Business Owners Toolbox Blog Discussions and articles to help the small business owner solve the challenges they face as they grow their business.

July 24, 2012

Former Employee Poaches Your Clients

Filed under: Employees and Human Resources — Tags: , , , — Mike Van Horn @ 12:02 pm

Q. Can you stop a former employee from poaching your current clients?  Question on Quora.

A. Probably not.

The bigger question is, from now on, how do you get your clients to identify with your company rather than with a particular employee. Do clients work only with one of your staffers, or do they draw on the team?

Some clients can be drawn away by the promise of lower fees, but a client who leaves solely on price may not be a very good client anyway.

This is a good time to ask your clients how you could serve them better.
Give them a call; put in some face time. If they’re already grumbling about
you, then they’re ripe to be picked off by a competitor, including your ex. In
that sense, this event could be an important wake up call for you.

Sometimes clients come back after a time, because the newly independent guy cannot provide the level of service they are used to. Keep in touch.

And finally, sometimes you’ve just got to let it be. After all, how many of us started our businesses with a few customers from our former employer? It’s the chain of business continuity. Look at it as a form of giving back.

Then go out and beat this guy in the marketplace with your superior service!

Where to Get Help to Grow Your Business

Filed under: For Coaches & Consultants,Small Business Resources — Tags: , , , , — Mike Van Horn @ 11:05 am

Q. Who is the best choice to help you grow your business?

I used a business coach to help get my business off the ground. Now I want to grow my business. Who do you think is the best–my business coach, a CPA, a financial advisor, or a business attorney? Or someone else entirely? Asked by Jacquelyn Bell, CPA on “Small Business Owners Group” on LinkedIn.

A. My Answer

Rule #1. As your business grows, don’t be the Lone Ranger! Get some form of outside advice and support. Every exec of a larger company relies on this. Only small biz owners hold on to the mistaken idea that they can go it alone.

You offer several good suggestions, and here’s another: business owner round tables. My company leads ongoing peer advisory groups for owners of growing companies, and I know there are similar groups all over the country.

How the groups work. I’ll use my groups as a model so you can find or build a similar group: Ten owners meet once a month for half a day, under my guidance; members set goals, hold each other accountable, give feedback, and do problem solving.

Benefits. A group of savvy owners holds your feet to the fire the way no consultant can. “No way would I show up for the meeting without doing what I had committed to the group.” The breadth of experience is so great within a group of ten, it’s hard to find an issue that somebody hasn’t dealt with. You find great role models: “If she can do it, surely I can.” You discover that your worst problems are not unique; others have dealt with the same. You learn from others’ problems: “I was advising him, and I realized my finger should be pointing right at myself.”

Guidelines for a business owner round table:
— Have a leader. All-volunteer mastermind groups are very tough to keep on track.
— Have people at similar levels of sophistication. I have groups for solopreneurs, and other groups for those with a management structure.
— Diversity of business types is a major strength. I’ve led groups where they were all in the same industry, and they all thought the same–nobody to challenge them.
— It’s not a networking group. You don’t want your best customer in the room when you’re describing your toughest challenges. Of course, no competitors.
— Members must agree to be there, on time, till the end. Missing meetings hurts the rest of the group.
— Written agreement of confidentiality.
— People need to pay–even if they miss a meeting. Otherwise they don’t respect the commitment.
— The leader has to be strong enough to ride herd, yet not dominate the group. The members need to be the resource for each other.
— My groups have ranged between 5 and 10 members. More people and you don’t get heard.
These groups can be long-lasting. I have a number of 5 to 10 year members.

Such a group does not replace specialized professional advisers. You still have your CPA, CFO, attorney, marketing whiz, etc.

But a group of peers helps you with the subtle ways you need to change your management style so that you can keep up with your company’s growth.

Look here for more on how our groups are run.

“Round tables” don’t have to be round! Our groups meet in a board room with a long table, comfortable chairs, and a large coffee pot. And plenty of white boards to take notes on while members discuss their issues.

July 17, 2012

Hire a Small Consultancy?

Filed under: For Coaches & Consultants — Tags: , , , , — Mike Van Horn @ 9:52 am

Q: What are the top 3 things solo practitioners can do to out-compete the big brand consulting firms when vying for a project? Asked on Linked In by Roberta Guise

My answer:

The top 3 benefits to clients of working with smaller consultancies:
#1. You get to work directly with a principal of the firm, not with some green MBA sent out by the partners.
#2. Nimbleness and flexibility.
#3. The billing rate includes less markup to cover the cost of big offices and admin staff.

