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

November 26, 2011

Business Growth Myth #3. “I can’t find and keep good people”

Filed under: Employees and Human Resources,Growth Management,Small business myths and dilemmas — Tags: , , — Mike Van Horn @ 4:26 pm

I hear this from both solopreneurs and owners with a handful of employees:
“I can’t find good people to hire.”
“I’ll train a good person; then they quit and become my competitor.”
“I had an employee. It didn’t work out. I’m not hiring anybody else.”
“My work is so unique, only I can do it. Too much trouble trying to train someone else to do it.”
“I can’t rely on my managers to make good decisions.”

What I see. If you fail to get needed help, if you opt to go it alone, if you have people who only follow orders and take no initiative, this guarantees you remain a small operation. This may be what you want, but if you want to grow, you’ve got to overcome this attitude. You must learn to ask:

“What is the highest skilled person I could bring in to free me up to focus on growing the company?”

My recommendations. (From our “Finding and Keeping Good People” and “Employer Assertiveness” ebooks)

— Make sure you hire the right people. If you have trouble interviewing and selecting quality people, get help from someone skilled at this.

— Start with a job description that answers the question just above. Look for, not just work skills and experience, but personal qualities and attitudes as well. For many jobs, the latter are more important.

— Help your people do the job you hired them for: training, clear direction, trust, feedback, systems and tools, acknowledgment.

— Be firm, fair, and consistent with your people. Employees leave because they don’t like their boss!

— It someone is not working out, let them go. Hire slow, fire fast!

— For every job that you think only you can do, look for the pieces that you could hand off to others.

This is a major theme in my “Top 3 Barriers to Small Business Growth—and how to overcome them” program.

 

November 15, 2011

Cost of training when cash is tight

Filed under: Employees and Human Resources,Growth Management,Thrive in tough times — Tags: , — Mike Van Horn @ 12:25 pm

Are training costs an essential part of your budget? Do you allocate funds to training programs even if your revenues are lower than expected? Linked In question by Eric Saint-Guillain

I advise owners of small growing businesses. When their business is small, money is tight, there’s no budget for training. So one of three things happens:
— Training doesn’t happen, productivity suffers, mistakes get more expensive, good people are fired for not doing a job they haven’t had proper training for.
— Training happens ad hoc, but since it’s not budgeted for, the money is drawn from other sources, such as marketing–or profit.
— Training duty is assigned to people who are already working full tilt, so it’s not accorded the importance it deserves, and gets done haphazardly or grudgingly by people whose hearts are not in it.

It’s a “coming of age” marker for a young, growing business when the owner decides to allocate money and time to training, for all levels–workers, managers, and him/herself.

 My comments were aimed at companies with employees, but they are equally true for solopreneurs. As a consultant, I find that I get most of my training via:
— My industry association, Institute for Management Consultants (IMC USA)
— Webinars and other such events
— My clients! I learn a tremendous amount from them.

Here’s my sermon!

Training needs to be viewed as an investment in the increased profitability of the operation. Otherwise, why are you doing it? An owner who is a strategic planner sees training of valuable people in the same light as upgrading and maintaining valuable equipment.

It’s insane not to do it–even if money is tight. If you as executive let operations slide so that you cannot afford to take care of your most productive resources, then you should be fired. If you’re the owner, you’d better learn the lesson well, or you’ll soon be left behind by competitors, and lose everything you’ve put into the business.

Getting Paid for Work for Canadian Client

Filed under: Finances — Tags: , , — Mike Van Horn @ 12:21 pm

How do I bill for my graphic design work for clients outside the U.S.—especially in Canada? LinkedIn question by Priscilla Pike, graphic designer

Specify in your contract:
— You get paid in US dollars
— Disputes will be handled in your jurisdiction

Who owns the work you do? Check the laws in other countries about “work for hire.”

Get paid via your merchant account. Don’t have one? Set it up. It makes out of country receivables so much easier for you. I’m not sure about PayPal outside US.

