Get Your Succession Plan in Order Now

We have always tried to recruit good people, promoting from within if possible. We think we have people in place who could play a significant role in the company’s next generation. We need to understand their capabilities and commitments on a whole different level. And we need to be clear about our expectations of them. Is there a match? If we mess up, this company’s future could be in doomed, or we could be back in the driver’s seat exactly when we’re ready to retire.

Thoughts of the Day: Planning out the next generation can be a challenge. “Now” is almost always the right answer when considering if it’s time to get moving on figuring out the future. Looking for talent inside the company is smart. Knowing when talent has to come in from outside is crucial. Figuring out any gaps well ahead of time gives you options.

Looking to the future can be intimidating. Thinking who might run the company when you’re no longer around shows that you’re mortal and replaceable. Who wants to admit to either of those? Most owners underestimate the time and effort needed to form a succession solution. Or, they get busy running the company and don’t make time to work through the detail. Or, they follow the model they have followed — one person in charge — without realizing that a management team might do a better job.

Lack of clarity about succession leaves employees farther down the line in the dark as to what might unfold if something were to happen to the current owner(s). If something unexpected happens, you want people who are prepared to step up. You want everyone in the organization to actively support those who do step forward. It’s easier to follow a plan already in place that everyone agreed to when there was the benefit of time to work through details.

It is preferable to be prepared with a solution than to be caught short. That means taking time to brainstorm and plan, even if those plans eventually get scrapped in favor of new plans. Having options is always better than being faced with a critical decision and no preparation.

Start by assessing the talent pool inside the company. Ask people what they’re good at, what they want to learn about and where they see themselves in the future. Expose employees to leadership and opportunities beyond their current roles.

Make it part of everyone’s job to participate in some form of outside education every year. Try job sharing with a peer company to expose your employees to another way of doing things and to bring in people who might look differently at how business gets done. Find out who wants to step up and who is more comfortable taking a backseat role.

Make sure to profile the jobs at the top. What are the jobs today? What skills and talents will be required five to 10 years from now as the company continues to grow and the marketplace changes?

It’s worth noting that any organization knows what it knows — and that’s not everything. There are ideas, solutions, suggestions and options that others have thought about that could be useful to consider. Some of those outside ideas might get rejected and some might be a fit. Ignoring the possibilities that others can bring to the table is just plain dumb.

Constantly challenge your team to get smarter, faster and better at what they do by exposing them to things outside the company. Ask employees to take courses, go on sabbatical, spend time working for another company. Try anything that helps to expand their horizons with information that they could bring back to help your company.

If there are gaps in what the company needs to know — at present or in the future — you have a couple options. Hire the talent. Hire teachers to train your employees. Get people to practice through simulations — for example take time off and let your employees deal with what comes up.

Right now, unless you’re in crisis, your company has time to work through its succession planning needs. Working on successions planning is job number one for every business owner. Ensure that the company is prepared for change and smooth transitions, ready to step into its future when the old guard steps down.

Looking for a good book? Try “Leaders at All Levels: Deepening Your Talent Pool to Solve the Succession Crisis” by Ram Charan.

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Top Obstacles to Running a Successful Small Business

As owner, I feel like I’m always looking over my shoulder, wondering what will get in the way. Hoping you could provide some advice on things to look out for, and what to do about them.

Thoughts of the Day: Major issues can get in the way of success. Be smart about how you grow your company.

1. Don’t have the right people.

Counsel employees about the importance of keeping up with change. Regularly review skills company-wide. Post jobs to assess talent availability. Build individualized training plans. Look for gaps requiring new hires.

Make it a privilege to work for your company – one that is earned. Give your workforce opportunity to grow and show what they’re capable of. Promote people who demonstrate values of ambition, drive, teamwork, honesty, commitment to the company’s future.

2. The market has moved on.
Engage every department in looking for new markets and new ways to serve existing clients. Ask customers what else they need. Get vendor updates on what’s new. Attend trade shows for new ideas.

Commit funds for marketing. Expand profits by selling new products to old customers and old products to new customers. Look 5-10 years down the road.