On the other hand, there are some (perceived) drawbacks:
#1. You’re stuck with one kind of expertise, and they try to make all your problems fit into what they know.
#2. If they’re busy, you wait. Your project may be subject to unexpected delays if multiple clients of theirs all have urgent requests.
#3. “What if the principal is hit by a bus?” You fear there’s nobody to step in to complete your project.

As the small consultant, how do you address these concerns with clients before they mention them? Here’s how I handle them:

1. Ally yourself with a few other complementary and trusted consultants, and don’t be afraid to refer business to them. You could also bring them into a project on a sub-contractor basis. These referrals have to flow both ways.

2. Under-promise, over-deliver. This is our time-management bugaboo. Don’t schedule all your hours; leave some time for urgent things that come up. The flip side of this concern is that we often handle urgent client requests during “overtime”—evenings and weekends.

3. Addressing this one requires having one or more strategic partners who can fill in for us, when we get sick, have an emergency, or just want to take a well-deserved vacation.

“Small” needn’t mean “solo.” The best consultancies I’ve had relied on two to four consultants who had partially overlapping areas of expertise. We were complementary. One client may use more than one of us. And we did have the capability to partially fill in for each other during absences.

Finding the right mix of people is not easy, but that’s a subject for another blog post.

July 16, 2012

How to Finance a Second Location

Filed under: Finances,Planning — Tags: , , , , — Mike Van Horn @ 10:27 am

From a question on LinkedIn by Arthur Goldhaber

Q: What cost items get left out when store owners are figuring out what size loan they need to open a second location?

A: Here are some expensive items that owners often overlook. I have several small business clients that have recently gone through this—a restaurant, a bakery, and another company that moved to a larger facility. They were good at figuring the new operating costs, lease and facilities cost, and tenant improvements, but there were several ways they underestimated the cost of the expansion:

The cost of expanded inventory. Some owners try to purchase expanded inventory out of current cash flow rather than making that part of the new-facilities investment, and they soon go into cash crunch. Their cash reserves won’t carry them through the time between when they must pay for new inventory and when they get cash from selling it.

Hiring and training a top manager for the second facility. Assume the owner currently runs the first location, and has an assistant manager. If the assistant manager is not skilled or experienced enough to step into being manager of the second location, then a new and more expensive manager will have to be hired and groomed for some period of time. That is strictly an overhead cost.

Help for owner. Since the owner will be totally absorbed in getting the new place going, someone must take over many of his or her regular responsibilities. This may require hiring extra people. (But may be combined with hiring the new manager.)

The cost of getting needed approvals, negotiating a lease, designing the new interior, overseeing the tenant improvements. These things take a lot of the owner’s time, but they also may require hiring expensive professionals: engineer, consulting contractor, lawyer, architect.

Cost of changes in location #1. The original store may need an upgrade to bring it in line with the snazzy new place. May need changes in the back office to accommodate admin for two locations. They discover that their old systems are completely inadequate, and need an upgrade: POS, inventory control, employee time tracking, accounting, plus the computers and networking—all integrating multiple locations.

Hiring and training staff for the new location before it opens, and before it has positive cash flow.

“Stuff happens” funds, to cover delays, glitches, cost overruns. For example, “At the last moment, the city required us to upgrade our handicapped access.”

The cost of capital. They may neglect to factor in the cost of borrowing the capital they need, paying interest on the investment until the new location is profitable.

Get the right kind of loan. Some businesses try to finance expansion with their revolving line of credit, which must be repaid every year. This can actually force you out of business! You must get a term loan for 5 to 7 years, which allows you to repay out of the profits of the expanded operation.

Never finance long-term needs with short-term capital!

Don’t use revolving line of credit, credit cards, or vender credit–except for quick turnover items or as a receivables bridge.

Do use term loans (including a personal loan), equipment leasing, funds from second mortgage or your own savings.

 

The good news is, once a company gets its #2 location up and running successfully, #3 and 4 are a lot easier. And since you’ve proven you can do it, it’s easier to attract capital.

July 10, 2012

Selling Internet Video Marketing Services

Filed under: Marketing — Tags: , , — Mike Van Horn @ 4:58 pm

Q. As the owner of an internet video marketing company, what is the most effective way for me to prospect and generate sales with little or no budget? Asked on LinkedIn by Jonathan Franco.

A. Selling “internet video marketing services” cries out for internet video marketing!
At the same time, 80% of selling is just showing up. You’ve got to get your face out there. In the end, people buy you.

