Over my career, I have visited hundreds of businesses and met with almost every variation of business owners. I’ve tried to zero in on what makes the few so successful. I found that when it came to appetite for growth, there are generally three types of owners of varying degrees.
THE WORKER: This accounts for majority of business owners who spend very little time growing their business. They work very hard and grow just enough to provide for a great living. There will be spurts of motivation from time to time but the moment the work gets too busy they back off the growth. Generally, this group’s focus is working hard in the business instead of working smart on the business. Many in this group are financially liberated at retirement.
THE BUSINESSMAN: The second type of business owner, comprising of a smaller population of business owners, understands the importance of growth. They usually have been the worker and now know how to do more with less. They innovate ways to grow their business, regardless of how busy they are. They usually have fiscal prudence and can manage people. They are constantly delegating their work to employees allowing them time to work on the business. They take the time to educate themselves and are good networkers. This group is usually financially liberated before retirement.
THE ELITE: The third type of business owner, which is conducive to an even smaller percentage of business owners, have a clear vision to grow their business right from the beginning. They are usually seasoned and well connected individuals who see their business as an investment opportunity. They make it a principle to surround themselves with highly experienced and well connected advisors to help them grow their business as an asset and as efficiently as possible. Once the asset has matured to its ideal value, they sell off the asset and usually restart the process. This last type of business owner is the smallest segment but represents majority of the wealth amongst business owners in Canada. Majority of these owners are millionaires by 40.
So what makes this last type of owner more successful than the rest? Is it vision? Discipline? Hard work? Although these are great characteristics that help, what I found was that the most successful owners were the ones surrounded by great advisors who they turn to for guidance and support. Just as Donald Trump has George Ross and Carolyn Kepcher as advisors, the most successful business owners have advisors. Whether it is an advisor for business, life, financial or legal, leveraging the experience of the right advisors will help you grow much faster than learning it on your own. Surrounding yourself with good advisors makes you more productive and alleviates much of the stress of not knowing what to do next.
When it comes to world of business, the most appropriate advisor is a business coach. This is because other advisors such as lawyers and accounts have a specific focus within a business whereas the business coach has a much broader “big picture” perspective with an overall business strategy.
So what exactly is a business coach?
If you Google business coach there are many definitions, most are vague and unclear. As a result of my experience, I have defined a business coach to be someone who thinks big picture, has experience in owning/operating businesses and understands the proper process to structuring a business to maximize the profits and equity. The role of a business coach is to teach the business owner the best methods of structuring and operating their business while providing support, accountability and encouragement. For my clients, coaching is a practical teaching where I work with the owner in all aspects of the business from setting the vision, structuring the financials, governing the operations and fulfilling the succession strategy. It is a formal hands-on practice with immediate results and not a hypothetical discussion of ideas without any real tangible outcome. I once heard a saying that articulates how I believe a coach should be:
“You can tell someone and they will forget
You can show someone and they will remember
You can teach someone and they will know”
As a result, my goal as a business coach is to teach my clients to know how to structure their business to build equity, maximize their profits and make it a valuable asset that can be sold in the future.
Real experience and actual business success
Find a business coach who is a fulltime business coach and has real world experience operating businesses. Don’t settle for a business coach who was a manager at a grocery store, look for someone who has owned their own sizeable business or has been senior management at credible corporations with positive results. The best guidance will come from someone who has been there and done it, nothing can substitute for real world experience.
In addition, an experienced business coach will be well networked with ample tools available to you and knows the most effective ways to coach an owner. As an example, I have a number of proven spreadsheets and procedures that have developed over the years that I use as templates for creating budgets and tracking costs which help owners establish the process of measuring costs and profitability. Look for a business coach that has developed tools to accelerate your businesses growth.
