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

November 25, 2009

Why Did You Go Into Business?

Filed under: Entrepreneurship — Tags: , , , — Mike Van Horn @ 2:08 pm

from a LinkedIn question asked by my friend Christopher Richards. I think this is a good question for all of us to ask ourselves. In “Success in 2010,” our annual plan workshop, the first question is, “Why are you in business?” It completely stumps some people! But once you answer that, it really helps you to organize your business to give you what you want.

Here’s my answer:

I went into business by accident. I was at a party. I overheard these two engineers talking about a project they’d gotten to produce a big conference for Jet Propulsion Labs. They were puzzled how they were going to handle the group interaction, which wasn’t their strength.

I butted in and said, “I could do that for you.” I ended up as #3 guy on the project, which went really well, and we were offered follow-on conferences. The two engineers said, “This really isn’t our thing; we’re turning this over to you.” So there I was, sole owner of a technical conference production company, with up to ten employees.

Since that time, I’ve only had one “real job” (i.e., one with paid vacation), when I made the mistake of going to work for my best client. That lasted two years. Since then I’ve owned an export management company (which lasted till Japan’s economy went in the tank), and my current company, The Business Group.

I’m in business because I like to create and organize big things. Yes, I like the money, and yes, I like contributing to others, but those aren’t the main drivers.

At heart I’m a teacher and  communicator and organizer, and my businesses have all been designed as venues for me to exercise these strengths in various ways.

And to schedule time off when I want it.

Oh yes, then there’s the fact that I’m such a hard-headed, autonomous sumbeech that no employer could long put up with me!

November 6, 2009

Delegate till it hurts!

Filed under: Growth Management,Marketing — Tags: , , , , , — Mike Van Horn @ 6:14 pm

When it comes to delegating, business owners can be their own worst enemies. (from my post to the Bay Area Consultants Network LinkedIn group)

“Delegate till it hurts!” is the advice I give my small business owner clients, who are overworked yet reluctant to hand off tasks to employees they’re paying good money to.

Yesterday I met with a client who owns a 10-person company. She hired a numbers person to free her up to do the creative stuff that brings in the money. Yet she still holds on to estimating “because it’s complicated and it has to get done right.” This takes so much of her time that she neglects business development. So we discussed how to hand off estimating to her numbers person.

Of course she neglects business development because marketing calls scare the bejeebers out of her. She holds onto estimating–call it “comfortable drudgery”–so she won’t have time to do the marketing.

What is it about marketing that scares her? She says every call seems like a cold call. Her unspoken attitude is, “You wouldn’t want to buy anything from me, would you?” So then how has her business been so successful? “I’m good at building relationships,” she says.

So I tell her, “Stop marketing. Instead, go build relationships–with allies and people who respect you. Tell them how much you admire their work, and that they are the kind of person you’d like to work with.”

This suggestion seems to take a load off her shoulders. Then she says, “I dislike making the calls to set up these visits. Hmmm, maybe I could hand this off to ‘numbers lady’ also.”

So. Two major delegations to free her up to focus on the two things she loves about her business (and that make the cash roll in) — creative stuff and building relationships. And delegating to a person who’s already on payroll. Note that we got there by addressing her fears and resistance and old habits. Otherwise she would remain the bottleneck to effective delegating.

She left with a new spring in her step.

This is why I love my work!

mvh

October 21, 2009

What qualities do you look for in a partner for a start up?

Filed under: Entrepreneurship — Tags: , , — Mike Van Horn @ 2:00 am

Asked by David Shaw on LinkedIn

1. First of all, never form a partnership, period. Use some form of incorporation instead. Partners have 100% liability for each other’s actions. But we often say “partner” when we mean fellow stockholder.

2. Never take on a “partner” if you can hire the person instead. Giving someone an equity stake because you cannot afford to pay them a salary will turn out to be the most expensive hire you ever make.

3. The only justified reason to bring in an equity “partner” is that they bring in something that you cannot obtain in any other way, such as:
— Capital. But even this is chancy. Much better to use a line of credit, or sell shares to a handful of investors.
— Synergy. The two of you have a proven wonderful working relationship and have complementary skills. For example Doer and Rainmaker, or Creator and Implementer.
— Connections with customers or resources that will make you rich.
— Access to a market that you could not otherwise enter.

