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

January 20, 2011

New Year’s Resolutions? Useless!

Filed under: Social media — Tags: , , , , — Mike Van Horn @ 12:45 pm

Inspired by Rochelle Moulton’s post on this topic

Resolution . . . Practically useless
Resolution plus Action Plan . . . Useful, maybe
Resolution plus Action Plan plus Support and Accountability . . . Now we’re talking real results!

I find that 80% of the business owners I work with make their goals. That’s because they take the time to set a practical plan, and they work together to keep each other on track.

Part of my 2011 resolution is to blog at least twice a week. Not just blogging for the heck of it, but as part of a strategy to build visibility and interaction.

I haven’t kept to this before, as you can tell. So I’m making a public declaration, and I have two levels of accountability:

— My wife BJ, who’s in the business with me, and who also lets writing deadlines slide. If this doesn’t break up our marriage, maybe we’ll instill some writing discipline in each other.

— I hold weekly problem-solving and goal-setting meetings with fellow consultant Janet Tokerud, who has several technology blogs and sets a good example for me.

I’ll be saying more about implementing the various parts of my “visibility and interaction” strategy in my twice-weekly blogs.

December 1, 2010

How to Say No to a Prospect

Filed under: Not yet categorized,Welcome to Mike's Blog — Tags: , , , , — Mike Van Horn @ 6:27 pm

“Sharisax is Out There” has a series of posts on this topic, and my “guest post” is the fourth in this series. After you read mine, check out the other articles.

Selecting the best clients is critical to growing your business, so how can you bring yourself to say no to a prospect?

First of all, you must know what kind of clients or work you want . . . don’t want . . . and why. Define your core expertise, and who your services are best for. Create a brief mission statement out of this. Then re-read it when you are talking with a marginally qualified prospect.

The main reasons you should say no are, in my experience:

1. Unprofitable

2. Off target for you

3. You don’t like them

If you think a prospective client isn’t right for you, you might ask, what would it take to make them right? For example, raising the price. Or being able to hand the work off to a subordinate. You propose that to them. They’ll probably say no, but if they say yes, you can have a good client.

If you’re turning down work because you’re too busy, then:

— Take the most interesting and challenging and lucrative work

— Raise your prices

— Hire a qualified associate, and bill them out at 3 times what you pay them

You’ve got to deal with your own resistance to saying no. For example:

– “In these tough times, I need every client I can get (even the unprofitable ones).”

These clients suck up the time and energy—and profit potential—you should devote to profitable clients. Your profitable, desirable clients end up subsidizing your unprofitable, aggravating ones.

– “Maybe they’ll grow into a bigger client.”

Occasionally true, but make sure you price high enough so that it’s profitable now.

– “They really need me, but don’t have the money.”

To keep your own business healthy and profitable, yet still help out the cash-flow-challenged, set a percentage (5 to 10% of your work time) for pro bono or el cheapo work you will do, and stick to it. Oh, and if you notice that this “poor” prospect is driving a new BMW, then bill them full rate.

– “Wow, this may be an interesting new thing I could get into!”

“After all, we can really do anything!” Not true. Stick with your core expertise. Go back and reread your mission statement.

It’s important to qualify—and disqualify—any prospective client early in the interaction. You don’t want to spend several hours with somebody then discover that you won’t be working with them.

Finally: All the above applies to firing an existing client as well.

November 10, 2010

Are we entering the Golden Age of Consulting? Yes or no.

Filed under: For Coaches & Consultants,Thrive in tough times — Tags: , , , — Mike Van Horn @ 12:57 am

I’m discussing this with another veteran consultant, Janet Tokerud, and also on a LinkedIn forum. I’d like to hear your 2 cents. Here are a few factors:

YES

1. Companies can’t keep up with the firehose of change. Many have downsized their expertise, knowledge, and wisdom. They have to rely on outside consultants. We are the only ones with the mandate to stay on top of change, and the only ones who get paid enough to make this feasible.

2. We traffic in ideas and solutions and information. These are constructed of data and numbers and words. Thus the internet is the ideal medium for us. It connects us with each other anywhere in the world, as is happening on this forum this instant. We can communicate and publish with no middleman or gatekeeper. Internet forums like this provide the nexus for us to flourish and to provide value.

