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How To Get Everyone Heading In The Same Direction In Your Family Business

28/10/2016

 
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Did you know it's estimated 75% of all firms in New Zealand are family businesses? This could be romantic couples, parent/child, brother/sister, uncles, aunts, in-laws, or many other combos.

(I offer some additional tips for couples in business, which of course has its own dynamics, in this blog, but keep reading, as this will be useful also...) 


>  The question is, how do you get everyone going in the same direction?

There are plenty of examples of family businesses that have thrived including Nike, Volkswagen, Samsung, and Walmart. Even at Facebook, Mark Zuckerberg’s sister and father have been involved.

A family business can be an incredible asset, where you build a future together, something you all can be proud of. It can last for generations and create real wealth in families.

It's also a fantastic training ground for the next generation, and an opportunity to learn business at a very high management level that is rarely available in other firms. 


Of course, this is only if the business has been set up in the right way and family are heading in the same direction.

Because on the flip side, when family members are in business together - but going in different directions - it gets messy very quickly. And puts strain on both family relationships and the business.

When there are unmet expectations, frustration starts to build...

It can feel like you are holding a grenade in your left hand with the pin missing. Hoping you can hold on a little longer without an explosion. You might get away with it for a while, but eventually, if the grenade is not disarmed and put away, there will be an explosion in the wrong place, at the wrong time, causing the most damage. 
 
Lack of direction can be an issue in any business, so no one is immune.However in a family business, in my experience it’s more obvious, the stakes are a little bit higher, the issues a bit more complex, and there is always history.

Some good history, some not so good. Little Brother remembers the time Older Bro didn’t back him in front of the other staff, or Dad can’t forget when Daughter’s inexperience cost a key account, even though it was 10 years ago and she now knows more about some aspects of the business than he does. (You may have a different story, but it will be something.)

History might blurt out in the heat of battle, or it could be a look that no one else recognises except you. But make no mistake, it’s there, and adds another layer to the dynamics of the business.

We'll leave the discussion on the emotional complexities there, but just remember to take them into account as they can derail plans quickly if not allowed for. Always ensure you’ve built in breathing space for all parties.


>  To be in good shape, it's essential there is good structure in place to deal with direction and expectations of all family members involved in the business.

Here are some simple, practical steps you can take to make sure you stay on track:


1.    Goals and Objectives
  • Meet regularly and define goals and objectives for the company.
  • Review what each family member wants to achieve in the next 1-3 years with the business.
  • Each family member should also consider their personal goals and how it all fits together.
  • Then talk about what needs to happen for the business to be successful.

If family members are employees, rather than owners, it is still smart to ask for and value their input and ideas, as you should of all your employees. Be transparent about the direction you want to take the company in, and make the job description very clear so there is no room for interpretation. Keep communication professional, and let your family member know in regular 1 to 1's the areas you are happy with and where they need to improve.
 

2.    Exit Strategy
  • Have an exit strategy for both the business and individual family members.
  • Sometimes I have seen that a family member might want to do something else but feels that cannot leave because of others expectations; this is a bad reason to stay.
  • Make sure all family members are clear about their expectations around how much and who will be involved in the business long term, and if they are realistic or not.
  • If someone wants to leave, make sure this can be done with dignity for everyone so that relationships are still intact.
  • Take requests to leave as seriously as you would for another employee. Keep it professional; don't let it drag on.

3.    Clear Roles

Make sure you each have clear levels of responsibility, and everyone knows who is in charge of each area. Do staff know who to report to?

Too many chiefs and not enough indians is like trying to build a pyramid upside down – it only ends in rubble.

Often there are frustrations about sharing of information, or one person not being organised enough. If this is the case, you may need to make sure you have better systems in your business. This adds clarity, efficiency and takes the pressure off.


4.    Performance

Just because someone is family does not automatically mean they should get the top job.

Do they have the skills and knowledge to do the job well, or do they need more training?

Are they better suited to another position or do they just need to grow into the role?

Have clear guidelines on performance levels for the position. If a family member is not making the grade, have the hard conversations early before expectations are sky high. Be very clear on what should happen next - standards met by a certain date, extra training to be undertaken, or some responsibilities to now be handed on.
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Remember to play to your strengths. Do some personality/skills profiling to find out where each family members strengths and weaknesses are if you aren’t sure.

Being stuck in a role they’re not suited for, is not going to be good for the person or the business.

 
5.    Rules of Behaviour

Have standards of behaviour for everyone, but especially family. If discussions get heated, have rules on what is acceptable and what is not.

A good start would be:
  • No raising your voice
  • Always listen first without interruption and take time to understand each other’s point of view
  • Respect for each other (especially when you disagree)
  • Never argue in front of other staff members

6.    Mediator

If you cannot agree on an important issue, work with a trusted mediator to talk through the issues with you. Sometimes with another viewpoint, they can help you work through the problem from another angle.

It would be useful to agree ahead of time, when things are good, who this person would be if it were ever needed.
 

7.    Board Meetings

Have board meetings monthly to go through financial performance and other aspects of the business. Any family members in management positions should be accountable for their role and for the performance of the company.
 
This is a business - and must run like one!

