The Entrepreneur's Mentor

Business Cycles

In my last post I was excited about the prospects of the Villanova Wildcats in the NCAA Tournament- and rightly so. They won two big games and made it to the Sweet 16. Then they crashed back to earth with a loss to Kansas. What does it mean?

Everything must be kept in context. They lost key team members to graduation and the NBA last year and everybody had low expectations for this year's team. They were young and inexperienced. During the course of the year they showed flashes of coming together, and flashes of raw youth. By the end of the season they were unsure of even making it into the big tournament.  But they did. They were the last team to make it in.

In the end, they did better than everyone except themselves expected. They ended with a respectable year and a lot to look forward to.

Starting and growing a business has a lot of similarities to the above scenario.  Every time you build and reach a new height, something can happen that sets you back a bit.  You lose a key "player" who is tough to replace. You have some unexpected competitive setbacks- maybe a key customer goes out of business or splits for some unclear reason.

Perhaps someone gets sick or goes out on maternity leave or gets hurt on the job. Perhaps a key piece of equipment or technology fails.  You get things straightened out because it is your nature to solve problems.  You begin to move forward again and start to climb, and then the next surprise comes along.

Business is like that. Ups and downs rather than a continuous movement in one direction. Entrepreneurs need to be prepared for that. With small businesses, 100% redundancy is not possible. But business owners need to have a plan for whatever might come down the pike at them. Who will fill in for whom?

If we need spares, where will we get them? Who are our allies? Who can we count on?

Knowing that every business will have its ups and downs keeps entrepreneurs on their toes. They need to be alert to the downturns and catch them as early as possible. They need to avoid going hog wild when things are going great. That is the time to put some money away for the proverbial "rainy day." That is the time to keep running a tight ship. Cash dribbling away is less noticeable in good times, but just as deadly, because then it won't be there for the bad times.

And in business, you can be at the top of the rankings one week, and in free fall the next. Entrepreneurs can't rest on any laurels, virtual or actual. Too many things can go wrong in an instant.

Steady growth, rather than meteoric, is a reasonable goal. Keeping costs in line is important. Staying close to, and listening to your customers should help you avoid any big negative surprises. It won't necessarily avoid negatives, but they shouldn't be surprises.

Managing risk is critical. Whether you love risk, love the buzz it gives you, or hate it; you need to manage it.

Always consider options and consequences; options and consequences.

Keep everything in context. A big win or two, does not necessarily mean that more will follow. Every "battle" must be fought on its own.  You will win some and you will lose some. Remember, it is a long "season."

You don't have to go undefeated. You just need to win enough to stay in the game. Then you will always have a chance.

All Work and No Play .....

Sometimes work just doesn't need to come first, even for entrepreneurs. It is Spring Break, and entrepreneurs with young families should be enjoying them on a beach or on a ski slope or at home.

It is March Madness, the best couple of weeks in college sports and almost everyone I know is caught up in a basketball pool. Go Villanova Wildcats!!

And it is still the middle of one of the most exciting political campaigns in recent memory. The Obama-Clinton race is high drama. It is huge issues and silly, stupid nitpicking. And it will most certainly impact the future of our country.

The economy and the stock market are a series of peaks and valleys and uncertainty reigns.

This is a time for entrepreneurs to relish their external world. Enjoy the events taking place at this time. Think about The Masters coming up in a few weeks and the start of baseball season. Take a look at what is happening outside of your companies. How will it impact your company? How can you take advantage of potential opportunities and protect yourself against potential threats?

Get outside your company for a bit. From outside, take a peek in and see what you see. And see what you have been missing in the outside world.

Where Does the Time Go?

I mean to market, I really do. I am sure you do too. Why do we let it fall to the bottom of our priority list?

When I owned a decent sized business, I was constantly pushing sales and marketing to do more and more-network, direct mail, advertise, improve the web site, entertain clients, exhibit at trade shows, etc. etc.

Now I am on my own and I have no one to urge on but me. And I am just not listening. I am giving myself the typical excuses. There is not enough time in the day. I have too much real work to do. I have enough clients for now, yada yada yada.

And of course, they are all good excuses, but none of them is good enough. I know better. You know better. You can never stop marketing, no matter how busy your company is. It can all stop in the blink of an eye. The telephone can just stop ringing, the pipeline can go dry. And then what? Start marketing from scratch then? How long will that take before it brings in business?

Marketing is a primary business function, just like finance, administration, human resources, operations, production and sales. It must be continuous, it must be carrying the message of the company clearly and regularly. It builds and establishes brand identity, tells the company story, and positions the company in the minds of potential clients.

Even if you are busy, are you busy with the right clients? With the right types of business? Are you achieving your company objectives? Are you known as well as you would like to be?

So, here I am giving myself excuses, then obliterating the excuses. Well, I guess the only option is to go and write my newsletter; contact my internet consultants and get them working on my account again, look at my calendar for networking events and speaking opportunities and schedule meetings with sources of business. What are you going to do? To who will you be accountable?

