Transition to Working “On” Your Business

I run into a lot of business owners that have successful businesses as well as many that are struggling.  Whether they are successful or still trying to figure it out, what most of these have in common is that they spend a lot of their time each day working IN the business.  In other words, they are grinding to make sure their product or service is getting performed to their customers’ satisfaction.  Being a business owner myself, I can testify to the necessity of doing this.  Nobody can articulate the owner’s vision as well as the owner!

While a business can be successful, i.e., profitable, operating in this manner, the long-term purpose of the business owner should be to sell it one day.  This, along with the inevitable burn out that will occur, necessitates a change of approach:  Working ON the business.

Now one does not make an abrupt change from working IN the business to working ON the business.  It’s actually an evolutionary process.  You go from working all day, every day IN the business to spending a few hours a week working ON the business and evolve from there.  Doing this, naturally, requires the business owner to cede control over certain hour-to-hour tasks within the business.  How does one decide where to cede?

I suggest making two lists.  For the first list, the owner should answer the question, “what are the business tasks which you most enjoy?”  There are no right or wrong answers here.  Simply list his/her opinion.  Love making widgets?  Write it down.  Really like dealing with customers?  Write it down, etc.

On the second list, write down the answers to this question, “At what tasks do you create the most value within the business?”  Here, it’s really important that the owner be honest and accurate.  Don’t just write down a gut feel (although a gut feel might be correct).  Deeply consider which business tasks will help the business grow/reduce costs/improve customer experience/increase cash flow, etc.

Now, let’s juxtapose the lists.  Here is where we separate passion (what we love) from what creates value (makes someone want to pay top dollar for the business one day).  Compare these two lists and see which tasks drive business value and fuel passion.  The owner should absolutely keep doing these tasks.  That is an easy call.  On the other end of the spectrum, any tasks not on either list should be passed on to someone else in the organization.  Another easy call.  The challenge comes where passion and value-creation skills are not matched up.

In my case, I really like wrenching on cars.  However, if I’m honest, I’m not very fast.  So, I quit wrenching and hired another technician.   I also love working with clients, vendors and creating processes.  I kept doing those things.  Guess what?  The year after stepping out of the shop and handing the wrenches to someone more talented, we grew 17%.  I was actually less stressed, clients were happier, I was happier, the technicians were happier (they got their parts faster with me in the office).  Winner!

This was just the beginning.  Over time, I slowly released more activities to employs.  Now we are at the point where the operation is turn-key.  I am not integral to its hour-to-hour success.  My trusted team handles that.  I still set the tone with clear expectations on process, client care, building appearance, etc.  But, I trust my team to do it right.  I also leave an open channel for clients to reach out to me when their

7 Ways to Create Value

I ran across this article in Pro Painter Magazine and, while it’s about running a painting business, it applies to any small service business…..
You’ll never earn a profit as a painting business owner unless you bring real value to the table. Here are seven essential ways to make that happen:

SELL WELL: Selling jobs at profitable prices is a completely different skill than painting, and most painters don’t like to find new jobs and clinch deals. Selling well is key to any business, and if you don’t like selling you shouldn’t try starting a painting company. And selling effectively these days always involves some kind of online presence. It’s certainly not the only part of selling, but it is the new normal for any painting business owner who expects to thrive. If the internet scares you, don’t try starting a painting business.

ORGANIZE BIG JOBS: The larger the painting job, the greater the role for you to coordinate painters, supplies, timelines and financials. Solo painters simply can’t do this on their own, so it’s a natural role for you as leader. Many successful painting companies find a profitable niche doing jobs that are too big for anything other than an organization to handle.

STREAMLINE THE FINANCIALS: Invoicing and collecting payments will always take too much time and too much effort if you don’t design a streamlined financial system intentionally from the start. The slickest I’ve seen painting business owners use is on-the-job digital payment systems at the end of each project. Swipe the clients credit card through a reader on a cell phone and you’re done. You get instant payment and there’s no need to follow up with paperwork. Painting business owners I know who use on-the-job payment also find that clients are less likely to call back for touchups and repainting when they’ve paid immediately, too.

