Entries Tagged 'Owner Strategies' ↓

Wondering if it would be useful, or a distraction to build an advisory board? How do I figure this out?

Thoughts of the Day: It’s useful to have outside perspective. Set goals for what you want to accomplish. Decide on frequency and venue. Get your documentation in place upfront. Be prepared to live up to the board’s expectations.

If you’re tired of going it all alone, one way to add company to the table is to set up an advisory board. If you are willing to take their advice seriously, the right board members can help you to sort through, prioritize and deal with the challenges and opportunities your company faces.

Look for people who have had experience being on other boards. Ask candidates to advise you on what the board should be doing. Get them to tell you how they would run it if they were in charge.

Look for people who can think quickly as they blend together concepts and ideas. You want people who can assess situations, are willing to be outspoken, who have the energy and desire to debate ideas vigorously and cooperatively. Focus on forward thinkers, who can help you decide on what to do to close current gaps in the company while simultaneously moving the company towards the next level.

Figure out what kind of support would be most helpful. Strategy and direction? Contacts and leads? Raising capital? How to handle employees? What to do with IT? Where the industry and competitors are going? Marketing, operations or sales challenges?  Make sure your advisors have experience with your industry, and with companies in your size range.

Look for people with a history of being accountable. They know that the advice they give matters. They think things through carefully, but don’t wait for someone else to surface issues.

Define how often you want your board to meet. Quarterly? Monthly? Know where you plan to meet. At the company office? Offsite? Figure out how long the meetings will last. A couple hours? Half a day? Full day? More than a day? Make sure your board candidates are in agreement as to your venue and timing.

Also think through who in your company should be invited to attend all or part of the advisory board meetings. This should not be about you presenting everything to the board. You want to give your staff opportunity to present, get questioned, and have access to the talented team of advisors you’ve assembled.

You may have a specific employee with potential to grow, and no one in their field to look up to. Consider bringing onto the board someone with skills in that field who’d also be willing to mentor the employee. Agree on the extent to which that board member would work with the employee on a development plan.

Insist that all board members sign NDA’s. Don’t be casual. You’re about to turn over information about the heart and soul of your company. Make sure your board members formally agree to respect the confidentiality and trust you’re extending. Have these documents ready to go as soon as you sign up board members.

Plan on a package of information to be distributed 2 weeks prior to a board meeting. Financial statements: P&L’s, Balance Sheets, Cash Flow Forecast, are typical. Progress reports on specific departments are also useful. Someone should be assigned to take notes during an advisory meeting, and get those notes typed and distributed shortly afterwards. Keep track of next steps, who agreed to do what, and review that at the start of the next meeting.

Final notes. Be ready to take the board’s advice seriously. Plan to pay board members for participation – it keeps everyone’s attention focused on the value being exchanged. Budget time to plan for meetings, and to debrief with staff afterwards.

Looking for a good book? How To Build An Advisory Board to Grow Your Business and Increase Profits, by Advisory Board Group.

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It’s a family business, all right. My spouse is in the thick of it with me, pitching in wherever help is needed. Not only do we get to have breakfast together, but lunch and dinner, too. She has a lot of good advice, but sometimes she and I don’t see things eye to eye. And sometimes it feels way too close. Any suggestions for maintaining marital harmony as we deal with the ups and downs of our livelihood?

Thoughts of the Day: Know who’s responsible for what. Make sure the business can afford to support both of you. Be the diplomat, but settle disagreements, or agree to disagree. Have a written plan to follow, and hold each other accountable for meeting deadlines and standards. Regularly check in: is this what you both really want for work. Schedule down time and time away from the business.

Who’s business is it, anyway? Yours? Your spouse’s? Or equal shares? Decide, and issue voting shares of stock to confirm the decision. Then decide on an organization chart, and lines of authority. Who’s good at what? Think it through and make job assignments accordingly.

Once jobs and lines of authority are assigned, respect them. If it’s not your turf, don’t go butting in. If you think your partner is heading for trouble, ask if help is needed. Make suggestions, but back out if you’re asked to. Be willing to listen to your partner talk through challenges, without giving out orders about what to do next.

It can be really hard to let go and watch someone else make mistakes or struggle. Keep in mind, you’re not perfect, either. I’m sure you have your own laundry list of things that have gone wrong. Allow your partner freedom to experiment, get it wrong and figure out how to recover – that’s where the best learning can come from.

Listen attentively when a partner has something to say. Allow for differences in communication style: men and women tend to tackle problems differently. Set up rules for how to resolve disagreements, and then follow the rules. If you strongly disagree, get an outsider to provide advice and support.

Think about why you’re in the business together. I hope it’s because you both realize that 2 partners pulling together can grow a business significantly faster than 1 owner going it alone. Make sure that there’s enough revenue and profit to pay both your salaries. If one of you ends up working “for free”, that’s a warning sign that the business can’t support both of you. Consider having one of you take a sabbatical and get another job that pays better. Don’t put all of your eggs in one basket, if that basket isn’t strong enough to support you both.

