It seems fitting that on the 4 July as America celebrates the declaration of independence from British rule we acknowledge the contribution made by the proliferation of independent businesses. Power, ownership and control are the hallmarks of an institutionalised world and this is particularly evident within an industrialised economy.
Amidst a rapidly changing landscape buoyed largely by technological advances and the global gateway we now know as the internet, the playground for real transformational change both at a personal level and a business level is the micro economy. As the nature of work becomes more transient and itinerant larger numbers, by necessity or choice, are opting out of the mainstream and into the world of freelance, self-employment and enterprise.
The digital and knowledge economies give the people a voice. Social media and viral marketing channels allow us to communicate in real time across the globe. Whilst there remains a healthy cynicism about the influence of big brother we have access to a wider range of non-mainstream information channels.
The raison d’etre of independent business owners differs at its core to large public companies and corporate institutions. The strongest catalyst for Independent business owners going out on their own in pursuit of their dreams is not primarily for wealth creation but rather lifestyle choice. The most discernible difference between the economic drivers of big business and small business is not the pursuit of profit but rather the MAXIMISATION of profit.
Entrepreneurship, at its core, is the place where materiality and spirituality meet. A heartfelt mission or passion fuels the drive to do what you love, make a purposeful contribution and leave an enduring legacy. It’s essence is creative. It is an invitation to create value. Sure, an institutionalised world offers employment opportunities and many of these are built around compliance and regulatory activities.
The heart of the entrepreneurial world beats as a conscious, creative collective and in large measure this is due to those that took a risk to pursue their dreams – in much the same way as our forefathers before us. So, today on Independents Day we salute those brave entrepreneurs who dared to dream and dared to pursue their dreams. Long may you prosper.
by Dennis Roberts
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by Dennis Roberts
A leader of a small to medium enterprise (SME) has challenges and approaches that differ greatly to a leader of a larger corporation or public enterprise. The term Owner/ Operator illustrates the dual roles that many enterprise leaders play. Not only are there dual roles but there are dual entities – the individual and the enterprise. And these distinctions are important to understand.
The role of the Owner – it is the capital or equity invested in the enterprise that is rewarded. As such the Owner does not need to play an active role in the business. The Owners rewards are twofold – share of the profits (dividends) and/or capital growth (share price). The critical point to note about capital or equity investment is that there is a risk that you will not only get a poor return but that you might lose your entire investment. The corollary of risk is return, ie higher risks command higher returns. That’s the theory in efficient markets but in the small business landscape you investing in your business idea and enterprise might amount to nothing more than buying a ticket in your own lottery. And you need to go in with your eyes open.
Ask yourself this key question – if I invested my money elsewhere what return on my investment might I have got from alternative investments, say real estate, share market or investment in another business enterprise.
The role of the Operator – it is the labour effort, generally measured in units of time, that is rewarded. Fee-for-service models are the most common and the rewards you would be familiar with are wages and salaries and perhaps performance incentives, bonuses or commissions.
Ask yourself this key question – if I worked somewhere else what sort of wages and salaries might I earn?
The most common mistake Owner/ Operators make is rewarding their labour effort by withdrawing profits. The reward for labour is wages and salaries whereas the reward for capital/ equity investment is profit (dividends) and/or capital growth.
If you do this, and many Owner/ Operators do, you will never know the true value of either your labour or your capital. Public accountants fudge the accounts of small businesses to make some sense out of this practice. It is an abhorrent practice.
I say abhorrent because whilst it may provide tax concessions it muddies the waters of both the individual entity and the enterprise entity. They are separate. They are unique and should be treated as such.
How can you become a more effective enterprise leader?
Here I am talking about your role as Operator. In bigger corporations this is the Chief Executive Officer (CEO) role. The title is a bit of overkill for a small business don’t you think? Anyway, the challenges most SME Operators face is that they are not only the one in charge but often the only one! SME Operators are required to be hands on and may wear many different hats.
Because you have started the business (as the Owner) you may also find yourself in it up to your ears in the CEO role, sales, marketing, strategy, operations, product development, technology, HR, etc etc.
So here are a few tips on how to become a more effective enterprise leader:
· Play to your strengths – being in charge means you need to make decisions and the best decision to start with is “I don’t know everything, and I don’t need to know everything.” Do what you love and enjoy. If you run out of juice the whole enterprise will flounder.
· You must have a handle on core functions – strategy, leadership, sales and finance. Prop yourself up with advisers and top guns but at a minimum know what questions to ask, and how to hold them accountable, ie when you’re being taken for a ride know it and act on it. You are nobody’s patsy.