If you do get a “partner,” get your working agreement (“pre-nup”) drawn up by the most hard-harded, cynical lawyer you can find, so it will have contingencies for all the worst-case scenarios starry-eyed newbies never think of.

By the way, the only thing worse than seeking a “partner” for your start-up is bringing in an equity “partner” to your established business. I’ve never seen a single instance where this worked out. Instead, hire them as a consultant.

If you want to bring in an equity “partner” to get a capital infusion for rapid business growth, don’t sell them a stake in your existing business. Instead, have them become a shareholder in a new venture the two of you start, while you retain control of your original company. The new company can contract for services from your original company.

mvh

October 15, 2009

What are the leading indicators of business success?

Filed under: Entrepreneurship,Growth Management — Tags: , , , , — Mike Van Horn @ 12:17 am

Asked by John Cameron on LinkedIn

Good questions, John!
With the entrepreneurs and small business owners I work with, here are some of the personal success indicators I look for:

— Desire to be a manager and executive, not just a worker and detail person. (Many prefer just to keep working away.)
— Habit of stepping back and looking at the big picture regularly
— Planning, even in the face of uncertainty; then review their plan regularly, take corrective action, and update it as needed
— Willing to hire top quality people–even people smarter than they are
— Delegate as many things as they can to others, to free them up to focus on strategic issues
— Willing to invest in their own business; to take a risk; to hire a person they cannot afford right now, but who can help them break out
— Get support from peers and experts who have been where they want to go. Listen to and learn from these people, even when it’s uncomfortable.
— Continual learning: improving management skills, mastering new technologies, broadening industry knowledge

Note that these are about the individual, not the business concept or model. However, I also look for:

— A business model that promises profit margins adequate to pay them well, but also to fund growth, pay back investors, and provide a cushion for tough times.

Also, notice that I said nothing about working 24/7. I do not think that correlates well with business success.

I have a Business Viability Test that I use to assess business models. I haven’t yet included that in my e-tools, but I think I will.

October 8, 2009

Getting Past Procrastination

Filed under: Entrepreneurship,Not yet categorized,Small Business Resources — Tags: , , , , , , , — Mike Van Horn @ 3:26 pm

Inspired by a short article in BNET, “Why We’re Wired for Procrastination”

Do you ever procrastinate? Stop kicking yourself! The linked BNET article says it’s not a moral failing; it’s just the way the brain is wired. Here are the first three “brain quirks” and the resulting “procrastination effects.” (There’s more detail in this Psychology Today article.)

  • Quirk 1: The brain is built to firstly minimize danger, before maximizing rewards.
    Procrastination Effect:     We avoid tasks that threaten the self, and we discount future rewards in favor of immediate gratification.
  • Quirk 2: Too much uncertainty feels dangerous. It feels like possible pain so we avoid it.
    Procrastination Effect:     Uncertainty — not knowing what to do next — is scary. Delaying a task becomes a way of coping with or avoiding that fear.
  • Quirk 3: Our conscious processing capacity is small, which makes us terrible at a lot of things, including predicting what might make us happy.
    Procrastination Effect    : It’s difficult for us to set realistic goals — or stick to them.

Well, okay, procrastination is not a moral failing, but we still have to run a business, and get things done.

My clients are small business owners, and I see this behavior everyday in them (yes, and in myself). This springs up whenever they need to get out of their comfort zone and dive into the new, e.g.:

— Making marketing calls
— Expanding into a new niche
— Hiring a top level manager
— Investing in growth
— Preparing their business to sell
— And the #1 Procrastination Generator: Writing a book! Hey, many of us get frozen up trying to write a blog post!

So how do you counter procrastination? I was excited to note that the way I work with owners helps limit their procrastination due to these “brain quirks.” Here’s how: I put together groups of 10 owners. Each ongoing group meets half a day a month. The purpose is to tackle the challenges to growth you face, using the group as your problem-solving panel and sounding board. But these growth challenges are the very ones that generate the most procrastination, because you are forced outside your comfort zones. Thus a big part of what we do is have members set commitments, then report back to the group the following month.