October 8, 2011

Business Growth Dilemma #1–Doing Paid Work and Developing New Work

Filed under: Growth Management,Overcome growth barriers — Tags: , , — Mike Van Horn @ 4:32 pm

When we’ve got lots of work, we don’t have time to market. Then the work ends, and we have to start marketing to find another big project.

This is a classic entrepreneur’s dilemma, and it can lead to the dreaded boom and bust cycle. However, a mistaken assumption lies beneath this—that we don’t have time to do both customer work and business development.

When I question owners about where they spend their time, I usually discover a third category of activity—“minutiae” —that takes an inordinate amount of their time. Yet these routine admin tasks are the easiest to hand off to someone else. Once we do this, then we often have time for doing the work and the business development.

Some people enjoy one and resist the other. Love doing the work, hate doing the marketing. Or vice versa. So, you bury yourself in the work so that you can plausibly claim that you have no time for marketing.

What is your strength? Where do you make the biggest contribution to your company’s success? Could you arrange your business so that you could focus on your strength, and hand other things off to someone else? If you are best at bringing in the business, then hire someone to do a substantial part of the paid work for you. If you are best at working with customers, then hire someone to do business development for you. This should make your business grow and prosper, because you focus on the activity you are best at. And in either case, hire someone to handle admin and routine for you.

How can you afford to hire this extra person if you have a small business? Let’s assume you have a viable business with growth potential. So if you find a way to hire this needed help, it can pay off for you.

To figure this out, answer a few questions like these:
— What is the highest-skilled person you could bring in to give you the support you need to boost your company’s growth? What’s their job description? What personal qualities must they have?
— What’s their learning curve? How long would it take for this new hire to pull their own weight? The more experienced the person, the shorter their learning curve.
— What’s the upfront cost and payback period of hiring the expertise you need for growth? I.e., how much will you have to invest before profit from the new business generated covers the cost of this person?
— Are you willing to risk this investment in your business growth?
— How would you need to change the way you run your business to best take advantage of their skills? What habitual ways of running things would you have to change?

These are the questions we tackle in our program, “Top 3 Barriers to Business Growth—and How to Overcome Them.” Ask me about it.

October 6, 2011

Growth Plans for Small Business–Some Rules

Filed under: Planning — Tags: — Mike Van Horn @ 12:50 pm

Plan for what you can. Then plan how you’ll deal with all the things you can’t predict–i.e., the uncertainty.

Dilemmas, choice points, open questions. Any plan that does not address these is bound to fail.

A successful plan is brief (just one page), dog-eared, marked up, covered with coffee stains, because it gets regularly reviewed and revised.

Targets must be achievable–and changeable.

Be firm on your vision, but flexible on means. (Steve Jobs)

Create a practical plan of action for your business in our annual plan workshop “Success in 2012.”

October 5, 2011

Business Growth Myth #2. “I must oversee everything.”

Filed under: Growth Management,Overcome growth barriers — Tags: , , — Mike Van Horn @ 6:02 pm

Everybody comes to you, so you can’t get other things done. This is another management habit that can keep you from focusing on the things necessary for growth.

I often hear two related complaints that pull in opposite directions. Here are two examples:

1. “My customers—and my employees—always ask to talk to me, because I have the answers.”
But you also complain, “My managers do not handle as much responsibility as they should.”

2. “I need to watch the numbers. I just have to shut myself away in my office more.”
But you also say, “I need to keep in touch on the floor, both to know what is happening and to motivate my people.”

What I see about this. You are operating at two levels—manager and floor supervisor. While it is important for you to keep in touch with what is happening, the question is, how much? You are clearly invading the turf of your floor managers who should have the primary responsibility for keeping in touch and motivating the troops. Since you are doing part of their job, your managers feel frustrated and take less initiative.

My recommendation. Examine your own motivation. Is it possible you are holding on to the floor work—at which you feel more comfortable—to avoid facing bigger challenges, such as tracking the profitability of each thing you sell? Or developing new strategic alliances?

