A Time for Coffee, A Time for Coke

Despite being attached to coffee to the point that I am highly unproductive without any coffee, and can increase my productivity relative to the amount of coffee I’ve drunk that day, I still refuse to drink it in the evening. Once dinner is over, if caffeine is required, coke will have to suffice.

The reasoning is simple – the effect of coffee is not as extreme as that of coke, but it lasts significantly longer.

This is an analogy to life as a business owner. At times, we must be like coffee, plodding away at a steady rate as our business grows and develops a level of stability.We must look to our current customer base, and ensure that they are being provided for and are happy. The business moves into a rut in which it can be productive and does not look for anything that may significantly impact the status quo.

At other times, changes happen fast, and perhaps at a rate that is not maintainable for very long, and the result may not be completely stable. New opportunities may be explored, calculated risks taken. Perhaps new customers are being wined and dined, and the workload for the business grows beyond its capacity, and other decisions have to be made.

Staying too long in either state can be disastrous for a business. Without taking advantage of new opportunities, of taking risk, the business will stagnate. On the other hand, a business which is constantly taking risks may wake up one day to find that it has no core customers, that the internal workings of the business do not work.

As with all things in life, everything in moderation.

Persistence is Required

Looking at the website for a local fitness center, I noticed that they had 2 portions of their site devoted to news. One was a banner across the top of the site, posting information about changes to their schedule. The other was a Twitter feed.

The banner seemed to contain fairly current information – it had a cancelled class and a new class starting, both pieces of information being about a week old. Not too bad for a gym with a relatively stable schedule.

The Twitter feed was more disturbing. It had not been updated in about a year. Looking around at the rest of the site, signs of neglect were everywhere. Schedules were out of date, information was no longer current.

It had the feel of a passing fad.

In social media, and online in general, being current is incredibly important. If some information is clearly dated, visitors will quickly leave. While a website and a Twitter account are by no means expensive, they can cost quite a bit in terms of lost business.

Unfortunately, it can be difficult to find motivation to keep going, but persistence is required. It took 9 months of writing articles on this site before I made my first sale that I could attribute directly to my writing, but it paid for that effort. Even when you think there are no visitors reading, you continue to write, to update, to maintain a sense of freshness.

You never know when the big break will come, and you don’t want to have only yourself to blame for not being prepared.

Choosing to Outsource

I don’t do my own accounting for my business – I hire a professional firm to do that for me. I have a lawyer who deals with any contracts or legal issues that I encounter. For marketing, I go to a company that specializes in that. For business advice and software consulting, I hire myself.

In any company, there are a multitude of tasks that need to be done in order to achieve success. All of these tasks can be broken down to either be:

  1. Central to your business;
  2. Needed by your business.

Central to your business

Tasks which are central to your business should rarely be outsourced. If your company specializes in graphic design, you should not outsource the design process, since that is what defines your company. Such tasks you need to retain full control over, as your entire company image hinges on how you accomplish those tasks.

You may choose to hire employees in order to grow, or to bring in contractors when the workload gets to be more than you can handle. But such tasks are ultimately your responsibility, and so you should keep them close.

Needed by your business

There are many tasks, though, which are necessary to be done, but don’t define your business. The accounting for your business is not something your clients would ever care about, or which company you use for advertising, or whether your website is hosted by a particular vendor.

These items can, and often are, outsourced to people or companies who define themselves by their ability to do such tasks. All you care about is that the task is done at a particular level of quality.

When you think about outsourcing, think about how the job fits into the above categories. Only items in the second category should even be under consideration.

Question: How do you ensure timely payments from clients?

Getting people to pay on time can be difficult, and can frustrate business owners as they struggle to create a reserve large enough to float unpaid invoices. There are many strategies published that address this issue, and how to best manage getting paid in a timely manner.

How do you go about ensuring that your invoices are being paid in a timely fashion?

Coping with Failure

Last week, I asked how you cope with failure, no matter the significance. Clearly, though, the significance of the failed event makes a difference to most people, but successful people have managed to define all failures in one of two ways:

  1. I failed and there was nothing I could have done to prevent it;
  2. I failed because I didn’t take some action[s] to prevent it.

If the failure falls under the first category, then it can be brushed off fairly easily – after all, the failure came about through no fault of my own. Granted, I need to be brutally honest with myself in this assessment, but if I truly believe the failure was not under my control, then it will not hamper my ability to move forward.

If the failure is from the second category, however, then I need to assess what went wrong, and how I can prevent such a failure from occurring again. That is, failure is a way to learn from the past, to create the lessons that will shape the future.

Regardless of whether the failure was due to my actions or not, I cannot allow the failure to impact my future actions at an emotional level. Such reactions will not generate positive actions, and are more likely to result in a downward spiral as logic is removed and emotion begins to take control.

If you want to be successful, look at failure as an opportunity to learn how to improve. While you should not hope for failure, it also need not be a calamity.

How to Pitch an Exit Strategy

When Carolanne Doig came on Dragons’ Den with her business, she was already on her way out. Having built up Seaforth Rain Gear over the course of almost 15 years, she had done all the right things, but had yet to hit a homerun.

Her asking price was $100,000 for 40% of the business, which was bringing in about $200,000 in sales of protective rain gear. Her specialty product, a cover for golf bags, was being used by professional golfers – and not because she paid them to do so. The business had a solid product, or line of products, and yet there was something missing.

Arlene Dickinson spotted the missing piece – Carolanne had put her heart into the business for many years, and was done. She didn’t have the motivation to bring her business to the next level. Whether it was a matter of being bored, frustrated with a lack of progress, or just ready to move on to something else – the time had come for an exit.