Even if you allocate 10% of your time each week to marketing, that is at least four hours. Get it on your calendar. Treat it like an appointment that you cannot break. And market, market, market.

Part II

In the last post we talked about acquiring a business as a way to fuel your growth. There are a lot of land mines buried around such transactions, but they can work.

What about taking on a partner? If he or she brings in needed operating or expansion capital or particular skills that the business needs, it might be worth considering. But before making such a decision, deep thought is required.

What looks like an immediate solution to a particularly prickly problem may turn into a ticking time bomb. If the partner to be will be a "silent" partner/investor, what does that actually mean?  How much control will you lose? How much will you have to pay out to that person? Five years down the road will you resent the checks you are writing to the person who you perceive as doing nothing for the money?

Memories fade quickly. I have seen it happen many times. An investment partner saves the day but soon after is perceived as a blood sucking leech. So beyond the legal issues and the accounting issues lie other questions. How will your partner interact with you on a regular basis? What about when the business is "flush?" And even more so, what about when the business is not? Will there be panic? Bullying? A rush for the door?

And if you bring in an operating partner, where is the risk? You will not be the sole decision maker. You will not be the sole leader of the tribe. Your judgment may be questioned. This can be both good and bad. But you need to think about what it will be like day in and day out in the office or the shop or in the field. You need to think about new politics, with your partner cultivating favorites among your employees, and in some ways, competing with you.

And even if the new partner (shareholder, member, etc. depending on business form) holds a minority interest, that can be enough to stir up all sorts of trouble. Be aware of minority shareholder rights in your state before taking on a partner and giving up shares. You may have to value your business and buy back the shares you gave away in order to get rid of a troublesome individual.

All of that being said, partnerships can work. Providing key people with a means to earn company shares can be a great incentive and a great retention tool.

Talk with someone who has been through the good and the bad to understand what the down side can look like. Then you can weigh your risk and make a more informed decision. Again, a mentor can be a big help in these situations.

Where Can a Mentor Help an Entrepreneur? Part One

Entrepreneurs take leaps of faith all of the time. They make moves without knowing how they will turn out. They have visions without necessarily filling in the blanks before pursuing them

Small businesses can grow organically or by acquisition. There are certainly benefits to both. And of course there are risks to both. But acquisition may be the riskier path.

Many entrepreneurs do not truly have an accurate sense of who they are and what their business is all about. They are not sure of why their customers come to them and why other people do not. They are not sure of their competitive edge. Their marketing may not be pitching their real benefits. They may not really know the competencies required for each position in their company. They may not know the importance of attitude, emotional intelligence, etc.

So, if all of the above is the case, how can that entrepreneur know what to buy in an acquisition? A company to be acquired may be attractive because of :

• its geographic location
• its product or service line
• the way it complements the acquirer's business
• its technology
• its profitability
• its customers
• its employees

But what can lurk behind all of those obvious selling points? Issues of organizational culture differences may not be as apparent. Unasked questions may cover up danger areas.

Entrepreneurs can get as hot over making a deal as teenage boys can get over a date with the head cheerleader. I have seen entrepreneurs (myself included) ignore certain fleas on the dog because the excitement was in the chase and in making a deal.

An experienced mentor can help sort things out. Sure, an accountant can pick out trends or problems in the financials. And a good lawyer can point out all of the potential legal pitfalls.  But those can be solved or brushed aside with relatively little effort. If an entrepreneur views his or her own advisors as potential obstacles to the deal, what they say may be discounted or even ignored.

But if there is a trusted advisor who has been there, felt the emotions and the excitement and can relate well to the entrepreneur, he or she can become a voice of reason.  The mentor can point things out and talk about the problems those things can cause in a way that the entrepreneur can grasp it.

If the acquiring company has been micromanaged and the company to be acquired is used to a loose, decentralized management style, those great employees of the latter may be in revolt in no time.

If decision making is quick and decisive in one and slow and tortuous in the other, think of the confusion and the frustration.

If sales people are order takers in one business and expected to be strong "cold callers" in the other, how is that sales force going to integrate?

An entrepreneur really needs to understand his or her business from a lot of different angles, because the company to be acquired will need to be viewed from those same angles. Congruence or fit is not a two dimensional dynamic, but a multi-dimensional process. Failure to understand that can lead to lasting and expensive damage.  Many a good company has been brought to its knees by a bad acquisition.

Even in the big leagues of the Fortune 500, mergers and acquisitions are usually unsuccessful. There are a lot of moving parts and it takes people who have been through them and who understand where hidden dangers lie who can help the chances of success.

This is not to say that all entrepreneurs are incapable of managing an acquisition. Most can. But at the same time, most cannot see what lurks behind the obvious in every dimension. What lies behind door #1, door #2 and door #3? It would be great if all of them had great prizes. But many times they don't.

Wisdom is part experience. The entrepreneur may be smart, may have good instincts and may run a great business. At the same time he or she may not know what they don't know.

Here is a place where a mentor comes in very handy.

A trusted advisor is a wonderful asset.