NO

1. Economic volatility puts us at the end of the tiger’s tail, where we are thrashed back and forth unpredictably. For example, my clients are small professional businesses that serve larger corporations that engage in the global market. When the markets hiccup, the corporations shudder, my clients can have a heart attack, and I can get dashed on the rocks. Where is the stability for us to get ahead?

2. Every year, more and more lucrative consulting tasks are outsourced across the world or programmed into an app. What will be left for us to do?

3. We lack the resources to innovate to keep up with the big players. We’re doomed to fall behind and slide into irrelevance, to be overtaken by the next newly-minted generation of PhDs and quants.

What’s your take on the outlook for independent knowledge professionals such as consultants?

August 24, 2010

Is Management Obsolete?

Filed under: Growth Management — Tags: , , — Mike Van Horn @ 4:01 pm

In “The End of Management” (wsjonline.com, 8.21.10) Alan Murray says that “managed corporations” are incapable of thriving in today’s accelerating change. He contends, “Traditional bureaucratic structures will have to be replaced with something more like ad-hoc teams of peers, who come together to tackle individual projects, and then disband.”

I reacted strongly to this, since I’m always advising small, growing companies that they need more management, not less.

My response: Okay, so this “ad hoc band of peers” comes together, builds and commercializes a whizbang disruptive new gadget like the iPad, puts it on the market, and I buy one. Wow, it’s great!

Then they disband. But wait. Who provides warranty service if they’ve disbanded? I sure hope there’s some big corporation behind them, interested in self-perpetuation and continuity enough to provide good customer service.

No venture capitalist I’ve ever met would back such a venture. A VC’s first question is, “How will you perpetuate this long enough for me to get my money out?” And nobody will cash out the VC unless they in turn are convinced that the endeavor they’re investing in has longevity and strong management.

A corporation’s biggest stakeholders are its customers, and customers want longevity and continuity. I’ve been buying Dial Soap for decades, and I hope some bureaucratic corporation will keep it available for the rest of my life, with as little innovation as possible.

So Mr. Murray, I think it’s way too soon to talk about corporate management becoming obsolete. For every bumbling bureaucratic corporate dinosaur you name, I can name a company like Google or Facebook or Apple where top management strives to find the balance between creative destruction, disruptive innovation, and profit-generating continuity. The only reason Google can afford to give its engineers this 20% time for new exploration is that its “regular business” is profitable enough to support this workstyle–that is all overhead.

If anything, managing a company like Apple or Google is tougher than managing a staid bureaucratic corporation. But both types have strong corporate management styles and systems and cultures. They’re just different.

I contend that your “ad-hoc teams of peers, who come together to tackle individual projects, and then disband” can only be effective within a larger milieu where strong policies and systems for continuity are paramount. And that requires dang good management.

August 10, 2010

O Woe Is Me! I’m Doomed!

Filed under: Growth Management — Tags: , , — Mike Van Horn @ 10:58 am

Here’s “small business growth killer #1,” and it’s a point of view that pertains to a lot of people, probably most of us at some time. Since I’ve been there too, I’m putting it in first person.

“Things aren’t working well for me now, and I’d really like to make my business work better. So I take steps to make that happen. But secretly I’m afraid there’s no solution. There’s nowhere to go. I’m on a downward track and it’s only a matter of time till I crash and burn. It’s scary to even look at that. I’m doomed! I’m stupid for going down this wrong track for way too long. I’m going to have to give up everything I’ve done and shift to a whole new business model. I’m way too old for this. Why didn’t I do this years ago? Look at all the opportunities I’ve missed! What a dunderhead I am! I’ll never learn. I’m doomed. I just want to crawl into a hole and forget about it. Why can’t I win the lottery?!? “

Now even if I don’t have these thoughts consciously, they’re running in the back of my head when I wake up at 3:00am.

But this below-the-surface negative energy detracts from my positive “go-get-‘em” energy, so making progress becomes a real slog. I’m constantly sabotaging myself by missing deadlines and dropping commitments. This happens because I have to drag this load of negativity around with me all the time.