Being held accountable by a group of peers you respect is a powerful force. As one woman said, “There’s no way I’ll go to the group and not have my commitments done! I’ll stay up till 2:00 am the night before if I have to.”

The 9th Circle in “Procrastination Hell” is reserved for people who write books. And business owners who write books are in the center of that circle. Running your business is a full-time job, and writing a book is a full-time job. The business pays you now; the book might pay you something way off in the future. The business gives you instant feedback on how you’re doing. The book? Will anyone ever read the dang thing? Writing a book–even a business how-to book–is complete self-exposure.

Thus writing a book scares the bejebbers out of people. (I’m saying this as a guy who’s published four books, and many workbooks.) I tell people a book takes two years to complete: 10% of the time writing; 90% agonizing over it.

An example: A consultant I’m working with has been writing a book about his field for the last couple of years. The early parts went really well, but the  closer he got to the end, the slower it got. He’s down to writing the lead ins for each chapter, and progress was zero. Every time he set aside time, something would come up. Paid client work! Can’t miss that. The wife needed his help. The dog had a problem. Etc.

We talk by phone 10 minutes a week, setting goals, then reporting how it went. Every time there was no progress, we problem-solved how to do better the next time.

Finally one week, he made a bit of progress. Elation! Congrats!

Then the next week, he reported that he had completed all the rest of the chapter summaries. “Once I got started, and generated some momentum, I just kept rolling,” he said.

Lessons:

1. Having a coach really helps. When I write my books, I hire a coach to keep me on track.

2. When you are stuck, find a way to get unstuck that will allow you to make a bit of progress.

3. Once the logjam is loosened, and you build some momentum, keep going. Stay on a roll as long as you can.

4. Strike while the iron is hot! When you feel a bit of inspiration, go for it RIGHT THEN. If you wait even 1/2 hour, it’s gone.

In my e-book “Recapture Your Time,” I have a section on getting creative things done while you’re running a business. Overcoming resistance. Carving out time for development. Finding your best creativity work style.

And I’m also doing an e-book on “Cash Flow From Your Creativity.” When will it be done? Depends on how well I practice what I’m preaching here. If you’re interested, bug me, then I’ll be more likely to get it done sooner.

mvh

October 5, 2009

How Can Small Business Compete for Top Talent with Large Corporations

Filed under: Employees and Human Resources — Tags: , , , , — Mike Van Horn @ 4:34 pm

(From question in wsj.com Small Business Forum)

Let me count the ways!

Small companies have many advantages in attracting top people. Here are a few. (I work with owner-run firms from 5 to 100 employees.)

— Shorter commute. One 50-person client just hired a COO for $120k who’d received a $150k offer from a corporation in the city. He opted for a local 10-minute bike commute over the hour+ daily grind each way. He figured the extra two hours a day added to his life was worth $30 grand a year.

— More opportunity. Another client hired a GM away from a much larger competitor. The guy saw that he’d reached the top where he was, and in the new job, he’d get to lead a major growth push. Big fish in a smaller pond.

— Less travel. Many professionals in their 40s and 50s switch to smaller, local firms because they’re tired of constant travel they’ve had in their corporate jobs.

— Flexibility. “Yes, we can bend your schedule around your kids’ soccer games.”

— More diverse opportunity. They see they’ll get to take on a much greater variety of projects and responsibilities.

— Get to work directly with the principals. Small companies may be headed by much more innovative and leading-edge people, and it’s a great opportunity to work with them.

— Less corporate bureaucracy and politics.

— Un-retired. Here’s a big growing trend: Senior people retire from the corporation, then go to work for smaller companies. They trade less money for lower stress and flexible hours. The oldest guy working with us is in his mid 70s.

Attracting top people is a marketing job. You must look at your company through their eyes, see what you offer that will attract them, and how you can make yourself more attractive. It’s about much more than just offering more money.

However, many small business owners discover that the people they’ve lured away from large organizations aren’t a good fit. These people may be accustomed to narrower duties, superiors telling them what to do (thus uncomfortable taking initiative), having a lot of support staff (thus not resourceful at getting things done). But by far the worst quality is exhibiting “employee mentality” rather than the “entrepreneur mentality” needed in a small, dynamic firm. And I’m talking about top-level managers!

