You are a CEO, but are you doing the job

April 25, 2014 8:00 am ,

The hardest job in the marketplace is the Chief Executive Officer of a small business.

So how could it be harder to be the CEO of Excel Supply, LLC, than the CEO of Exxon? Let’s look at the definition.

Investopedia says a CEO is, “The highest ranking executive in a company whose main responsibilities include developing and implementing high-level strategies, making major decisions and managing overall operations and resources.”

For every element of that definition, Exxon’s CEO has a cadre of presidents reporting to him about how they’re managing battalions of VPs, brigades of managers and armies of employees. Exxon’s CEO manages that handful of presidents who bring him performance updates.

The CEO of Excel may have managers reporting to her, but she’s never more than one degree of separation from the work, and likely the alpha member of any given task, especially things like capitalization, cash flow, business development, etc.

There is one thing that sets all CEOs apart from every other position and it’s the first item in the definition: high-level strategy. A CEO’s primary job, which can be supported but never delegated, is to determine the long-term direction of the company. Every business, large or small, must have someone doing this CEO job, whether they use the title or not.

Big business CEOs spend very little time managing and most of their time working on strategy and future direction. Conversely, and unfortunately, most small business CEOs spend too much time managing and too little on executive thinking.

Recently in our online poll, we defined a CEO and asked small business owners: “How difficult is it to budget CEO time away from managing?” Here’s what we learned.

Only 3% said they had “…found a way to balance management and CEO duties,” and 8% allowed they were “…

inconsistent but getting better at it.” Over half of our sample said they “…can’t focus on CEO tasks for putting out fires,” while one third rejected our premise with, “I’m a small business owner, not a CEO.”

Here’s a practical way for small business owners to increase their CEO activity: As often as possible – at least once a year – fire yourself from jobs someone else can do and promote yourself to jobs only you can do. This will push you toward more executive thinking and behavior and put you on a natural path toward performing all the tasks of a CEO, including charting the long-term course for your small business.

Every business needs someone doing the work of a CEO – that’s you!

Posted in: Business Ownership

Small business lessons from big business mistakes

April 23, 2014 8:00 am ,

Here is a true story from which several business lessons can be learned.

A while back, I needed to reach a friend who worked in the local office of a national company.Searching the phone book and online, I found only a toll-free number that connected to an answering system for the entire company. That’s right – this business didn’t publish a local number anywhere. And incredibly, this automated system did not offer an option to connect to any local branch or person. I’m not making this up!

Lesson 1: Don’t create barriers to customers. Even if you think you don’t have barriers, look anyway, because you might. Ask employees and customers to help you find them.

Undaunted, I finally acquired the local number (yes, they had one), but the person who answered said my friend, who was in sales, had been laid off. It turns out that this publicly-traded corporation was losing money, so in order for the CEO to impress Wall Street analysts, who influence the stock price, almost 2,000 employees across the company were told to hit the bricks.

Never mind how valuable these employees were or if those cuts would hurt the company’s long-term performance; the quickest way to increase profits was to cut payroll.

Lesson 2: Performance goals are important for planning, but customers don’t always buy on your schedule. Don’t let short-term expense pressures cost you sales, and worse – long-term customer relationships.

I learned that my friend had been a top producer, but since he was the last one hired he was the first to go. He’s no longer a payroll drain on his former employer, but one of their competitors quickly snapped up this winner.

Lesson 3: In the 21st century, seniority doesn’t trump performance.

So what if this big business CEO had simply installed a phone system that made sure customers could connect to his local offices? The answer is that my friend and several hundred others may not have been fired.

And who knows? By simply eliminating one customer barrier, this company might have needed to hire more employees to handle all of the business that went elsewhere.

Lesson 4: How you run your business – including people, systems, technology and policies – is not more important than the ever-evolving expectations of prospects and customers.

By the way, that big business that taught us these valuable lessons is no longer in business.

Think you don’t have customer barriers? Neither did that big business CEO.

Posted in: Age of the Customer

In the marketplace, it ain’t over ‘till it’s over

April 21, 2014 8:00 am ,

One of sports history’s greatest upsets happened at the 1975 U.S. Open tennis tournament at Forrest Hills, New York, when the Spaniard, Manuel Orantes, defeated legendary Jimmy Connors in straight sets (6-4, 6-3, 6-3), in Connors’ own back yard.

But that contest isn’t the best part of this story. Beating Connors to win a professional tennis Grand Slam tournament couldn’t have happened if the night before, against all odds, Orantes had not demonstrated enormous courage and extreme perseverance.

