Start at the end!

Starting at the end might seem counter intuitive at first glance but knowing where you want to go is actually the first step on any journey. Where do you want to go? Failing to do this is one of the most common errors made by new start-ups. When we ask, “so how and when will you exit the business?” we get some very strange looks!

A clear view of the exit helps shape the business model. It gets the policies and processes lined up toward a common goal, it guides your staff selection, and ensures the company identity can be separated from your personal identity. It’s okay to live and breathe it but it does not have to be indelibly tattooed across your forehead. There is life after and outside your business. Having a successful business that is identifiable in its own right makes it a far better transferable unit for yourself and a potential buyer as well.

Starting with the end means your decision making can also be more outward focussed, you can concentrate on building the entity rather than yourself. Selecting the right people to run the business, rather than just as a support for yourself also ensures that the business is more automated and not totally reliant on your input for its survival. Wouldn’t it be great if you could go away for a month and not have to worry about it?

Businesses that are “turn key” are far more attractive to potential new owners. If it is clear that the business is you, a potential purchaser is going to look at a purchase much less favourably as when you walk out the door much of the business does too. Alternatively, if the business can be seen to be managed by a group of qualified and capable people that are staying on greater reliance can be placed on it to continue to perform when you leave.

Working with the “end game” in mind you will have tidy and up to date shareholders agreements, simple and up to date accounts, and a robust marketing plan for the future. You have identified the next products and services to develop, and you will have an outline plan for how that will happen. All your agency and distributor agreements are up to date and fully transferable!

In short – starting with the end in mind gives you the best possible capital return, and along the way improves profitability and ease of management, making YOU much happier!

Good managers set good boundaries!

A great number of owners and managers have come off the tools and into business ownership without stopping to change hats from employee to employer! They try to do everything for everyone with the end result that things are done haphazardly and not on time. This problem only gets worse as the business grows with the end result being very frazzled, unhappy senior staff and in the worst cases personal grievance pay-outs.

Learning to set clear boundaries with staff is essential – be consistent, clear, and fair.
Don’t play “favourites” no matter how tempting it is. Be clear in your expectations of high performance and use a simple but robust performance appraisal system that is objective, regularly applied, and religiously followed up!

Leadership starts at the top and by example – you set the tone, if your staff see you making free and easy with the company’s stock and assets, they will too!

KPI’s that are applicable to all staff that are fact based and measurable are crucial. Ensure there are consequences for poor behaviour or performance – don’t just let it ride. The other staff are watching! And taking note!

There should be “consequences” for good performance – we’d always recommend non-cash rewards, but do make sure you give a genuine acknowledgement of good work. Suggestions could include movie passes, dinner vouchers, mystery weekends, long weekend bonus leave, whatever works in your business and industry. Keep changing it up as doing the same thing over and over becomes expected and stale. Talk to your staff and ask them. It’s always quite interesting getting them on board particularly in a healthy competitive environment.

Good fences make good neighbours, and good boundaries make for happy, productive workplaces! Don’t trespass over those boundaries and don’t let your staff trespass either, and you’ll be a lot happier!

Always remember “perception is everything”! Your peoples’ view of you and your business relationships may not be accurate, but that perception is what you’ve got to work with. Don’t just be fair, prudent and careful with boundaries and relationships – be seen to be fair prudent and careful – very visibly!

Employ in Haste, Repent at Leisure

Is there a death-wish amongst SME owners – they will keep hiring the wrong people!
Why? Mainly because recruiting is not what business owners enjoy doing – but recruitment companies are often seen by owners as too expensive or not reliable enough.

So here are 10 steps to take the worry out of recruitment:
• Use the opportunity of a vacancy to review your organisation chart – take the time to review roles, and work out exactly what roles you need to fill – and will other roles need adjusting to suit?

