The Entrepreneur's Mentor

Double Vision

I am a big proponent of every business owner having a vision for the growth and development of his or her company. Why leave success to chance? A strategic plan for achieving the business goals is a must. Remember, "Hope is not a strategy." We cannot just hope that we are going to hit our marks.

At the same time we are growing our businesses according to a plan, we should be living a personal vision made possible by our business success.  We all know that "all work and no play make Jack a dull boy."

I guess I am at that age....I tend to read the obituaries in the morning papers to see who has passed away. Of course I have a curiosity as to whether death has taken anyone I know. But beyond that, I am trying to get a sense of how people have lived their lives, if they have left a legacy beyond  their business and their assets. Have they enjoyed the fruits of their success? Have they enjoyed their lives?

It is important to remember that our business success is a means to achieve our personal goals. Let me say that again. Our business success is a means to achieve our personal goals. When I look at obituaries, I look at what people did with the life they had. Did they do volunteer work? Did they support certain causes? Did they have a family life? Interesting hobbies?

Life is not about amassing the most wealth, the most "toys." If you could write your own obituary, what would you want it to say about you? If it was the only reference your great, great grandchildren had about you, what would you want them to know? What message would you want to send by how you lived your life?

Would you want it to be "Joe was worth $1 billion when he died, and it was all buried with him?"  Or "Joe was worth $1 billion at his death, all of which he gave to charity?" Or "Joe's funeral was attended by all 100 of his employees, his many friends, the boards of all of the causes he supported, and his children, grandchildren and great grandchildren?" I am not saying there is a right or a wrong response. But as a friend of mine says, "Life is not a dress rehearsal."

We need to live and enjoy our lives as much as possible. We can best do this by aligning our personal vision and goals with our business vision and goals. We work hard to provide us with the lives we want. There is a connection and we should not forget it.

If we have choices in life (and all of us do, though many believe they do not) we should choose to be happy, to choose our career to do something we find meaningful, fulfilling and enjoyable and to spread that happiness into our personal lives.

So, take a few moments to sit down and write your obituary. And then work to make it happen the way you have written it.

To Grow or Not to Grow

Every organization with which I work has "GROWTH" as part of its vision of the future. And of course, the conventional wisdom is that growth is good and without growth you are standing still while everyone else is moving ahead, thus you are actually falling behind.

But, while everyone agrees that growth is good, "everyone" does not define "growth" the same way. The definition is critical to the success of the company.

Top line growth may give rise to an impressive gross sales figure, but it may be deceiving if the bottom line hasn't grown at least proportionately.  Would you rather be a $5 million company with a $1 million profit or a $10 million company with a $1 million profit? How much harder are you working in the latter case for the same result? What is the benefit of the additional $5 million in sales?

Granted, there could be a strategic reason for growing sales at little or no profit for a short period of time. It may involve capturing market share; or it may involve moving into new product or geographic markets at a high initial cost. It may involve increasing overhead and payroll to take the company to a much higher level where profits will be greater.

But it could also be vanity, or lack of focus on the right numbers.

What if you could stay at $5 million in gross sales but get rid of all of the accounts that aren't profitable and replace them with accounts that are very profitable. You can grow your bottom line without your top line. You can grow your market share of the most ideal customers, the most profitable ones and the ones that have the most potential for profitable growth.

Some businesses recognize that they will lose their "souls" if they grow beyond a certain size. They value their culture and their "family" atmosphere and do not want to lose them. Or they don't want to take on the investments in new technology or facility or machining or inventory that growth would necessitate.

Growth can be into adjacent geographic areas- new territories. Growth can be into new product lines. It can be deeper penetration into existing customers.  It can be new customers.

So, just thinking about growth in a generic way is not enough. Know what you want to grow and what it means to your business to do it.

Subtracting by Adding

 How many of us have made that key hire that we have been waiting to find for so long and have made the mistake of thinking that we have found the last piece to the puzzle? Sometimes we assemble a team one member at a time in the belief we are building something solid. We then hire the COO, or Operations Manager or General Manager that we feel will tie the whole thing together.

Wrong!!!!

Do sports teams hire the General Manager after the draft and after the team has made its additions and subtractions for the year, and expect the new GM to wokr wonders with players he had no role in choosing? They usually don't.

Even if the last hire, who we will call the COO for example sake, shares the entrepreneur's vision and values, he or she may not feel the chemistry is right among the team members. Or he/she may get a different feeling about certain individuals. If we trust our COO then, he or she needs some leeway in creating their own team.

Does that mean we allow our carefully chosen employees to be fired subject ot the whim of the new hire? No, of course not.