 
>  Working with family can be a lot of fun. Where there is mutual respect, the older generation can bring experience and perspective and the younger ones can bring energy and fresh enthusiasm. It can be the best of both worlds!
 
Although, sometimes, despite best intentions, running a business together isn’t healthy. If you’ve tried everything and it isn’t working, implement an exit strategy.

At the end of the day, money will come and go, and you can choose to start or stop a business. This business may not always be in your life, but your family will be. So make sure you protect the relationships; if broken, this would be probably a bigger source of pain and regret than a failing business would be.

You don’t want any grenades exploding. It's just way too messy.

> I have plenty of stories from clients who, with a little coaching, are all heading in the same direction again and loving it.

If after reading this, you realise your family business is not in good shape, give me a call
. (The longer you wait or ignore the issues, the harder it will be to fix.)

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Are you gripping the controls too tightly in your business?

22/7/2016

 
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If you’re trying to grow your business or your business is sucking up all your time and life, autopilot is the answer.

The best businesses are on autopilot. 

Here's why.

Let's imagine you are a pilot and you're about to fly a Boeing 747 Christchurch to LAX.

Your job is to fly the plane, but there are lots of other distractions that can disrupt you. Direction needs adjusting, air control wants to change the schedule, a passenger is sick. Perhaps you had an argument with your honey this morning or are just having a bad day.

You’re just one person, so how can you handle everything? Enter the most amazing invention - the super dupa autopilot - an automated system that will fly the plane without 12 hours of your constant, unwavering attention. The beauty of this system is it can be turned on or off at any stage.

For the bulk of our flight to LAX, the plane is on autopilot. Fewer errors and more time to focus on the bigger picture.

In some or most situations, the autopilot is even better than a highly trained pilot. Smoother, more efficient, and having a backup for the pilot makes us feel safer at 30,000 feet as we look out the window at the fluffy white clouds of possibility. 


What happens in your business if you grip the controls too tightly?

If you hold on too tight, you have to run a whole business all by yourself. That’s kind of crazy!

Signs include:
  • Working long hours: nights, weekends... your family have forgotten what you look like.
  • Wearing all the hats from driving sales to pushing marketing to hours of endless paperwork to collecting money and everything in between.
  • Exhausted and frustrated.
  • Not enough cash in the bank when you need it and cashflow headaches abound.
  • Staff often grumpy and inefficient and everyone wanting a piece of you because all the numbers and systems are in your head.
  • Just to name a few.


What can autopilot do for your business?

When we’re talking about autopilot – we’re really talking about systems in your business. Get the right systems in place and your business will run more smoothly, more efficiently, more profitably and with way less stress. Your time will be freed up for more time with family – or to focus on important projects to grow the business.

Here are some of the areas you want to start putting on autopilot:

Financials on Autopilot. Systems that ensure good profit and plenty of cash in the bank when you need it.

Marketing on Autopilot. Getting high-quality leads and enquiries coming in every month without relying on you.

Sales on Autopilot. A sales process that consistently converts enquiries to customers without relying on you.

Staff on Autopilot. Checklists and procedures that ensure staff produce consistent quality work even when you’re not around.

Time on Autopilot. Your time scheduled so that there is always time for the important things... Are you controlling your business or is your business controlling you?


Does it really work?

I was talking with a client of mine recently about what happened when we put some systems into their business. By the way, this was a solid, reputable building company with over 30 years of experience, producing top quality work and a reputation to be envied. But their office systems were letting them down, meaning they had to be the pilot a lot more than they wanted.

In their words "things were overwhelming and chaotic". But now they have some good systems in place; they go on holiday for weeks (sometimes over a month at a time) and business is rocking even when they are away! When they come back, everything is running smoothly... solid systems and great staff take care of the business for them.

Now their autopilot is working, so they don't have to. They are still pilots some of the time, but when they want to be, and doing the bits they want to do - not being slaves to their business. 

Note: autopilot doesn't mean you're asleep on the job. You still need to be alert and in control. The autopilot will alarm when it’s NOT "business as usual" and you need to take the controls. Staff know when to come to you, or when you check in on the systems and the numbers, you'll know if something needs your attention.

And here’s the real key: Because you’re not exhausted and running from fire to fire, seeing only what’s right in front of you - you're fresh to deal with issues as they arise, and you are able to see the big picture and take advantage of the opportunities you can now see.

So how long could your business be on autopilot for before things go wrong? Anything less than a month is a sign that you need better autopilot - Drop me a line and let’s have a chat.​


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Would Your Business Survive This?

1/4/2016

 
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Imagine for a moment you are at the hospital, and the doctor is explaining to you that your wife/daughter/father… is very sick and over the next few months, they will be fighting for their lives. After the initial shock and as you support them through this, you start realising you are not able to put the time into your business that is needed.

Slowly but surely the business starts to stutter; small problems become bigger; staff are not "stepping up" like you need them to; cash flow starts to get tight, and you just don’t have the time to sort these things out. It’s becoming necessary to be at the hospital more and more, but if you don’t resolve these problems with the business, there is going to be one more casualty.

If you were in this situation, would your business survive for a week, a month, six months, a year? Would it continue to produce profits and income for you, or would it struggle to survive?