In the semi-final match between Orantes and Argentinian, Guillermo Vilas, the Spaniard was down two sets to one, five games to zip in the fourth set, and two match points in the sixth game. Vilas was serving triple match point to the seventh power.

If Orantes loses one more point in this game the match is over. And even if he battles back to win this game, he would then have to win the next six games in order to force the fifth set to determine who advances to the finals. Tennis fans know a score of 2-1, 5-0, 40-love, is an against-all-odds, improbable comeback scenario.

There’s another group that can appreciate the long odds Orantes faced—small business owners. Entrepreneurs are no strangers to the marketplace equivalent of triple match point to the seventh power. Here’s what it might look like: losing a major customer, having an unexpected expense, and a cash flow crisis resulting in a call from the bank, all in the same hour. The question is not whether a small business will have triple match point challenges—Orantes faced it only once, small businesses see it all the time—but how well the owner manages them.

Back to the tennis match: In perhaps one of the gutsiest display of guts in the history of pro tennis, Orantes overcame that triple match point to take the sixth game, and then proceeded to win the next six in a row to claim the fourth set 7-5. This courageous comeback not only produced the momentum to beat Vilas 6-4 in the final set and get Orantes into the finals with Connors, but, as you now know, it carried over to the next day when he became the 1975 U.S. Open champion by dispatching one of the greatest tennis champions of all time in straight sets.

Next time your business is down triple match point, remember that as long as the game isn’t over you can survive. As long as you have the desire to win you can succeed. As long as you believe in yourself you can gain the momentum to win today and become a champion tomorrow.

Even when you’re down triple match point, you can still win.

 

Posted in: Entrepreneurship

Who made a difference in your life?

April 18, 2014 8:00 am ,

The following quizzes, and the subsequent paragraph, are attributed to the late Charles Schultz, creator of the comic strip, Peanuts. I’m passing along his thoughts because I think it’s important that we realize what is really important in life.

Quiz 1:
1. Name the five wealthiest people in the world.
2. Name the last five Heisman trophy winners.
3. Name the last five winners of the Miss America contest.
4. Name ten people who have won the Nobel or Pulitzer Prize.
5. Name the last half dozen Academy Award winners for best actor and actress.
6. Name the last decade’s World Series winners.

Quiz 2:
1. List a few teachers who aided your journey through school.
2. Name three friends who have helped you through a difficult time.
3. Name five people who have taught you something worthwhile.
4. Think of a few people who have made you feel appreciated and special.
5. Think of five people you enjoy spending time with.
6. Name half a dozen heroes whose stories have inspired you.

“The applause dies. Awards tarnish. Achievements are forgotten. Accolades and certificates are buried with their owners. The people who make a difference in your life are not the ones with the most credentials, the most money, or the most awards. They are the ones who cared.” – Charles Schultz

This is Jim again. As we go through life, let’s make sure our goals and priorities include caring about and serving other people, not just about other things.

Posted in: Management

Small business ethics

April 16, 2014 8:00 am ,

While talking with an attorney friend of mine, our topic of discussion was about professional behavior in the marketplace. She reminded me that attorneys have very specific ethical and professional standards that are published, plus a well developed monitoring organization, complete with sanctioning authority.

The story is quite similar for CPA’s, architects, medical doctors, or any securities representative such as stock brokers, financial planners, etc. Much of the behavioral track these professionals run on is pretty well spelled out for them. Not that the members of these groups need to be led or coerced into good professional behavior. It’s just that, when in doubt, they have published guidelines with which to refer.

Small business owners operate in the same marketplace as the so-called professionals. Indeed, they are often our clients and customers. We serve the same businesses and consumers as other professionals, plus we enter into similar relationships, contracts and agreements. And we often find ourselves perched precariously on the same horns-of-a-dilemma as other professionals. But here’s the difference: The Universal Small Business Code of Professional Conduct and Ethics doesn’t exist.

Small business owners, like all humans, ultimately behave according to their own moral compass, sense of fair play and inclination to deal in good faith. When we find ourselves in a quandary over how to respond to a difficult situation with a customer that is in the gray area of a contract, we’re on our own. When we are faced with an ethical issue that would challenge King Solomon, there is no sanctioning body or support group to dial up, or to whom we can email a “scenario.”

There are many ancient codes small business owners can turn to for behavioral guidance in the marketplace, such as the last three of the Ten Commandments. But in terms of a handy guide, I think philosopher and 1957 Nobel Prize winner for literature, Albert Camus, may have given us the best ethical vector when he wrote, “Integrity has no need of rules.”

Wise small business owners know that life is much simpler, and exceedingly more rewarding, when we just do the right thing.