· Keep on top of your financials – short cycles, prompt reporting is a discipline worth drilling into your enterprise and how you run it. You should track cashflow weekly; profit monthly; and balance sheet (equity) monthly also. No exceptions.
· People and performance – learn how to manage people, performance and problems. It is something that can be learned quickly and easily. This is a skill not a behaviour. You can learn new skills within days.
That should be enough to get you started. If you can distinguish the roles of Owner and Operator and then in turn, your personal success and the success of the enterprise, it will make it so much easier to perform at your best, identify what is working or not, and where and how to take corrective action. Don’t try to do it on your own, engage professional help – you have too much at risk and potentially such much to gain.
by Dennis Roberts
by Dennis Roberts
In many small businesses word of mouth referrals are the primary source of leads. So should you reward the referrer by offering a reward or incentive or trust that the karmic law will prevail and you will be duly rewarded by divine providence.
Unfortunately most creditors require something more substantive than “trust me, the universe will provide.”
Let’s explore the distinction between reward or incentive. Both serve the same end but the means is very different. Rewards are for an action taken in the past. They are a reaction or response to past behaviour. Incentives, on the other hand, are present/ future oriented. They encourage future behaviour. If rewards are the effect then incentives are the cause.
One of the things that dumbfound me most in business is that 80% of leads may come from referrals but the same business will spend nothing on proactive marketing effort to drive that very same pipeline of referrals. Is this true for you?
When preparing your marketing plan include a budget (both time and money) for either incentives or rewards for the creation of word of mouth referrals. In fact take the idea further and make it easy for people to refer you. Spell out your ideal client, what problems or issues they have, and how you can help them.
I prefer incentives over rewards. Why? Because they drive behaviour, it shifts your/ their mindset from reactive to proactive and this is the most empowering thing you can do for someone. Having said that it is a falsehood to claim you can empower someone. The only person who can empower you, is you. An outsider may remind you of that fact, or hold a mirror for you to reflect but personal empowerment comes from inside of you.
by Dennis Roberts
by Dennis Roberts
What is the appropriate strategy or strategies for growth? Before you answer that question consider what is that you are striving to achieve. Growth strategies come down to one of four options:
· Retention of existing clients
· Upselling existing clients
· New clients acquired by organic growth, or
· New clients acquired by merger or acquisition (M&A).
All of these options are a strategic choice. The growth option you choose will be influenced by your strategic objective and in some cases the converse is also true, ie your path to growth may influence your ability to deliver your strategic objective. For example, if you choose not to poach clients from competitors then it may slow your growth. You may choose not to target clients of competitors for moral or karmic reasons but in any event be aware that targeting clients of your competitors is a viable and legitimate strategy. Many consider it fair game.
What is your choice?
Be wary of any choice to combine growth strategies. Hybrid strategies may work but they add a layer of complexity that small businesses typically don’t do well. Focus on “depth not breadth”. If you execute one strategy really well then you gain leverage for your time and effort, rather than scattering your efforts.
If you have an urgent desire to generate new business and operate with a limited budget then the place to start is “one degree of separation” from your existing clients. Start right where you are by retaining your existing clients. Sign them up again. Upsell them into new products or services. Step out one degree and re-engage past clients. Step out one degree and ask current clients for a referral. Ask this question, “Do you, or someone you know, need this service?” if they draw a blank prompt them with follow up questions, “What about your accountant?” “Your lawyer?” “Your financial planner?” Who else? Note I asked an open question here. “Who else?” is very different to “Is there anyone else?”
The common basis of competition is differentiation. How are you different from your competitor? You must know this, communicate it, and communicate the benefits to your customer. There are very few services these days with insurmountable switching costs. In fact the opposite is true. Many buyers welcome an opportunity to try something new. Dare to be different and celebrate and communicate that you are, it may just give you the edge you need.
by Dennis Roberts
by Dennis Roberts
The end of the financial year is fast approaching and for many business owners it marks the time of year for an annual performance review. The effectiveness of your review process will largely be a function of how well you framed your expectations at the outset. The performance review has two parts – backward and forward. So, if you didn’t frame your expectations well last year then not to worry, lesson learned, you can now set and manage your expectations of the coming period.
I know most forward plans project twelve months ahead. The more strategic your outlook, the further forward your planning horizon. I suggest amidst great uncertainty that you set and measure quarterly performance measures. Small business, short focus. Prepare a 90 Day Plan. You can get quite specific with short term accountability.
