Work ON Your Business

Unless you’ve just been released from a long incarceration in a Turkish prison, you know that the concept of working on your business – rather than in it – was popularized by Michael Gerber in his mega-hit book, “The E-Myth Revisited.”

Gerber made many great points (which explains the “mega-hit” part), but the on/in distinction is the big take-away for most readers.

Here’s an excerpt:

“Go to work on your business rather than in it, and ask yourself the following questions:

  • How can I get my business to work, but without me?
  • How can I get my people to work, but without my constant interference?
  • How can I spend my time doing the work I love to do rather than the work I have to do?”

So, what does it mean to work ON your business?

Well, one of Gerber’s main themes is the idea of systems. Systemize everything. Manage systems, not people.

It’s terrific advice, of course, but many small business owners still struggle, even after reading E-Myth. What’s a system? What systems are needed? Where do you start?

My answer: Anything can be a system. A system is simply a way to avoid NOT making things up as you go along.

  • Instead of plucking interview questions out of thin air, create a hiring system.
  • Leaving the coffee pot on overnight, or forgetting to set the alarm? Create a “last person out the door” system.

Here’s a system I’ve used for years in my own businesses:  “Never, ever ask for computer help until you’ve restarted it. Period.”

Simple? Yep. Like I said, anything can be a system. Not all systems are this simple, but you get the idea.

Beyond creating and installing systems, how else can you work on your business?

Perhaps more to the point, how can you find the time to work on your business when you’re consumed by it all day, every day?

Here’s a way to let the ideas and time find you: Constantly be in “improvement opportunity mode.” Every time an error or crisis occurs, stop. Avoid the temptation to put out the fire and get back to work. Analyze what just happened. Was it human error, or could a system – even a simple one – prevent future recurrence? If so, create it right then and there. In many cases, you can do this sort of “post-mortem” work in a matter of minutes.

Planning is a great way to work on your business. As an early riser, my favorite planning time is early Sunday mornings, before my wife gets up. And business trips can turn into mini planning retreats … if you keep the TV turned off in your room.

I know a business owner who tells me he likes thinking about his business while on his riding mower. Some folks really embrace this concept by taking their teams on annual out-of-town planning retreats.

Exactly what you do is less important than developing the habit. Start working ON your business today.

“Do it. Do it now!”  – Arnold Schwarzenegger

No Sweat Compensation Planning

You’re sitting in your office, and like most business owners, you’re up to your elbows in a variety of challenges and opportunities. Suddenly, one of your employees appears at your door and asks the dreaded question, “Since my anniversary date was two weeks ago, am I due for a review and a raise?”

You buy some time by telling the employee you plan to work on it within the next few days. But you can’t help feeling guilty. First, you just lied because until you were reminded, you had no idea that the review was due and had no intention of addressing it. Second, you feel a sense of guilt because your lack of a systemized approach to reviews and raises repeatedly ruins your schedule.

As if this wasn’t enough, the next interruption is your accountant who brings the news that salary expense is way over budget, ending with, “Oh, and by the way, we just got our health insurance renewal. It’s going up 22% next year.”

Most small business owners operate in exactly this fashion. The employee anniversary date, by default, creates the expectation of a raise. (Reviews are generally dreaded by all involved, but as part and parcel of an annual raise, they go along for the ride.) Health insurance and other compensation-related expense increases take us by surprise. We’re supposed to be in charge of our companies, but we’re at the mercy of employees, vendors, and arbitrary schedules.

It doesn’t have to be this way.

How about a system that lets you take charge of schedules, accurately budget for increases in salaries and benefits (and actually stay within that budget), and eliminates the constant stream of mid-year raises?

Sound too good to be true? Read on.

First, who says that an employee’s anniversary date has to trigger a review or a raise? I suggest you do two things:

  1. Perform all the performance reviews in your company within a 2-3 month timeframe, near the end of your fiscal year.
  2. Schedule all pay raises to kick in at the same time – the beginning of the new fiscal year.

What does this do for you? For one thing, it eliminates the constant stream of interruptions and unplanned, hastily-prepared reviews (which hopefully equates to better, more thoughtful reviews.) It also gives you the structure to proactively look at your entire team and corresponding salary expense at one time, and to take the time to budget this expense for the new year.

Yes, it can be a lot of work. Yes, it requires plenty of discipline and organization. But in my mind, the benefits outweighs the costs. You’ve got to do this work anyway, right?

Here’s another change to consider: Try to move your health insurance and other benefit renewals to coincide with the start of your fiscal year. Then, by the time you’re doing your annual planning and budgeting for the new year, you’ve got your renewal quote in hand – ready to be plugged into your budget.

Finally, here’s the biggie: Lump ALL of your compensation-related expenses and focus on that number, and not just on the salary expense. Aim to keep this number growing more slowly than revenue. Better yet, manage to keep it growing more slowly than your gross profit. After all, that’s the number that pays all your overhead expenses.

So, if in the past you tried to have an average annual salary increase of 4%, consider having an annual total compensation expense increase of 4%.

This way of thinking requires some trade-offs. If health insurance is going up a bunch, it may eat up some of the funds that would otherwise be available for raises.

This approach also requires you to have some frank discussions and some educational sessions with your employees. Most are probably unaware that you pay FICA, Medicare and unemployment taxes. They may not know about your cost for their health insurance, worker compensation insurance and other benefits. One way to drive home the total cost to the company is to prepare a year-end summary for each employee, detailing each compensation-related expense.

Eliminate the chaos and take control. Spend some quality time once a year doing this admittedly hard work, and the rest of the year you can focus on growing your business.