Here is the not-so-secret secret: Your business doesn’t care what’s happening to you. It just reacts to what you give it.

Your business is like a plant. If you give it water (customers), sunshine (good systems and staff), and good soil (the right market), it grows and flourishes. But if you neglect it, forget to water it, and put it in the wrong place, it will struggle. Leave it alone for too long and eventually it will die. 

What if you found the perfect place for your plant, set up an automated water supply, and gave it nutrient-rich compost? Sure, you still need to check on it from time to time, but if you are away for a while, it would be okay. The plant doesn’t care what is happening in your personal life or if you or your family are healthy or well. It doesn’t understand and never will. To live and flourish it just needs what it needs.

I have seen businesses too reliant on the owner get into trouble very quickly. The owner experiences an unexpected personal crisis, can’t work for awhile, their attention is elsewhere. All of a sudden jobs start going wrong, customers start complaining, cash flow dries up, work stops coming in; it’s very very stressful.

As we all know (especially in Christchurch), unexpected things can happen in life. Circumstances can change in an instant, and your whole world looks different.

What kind of stuff can happen? Well, anything.

•    Trouble with your marriage/partner
•    A family member is very sick/Life-threatening illness
•    Death of a loved one
•    Personal injury or illness/chronic pain
•    Spouse/partner needs a minor or major operation
•    Addiction struggles (your own or a family member)
or
•    Staff you rely on are experiencing one of the above

The list is endless, but you get the idea.

By the way, although the odds of these things happening to you in the next year are relatively small, if you look at the list entirely, the chances are at least one of these things will happen to you or your staff.

When it does, you will not be able to give the time and effort to your business that you once were. You will need space to deal with these important life events. (Even if you are still spending time in your business, you won’t be at your best).

I think we all agree family is more important than business. So if someone you love needs you, you need to be able to step away from your business without things falling apart.

In these storms, you need a business that will look after itself for a while or at least survive with only a little focus and help from you.

Remember too there are plenty of good things that affect your business also, although these are easier to see coming. 

•    Weddings and new relationships
•    Pregnancy and new babies
•    Moving house
•    A big holiday or trip overseas

Think about what happened last time you took a few days or months off. What shape was your business in when you got back? Maybe you don’t take holidays anymore because the mess you come back to is just too stressful…

The good news is with planning and some good strong systems, it doesn’t have to be this way.

Two of my clients not so long ago each had an unexpected health crisis, and both of their businesses have come through in good shape. I am not saying the businesses were performing at optimum capacity, but they kept functioning properly in spite of the owners absence - continued to produce results, perform well and provide income. Staff knew what to do, so there was no extra stress on the owner. 

You know what? Every single circumstance I listed above has happened in the lives of business owners I work with, at least once, in the last two years alone! And some in my own life as well. 

As a business mentor and coach, I know how important it is to hope and plan for the best, but also have a plan for the worst.

So to sum up: your business needs protection. You need to make sure you have everything in place so, just like the plant, it will carry on regardless of your circumstances.

​PS:
If you need help, email me to ask about the 7 Most Important Action Steps to ensure any business would survive a personal crisis.


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Are you sick of losing money on bad debtors?

25/7/2015

 
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I am sure at some time during your life as a business owner, you have been stung by some bad debtors. You completed the job in good faith, and then your customer didn't pay you! I have not yet come across anyone who hasn't had this happen to them, myself included, and in every case without exception, at best it has cost you profit and time, and at worst, it has put your business in serious jeopardy or even killed your business completely.

I think it's fair to say that this is a real problem for any business. Therefore it is important that you are keeping this downside to a minimum. It is a disturbing trend I am seeing more often, especially in but not limited to trades businesses.

I have put together here a list of preventative measures, from my own experience and also from advice I have gleaned from lawyers and debt collectors over the years.

I have tailored these specifically for trades and service businesses, but they will apply to other businesses also. Let's jump in!...

Your Terms Of Trade
With any quotes you complete, it's important to include your "Terms of Trade" which should be referred to in your signed quote (yes you should definitely get your customer to sign the quote to officially accept it, and prior to work starting). The "terms of trade" are the terms you will complete the job under and give an outline of responsibilities for both you and your customer. It usually includes standards of work, what happens if there is a dispute, payment terms, guarantees etc. 

A good "terms of trade" will reduce potential arguments with your customer if things go wrong. When completing a "terms of trade" here are a few important things you should always include:
  • Notice period for any dispute or problem with workmanship (within 7 days of completion or invoice is good).
  • Any charges incurred for collection of payment can be added to the bill.
  • Interest can be added on overdue amounts.
  • Clause agreeing that you can register their debt under the Personal Property Securities Act 1999 (PPSA). This is a national debt register you can register your invoice against until paid - it means that if your customers company goes broke, you have a priority of payment over others not registered. You still need to list the debt on the register for this to be valid.
  • Personal guarantee (with larger companies you deal with, these are usually difficult to get, but can be possible with smaller companies).
I recommend that you get a personalised copy of "Terms of Trade" for your business from a debt collector. They know the rules and often already have something that is easily adapted. They usually only cost a few hundred dollars and are well worth it.