But it does mean that we have to be willing to listen to opinions other than our own, and hear the reasons why the COO believes certain individuals don't fit the bill. We entrepreneurs may have been blind to certain traits of some of our employees who were with us from the beginning or were good at certain stages of the company's growth. Some can only grow so far and we fail to see that they don't fit the company's current needs.

If an individual's success is going to be based upon the quality of work coming from direct reports, he or she needs some leeway in choosing them and developing them.  There may be some "untouchables" that have  a strong history of performance. There may be some that hold too much institutional knowledge to let go right away. The COO needs to be apprised of the importance of trying to make it work with these folks.

On the other hand, the entrepreneur that has built a company to a certain point cannot just turn over full control to a COO and watch him or her dismantle what has worked well just for the purpose of asserting total control.

Some of us have waited for years for the time to turn over operating control to someone else so we have time to strategize and think about the big picture. But, we cannot do so without a strong degree of accountability in place. The COO needs to understand that any move made needs to be justifiable and run past you.

I have had a COO fire my lawyer and end other long term relationships to put his own people in place. I gave him the space to do so without asking for his rationale. In the end, the freedom I gave him came back to haunt me.

Don't sacrifice your judgment just to give a COO room to operate.

Don't let a COO get away from being accountable to you for decisions taken.

Don't sacrifice your operating principles or values for this key new hire that completes the puzzle.

It is your company and don't forget it.

Always consider options and consequences.

Don't turn the desire to give up running day to day operations into total abdication. You could easily lose your kingdom.

And be careful not to diminish what you have by hiring one person to whom you give the power to bring you down.  Don't subtract by adding.

The whole is supposed to be greater than the sum of the parts, not less.

What Are Our Weaknesses?

Entrepreneurs tend to be optimists. We don't see the obstacles between us and the goal line. We typically just see the goal line.

We don't want negativity around us. We want people that share our vision. In some way, we are almost encouraging people to become clones of us. And while it might be nice to have everyone aligned with a vision and a set of values., it is not nice and not helpful and not even sane to have everyone align on competencies.

One of the joys of being our own boss is to get to choose how to spend our time and what tasks we get to perform. In choosing  our areas of responsibility, we are, in fact, also choosing those areas that we are abandoning. We have either decided that there are some areas of management which we do not enjoy; or there are some areas to which we assign a lower priority. In either instance, we either delegate those duties or ignore them.

If everyone else in the company is just like us, that would mean there is no one to delegate to. And that would further mean that important items don't get accomplished.

I had one business where my general manager/COO was enamored with the position I had carved out for myself. It was a combination of visionary, rainmaker, proselytizer, customer relations and problem solver.  He wanted to be just like me.  Well, guess what? The business did not need two of me (I'm not sure it even needed one) but it certainly did need a COO who was detail-oriented, operations-minded and penny pinching. We needed someone who watched the numbers (because I certainly didn't want to be tied to a chair and a spreadsheet.) and tightened expenditures. I was out there boosting the top line to new heights and I was counting on up to get us to a bigger bottom line. Well, he didn't keep his eye on the ball and I didn't keep a close enough eye on him- until one day it hit me what was going on.

He was the one with the MBA. He was the one with the background in the business I had purchased. And yet he wanted to be me. What was wrong with that?

The entrepreneur can choose to wear a number of heights. We all have closets full of hats. But, there are some that don't fit us and we have to make sure that somebody else is wearing them, and wearing them well.

I don't particularly care for finance. I recognize its utmost importance but it is just not my cup of tea. But for a business of mine to be a success, I have to have a strong, skilled, passionate finance person to look after our numbers as if they were just his/hers. While I and other entrepreneurs can probably be a jack of all trades, we are really only masters of a few. Make sure the other hats are being worn by folks that have the competencies and the attitude to master their areas.

In every large corporation, the C level has a number of executives-COO, CFO, CIO, VP Sales, VP Marketing, VP HR, etc. Which hats do you wear and which ones do you give to others?

Even if we know what we want to be doing, we also need to know that we do it well. While what we are good at usually becomes what we want to be doing, that is not always the case. We must make sure that we are competent and have the competencies for what we are spending our time on. We need to look at ourselves and be honest and objective- and we need to ask others who will give us an honest opinion.

We can't be blind to our faults and our weaknesses and thus debilitate our businesses.Where the right hats and make sure they fit. And be just as sure that the others in your company have hats that fit.

Where Do I Get My Funding?

I don't really get involved with the funding of businesses, even clients. But I do try to help clients think through their strategy for coming up with necessary funds.

Every source of funding wants to see the entrepreneur have some "skin in the game." That means that the entrepreneur is putting some of his/her own money at risk in the deal and therefore has more motivation to spend well and keep a close eye on things.

So, don't expect anyone to give you all of the money you need. You or your business have to put up a chunk.

