React to This!

I was reading an interesting article, Your Problem Solving is Killing Your Growth, which made me think that perhaps  the value we continue to put on the ability to “put out fires” and “think on one’s feet” has turned our business world into a reactive one, rather than a proactive one.

The best way to be a “problem predictor” is to become a customer-centric company. In other words, ask the customers what they want, and how they want it. Their problems are your problems to solve. This is a great way to stay close to them and to avoid or resolve many issues before they impact business. The ability to predict - and prevent - future problems is a key component to your company’s continued growth!.

Strategic Thinking for Small Business: Where & Why

As a small business owner, you have most likely at one time or another referred to yourself as “Chief Cook and Head Bottle Washer.” For those of you in the food business, this may be a literal definition of your role. To others, it is a term that represents a business owner who does it all in his or her business. Sometimes, this is because you are a one-person operation. Other times, it’s because you like to… ahem… have control of everything in your business.

But whatever the reason you wear that tag, the fact is that the vast majority of your time is spent running the day-to-day operations of your business. While this may seem to you to be an appropriate, if exhausting, role, the fact is that while you are taking care of business today, you don’t have much time to think about tomorrow. And I’m not talking about tomorrow as one day; I am talking about the indefinite future.

If the world stayed the same for decades at a time, this would not be an issue. But you realize that today’s world is rapidly changing. This is no longer your father’s world. Hell, it’s not even the same world as five years ago. So how is your business going to continue to grow and thrive and remain relevant, if you don’t take the time to think strategically about the direction it will take in the future? This is the difference between working IN your business, as opposed to working ON your business.

As a business owner, you need to make the time to think strategically. You can’t just be operationally busy all the time; you need to escape the day-to-day business operations to focus on a short- and long-term strategy. And I’m not talking about doing this on your 15 minute lunch break, as you jam a sandwich in your mouth. I’m not talking about a 5 minute bathroom break.

Rather, I am talking about prioritizing your strategic thinking time as if it were an important client meeting. You know very well that if your best client or customer needed to have an hour long sit-down with you this week, you would make the time for that to happen!

But, you say, strategic business planning is for Big Businesses, the ones with layers of management with fancy degrees, who have teams of people under them to handle the day-to-day operations. To that, I say this: consider your smaller size an advantage. You are more nimble. You are better able to see an opportunity and switch gears to capitalize on it. You don’t have to sit through endless boardroom (or bored room!) meetings, while MBAs float theories and projections past one another. You are probably in closer touch with your customers, your employees, and your industry, than some bigwig Fortune 500 CEO. Use that to your advantage! Huddle together on a regular basis with your constituents – your top managers and customers - in order to address business challenges and explore options. Seize these opportunities to out-maneuver your bigger, slower rivals.

The Commercial Appeal, from Memphis, TN, recently did an online study where they asked small business owners: “How difficult is it to budget CEO time away from managing?”

Only 3 percent said they had “found a way to balance management and CEO duties,” and 8 percent allowed they were “inconsistent but getting better at it.”

However, over 50 percent of the respondents said they “can’t focus on CEO tasks for putting out fires,” while 33 percent of them completely rejected the premise with, “I’m a small-business owner, not a CEO.”

So, do you want to increase your CEO activity, especially on the strategic end? Here’s a suggestion:

At least once or twice a year (if not more), fire yourself from jobs that someone else can do. Promote yourself to jobs that only you can do. This will free up some time and put you on a course toward performing the tasks of a CEO, including charting the long-term course for your business.

Knowing When to Sell Your Business

Small business owners sell their businesses all the time. Every once in a while, they sell for the right reason, at the right time, and everything turns out well for them. However, more often than not, there is regret. According to a study by PwC, 75% of business owners are dissatisfied with the result of their exit. There could be a lot of different reasons for that dissatisfaction, but knowing when the best time to sell a business probably could have alleviated many of them.

Let’s look at some considerations for selling your business:

• You get an offer well above the company’s projected valuation – an offer you can’t refuse.
  These are the kind of small business sales that you read about, and that create buzz. For example, Facebook’s recent acquisition of WhatsApp, for the tidy sum of $19 billion dollars (yes, that is billion, with a “b”). While most of us know about Facebook, who the hell knew anything about WhatsApp? Obviously, Mark Zuckerberg and his people did, and the former founders / owners of WhatsApp signed off on the acquisition, and are now set for life.
  
  But please don’t start licking your chops right about now. This kind of deal does not happen very often, and it is folly to hope that it will magically happen with your business. Not trying to be rude here, just offering a dose of reality. So let’s move on to some more realistic considerations.
  
