the plan or strategy and ensure that you stay the course and achieve your mission, and therefore the “balance” in the “check and balance” equation.
It is important to find a coach that will fit the business vision, in with the business owner’s personal goals, which is a step that is often missed by most business coaches, who often only focus on the business goals. In so doing, they are omitting the goals of the business owner altogether.
A great business owner seeks to understand why reaching business growth goals is important to them personally, and the impact it will have on their life. After all, you ultimately determine the speed and passion in which the goal is met (if ever), and, if it is not linked to your personal dreams, goals and plans, then there is no burning reason why getting to that business goal is critical.
Often, people see mentoring and coaching as one and the same and there is a bit of crossover, hence often mentors coach, and coaches mentor. If you can have both in one then you save time and money, however if you can afford both to be separate then a “Check & Balance” scenario is created, and certainly where there may be a difference of opinion on strategy or approach then the third can weigh in and be the deciding vote. But to begin with having one that can perform both is perfectly fine.
A good coach/ mentor will most certainly apply the SMART rule to every goal you set for your business. The acronym SMART has several slightly different variations, which can be used to provide a more comprehensive definition of goal setting:
Each one of these words have strong meaning and should be adopted in every goal setting workshop outcome. I won’t go into this process much further and there are many more tools and strategies they may apply based on your specific circumstances. However, once you have decided on the actions needed to be taken based on the SMART principles, then the journey can begin with your mentor and/ or coach. (Note, having a coach/ mentor and or apply the above principles can also be used by you to manage your own staff, as a great leader possesses and apply these in the way they lead their people)
When choosing a business mentor/ coach, it is important to first understand why you are getting one in the first place. The whole purpose of a mentor/ coach is to ensure that you hear what you need to hear, rather than what you want to hear. There is no point getting a coach/ mentor who won’t stand up to you or you fire if they do. The whole point is to identify change that you need to implement in order to achieve your goals in a defined period of time.
Avoid having someone in your family or in your business to assume this role especially they are both, why? Well because they probably have similar experiences as you, or may not be willing to get tough on you, or have a subjective opinion which may cloud what they are willing to tell you. By having an individual who objective and has no emotional and physical attachment to you or your business, will be more inclined to give it to you straight and also bring a fresh approach and experience.
Step back and really understand, what is it that is holding you back from realising your business’s potential? This is definitely something you want to share with your mentor/coach. This will set the context of how you will achieve your goals.
In most cases, as I have mentioned in my first article, the owners get too hands on and often won’t allow the business to grow beyond their control. However, in today’s market there is help with every function of business that you may have and it’s just a matter of finding the right outsource structure that can step in to assist you to grow.
To illustrate, here are some examples of how turning your weakness into a strength can differentiate you!
One of my clients who had just started their business 5 years ago hated paperwork. In their line of business there is quite a number of documents that need to be handled in order to protect all parties and comply with the industries regulatory requirements.
Additionally, as he had started on his own with his wife’s supporting part time, he was limited on how many transactions he could perform because the paperwork would consume his time and he would have to revert to sitting behind a desk instead of selling.
To overcome this, he looked to us to see what technology that we offer that could remove this burden and keep him actively selling to more customers without having to hire an army behind him just to perform the administration.
As he operated in a very niche industry which had nothing available off the shelf, we designed a website with a complete ERP backend that fully automated his operation. This new piece of proprietary software not only reduced his need for additional staff, but became the cornerstone of his business’s value proposition.
In just 3 years he has grown to a national presence with over 10 franchises who joined him largely for the uniqueness of his software and way in which it supports and grows their business. He is poised to be the biggest operator in his industry within the next 5 years. “All because he turned a problem into an opportunity!”
I can give many examples of where entrepreneur have taken a simple operational bottleneck in their business and have turned it into their biggest selling point or have identified how to overcome them to outperform the competition.
Many small business owners are reluctant to employ more staff and would rather prohibit their growth than to employ hundreds of employee and with good reason.
Owners have a particular talent in a certain area of the business function that sparked their desire to become a business owner, however what got you here isn’t necessarily going to get you where you want to grow.
