Back to Business Basics

Another year has already come and gone? Really?

As you wrap up this year and prepare to start another, consider using the following list to guide your business activities. If you want to consider this a “New Year’s Resolution” list, that’s fine as long as you actually turn this list into reality and stick with it all year.

Set business goals, and have plans for achieving those goals.

Establish written plans for achieving your business goals. Be sure to assign accountability using the following formula: WHO will do WHAT by WHEN?

Run your business by the numbers.

It’s important to regularly review your progress and results. Your review should include:

  • Sales, broken down by product/service or customer segments
  • Gross profit, broken down the same way as sales
  • Major expense line items
  • Net profit
  • Cash balance and cash flow
  • Accounts Receivable, if you extend payment terms to your customers

Look at both month-to-date and year-to-date results, and compare to the same period from the prior year. It’s also a good idea to look at your P&L statement numbers as a percent of total sales. This allows you to spot trends early.

Use time wisely.

Your time is one of your most precious resources, so be sure you’re making the best use of it. Use a calendar and set aside time for planning and review.

“Hire hard” so you can “manage easy.”

Spend as much time as needed with the recruiting and interviewing process to build a strong team who will grow with your company.

Spend quality time with employees.

Rather than waiting a year to discuss performance with your team members, regularly visit with them informally. Get to know their talents, strengths and weaknesses. Praise them for their good work, and coach them when you see opportunities for improvement.

Delegate.

You can’t do it all yourself, so don’t even try. Continually ask yourself, “Is what I’m doing right now the best use of my time and talents?” If not, find a way to delegate those activities to employees or outside vendors.

Spend quality time with customers.

Find out the answers to these two questions:

  1. What’s important to you? (Quality, customer service, product mix, etc.)
  2. How are we doing in those areas?

Develop relationships with your customers.

Find ways to stand out from your competitors and to become the supplier of choice.

Make smart use of technology.

Technology has become so affordable and easy to use that even the smallest home-based business can afford to appear bigger and to level the playing field with larger competitors. Get tech savvy to reduce costs, improve communication, increase productivity and enhance customer service.

Create a winning culture.

Get everyone in your company on the success bandwagon, starting with you. Think and talk about growing, pushing through challenges and achieving goals. Be winners.

Implement these common-sense business practices, and go make the new year your best yet.

Your Most Important Document

In a previous column titled Great Expectations, I urged business owners to have realistic expectations for their employees.

Now let’s build on that message: Define your expectations.

In my role as a business coach, most of the issues I hear about are related to employees. And more often than not, a lack of clear expectations is at the root of the problem.

We usually let our people know how to do a job. “Open the software. Click the blue icon. Use the menu to find the customer …”

But how often do we let them know what behavior we expect, or perhaps more importantly, why we expect it?

If the only clues to acceptable behavior are the inevitable corrections that come when straying off course, it may take a long time for your team to figure things out for themselves.

If you expect your team members to treat others with respect, just say so. Clearly. Directly. Early and often.

Some of you may know that I own a company called Arch Engraving in Kirkwood, Missouri. We make and sell awards, signs, nametags and personalized gifts. In 2010, I bought out my two partners and became sole owner. After that, we were busy moving the facility and creating a spin-off business. The dust has settled so I finally found time to create a “culture document.” It was rolled out in late 2012 and early 2013 for our 10 full-timers and various part-timers.

This document contains our Mission, Vision and 6 Guiding Principles. Under each Guiding Principle are 4 or 5 bullet points to explain the principle.

The contents were reviewed individually with each employee. The Guiding Principles and underlying bullet points were used as the performance review form. Since this is brand new for everyone, the review meetings were mostly about explaining our direction and our “why”, with suggested (and in some cases, required) improvements noted as appropriate. I tried to use these primarily as educational meetings, and as my opportunity to get feedback on the document. After all, they were seeing these expectations in writing for the first time so there was no justification to get all worked up about non-compliance.

Going forward, though, this document will be our guide. Everyone now knows we will hire, fire, reward and promote based on it. They know to filter all decisions through it. Our Mission tells them what we’re all about. Our Vision shows where we’re going.

I’m not kidding myself – there will be set-backs. But staying the course and using the document in our daily work will make it real. It’s not just a plaque on the wall.