3. Cost to produce has changed and the company’s pricing hasn’t kept up.
Do an annual cost reviews. Put someone in charge of negotiating for discounts with vendors. Get more efficient. Remember that cost cutting only goes so far.

Eventually you’ll have to increase prices and pass along price increases. It’s better to do little price increases each year versus one big increase every few years. If customers balk, beef up marketing to look for new opportunities.

Keep an eye on what competitors are doing. Stay away from price wars – nobody wins. Define a niche, a specialty, an add-on, something that makes your product or service more appealing.

4. Don’t have a good handle on the finances of the business.
Learn how to read both balance sheet and income statement. Build KPI’s (Key Performance Indicators). Teach everyone in the company to use reports to quickly spot problems.

Use budgeting tools. Forecast income by product. Estimate costs that vary as sales volume goes up or down. Know how much you need to cover overhead, R&D.

Forecast peaks and valleys. Know when you’ll need cash. Build in margin for taxes, loan principal, shareholders and employees, reserves. Tie salary increases and bonuses to company profits, not revenue.

5. Theft, loss and waste.
We all like to think that we have good people we can trust. And for the most part, we do. As things get busy it’s easy for stuff to slip by.

Use tools and rules to help keep good people from doing stupid things. Let people know you want what’s best for everyone. Wasted hours, lost materials and accidents mean less profits to share.

When there is a problem address it swiftly. Line up the facts. Get employees involved in resolving problems. Don’t let things slide.

6. Not enough of the right sales.
Some clients are your company’s future, some are its past. Look for customers that are forward thinking, well run, well-funded, concerned about the health of their vendor partners. Give them top priority.

Let poor quality customers know you’re concerned. Look for late payers and low margin accounts who demand a lot and don’t want to pay for the privilege. Replace them.

7. Not enough capital.
Every business needs reserves. 3 months of overhead is good. 6 months is better. We call it the ‘sleep at night’ fund.

Don’t try to pay down credit lines quickly at the expense of cash on hand. Put $1 toward each. Build up current assets as you reduce current liabilities.

Ask your banker to explain the ratios they look at to assess the health of your business. Set goals to improve those ratios. Build up hard assets, such as owning a building, that can back-stop your lending needs.

Looking for a good book? The Facts of Life, What Every Successful Business Owner Knows that You Don’t, by Bill McBean

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Help, I’m Stuck in the Day to Day!

“No matter what I do, it seems like I’m always getting pulled back into daily tasks. I know that my job as owner is to focus on building the business. But there are so many things that need to get done and I can’t afford to let things fall apart when the people around me can’t do it all.”

Thoughts of the Day: Working “in” the business instead of “on” it can cost you. You can’t afford not to let things fall where they may when it looks like the people around you can’t do it all. Check into your growth rate – if things are falling apart, you may be trying to grow too fast. Ultimately your business will be run by someone else – use that visual to get focused now on what you have to do.

Research shows that the majority of business owners in the U.S. – actually more than 90 percent of all businesses – spend most of their time working “in” and not “on” the business. Research also shows that when business owners work “in” the business, net income over the years tends to flatline. If there are profitable years, much of those profits eventually get plowed back into the business during down cycles.

The perceived risk of having things go wrong on a day-to-day basis is overshadowed by the reality of having a business that cannot stand on its own. The owner cannot take time away from the business to enjoy the rewards of what has been built for fear things will stall, or worse, decline, in his/her absence. Consequently, hard work over the years turns into more of the same.

Perhaps, most disturbing of all, when the long-term focus is working “in” the business instead of “on” the business, exit value is nowhere near what it could be. When ready to exit, owners struggle to find a ready buyer willing to take over a business that depends on the ongoing involvement of the seller. To the extent that a buyer can be found, the value of the business is severely discounted due to inconsistent performance, lack of a strong, secure management team and inadequate systems.

Now that I have your attention, let’s talk about another way to do things. Learn to get out of the way. Make people fix the problems they create. Stop rescuing.

In order for other people to learn, you have to let go. Give people specific assignments. Put the assignments in writing as job descriptions, process descriptions and agreements on conditions of success.

Teach employees how to do what’s been written down. Don’t let them off the hook when things go wrong. Ask them to describe how they plan to fix the situation. Then hold their toes to the fire while they do it.