There are many ways to scale your business without the traditional bums on seats, but I want to provide you with 3 of the best I’ve come across which will hopefully be thought provoking for you seek out other options if these may not necessarily work for you.
This approach has grown exponentially over the last decade, and has become a key strategy for big business and is slowly trickling down the chain. Jump in and get a head start as this is an awesome way of growing without outlaying all the capital, or employing all the resources you need to grow.
An example which really makes sense here, is radical changes that has occurred in IT departments. A traditional IT department needed to anticipate what your current and future needs would be for capacity, and the applications you will need for the future and start building or provisioning them well in advance so that the business continues to operate seamlessly, or as close to it when it came time to use it! The problem generally here is that it’s very difficult to predict 3-5 years out, exactly how your business is going to grow and or in which direction it will take. Another cost blow out was that the technology selected becomes redundant before it is implemented as better and cheaper solutions enter the market!
This was a common outcome for most businesses only 10 years ago (and for some still happening) and you end up over investing or investing in the wrong area and then having to redesign the solution, and the cost is all upfront which impacts your cashflow, and you need to hire all the staff who will manage it and so on, and so on!
Nowadays, with Cloud computing Services in Sydney, everything is at your fingertips. What would have taken 3-12 months to implement (with a 70% failure rate), can be up and running in weeks and even hours, and you only pay for what you use and the capacity is limitless. This is a huge shift in technology which is opening up unprecedented opportunities for small business owners to access all the tools that big business use and at a fraction of what it used to cost.
Now it’s the same when it comes to human resourcing. Whilst contracting staff for specific projects has been around for a long time. Today, there is a much bigger pool of consultants/ specialist and companies that you can access for short term projects or outsource complete functions of your business.
The advantage of this is that again you only pay for what you use/ need, and not have someone on your payroll that you only need adhoc or irregularly. This is a great way to grow without needing to employ a lot of staff and then manage them. Whilst some of you may be saying but Vick it can work out to be a lot cheaper and I have greater control if I employ staff myself as outsource companies charge a premium above salaries for the privilege…
Most outsource companies invest heavily in best practise and can increase productivity beyond that of what a normal staff can perform consistently. There is always an argument for and against buying vs building capability, however for small business the argument tends to lean towards outsourcing more often than not, particularly if you as the owner don’t see managing people and process design as a core strength.
I also want to demystify the notion that you only outsource non-core functions and keep all core functions internalised. Again, not necessarily, think about the best outcome for you, your business and your clients. If you can outsource a function to a third party that can deliver as good if not better than your own staff, do it cost effectively, then nothing should be off the table. Also it is important to note that outsourcing can come in many forms or structures.
- Individuals ie consultants/ contractors,
- Companies that specialise in certain areas, ie contact centres, bookkeepers, payroll, HR, accounts payable/ receivable etc.
- Franchising, licensing, agencies: this is a common way of outsourcing the entire stack to a third party whom not only manages and runs the business on your behalf but also invests capital and expands your capacity beyond your own means.
- Technology: the use of technology such as customised or off the shelf apps and software that can be developed to increase capability, improve productivity, and reduce cost.
In summary, outsourcing can be achieved in a variety of ways and owners should explore these options with a closer eye to see which will best help them achieve their goals and aspirations.
With all outsourcing or business initiative, there needs to be a case for a strong “Return on Investment” (ROI) or increase the value of your business above the cost of implementation.
This is something that PwC partner Sue Prestney touched on in her article which I believe is one of the best opportunities for all small business owners to achieve their goal, and that is find someone in your business who could take over the reins.
In fact, try to find 2 or 3 if you can as this is a long term strategy that could not only give you financial freedom but also an investment vehicle that can provide passive income well into your retirement years.
Let me explain:
If you have staff already, take a look around and see which one of them has the most “potential talent” to take over reins from you. Note they should be at least a generation or two younger than you, and someone you trust and can nurture to grow into running your company, like a son or daughter you never, or wished you had, hey they may actually be your son or daughter!?!?!
The reasons why I suggest identifying 2 or more if possible, is because, they may not always turn out to possess the talent you were hoping for and it can take a few years down the track before you come to the conclusion that you need to start again with someone else and you may not have the luxury to restart the clock again.
