What Sets Business Owners Apart

What’s the difference between being a manager and being a business owner? Let me use a sports analogy. I recently read the following about new NFL coaches (as it’s that time of year where there’s job turnover).

“If there’s one thing I’ve heard from new head coaches, it’s dealing with all the things he’s not anticipating, and still devoting the proper time to the things he was.”

In other words, there’s a lot more responsibility. You don’t have just your silo of duties, you have everybody’s silos. It’s like the owner who told me he came to realize while he didn’t have to know how to do everything in the business, but he had to know what needed to be done, who needed to do it, when it was to be completed, and what it looked like when done (correctly).

And then there’s the unanticipated. I learned many years ago, the hard way, you can’t budget the whole day because something will sneak in the side door and disrupt your schedule. It could be a client situation, a great new prospective client, a negotiation item, etc. But something will disrupt your day and the tighter your schedule the increased odds this will happen.

Similar is scheduling meetings too close together. Especially in today’s world of smartphones, giving yourself enough time between meetings is smart. Because the tighter our schedule the more likely Murphy’s Law appears by having the first person we’re meeting show up late.

Coaches strive to become a head coach; many executives strive to be owners. It’s often more work but with higher rewards, financially and emotionally.

“Success is relative: It is what we can make of the mess we have made of things.” T.S. Elliott

The Five Types – Buyers, Owners, Employees

I’ve been in my industry for about 25 years. I’ve seen a lot of business owners, business buyers, wannabes, employees; meaning people of all types. I’ve concluded there are five types, whether they’re business buyers, owners/sellers, or employees. When it comes to buyers this analysis is after I determine if the person is an offensive or defensive buyer. Defensive buyers rarely do a deal. They’re too worried about any and everything including the economy, the industry, the debt, the weather, and especially (although they won’t admit it) their own abilities.

All of these types have beneficial traits, and some have more detriments than the others. It depends on the person and their objective. And, it depends on the life phase the person is in at the time.

Driven by money– everybody is driven, to some extent, by money. Even the homeless, which is why there’s so much crime near homeless encampments.

The business buyer in this category probably has significant assets but wants more. He’s worried he won’t have enough in 20, 30,40 years. He wonders if the company he buys can scale from $1 million in earnings to $5 million and how fast it can be done.

When this is a business owner/seller, employees and buyers need to be careful. This is the person who tilts the pension plan to 90% to owner and 10% to the few dozen employees. She pays as low a wage as possible, provides skimpy or no benefits, and is extremely aggressive as she blends her personal and business checkbooks (deducts personal expenses on the business’ tax return thus cheating the IRS).

Employees in this category are often in sales. Sell more, make more. Others climb the corporate ladder just for the pay. Seventy-hour weeks, no problem because they’re making more than their friends.

Driven by accomplishment– Offering a broad-based opinion, these people make great buyers, sellers and employees. They want a great income but it’s not the top (or only) motivating thing.

The success driven buyer wants to grow and expand, create jobs, innovate, and feel good about what they’re doing. They’re the owners (I know many like this) who will say something like, “Our earnings are $2 million a year but I still take only $20,000 a month in salary and reinvest the rest in the business.” He’s focused on the end game.

Owners like this are often most concerned with legacy. When selling, it’s take care of my employees, do good by my customers, etc. because I want to take my grandkids here in 10 years and see how well you’re doing.

Success driven employees are what you want. While looking for career growth, they want to be part of a successful team and see the results of their work. Many become owners later in life.

Life Balance– here we can lump all three categories together. They want to work a normal work week, be productive, earn a good living and still have time for family, hobbies, non-profit work, etc. These people don’t accumulate vacations because they want to work more. Owners in this phase are often “coasting,” working hard enough to make their great living but not wanting to grow too much.

Lifestyle– This is where it gets interesting because what on the surface seems like a great thing, it’s something that drives buyers nuts.

The buyers not driven nuts by this are ones often featured in articles about franchises, main street (mom & pop) stores, etc. They want something they’re passionate about, with reasonable income. But most buyers are in the above three categories not this one.

Here’s what I mean, via the combination of a few real-life examples. The owner said they work from 8-4, make enough money to get by, get done what they get done, and there’s always tomorrow. No urgency, no emphasis on the customer, and surely no career path for the employees. And, not much value to a buyer who will figure they’ll lose the employees when they come in and want to grow the business.

Employees in companies like this tend to be ones with bumper stickers like, “A bad day fishing is better than a good day at work.” It’s a means to an end to them. In a book I’m reading, “Invisible Influence” by Jonah Berger, he says it’s tough for those who want to be successful to relate to these people as there’s not much commonality.

Hate the boss– some people just hate authority, no matter who it is. My thoughts are when these people get so sick of working for someone else, they buy or start something that’s a job and nothing more. Route sales fall into this category as does anything else where the job is task driven and there are no employees, because they probably (would) hate employees as much as they hate a boss.

Employees like this can’t wait to leave (every day, especially Friday, and eventually for good). They’re the bad apples that make the culture rotten and if they ever inherit some money they’re probably gone, into some business described in the preceding paragraph.