Knowledgeable with a verifiable coaching process
An experienced business coach will know what the sequence is to structuring or fixing a business because they have done it before. They should be able to articulate this to you very easily without any waffle or excuses. They must be able to demonstrate experience in business finance and knowledge of general accounting and accepted principals. They must be able to demonstrate how to structure the processes of a business from sales to shipping as well as know the strategies to maximize profits and equity. Lastly, your business coach should understand the various methods of valuing a business; know the current value of your business and how to increase its value in event the business is to be sold.
Practical and hands on teaching
We’ve all heard the stories of companies hiring advisors who come in and write a 500 page book on how to improve the business, then charge a small fortune and leave without actually implementing anything. This is not practical business coaching. Real business coaching must be results oriented with immediate application. Although no business can be structured overnight, there should be noticeable improvements and value to the coaching almost immediately. It is not hypothetical ideas to be implemented sometime in the future. Your business coach should be practical and able to produce results each time you sit down. Your business coach should be able to teach you how to read your financials, show you how to structure your organization for maximum efficiency and be able to offer guidance on legal and regulatory requirements.
Confidentiality and Integrity
A business coach has to be someone you can confide in. In many cases I know more about my clients businesses than their spouses do and therefore my clients need to be assured that information divulged to me is never disclosed to anyone without their consent. If you cannot confide in your business coach, you will naturally limit what you tell them and in turn they will be limited in helping you. The relationship between you and your coach, to be most effective, must be limitless. They should be the person you can always feel comfortable in communicating with no matter what the issue. Of course trust is earned and not given, it will take time but you should feel good about your coach right from the beginning.
Do they have a specialty?
Many business coaches have a specialty such as finance, retail, service business etc. For example my specialty, in addition to my experience owning businesses and years of business coaching, I am a business intermediary licensed in Ontario to be able to buy and sell businesses for my clients. This allows me to assist my clients to structure their business for maximize value in the event the business is to be sold. Knowing what buyers look for when buying a business allows me to stage the business for maximum exposure to buyers. Know what your needs are and find the coach that has the specialty that compliments those needs.
Is my business is too small to hire a business coach?
Many business owners believe their business is too small to have the need for a business coach. This is incorrect. The smaller the business the earlier you can build vision, culture and process helping to maximize profitability early and it keeps the business efficient as it grows. Similar to a home, building a good foundation will ensure strength and longevity. It is easy to imagine that as a business gets larger it becomes more difficult to implement processes and there is typically more resistance to change. Having a business coach early will help set the foundation you need to enable faster and sustainable growth.
Consider a merger or acquisition
The quickest and most efficient way to increase growth is to merge or buy a business that adds to or expands your capability. Buying a business and importing its capabilities can immediately yield a boost to profit margins. Additional benefits of an acquisition are increased revenue, market share and production capacity just to name a few. For evidence of this, just look at all the Fortune 500 companies; their growth success is mostly driven by their ability to acquire companies rather than growing organically from within. This is an area I have extensive experience in; ask me to show you how this can create a huge growth impact in your business, literally overnight.
Add a product or service
Most businesses usually have the resources to expand a product line or offer additional services even though they may not realize it at first. An example is a landscape company I have coached who were using roll off bins to carry away clean fill material from their jobsites. This company had extra bins and access to dump the clean fill for free at a dump site. It became very clear that they should expand their business to offer waste disposal services as an added service since they already had the resources in place. This expanded service generated additional revenue to support the purchase of more bins and trucks which also helped grow the core landscape business. Look within your business and assess your resources, (labour, equipment, tools, etc) and see if there is a product or service you can expand. Another suggestion for adding service or product is to contact existing customers and ask them what services they are currently outsourcing. Look for opportunities using your available resources and start bidding on the work.
Increase your lead generation and sales force
Lead generation is the process of creating leads and business opportunities. You should always have a minimum of 10 lead generation techniques working for you. Measure the success of each of your lead generation strategies and make changes according to results. Also consider increasing the size of your sales force. I have the belief that performing salesmen are free assuming they sell more than their base pay and commissions. Conversely, I am more than happy to pay my performing salesmen millions in commissions because that means I have tens of millions in revenue to convert into profit.
