Entries from December 2011 ↓

My partner’s caught up in details. She won’t let go. We don’t have time to work on where the business is going. She ends up working really long hours, and expecting me to do the same. I don’t see this ending up well, and I’m running out of patience.

Thoughts of the Day: It’s important to periodically step back and look at what’s going on. Often it seems easier to “do it myself” versus training someone else. Delegation can be scary. Change will take time to implement.

Draw a map of the company’s functions: sales, finance, marketing, operations, human resources, leadership. Put down on paper the tasks required in each area. Match people to the tasks – as things stand today. Identify several areas where the owners are currently assigned to tasks, and others could be trained to take over.

Start with a list of people inside the company who could pull extra duty. Identify tasks that could be grouped together and turned into a job for someone yet to be hired. Consider which tasks could be handled by professionals who come in to work part time.

Tasks such as bookkeeping, personnel, marketing campaigns, shipping, receiving and inventory management, are all ripe for vending out. Break out big subjects, such as sales and operations, into smaller parts and look for opportunity to hire  part timers. Lead generation, customer service and production assistance are three common areas where part time help can make a big impact.

Many people hesitate to delegate in the mistaken belief that no one can do the task as well. They think it would be faster to just do the task, than it would be to train someone else. That’s usually only true the first time. The second time the task needs to be done, and the third, and the fourth, valuable time is wasted doing a repetitive task that someone else could have learned to handle.

Some people won’t delegate because they fear the person they’re training will make mistakes. That’s true, the person learning the task will make mistakes. And they’ll have to learn how to recover – just like the owner did when he or she first learned how to do the task. It’s okay to make mistakes – that’s how companies learn to innovate.

Helping someone else step in will take time, practice, and oversight. But eventually the partner is freed up to work on higher level tasks. So build a list of activities that the partner could / should get to, but lacks time to do so. Have a vision of where this delegation / training process is headed, that benefits both the partner and the business.

Sometimes partners don’t make time to work on the business because they’re afraid of what they might discover – the business isn’t growing enough, isn’t profitable enough. Other times, the owner sees himself or herself as too essential to the tasks at hand – no one else could do it as well. In some cases, the owners simply lack the skills to pull back and make time to work on the business.

Start out with incremental changes. Insist on a twice weekly 1 hour meeting to discuss the business, where it is, where it’s going. Spend time planning the future of the business, what it will look like, what it will need. Discuss challenges that have come up during the past week / month, and what to do about them. End the meeting at the 1 hour mark, and get back to day-to-day work.

Set goals and build a budget to pay for the additional help you need. Figure out how many more customers it will take  to pay for the help. Keep notes about each meeting, to use the next time you get together. Practice lifting your partners’ sights to a higher point on the horizon – where you both end up out of the day to day, enjoying the business more.

Looking for a good book? The Partnership Charter: How To Start Out Right With Your New Business Partnership (or Fix The One You’re In).

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One of our sales people recently had 4 out of 6 deals fall apart. What concerns me most is that she had put a very high close ratio on all 6 – she estimated that each had an 80% or better chance of closing. I know that her closing percentage estimate is a gut – it’s subjective. How can I help her get a more accurate picture of what’s likely to happen?

Top Thoughts: Sales people often focus on what seems hot today, regardless of the real probability of closing. Getting prospects to close is not an event, but a process – a series of steps that need to be tackled in the right order. Building an accurate sales forecast system will help both sales and management better understand and deal with the challenges they face.

An active prospect, saying what seems like the right things, can easily be mis- interpreted as a sale that’s ready to happen. Sales people can be overly enthusiastic about what they’re working on, and have blind spots about reality. Maybe the prospect was ready to close, maybe it wasn’t. Either way, the forecast of 80% x 6 prospects means that 4 – 5 out of 6 should have closed. In this case, only 2 out 6, or 33%, actually ended up closing. A big gap.

Who cares? Management and the sales person should both care. Management needs actionable, accurate information with which to plan. Sales people need to know what they can count on to close, and where they’re getting tripped up.

It would help both management and the sales person to look at the steps a prospect goes through. Classic sales stages include information gathering, agree on needs, negotiate price, confirm solutions via proposal, negotiate contract. Have a couple brainstorming sessions to figure out the typical path a prospect follows. Build a checklist to use for each sales stage, to verify that everything appropriate to that stage gets covered and checked off.

Think of the sales funnel as a weeding process. As prospects move from one stage to the next, the goal is to focus on those prospects most likely to close, eliminate those that are unlikely to close, and set up a nurturing process for those that could close but aren’t ready. Mistaking so many accounts as highly likely to close (80% or better shot of closing), and they don’t close, means that the sales person is missing something in the weeding in / weeding out process.

Assign probabilities to each sales stage, based on historical averages. For instance, if typically 2 out 10 prospects that complete stage 1 end up closing, put a 20% close ratio on all prospects at the end of stage 1. If the chances increase to 4 out of 10 closing when the prospect completes stage 2, assign a 40% close ratio at the end of stage 2. And so on.

Sales people will get a lot of benefit out of learning to forecast accurately. No good sales person wants to miss out on exceeding quota and cashing commission checks. Help them build a fact based way to assess where they stand.