As your business grows, you must promote yourself from worker to supervisor to manager to CEO. Many owners get stuck at supervisor or manager, so their company in effect has no top executive. This is guaranteed to keep you small.

Do the work you enjoy, but find a way to do it that doesn’t conflict with the responsibilities you have given your managers. Maybe you should take one shift on the floor a week, just to keep in touch.

This is a major theme in my “Top 3 Barriers to Small Business Growth—and how to overcome them” program.

September 29, 2011

What Drives You Crazy About Growing Your Business?

Filed under: Overcome growth barriers — Tags: , , — Mike Van Horn @ 7:00 pm

What’s the difference between a company that seems to grow with ease and one that has a lot of problems growing? Often it’s the owner’s management style and attitudes that get in the way.

“Well, in my case,” you say, “it’s the problems we encounter selling in such a tough market.” Maybe. But if we talk, we may discover that your real difficulty in selling is related to the need for better tracking systems, or for more consistent effort, or for better training of your sales people. Or it may be related to your own attitude toward marketing and selling. Many I work with seem to have the attitude, “When all else fails, try some marketing!”

Tough competition, unresponsive customers, bad economy—these things are true for everybody. Yet many companies like yours are thriving. What’s the difference?
Start with your own (often-unstated) beliefs, attitudes, and work habits. I’ll give some examples, based on my work with business owners, here and in upcoming posts. Here’s one I hear all the time as an excuse why growth is not worth the effort:

Myth: “Only I can do this job right.”
“I can do it so much faster and better than anyone else.”
“It takes so much effort to manage others. I might as well do it myself.”
“My unique creative ability has gotten us where we are.
“It’s hard to let go and turn things over to my employees.”

These attitudes and beliefs can impede your growth.
People state such things as if they were cast in stone, but what I hear are beliefs and attitudes that could be changed, thus opening the door to growth and profitability. So I’m calling this a myth. After each myth in upcoming posts, I’ll give an example of how it can be turned around. Let’s start with this one:

On the one hand, you believe: “Only I can do this right.”
But on the other hand, you also complain, “I hire good people to help me, but end up just training my competitors.” These contradictory attitudes together reinforce your growth barrier.

What I see: You hire good people, but then continue with the attitude that only you can do certain jobs. The result is that they feel constrained in the job, never fully trusted, or not able to live up to the job they were hired for. Thus, you tend to drive them away. They may go to work for a competitor, or set up their own similar business.

Recommendation: Shift your management style so that you give them challenge and responsibility; they then feel better about staying with you and advancing within your company. And you are freed up to focus on growth.

Change your management style? Easier said than done, you say. But stay tuned. I’ll show how to make this happen in future posts.

This is a major theme in my “Top 3 Barriers to Small Business Growth” program.

August 25, 2011

Can Apple Thrive Without Steve Jobs?

Filed under: Growth Management — Tags: , , , — Mike Van Horn @ 11:56 am

Could your business thrive without you? Can you “bottle your soul”? Can you instill in your top team your seemingly unique qualities and values?

“The better people you have in place, the longer you can afford to be away,” I tell my small business clients.

— If you have a good part-time admin assistant, plus good instructions and checklists, you can take a long weekend, knowing that no customer is left hanging.

— If you have a good manager who can oversee the work, plus good systems, you can take a nice vacation without constantly checking in via cell phone.

— If you have a strong #2, who has been carefully groomed, and who has a reliable management team, you can safely be away for an extended period, like a sabbatical or world cruise, or to focus on a major expansion.

But what if you’re going to be gone forever, like Steve Jobs? How can you assure that your company, into which you’ve poured your heart and soul and sweat and tears, will continue to thrive? Very few strong CEOs and visionary leaders do a good job of this.

For this to happen, you’ve got to make sure that someone there (perhaps more than one) can excel at the things that seemingly only you can do. Seems paradoxical, but this is your challenge.

Look at what Steve Jobs has brought to Apple:

— Product visionary—from conception and design to execution.