Make sure you’re both heading in the same direction by writing out goals and plans for reaching those goals. Meet regularly to review the plans, to be sure the business is on track. Assign accountabilities in writing. When there’s disagreement or breakdown, set aside time to discuss it when you’re cool headed.

Conduct regular reviews with each other, just as you should do with employees. How is the job going? Is it still a fit? What do each of you want to learn about and do next? Train your replacements so that if either of you wants to step back you can. Make sure someone else can replace both of you, so if either of you gets sick, it’s not an emergency.

Regularly take time off from the business. Set a rule that no one talks about the business after a certain hour in the evening. Take weekends off. Plan vacations. Have a hobby to pursue outside the business. It’s important to recharge, especially when so much of the day to day conversation is likely to be focused on the business.

Looking for a good book? Sleeping with Your Business Partner: A Communication Toolkit for Couples in Business Together, by Becky L. Steward-Gross, Michael J. Gross.

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We’re not bringing in enough to cover expenses. We’re giving away too much work for free. Recently we had to dip into the credit line to stay afloat. I need to turn things around. What do you suggest?

Thoughts of the day: Too many expenses, not enough income, and bingo, the checking account is empty. Find out who your friends are, and who could care less if you survive. Look for opportunities to turn a quick buck. Implement long term changes that can move the business forward permanently.

Tapping into the credit line is a short term fix that usually leads to even greater problems. There’s interest and principal due on the credit line, along with all of the other expenses. Now there’s even less money to go around.

If you find your company is cash strapped, be honest with employees and vendors.

Tell employees that bonuses are on hold, and hours may be cut back, or salaries reduced, to get through the cash flow crunch. Ask vendors for terms. Prioritize working with employees and vendors who will work with you.

After making all the expense cuts you can, check your Revenue:FTE Ratio. If it’s higher than $125k / FTE (full time equivalent), don’t bother trying to cut staff. Personnel wise, you’re reasonably productive. Not sure how to calculate Revenue:FTE? Give me a call, I’ll give you a hand.

Check that your firm turns a profit on work completed, every job. This is no time for excuses. Taking on work just to keep people employed is a really bad idea. Salaries are only the tip of the iceberg. Every employee had add-on expenses: phones, desks, benefits, and all of the other infrastructure that goes with having employees To make a profit, at a minimum, each employee needs to turn in 2 to3 times as much billable work as they cost.

Build skills in sales and marketing, fast. Learn how to sell 2 – 3 x as much as you need so you can cherry pick the best work for your firm. Don’t just chase volume. Only take on profitable work. The last thing you need is to get worn out, working harder instead of smarter. Not good enough in sales? Go to school!

Weed out bad customers quickly. You may not think you can afford to let them go. Au contraire. Time spent hanging onto bad customers keeps you from going after good ones who can value your work and pay you what you’re worth.

Make sure all clients are willing, and able, to pay their invoices in full. If customers regularly negotiate for concessions after the fact, they are un-desirable and should be eliminated,. Not only do you not make the money you expected, but then you’re forced to waste un-billable hours researching and defending invoices.

Spend time figuring out how to turn a quick buck. What are good customers complaining they can’t get to? What kind of help are they asking for? How can you make a profit if you supply it? Fill in negative net income months with additional work, rather than trying to do too much in high profit ones.

Even if it’s not the highest and greatest work your firm will ever do, if quick turns put additional profit on the table, do it. Sometimes simple solutions are the most valuable. Pick up products or services that good customers would willingly pay for. Even better if you can get clients to pre-pay to get what they want.

As you start to dig out of a cash flow hole, make sure you know the status of your cash position at all times. Build up to one month of cash on hand, then three months, and ultimately six months of cash on hand.

Be careful paying down credit lines as you turn things around. Put half your extra funds into paying down debts, and half into savings. That way, if the bank should decide to re-negotiate your credit line terms, you’ll still have your own cash to fall back on.

Looking for a good book? Reversing the Slide: A Strategic Guide to Turnarounds and Corporate Renewal, by James B. Shein.

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Any thoughts on where to focus my company’s efforts this coming year? We’re hanging in there, and think things are looking up. What can we do to help the company succeed?

Thoughts of the Day: Things are looking up. More deals, more opportunities coming. Make sure your sales team is the best it can be. Keep a careful watch on the purse strings. Invest in marketing. Deliver top quality. Reward performance. Add employees.

Most of the business owners we talk to are cautiously optimistic about 2012. Caution continues because 2010 ended stronger than it began, followed by a very weak first quarter in 2011. That was frustrating. But not a pattern.

Frustration over the first quarter dip in 2011 drove many business owners to rethink how to get their businesses back on track. Actions taken in 2011 are starting to show fruit. The momentum is picking up, especially for those companies that have retooled.

Make sure your company isn’t left behind. Weeding out lackluster customers should be pretty much done. Focus on adding more of the right customers in order to drive growth and profit. Attention paid to cleaning up financials should be delivering a stronger bottom line. Changes in personnel, keeping the best and most committed, should be showing productivity improvements and waste reductions.