Increase relationships with existing clients
Existing clients are an excellent source for growth because the hard selling has already been done. Assuming you’ve done a good job keeping the client happy, getting referrals and opportunities for more work should be easy. Build on those relationships and leverage them for more opportunities. Many times your clients are looking for a product or service they have trouble producing or sourcing which you may have the ability to provide. But if you never get close enough to the client you will never know of those opportunities. Connect with your best clients and become the “go to” source whenever your client needs something and new opportunities will surface quite often. Relationship building will secure repeat business; provide referrals and generate other business opportunities. Something as simple as remembering a client’s birthday is an easy way to connect and begin to build the relationship.
Add management and labour capacity
Measure the performance of your employees and know who your key players are. Train and promote from within where possible and have your key employees hire and choose who they will manage. This reduces the amount of time you will need to spend recruiting and interviewing and puts accountability on the manager to hire good people they can work with. Also consider building a database of contract labour. This is a good way to handle overflow work without obligated to long term labour costs. Keep track of the good contractors, reward them with additional work and attempt to convert them to employees if the opportunity arises.
Service your clients and never leave clients unhappy
In today’s social media world, it is incredibly important to pay attention to your reputation and client retention. Customers who are researching to do business with you have many tools at their disposal and if you have a bad rap you may miss out on good opportunities. Although it is impossible to please everyone all the time, make it a rule to never leave a customer unhappy. A satisfied client may give you referrals but a dis-satisfied one will almost certainly share his negative experiences with others. Negative news spreads fast and negative customer reviews are growth killers. Make your clients happy, even if it incurs a short term loss to resolve their complaint. Leverage the benefit of happy customers by encouraging them to write testimonials or positive reviews about their experience. Put client retention methods in place to follow up with clients regarding your products and service to ensure your meeting the expectations.
Get an opinion from an experienced business advisor
A fresh set of eyes never hurts. As a business coach specializing in process and productivity, I can usually identify the inefficiencies and opportunities for improvement within the first meeting. Avoid having the belief that only you know what’s right for your business. This closed-minded thinking will slow growth opportunities. The point here is that having someone with an experienced objective view who has been involved with many businesses can be invaluable. I offer free initial consultations where there is nothing to lose other than a bit of your time. A bit of your time to find out something about your business you didn’t know is always worth it, especially if there is no obligation.
Weed out the unprofitable clients
We have all had clients that we spend an incredible amount of time trying to please and no matter what we do we cannot seem to make a decent profit or win any extra orders from. This may sound crazy at first but figure out who those clients are and one by one replace them. In my last business, I determined that I was spending 40% of my time on 12% of my clients which were unprofitable clients. My revenue and profitability soared once I replaced the 12%. I know it is much easier said than done, especially if those clients are a major source of revenue, but once you make the shift you will never look back.
Improve your labour force
Inefficient labour is perhaps the biggest profit destroyer. Establish measurements and controls to track employee efficiency. Do not be afraid to train or promote good employees and conversely, don’t be afraid to redirect inefficient or problematic employees. Always be looking for a balance of new talent. Bringing on experienced employees can assist with management and offer the capability to add new services and revenue. Adding younger employees can bring a level of inspiration and creativity to your organization. Regardless of the balance, having good measurement and controls in place to monitor staff performance is a must. No one ever wants to trim their staff but if you have to, having good metrics and documentation will help justify the decision. In today’s competitive market, profitability demands you have the most lean and efficient team.
What is your win/loss ratio?
Track your wins and losses for outbound quotes. If you lose/win an order, follow up with the customer to find out why you lost/won the order and document it. If you’re constantly losing business on price then you know your price is too high and conversely if you are always winning your price might be too low. Track the time and costs spent on quoting and measure it against your win/loss ratio. It is easy for a company to eat up a lot of profitability preparing quotes that are not won. Find ways to turn quotes around quicker and easier by using standard pricing or templates.
