Thirty Years in Business

It was thirty years ago I started my business training career as a seminar leader with the Federal Business Development Bank. It was Small Business Week, of 1986, and I did my first workshop in Courtenay BC.   My mother couldn’t believe that someone would actually pay me to talk… but at least I had plenty of practice.  In that time, I have not only spoken to business owners and managers, I have listened to questions and concerns about starting, operating and growing small and medium sized businesses all across Canada.

Over the years, I have done thousands of presentations to tens of thousands of business owners and entrepreneurs.  Although I have done presentations to larger corporations, my heart is with those who want to start and build their own enterprise.  Some have succeeded and others have not. The best part, for me, is the great enthusiasm.  I love working with and for entrepreneurs.  It is an honour and a responsibility, one which I will continue to do with humility and enthusiasm.

In the past thirty years, some things have changed dramatically, whereas the fundamentals of business have remained remarkably consistent.  So here are my ‘top three’ in each area.

Three Great Changes in the last thirty years

Speed: Markets, information, technology and production have changed rapidly over the past thirty years. Trends and cycles are nothing new, however; these cycles happen faster than ever before. Today’s entrepreneur must be aware of these rapid changes and strive to remain relevant in a rapidly changing environment. Beware…remember Blockbuster, Nortel & Blackberry used to dominate their markets. 

Information: Information, both true and false, travels at the speed of light.  Some information growth is great.  If you want to know if there are any living cast members from Gilligan’s Island, it is only a Google search away.  That said, there is false information out there too.  Some of the ‘interesting’ medical information out there is…well incredulous.  Reputations can also be built or destroyed in a ‘heart tweet.’  When information is added to speed, ability to keep up with our business is increasingly difficult!

The Power of One: When I was at the Bay, just out of university, I did a form a forecasting called a buying plan.  We forecasted monthly revenue, and used that to determine how much money was available to buy merchandise.  I did these by hand on paper.  When my boss didn’t like the results, I started over.   I was just one of the many Assistant Department Manager doing these forecasts.  Today, I can write a spread sheet which automates the bulk of that job and allows instant updating.  This allows smaller firms and individuals to have greater impact than they could ever have had in the past.  

Three things that haven’t changed in the past thirty years

Cash Flow: No matter how much things change; cash flow is king.  For most small businesses, angel financing and venture capital are unlikely.  You must manage cash.  Cash flow management is especially difficulty when growing.  Managing profits, inventory and accounts receivable are essential parts of managing cash flow. 

Customers: Understanding your customers has all ways been important, and may be more important than ever.  As customer choice increases, business owners must understand all of the nuances that affect customers’ decisions.  Remember, good entrepreneurs know what their customers’ want, great entrepreneurs know what customers’ will want.

Talent: Much is said about today’s competition for talent.  Nonsense…this has always been true and until everything in life is automated it will continue to be important. Management fads come and go (and believe me there have been many in the past thirty years). Great managers, have always done three things:  provide clear expectations, support great people, and create a great environment. 

Now I am sure that many of my fellow sexagenarians, have other valid observations, and I certainly don’t think that these are the only changes and consistencies over the last thirty years, but perhaps, this will give you something to think about as you develop your businesses and organizations over the next thirty years.  

Billy's Fifty-First Law: Know your role as CEO

This is just a short blog entry, and it comes from a client who asked me to help him work on his 'job description' as the company CEO.  Here is what I came up with, in sufficiently generic terms that I can share it with you.  See if this works for you, and comment if you would like to add to it.

The purpose of the CEO is to

·       Set the overall direction of the enterprise.

·       Ensure the different business of the enterprise are acting in a coordinated and integrated manner.

·       Provide leadership, especially with respect to honouring the mission, vision & values of the enterprise.

·       Understand and emphasise the priority areas of the business, and lend his or her weight to that area.

·       Ensure the continuity of the enterprise from a marketing, human resources and financial perspective.

·       Provide regular operational planning, and periodic strategic planning to re-set the course of the enterprise.

·       Be fully aware of the changes in industry, economic, social and market changes that affect the enterprise and its stakeholders.

·       To build people…especially the next generation of leaders in his or her enterprise.

·       To, on leaving the organization, leave the enterprise stronger than it was before.

·       Be fully aware of the changes in industry, economic, social and market changes that affect the enterprise and its stakeholders

·       To build people…especially the next generation of leaders in his or her enterprise.

·       To, on leaving the organization, leave the enterprise stronger than it was before.

 That is what I have come up with.  I am sure that there are a myriad of other important roles, not to mention personal characteristics that drive business success. 