Posted in: Business Ownership, Customer Care

The greatest challenges of small business owners today

April 14, 2014 8:00 am ,

Ask any small business owner how business is and even those who honestly report, “It’s great!” will also likely say, “But we can always use more.”

Knowing this about the heroes of Main Street, to find out what’s really going on you have to ask the way we did recently in our online poll: “What’s the greatest challenge for your business right now?” Below are five options we provided, the responses, and my thoughts.

It was surprising to learn that less than 10% reported “Finding qualified people” was their big concern, which was down from past surveys. Some sources estimate there may be 4 million positions going wanting for qualified candidates, so my speculation is that this change has more to do with the economy than talent supply.

And it was interesting that less than 10% of our sample were troubled by Obamacare impacting their HR strategy, also down from past polls. Perhaps the fear factor has diminished since the president delayed the employer mandate to 2015. We’ll see if this response changes next year.

According to Dr. Bill Dunkleberg, Chief Economist for the NFIB, who’s polled small business owners for 40 years, their single greatest concern over this period has been taxes and regulations. But when we offered this option in our poll, only one-fourth of our folks chose it. Since taxes and regulations have actually increased in the past five years, the next response represents what it took to knock these perennial pains off the top.

The big number in our poll came in at 58% for, “We need more sales.” This response has to be juxtaposed over another response we’ve received for the past five years, which is that consistently three-quarters of small businesses feel they’re operating in a stagnant economy. At this stage of a recovery, the economy should be growing at 4%. But when you see this response from the sector that creates over half of U.S. GDP, it’s not difficult to understand why the economy has barely averaged 2% growth per year.

Response to the next option supports the previous one. Only 3% said, “We need a bank loan.” For five years small businesses that survived the Great Recession did so by de-leveraging and learning how to operate more efficiently. Bank loans are the primary source of small business growth capital, but when the economy isn’t growing so goes business loans.

Wall Street, once the leading indicator of the economy is now merely a leading indicator of itself. The new leading economic indicator is Main Street. If you want the economy to grow, create conditions that foster small business growth

If the economy is the chicken, small business is the egg.

Posted in: Age of the Customer, Management

Are you an Internet dynamo or a dinosaur?

April 11, 2014 8:00 am ,

Sometime during the spring of 1995, you and I were given access to the Internet for the first time.

Since then, related innovations have produced a new marketplace where businesses of all sizes turn prospects into customers in a virtual, parallel universe. Here is a short list of the significant innovations:

  • E-commerce – the ability to buy and sell online
  • High-speed internet replaced dial-up
  • Search engines indexing a gazillion online offerings
  • Mobile computing from convergence of mobile networks and smartphones
  • Social media transcending websites by connecting participants in online communities

After 10,000 years of the traditional marketplace, these innovations have at once produced unprecedented opportunity and disruption in less than 20 years. But here’s good news for small business: Part and parcel with the new capability is the incrementalization of virtual resources, which means they’re available in units and pricing that fit our focused (niche) applications and diminutive budgets.

We wanted to know how well small businesses are adopting the handy and affordable virtual marketplace tools, so in our online poll we asked: “How much of your sales can you attribute directly or indirectly to your online strategy?” Here’s what we learned:

Only 5% of our sample reported that 100% of their business resulted from an online strategy, while double that percentage said they did “more than half” of their business in the virtual marketplace. Just a few more, 12%, allowed that they got “about half” of their revenue from the Cloud, while our big group, 55%, said “less than half” of their business came from the Internet. And finally, almost one-in-five said the Internet produced “zero” business for them.

It’s good news that 81% of our respondents are experiencing some business from their online strategy. Twenty years after the telephone was introduced in 1877, I wonder how many businesses had adopted that proto killer app?

But another way to look at small business’s virtual marketplace adoption is that almost three-fourths of our folks still associate less than half of their business in any way to an online strategy. Sadly, that troubling news could foretell the unnecessary extinction of way too many small businesses.

After almost 20 years, customer expectations are increasingly evolving in the direction of more virtual interaction. Which way is your business trending?

Don’t act like a dinosaur – execute an online strategy.

Posted in: Age of the Customer, Mobile Strategy, Online Content

Find work you can love

April 9, 2014 8:00 am ,

Whether work is a blessing or a curse depends on what you are working on and your attitude about it. James Matthew Barrie, the Scottish novelist said, “Nothing is really work unless you would rather be doing something else.”

Many hard working entrepreneurs were once unproductive employees, but now, with their wagonhitched to their own star, work is the stuff of their dreams. Many productive employees – once unsuccessfully self-employed – now understand the blessings of employment, and become the most valuable of resources: the entrepreneurial employee who loves his or her work.