• Changes in your personal life will affect your business, and you need the extra money.
  The wrong time to decide to sell your business is when you really need to sell your business, due to life events that are not business-related. A divorce, a serious illness, a disabling accident to you or a loved one, gambling debts… you get the idea. I’m not saying that these types of matters are not as important as your business, but selling your business to resolve these issues will more than likely cause you to make an unsatisfactory deal. Ultimately, you will do what you have to do, to address whatever crisis you are facing. Just understand that this is probably the worst reason, business-wise, to sell a company.
  
• You look into the future, and see the writing on the wall.
  You feel that tough times are ahead in your industry. Evolution in technology or shifts in business or consumer needs may well render your company’s products and services obsolete, or at least less in demand. The value of your business may never be higher than it is now.
  
  You may also realize that global demographics are not in your favor. More and more Baby Boomers, who are retiring earlier, or find themselves unemployable, are starting small businesses. This could mean more competition in your industry. Smaller businesses, with less overhead, willing to do the work your company does, at a fraction of the cost. You may feel that you don’t need that aggravation, going forward.
  
• You see a more lucrative opportunity elsewhere.
  Your business may be too small to ever be big, and you've got some big ideas. The more you've learned about business, the more you understand the limitations of certain industries or companies. You want to accomplish more, and you know your current organization will not get you there. The neighborhood bodega is not going to evolve into a gourmet wine and cheese shop with an international clientele. So selling your small business may give you the financial leverage to get into a bigger game, where your ideas can really develop.
  
• Your company is growing faster than you can fund it.
  Your business may be getting too big to be small, and it is more than you can handle. While you are grateful for the success you've been able to achieve, you realize that you are having difficulty in keeping up with customer demand. You don’t want your reputation for quality and service to suffer, but trying to satisfy a huge influx of business may not be your strength. All of your instincts tell you not to turn away business, but you begin to think that maybe a larger organization could better handle the growing customer base.
  
• Your business is no longer fun, or interesting to you.
  When you started your business, you had a reason. It could have been your love of the industry, or a great idea you had for a product, or maybe you just enjoyed being a contributing member of the business community in your town or state. But it had to have been a good reason; people don’t go through the effort of starting and maintaining a business just for the hell of it. But whatever the reasons you had for starting the company, let’s just say, to quote B.B. King, “the thrill is gone.” If your heart is just not in it anymore, perhaps it is time to let someone else take it off your hands. You’re not getting any younger, and maybe selling the business is a good way to secure a comfortable retirement and diversify your wealth.
  
• Ultimately, the best time to sell your business is when the company and its sales are peaking.
  The best way to ensure getting good value for the organization that you have poured your life’s blood into is to take full advantage of the success it has shown. You've created a company that has strong management, and runs effectively without you overseeing every detail. Sales are strong, customers are happy, employees are engaged. This is the kind of business that is very attractive to buyers, and will command the best price.

The bottom line here is to start thinking and planning the sale of the company a few years before actually doing it. The stronger the organization is, the more you will be compensated for it. Unless, of course, Mark Zuckerberg comes snooping around.

Pointless New Year’s Resolutions for Your Business

I don’t know that “corporations are people,” but I do know that businesses are run by people, and therefore are prone to the same mistakes and miscalculations that we mere humans often fall prey to. And although we realize that the calendar is an arbitrary, man-made, slice-and-dice of the year, we still put a lot of emphasis on the late December – early January period as one of putting some changes into effect, in our personal lives or in our businesses’ lives.

In my view, New Year’s resolutions for your business are pointless if:

• You feel you have to wait for January 1 to implement them.
  This shows a lack of urgency to the resolution. Who is the genius that decided that the middle of winter was the best time to make changes in our lives and businesses? 
• You resolve to do (or not do) things without first establishing a clear plan to navigate to success. Winging it means you change some things kind of when you remember to do so. It does not show the commitment to change that is necessary. Without a clear plan, you do not have a resolution; you have a hope, a dream, a wish. Good luck with that.
• Your resolutions are too big. Rome wasn’t built in a day. I mean, even Lost Springs, WY probably took at least a few days to build. Very few people or organizations succeed when they bite off more than they can chew. Instead, break the big goals down to a succession of small goals, tied together with one purpose in mind.
• Your resolutions are too small. If your big change this year is that Fridays are now “Hawaiian Shirt Day,” it might be fun, but it does not qualify as a business resolution of change. Sorry. If you want to resolve to change something, then change something that will impact your business in a significant way.
• The resolutions you make in December seem like a big pain in the ass in January. If the love of the resolution dies that quickly, then you have to wonder about the importance / feasibility of the idea in the first place. 
• Your resolutions are directed by industry changes or regulations. They are no longer resolutions, but mandates. Do not mistake one for the other.
• Your resolutions are created solely by you, the boss, and handed down to your organization. Without input from your team, your business resolutions become personal directives from the boss. We know how much employees just love having change foisted upon them, with no say in the matter!