The people I know in your business go to meetings of business organizations and make presentations on how to do video marketing affordably. The venue must have wi-fi and a digital projector, so that you can demonstrate some before-and-after efforts. Select a guinea pig and do a two-minute video for them right on the spot. You want people to say, “That’s not so scary! I could do that!” and “I like this guy. I want to hire him to help me.”
Your approach is to show ’em how to do it for themselves, so that they will hire you to do it for ’em.

No budget? Then you have a one-man bootstrap operation–at least initially. You have to substitute your time for money. But you will need to invest in a quality website, where you can embed your videos, because that’s your portfolio.

It’s hard for me to see you attracting investors so you can hire a sales force. Don’t waste your time even trying. Get out there and sell yourself!

July 3, 2012

12 Steps to Introduce Change to Your Employees

Filed under: Employees and Human Resources,Growth Management,Overcome growth barriers — Tags: , , — Mike Van Horn @ 9:28 am

“How NOT to introduce change” was the topic of a previous post. So how should you do it? Follow these steps. I’ll elaborate on these in upcoming posts.

  1. Treat change as a shift in your business culture.
  2. Take leadership. Don’t leave it to others.
  3. Do your homework before you start.
  4. Involve all those affected.
  5. Apply the Problem Solvent.
  6. Build acceptance, starting with allies.
  7. Address questions, concerns, and objections.
  8. Tackle resistance.
  9. Watch for the hidden barriers.
  10. Stick to it. Don’t get sidetracked.
  11. Know when to change course.
  12. Declare completion.

I’ll talk about these in upcoming posts, but I’ll start here with #8, “How to tackle resistance to change,” because that’s what the most people ask me about.

How to Tackle Resistance to Change

When you introduce change to the people in your organization, you can count on questions and resistance. Even making minor changes: “All I wanted to do was change the type of fluorescent bulbs we use; I had no idea this would rouse such heated discussion!”

How do you tackle this resistance? Here are a few guidelines from my “Twelve Steps to Successful Change” from my new ebook.

Resistance comes from supportive and well-meaning people—it isn’t necessarily antagonistic. It can come from long-time employees, your partner, spouse, co-owner, or even from you. Yes, you! You, as owner, are an enthusiastic backer of the new system. You want the benefits, yet you resist the change and become part of the problem yourself. If your people sense this, then you give them tacit permission to vacillate and backslide.

Can you spot these negative reactions to change? How will you address them?

• Inertia. Any change is resisted. Its value must be proved.

• Not invented here reaction. “If we didn’t come up with the idea, it can’t have much value.”

• Busy-ness. “It sounds great, but we have way too much to do already.”

• Bad timing. “We can’t do this just now. We need to wait until after the summer season.”

• “It’s just another whim of the boss. If we drag our feet, she’ll get tired and forget about it.” This is an important comment on your management style.

• Fear. “I’m afraid I’ll be held accountable for all of these tough things in the future.”

• Resistance to your mandate. You think you are asking, “Will you do this, pretty please?” while others hear you demand, “You will do this!” Perception is reality!

How can you create allies from people who are initially indifferent or against you? By heeding their concerns, and producing positive results.

Resistance with a smile. Some people will smile and say, “This is a great thing.” But then they will pick it apart and criticize you behind your back. For example, a long-time loyal employee may subtly resist things you want her to do that push beyond her comfort level. These might include mastering a new technology, adopting new systems, logging time or activities, supervising others, or even participating in the coordination meetings for the big transition.

This puts you on the spot. You are loyal to her but you can’t let her dictate the pace of change. She has done her job well up to now but now the job requirements are changing. Can she adapt? Is she willing to learn? How can you make it easier for her?

Her initial resistance may melt away once the change is made and positive results are apparent, but it may not. She may not be happy with the new responsibilities, and on top of that feel guilty for letting you down. She may well be happier elsewhere.

The Foot Draggers’ Club. Some who resist turn out to be saboteurs. Unfortunately these might be long-time employees. They may pay lip service to the change yet drag their feet to the extent that the process is endangered. They may seek out others who don’t want to change and reinforce each other in their resistance. Their hidden agenda may be to prove that the new process won’t work so you will go back to the old way of doing things. It is dangerous and debilitating for you to allow this to spread. In most cases you will have no choice but to get rid of such people.

You can find the whole program laid out in my new ebook “How to Introduce Change to Your Employees” on Amazon for Kindle or iPad. A very affordable $2.99.

 

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