Are you hoping for success or planning to succeed?
What every business owner should be asking about their company and themselves…
Perhaps you own your company and it’s a one-person show – you. The hours are long and you are usually working nights and weekends. You only make what you can produce. There is no money generated if you are injured or take time off.
So, you decide to grow into a business by adding another crew or two because you’re “busy.” This means more trucks, more overhead, etc., but what was supposed to be easier and more profitable just became an operational and financial nightmare. Your cash flow is more out than in. You try working harder and more hours, but you become increasingly more miserable. Before long you retreat back into a one-truck company.
The good news is that you can avoid this scenario with some strategy and implementation. You can have positive cash flow and more free time. But it starts with a clear picture of who you are, why you are in the business, where you are going, and how you are going to get there. By implementing a strategic plan and focusing on obtaining your goals, you can generate the wealth you need to meet current goals and prepare for the future… a much brighter future.
Let’s look at some of the questions you should be asking to plan for – and achieve – your success.
Which way is your way?
The first and most important thing to keep in mind is “the right way, is the way that is right for you.” You determine your company’s culture and ultimately its direction based on your values, strengths, weaknesses, risk acceptance levels, communication and management styles.
It all starts with knowing who you are as a person, setting goals, having a strategy to reach your goals and implementing your strategy. This will help you anticipate challenges and navigate around foreseeable challenges in the market and economy. Think of it as your GPS that can identify trouble down the road.
The following are a few topics that we discuss with our clients in the start-up or transformation stage of their business. If you have been in business for a while, answer the questions according to how you would like your business to be and compare those answers to where you are currently in your personal and business life.
What is most important to me?
Money. Quality. Personal time. Status. Respect. Being the boss, etc. We have had clients who initially tell us “I want to be big and make money,” but they aren’t willing to invest their productive time, money and/or energy into it. Other times they say they want to be the best, but they won’t invest in the best training and tools. The truth is, nothing comes without giving up something else in your life. What are you willing to invest?
What type of customers do I want to service?
This usually dictates the type of person you hire and the quality of work you will deliver. It’s an important question to ask, so give it some thought.
- A higher-end customer will typically expect quality results delivered by professional people driving nice, dent free, clean vehicles. In our experience, wealthy people are used to buying larger dollar items so the amount doesn’t scare them. But they expect the results and the person who performs the work to match the price.
- Middle-income people appreciate the value of a dollar and usually realize you get what you pay for. These are customers who are limited in their ability to spend freely on non-essential projects. They can be great customers but have limited buying power.
- Commercial projects are usually larger in scope. Therefore, quality isn’t as much of an issue as the price and they often call last minute or put stringent time deadlines on a project. These are good clients for larger companies who can carry the receivable and have capable talent level on staff. These are not typically good customers for a craftsman who wants to take their time, deliver high-quality results, get paid accordingly and be appreciated for their work.
What type of person do I want to work with and have work for me?
Sometimes you just need a person to prep, carry and generally complete non-technical tasks. This type of employee is good for commercial contractors or larger companies who have people with above average skill levels to perform technical applications.
Hiring someone with a great attitude is perfect for companies that have training programs or skilled technicians with good communication skills to help teach and mentor new people. People with ambition, but limited knowledge who are hired and not properly trained will often get frustrated and quit.
Skilled craftsmen usually like to work alone and on challenging projects. Craftsmen are good for high-end clients who are willing to pay for results. Craftsmen usually get frustrated with tight financial budgets, time-sensitive projects or projects where their work is not appreciated. They are often not good at building teams or taking directions. They typically have difficulty growing businesses bigger than the work they can perform themselves.
What is the ultimate goal for the business?
- Do I want to eventually sell it? And if so, when? People buy systems, assets and sometimes a company to eliminate a competitor. They usually do not buy a company if it is a one or two-person show with nothing to offer but themselves.
- Do I want to pass it on to my family? A lot of people want to create a legacy they can pass onto their children. The problem arises when the children do not want or are not capable of running the company. The other issue is getting paid for the company when the family member takes over the ownership. If this is your plan, make sure you have open and honest communication with all the family members involved regarding the time frame, the cost to purchase the company and if the parent will stay involved and to what capacity. Communication and honesty is monumentally important in these situations.