Billy’s Fiftyth Law: Effort is important…results are critical

Do or do not…there is no try.

Yoda to Luke Skywalker The Empire Strikes Back

A friend recently asked me, “In a start-up, how do you manage effort.”  This is an intriguing question. On the one hand, we learn the importance of trying hard…but on the other hand, effort without results is a recipe for disaster.

The question is not in managing effort, but in measuring a variety of outputs.  For example, suppose we have two companies in services.  The first company bonuses employees based on the number of billable hours they generate.  The top output, therefore, is billable hours.  The second company values marketing.  They have a formula that gives a percentage of revenue to any client an associate brings to the firm, regardless of who does the work.  The measured output here is customer acquisition and retention in addition to the work done. 

Some places measure effort in working hours.  Others on a series of objective and subjective measures.  All of this begs the question; is effort important?

Effort is measurable and valuable in one area, improvement.  Improvement is change in measurable output.  Sales went from X to Y…unit production went from X units/ hour to Y units per hour.  This helps those people with potential who get off to a slower start, but may well prove valuable to the company in the future.

Effort usually turns into results.  Coaching and management help people channel effort into the right direction and achieve the result they ultimately desire. Effort is important, but results drive your business forward. 

Sometimes effort is a measure of potential.  If that potential is not turning into results, perhaps you have the individual in question in the wrong position.  The effort is not turning into results.  This is the ‘square peg in the round hole’ syndrome. If somebody is trying hard, but not achieving the desired result, despite your best efforts in coaching and training, perhaps you need to find another place for the individual.  In today’s labour market, it is difficult to find hard working people.  Unfortunately, if you cannot find a place to take advantages of great effort in an area that will achieve results, then they should move on. 

Billy's Forty-Ninth Law: Use your professionals wisely!

“The minute you read something that you can't understand, you can almost be sure that it was drawn up by a lawyer.”

Will Rogers

Accountants are the pathologists of business.  They can tell what wrong six months after the business died!

Bill Erichson

 

Over the years, I have worked with hundreds of business people and I have found an important truth… business is too complex to run without professional advice.  A well run business has three key advisors:  a lawyer, an accountant and a business advisor.  The trick is how to use the advisors in order to help you run a sustainable, successful business.

The Business Advisor

Businesses need good business advice.  This is what I do for my clients.  In general, business advisors help the business owner see the big picture, mentor the owner and keep an eye out for the pitfalls that often lead a business down a dangerous path.  Some business advisors are technical specialists and focus on particular industries.  Others are business specialists, usually concentrating in on are such as marketing or finance.  A good business advisor helps you make decisions that make good business sense!  This is a critical factor when making decisions.  The advisor helps you look at things from different sides, and often looks at unforeseen risks and unintended consequences.   

The Accountant

Businesses need good accountants. Accountants, recent advertising notwithstanding address financial issues, especially around the preparation of financial statements and tax returns and around providing solid financial advice.  Many business owners simply use their accountants as tax strategists, and in truth, many accountants look at business through a ‘tax lens’.  Unfortunately, many accountants are not as expert as explaining things as they are doing things.  As one client once told me, “Five minutes into my meeting with my accountant and all I see are dancing cows.”  Accountants are essential, not only for taxes, but for helping entrepreneurs make good financial and tax decisions.

The Lawyer

Lawyer jokes notwithstanding, it is imperative to get good legal advice.  Contracts are tricky, whether we are talking about a lease, loan agreement or sales contract; all of these are contracts and are written by lawyers for judges!  They are often incomprehensible to normal people, but the language of contracts is important.  This way, the intent of the agreement between two parties is reflected in the legal agreement just in case anything goes wrong and the contract goes to court or to arbitration.  Lawyers look at your business through the legal lens just as accountants often look at the business through the tax lens.  A good lawyer is an essential part of any business.

So, what is the problem?  The problem is how many business owners use their advisors.  I have a rule.  See your business advisor first…your accountant second and your lawyer third.  The reasoning is simple.  If a decision does not make good business-sense then don’t do it.  (I am always amazed that people make decisions to spend money because they can “write it off”.  Remember, you have to write it on before you can write it off!) 

If a decision makes good business sense, then meet with your accountant so you can structure the decision to ensure it makes good financial and tax advice.  This can include buy vs. lease decisions, to structuring contracts for tax purposes.  If a decision does not make financial advice, then again, don’t proceed!