— Strong attention to detail

— Able to attract a top-quality team, and hold them together despite their strong personalities

— He’s the soul—the creative force—of the company.

For Apple to continue to thrive beyond the products currently in the pipeline, Tim Cook or someone else must manifest all these qualities.

If your company is based upon your vision, your sure perception of opportunities, your attention to quality and detail, and if you wish for it to thrive after you depart, then you must find a way to “bottle your soul” and convey it to your top people so that they internalize it. This is difficult if, like Steve Jobs, you are a strong-willed leader. It may be hard for you to allow others to grow into these qualities, which have been your special domain. It may be tough for you even to hire people capable of replacing you.

At our recent retreat, for my senior business owners, this was a major topic of discussion. I’m going to do a series of posts here on “how to bottle your soul” and instill it in your top team. If this is a live topic for you, please subscribe so you’ll receive them all.

I would also love to hear from you. Your experience with this (positive or negative), or your questions about how to make it happen.

August 15, 2011

How Do You Set Prices for Your Products and Services?

Filed under: Finances,Profit — Tags: — Mike Van Horn @ 3:54 pm

Question from Alicia Terry on Linked In. She also asked, “What is your biggest challenge in setting your price?”

Set prices using two different methods:

A. What the market will let you charge, e.g., competitors

B. What costs you must cover, plus a profit margin

If A > B, charge A

If B > A, then go back to the drawing board. Perhaps you can redesign your product or service so that you can sell it profitably at the price point the market will allow.

Or perhaps you need to promote it in a way that will justify the higher price in the eyes of your target customers.

Many entrepreneurs fail to include all relevant costs when setting prices. Items often neglected: Markup on direct labor, sales commissions, freight costs, damaged goods, warranty work, project management. And #1: the value of the time put in on the job by the owner!

Small business owners underprice. They’re notorious for this. “I’m new, so I’ll offer more for a lower price.” You can’t compete this way with larger, better-capitalized competitors. It’s the route to bankruptcy.

In many fields, if you price too low, people don’t take you seriously. “Is that all he’s charging? He can’t be much good!” Charge at least what your larger competitors are charging, and demonstrate to customers why you are worth it, since you are better.

For small service businesses, look for clients who know the value of their time. If you can save them time, they are willing to pay more for that. Turnkey, troublefree, flexible, responsive–these are the things I will pay extra for. And of course friendly, personal service.

August 8, 2011

Alternatives to Bootstrap Financing

Filed under: Entrepreneurship — Tags: , , , , — Mike Van Horn @ 11:03 am

Bootstrap financing may be unavoidable initially, but it’s a huge barrier to healthy growth, and you should get outside growth capital as soon as possible. Besides bank loans, what other sources are there?

• Borrow from yourself, even from your retirement fund. To do this, you must be as hard on yourself as any banker would be. You’ve got to demonstrate to yourself just as you would to  a banker that your business plan is sound and profitable and will pay back this loan in a timely fashion.

• Friends and family. Same thing goes. Before taking your rich uncle’s money, be able to demonstrate convincingly that this is a good business to invest in. He won’t give it to you otherwise.

• Leasing equipment and fixtures. Leasing can be very expensive but it’s worthwhile to shop different options to see where you can get the best deal. It’s best to have the advice of someone who is familiar with this type of financing.

• Vendor financing. Companies that want to do business with you and are convinced you are a good credit risk will extend you terms that will allow you to purchase goods from them. Use them to make money and then pay for these goods out of the resulting sales revenue.

As a last resort . . .

• Credit card. Financing via our credit card is an expensive trap. You’re playing with fire–or dynamite. Yet, sometimes we must do it. There’s a way to make it work if you are an excellent manager. If you have a good credit score, you will get offers for low cost balance transfers into a new account. Sometimes at 0% for a time. If you manage very well, you can replace one loan with another loan before the interest rate increases to a higher level. This is a dangerous game to play but it can be done successfully.

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