Secondly, you have to show how the money is going to be paid back within a reasonable period of time. If you want to borrow $100,000, you realistically have to show that you can afford, out of cash flow, to pay back $20,000 per year plus interest; or to pay interest only, with a huge balloon at the end; or something in between. Will your cash flow support that?

Thirdly, you need collateral. To get that same $100,000, the lender will want to see collateral of at least that amount. That can come from fixed assets, inventory, real estate, accounts receivable or a personal guarantee. Lenders don't like risk.  They want to be covered. They will take your assets if you cannot repay the loan.

Fourth, you need to convince the lender that you and your management team have the experience and the expertise to run the business well.

If you come up well on all fronts, straight bank financing is a real possibility. If you can't get bank financing, then you can look to private investment bankers or venture capital funds. Their rates will be higher (higher risk, higher rates) and they will probably want equity in your business as well. Some entrepreneurs find this hard to swallow. But owning a smaller piece of a bigger pie should be palatable, especially if it is the only way to get funding. They are still not the easiest people to convince. They get to look at lots of potential deals, so there is lots of competition for their money.

If you have not yet succeeded, you can look for high net worth individuals who are "angels" for small companies. There may be someone who knows your business area and is attracted to investing in companies such as yours without the same regard for the fundamentals as banks and VC funds may have.

Some entrepreneurs try to put together a "private placement", trying to sell shares in their business to a number of individuals to raise the desired funds. This effort is expensive and takes a long time, but may be fruitful.

If all else fails, it may pay to just put your nose to the grindstone and knock out a couple years of improved results and then go back and try it all again. You may need to take a hard look at your company, particularly at those areas that caused potential investors to turn up their noses, and do some cutting or put in some operating efficiencies.

You can use your search for funds as a learning experience. You are getting advice from objective professionals on what is wrong with your business. Take the advice, fix your business and go back to the lenders showing them what you learned.

Patience can be a virtue. In most cases, windows of opportunity will always be there.Listen to the experts and make your business better. The growth will come.

What Do You Want?

In the initial thrill of a new idea, we sometimes forget to begin to think about the long range strategy that needs to operate in the background behind it.

Short term thinking is "This is a great idea. I can start a business around it and make some money and it will get me out of my dead end job."

Then the next level of thought kicks in. "How much money will I need to get started? Where will I locate? How will I operate? When can I leave my job?"

All of those questions get answered, and certainly a bunch more as well. The entrepreneur is satisfied with the "plan" and goes for it. And it may work out or it may not. I have seen many businesses come and go over the years and they all seemed like good ideas to someone. I had a few of those myself.

What other questions can you ask to give yourself the best chance of success? I am sure that the readers can list dozens that are important.  Here are a few.

• Is anybody else doing this? If not, why not? If so, where? How are they doing? Would they be competitors and if so, what are their relative strengths? Do they have an advantage by being in the market already? What are they doing right? What are they doing wrong?

• How big is the current market? What is the size of the potential market?

• Do I know how to tap into the potential market?

• Do I have a plan for grabbing market share from my competitors?

• Do I know what competencies are needed to operate this business? Do I have them? If not, where or how can I get them?

• Do I know what all of my expenses will be? Do I know what it will cost to operate for one year? Two years?

• How long can I afford to live without income?

• How much risk am I willing to assume?

• How much do I really know about the industry or profession in which I am entering?

• Do I have credibility as an individual? Subject matter expert? Business person?

• Do I know where to go from here?

• Do I have ideas for more products or services? A bigger geographic market? Or am I a one trick pony? Am I putting all of my eggs in one basket?

• Do I envision this for a career? A stepping stone? Do I have an exit strategy?

• What do you want the result to be from having entered this business? Do you know what the steps are from start to finish?

Boy, so much to think about, and we haven't even gotten started. Being entrepreneurial doesn't mean we just wing it. Ask the questions, at least try to answer them and be aware of what you don't know. It won't hurt your entrepreneurial image to do some planning. In fact, it just may enhance it.

The Five Most Important Questions

Peter Drucker, perhaps the greatest business consultant of all time, lived from 1909-2005. He is responsible for much of the management theory that came into being in the 20th century.

Well, we are now in the 21st century, and one might think that many of his concepts have become outdated. In fact, in a previous post, I cited a book by Gary Hamel, called The Future of Management in which the author calls for a whole new management model for the future.

Nonetheless, Drucker is still relevant. He wrote The Five Most Important Questions, which has recently been re-released. He says the five most important questions an organizational leader can ask himself/herself are:

• What is our mission?

• Who is our customer?

• What does our customer value?

• What are our results?

• What is our plan?

So, do you agree with Drucker? Should there be other choices in the top 5?

I wonder about the future. What type of innovation do we need to foster to succeed in the years ahead?  How will we fill our personnel needs? What skills and competencies will we require?