Make sure employees understand the important role they play in building the company’s future. Have both short-term and long-term plans in place, with progress measures. Assign teams to oversee what’s going on.

Talk with employees about the importance of teamwork. No individual heroes or heroines. Everyone is responsible for the success of the company.

If problems crop up, ask the team to solve them instead of you personally jumping in to pick up the reins. Get regular reports on progress. Help the team brainstorm how they will know when the problem is fixed. Then ask everyone to stay on task to get there.

If things start to fall apart, check on whether the company overall is trying to take on too much, too fast. A growth rate of 10 percent to 15 percent, year-over-year, should be fast enough to stay ahead of inflation and slow enough to allow time to catch and fix mistakes before they become big problems.

Have a vision that includes exiting the business. Ensure that others know how to run the business in your absence. Use vacations as test runs.

Looking for a good book? Try “Work Toward Reward: Building Business Value Today for a Well Deserved Future” by Chia-Li Chien.

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A Business Owner Can’t Be Too Accommodating

“This month I got hit with it from every angle — customers, employees and vendors. Seems like it was a one-way street, with everyone this month asking me to do them a favor and nothing coming back in return. In trying to help them out, the only thing that happened was I got worn out and frustrated.”

Thoughts of the day: Human beings are wired to help others. Know when and how to say “enough.” Use favors in advance of requests to build up good will. Help the recipient to distinguish your behavior as giving, not just being cooperative. Recognize that people value things more when they’ve had to work to get them. Keep things equal by allowing others to pay you back and expressing appreciation.

Do someone a favor because it makes you feel good. Someone asking for your opinion or help signals that they value what you have to say or do. Being open to requests translates into positive feedback that your psyche needs. Use time to reflect on requests that have come your way as a way to boost your personal sense of worth.

Meeting a request doesn’t necessarily mean going “above and beyond.” Do what you can and be honest when you can’t. If you’ve overextended, don’t get mad at the requester, take a good look at your role in going across the line. Try to find a simpler way to respond that is within the boundaries of your available time and energy.

Of course there are some people in the world who spend all of their time receiving. They are always there to ask for a favor, never there to help when you need it. Fortunately they’re in the minority. Don’t let them get you down.

You might do these “takers” a favor by pointing out the problem: “Why is it that whenever you need something you’re quick to ask, but when I need your help I don’t hear back from you?” See how they respond. Boost their awareness of how their behavior is perceived. See if they can rise above and start to take action. If not, then put your attention elsewhere.

As more requests come your way, focus on the outcome value. See the results of extending favors as things you’ve helped to make possible. Connect two people and watch to see how their worlds expand as a result of the connection. Give an employee extra time off and circle back to find out how things turned out for them. Extend a customer or vendor a favor and follow up to find out how that favor helped to make things better for them.

Get ahead of the curve by offering to do something for someone before they ask. Don’t hesitate to start with a simple introductory statement, “I’m going to do you a favor.” Make the point that you’re intentionally extending yourself now for the potential of a return favor in the future.

Human beings are wired to value things they strive for. Flapping your jaw with unsolicited advice on topics that aren’t important to the recipient will likely diminish the value of what you’re offering. Take a moment upfront to establish that the topic at hand is important to the person you’re about to help. Ask them to let you know how things turn out, in order to show your interest in having the favor lead somewhere productive.

Many times “givers” are really good at giving and helping, not so good at receiving back. Check your “recipient” quotient. How good are you at letting others help you? Do you even recognize when it’s happening? Do you remember to say, “Thank you for the help”? Do you circle back to fill people in on how their help made your world better? Keep the world in balance by allowing others to help you whenever they can.

Looking for a good book? Try Give and Take, A Revolutionary Approach to Success by Adam Grant.
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Andi Gray is president of Strategy Leaders Inc., a business-consulting firm that specializes in helping small to mid-size, privately held businesses achieve doubled revenues and tripled profits in repetitive growth cycles. Interested in learning how Strategy Leaders can help your business? Call now for a free consultation and diagnostic process: (877) 238-3535. Do you have a question for Andi? Email her: AskAndi@StrategyLeaders.com.
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