The sales funnel can also be used to identify training needs. When closes fail to happen, often there’s a pattern – something that gets skipped, or a stall that happens regularly. In this sales person’s case, we found that she missed a crucial step about half way through every sale. We isolated the problem and helped her understand how to keep it from cropping up in the future. Her forecasts are becoming more accurate, and she’s closer to hitting her goals.

When sales management and sales people can agree that the sales forecast is accurate, trust goes up. Confidence increases when both are on the same page. And management can proceed with decisions based on knowing where the company’s growth is coming from, and what else, if anything, needs to be done in order to make plan for the month, quarter, or year.

Looking for a good book? Quotas & Compensation: Pinpoint Sales Management Skill Development Training Series, by Timothy F. Bednarz.

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Assign someone the job of being your assistant coach. Meet regularly. Review results. Define your goals and agree on what to test. Roll out ideas that deliver in practice sessions, see how they work in the real world. Don’t quit after one try.

When it comes to budget, spend what you can afford. Split the budget between tried and true initiatives, new projects that you’ve tested and know they’re ready for prime time play, and some that are your “farm team” because you’re still experimenting to see if they can work.

Remember that some teams have bigger player budgets than others, and that doesn’t always equate to results. If your budget is small, you’ll need more low cost players – focus on the internet and marketing activities your current staff can implement. Check with industry based peer groups on what works for them. Cut down on expensive trials by adopting programs others have tested.

Your marketing payoff ratio is defined as marketing expenses divided by revenue and also divided by gross profit. To prove marketing efforts are delivering, you want to see the cost of marketing drop, in relationship to revenue and gross profit. Your marketing budget stays steady from year to year, as you change around your “players”, your marketing initiatives.  Your marketing spend : revenue ratio drops as proof that your marketing efforts are working.

Looking for a good book? Introduction to Marketing Concepts by Graeme Drummond.

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Find a business that operates at a loss. Add their revenue to yours. Cut redundant costs. Increase your bottom line. Simple formula – success is in the details.

We’ve decided to do an acquisition. We think this is a good time to try – we’ve heard that prices are lower, some owners are anxious to get out. We’ve never done one before, so we’re not sure where to start, or what to look out for. We also don’t have a lot of room for error. However, without an acquisition, we’ll have difficulty hitting our growth and profit goals, and may be facing a significant loss next year.

Top Thoughts: Acquisitions are potentially a great way to grow the business. Most acquisitions start with lots of optimism, and end up not delivering the expected results. Figure out what your company needs, then go get it. Be careful to pay only for assets you can secure. Look for buyers who are ready to do business.

If you feel like you’re beating your head into the wall, it may be faster and more profitable to do an acquisition as a way to beef up revenue and profit. Perhaps the recession has taken a toll on your customer base. Or costs have risen faster than profits. Or new innovations are pulling customers away. Or you can’t locate the human talent you need. When the core business maxes out, add to the mix of what you own.

Keep in mind that when all the dust settles, most acquisitions fall far short of expectations. That’s not a reason to avoid doing one, just a warning of caution. It is possible to do an acquisition well, and help your company get to the next level. The answer is in the details of how you go about acquiring and managing the newly acquired business.

Start by profiling what your company is good at, and what areas need help. Fill in 2 columns, strengths and weaknesses, for each of the 6 Sisters: Leadership, Sales, Finance, Marketing, Operations, Human Resources. Be realistic about where the company needs reinforcing.

Build a shopping list. Need customers? Need goods to sell to existing customers? Have unused production capacity? Need equipment and expertise to improve profitability? Strong enough at marketing? What about training and development?

Get to work to find acquisition targets that meet your company’s short, mid, and long term needs. Figure out the value that would come from adding specific attributes, volume, skill. Think of the acquisition as time sensitive – if you can’t reap rewards within 1 – 2 years, it may not be worth doing.

Check on the security of the assets you’re buying. Are there outstanding liens or loans due on hard assets. If you’re planning to acquire personnel, which is the case in most acquisitions, are confidentiality agreements, non-competes and golden handcuffs in place – on the right personnel.

I recently heard a business owner brag that he had sold his company, only to start another company and lure former employees and clients to that new entity. The acquirer folded within 2 years. Not particularly admirable, but certainly possible without the proper contracts.

Consider the potential seller’s motivation and experience. If this is their first conversation about selling the business, and they’re just shopping around, they may not be as realistic or quick to close as you’d like. If they’ve been to the doorstep of a deal before, only to have it fall through, the experience may help to reduce their expectations, or be a warning sign that they’re unrealistic.

Ask about the sellers advisors. Beware if there’s no lawyer or accountant to work with. At a minimum, that will slow the process of information gathering and document creation. Trust is built between buyer and seller by putting information and deals on paper and affixing signatures, no more, no less.

Have an acquisition process ready to roll the day you take possession. Put people in charge. Quickly secure personnel, inventory, equipment, customers, and production, in order to minimize losses. Know how much revenue has to be produced, at what margin, to make the acquisition work. Measure results daily, until the new business is on track.

Looking for a good book? Do-It-Yourself Business Sales Guidebook: A Proven System to Help You Sell a Small Business with Less than $1 Million in Revenue, by Ben Brickweg.

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