What can I do about this? First of all, I can ‘fess up. Tell someone what’s going on in my mental back room. Someone credible. Not someone who will give me sympathy, and bemoan how tough things are. Not someone who’ll make a negative judgment about me. Not someone who then tells me their own hard luck story. It needs to be someone who will listen, then say, “I get it. Now what are you going to do about it?”

That’s the “business therapy” function of The Business Group. It makes a huge difference to our members who confide in their peers. I unload my sad story and fears onto them, and instead of sympathizing or judging, they problem-solve. They say, “Why don’t you do B instead of A?” I often find that my group has given me a $10,000 idea! My business improves. The negative load is lifted — at least until the next thing comes along.

Or my Business Group members may say, “The old way isn’t working. Looks like you need to change your business model. We give you permission to do this. No blame. What would work better for you? What would it take to do that? What are the next steps? How could we support you? What do you commit to do by the next meeting?” This takes a significant load off me. Then I can look around and notice opportunities I couldn’t see before because I was so blinded by fear and resistance. Then, I think, “Wow! I could do that!” And so I do.

A wise anecdote states, “When you are ready, the Universe will provide for you.” What this means is, if I open my eyes, I’ll notice things that were there all along. I meet a great connection. Someone calls out of the blue. “Create your own luck” means stop wallowing in bad luck and apply my talents in a way that people who appreciate what I offer can connect with me. Hire me. Pay me big bucks. Thank me profusely.

There’s nothing like a run of enjoyable, appreciative, lucrative clients to dispel the fear of failure!

But I must be careful not to bury my head in my work again, pull in my opportunity antennas, and once again start down the slope to, “It doesn’t work.” This is why The Business Group has regular planning workshops, review sessions, and monthly commitments. To keep all of us honest, happy, and prosperous.

August 2, 2010

The 3 Barriers to Small Business Growth

Filed under: Entrepreneurship,Growth Management,Not yet categorized — Tags: , , , , , , , , , — Mike Van Horn @ 4:10 pm

Your business is growing and profitable, then BOOM, you hit a speed bump. Or you get stuck in a swamp. What happened? The bigger you grow, the tougher it can be to grow yet larger. I call this the “paradox of small business growth.”

As your company grows, you’re likely to run into three barriers at different stages of growth. Seems to me these are dang near universal!

Barrier #1. You’re a solopreneur, yet you want to grow beyond what you can handle working by yourself. But you get stuck in “the business is moi” trap.

Your growth challenge: Learn how to find good employees, then trust and manage them well.

Barrier #2. It’s you and the crew, but further growth is limited because everybody reports to you, and it’s running you ragged.

Your growth challenge: Learn how to be the CEO and entrust day-to-day operations to your skilled managers.

Barrier #3. You’re a successful, strategic CEO of your growing company, and now it’s time to move on to the next thing—sell, retire, start something else. But you’re so tied to the business, you can’t bear to turn it over to others.

Your growth challenge: Learn to let go.

I’ve been working with owners at all three levels for a lot of years. Here’s what they have in common: They have a management style that has worked very well to get them where they are. But to get to the next level—and they definitely want to get there—they must change what works. “It works, but break it anyway!” And this is very painful.

Many can’t make the leap. They decide to stay the same, and come up with very convincing explanations why further growth is not desirable for them. Alas.

There are straightforward ways to tackle these barriers. Once you see them laid out, you say, “Oh yeah, I could do that. I just need some guidance.”

This fall I’m going to offer a program that addresses each barrier. (You can only be at one barrier at a time.)  I’ll elaborate on each of these barriers in later posts.

In the meantime, I’d love some examples from the Peanut Gallery. If you read one of these and moan, “Ohh, that’s me right there you’re talking about!” let me know your story. Where do you want to go; what’s in your way?

We learn best from each other. You learn to transcend your barriers by seeing how others have done so (or even by watching them be stuck).

April 27, 2010

How entrepreneurs get started

Filed under: Not yet categorized — Tags: , , , , — Mike Van Horn @ 12:15 am

From a question on LinkedIn by Robert Saric: “Do you agree — first build the product everyone wants, then raise enough money to build the business?”

I agree, Robert. If you don’t have a workable product, then you cannot demonstrate that everybody wants it. Without this evidence, nobody will invest in you.

