Year Seven: Renewal

Risk: Medium

Satisfaction: Medium

Key Issue: Creating a new challenge for yourself

There is nothing more dangerous to a business than is a bored entrepreneur!

Year Seven is a tough year on which to comment.  For many business owners, this is a time to capitalize on the gains built in the first seven years and grow their enterprise to the next level.  For many entrepreneurs, starting a business is more enjoyable than growing or operating a business.  This is how many businesses go onto divergent paths growth and renewal or neglect and decline. 

The story of the bored entrepreneur is personal to me.  Before starting his own business, my father was a shareholder in an electrical contracting firm.  They brought in my father to acquire his engineering expertise, just as they brought on another individual for his expertise in the field of programmable control. The founder of the business still owned 51% of the business and thus had controlling interest.  The company had a line of credit, backed in part by the personal guarantees provided by each of the shareholders and their respective wives.

The founder of the company was a bit of a tinkerer and inventor.  He invented, and patented as ‘self-propelling’ boat.  It took the side-to-side rocking motion of the boat and turned it into forward propulsion.  As with many entrepreneurs he thought that just because he was good at one business, he would necessarily succeed at all his businesses.  He decided to begin manufacturing these self-propelled boats using the line of credit from his original company.

When the other shareholders found out about this they went to the bank, asking the bank to ‘call the loan' so the founder could not drain the company on this boat venture.  The bank agreed not to call the loan provided the company undertook not to forward money towards the boat company.  The bored entrepreneur continued to follow his dream, resulting in the bankruptcy of both companies.

I have seen too many entrepreneurs follow this pattern.  Sometimes, they are like Richard Branson…sort of entrepreneurial polymaths.  Most are not, and have both successes and failures.  Many are  one-trick-ponies, and confuse a single success with entrepreneurial genius. In planning sessions, I tell these ‘serial entrepreneurs’ that the start-up plan should include an exit strategy.

So what should Year Seven look like?  I believe strongly in the following:

·       Ask yourself “Is this really, what you want to be doing?”  If it is not, develop an exit strategy or a succession plan.  If so, think of it as signing a seven-year contract extension.
·       If you want to commit yourself, re-vision your business to align your personal goals with the goals of the many stakeholders around you.  These include investors, employees, customers and your community.
·       Take action.  Inaction means attrition and attrition means an uncontrolled end to your enterprise.  It is better to go out of business than to be forced out of business.

 

The reason I am so passionate about planning in Year Six is so you can execute strategies in Year Seven.   Exit strategies and succession plans are just as important as are growth plans.  Too many entrepreneurs do not even think about the end as they are so busy building a business they never know when it is done.

One client with whom I am working is in year seven.  I put the ‘contract extension’ concept to him.  He told me that he wanted to do the next seven years, but that after that, he would be done.  This will help us develop a planning framework with an end game in mind.  By having a well thought out exit strategy, he can ensure continuity for his employees and his customers, and at the same time, reap the rewards of what will have been fourteen years of hard work and commitment.

Year Seven is either a springboard to bigger and better things, or it is a black hole drawing the enterprise to perdition. Not since the founding of the business is the passion, desire and direction of the founder more important.  There are two key differences.  Firstly, you have an infrastructure of success.  You have customers, you have production / provision methods and you have a financial track record.  You are not in uncharted territory.  The second is that you have more to lose.  The stakes are higher now than they were at the beginning. You have more people relying on you.

As a part of a strategic planning exercise, I had the planning team calculate how many people were directly affected by the success of the enterprise.  Over 200 peoples', lives depended on this firm.  This helped put the importance of planning into a greater context than profit or loss, but into a context of families.

Seven years may seem like a long time, but ask any entrepreneur who has succeed for that long and he or she will tell you that it went by in the blink of an eye.  As Geoffrey Chaucer wrote, “time and tide wait for no man.”

Year Six: Mastery

Risk: Low

Satisfaction: High
Key Challenge: Balance

The emerging picture from such studies is that ten thousand hours of practice is required to achieve the level of mastery associated with being a world-class expert…in anything.

Neurologist Daniel Levitin Quoted in Outliers by Malcom Gladwell

The sixth year of business is often one of the most satisfying.  If you are still around, you have not only developed a client base, but have experienced losing customers and gaining new ones.  You have developed your business skills, learned from the arrogance of year four, and carved out a specific role for yourself within your own company.   In many ways, this feels like smooth sailing.

This is a time for you to enjoy yourself personally and professionally.  If you have developed your business correctly, the business has become less dependent on you more dependent on your staff and your systems.  Even if your business is primarily about your own contribution to the enterprise, as is my one person training and consulting firm, you will have developed sufficient goodwill with your clientele to take some time for you and your family.

The problem for some entrepreneurs is the habituation to working long hours.  If you work forty hours per week, that soon seems to be the norm.  If you work sixty hours per week then that seems to be the norm.  The problem is that we do not necessarily use our time as efficiently as we should, or even as we once did.  Many people define themselves and their success by their effort rather than their results. 

 

This poses problems for the enterprise and for the entrepreneur.  The entrepreneur can give the impression that people are not trusted do their jobs.  This may not be true…in deed often entrepreneurs have great faith in their teams, however; the perception is more important than the reality.  From the entrepreneur’s perspective, this dogged mindedness to the business often comes at the expense of other aspects of life.  This includes long-time friends and often times family. 

