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.

Question: How do you cope with failure?

No matter who you are, at some point, you will encounter failure of some sort. It could be a major event in your life or a tiny insignificant occurrence that barely registers. Regardless, failure will have occurred, and you must deal with it.

Naturally, the way in which people deal with failure is somewhat dependent on the nature of the event. However, some people are in general better able to cope with failure, and everyone can learn from them.

The question of the week is simple: how do you cope with failure, whether significant or otherwise?

Assessing Competency

Last week, the question dealt with interviews, and in particular, how you assess the competency of a candidate. Chemistry, or how the candidate will fit in with the corporate culture, is in some respects easier to assess. After all, you can describe the culture, assess for a personality clash, have the candidate meet the team.

Some will venture to say that qualifications, that is, the degrees and certificates a candidate presents, can be used to assess their abilities. Unfortunately, in reality, this doesn’t really work very well.

First, unless you have knowledge of the particular institution issuing the degree or certificate, you cannot assess how well the curriculum of that degree matches the needs of your business. Additionally, unless you request transcripts, you have no way of knowing whether the candidate finished at the top of their class or the bottom – which could be a significant spread.

Second, most jobs entail real-life experience, something which few degrees provide. As such, the work experience of a candidate has more relevancy than which university they attended, and what grade they received in a particular course.

Looking at work experience has similar problems. While the candidate can describe their role in order to appear to be a good fit, the reality of what they did at past jobs may have little resemblance to the verbose descriptions provided in the interview. Stories about events at past jobs may have been minor parts of the role – if they happened to the candidate at all.

As such, the interviewing company must resort to more practical assessments of skill. There are a few ways to accomplish this.

The first way is via a portfolio, in which the candidate is asked to provide samples of their work. The company must make it clear that the work is being requested purely for assessment purposes, and should NEVER use the work without the permission of the candidate.

However, not every job can be assessed via a portfolio. In some cases, more specific samples are needed.

The company can request a particular sample. For example, a salesman might be asked to prepare a sales pitch on a particular product, and present it during the interview. If the preparation of such a pitch is not expected to take too much time (and this is relative to the position being filled), such a mechanism can provide a very accurate assessment of skill.

Last, the company can attempt a test, but with caution. The test questions should be designed such that it’s not so much the correct answers as a way of thinking that is being measured. For example, a candidate could be given a problem to which there are many known solutions, and the assessment is not whether or not the candidate knows a particular answer, but how they approach the problem. This can be used to assess the candidate’s problem solving skills.

Investing with a Social Conscience

Barb Stegemann appeared on CBC earlier this week, showing that smart business can go along with social responsibility. Presenting herself as a savvy entrepreneur, she demonstrated that good business sense can also better the world we live in – and make a lot of money along the way.

The 7 Virtues based out of Halifax is a perfume manufacturer, with a twist. Rather than look for easy sources of flower extracts to form the basis of the perfumes, Barb targeted Afghanistan, where the orange nectar needed for the perfume could provide an alternative to the other cash crop in the region – poppies. Paying competitive prices for the nectar (the estimated cost of a liter of nectar is $8,000), she gave farmers a lucrative, legal option for their fields. Additionally, this source of legal funds would result in hundreds of jobs, creating a boost to the regional economy.

To some degree, Barb was overpaying for the supplies – with the caveat that it provided her with a good marketing line for the business, which would make it even easier to sell her product. Additionally, with the high margins perfumes are able to manage, Barb had some room for flexibility in her purchasing prices.

As her presentation proceeded, Barb demonstrated her business acumen – she managed to break even within her first month of operations, and was unable to keep up with demand. While social conscience played a role in her business, Barb was quite clear: The 7 Virtues was not a charity.

Running a business based on social responsibility can have many benefits, and it does not need to be mutually exclusive with being profitable. With the right person in charge, the business can end like Barb’s – with an investment from Arlene Dickinson, Brett Wilson, and Jim Treliving.

Early Failure Can Impact a Career

A concern arose on one of the various question sites I frequent – a manager was hired on contract to supervise a project, which was cancelled a short time later. As a result, the contract was terminated. Normally, this would be percieved as a standard part of business as a consultant – except for this particular manager. It was his first job.

The manager was concerned that this would appear as a stain on a clean resume, perhaps having a negative impact on his ability to market himself effectively. However, perhaps this early failure could turn out to be of benefit, when properly presented.

Everything in life is about the spin, or the angle. In any situation, the question is not whether there is bias, but rather, how that bias is being presented, and to what ends. Sometimes, the creation of the bias itself is subject to analysis, showing the thought processes of the presenter.

The manager, seeking to put a positive spin on the situation, can choose to reflect on what was accomplished prior to the conclusion of the contract. Additionally, he can look at the reasons for the project being cancelled, and learn how to detect such issues early in the project lifecycle. He can apply those lessons learned to future projects, but, perhaps more relevant, he can explain all this as a lesson learned in the school of hard knocks.

When presented with a situation in which the outcome was not the hoped for success, that’s not the same as a failure, unless you choose to present it that way. Every situation has bias, and you can choose to bias the situation to be described as an alternative successful outcome, rather than a failure.