PROTECT YOUR PAINTERS: Part of running a successful painting business involves finding and keeping skilled and loyal employees or contractors. And a big part of loyalty comes down to creating a hassle-free zone for your painters to work within. You need to protect them from the conflict caused by angry customers and the hassles involved in gathering paints and painting tools. Eliminating everything beyond the work of painting is one way you can bring value to your work as a painting business owner. Painters will want to work for you because it’s a simple, hassle-free experience for them.

PAY LIKE CLOCKWORK: This is huge. One of your main roles as a business owner is to cushion your employees against all financial shocks. Making payroll late is a recipe for disaster because your painters will jump ship. It doesn’t matter if a client pays late or stiffs you for an invoice. Your job is to take the hit and make it up another day. If you don’t have enough cash on hand to make at least three months of payroll with no revenues, don’t start a painting business. You’ll fail.

RESEARCH & DEVELOPMENT: As the painting world advances, it’s your job to stay on top of technical advances, try them out, then introduce the good ones to your crew and clients. Don’t neglect this role or your business will slowly lose vitality and profitability as the painting world advances.

GATHER AND ANALYZE NUMBERS: Bidding profitably on jobs is the single most important skill you need as a business owner, but it’s a skill that requires informed practice. And the only way to get that practice is by monitoring the numbers to see if they lead to profit or loss. Keep close tabs on what your crew actually costs you in time, wages and benefits, then compare these costs to the offsetting revenues from your bids. While you’re at it, monitor the productivity of individual employees and contractors. You need to know who’s actually delivering more value than you’re paying them for. Some employees will contribute much more to your bottom line than others.

Transitioning to Working ON the Business

I meet a lot of business owners that have successful businesses as well as many that are struggling. Whether they are successful or still trying to figure it out, what most of these have in common is that they spend most of their time each day working IN the business. In other words, they are grinding to make sure their product or service is getting performed to their customers’ satisfaction. Being a business owner myself, I can testify to the necessity of doing this. Nobody can articulate the owner’s vision as well as the owner!

While a business can be successful, i.e., profitable, operating in this manner, the long-term purpose of the business owner should be to sell the business one day. This, along with the inevitable burn out that will occur from the grind, necessitates a change of approach: Working ON the business.

Now one does not make an abrupt change from working IN the business to working ON the business. It’s actually an evolutionary process. You go from working all day, every day IN the business to spending a few hours a week working ON the business and evolve from there. Doing this, naturally, requires the business owner to cede control over certain hour-to-hour tasks within the business. How does one decide where to cede?

I suggest making two lists. For the first list, the owner should answer the question, “What are the current business tasks that you most enjoy?” There are no right or wrong answers here. Simply list his/her opinion. Love making widgets? Write it down. Really like dealing with customers? Write it down. And so on.

On the second list, write down the answers to this question, “At what tasks do you create the most value within the business?” Here, it’s really important that the owner be honest and accurate. Don’t just write down a gut feel (although a gut feel might be correct). Deeply consider which business tasks will help the business grow/reduce costs/improve customer experience/increase cash flow, etc.

Now, let’s juxtapose the lists. Here is where we separate passion (what we love) from what creates value (makes someone want to pay top dollar for the business one day). Compare these two lists and see which tasks drive business value and fuel passion. The owner should absolutely keep doing these tasks. That is an easy call. On the other end of the spectrum, any tasks not on either list should be passed on to someone else in the organization. Another easy call. The challenge comes when tasks that the owner enjoys doing don’t enhance enterprise value if the owner is doing them.

As an example, in my auto repair business, I really like wrenching on cars. However, if I’m honest, I’m not very fast. Any decent technician could blow me away from a quality and efficiency standpoint. So, I quit wrenching and hired another technician. I wasn’t adding enough value. I also love working with clients, vendors and creating processes. I kept doing those things. There, I was adding value. Guess what? The year after stepping out of the shop and handing the wrenches to someone more talented, we grew 17%. I was actually less stressed, clients were happier, I was happier, the technicians were happier (they got their parts faster with me in the office). Winner!

