it is with business. We don’t jump into a major corporation at our first attempt. We need to learn the business rules as they apply to the industry and the markets that we seek and we then need to turn some of our knowledge into know-how. Most of us do this as employees, working our way to management within someone else’s company, making mistakes and learning along the way.
Ultimately, when we have our experience and we are ready to fulfil the dream of owning our own business and being the boss, we have to learn a whole new set of rules. It may be that you have never had to balance your cash daily or calculate the turnover and/or projections for the lenders before.
In most cases, the new layers of learning are harder to grasp than the operational functions and we struggle to bring it all together. If, for any reason, we choose to focus on getting the operations running smoothly, we are not maximizing our resources. As the business owner, you need to start with the end in mind and the end game is to have more competent operators operating the business, while you manage it. This means you need to allocate some of your valuable time to the practice of management, to get you away from the operations as quickly as possible. To best achieve this we recommend an eight-stage model, which is detailed in this book, as a practice model for most small businesses. These steps are:
Segment the operational functions. Even if your business has a part-time workforce of one, you still need to plan it out as if the fully-operational full-scale business is inevitable. You need to prepare the organisational chart for the firm and then start to create the divisions or departments. Typically, these would be around (1) Management and Administration, (2) Finance and Accounting, (3) Production/Service and R & D, (4) Human Resources and (5) Marketing and Sales. Although these may be broken down further in major corporations, they are still structured around these five key functions.
Identify the positions. Typically, the organisation chart may have a manager in each of these positions, with your name under each, from the commencement. The art of true growth is to get the names of other quality employees on these functions, as quickly as possible.
Set the operational function for each position. After the organisation chart has been set and you can fully document the functions within each position, you then need to draft up the job description. Although you will be performing most of the tasks in the short-term, you will need this experience as part of the knowledge-base you hand on to the incumbent in the induction process.
Work out the accountability for each position. Each role will need a job description and position on the organisation chart, clearly identifying the role, to whom they report and also who reports to them. This structure ensures full accountability from the end of induction.
Set about hiring someone for each position, against the job description you set. As you expand your business (based upon your hard work and strategic planning brilliance) you follow the basic recruitment process for selection, appointment and induction, with you sharing your experience in that position, with the incumbent. The recruitment process for all positions identified may take several months or even years, but with the right paperwork in place and the procedures for everyone to follow, you will not have to go back and repeat the process when people leave.
Work with each person until they are comfortable and competent. Some small businesses consider the induction process to be a half-day exercise and will view it as lost productivity for the position leader. There is considerable research available that bears out the theory that the more comprehensive the induction process, the more likely the candidate will engage and become part of your team. The temptation for most small business owners is to focus on business and see induction as a cost (lost business) but the long-term strategic business manager knows the value of hiring once. Don’t be tempted to drop employees in deep water but be ready for their inevitable mistakes during the learning process.
Measure the individual and collective operational performance. As your first employee becomes part of a growing team, the KPI measures you put in place will enable you to remotely monitor and measure your business and not have you work in an operational role to grow the business. It is essential to give regular feedback to teams and individuals, so that corrective action can help all employees adjust to their roles and functions.
Focus on the outside. Once you have the business in a strong and steady growth trajectory, you can now begin to look outside the company. Your focus now switches from growth through operational efficiencies, to growth from other areas. These areas may include new customers, offer more products or services, new regulations, opportunities, compliances, suppliers and contractors, as well as protecting your intellectual property and know-how.
Once you are out of the business (with no operational functions) your very presence and your access to accountabilities (KPIs, etc) will ensure the business will continue. With encouragement and with regular adjustment against the KPI trends, your business should prosper, if the outside environment remains the same.
Your final role is to look for your next business. Could this be a business you buy from or supply to? Could it be a competitor? Could it be a new branch in another area, as your first attempt to prove your business model as a franchise?
Why Change Anything?
In consulting, one of the first sessions we have with business owners (before accepting them into a change program) is to have the business owners set their outcomes. To effect this managed change, we provide 100 points for them to allocate on their goal priorities. We offer them the chance to invest in any proportion, in the following outcomes:
Increasing the net earnings
Reducing the hours worked by the business owner, and
Increasing the sale value of the business, as a going concern.
The most immediate response from business owners is to affirm their desire to double their net earnings. Forcing business owners to decide how much of this as a priority they would be willing to trade-off, in order to effect gains in one or both of the other areas, can be confronting for any of them. This may be the first time they have been encouraged to think about these other options, as part of their overall vision for the business future. The intent becomes even more pronounced when they discuss the trade-off with a business partner and/or spouse.
People understand that with the scarcity of resources, they could not achieve increases in all three areas of their business operations within a ten month period, unless they employed several full-time consultants. They would also need to be willing to entertain an extended period of turbulence, as the business is dissected and re-built from different directions.
From the very beginning of the change journey, the business owner should feel confronted by their own personal goals and making these congruent with their business goals. The goal-setting process (for personal or business applications) will almost always start with the vision and include a mission and a stated set of values. These personal VMVs are then measured against the business VMVs to ensure congruence. If there is a difference (and there usually is) this is the first change requirement that we would work on, in their business model.
The underlying messages and themes that we are going to share with you in this book are packaged and presented in understandable and implementable nuggets. The intent is to deliver each of these practical and proven business concepts in “bite-sized pieces” for you to recognise, understand, implement and measure, before returning for another. Some of the core concepts we need to embed within our business practice, include:
We need to measure everything we do, so that we can improve it
We need to focus on one area at a time and not change too much at once
We need to make incremental changes not massive changes
We need to implement strategies that will ensure we are not working in the business
We need to structure the operations which will make our business most attractive to buyers and will deliver us the highest value at sale
We need to Increase our margins by adjusting our profit drivers (so the value increase