The whole idea of succession is that you have someone internal who may not be in a position to buy you out, but can, through a number of mechanisms.
- earn the right to gain equity in the company by setting measurable “Stretch” target for them to achieve (which would be well above the norm) with the view that if they succeed, that would entitle them to receive equity instead of cash as reward.
- Drive a significant project or solve a divisional problem with the view that if they succeed, then they will earn the right to buy in at a predetermined figure for equity.
- Take on more responsibility and even management and then based on success against an agreed outcome, they may have the option to convert their bonus or commissions into equity and even at that juncture have the opportunity to buy more through personal funding.
The journey to equity, needs to add greater value to your business then natural progression, provide the opportunity for the candidate to acquire and display leadership qualities that will demonstrate to you and his current colleagues that he is capable of running the business. Be attainable and achievable!
How the transition will work is a matter that I recommend you discuss with your advisors and seek legal representation who has knowledge in the area. Every circumstance will have their own unique terms and conditions and performance criteria which will need to be fleshed out, sanctioned by lawyers, and put into writing to adhere to by all parties.
Without proper consideration, one bad call could sour the relationship which could not only break the succession process or incur $000’s in legal fees, but you could lose a talented and valuable contributor to your business.
Oh, and last point on succession, if you don’t feel you have the talent pool in your business currently, then your next hire should have this as a high priority in qualifying the successful candidate.
Another traditional form of selling out, or buying up, or getting a bigger pie, is to join forces with another business.
In many industries. It is much easier to merge with another likeminded business owner who has taken the same journey as you than to sell to an unknown or find a successor. However, there are considerations that you need to take into account when choosing this option.
- Try to find your opposite: for example, if you have a more established business with years of experience and brand awareness, try to find an up and coming innovator in the industry to partner with, they will benefit from your established brand and density, and you will benefit from their agility and innovation. If your strengths are technical, then find someone who has strengths in sales and marketing or leadership. this way you’ll be able gain a number of wins, the notion that one plus one equals three, and bringing in new talent that will complement each other.
- Who to merge with: There are strategic considerations, whether you should merge with someone bigger than you, smaller than you or the same size as you from a control perspective. However, whenever you anticipate to hold on to the management team or existing owners beyond the sale, then go out of your way to really get to know them and their mind set on everything. As businesses are a reflection of the owner, the shape, vibe, and culture it displays will give you great insight. However, even this can hide skeletons in the closet, so be on your guide to find out everything about them.
- M&A to diversify. This is a great opportunity to increase your footprint, so you don’t have to merge or buy the business from across the street. In fact, strategically, it may make sense to M&A a company that operates outside your current market. For example, if you are in the Western Suburbs M&A with someone in the Eastern suburbs, or Sydney with Melbourne, or even diversified products that is sold to the same market, ie plumbing with electrical, or furniture with lighting. This definitely opens more possibilities and options to create something completely new to the market.
- Lastly vertical integration, this is where a retailer may M&A with a wholesaler etc, by buying up or down your supply chain you gain greater control and stronger purchase parity, giving you a competitive advantage. This is a common approach with big businesses.
In all these cases what ends up happening is that the entity that emerges becomes stronger than the two individual parts that went into it. However, again I need to caution that most M&A’s fail and I can write a book about what are the problems can arise.
But in short, to avoid some of the pitfalls, you need to be very selective on who you want to M&A with, get a third party with great credentials in the area to perform the due diligence and then do one yourself, and remember that an M&A is like an arranged marriage without the sex!
You need to provide each side time to adjust to the new state, staff will be nervous about their own job security which you will need to deal with, and at the core of it you need to establish a new culture that brings them all together.
Finally, the 2 processes and systems will need to be merged into one, which I will discuss in great detail in my next edition.
In summary, there are many ways to turn your business around and the above mentioned are just a few for your consideration. In my next edition, I will go into how to prepare your business for any situation both fore mentioned and with whatever life may through your way.
As always, I welcome your feedback and experiences to share with my audience, your learnings and what your thoughts are on my subject are invaluable so please keep them coming.
Thanks and until next time, have an awesome week.