Carolanne pitched her product well, and pitched her business well. She even noted what the flaw in her business was, that she needed to bring someone in to breath new life into the business. The offer she received reflected precisely that, and made a first for Dragons’ Den.

Arlene offered her $200,000 – for 100% of her business, with a royalty of 5% being paid over the next five years. The conditions were basically those which would involve putting into place a new management team – and Carolanne would have her exit. The offer was accepted on the show, making it the first time that someone sold their business by pitching on the Den.

Every business owner needs to know their exit strategy. Whether it will be to sell the business, merge, hire others to run it for you, there needs to be a way out. If opportunity presents itself to realize your exit strategy, then as long as you are aware of what that strategy is, you’ll be prepared to take advantage of that opportunity.

Running Meetings Effectively

A recurring problem that many people have is running meetings effectively – that is, where the meetings in hindsight are not deemed a waste of time – for any of the participants. This can be quite problematic, as different people coming to a meeting will often have different objectives, and reaching everyone’s objective in a single meeting can seem to be an impossible task.

However, clearly some people manage to run meetings effectively, or at least in such a way that people leave those meetings with a sense of accomplishment. The tricks include some of the points below:

  1. Make sure the right people are invited to the meeting – that is, every person who needs to be there is present, and those who do not need to be there are not invited. It’s not an insult – it’s about respecting everyone’s time and energy.
  2. Have an agenda, and stick to it – if you want to accomplish something at a meeting, make sure everyone knows what it is you’re trying to accomplish, and stay on topic. If other items come up during the meeting, put them aside and deal with them later.
  3. Keep it short, ideally no longer than 45 minutes – after about 45 minutes, people’s attention begins to wander. If it seems likely that the meeting will last longer, break it into multiple shorter meetings, perhaps with fewer people at each meeting.
  4. Avoid touching base meetings – this can be handled more effectively via email, and does not really serve any useful purpose other than to take people away from doing productive work.

If you have a suggestion or idea about how to keep meetings on track, I’d love to hear from you in the comments!

Mistake of the New Office

I’ve written about having professional offices on several occasions, but I’ve also learned that poor choices in office planning can undermine a business, potentially for years. There are several aspects to the risks inherent in renting new offices, and I will attempt to address each of them in turn. At the end of the day, only you, the owner of an expanding business, can fairly assess whether the move is right.

The first issue is in regard to cashflow. Renting an office for the first time can be a surprise in terms of what is, and isn’t, included with the rent. The little fees that aren’t mentioned can often be the same fees causing the largest issues. Is your internet access fast enough? What about coffee for the office? How about furniture? What maintenance fees will you have to pay?

A good rule of thumb is to have 6 months worth of rent stockpiled before signing the lease – over and above the deposit you’ll have to make. It may take you that long before your business is breaking even with the new and increased cost.

The second issue is in regard to the amount of space rented. It isn’t good to move your business too often, so you need to plan for expansion. At the same time, that extra space will cost, and isn’t earning the business any money, and so should be kept to a minimum.

One strategy to deal with this issue is to find an office in a building with a fair number of vacancies, where larger or additional rooms can be rented when the time is right. With careful selection, you may even be able to find buildings that include some shared resources such as meeting rooms, which help to reduce your costs (though the rent at such offices is likely to be higher as a direct result of this).

Last, there’s the issue with a bailout plan. Offices will often request a multi-year lease – something startups should be reluctant to sign. As there are two scenarios that could result in you wanting to break the lease (enormous expansion or spectacular collapse), try to avoid signing for two years if possible. However, bear in mind that with shorter leases, the amount of negotiating you can do on the details will be extremely limited.

A Matter of Trust

In studying the business applications of being a personal trainer, there was a comment that piqued my interest:

Within 6 to 9 months of becoming certified, if you are not getting 75% of new clients via referrals, you’re doing something wrong.

This is particularly interesting to those in service-based industries. Getting new clients is generally extremely lucrative, and many businesses would be prepared to pay hefty fees to bring in new clients. However, the vast majority of their new clients don’t have any costs associated with them.

Word of mouth is the best way to draw in new business, and there is no reason why any business owner need have any difficulty in this manner. Treat your clients well, and they will, in turn, pass your name along to their associates. Establish trust with people, and they will reciprocate over time.

Additionally, there is no reason not to try to use this method of bringing in new business. You should be treating your clients well, because in service-based industries, that is precisely what you are being paid to do. While this may not be true for every client, treating them well in general will see your clients treat you well – with respect, courtesy, and understanding as you may need it.

For example, I try to be generous with my referrals – but only in terms of whom I will give a referral to. That is, if you ask me if I know someone who can fill a particular role, I would be happy to provide such a recommendation – if I know and trust someone who can fill that role. Getting onto my list of people I refer, however, is much more difficult, as competency and courtesy must be established before I will consider giving the referral.

Over time, this has benefited me, and so most of what I’m doing could be considered selfish. As a result of the dozens of referrals I’ve given out, I have in turn been referred a few times, but every time that has happened, the value of that one referral has shown that it is worth considering others. No, I don’t demand, expect, or even hope for reciprocity every time I give someone a referral. But I know that by doing so, somewhere down the line, a referral will arrive.

I’ve been consulting for several years. As of right now, I have only one client who was not the result of a referral. That’s how service-based businesses work – I provide one client with a service, he mentions my name to his friend, who in turn becomes a client. She mentions me to a colleague, who also becomes a client. I earn each referral (or at least, I try to) by providing that client with the best service I can.

At the end of the day, this is all a matter of trust.