This was just the beginning. Over time, I slowly released more activities to employees. Now we are at the point where the operation is turn-key. I am not integral to its hour-to-hour success. My trusted team handles that. I still set the tone with clear expectations on process, client care, building appearance, etc. But, I trust my team to do it right. I also leave an open channel for clients to reach out to me when their experience isn’t what they are used to. Was it scary to let go? Most definitely! Was it necessary? Also, most definitely.

When the time comes, I feel way more confident that the right buyer can be found so I can to move on to the next chapter in life. You can do this, too!!

Being “Solo” Only Works For a While

Are you a solo business practice owner (physician, dentist, chiropractor, attorney, accountant, auto technician, etc.)?

If so, you may have Solo Professional Syndrome. No, of course that’s not a real name for an illness. It’s just how I refer to the situation where you are doing all the work yourself and can’t grow the business or find time to work On the business instead of In the business.

You’ve done everything possible to streamline operations, maximize revenue and increase margins. You may have even outsourced marketing, accounting and payroll to give yourself a few precious extra hours every month. You have proven that you can be successful going it alone. However, you find yourself wondering, “Isn’t there a better way?”

Think about it. You are responsible for every dollar of revenue generated by your business. If you are absent, no revenue comes in. If you are disabled or worse, your practice likely will shut down and you will lose all the value that you have created over your years in the business. Why? Because you have no successor in place.

What if I told you that there is a way to increase your current income without doing all the work yourself? And, at the same time, you would then have time to step back and work On the business instead of In it, reduce your financial risk when you are absent, protect the value that you have created in your practice and provide yourself with a succession plan. Would that interest you?

You may be thinking right now, “Why don’t I just add an associate? That’s what Suzy did on the other side of the city.” That can work….but there are pitfalls that need to be headed off before doing that.

Where will he/she work? Where will I find clients/patients for him/her? I don’t want to eat their salary until their book fills up. How can I be sure he/she won’ t leave after getting all trained up and end up being my competitor? Ugh…I think I will just stick to the problems I already have.

That is an understandable conclusion. But it would be wrong. Let’s get a little creative and figure out how to do it right and provide those benefits mentioned above.

You are right to be concerned about having enough patients/clients to keep the changes from costing you a lot of money. It’s really not reasonable to expect the associate to fill their own book of business. You are hiring them to produce revenue, not make sales calls.

So, to combat those issues, the method I am suggesting is to acquire another solo practice. Preferably, it would be one that is geographically nearby so you can fold it into your existing practice. This will give you a very good chance of keeping that new associate busy.

If this has your interest piqued, let’s discuss where to start.

First and most importantly, you need to make sure that you, personally, are ready to lead another professional. How are your supervisory skills? Do you explain things in a manner that someone else can easily pick them up? Perhaps you need some training. Go and get it!

Second, assess your financial situation. How much cash do you have on-hand? How much can you afford to spend on another business? Talk to your banker about loans, if necessary. Check with your accountant with respect to tax issues. Talk to your attorney about the employment document that codifies a compensation plan that we will cover in just a moment.

Third, start looking for acquisition targets. This may take some time. There aren’t always businesses for sale. Take your time and get it right. This is the beginning of your exit strategy and intended to give you more near-term freedom and strategic thinking time (working On the business).

OK, so getting the acquisition done will take care of the near-term revenue growth and work/life/time balance issues. It does not, however, address how to extract the value you have created in your practice when you decide to retire.

If you hire the right associate, he/she will also be a part of that solution. A really good associate will, most likely, want to own their own business one day. You should make sure it is your business that they acquire to make that dream a reality. Build a compensation plan for them that rewards performance with equity in the business.

As part of that compensation program, you make it clear that there is a specific process for him/her to succeed you when you decide to retire. In fact, it should be documented that they must succeed you and buy the practice. Failure to actually purchase the business from you at the agreed upon time will cause them to forfeit the performance rewards. That is how you will extract the value you have created. It is virtually guaranteed.