Purge and consolidate expenses
Constantly review your expenses and remove non operating expenses from the books (such as the condo in the Bahamas). Try to trim items that do not provide a full tax credit such as travel and entertainment, meals and vehicle allowances. Trim overhead expense such as payroll administration and office expenses and convert under-utilised labour from full-time to part-time. Make it a goal to trim at least 10% and I am sure you will find more. Also try to create volume agreements with vendors/suppliers and consolidate purchases to get volume discounts. Track the hit ratio of all advertising and focus only on advertising that works.
Pay suppliers early if they offer discounts
If you have the cash flow, consider taking advantage of suppliers who offer discounts for early payment. I have had several suppliers who discounted 5% for payment within 10 days. It does not seem like much looking at just one invoice but this amounted to thousands of dollars in savings over the course of the year which went directly to the bottom line.
Consider a merger or acquisition of a competitor
Buying or merging with a competitor can have a huge effect on your profitability even if you have to finance the deal. Here are just three of the top reasons why:
- By merging two facilities into one you will save the rent from one of the business’ converting the unnecessary rent directly to profit.
- Merging the labour forces and dismissing redundant employees can yield a big boost in profit. Most likely you will not need all the administration, management and production staff of both companies. Trimming the combined staff into one “Super Team “will increase efficiency over time and the reduction in labour cost goes directly to profit.
- Merging the equipment will improve productivity and efficiency and add extra capacity for growth. Sell off any excess and inefficient equipment for a quick injection of cash.
Make invoicing the priority. Ensure the invoice is sent out as soon as a shipment is made and you have a packing slip or proof of delivery. Make it a point to follow up with your customer’s payables department to confirm they have received the invoice and catch any potential issues early to avoid problems down the road. You will be surprised how many invoices get misplaced by the customer which leads to getting paid late even though it’s not your fault.
Track and collect your receivables
This is another area where owners are neglectful. Be diligent collecting your receivables. Know your customer’s terms and follow up with them a week in advance to make sure your cheque is prepared to avoid delays later. Do not make the mistake of sitting and waiting, be proactive and stay on top of collecting your receivables. If you personally do not have the time, have someone in your office do it for you.
Measure your monthly expenses
If you have read some of the content on my other pages, you will know I am a big proponent of budgets and planning. An accurate yearly budget will give you a good idea of how much cash is required to pay expenses. Use this as a baseline number and add to it any unexpected expenses not in the budget. Keep your expense budget up to date at all times.
Track your payables
Have a clear understanding of who you owe money to and when it is due. Negotiate terms with your suppliers and use them to your advantage. Try to match terms with suppliers with the terms of your customers. Be consistent with your payables; pay your bills when they are due, not earlier and certainly not later, unless there is incentive in doing so. If you have to delay a payment, notify your supplier well in advance as it will go a long way to maintaining a good credit standing which is critical to cash flow.
Offer discounts for early payment
A quick way to improve immediate cash flow is to offer a discount for early payment of your invoice. Typically discounts range from 3% to 5% for payments made within 10 days of the invoice being issued. I have seen as much as 10% being offered but this is aggressive and not recommended unless you are in serious trouble for cash.
Track your taxes
If not tracked properly, tax bills can sneak up on you. An example is HST filings. In my last business, projects ran for 3 to 6 months which meant that I had a great deal of costs incurred without revenue at times followed by times of high revenue with few cost associated. Of course it all balances out over the year but it created havoc with cash flow because high revenue with no cost meant large HST payments which had big impact on cash flow. Always have good control of your tax obligations, including EDT’s, HST, EHT, corporate taxes, property taxes and, any special WSIB premiums or fines. Once you have all this information tracked, it is simply an exercise of adding and subtracting to get an indication of cash flow at a particular point in time.