Over the past decade I have learned a lot about what it means to own a business, how business owners think, and what is most important to them. I have narrowed this down to a list of five recurring themes in the order that they manifest most frequently. Not all owners want the same things in the same order, but the underlying issues seem to be somewhat universal.
Of all the themes, cash flow is the most critical. It is emotional and practical. Cash is oxygen and when in short supply, owners become light-headed, then despondent, then desperate. Cash represents success and lack of it, failure. This is the one theme that always goes home with the small business owner. You might leave all other issues behind when you depart the office, but not this one.
Check out this Podcast: Seven Tips to Improve Cash Flow:
- Short Term
- Expect to get paid. Give customers multiple options to pay including credit cards.
- Get better terms from suppliers, landlords, and banks. A 90 day reprieve on loan repayments is probably there for the asking.
- Cut back on discretionary spending for 90 days then decide if those expenses were really important. Maybe cut out janitorial services or those season tickets?
- Longer Term
- Increase your line of credit. As long as you can pay it down twice a year, a LOC is a tool not a crutch.
- Reduce overhead – make some hard decisions on headcount, office space, utilities.
- Take a hard look at products, services, and pricing. Many companies have out of date or inaccurate cost assumptions that hurt profits.
- Eliminate Owner Burden – Get your personal finances in order to eliminate unplanned draws.
For most owners, profit represents the freedom to make choices. It represents fuel for growth, and an abundance affords you more choices about how to grow. Profit is also a driver of valuation. It’s a way of keeping score – slightly edging out growth as the second most frequent need that owners have for their businesses.
My old boss used to say, “We are in business for fun and profit. If we are not making a profit, it’s not any fun.”
When it comes to making a profit, most owners do not respond quickly enough when the market changes. If you are in a services-based industry, then it is quite likely that you are undervaluing labor and your intellectual property. If you reduce the expected margin on the productized parts of your business and move that margin expectation to the services side – that one step alone will make your business more scalable plus it will significantly increase the profit margin on a majority of your projects.
There’s one more thing. You need to behave like owner of a profitable company. For some more thoughts on this, read Love and Profit in a Fishbowl
When an owner tells me that Growth is a high priority, what that often means is that the company is not yet large enough to represent success to in his or her mind. Growth is only third on the list, because even the owners that want growth don’t want it forever. They have a target and want to get there faster.
If you want to grow, then take logical steps to get there. Here are the three biggest obstacles to growth and what to do about them:
- Your Team says they are at capacity already: In order to successfully and grow and remain profitable while you do it, businesses have to embrace outsourcing. Labor-intensive tasks that increase when you are busy are prime candidates for third-party services. Read this blog: Outsourcing is the Key to Growth
- As companies grow, processes need to evolve. You need to add or improve software tools, management structures, and pricing. In other words, you need a process for process change. Check out this blog on Crossing Growth Plateaus
- Finding the new business is easy. Finding the right customers is hard. Time spent profiling your ideal customer (and sharing that with the sales and marketing team) is priceless. However, if that profile is almost impossible to find, then you need to loosen up your expectations. Here are some thoughts on why The Perfect Customer Ruins Good Enough
This is the one thing that seems to be on everyone’s list. Is satisfaction an outcome or part of the journey? The fact that it makes this list tells me that it’s both. Having better cash flow will make the journey nicer, but without satisfaction – many owners will struggle to take the steps to fix cash flow. It is glue, it is lubricant, and it is essential.
Try this exercise: Think about times that your business was fun. Write them down – just a few words to remind you of the event.
Now answer these questions: What was fun about it? What seems to be getting in the way of that now? What can your team do to help reverse that trend?
Tell the stories: Start your next team meeting with a story about having fun. Explain what made this a good memory and talk about the importance of letting this happen again.
The desire for harmony stems in part from wanting to be understood. Being an owner is a lonely job and the decisions you make often create discord amongst employees. Can’t we all just get along? Aren’t we on the same team?
Here are three things you can do to help reduce the stress of being a team member in a busy, growing company:
- Instead of an Organization Chart, develop a Process Owner chart. Show who is in charge of making sure key processes are followed. Then, employees won’t spend so much timing wondering who their “boss” is. It’s the person in charge of the process they are helping with right now.
- Keep meetings on topic. A weekly “Production Meeting” that wanders off into non-project topics or gets hijacked by owners or managers to talk about something should be another meeting is demoralizing and frustrating. Respect everyone’s time.
- Focus on behaviors not personalities. When conflicts arise, work on the behaviors that made the problem worse. Personalities are things that you cannot change in other people, but you can talk about the results of the behaviors that they employ.
There is a direct correlation between team work and systems. Overworked or overtasked individuals make lousy teammates. If you want to improve the potential for harmony amongst your employees, then take a hard look at how responsibility and authority are delegated.
Here’s a blog to get you started on this topic Why Your Team is Always “Too Busy”
The five themes are equally important, but differently prioritized. Each affects the other in much the same way that removing one petal from a flower affects our perception of that flower. To that end, what I have learned is that in order to help owners be more successful, we have to work towards all five conditions.