The main reason I suggest short timeframes is to shorten the decision cycle. Quick, decisive reviews and action are the order of the day. Few small businesses are afforded the luxury of carrying stock, working capital, non-performing staff or overheads of any description.
Conduct a performance review of both your business and your staff. Prior to meeting for the staff performance review here’s a couple of suggestions.
1. Set the context in terms of time period and scope. For example, say upfront that it is going to be an annual performance review covering 1st July, 2010 to 30th June, 2011. It is a performance review of how well you achieved the duties, measures outlined in your employment agreements, contract or whatever you have documented. The first rule of performance reviews is NO SURPRISES. If you, or they, spend much of the review discussing or debating items of feedback that haven’t previously been aired then you are not giving enough informal/ formal feedback ongoing. If this rings true, learn from it, and change your ways.
2. Invite your staff member to conduct a self-assessment PRIOR to meeting with you. The questions that can prepare are “What worked/ didn’t work?”, “What did I do well/ not so well?”, “What were my major wins?”, “What should I keep doing, stop doing or improve?”
3. Let them talk. If they have prepared answers to the questions above then once they have shared their view then, and only then, can you ADD to the discussion. You may have a different view, and that is OK, but let them hold the floor for a bit.
4. Setting expectations. If someone’s performance hasn’t come up to scratch then state what you expect of them. Provide lots of specific examples. Give generous, objective feedback. Listen a lot. If they have done well, then be lavish in your praise. Remain objective and be specific. The best way to be specific is to give examples.
Pay performance or reward results?
Performance drives results. Performance is the CAUSE, whereas results are the EFFECT. There are two things that drive performance – skills and behaviour. In business measures think in terms of the following – lead generation is the performance driver. Sales revenue is the result. Obviously you want to get results but if you want to influence your ability to get results you will need to stimulate the performance drivers at the causal level.
If someone gets results but you don’t know how then it will make it extremely difficult for you to clone their success or build your business.
by Dennis Roberts
by Dennis Roberts
It is an urban myth that you can create sustainable growth in your business. Just as life is followed, or preceded, by death, all growth is followed, or preceded, by periods of stagnation or decline. We have much to learn from the seasons of nature.
It is folly to assume that we can create sustainable growth rates, however we can create a sustainable business that recognises, plans for and adapts to these seasonal ebbs and flows.
Growth will take one of three forms - linear, step function or boom and bust. You may experience any or all over the life of your business. To understand growth is to understand life (and death). It’s all part of the life cycle.
At some point your business may die, or at the very least, experience mini-death (le petit morte) just as the branches of a tree die. You can expedite what occurs naturally just as you can prune the branches of a tree. When you know the cycles of your business you can pre-empt nature by pruning where appropriate.
Let’s explore this growth phenomenon a little further.
Linear (or incremental) growth
This is the basis upon which most business plans and revenue forecasts are created. It seldom reflects reality or seasonality. So what, you may ask? Well, if your revenue forecasts assume steady growth then your resourcing levels will also. This impacts hiring and firing decisions, capital and plant acquisition and expansion, service delivery and all business processes that support revenue growth, client retention and acquisition. Put simply, if you grow faster or slower than expected you are left without contingency strategies to upsize or downsize or take remedial action. It seldom works this way.
Step function growth
Your revenue growth may rise exponentially and flat line for a time. This is often due to seasonal factors, marketing campaigns, product launches and environmental factors. The biggest issue you face is when your organic growth exceeds your capacity to deliver triggering capacity issues. This will require capital investment, labour hiring, outsourcing, business process re-engineering, multi-site expansion and a range of commercial decisions that take you into unchartered territory. When you grow from a one man band with no management infrastructure to having to lead and delegate responsibility the personal challenges rise. It may also trigger a need for debt or equity raisings and greater personal financial exposure. Directors guarantee anyone?
Boom and Bust
This is volatility at its best. Rapid growth followed by either a plateau or downward spike. It is often triggered by turning your marketing pipeline on and off, or your infrastructure not keeping pace. It is easy to invest in the front end of your business, eg sales and marketing because the measures of success are tangible. If you are reluctant to invest in business systems, processes and service delivery capability then you are asking for trouble.
I once worked in the wholesale telco space and witnessed one of our retail customers grow from virtually nothing to $100m in eighteen months by acquisitions and promptly collapsed. The model was not sustainable. The tragedy was that you could see it unfolding before your eyes.
I have been a judge of small business awards and have also worked with small businesses on the brink of collapse. The sweet smell of success or bitter taste of failure is quite intuitive.
How can you better manage your growth?