It will take some extra work up front and test your coping skills during the early months after the transition. But if you hire the right person and set your business and compensation plan up the right way, you will reap the benefits.

Realizations of New Business Owners

The US and, probably, the world are filled with millions of people who dream of owning their own business.  However, when it comes to finally taking the plunge and doing it, a much smaller group of people actually make the move.  This is not a judgement on those who don’t.  It’s not for everyone.  Personally, it took me a long time (over 25 years) and the loss of a job to get me off the sidelines.  Inertia was my roadblock; that and the fact that I didn’t really know what I wanted to do.  For many, they have the same issue.  For others it is the lack of financing or the realization that their dream or idea is not capable of being scaled to the point of providing a living for them.  Still others just decide it is not worth the risk.  All of those are OK.  For those of you that are about ready to take that leap, here are some thoughts that may push you one way or the other.  These come from the experiences of first year business owners.

Talent and Determination Only Take You So Far

In many cases, having a particular talent like repairing cars, building houses, making cupcakes or fitness training drive us into our own business.  Then, we put our heart and soul (i.e., time) into making it grow and become profitable.  However, none of us can do everything in the business.  Where to turn?  The answers are closer than you think.  We all know people.  They all know other people.  Somewhere in that network are resources that you can tap into for help with areas that are not your strength.  First, identify those weaknesses (yes, I said it) and then ask for help.  The second was my toughest step.  As it turned out, a lot of people were mentors to me, but they didn’t really know it.  I got little tips from a lot of places instead of leaning on one person.

You Will Need to Adapt to The Market

If you were wise, you wrote a business plan before you started your business.  It’s been written that nobody plans to fail; they just fail to plan.  That said, business plans cannot be something you write once and toss in a drawer never to be seen again.  They must be reviewed and adjusted based on the market place; primarily feedback you receive from your customers.  Should you do everything they recommend/request?  Heck no.  The customer is always right…..except when they are not.  You should, however, take ever suggestion into consideration.  Examine the cost and ROI of each idea.  In the end some will make good business sense.  Some will not.  That is up to you to decide.  No business stays the same over time.  The longer you are in business, the more you will need to adjust.  Change products.  Change marketing methods.  Change personnel.   Improvise, adapt and overcome.  That is the secret to longevity for your business.

Do NOT Sell Yourself Short

This might be the biggest single mistake that entrepreneurs make.  They don’t charge enough for their products and services.  When I bought my business, part of my business plan was to compete on service and quality.  That, necessarily, precluded me from competing on price.  We let hundreds of jobs go due to pricing over the years.  That was a strategic choice and we stood by it day in and day out.  Charge a fair price for what you do; fair to you and fair to your clients.  We weren’t the most expensive and we weren’t the cheapest.  Find your price point where you aren’t working at full tilt just to break even.  Know your market value.  Know your costs.  Price accordingly.  It’s equal parts science and art.  You will need to adapt from time to time based on the market (do your best not to go downward).

You Will Never Work So Hard in Your Life and Love It

I’ve had a few people tell me, “It must be great to own your own business.  You can take time off whenever you want!”  All I can do is laugh and tell them the truth:  I’ve never worked so many hours in my life.  To which they just stare at me with their jaws wide open.  The other part of that statement is that I never had any trouble getting up and going to work.  It was a labor of love.  Every entrepreneur that I have known or worked for felt the same way.  In many ways the business defined them.  Vacations will be few and far between for a while.  If you and your significant other can handle that, dive in.  If not, it may be best to continue being an employee for someone else.  Either way is OK.  Just know what you are signing up for.