Creativity and innovation are hard; building a business around these is much easier (though still difficult). Creativity and innovation are rare, business skills are much more common, investment capital is plentiful. But investors want strong evidence that you can give them a 5x return.

Thus most businesses are initially self-funded, or rely on “3F funding”: family, friends, and fools. You go into hock to build your prototype and see if you can generate some market buzz. Then you go after angel or VC backers. You get some seed capital, do more marketing, produce more results, then go after 2nd round financing.

You build stepwise in this manner. You hire only those who are essential to get your product to the next level.

Pre-dot-bomb and pre-“great recession” rules were much different, but this is 2010, and investors hold their cash with an iron fist.

*   *   *   *

If you’re in this situation, and don’t see where the capital is going to come from, let me know. I’ll be glad to talk you through it.

April 26, 2010

How Much to Pay Your Sub

Filed under: For Coaches & Consultants,Growth Management — Tags: , , — Mike Van Horn @ 5:28 pm
As a consultant or other professional, if you hire a skilled person to help you on a client project, how much should you pay them? How should you bill your client for their time on the project?  Here are my two rules:
— If the person is an employee of yours, bill them out at three times what you pay them. That is, if you pay them $30 per hour, you should bill them at $90. Looking at it the other way, if you can bill your client $90 for a skilled associate you assign to the project, you can pay that person no more than $30/hr.

— If they are a subcontractor, bill them at twice what you pay them. Thus if you can bill the client $90 for their billable time, you can pay your sub no more than $45.

Why must you have this much mark up? You are taking the entrepreneurial risk, doing the marketing, taking project responsibility, overseeing their work. You have to pay them whether or not you get paid. If there’s a glitch, you are responsible. If there’s a do-over or wasted time for which you cannot bill the client, you must still pay your associate. You’ve got to cover your overhead, contribute to your own salary, AND make a profit.

Why the difference between employee and sub? With an employee, you must cover payroll taxes, workers comp, etc. You may be paying them for hours that are not billable to any project.

You may respond, “I can bill my client at $120 per hour, but my sub wants $100. So I only make $20.” If you do this, you’re losing money every hour they work for you. You notice this via your feeling of  burnout: “I’m working my tail off on this project and I’m not making any money!” You’re tempted to do more of the billable work yourself–on evenings and weekends–rather than handing it off to your sub.

Instead, say, “I have this project ready to go. I need some help, and I can pay $60 per hour. Interested?” I’m betting you can find someone really qualified who will step up and shout “Yes!” Don’t let your overpriced sub call the shots. If you really need someone whose market rate (not their personal inflated rate) is $100/hr, then you must bill your client at $200.

If you don’t do this, I guarantee your business will stay in the cycle of smallness. Owners who adopt this pay policy free up their time to bring in new business, grow their business, hire and train more associates, and take more time off. Which do you want to be?

Do you have a situation where you can’t figure out how to make this work? Get back to me; give me some details. I can talk you through it.

January 21, 2010

Lessons From a Gawdawful Year

Filed under: Not yet categorized — Tags: , , , , , , — Mike Van Horn @ 7:52 pm

Some people have told me that ’09 was not their best ever year! But what doesn’t kill you makes you stronger. What lessons have you learned from this tough year? Here’s what people in my Success in 2010 plan workshop sessions have been saying:

“We’ve had to cut costs to the bone. We’ve managed to save 10%. It struck me, what if I had been that ruthless in good times and not just bad? I’d have 10% more bottom line. Money to put in my pocket, to create a cushion for future tough time or to create a growth fund.”

“2009 was humbling. I saw how arrogant I’d been. We assumed that growth would just keep going. But when the phone stopped ringing, we had to relearn Marketing 101. For example, setting targets for number of new clients, and tactics how to bring them in. We should have been doing this all along.”

“I let myself get discouraged by telling and retelling the same old story of woe about how bad 2009 was. This was killing the business. During the plan workshop, I wrote it all out in excruciating detail, took one last look and then tore it up in little pieces. Now the slate is clean for 2010.”

“We kept people on way too long. We should have laid people off sooner. I was afraid that we’d never get the good people back. I’ve learned we cannot guarantee jobs. We must retain labor flexibility. From now on, our scheduling must go along with revenue—not just shop people but admin as well.”