Spread Your Risk
Make sure you have a good base of customers rather than relying on one of two large ones only. Then if something goes wrong with a major customer you still have a business!

Terms Of Trade From Your Customers
Sometimes larger building companies or corporates will ask you as the supplier to them, to sign their terms of trade. Look through these very carefully as they are written in favour of them not you, and they have expensive lawyers! Be prepared to negotiate anything you disagree with. I will often cross out clauses or make additions before signing these.

Here are a few things to watch out for before signing:
  • Make sure there is a notice period if they are not happy with workmanship; otherwise if there is a dispute it's hard to get a debt collector involved as debt collectors can't collect disputed amounts.
  • Check payment terms: when, and if overdue, can you charge interest?
  • If a debt collector is required, can you recover collection charges?
  • Make sure that you are not made responsible for things outside your control i.e. other subbies work. 
  • Any penalty clauses for work not completed on time.

When Taking On New Customers
  • In addition to the "terms of trade" it is also recommended that you get your customers to complete a "credit application form" - this helps gather all the relevant information about the creditor, which you then have on hand if you need to track them down later, and can be vital if it ends up going to debt collection.
  • If your customer is a company, then check out some of their other suppliers to see if they are getting paid; if not, this is a bad sign!
  • If you are concerned, get your debt collector to check out their liquidity and payment history.
  • Wherever possible negotiate deposits up front on starting, or progress payments at various stages of the job. 
  • Make it clear that payment on time is important and get agreement from your customer to pay when due. 

When Jobs Are Completed
  • Invoice the job ASAP, and state due date on the invoice.
  • Make it easy for your customer to pay you - put your bank account details on the invoice.
  • Check your debtors list at least weekly, and follow up any overdue amounts. Delegate this task if necessary - but make sure someone is doing this.

Overdue Amounts
  • If your customer can't pay, then get a payment plan in place, and make sure they stick to it.
  • Keep in regular contact until paid. Remember your customer has to pay someone or they are not in business - by keeping the pressure on, it's much more likely to be you, rather then someone else.
  • Be proactive. If the customer is unhappy with your work, then talk with them early. In most cases the longer it is left, the less likely you are to be paid.
  • Be tough and be prepared to walk off the job or stop supplying if necessary. The more jobs = the more money owed = the bigger the risk to you.

Existing Bad Debts
  • Don't be afraid to negotiate to reduce the debt and actually get paid something - if you need to. A bird in the hand is better then two in the bush that fly away and leave you with nothing.
  • If the amount is in dispute and under $15,000 one option is to file an application at the "Disputes Tribunal". You can this yourself without the cost of lawyers. Check outhttp://www.justice.govt.nz/tribunals/disputes-tribunal
  • If after a few months, you are not getting anywhere, then hand over to a good debt collector.
Note: In my experience a good debt collector is very proactive with phone calls and regular contact putting continued pressure on the debtor. Find out exactly how they will go about collecting the debt. If it's just sending a few letter with no follow up, this is usually not enough.

These things will help reduce your risk, but the only real guarantee in all of this is when the money is in your bank account not theirs. 

Remember you have provided goods or a service for your customer, and you deserve and need to be paid. You also have bills to pay and if you don't get paid, you can't pay your suppliers, your employees, or put food on the table for your family.

This article is really about protecting you from those bad debts that destroy your profit for the year or even wipe you out. The large building company, for example, that goes broke, takes lots of subcontractors with them. So reduce the risk and keep your exposure to a minimum - if you have a few small bad debts that's okay- you will survive those - it's the larger amounts you need to really pay attention to. 

Action Points
1) Get your "Terms of Trade" sorted or updated and start using them with all your customers. Yes even the old ones.
2) Be proactive with your overdue debtors - check them weekly and chase the overdue ones.

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Your business will crash without a dashboard.

3/12/2014

 
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How would you drive your car without a dashboard? I would say not very well. You would miss the basic indicators that you need to know. Important things like how fast you are going (especially if you are passing a cop on the side of the road), if the car is too hot, if you have enough fuel… just to name a few.

This is for small car but what about a bigger vehicle like a plane? For this you need a much more sophisticated dashboard. If you are a Boeing 747 airline pilot with hundreds of people under your care, the dashboard of your plane will have many more dials, switches and flashing lights, to cover all parts of the plane including electronics, fire suppression, passenger comfort, pneumatics, hydraulics, lighting engine control, auto pilot, air pressure, weather, fuel levels, brakes... and a whole lot more.

There are literally thousands of parts in a plane that need attention; nothing can be left to chance. A pilot who is not on top of these things will not be a pilot for long, it’s just too dangerous. These dashboards are the reason why literally thousands of planes fly every day and nearly every one of them arrives safely to its destination.

So do you have a dashboard for your business? 

Even for small businesses, indicators are vital, but this becomes increasingly more important as the business grows and gets bigger. As you employ more people it’s very easy to lose control of your business and be blindsided by a problem you did not see coming. By the way when things go wrong there are always early indications or signs, the problem is that without good information you won’t see it until it’s too late and it causes more damage than it should. If you have a little time, you always have options. I am not saying you will never have problems, but that you will have much more time to deal with them, adjust your course, and reduce the severity. It’s exactly the same with your business. 