- Do I want to keep it smaller and easy to run without worrying about selling or passing it on? If this is the plan, make sure you are diligent in your financial planning for retirement. If you have nothing to sell, you have nothing to gain. This can be a dangerous path if an unexpected sickness or injury occurs. Supplemental insurance policies are incredibly important.
Would I be willing to take on a partner to grow?
This usually means giving up some control but hopefully gaining strengths you may not have. It is often a great choice for somebody who has a vision and a strategy and realizes they can’t do it all. A partner allows you to have somebody who should be as invested as you with complementary skill sets. If you are going to form a partnership, be sure to build the agreement with the worst-case scenario in mind. Just because you are friends now, doesn’t mean you will be great work partners. Communication is critical. If you are not a good communicator, get outside help. Do NOT go into a partnership lightly.
Would I be willing to personally borrow funds to grow the business?
Traditional funding is getting harder to obtain and more financial lending institutions are requiring personal guarantees for all loans. If you are going to grow your business with financing make sure your cash flow, not just your income statement, can afford the payments.
Would I be willing to invest in the future of the company, even if I don’t see immediate returns? Do you have the financial means or fortitude to keep making loan payments or not making much money for future success? Many companies will borrow or invest personal money into the business, but get nervous and bail when things get tough. This is where knowing your risk tolerance and having a strategic plan comes into play. If you know where you are going and how you are going to get there, rough seas aren’t that scary.
Would I be willing to work long hours to keep it going or help it grow?
As noted before, nothing comes without giving up something else. It could be time, money, ethics, etc. This can be especially hard on the family if a spouse or other parent feels alone or is expected to take care of all the personal matters. Communication with everyone directly or indirectly involved with the business is crucial to ensure your personal life doesn’t suffer. I have met very few people that can separate personal and business. It seems when one suffers, the other does too.
Do I want to manage the day to day business?
Oftentimes the best person to lead a company isn’t the owner. Many times we have had to tell an owner if this is where you want to go, you are not the person to command the boat. It isn’t an insult to the owner, it is the truth of helping them reach their goals. An example is somebody who wants to build a large company but has a craftsman mentality. Oftentimes they have to be on the job to ensure quality that matches theirs. That severely limits growth potential. In such cases, they have a job and not a business.
Do I know my S.W.O.T.?
Perform an honest, periodic S.W.O.T. analysis for your business and yourself – what are your strengths, weaknesses, opportunities, and threats, both for your business and your personal life? Add a financial S.W.O.T. based on your income statement, balance sheet and especially your cash flow. Look around at your competitors and your opportunities. This is especially true with small service companies where the owner thinks they are the best and nobody can do it like them. Spoiler alert, there are people just as good or better than that owner at their trade and running their business. Take the time to assess your competition and opportunities and build a roadmap to success based on being aware of your S.W.O.T.
Do I have a strategic plan to obtain my goals?
This is the big question. It is the GPS to success. If you do not have goals, a strategic plan, and an implementation program, you are simply hoping for success.
You should think hard about your risk acceptance before you decide to grow. Every business comes with risk and you must decide if are you willing to accept the risks (financial and personal) that come with operating a business? You are either risk-tolerant or risk-averse by your very nature. Understanding this greatly determines how you will grow your company. The risks grow as your company grows, but so does the opportunity for rewards.
These are just a few of the items we go through with our clients when we start working with them. It is amazing when you start answering these questions honestly how your view of your business, and yourself, becomes clear. This usually helps validate whether you are on the right path or need to reevaluate your current situation.
Not sure where to begin?
Learn more about yourself with a six minute questionnaire? To begin your strategic roadmap, take this free Personal Assessment. It will help you understand who you are and your qualities that will lead you to your success.
Dean McArthur CPA, SHRM-SCP is a strategic transformation coach who has started, consulted, bought and/or sold hundreds of businesses over the last 30 years. He is also a Certified Public Accountant, Senior Certified Professional in Human Resource and a Certified Talent Optimization expert. He can be reached at email@example.com or via linkedin at Dean McArthur.