“We saw our employees perform better in tough times. They’re more friendly, supportive and team-oriented. Is this fear of unemployment? I think they just saw the trouble the company was in and it focused their thinking. As a result, people are doing better client work than ever.”

“I watch the books like a hawk now. During good times, I only kept half an eye on the books. I’ve got to track how we’re doing—even day-to-day. I can’t wait till the end of the month to see what we did a month ago.”

“We hunkered down and lost sight of our goals. We’ve had to get in touch all over again with our long-term vision. It’s the source of our direction and inspiration. Without this we’re just wandering around.”

“Tough times force us to make better decisions. In fat times, we get lazy; let bad decisions slip in; spend too much on marketing and keeping poor employees, etc.”

“We laid off 40% of our people and kept the best 60%. Now that business is picking up, I’m giving more hours to our remaining people—even overtime—rather than rehiring. I see that paying overtime for existing people is cheaper than paying health insurance, workers comp, etc for extra people we hire.”

“We got a lot less picky about our customers. We’re going after smaller clients we would have said no to before. And without these, we’d be dead now.”

“A key employee left unexpectedly. This threw us for a loop. The lesson? Cross-train. Don’t be put into a position so that the company is held hostage to whether one employee stays or leaves”

What lessons have you learned? Add ‘em below.

December 31, 2009

Can Consultants Collaborate on Marketing and Projects?

Filed under: For Coaches & Consultants — Tags: , , , , , , — Mike Van Horn @ 3:26 pm

From a discussion on Bay Area Consultants Network (LinkedIn) started by Herb Kessner: “How can our members with similar business models collaborate for success and revenue in 2010?”

Herb

I’m involved in such an effort with other consultants.

I would like to see efforts like this work, but I’ve found it difficult to produce the desired benefits. The idea is simple: We  have complementary offerings, thus:
1. We should be able to provide related services to a single client, when either of us alone could provide only part of what the client needs
2. We can take advantage of each other’s marketing networks. I refer qualified prospects to you, and you refer them to me.

But what happens is often different. I may be attracted to such a joint effort because my well is running dry, I’m trying to shortcut the tough necessity of marketing, and I’m hoping you will rescue me. Alas, you are hoping the same of me! So we’re two people (or more) whose pipelines are trickling.

Thus to work together effectively, the first question we must address is how we will tackle the annoying marketing question.

If our pipelines are flowing smoothly, and we’ve got as much work as we can handle, what’s our motivation for joining forces? Why go to the trouble of working out joint operating agreements with you when it just takes away from my billable hours? If I need somebody with your expertise on a project, why don’t I just hire you? Or sub part of it out to you?

This is a legitimate viewpoint, and a lot of consultants think this way. And this is why we remain solopreneurs. (Or, if we’re a very prolific rainmaker, we begin hiring others as subs or employees to handle projects we generate.)

But there is a case for a joint operating agreement among two or more consultants. The prime rationale, in my experience, is synergy and collaboration. We’ve got to energize each other, and make each other more creative and productive.

Several pre-requisites:

1. We must work with the same type of clients. Not just similar, but the same. I’m seeing this in a current effort: I work with slightly larger small businesses than does my collaborator, and it’s an issue.

2. We must offer truly complementary services to the same niche of customers. Not just non-competing services. Not just services the same client would purchase (e.g., my growth management services and your financial services). We must offer an integrated package that meets the felt needs of our target customers.

3. We must be able to develop brand new customers–and probably new channels to reach them. We can’t rely on our existing lists and means of outreach.

4. We must all be 100% committed to making this work–esp. the marketing, which is often the hardest part. Can it work as a sideline? A big question. How do we continue to handle our current business while developing this new joint venture?

Questions of success. When we do get joint clients:
— Who handles the admin stuff? Contracts. Billing. Banking. Insurance.
— Who owns the intellectual property? Not the “for hire” stuff that belongs to the clients, but the creative stuff that belongs to us. If I get inspired by your idea (and I will!), and develop a whole new thing from it, how do we divvy it up?
— What happens if you want to work, work, work, and I want to spend more time in Hawaii? Or if our joint venture has a big rush client, but I have to serve my own clients as well?

What do you think? I invite others to weigh in on this issue as well.

Mike Van Horn

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