When the fuel gauge falls to E, it’s time to do something about it. But what if you didn’t know? What if you were the pilot of a huge 747 and the one who was responsible for all the passengers aboard (including your employees and your family). What if you ran out of fuel and the engines stopped. What if your plane started falling out of the sky? What if it could all be prevented by seeing the early warning signs?

So do you have a dashboard in your business? And what should be on it?

Here is a checklist of some of the things you should have on your dashboard, depending on your business and industry:

Advertising
  • Profit/loss from each advertising campaign (yes you need to keep a record of how much money each campaign loses or makes – so you know if it is worth repeating)
  • Cost to get a new customer or lead

Sales 
– you need to know:
  • How many leads per month you need – and how many you are getting
  • How many walk-in sales per month you are getting
  • Conversion rate from leads to customers
  • Average dollar sale per customer
  • Sales needed each month to break even (hey, wouldn't it be great to know at which level of sales you start making money, and if you are on track each week. If you are short you still have time to get back on track.)

Margins 
– you must know:
  • Gross profit margin each month
  • Gross margins on largest volumes of services or products

Employees
  • Billable hours
  • Percentage of wages to sales 

Financials
  • Monthly profit and loss
  • Cash position (calculated as money in the bank + accounts receivable - accounts payable)
  • Stock levels 

There are many more, but this will get you started.


Action:
Imagine that you are on unplanned leave from your business for the next three months. You have a manager running your business for you. What would you want to know? You can’t go into work so the only way you will know if your business is okay is by the dashboard reports your manager gives you.
  1. List the main indicators you must know about, so you can sleep at night knowing the business is okay, eg. profit, sales, key expenses, key customers.
  2. Decide on what the target is for each of these indicators, eg. sales target $300,000 per month.
  3. Turn this into a dashboard report you use weekly/monthly for your business.
  4. Use it every month from now on, so you know at a glance if any of these important areas need a course correction.

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Are Bad Customers Good For Business?

1/11/2014

 
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As a business owner, I am sure you have heard or thought at some stage that "Every customer is a good customer". After all, every customer puts money in the bank and keeps you busy, especially when things are quiet. Right? 

Wrong. Be very wary of this approach - it's a trap. If you run your business this way, you will be creating a lot more headaches than you want, and will be disappointed with your profits (or lack of profits!). Let me explain:

If you think about all your customers over the last year, they will basically fall into four types:

A customers 
This customer values your service, and is prepared to pay what you ask. They don't argue over price and value your service and quality. They are raving fans of your business and tell others so. Very loyal, they repeat business with you regularly and won't go elsewhere. You often get referrals from them.

B customers
Most of your customers are B customers. They appreciate your service, but are a little more price sensitive. You need to work a bit harder to keep them, but they are still good business.

C customers
Not very loyal, they will haggle over price and will shift if someone else is a little cheaper.

D customers 
Impossible to make profit from, they are always complaining - something is always wrong with your product or service. Often to get the bill paid, you have to argue and sometimes reduce the bill. They never pay promptly either, and take a lot of your time sorting out their constant whining and complaining. Keeping them happy is almost impossible because they always seem to come up with some new problem or complaint. 

Warning: If you are getting a lot of D type customers, you are either accepting too much of the wrong kind of work, or it could be a sign you have poor systems for quality and customer service - which is a whole different problem in your business (and you will need to fix these issues first).

Once you have identified your customers, now you need a strategy for dealing with them.

A customers (A = Awesome)
Really look after them. Go above and beyond with exceptional customer service. Keep in touch. Let them know what you are doing for them; let them know what else you do and look for new ways to add further value to them. Tell them how much you appreciate their repeat business. For every referral you get from them, make sure you recognise it with a personal thank you note or gift. They will reward you with more of the same.

B customers (B = Basically sound)
You want to turn as many of these into A customers as you can. Treat these like A customers by making sure they understand and appreciate how and why you do things. Keep in touch regularly and get feedback from them on what they like and don't like about dealing with you. Then work on improving your service.

Tell them how important it is to you that they get the best service. For example, if you are a plumber you could explain why you test the fitting to make sure there are no leaks, why you use a certain grade of fitting, and why you won't use the cheap nasty ones that leak and will cost them more money in the long run; remind them that you are a Registered Master Plumber which means that you have a standard of work they can rely on. 

Again, once the job is finished, thank them for their business. For a larger job, go all out with the thank you gift - I guarantee you that your customers will be blown away by this gesture, especially if it is unexpected. Sending a thank you is a tried and true approach that still works today and a great way of creating very loyal customers who tell their friends how great you are.

Also, these strategies work best when you put them into a system so you don't need to remember. For example whenever you get a referral, a thank you card should automatically be sent; when a large job is completed, a gift is sent one week later; on the job your staff should know to automatically explain to the customer the reasons why you do it the way you do; maybe send a free sample with the invoice if the job is over $1,000, etc...

Due to the nature of some businesses, there may not be a lot of repeat business, but this strategy is still worthwhile. Maybe you build new houses? Remember a small percentage will build again in the future, but more importantly, many will know others who are also looking to build, so are an ideal source of referrals.