I suppose if each of the 5 questions is the heading of a section of an outline and we can ask more and more questions under each one, we can cover most of what we need.

What is it critical for you to focus on in your business or organization? What do you NEED to know on an ongoing basis?  Can you top Drucker?

Growing by Acquisition

Organic growth is not the only way to build a company. Some entrepreneurs, seeing opportunity for more rapid growth, look to make acquisitions. Typically, this is done to expand a geographic or a product market. Let's look at a couple of examples.

A bagel store/restaurant owner (Moe) has been in business for five years. His sales have grown quickly in the first three years and then pretty much leveled off during the next two.He doesn't want to change his product mix too much because he doesn't want to try to be too many things to too many people.

Moe surveys his customers and finds that 85% of them live within 5 miles of his store. Looking 10 miles east, which is an area similar to that in which his shop is, he finds no bagel shops. Looking 10 miles west he finds a shop very similar to his. He speaks to the owner of that shop who might be willing to sell.

Thus, he has a decision to make. What would it could to start a new operation from scratch as compared to buying an existing operation? All things considered, Moe decides to buy rather than build.

Meeting Madness

Most employees of the average business feel that they are forced to attend too many meetings, and that most of the meeting time is a waste of time. In many instances, they are not wrong. Those calling meetings need to follow some simple rules.

Every meeting should have an agenda and every attendee should have the agenda in advance.

Every meeting should have set rules regarding behavior and expectations.

Every attendee should be prepared for the contribution required of him or her.

The purpose of the meeting should be clear to all who are asked to attend.

Every meeting should have at least one clear outcome, and responsibilities and accountability should be assigned.

Time is money, and entrepreneurs do not have time to waste. While it is important for all to have their say over issue involving their interests, that does not mean that everyone "gets the floor" for an unlimited amount of time.  Clear and fair limits on discussion need to be enforced.

Meetings are a big part of my day. Some are with potential clients or prospects. Others are with clients to discuss next steps. Still others are for brainstorming. It doesn't matter what the subject is. Meetings need to be efficient and effective uses of time.

Every once in a while, just sit back and listen to others in meetings. See who gets to the point, who doesn't. Determine who just loves the sound of his/her voice and who only speaks when they have something valuable to add to the discussion. Track how much time is wasted when a meeting is unstructured and unregulated.

Do you know how you are in a meeting? Are you aware when you go on and on without saying anything? Are you aware when you cut people too short, either by interrupting them or by body language or non-verbal communication?

Before we attempt to influence the "meeting behavior" of others, we should be aware of our own. We should work to become the role model before we try to impose rules on the rest of our team.

Meetings are tools to impart information, share ideas, motivate others. Don't let them morph into something negative! Keep them no longer than they need to be; keep them positive; keep them on task; and get results.

Why Them and Not Me?

I read the newspapers every day, just like everybody else. When big companies start to go bad, do their banks call their loans? Do their creditors cut them off or sue them? No, of course not. When Bear Sterns looks like it is going to collapse, what happens? The federal government arranges for an influx of funds...

Then there is the world of small entrepreneurs. Hiccup once and the bank is all over you. Hiccup twice and you find yourself in workout. Where is the government to help the little guy who needs a leg up?

It is interesting that small business is the lifeblood of the American economy, yet there is no safety net out there. It is supposedly what sets the United States apart from other countries, yet we have no way to cut it any slack.

Small business people put up their homes and their personal assets to get financing.  They have "skin in the game."

I understand that the market decides which businesses are worthy and which not, which should survive and which should not. Some businesses are ill-conceived and probably don't have a chance from the beginning. Others are innovative and have good ideas, good products or good services and occasionally hit a traffic bump. Look what 9/11 did to so many businesses. Imagine what Katrina did to small business in the affected areas.

I don't have THE solution, but would love to brainstorm and come up with a bunch of good ideas.How do we support entrepreneurs and help them to overcome temporary financial difficulties? How do we encourage entrepreneurs to be innovative and to take reasonable risk without having them feel like tight rope walkers without a net?

Airlines and auto companies rack up big losses and keep on going. The government has bailed out many big companies. Financiers have bailed out others. What can we do to create some breathing room for our brothers and sisters, the entrepreneurial majority? Remember, many of the great ideas are derived from the efforts of small business people. How many will die on the vine if their companies are not sufficiently financed or capitalized?

Micro-banks have been wildly successful in Asia, giving small entrepreneurs a start or a leg up. Where is that same thought process in the US? On many projects, developers are required to build a certain percentage of their units for low income housing. Why can't banks be required to lend a certain percentage of their assets to small business with few assets? Why aren't there venture firms that are set up to help small business rather than to just make the investors rich?

Ideas anyone?