Finally, if the decision meets the first two criteria, then see your lawyer.  Ensure that the decision makes good legal advice and that you structure it correctly.  Lawyers often see the differences between an agreement, as you understand it, and the contract as written.  This is far cheaper than trying to enforce something not found in the contract, but something you are sure should have been there.

You need all three pieces of advice.  For example, if you decide to incorporate, it should make good business sense, tax sense and legal sense, and the legal agreement and shareholders agreement must reflect the intent of those involved.  A shareholders agreement is developed to protect both the shareholders and the corporation from the future disputes that will inevitably arrive.  

So use those advisors.  In my experience, they are on your side and are advocates and allies in your enterprise.  Find good advisors and then trust the advice you receive.  It will save you from harm, and help you build the kind of foundation to build a successful and sustainable enterprise.

Billy’s Forty-eighth Law: Find your gift

Believe in yourself! Have faith in your abilities! Without a humble but reasonable confidence in your own powers, you cannot be successful or happy.

Norman Vincent Peale

 

Many, if not all, of the successful entrepreneurs I have met have a ‘special gift’. This is not exclusive to entrepreneurs, but it is somehow different.  This thought came to me as I spoke to a businessman about his relationship with his children.  I tried to involve my son in the business, he told me, but he got to a point where he thought he knew everything. He second-guessed my decisions, and frankly, he was wrong a lot.  Not only did leave the family business, but also then went to work with the competition.  The son did not understand or appreciate his father's gift, and how important it was to the business.  (His gift was having the ability to see if a piece of equipment would work in a specific situation.) 

I am fourth generation self-employed.  Each of us (all William Erichson by the way) started different businesses.  My Great-grandfather was a blacksmith…my Grandfather & Great-Uncle were farmers…my dad was an electrical engineer who ran his own company until he passed away.  Each had a gift.  My great-uncle was an inventor.  He would use the blacksmithing tools and build his own farm implements.  This made their farm more productive.  My dad had the knack of getting right to the heart of a problem and doing it quickly. 

Some of the other entrepreneurial gifts I have encountered in my journeys include:

Problem Solvers:  I know a fellow who solves production problems in a manner most trained engineers would envy.  His solutions are quick, elegant and usually inexpensive to implement. 

Networkers:  A good friend of mine knows how to put people together.  She is sort of like a business matchmaker.  All you have to do is say, Barb…do you know anyone who can… and there is someone in her network who has the necessary skill set.

Influencers: We all know these people.  They not only know things, but they have the ability to mobilise and convince others.  They bring great sales and marketing skills to their enterprises and influence the buying decisions of others. 

Futurists: A business partner of mine has an uncanny knack of seeing trends.  He capitalised on medical billing and electronic tax returns in the ‘pre-internet’ days, using modems to communicate directly to mainframe computers. 

Implementers: This ‘breed’ of super organized people get things done in spite of the difficulties surrounding them.  They have clarity of both goal and task.  These people can both ‘herd cats’ and ‘nail Jell-O to the wall” to mix two metaphors. 

People Masters:  These people are ‘Human Resources Savants.’  They break all of the traditional rules of recruiting and management, except one,…they get great results!

There are many more, and many of you can think of other people whom you know and other gifts your network possesses. But gifts are often these intuitive, talents that are almost inexplicable. Herein lies the problem.  People with a gift often do not know how to pass it on.  They don’t think…they just do. 

My father thought that his way of getting to the important aspect of an engineering problem was obvious.  In fact, he got frustrated with anyone who could not do the same.  I have met instinctive sales people who make terrible sales managers. I met one woman who was a recruiting savant.  Her techniques were non-transferable to anybody else, but she rarely made recruiting mistakes, and when she did, she said that she didn’t use her instincts.

The gift is a blessing and a curse.  They are great to have, but a business dependant of the gift of the founder may remain dependent on that founder. This makes scalability and sustainability difficult.  For those of you who are gifted try to understand the following:

1. Not everybody has the gift.  They reach the same destination using a more formal process. 
2. Try to de-construct your gift.  This is the only way you can pass on your instinct to others. 

So find your gift, use your gift, it is a competitive advantage there for the taking!  Like any gift, it is best not squandered.

Sorry for the late posting however; I have just written and delivered a three-part personal finance program here in Whistler.  This took up a great deal of my writing time.

Billy’s Forty-Seventh Law: Don’t overlook your steady performers.

I was talking to a friend the other day and she told me that she felt underappreciated at work.  “I do exactly what is expected and yet I don’t think that I am perceived as a ‘rising star’ in the company.”  Although my friend works for a larger firm, I wondered just how common this might be in smaller enterprises. 