Frankly, the idea of New Year’s Resolutions for businesses is a cute one, but not terribly practical or binding. Strong businesses have a Business Plan, complete with tactics and strategies. This is significantly different than resolving to do some things differently in the coming year. If your idea for a New Year’s Resolution is something that will positively impact your business, then perhaps it should be included in your next version of the business plan, instead of simply “resolving” to do something differently this year.

Put that on your list of New Year's Resolutions!

Family Business Decisions

The good part about family business is that many of your co-workers, including management, are family members. 

The bad part about family business is that many of your co-workers, especially management, are family members.

When business decisions are made among unrelated businesspeople, there is usually discussion among senior management, and then the Boss (the CEO, the President, the Big Kahuna) makes the ultimate decision, and everyone goes along with it, if they wish to remain employed at this company.

In family businesses, the business decision-making dynamic is often blurred with the family dynamic.  Family roles were defined and ingrained long before most of the family members became part of the business team.  These roles often reveal themselves in business decisions, whether consciously or sub-consciously.

Oftentimes, there is consensus about a decision, be it a new technology, or entering a new market, or creating a new product, or moving to a new location.  But maybe it’s not a unanimous decision.  In the corporate world, such decisions are made, and if certain parties cannot abide by said decision, then maybe they look to work elsewhere.

But what if the lone dissenter is the patriarch, the owner, the founder?  Or what if the dissenting vote comes from the “favored” offspring?  Does a father tell his oldest child to find work elsewhere?  Does a daughter tell her father to get out of the way, because he’s standing in the way of progress?

These are sticky situations, for both the business AND the family.  These kinds of situations put some tough personal issues on the table.  Like, what is more important, a successful business or a unified family?

To avoid having business and family roles bleed into one another, smart businesses have an agreed-upon decision-making process in place, including what to do in the event of a divided vote.  If the resolution process of these types of issues is accepted and in place before a business decision is put on the table, then resolving them is a much smoother, less emotional ordeal.

In their 2005 paper, Ludo Van der Heyden and associates pointed out four distinct elements that should be in place to enable fair process in business decision-making:

·         Communication - Each person impacted by the decision on the table should be given an opportunity to share their views, and have their questions answered.

·         Clarity - Accurate details of what the decision entails should be provided, including perimeters and any changes it will create.

·         Consistency - A roll-out plan for each taken decision should be in place, so that when changes are made, the integration process is already familiar to the company.

·     Changeability - Flexibility around revisiting previously taken decisions and rules should be facilitated, to ensure that the business, and the rules it lives by, have the opportunity to evolve as the business climate changes.

If these four elements are the cornerstone of every business decision a family business makes, it will go a long way in making the process a smoother, more professional, less emotional one.  I believe these elements are important for all businesses, but with the additional baggage of previously-established family roles and relationships, they are imperative for the continued development of successful family businesses.

Mistaking Your Way to the Top

Last week, I read an interesting article called Common Mistakes Every Entrepreneur Should Avoid.  All of the listed pieces advice are excellent, and should be followed as best one can. I would advise you to read it.

However, keep in mind that making mistakes, and learning from them, will be the best thing that can happen to you and your business.  This is how you learn, really learn, what works and does not work in your business world.  Oftentimes, things that sound good in theory, or look good on paper, may not hold up in the cold light of reality.  

This is no sin.  This is how great businesses are built.  But...if you repeat the same mistake twice, it might be time to look for something else to do.  You shouldn't have to be hit with a hammer more than once to know that it hurts.

Family Business Transitions

I want to share a brief but informative article I recently read by Josh Patrick on Divestopedia, called "8 Issues To Think About In Family Transitions."

In the article, Mr. Patrick raises eight big matters to consider and figure out before transitioning a family business to the next generation of family members. You might think some of these are obvious, but oftentimes, as business-owners AND heads of families, we are sometimes too close to the matters at hand to see them in their proper perspective.  As the son of a small business owner, I had direct experience in this matter.

This is a good list, and I have just a couple things to add to what Mr. Patrick listed. 

Point #4 urges the owner to make sure the kids can actually grow the business, once they are leading it. However, in my view, the only way the owner can be confident of that is to allow the kids to TAKE RISKS. Many old-school business owners become more fiscally conservative as they get older, and are averse to taking calculated risks to grow the business. Don't shackle the kids with that kind of hesitancy. Most businesses do not grow by simply doing the same thing, year after year.

Point #7 urges the owner to fully let go, once the business has been handed off to the kids. This is rarely an easy thing to do, even when the owner has been pining to step away from the business for a while. My take on this is, when you leave the business, stay gone. Don't try to be the "helpful adviser." This will make it harder for you to move on to the rest of your life, and it will provide the kids a convenient crutch to use, instead of learning from their own mistakes.

Take a minute to read Mr. Patrick's article. If I can be of any help in your family business transition, please don't hesitate to call.