In year six, you must review your personal and business goals.  Is the business doing what you wanted it to do?  Is your lifestyle all that you envisioned it would be when you started the enterprise?  Alternatively, do you need to make changes?  This is a great year for some personal planning.  This could even include thinking about a transitional plan or even developing an exit strategy.  It takes time to exit a business, so beginning this process early helps.

You have worked your butt off for five years.  In year six, remember the reasons you started the business, the price you have paid, and the rewards you may seek.  You don’t have to be religious to appreciate the wisdom of this verse:

 

For what will it profit a man if he gains the whole world and forfeits his soul?

Matthew 16: 26

Next time is the last this series…the transition of Year Seven.

Year Five: Managerial

Risk: Medium

Satisfaction: High

Key Challenge:  Re-defining the founder’s role in his or her company.

Year Five challenges are often similar to Year Three challenges.  The difference is often the scope and scale of your role in the business.  The challenges in year five are also extensions of the lessons learned in the Eighteenth Law…The Entrepreneur must develop ahead of the Enterprise. 

The important question to ask yourself at the beginning of year is what your role in the enterprise should be.  You have developed your management skills and understanding…you have ‘Moved North’ and are spending some time thinking about the future of the business…now it is time to find the job to which you are best suited.

Should You Hire a Boss?

Sometimes, the best thing you can do for your business is to replace yourself as the CEO.  This is often true when the entrepreneur brings unique skills to the organization.  I met a fellow in the eighties named Bill Gibson.  He is a public speaker and seminar leader now based in South Africa.  Bill once told me that the smartest move he ever made was hiring a boss.  It allowed him to focus on the thing that generated income for the company…Bill Gibson! (He also told me how many sessions he had to cover his new and substantially higher overheads!)

Some people have a passion for what they do.  When Bill Gates stepped down as CEO of Microsoft in favour of Steve Ballmer, he took on a technical role… something he wanted to do!  He re-cast his own role within the business.

For many founders, it is difficult not being the boss.  You may have a founder’s skill set, but may not have a builder’s skill set. These skills are different.  Having a founder’s skills is no guarantee you have a builder’s skill set.  I met one ‘serial entrepreneur’ who sold her businesses instead of having to build and manage them.  She was great at getting them off the ground, but then got bored and wanted a different ‘founding’ challenge.

Should You Be the Boss?

You may, on the other hand, want to grow your business.  You must decide which areas you want to drive, and which areas you want to delegate.  A client of mine, in professional services, wanted to grow his company.  He hired great project managers in order to increase his capacity in the business.  He also hired an internal accountant years before most people in a company his size would take that decision.  In fact…conventional wisdom would have said that he was five years too soon.  He knew that there were financial complexities coming and that he couldn’t keep up with these areas.  He found a great CFO/Accountant and never looked back. 

Managing and leading a larger business is a different kind of challenge.  It is slower and more systematic.  Many great entrepreneurs transition well from founder to builder.  Michael Dell and Howard Schultz are examples of founders who became great builders.  Just remember, if your role changes, somebody else may have to do things you used to do…and that is difficult for many entrepreneurs!

Year Five is a great year.  The angst of adolescence is behind you and you are still excited about operating your business.  You also have learned about both your business and about business in general.  Year Five is a great ‘launching pad’ for business growth.  Year Five is a planning year, a time for, looking at the future of your business, and your role in that business.

Year Four: Transition

Risk: High

Satisfaction: Medium Low

Key Challenge:  Humility!

Pride goes before destruction, And a haughty spirit before stumbling.

Proverbs 16:18

In the first version of my seven year business cycle, I paralleled business cycles to human growth…infancy, toddler, child etc.  Year four was adolescence. I still believe that the dangers of year four are analogous to this strange yet important stage of human development.

Unless your business is a survival or hobby business…a business, which is not even providing you with a decent income compared to the effort you expend and the risk you take, then you often are seeing success during this pivotal year.

Success is great, but can also create problems.  I made some of my biggest mistakes in year four, all because I started to ‘believe my own press clippings’.  I had some successes and I done a few decent sized contracts.  I was speaking throughout the province and, for the most part, my audience loved my presentations.  I thought of myself as Tom Peters meets Robin Williams. 

Confidence is important…in fact it is critical not only in public speaking but in business generally.  The problem is pride.  I started to think that I was a little too good for my clientele.  I didn’t treat my customers quite as well as I should have.  I even billed a client a cancellation fee, something that I had never done before.  By the way, I never worked for that company again.

It is a bit like being an adolescent.  Apparently, the neurological pathways between the emotional and the rational parts of the brain are not completely formed until age twenty-five.  This accounts for dumb things done by guys in their late teens and early twenties.  This is similar to many of our behaviours in business.  Billy’s Tenth Law about buying the Porsche too soon is typical of this stage in an owner’s business life cycle. 

Hubris and the inevitable need for change create a potentially dangerous combination.  Pride tells you that things are good and that you are damn good.  This blinds you to the need for change and can make you take customers, and success for granted.  Why did Microsoft wait so long to develop office for the iPad?  Hubris.  We can miss the obvious just because we are successful!

Year Four is risky.  Decisions based on a false self-perception can come back and bite you in the ass.  This is especially true if you are a younger entrepreneur.  I made more mistakes in year four than my father because I started my business when I was thirty-five and my Dad started his when he was fifty.  If you are in Year Four both you as the founder and your enterprise is transitioning into a sustainable, long-term businesses.   Be aware that you and your business are changing and that you must do your best to manage change and manage yourself.