There are lots of ways to get referrals but first you need to have happy customers who remember you.

C customers (C = Could do better)
Do your best to turn these into B customers. (Find out what they are really looking for - then you will get a better idea if they will suit your business - in some cases they may not, which is fine.). At the end of the day if they don't respond, don't be too worried. The non responsive customers are unlikely to stay anyway.

D customers (D = Don't want to deal with)
Every business gets a few of these. Get rid of them as quickly as possible. D customers take up all of your time and you will never make any money off them. They will send you broke trying to keep them happy and then they probably still won't pay. Send them to your opposition and let them have the problems instead! Just say something like "We are not really geared up for this kind of work, I would recommend you contact x competition, they might be better equipped. Here are their details. Have a nice day". This kind of approach will work best as it avoids confrontation and means both you and the D customer keep your dignity intact.

Never be rude of course. Just be aware of who you can deal with and who you can't. At the end of the day you are running a business (which your family and your employees rely on to be profitable), and you don't have unlimited time or resources. 

It is worth mentioning that I come across a lot of business owners who get scared about letting these D customers go, as they are worried about less sales. If you are still feeling unsure then take a look at recent sales you have had with these D customers and if you are a service-based business, do a quick costing on the job. Include time involved at your hourly rate, cost of extra materials, freight, time spent explaining things to them, etc. Work out how much you lost on the job and then think about what you could have done with the extra time to make more profit in your business. How much did you make or lose on this job?. I'll bet that you actually lost money and are worse off.


The point of all this and the key: is to isolate your A and B customers, find out what they have in common, and use your marketing to attract more of those excellent profitable customers. Ditto D customers, if you are getting a lot of them, ask yourself why they are attracted to your company. What is going wrong in how you market your business?

The truth is, you need to be very strategic with your customers and your business. Get your customer base right, and your business will be much easier to run and you will achieve much better profits and margins.


Task
  1. Take a look at your customers over the past year and give a rating of A, B, C or D to each one. Then decide how you will deal with each group. Make it into a system that is automatically followed and assign one particular staff member to follow through.
  2. Look at each group and search for similarities. You will find that your A and B customers will be in a certain location or have very specific needs or a certain income or occupation. This is valuable to know because now you can target this specific type of potential customer! And chances are they will be excellent customers for your business and bring in good profits for you.
  3. Make a decision to stop dealing with D customers. List who they are and make a clean break.

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A little business lesson from a top surgeon

2/10/2014

 
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I was talking recently with one of the top surgeons in Christchurch about how he works with high-risk patients or any patients for that matter. He said he starts with Plan A, but then he also has a Plan B, and a Plan C, and more if needed. The whole surgical team talk through these in depth and everyone knows exactly what to do in each scenario.

Nothing is left to chance - every possibility is evaluated and the best course of action decided on if it were needed. So then, when they perform the operation, the whole team has confidence that they will not get into trouble if things don’t go according to the original plan, and more importantly they know what to do, no matter what happens.

Now does that mean that nothing ever goes wrong? Of course, not. Patients sometimes are unpredictable - they are people after all. The difference is that the plan is there ready and waiting if unlikely scenarios occur. This saves lives.

And this approach ultimately can save your business too. It’s the surprises that you don’t know how to deal with, or just don’t have enough time to fix in the heat of the moment, that are the most dangerous. These usually cause the most damage, take all your focus and attention, and cause the most stress. Have too many of these and you are in trouble big time. You may not be in business any more.  

So, do you have a business plan? Because if you don’t, you need one.

A plan is important to any business, no matter what the size, and I am not talking about the 50 page type plan that sits in the office drawer never to be looked at again. I am talking about a day by day, week by week, month by month plan for areas of your business that need attention like marketing, cashflow or maybe profits, just to name a few.

For example let’s have a look at a typical problem business owners have – cashflow. The cashflow plan would look something like this depending on the business and their situation:

Plan A
•    System for invoicing (making sure money is invoiced on time)
•    Ensure target margins are being meet with jobs
•    System for collecting money on time
•    How to deal with late payers
•    Ensuring you are getting the right kind of customers (in other words the ones that pay)
•    Negotiating with suppliers for credit terms
•    Good stock control (not buying stock too early before needed)
•    Complete a cash flow to see when money is likely to be short

Plan B
•    All of the above, plus:
•    Selling dead stock
•    Extra facility in place with bank when needed
•    Access to extra capital

Plan C (last resort - if in crisis)
•    All of the above, plus:
•    Negotiate payment plan IRD for overdue and current outstanding amounts
•    Negotiate with suppliers to help you through a bad patch

This plan if followed will keep most businesses out of trouble and the bank account thriving.

Now the thing with a plan is that it needs to be put into action and used. So Plan A should be applied every day or at least every week. This is the proactive “sort things out before they get out of hand” plan. 

Plan B and C are if things are a little more serious. By the way please make sure that if you are reading this and you do owe the IRD overdue payments, negotiate a payment plan immediately. If you don’t, you will find very quickly that the penalties and interest will accumulate and could double the amount you owe. If you are unsure how to negotiate with IRD then get your accountant involved or give me a call and we can talk through some negotiation tactics that have worked very well with those I have helped get out of trouble.