So it’s essential to make sure that the “corporate escapees” you hire are comfortable in your small business culture.

September 24, 2009

The Power of a Strong #2

Filed under: Growth Management — Tags: , , — Mike Van Horn @ 5:30 pm

(from discussion in a Business Group meeting)

“I’m now getting a glimpse of what I can do in my business if I’m not in charge of day-to-day operations.”
So says a woman who owns an eight-person professional service company and who just hired a top-notch marketing associate. “Execution–doing the work–isn’t our problem; it’s keeping the pipeline filled. That’s what she’s going to do.”

“Now that she is producing results, I have the bandwidth to turn my attention to building the strategic relationships we need in order to expand into new cities.”
“She’s expensive. But what choice do I have if I want to grow? I’ve got to be willing to invest in my business—especially right now as the economy is beginning to turn around. I’ve got to be there to take advantage of the opportunities that are happening right now. If I don’t, the others will be passing me by. The key is selecting that person who can do the job—even better than I could—so that she pays for herself many times over.”

My question to you, readers: Who is the strong support person you should bring in (or groom) to free you to leap into the emerging opportunities? Could be anybody from a part-time admin assistant to a high-powered director of operations.

When Do Companies Stop Being Creative?

Filed under: Entrepreneurship,For Coaches & Consultants,Growth Management,Not yet categorized — Tags: , , — Mike Van Horn @ 5:23 pm

(From my response on joyofhumancapital.com.)

A. As I look around at the small business owners I’ve worked with (including myself) here’s what I see:

1. Creativity comes in all kinds and sizes of business, and so does failure of creativity.

2. Failure of creativity follows shifts in the attitudes of the owner and other key people

CREATIVITY KILLERS FOR SMALL BUSINESS OWNERS

• Owners get dragged out of creativity by the demands of running the business day to day. This has a lot to do with your own management style. “ I can’t find good people that I can trust.” “I got into this business to do what I love; now I spend all my time as a damn manager.” Thus you are continually pulled back down into lower-level tasks, and can’t focus on creativity, vision, strategy.

• Lack of support. Nobody is pushing you to take the creative leap, nor problem solving how to overcome the hurdles. No-one following behind, handling the details, executing the vision.

• Lack of systems; seat-of-pants management. Thus your “franticness quotient” increases exponentially with growth.

• Ill-fitting systems. E.g., accounting or project management or sales tracking systems that don’t give needed performance information to the owner.

• Constraining systems. Too much “by the book” or “bean counter mentality.” Of course the owner has put these into place, but then starts believing in them.

• Failure of vision. A creative owner gets beaten down, burned out. You have one good idea, but stick with it long after the window of opportunity has slammed shut. Or you fear taking the needed next step. “Tried that, got beaten down, it didn’t work, now I’m gun shy.”

• You get out of touch. You drift into an eddy out of the current of new ideas and technologies. This can be related to age, but there are many creative codgers out there.

• You get too comfortable. The balance between work and life tips toward Maui.

• Physical/mental impairment. Alas, this eventually catches up with us. If you’re smart, you’ll go out at the top, handing the creative reins over to the young whippersnapper you’ve groomed—and whose ideas you probably hate.

What’s the answer? First, see if you spot yourself in the above list, and own up to it. Then you can tackle the problem.
— My book can help you tackle this challenge: How to Grow Your Business without Driving Yourself Crazy.
— If you were a member of one of our business owner groups, this would be a perfect challenge to bring up to your group of peers. This is valuable because it’s often hard for us to see and acknowledge our part in this process.

— Call or email me. I’d be glad to talk with you a bit about this at no charge.

Marketing vs. Selling

Filed under: Marketing — Tags: , , — Mike Van Horn @ 4:22 pm

Q. What’s the difference between marketing and selling? I often hear these words used interchangeably.
(Asked during Business Group meeting)

A. Marketing and sales are often confused because “sales person” is seen as much less prestigious than “marketing associate,” so everything gets lumped into marketing.
Marketing is everything you do to prepare for sales. Selling is closing sales that make you money. Thus, you could say . . .
— Marketing is money OUT the door.
— Selling is money IN the door.
For small business owners, marketing is usually time intensive. We spend at least as many hours as we do dollars on marketing.
People who are good at marketing are often not good at selling and vice versa. These take different personalities and mindsets. Seldom will you find one person who is good at both. That goes for us entrepreneurs as well. We’re usually much better at one than the other, but we are forced into both roles, one of which we do poorly.