Work feeds our stomachs with food and our spirit with accomplishment. Work creates, produces, energizes and fulfills all things humans need for survival and happiness.

If work is not a blessing for you – whether owner or employee – the problem is not work itself, but the work you are doing. Lebanese novelist, Kahlil Gibran wrote, “Work is love made visible.”

Life is short. Keep searching until you find work you can love. I did.

Posted in: Entrepreneurship

Business planning will always be relevant to success

April 7, 2014 8:00 am ,

The Age of the Customer is disrupting and making obsolete many older practices, but not the requirement for business planning, especially cash flow.

A business plan is the result of thinking, researching, strategizing, and reaching conclusions about how to pursue opportunities. It may exist only in the head of the planner, but it’s better when written down.

Whether elaborate or simple, a written business plan is an assembly of facts, ideas, assumptions, and projections about the future. Here are three ways to use a written plan:

  1. To document the due diligence on a new business or the future of an existing one.
  2. To evaluate opportunities and challenges, and compare them with your strengths and weaknesses.
  3. To assist when getting a bank loan and essential when courting investors.

So how does a static, written plan work when a business is always in motion? It works when you turn your plan into planning. A plan is like a parked car; planning is taking that car on a trip.

Planning is measuring your business motion against the baseline of assumptions and projections you made in your plan. Planning allows you to see how smart you were when the plan was written, or where your research and assumption skills need work. It also highlights external forces you face.

Written business plans often become collateral damage during challenging economic times. But you can’t allow planning to meet the same fate. Indeed, when things slow down there is even greater need to check your position than when things are rockin’ and rollin’.

Here is a critical two-step planning activity that is the heart of a business plan and the essence of planning. Beginning with these will help you operate more successfully anytime, but especially when things are slow.

1. Build a 12-month cash flow spreadsheet in a program like Excel, so you can project and track the monthly relationship between cash collections and cash disbursements from all sources. This planning tool will provide a rolling picture of cash flow in any given month.

2. Look at the “Ending cash” number at the bottom of each month’s column. A negative number in any month means you’ll need to add cash from sales, reduce expenses, add cash from another source, like a bank loan, or some combination.

A banker once told me that if I could bring him only one financial document with a loan request it should be a 12-month cash flow projection that included both how the borrowed cash would be used and the debt service. I always listen to my banker and you should too.

A business plan is important, but planning is essential.

Posted in: Age of the Customer, Future Thinking

It’s good to be a business owner

April 4, 2014 8:00 am ,

The military has produced many acronyms, one of which is RHIP, which stands for, “Rank Has Its Privileges.”

RHIP is the unofficial way to point out when a person accrues some benefit by virtue of their position. Mel Brooks’ character said it another way in his comedy “History of the World” with, “It’s good to be the king.”

In that spirit, here’s a new acronym for small business owners: OHIP, which stands for “Ownership Has Its Privileges.” Let’s look – sometimes with tongue-in-cheek – at a few business ownership privileges.

By virtue of being the owner, you have the privilege of working all you want. That means you’ve earned the right to work half-days. And as an added bonus, you get to choose which 12 of the 24.

If you so choose, you can brand the company with your name, which can be pretty rich ego food. But it also helps a plaintiff’s attorney – the one who represents the customer who “slipped and fell” in your business – to identify at least two of the co-defendants in the lawsuit: the legal entity and its founder.

When getting a bank loan, almost all small business owners are afforded the high honor of signing their name twice on loan documents. Having perfected the belt-and-suspenders approach, banks provide you with this special moment to acquire not only the business assets as loan collateral, but also your personal estate as a double guarantee.

But seriously folks, as Mel Brooks might say, here are a few real ownership privileges.

Structure your small business as a Sub Chapter S Corporation (S Corp) or a Limited Liability Company (LLC), both non-tax-paying entities, and accrue the benefit of having business income or losses pass through to shareholders or members, respectively. These two legal entities are handy because personal tax rates are typically lower than corporate rates, plus you avoid double taxation of dividends. Additionally, S Corps and LLCs allow owners the privilege of sheltering personal assets from liabilities that may befall the business.

Finally, there is something I call the stealth benefit of business ownership: owning the real estate your business operates in and leases from you.

For example: John Jones owns the property at 21 Enterprise Blvd. and leases it to John Jones, Inc. John receives rental income, tax advantages and asset appreciation. Plus, as long as it can be justified, John can raise the rent instead of giving himself a pay raise because, as passive income, it avoids payroll tax.

So are you taking advantage of all of the “privileges” of business ownership?

It’s good to be the owner.

Posted in: Entrepreneurship
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