On Plan A you will also notice “Complete a cash flow”. This is important as it will show you what times of the year you are likely to out of cash like Christmas holidays, and what times of the month are difficult. Once you know this, you can work out how to deal with it. Always better to see a problem coming and make a plan, than be caught by surprise. I hate bad surprises as I am sure you do also. 

So how does your bank balance look? Are you constantly being surprised when you don’t have any money in the bank? Take the stress out of it and make a plan, follow the plan and have Plan B and C ready if needed.


At the end of the day, if it is you that ends up on the operating table, you want to know that your surgeon has thought through his plan of action and has every eventuality covered. Your business is your livelihood - your family, your staff, your customers are depending on you - think like a surgeon and use this approach to win.


Task:
  1. Pick the area of your business that you are having the most difficulty with. 
  2. Now list all possible solutions to the problem – Create Plan A.  (If possible involve your staff in this as they will often have some perspectives you would not think of)
  3. Think about things that might derail Plan A - other things that could go wrong – and think of solid solutions for these scenarios. This is your Plan B, C and so on.
  4. Take action - use Plan A – remember a plan without action does not work! 
  5. And have Plan B ready if needed. 

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Staff - your biggest headache?

27/3/2014

 
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Business owners often tell me this - that staff are their biggest headache. The fact of the matter is that the more staff you have, the more things can go wrong. Many business owners say that if they just had good staff, they would be okay. 

But there is another side to the story - even with the very best employees, they will never meet their potential and live up to your expectations without good systems and clear guidelines for what you expect from them. 

Can you relate to this story? Bob the Builder has started his new business. He gets known as dependable and does good work. He does everything - manages the projects and works hard on the tools, and Wendy his wife does the accounts. Before long he has more work than he can handle himself, so he employs some extra workers and finds some good subbies. Things get busier, and he is finding he is running out of cash as his business grows. Part of the problem is that Wendy was getting the bookwork done at night, but now that the sheen has worn off and the workload is increasing, more and more is getting left undone. Bills are not getting out on time, so Bob is not getting paid when he should. No one is chasing up old accounts not paid, and some are over six months old.

He decides he needs a good office lady as Wendy does not have the time anymore to keep up with the extra work and is sick of chasing Bob so that she can get the invoices out when she would rather be chasing him round the bedroom. So he employs Cindy and everything seems to be going well, although Bob is now so busy that he doesn’t really know what is happening with every project, or how much money they have.  But Cindy seems to have it under control so why worry, it's working. Then out of the blue Cindy hands in her resignation; she wants to pursue a career in interior design which is what she really loves.

A week after Cindy leaves, everything turns to custard. Bob suddenly discovers there are a whole lot of problems he did not see coming. Suppliers have not been paid for three months and have stopped supplying, customers are unhappy that jobs are taking too long, and there are a whole pile of jobs that were never invoiced. Bob finds himself in absolute frustration – he trusted Cindy and she let him down. 

I have seen this kind of thing a lot. The problem in this scenario is that Bob did not know what Cindy was doing, and even worse Cindy did not know what Bob even wanted. So the chances of this going well were abysmal. Bob was not clear on what time frame was acceptable to send invoices within, when old accounts should be chased, what suppliers should be paid first, how much money should be in the bank, etc...

Can Bob fix it? Not without good systems.

The moral of this story is: Have good staff, but have even better systems. This is the vital first step towards building yourself a great team...

Good systems will show when staff are not performing, Good systems will make good staff, Good systems will mean the business carries on when staff leave, Good systems take headaches out of your business.

Action Point: Look at your key staff and list what you specifically need from them. Then meet with them individually and go through it with them. It could be the most important thing you do this year!

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Your business sucks without robots.

28/8/2013

 
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Robots? Daniel, what the heck are you talking about? I don't have robotics in my business and although I feel like a robot I am unlikely to have one.

Well let me explain. I went to a robotics workshop with my son during the school holidays. The instructor first put on some DVDs showing how far robotics technology has progressed, and it is amazing. It won't be long before robots are a normal part of our lives. You may have seen a recent TV commercial urging you to buy a UFO-shaped robot that vacuums your house while you laze on the couch. In Holland in an aged care facility there is a robot that takes the washing to the laundry, pours and serves drinks to the elderly - and it keeps track of how much liquid each resident is served each day. Another four legged version (like a headless horse) could walk over almost any terrain including rocks and stairs, and another was bug sized and could fly around the room just like an insect. All this is available now if you have the money.

The instructor then got the kids to put together a robot themselves. There are two parts to robotics - the hardware assembly, and then the computer programming or instructions. Without the programming the robot will do nothing, it just sits there, useless. The instructions are everything.

This is just like business. Basically every function of your business, from customer service, production, cashflow, marketing, day to day operation... are all based on a series of instructions that we follow to get the job done. 

Now here is the problem. In most businesses the instructions are in the owners head. This means the business must rely heavily on the owner to perform many of the basic functions. The business owner only has limited time, so this can start to cause problems very quickly. The business becomes inefficient as staff have to rely on the owner relaying instructions to get things done.

