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!

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?

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

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

September 24, 2009

When Do Companies Stop Being Creative?

(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.

June 30, 2009

Has Your Company Stopped Being Creative?

Filed under: Growth Management,Not yet categorized — Tags: , , , — Mike Van Horn @ 3:08 pm

This post was catalyzed by “At what size do companies stop being creative?” on www.joyofhumancapital.com

I see small companies launch in a burst of creativity, then slowly lose their creative edge over time. How about you? Tell me about you and your company’s creativity.

My clients are small business owners – from a handful to a hundred employees. Run by the owner, who is often the founder as well. As I look around at the people I’ve worked with (including myself) here’s what I see.

First, two observations:

1. Creativity comes in many flavors. Not just the “creative industry” like ad agencies. Also creative business concepts, product dev, designs; creative marketing campaigns, merchandizing, or product selection; creative distribution or service packaging or customer service; creative team building or organization structure; creative pricing or financing.

2. Creativity comes in all sizes, and so does failure of creativity.

CREATIVITY KILLERS FOR SMALL BUSINESS OWNERS

• Lack of support. Nobody is pushing her/him to take the creative leap, or problem solving how to overcome the hurdles . . . No-one following behind, handling the details, executing the vision.

• They get dragged out of creativity by the demands of running the business day to day. This has a lot to do with their 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.”

• Lack of help. Owner continually pulled back down into lower-level tasks, can’t focus on creativity, vision, strategy.

• Lack of systems, relying on seat-of-pants management. Thus their franticness quotient increases exponentially with growth.

• Ill-fitting systems. E.g., accounting 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. Creative owner gets beaten down, burned out . . .  Has one good idea, and sticks with it long after the window of opportunity has slammed shut . . .  Fear of taking the needed next step. “Tried that, got beaten down, it didn’t work, now I’m gun shy.”

• Gets out of touch. Drifts 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.

• Gets 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.

Can you add to this list? And how did you overcome this hurdle?

February 5, 2009

Economic stimulus for small business?

Filed under: Political rants for entrepreneurs — Tags: , , , — Mike Van Horn @ 5:15 pm

Three rules for Washington economy rescuers to live by:

“First, do no harm.”   (Hippocratic oath for fiscal policy makers)
“It’s got to work, stupid.” (From Clinton’s “keep it simple, stupid”)
“Targeted, timely, and temporary.” (From Obama’s economic policy advisors)

I want to hear from you.

What specific items in the economic stimulus package wending its way through Washington would benefit small businesses and independent professionals? Why? How?

What elements of the package would not be helpful–or could hurt you?

No conservative or liberal rants, please. Be specific. Relate it to your situation.

Below are ideas and responses on this topic–starting with my answers to my own question.

December 15, 2008

Kill the golden goose with taxes?

Filed under: Entrepreneurship — Tags: , , , — Mike Van Horn @ 4:50 pm

Convincing blog post on the “Doing Business” blog on the importance of entrepreneurship for innovation and economic well-being. We all knew that!

Business Owners Toolbox

Business Owners Toolbox

Read the full post at http://www.typepad.com/t/trackback/462659/35963502

But small businesses also bear the brunt of taxes! And the more we pay in taxes, the less we can afford to invest in our businesses. So our government is damaging our ability to create jobs and innovation, the very things they say are essential to boost the economic well-being of all of us.

August 12, 2008

When to grow out of a home based business

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

Q: “When is it time to grow out of my home-based business?”

 A: When I ran my business out of the house, my wife would say, “Mike, every flat surface in the house is your desk.” Clients would come in and plop down on the sofa. Our part time office assistant worked in the room next to the kitchen. I was always on; things always had to be cleaned up, ready for business. There was a big temptation to blur the time between work and home life. Did I work at home, or just sleep at the office?

It’s true that some good-sized businesses are run from homes. These are usually virtual business, where numerouis people work for the business, but remotely. Support people: bookkeepers, web designers, marketing strategists, virtual assistants. But also line people: field reps or technicians, contractor’s crews, and others who are paid per result not per hour.

This depends on the kind of business. A business that you essentially run out of your head (or from your computer) can be run from your home for a long time.

Many people run businesses from their homes that do not fit zoning requirements. But aside from the legalities, just how many people can you fit in your house? So the real crunch comes when you need to have a team of people work together in an office.

You must balance your desire to minimize overhead and avoid paying extra rent with several factors:

– The number of people that need to work together regularly

– Greater productivity and efficiency due to better workspace. Houses are often poorly laid out for office space.

– Image. How you come across to your desired customers and even your employees

– Revenue potential. By moving into an office or commercial space, how much could you boost your revenue and profitability? Is it enough to cover the increased overhead and then some?

– Readiness to grow further. 

August 7, 2008

How do I grow beyond a one-person business?

Filed under: Entrepreneurship — Tags: , — Mike Van Horn @ 1:40 pm

Q: from JD, Consulting engineer (from LinkedIn Q&A)

 

A: I’ll answer your question with some questions. Use these to help you assess your growth options:

 

– How easy is it for you to bring in more business? Is there business out there for you to get, assuming you have the time and resources to service it?

 

– How competitive is your market? If companies don’t work with you, who do they go to instead?

 

If your answers to these two are positive, then growth is worth pursuing.

 

– What about your pricing? I often find that sole professionals like you underprice – esp. those who charge by the hour.

 

– How do you feel about managing others? Some professionals love the work, hate to manage others. Some are control freaks: can’t let go. Others get a charge out of coordinating a team. The latter find it easier to grow.

 

– How do your customers view you? Are they hiring just you, or are they hiring your company? For you to grow by delegating work to other techs, you must train your customers to do the latter.

 

– What is your best role in the business? Tech? Business development? President? Set it up so you do what you love doing, and what you do best, and hire people (even part time) to do the other parts. I work with professionals who hire a general manager to run their company, so they can keep doing the tech work they love.

 

– How much is your time worth? List in a column the things you do in your business, then in the next column how much it would cost you (per hour) to hire someone else to do each task. For example, strategic business development, $250/hr. Tech work, $150. Bookkeeping, $35. Office tasks, $15. If you spend time on the office tasks, then you are overpaying your office assistant by at least $150/hr!

 

– Can you price high enough to generate the surplus you need to grow your business? Here’s how you can justify hiring employees:

— Tech person. You must be able to bill them out for at least three times what you pay them. (For a subcontractor: two times their pay)

— Admin person. They must free up enough of your time so that you can bill additional work that is AT LEAST three times what you pay them. That’s break even: actually they should free you up to bill many more times what they cost you.

— They free you up to take more time off.

 

– How much are you willing to invest in your company’s growth? Some are willing to grow only what cash flow will allow. This is slower. Are you confident enough in your prospects to invest, say, $50k in hiring and learning curve time for people who will then make you a lot of money?

 

– How good are you at hiring excellent people? If you don’t give yourself an A, get some help with this from an HR professional. The biggest barrier to growth for professionals like you is not bringing in good enough people.

 

Your answers to these questions will point to the best growth strategy for you.

 

My book, How to Grow Your Business without Driving Yourself Crazy, is about this very question. You can get it from my website http://www.businessownerstoolbox.com

 

Mike Van Horn

 

 

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