1. Manage your risk tolerance – most people have a risk tolerance of +/- 10% and entrepreneurs significantly more. What is important here is not your personal risk tolerance but the robustness of your business systems. If you have a high risk threshold and it is not reflected around you, something will break … and it may be you! It is highly desirable to surround yourself with balancing influences not yes men. Engage a coach/ mentor, seek wise counsel from your accountant/ CFO and appoint an Advisory Board.
2. Know when to slow the flow – create your marketing and sales pipelines to be independent of you. As an Owner/ Operator you have the primary role of overseeing business development even if you have sales and marketing people. the buck stops with you as the CEO. If, by good management or good fortune, your lead generation and conversion exceed your capacity to deliver then slow the flow. Don’t turn it off but slow the acquisition.
3. Build robust business systems – you are not your business. Appoint a project team or external consultant to build business systems. This is about working smarter not harder. Build the foundation for your future success. If your marketing budget should be 10% of your revenue then equally a percentage should be allocated to building your backend. How much varies in each case.
4. Build a buffer – expect cost over runs and time delays by as much as 50%. It doesn’t mean blindly tolerate 50% inefficiency in your business but understand that as human beings are estimates are based on best case and life is seldom best case.
5. Keep a tight rein - on your money and your time. At a minimum conduct monthly reviews. Ideally conduct real time reviews. So in order of preference - real time, daily, weekly, monthly. If you don’t have a handle on your monthly performance by the 10th day of the following month you are setting yourself up for a fall. Remember 80% of businesses fail. It doesn’t have to be you.
6. Retain faith in your vision - and back it with the facts. Faith is one thing, blind faith is another. Solicit independent professional opinion, eg coach, mentor, advisory board, accountant. Build a mastermind team around you.
7. Plan you work - it’s actually much more than planning your work. Planning your work suggests time and task management. To succeed in business you really need to think strategically. So whether your plan is one page or fifty pages, it must be strategic. A good strategic plan consists of three core elements in this order – vision, strategic objectives, strategies. Your principle responsibility as the CEO is to formulate this plan and execute it. Do this well and you won’t know yourself as an enterprise leader. Day-to-day challenges will still arise but now you will have a context within which to lead, and not just respond. When Einstein said, “You can’t solve a problem with the same level of thinking that created it” he was talking about your strategic thinking, your strategic plan and your enterprise leadership. I’ve been around the block a few times and this strategic planning and execution element is THE difference between mediocre business and elite performing business.
I hope you have found this article/ blog useful. If you have any questions or issues that I can help you with post a comment or contact me directly.
by Dennis Roberts
by Dennis Roberts
Your ability to reinvent yourself, products/ services, brand and even your category is a key to enjoying sustained business success. Sadly most business owners don’t look at reinvention or innovation until it is too late. Why? 80% of the population adopt reactive behaviour. They wait for the external environment to create such discord or circumstance that change is demanded.
When you run an enterprise the best advice I can afford you is to reinvent yourself and your business on an ongoing, if not scheduled, basis. You may well ask, “Why take action when it’s not broken?” Well, the business environment moves so fast and with such volatility that if you are standing still or operating from yesterdays assumptions and beliefs you will be dead in the water.
In the education sector curriculums which are set at the beginning of the year are outdated before they have run their term! Fortunately, you are an enterprise and a small(er) one at that and this affords you the flexibility and ability to alter course more quickly than larger institutions. Herein is a major competitive advantage for you. If you program annual reinvention of yourself and your business you not only take out the reactivity, you create a decisive advantage over your competitors, big and small.
Quite simply, if there was one new thing you did in your business all year, let it be this – reinvent yourself and your business. Question the very assumptions upon which you started the business. everything is fair game.
Here’s some things for you do:
Make reinvention an annual event – Given that reactivity is so widespread take the spontaneity out of the equation by programming an annual review, or time to reinvent yourself. This applies equally to your as an individual as it does for your products, services, brand and category.
Go offsite – The process of reinvention, innovation or lateral thinking is best explored when you are free from the constraints of your day-to-day activities. Get out of the office, commune with nature, or find some avenue where you disrupt the limits of your current thinking. Creatives adopt techniques like writing ideas with your non-preferred hand, engaging in musical or theatrical stimulation, or any right brain activity.
Innovation is play – Business is too serious. If managing a business is science then innovating is art. Give you and your team permission to explore the unexplored. The creative power houses like Google and Apple have made art an art form. Huh? Give yourself permission to play and reap rewards unimagined by your logical, linear, conservative left brain.
by Dennis Roberts