The obvious answer is delegate, get someone else to do it. What I hear you say is "Daniel, that's all very well but how will I know that my staff will do the job as well as me? After all it's my business and I have standards". Good point however the reality is that a job delegated properly can still have the standards you need and expect.

Let me give you an example of how this played out with one of my clients. My electrician friend wanted to get off the tools so he could spend time improving the business. But he was concerned that without constant supervision, his workers would not provide the same standards he was giving his customers. What if they didn't complete all the safety checks? After all this is electricity we are talking about. Or,  what if all the parts for the job were not charged out, what if, what if...

All these things he would normally check when overseeing jobs are simply a set of instructions that he follows in his head.

So my electrician friend is now putting together a list of principles and detailed instructions for his workers. He has made these into a checklist his workers tick off and sign. Now if there are any problems with the job he can go back through the signed checklist for each job, he can see if everything was completed correctly. Now he has the freedom to work on getting more customers and making more profit without being constantly on site checking work. 

Start thinking about how your business can be systematized with checklists - so that you don't need to micro manage your staff and be there holding their hand every time.

Action Point: Take one task in your business that you normally do, but don't want to do anymore. Create a checklist of instructions. Delegate this job to someone else, and then check that the list is followed a few times until you have confidence that the job is being done properly.

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Are you under the gun?

2/6/2013

 
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"Under the gun" is an older saying I remember hearing as a kid. It was often used to describe when someone was under pressure, if they had a tight deadline and time was running out. 

I was reading a book called "Being the Best" by Denis Waitley who researched the (supposedly real-life) origin of this saying, giving quite a different insight into its meaning..............

Back in the 1700's when sailing ships were prevalent, a young naval officer reaps the reward for solving a problem, but also pays a high price for creating the problem in the first place.

This young mans name was Ensign Noble and he was aboard the HMS Intrepid en route from England to the colonies.

Back then the colonists were rebellious and this Royal Navy ship was loaded with guns and ammunition including a large cannon for delivery to the proper authorities.

Two days into the trip they were headed into bad storm and needed to secure the huge cannon to the deck to prevent it from damaging the ship or falling overboard. The young naval officer Noble quickly secured the cannon while telling himself that "these ropes should hold it; It doesn't look like the storm is that bad anyway" - a patch up job at best.

He finished the job and went below deck. It was only a few minutes and the storm got much worse. The cannon came loose, and started moving around the deck, damaging the ship, and putting other crew members lives in danger. He leapt back on deck to see the cannon rolling to the port side and straight for two fellow sailors who were trying work the sails and stop them from ripping in the violent winds.

Without a moment's hesitation, Noble put himself in harms way by throwing himself in front of the cannon, somehow stopping its path and saving the two sailors from a messy end. Both his legs were broken under the weight of the cannon, but he had saved the day by literally throwing himself under the gun.

The next morning there was a ceremony in his honour to celebrate this act of bravery. The whole crew were present as Noble hobbled forward (supported by crutches on his two broken legs) as the Captain bestowed a medal of honour for the countries highest award of bravery. The crew cheered, but soon fell to absolute silence as the Captain finished his presentation by saying "For placing his ship and shipmates in dire peril and being guilty of dereliction of his duty, Ensign Noble is sentenced to death by firing squad, sentence to be carried out immediately".

Dennis Waitley concluded the following moral of the story: "That working hard even heroically to solve a problem is not to your credit if you created the problem in the first place".

I believe in second chances and I think most of us would agree that the Captain's punishment was severe considering Noble's heroic act.

However, storms come regardless of people's intentions and if the cannon is not secured, there will be a price to be paid by someone.

What "storms" could affect your business? External factors that you don't always have control over but have a choice as to how you react to them. Some you can see coming, others creep up on you or strike suddenly. It could be earthquake, recession, competitors' new products, a health or family crisis....... A good business needs to be positioned to weather whatever storms may come. With good systems in your business, you will at least have planned ahead and be better prepared for these eventualities.

What are the "loose cannons"? These are the internal factors that you do have some control over: Poor office procedures, a disruptive staff member that is influencing the others, customers not paying when they should, eroding margins, wrong kind of customers, unhappy and complaining customers........ The crucial matters that if allowed to get out of control can cause serious damage to your business!

If you put the right systems/procedures in place (ie tying down the ropes), you are on the way. And remember you can have the best systems in the world, but they will only work if they are followed. The Royal Navy had excellent procedures for tying down cannons, but our friend Noble did not follow them. I suspect this is why the Captain was so tough - because this situation should never have happened.

I encourage you to spend some time writing out your systems and procedures step by step, and making sure they are followed. Secure the "loose cannons" in your business. Follow through. Make sure everyone knows how to tie down the cannons properly, from management to the cleaner. Because if you are the only one who knows and you are caught in a storm, then you are in trouble.

The benefits of good systems are threefold:
  • Your business will function much more efficiently day-to-day with happier staff and less headaches for you, freeing your time and ultimately giving you more profit.
  • You can relax and not stress about "what if's" knowing that your business is in good shape if the waters get choppy.
  • Your business will be ready to take advantage of good opportunities that come along - and do even better!
Be prepared and don't be caught "under the gun"!

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