It’s time to shift into the next gear. Start with your sales force. Ask yourself these questions:

• are the goals clear, with everyone bought in, committed to delivering
• do I have enough of the right people calling on the best targets
• do customers get what they need
• are my referral sources strong enough to help me get additional business

Focus on building the strongest sales organization possible.

As you build up sales, make sure you hold onto the purse strings. Set up reports to tell you what’s going on financially. Build a budget that channels profits into getting more growth. Consider using profits to buy market share. Put money into reserves so that you can self fund, rather than having to borrow; that way you’ll have choices.

Take a look at how well your company tells it’s story. Ask yourself this:

• are we innovating to serve the needs of our best customers
• are sales tools helping get us deals
• are we taking advantage of what we’re good at, expanding on that
• where else should we be telling our story – what is our story
• is the phone ringing, are leads coming in over the internet

This is the year of competition. Someone will meet the slowly expanding needs of buyers. Make sure your company is in line to get more than it’s fair share of opportunity.

Any products or services that aren’t making you proud? Now is the time to finish them off. Sell them to someone else, or shut them down. Channel energy into your company’s future.

Your best customers will likely be more demanding. Marry quality with great customer service to protect and build your margins. Use customer service as a vehicle to gather intel on what else customers want, so you can get a head start on creating exactly that. Look for opportunities to increase prices as competitors with less depth, focus and ability fall away.

Employees are also looking for improvements. Use a portion of the profits to reward behaviors that are likely to help the company grow and become even more profitable. Not sure how to do that? Get help.

Figure out who are your keepers, but don’t be afraid of change. As the economy turns up, employees will get other offers. Make sure jobs are documented, and build a rolodex of candidates for key positions, just in case. Reward initiative and results by moving people up. Bring in new blood at the bottom of the pyramid. Encourage change.

By all means, have a written plan. Know where you’re going. Keep focus by working the plan. Be patiently demanding. Measure progress and make corrections regularly as needed.

Looking for a good book? The Right-Brain Business Plan: A Creative, Visual Map for Success by Jennifer Less, Kate Prentiss, Chris Guillebeau.

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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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Thanks to a lousy economy and not knowing what was going to hit us next, instead of leading and being strong, we went into survivor mode. That has cost us a lot of money. As a result, we’re not having as much fun as we used to, running our business. What suggestions do you have for helping us get back on track?

The driving force behind every privately held business is the owner. In tough times business owners end up isolated, trying to work out complex problems on their own. It’s been a touch and go economy, with 2 steps forward, 1 back. The stress that goes with uncertainty can wear down the strongest of business owners.

Unfortunately, as business owners get stressed and distracted, playing more defense than offense, the business slows down, opportunities are missed. Getting back on track takes razor sharp focus, a clear plan of action, and deliberate marshalling of resources.

This owner would do well to remember that in every economic cycle, there are winners and losers. Not everyone fails, not everyone survives. Choices, plans  and perseverance make the difference. Owners who take deliberate, well-thought-out risks, and who use a written, regularly updated plan, are more likely to survive.

Most owners, if asked, say that a plan would be useful. But there’s no time, and no one to help them build one. Don’t believe it.

Set aside time each week to work on the business. Figure out how the business will grow it’s way out of it’s troubles. Answer some basic questions:

• who are our best customers, and what do they want next from us
• what are our best profit products or services, and who else might buy them
• how much more could we make if we let go of our least profitable clients and replaced them with better quality customers
• what would be the benefit if we stopped supplying low margin products or services and put all our effort into our best ones
• how much more profit do we need each month in order to put money away into reserves
• where can I get a budget and forecast, so I can see what’s happening more clearly
• which jobs have to change, as we move forward
• since we can’t do everything at once, what are the top 5 things we need to get done right away, 5 things mid-term, 5 things long term, to help the business make progress

The company’s success means a lot to everyone around you, and most are motivated to help. Employees keep their jobs. Vendors keep your account. Customers continue to rely on a valuable supplier. Advisors add you to their list of success stories. Family members get to share in the profits and benefits of a more relaxed owner. Friends get to see you succeed and enjoy your company. Get them all involved in helping you move the business forward.

Here are suggestions for marshalling support, so you don’t have to do it all yourself:

• ask who can help you get more prospects; include easier-to-sell referrals
• brainstorm ways to self-finance growth, and prioritize next steps to build up cash flow
• ask everyone to come up with 1 or 2 ideas for a guerilla marketing plan, targeting the most profitable markets and customers
• check on operations one more time – by now you’ve probably made as many cuts as possible – just check to be sure things stay efficient as you expand
• look for opportunities to partner up to pursue new ideas and growth, to limit risk and increase your odds of success.

The bottom line is, don’t go it alone! Get everyone involved in putting a plan down on paper and making it happen. In areas where you’re struggling, get expert advice to help you break through.

Looking for a good book? Duck and Recover: The Embattled Business Owner’s Guide to Survival and Growth.

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