Some experts advise to make this sort of work a team effort. In this case, I did it myself and tweaked it based on employee feedback. Right or wrong, I felt the business should reflect my own values and expectations.

There’s no doubt in my mind that this is now the company’s most important document.

Do you have a culture document? I’ll show you mine if you’ll show me yours. I intend to write more on this topic and would love to find great examples to highlight. Send me an email.

 

Talking about Values is Good Business

What do “values” have to do with business? Everything!

This isn’t about “touchy-feely.” I see core values as a hard-nosed business practice, just like reducing costs. It’s simply a way to ensure that everyone on the team knows what is important.

As owner, you can – and should – shape your company’s culture. You can let it happen or you can make it happen.

So, what makes up a culture? All sorts of things. Fun versus serious. Honest versus dishonest. Friendly versus confrontational. Lunch with others or eat at your desk. All this and much more is the stuff of company culture.

A big part of a business’ culture centers on its values. You may not care whether your employees eat at the desk or go out, but you darn sure better care whether they are being honest with your customers.

My recommendation: Determine what principles are important to you, and then inject them into the workplace.

If you don’t spell out what’s important, then the implication is that either nothing is important or everything is important – trouble either way.

Here’s an example: Barry is the new guy in sales. He was put place with no orientation on what’s important to the company. He brought some bad habits, including breaking promises to customers. His manager doesn’t find out until a furious customer calls him.

But George works at a company where breaking promises to customers is unacceptable. The owners and managers “walk the talk”, setting the example for others. It’s discussed in meetings and in new employee orientations. It’s used in performance reviews and job descriptions. Do you think George shares Barry’s cavalier attitude toward commitments to customers?

This is the difference between ignoring what’s important and building a values-based culture on purpose.

Adopting a set of values is not about picking a litany of lofty goals that nobody can live up to. A company must identify those principles that the top people are passionate about and can adopt without hesitation.

What values to pick then? Each company must answer that question for itself. The answer may be found in things like the founder’s personal values and vision for the company.

Whatever values are chosen – and a handful is plenty – the company needs to really work at making them second nature for all employees. This doesn’t happen overnight. About the time you think your staff is getting tired of hearing a message, that’s about the time it’s just starting to soak in.

Here is perhaps the most powerful sign that it’s working: Your employees start enforcing the culture. When you hear one of them tell another, “That’s not how we do things around here”, you’ll know your work is paying off.

Adopting and living up to a set of guiding values can literally transform your business. Don’t assume your people know what’s important. Tell them. It’s hard work and a long process, but it will eventually have a positive impact on your bottom line.

Common-Sense Small Business Policies and Procedures

Successful companies don’t make it up as they go along.

For your business to be successful, you need a set of policies, procedures and systems.

Policies

Whether written or not, every company has policies. Policies cover things like whether a product can be returned, under what circumstances an employee will be fired, how long an employee needs to be on the job before being eligible for health insurance, and whether company computers may be used for personal emails. Here are some guidelines:

  • Keep your policies simple, clear, and as few as possible.
  • Don’t create a policy for everything, but do create them for important issues.

A good time to develop a policy is when someone asks for the first time, “What’s our policy for …?” If you don’t have an answer and you expect the question to come up again in the future, you may as well develop a policy to cover that situation. Discuss among the management team or, if appropriate, get an attorney involved.

Procedures and Systems

Can you imagine a fast food restaurant that allowed each employee to decide how to make a burger? Or a bank without formal processes for accepting a deposit? I’m not suggesting creation of unnecessary red tape or nonsense. I am suggesting that …

  • once someone spends the time to figure out how to do something, it’s a waste to let other employees spend the time (also known as “money”) to figure it out again.
  • it is irresponsible to let the company’s know-how go out the door daily at 5PM.
  • you don’t want important business processes to be done “Jim’s way” or “Judy’s way.” You want important business processes done the company’s way!
  • the only path to consistent product and service quality is to have simple, clear procedures and systems.

So, what’s the difference between a procedure and a system? I can probably best explain by example.

Let’s take hiring. You might have a procedure for conducting an interview. (I use the word “procedure” pretty loosely. It might just be a simple checklist. In my mind, a procedure is anything in writing – even in pictures – to guide the steps someone takes to accomplish a task.) You also have a job application and a form asking for the applicant’s approval to perform various background checks.

