1. Open your eyes to the big picture! Prepare for your next life!
Failing to start with the end in mind is one of the most common errors of business – when we ask a “start-up’ business “so how and when will you exit the business?” we get some very strange looks!

But, a clear vision of the exit pathway helps shape the business model, gets the processes documented, guides your staff selection, and ensures the company identity is separate from your personal identity. For example, it is much harder to sell a business that is your name – Fred’s Heating Ltd is YOU! And you certainly don’t want to have to change the name just before the sale and lose the goodwill you’ve built up over years – devaluing the business in the process!

Starting with the end in mind makes sure you delegate, groom your second line of management, and build an “automated business” that can run without you. If it can’t run without you – sorry, but you haven’t actually got a “business”, you’ve got a very intense job!

In many cases, you’ll work in the business for a while to ease the transition to a new owner, and you’ll need to prepare for that change in role. Handover periods are often cut short because the old owner just can’t “let go” to the new owner. Work out the handover plan in advance – have a month by month schedule set out, (you’ll just need to add the dates when the deal goes through).

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!

2. Good managers set good boundaries!
A great number of IRHACE member owners and managers have come off the tools and into business ownership without stopping to change hats from employee to employer!

The result is often blurred or non-existent boundaries, poor staff performance and in the worst cases personal grievance payouts.

Learning to set clear boundaries with staff is essential – be consistent, clear, and fair.
Don’t play “favourites and scapegoats” no matter how tempting it is. Don’t gripe about any staff member to other employees. 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!

Lead by example – if your staff see you making free and easy with the company’s stock and assets, they will too!

Ensure there are consequences for poor behaviour or performance – don’t just let it ride. The other staff are watching! And taking note!

There also must 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.

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!

3. 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. Use the interview checklist you’ve developed from 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!

4. 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.
• Maximise the inflow into the funnel: keep testing your market pricing – small, regular price increases are much less noticeable than a big jump every two years! Use bundling strategies, add services to products, bundle products together, add related services or products. Don’t undersell yourself, and remember price is NOT a sustainable competitive advantage in most cases – you’ve only got it till someone undercuts you.

• Fine tune your production systems to reduce waste and rework. Many businesses don’t have reliable measures for rework, and don’t track it at all. Doing a job or service twice is a huge drain on profit and cash – fix once, fix right. Track scrap and waste – a restaurant we worked with reduced food costs by nearly 10% by reducing waste: partly by careful menu design, but also by the simple expedient of weighing 3 bins of waste- prep waste, cooking waste and food returns. Simply the fact that it was being measured reduced the amount of waste dramatically within 1 month! What will you track for HVAC?

• 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!

• Do a line by line review of all overheads – get a broker in to review your insurances, consider moving to Voice over Internet for your toll calls, check alternative power suppliers, look at high efficiency lighting, ensure power is off when not needed, recycle rain water for general cleaning duties etc. Discuss with key staff – every item, one at a time!

• Rather than paying tip fees for some waste – can you use people like “waste exchange” (http://www.nothrow.co.nz/) for you off cuts, packaging and waste material?

• And once you’ve done all that – fine tuned the system – then look for more clients to tip more money into your funnel!

A simple guideline – working on typical HVAC business profitability in NZ, for every 1% you add to price or turnover, and for every 1% you save on waste, materials or overheads, you earn 20% more NET PROFIT after Tax. Small Changes produce Big Results!