Work Life Balance Can Be Hard to Find

As I mentioned above, your business can be a labor of love.  The risk in that is that other parts of your life may suffer.  Are you married?  Do you have kids that are busy with activities year around?  Can they handle your not being present (physically or mentally)? Often times, this is the tipping point between hanging up your own shingle or holding off.  When is your family ready?  Even when you all collectively decide you are ready, there has to be balance.  Just like you wrote a business plan, I suggest writing a “Work/Life Balance Plan.”  Commit to certain vacations and other events that are inviolable.  Maybe you like to volunteer at your church or other organization.  Find a way to NOT give that up.  These things complete you and refresh your mind.  For me, the time was not right until our children were grown and out of the house.  My wife was busy with here career, too.  We agreed that vacation was not an option, it was a requirement.  Our church and our relationship had to be on equal footing with the business (in fact, they came slightly ahead of the business in reality).  Find your balance.  Find your success.

Be Persistent

To be direct, there will be struggles.  How you handle them will determine your level of success and longevity.  Stick-to-it-iv-ness has helped many a business owner when talent wasn’t enough.  Let me repeat:  there will be struggles.  You may even fail and have to start over.  If you want it it badly enough and believe in what you are doing, keep pressing forward.  When you hit the bumps, be willing to work/suffer through them.  Lead your people, if you have any, and show them you are confident that the business will get through the issues.  Make the changes that are needed.  Persistence can overcome a lot.

Starting a Business

Over the past 7 months, I have had the opportunity to mentor a number of would-be entrepreneurs as they began the trek toward starting their own business.  Each of these situations was different.  Some were truly at the “dream” phase.  They had an idea about a business, but no idea about how to start turning that dream into something more.  Some had businesses underway, but did not know if they were making money (a business that is not profitable is known as a “hobby”).  Still others had begun the process but hit a snag where they needed help to keep going.

Among all these were a few constants.  The biggest one that I have run across is that each was surprised by the capital needed to get up and running.  Either we discovered that together or they already knew that and needed help finding the capital.  My point on this particular topic is a simple one:  If you have a job, keep it.  If you don’t have a job, find one.  Your job is the most direct source of start-up capital available to you.  Sure, it will require you to spend time working on something other than your start-up.  Welcome to entrepreneurship, where your time belongs to your business.  Generating your own capital is a lot easier, for most people, than asking friends and family for an investment or borrowing money.

Commit to being “all in.”  Your time and your money will need to be poured into your dream to make it a reality.  Are you ready to work harder than ever before?  If so, you can be a success.

Marketing Today

I have been in business for a long time.  Over the years, marketing has changed quite a bit.  From TV and radio ads to Yellow Page ads, direct mail, variable data direct mail and now the various forms of internet and social media marketing, it has been difficult to stay on top of what works best.

Having spent over 20 years in the printing industry (and not being in the industry any more), I can tell you that print ads just don’t produce like they used to.  Personalized variable data mailings provided a huge leap in response %.  However, they are so common now that most of us just throw them away too, don’t we?  To be honest, I would not recommend spending much, if any, on print marketing other than business cards (apologies to my friends still in the industry).

Where to spend your ad budgets?  It’s all about the web, my friends.  SEO (search engine optimization) is important but don’t blow your entire budget on that.  There are a lot of simple free, or nearly-free, things that you can do for that.  The key is to make sure, if you own a small business, that you are on the 1st search page when a smart phone searches you nearby.  Don’t worry if you aren’t on the 1st page of a search in LA for your Wisconsin business.  They won’t be a customer anytime soon.

Where you really want to focus is on Facebook.  70% of Facebook users log in every day.  Couple that with all the demographic data that Facebook collects (themselves or via business partners) and you can target your marketing very specifically at reasonable prices.  I have just begun to learn about this and the potential is amazing (if a not a bit scary with respect to the data Facebook has on each of us).  I paid for a service to help me do it the right way.  It was under $500 to learn how to do it.  There are email marketing subscriptions that I will need to purchase, but they are not terribly expensive, either.  Time will tell just how effective this will be, but it seems to make good sense to me to skip paying for ink-on-paper and target my “ideal customers” using all that demographic data.  I expect it to minimize my cost per new client.   Once I work out the kinks on my more established business, I will set out to work on my newer business.  It’s going to be interesting.