All of these checklists, procedures and forms make up a hiring system.

Please don’t get hung up on these terms. Feel free to give these things different names. The important concept is documenting:

  • what you do
  • who does it
  • when it gets done
  • how it gets done in sufficient detail to ensure quality and consistency, and prevent duplication of effort.

Let’s look at another example that can help make my point. Suppose you start a store and are the only employee. In the early days, you’ll be doing all kinds of tasks … some simple, and some complicated. One task might involve buying and restocking product for sale in your store.

Let’s say you hire a new store sales employee, Kathy, and you want her to take over the purchasing process. Your training choices include:

  • Show her how you do it, and hope she takes notes or has a good memory, or
  • Type up a simple procedure and give it to her while she’s being trained.

Which do you think will work out best?

If you go the route of most small businesses – which is to show rather than write a procedure – eventually Kathy “gets it.” She starts doing the job, becomes good at it, and over time probably adopts new approaches to the job that you don’t even know about. These changes may impact important things like your cost or delivery lead times. But, none of her improvements get written down.

After a year on the job, Kathy quits. All of this knowledge that Kathy gained – which belongs to you – walks out the door.

So you hire her replacement and show him how to do it the old way. You haven’t been involved in purchasing for over a year. Kathy handled it. You don’t know anything about all the changes she made to the process. You’ve lost a year’s worth of important business knowledge … because nobody bothered to write down a few simple bits of information.

So, even if you’re the only employee, take the time to write down what you do and how you do it. Put it in your computer and print it out. By the time you have your first employee, you will probably have a good start on an procedures or operation manual. Think how much easier it will be to train your folks and how much smoother the operation will run.

Remember: Successful companies – like yours – don’t make it up as they go along.

7 Business Resolutions for the New Year

How is 2011 turning out for you? Check one:

[ ] Pretty rough
[ ] Fair
[ ] Great!

Even if you chose “Great”, it’s hard to be optimistic when unemployment is high and many of the most powerful people in our government seem determined to punish achievement via the tax code. Until fairly recently, entrepreneurs were celebrated and respected. It was all about the American Dream. Now … well, just listen to the words being used and the proposals being made. It’s clear that some folks don’t value what entrepreneurship represents: Pursuing dreams, hard work, jobs and a rising tide that floats all boats. When the dearly-held principles that made this country what it is today – including Capitalism – come under attack, it is difficult indeed to stay positive. Don’t fall for it. Here are seven resolutions for the new year to help you stay positive and improve your company’s performance.

1. I will not buy into the “the rich don’t pay their fair share” nonsense. The top 1% of earners pay 38% of all taxes. The top 10% pay 70% of all taxes. (This information is readily available on the IRS website.) You may not be rich but this ridiculous mantra is mutating into an indictment on all business owners. Get informed – immunize yourself against the negativity.

2. I will run my business by the numbers. It’s important to regularly review your progress and results, including:
• Sales and gross profit, broken down by product/service or customer segments
• Major expense line items
• Net profit
• Cash balance and cash flow
• Accounts Receivable, if applicable

Look at month-to-date and year-to-date results, and compare to the same period from the prior year. It’s also a good idea to look at your income statement numbers as a percent of total sales to spot trends early.

3. I will “hire hard” so I can “manage easy.” A bad hiring decision can haunt you for a long time. Don’t make a snap decision. Build a strong team who will grow with your company.

4. I will delegate. You can’t do it all yourself, so don’t even try.

5. I will connect with my customers. Find out the answers to these two questions:
• What’s important to you? (Quality, customer service, etc.)
• How are we doing in those areas?

Develop relationships with your customers. Find ways to stand out from your competitors and to become the supplier of choice.

6. I will make smart use of technology to improve my business. Technology has become so affordable and easy to use that no business has an excuse for not going high tech. Even the smallest home-based business can afford to level the playing field with larger competitors.

7. We will think like a growth company and will not participate in the poor economy. Get everyone in your company – starting with you and including all your employees – on this bandwagon. Think and talk about growth, pushing through challenges and achieving goals.

Be winners. Build on your successes and learn from your mistakes. Implement all these business practices, and go into the new year with the attitude that this will be your best year yet.