  • Draft up a Job Description to match the role – and not just a task list –show what results are expected from each activity – make it performance based. From the job description make up an interview checklist – and prioritise it for the most important factors.
  • Either advertise or put with an agent – if you’ve got a good brief – you’ll get better candidates and better service from an agent. If advertising yourself – use electronic media – Seek and Trademe etc, and be really, really specific in what you want. You’ll cut down the timewasters and tyre kickers. If using an agency, ask for very good reference checks prior to interviews.
  • Screen the applicants carefully – I tend to do a couple of reference checks before the interview. No point wasting time interviewing someone with a skeleton in the cupboard. Make up a shortlist of the most likely candidates for an interview. If there are no likely candidates – re-advertise. Never accept second best.
  • Never interview alone – always have at least an observer. Develop an interview checklist based on the Job Description, and you’ll be able to stay objective, and on focus.
  • For key roles – sales, customer service, supervisory or management, consider using behavioural profiling tools such as Extended DISC or any of the many others out there. It will help in deciding between two equal candidates.
  • Use a comprehensive Job Application Form with full history, and the usual medical questions etc. Your friendly Trade Association will have samples for you to download.
  • Always, always do final reference checks after the interview, to clarify any weak points or questions you may have. Use a standard reference check form to record the replies, and always listen “between the lines” to what’s NOT being said. DO NOT miss this stage out!
  • Make sure all the paperwork, job offer, employment agreement and any special terms (especially trial or probation periods) are agreed, in writing, before employment starts.
  • Carry out a proper induction, brief them thoroughly, and then monitor performance formally at least monthly for the first 3 months, give feedback, ask for feedback, and set targets for learning and improvements.

If you follow the process – you’ll not regret it later!

Look after your cash and your cash will look after you!

There’s an old saying “cash is king” and there’s a lot of truth in that. Many a profitable, growing business has been scuppered by running out of cash! The best way to think of cash flowing through a business is in the form of a large funnel – your customers pour their cash into the top, and on the way down there are many paths for the cash to escape, and what comes out the bottom is yours.
Many leaks are essential: staff, rent, power, materials, tax, vehicles and all other normal business items.
There are also a lot of hidden leaks! Manage the flow, and more will drop out the bottom of the funnel for you!

So here are a few pointers to managing that precious life fluid.
• Keep the funnel wide: don’t sit on one price – small, regular price increases are much less noticeable and acceptable than a big jump every five years! Explore new or different products and look for new ways you can help your customers. Upsell and use bundling strategies, add services to products, bundle products together. Don’t undersell yourself, and remember price is NOT a sustainable competitive advantage by itself in most cases – you’ve only got it until someone undercuts you or provides a better service.

  • Fine tune your production systems to reduce waste and rework. Many businesses don’t have reliable measures for rework, and don’t track it. Either because they haven’t thought of it or they don’t have a system in place that does. Doing a job or service twice is a huge drain on profit and cash – do it once, do it right. Track scrap and waste and make staff personally accountable– a engineering shop I worked with had a significant amount of rework occurring. Getting the guys to discretely initial each piece gave them a sense of pride but also helped identify who was making the stuff ups if the job came back.
  • Ask your suppliers what they can do to reduce your materials costs – what deals are available, what credit terms, prompt payment discounts etc. Every single % point helps!
  • Ask your customers what you can do to reduce their costs – what deals can we provide, what credit terms, prompt payment discounts etc. Every single % point helps them too and the benefit is a far better business relationship!
  • Do a line by line review of all overheads – it pays to review your overhead suppliers on a regular basis as it is common for complacency to set in over time. Is your banker providing the best terms and are your insurances still giving you the cover you require at the best rate, review your telecommunications, many providers are offering good deals on bundles, check alternative power suppliers, look at high efficiency lighting and turn off appliances and computers when not needed, recycle rain water for general cleaning duties etc. Discuss with key staff – every item, one at a time! The added bonus is that we can be environmentally friendly at the same time.

Andrew Ross
ABL Advisor 2018