WHAT’S INCLUDED IN MARKETING? Remember, marketing is everything that leads up to selling. Here are some marketing activities:
– Handling incoming inquiries
– Asking your current customers for referrals for more business
– Networking and building relationships
– Advertising and public relations. Direct mail and e-newsletters
– Special promotional events
– Merchandising and merchandise selection
– Holding sales, offering preferred customer bonuses
– Getting articles published. Blogging
– Doing cold calls to set appointments
– Market research, customer surveys
– Branding, creating your sales message
– Design and creation of collateral materials
– Building and maintaining your web site, blog, Facebook page, Twitter
– Market planning and strategizing

Marketing includes doing good work so that your customers come back, and tell others about you. It includes hiring employees who are good at customer service, and giving them the training so that they can keep your customers happy.

Marketing includes pricing–finding the price level that will attract the customers you most want to do business with (and will make you a profit).

Marketing includes product design and development and packaging.

All these things lead up to selling.

SELLING INCLUDES THE ACTIVITIES THAT GET CUSTOMERS TO MAKE A PURCHASE . . .
. . . presenting, answering questions, making suggestions, doing proposals or estimates, addressing concerns, negotiating. And most important, asking for the sale. Then completing the sales agreement, etc.

Your sales people clearly do some marketing. Networking, responding to inquiries, making public presentations, doing cold calling, calling old customers. The marketing that sales people do best is just one or two steps away from selling.

Selling is harder than marketing, and this is why good sales people get paid a lot of money. As business owner, your aim should be that your sales people get filthy rich, because in the process, they make you even richer.

Because selling is hard for many people (including sales people), those who are hired to do both often spend too much time on marketing activities and not enough on selling. (This goes for us as business owners as well.)

Salespeople are motivated by performance incentives, aka commissions. In my experience, sales people on an hourly rate or salary are less effective. If there’s a mix between salary and commission, it should be weighted toward the latter. Their performance is very easy to measure: signed orders, cash in the door. Not hours worked, nor contacts made, but sales closed.

The marketing and selling funnel. This funnel shows the different stages of marketing as it proceeds toward a sale. It’s wide at the top and narrow at the bottom. This represents that your marketing must reach a lot of people in order to make a few sales.

I’ll send this to you for free. Just subscribe to my list, then email me and ask for it. I’ll send it as a pdf. (You’ll also receive my Success Tips from Small Business Owners, just for subscribing.)

Who Is the Carrier of Your Company’s Culture?

Filed under: Growth Management — Tags: , , , — Mike Van Horn @ 4:15 pm

Q. If I have a virtual company, how can I have the kind of company culture I want?
(question on LinkedIn)

A. Who is the carrier of your company’s culture? You, of course, plus the people who work for your company. (And to an extent, customers and others who influence it with their expectations.)

The less continuity in your workforce, the harder it is to sustain a desired culture. If it’s just you plus a bunch of subs and virtual assistants, there will be a culture, but it may not be the one you want. You’ll have to work harder to maintain a culture of shared mission and commitment and productivity among people who work with you only some of the time and have little invested in your success.

I have many small business clients that have key players who work remotely, even on different continents. The owners sustain the desired culture among the far-flung folks by:
— Paying attention to it. Knowing what culture they want and continually pulling people and operations toward that.
— Selecting the right people. It takes a special person to be able to support your desired mode of interaction when they are half a world away
— Having regular face-to-face team interaction. This usually means getting people together for special events, but video conferencing can work also—at least for some of the interactions. And cost decreases make this increasingly feasible for even small companies.
— Rewarding those who act in congruence with the desired culture, and eliminating those who won’t.

Even a tight-knit group working physically together will pull against you, and test the limits of the cultural norms. This is even more prevalent with remote team members. You as owner are the ultimate keeper and enforcer of the culture.

I have a downloadable piece titled “Build a Culture of Growth” that goes into this more.

Or call or email me with your challenge. I’ll be glad to talk with you – at no charge.

mvh

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