Some people are good at their jobs.  To use ‘familial language’ they are the sensible sons and the dutiful daughters.  They are always on time.  They are low maintenance. They always show up for work and put in extra time.  Often we overlook these individuals for praise or promotion. 

There are many career books and seminars coaching people on how to get the recognition they deserve in the work place.  I can understand this in a large corporation or organization.  In a smaller enterprise, this should never happen.  In large companies, the individual plans and executes his or her own career path.  In smaller enterprises, there is no excuse for this.  There should be no need.  As an owner or a manager in a smaller enterprise, the skills, abilities, potential and performance of each individual is apparent.  There simply is no place to hide.

The problem is management.  Just as we are acutely aware of the individuals, we should also be careful to manage well. We must not quit managing just because we do not need a change in behaviour.  These sensible sons and dutiful daughters are keeping our companies in business.  Consistency and reliability count.  Sometimes, as leaders (as someone once said, you manage tasks you lead people), we fail to do the obvious…lead those already going in the right direction. 

Many entrepreneurs manage by exception.  They only lead when something is wrong.  They fail to lead or manage when things are going well.  Now think of people.  If we only take action when the extraordinary occurs, such as a huge success or a major failure, we send the message that we are only interested outlier behaviours, and not in the 95% of behaviours and actions happening within the ‘normal’ range of activity. 

This is just plain dumb…yet it happens all of the time.  I know two things about all companies.  Firstly, they have people they should fire and have not done it yet.  Secondly, they have the steady performers whose contribution is invaluable yet who are not recognised and underappreciated.  This is a management failure…a leadership failure and a commercial failure. 

Many superstars are working for smaller firms, for less money than they could make for large corporations for life style and personal reasons.  As smaller enterprises, you probably cannot compete on wages, so we must work twice as hard by competing on environment. Recognition is one of the most important management roles in any organisation.  It is the most important thing in a smaller enterprise. 

By the way, if one of these ‘Steady Eddies’ begins to falter this is a warning sign.  Address the issue immediately.  You may be the source of the problem.    

Billy’s Forty-Sixth Law: Sometimes you can do almost everything wrong and still make money

This law is the inspiration of my friend George, of the Fifteenth Law.  He has a customer who does almost everything wrong, and still makes piles of money.  George is a technical specialist, and looks at the world through the eyes of technology.  Here are his observations on this e-commerce company:

1. The search snippet (The brief snippet Google displays below the company name, describing the Website) is useless at driving business. Nine out of ten users ignore the search results and select a competitor’s website. The company spends time and money for search optimisation, yet fails to convert due to this one small, but critical error.  
2. The home page leaves new users confused.  Testing shows the entire forty-nine page Website is so confusing that most users simply give up.  The calls to action do not stand out and it is unclear what action the customer should take.
3. The Website does not take advantage of any management tools such as page based SEO or split testing. There is no conversion optimization testing, but rather the owner bases the design on guessing what customers really want. To make matters worse, there is no performance testing to confirm if the guess was correct.
4. The president institutes changes without any strategy or change management process. The result is unreliable and inconsistent performance.
5. It takes over twenty seconds to return a list of products selected to the shopping cart.  This is due to high levels of unnecessary customization.  Twenty seconds is an eternity in the internet world.

This company breaks every e-commerce rule in the book except one…that they make money!  They are doing one very important thing right that is customer service.  Company policy is is always do right by the customer.  Examples include:

1. Anyone who complains receives a free company T Shirt; talk about turning enemies into friends.
2. If a customer perceives any financial loss, the company reimburses them without question. 
3. The customer support staff are empowered to do whatever it takes to make a sad customer happy.
4. The company president follows up every complaint with an email asking the complainant, "Did we solve your problem, are you happy, and is there anything else we should do? “

Every customer who has an issue is made whole and happy.  The result is Yelp and other review sites are full of meaningful complements.  This fanatical dedication to over the top customer service results in thousands of positive reviews all over the Internet.  Due to this massive volume of positive reviews, the Website enjoys an unprecedented number one ranking for any related Google search.

When a company is successful in spite of themselves, it is difficult to suggest changes.  “If it ain’t broke, don’t fix it” is an oft-heard cliché in such situations.    The challenge for those of us who provide advice to business owners is to encourage change when things are going well.  This is far more difficult than forced change when things are going badly.

In my experience, most business owners are lousy business people.  They are, typically, very good at what they do or very good at sales and marketing.  To sustain a business, owners and their teams must develop a more complete skill set, incorporating all aspects of business and not merely in the areas they prefer or the areas in which they are comfortable.