Conclusion

In my day-to-day goings on I see, and want to see, mostly success driven and life balance people. I see quite a few money driven folks, nothing wrong with them especially if they also take care of their team, and if I was in the private equity world I’d see a lot more of them. The lifestyle owners and buyers don’t cross my radar and I stay away from the last type.

Think of your clients, your employees, your customers, and others. I’ll bet you’ll find you have a lot of them with the same traits you have.

Technology is Changing Unexpected jobs

Can you think of many industries not affected by technology?

You might think construction as people still pound nails, drive screws, lay flooring, etc. But plans are now downloaded, iPads are prevalent on job sites, communication is by text, etc. Cars are nothing but a computer on wheels. Kitchens have become high-tech with Wi-Fi appliances, Amazon Echo or Google Home devices providing recipes, being a timer, and more.

I mention this because of a Wall Street Journal article from last year titled, “Technology Spells End Of Roughneck Boom.” It seems automation and artificial intelligence are replacing high-paying blue-collar jobs in the oil drilling industry. One expert said jobs like measuring well conditions thousands of feet underground could decline by 25%. Also, efficiency is improved, inspectors now get their efficiency-driven schedules determined by a computer algorithm, they use augmented reality glasses that send real-time feeds to the office, and get back data via those glasses showing him how to perform complicated tasks.

This improved efficiency reminds me of one of my favorite stories. Bill bought a company that, in simple terms, sold blocks of service time. A good analogy is a hotel; if they don’t rent the room today, they can’t rent it twice tomorrow. The company’s website was a brochure and within a couple months he converted it to an ordering system, almost eliminating phone calls and phone tag. The good news is he didn’t get rid of the employees he had them do productive marketing work to grow the business.

We’re going through something similar. We just upgraded to Salesforce. We’ll use 10% of its capability but if it does the one primary thing we want it to do it will more than pay for itself in saved time – and everything else will be a bonus.

Like most things, there are good and not-so-good implications from new technology, new processes, or anything else. It’s using the good changes to overcome bad changes that makes a difference.

“Perfection is like chasing the horizon. Keep moving.” (Author) Neil Gaiman

It’s what you don’t know that can hurt you

On our recent Rotary service project in Antigua one of the adults with us is a dedicated vegan, which is fine, and it’s because of a combination of allergies and health concerns.

I say dedicated because at one meal he found a little cheese in his salad and had a meltdown, dumping his whole plate of food. The next night pasta was on the menu and after we were done eating, I asked him why he eats pasta. He looked puzzled so I said it’s because most pasta has eggs in it.

His look was priceless, and he avoided pasta the rest of the trip.

We often make assumptions about things, including our customers, our products or services, what the customer wants, what’s important to employees, etc. when we should be asking questions. All my vegan friend had to do was read a pasta package label. We need to ask customers and prospective customers, what’s the objective? Or ask, why? (or why not?) they made certain choices.

When “Word of Mouth” Isn’t Enough

I’m talking to an owner who’s pretty darn proud of the fact he doesn’t do any marketing or have any sales effort because it’s all “word of mouth.” He tells me this knowing I know his friend (with the same type of business) in a noticeably smaller market that has two to three times the revenue he has.

My first thought was, maybe if you did some marketing, you’d be making more money, and more importantly, have a more valuable business. By his own admission, this owner spends a good amount of time working “In” the business. He’s working well under his pay grade when he does this and probably works more hours than he would if he grew the business.

Word of mouth is great, especially for businesses like mine where referrals are the platinum standard. But those referrals only come as the result of marketing. But for a more traditional B2B or B2C firm (like this one that sells to businesses, government, and consumers) there needs to be marketing plus some sales effort.

A salesperson should be calling on the businesses and government buyers letting them know about new offerings, building the relationship, etc. As consumers, what’s the first thing we do when we need a new product or service? Right, we Google it. Some SEO or AdWords is sure worth a try.

Marketing is what creates customers, which creates buzz, which leads to the word of mouth phenomenon, and even more customers.

“I don’t always follow my own advice.” Edith Wharton

Getting Culture Right

In November I had the pleasure of attending the all-staff dinner as part of the Farallon Consulting retreat (Farallon is an environmental consulting firm on whose board I serve). It was an exhibition of culture at its best.

While I only heard reports about the day’s activities (and happy hour) I witnessed a group of people on the same page. While there’s an endless supply of “bad” stories about managers, culture, etc. a good way to start the new year is to consider what a good culture means, whether you have a few employees, dozens, scores, or hundreds.

  • Realize even companies with the best culture still have issues, but those issues are at the other end of the spectrum from the shenanigans on The Office. It’s simply because people are people.
  • A good culture means better collaboration to achieve goals, whether it’s increased revenues, better productivity, reduced costs, or anything else. When employees work well together the boss (business owner in small companies) spends less time refereeing and more time strategizing.
  • When employees enjoy their work environment they want to work there, will do extra, will not be job switching and that means higher employee retention. Given the costs of replacing someone, this is huge.

There are a lot of people who help companies improve their culture, and it’s worth it (when done correctly). This month is a good time to assess your culture and do what it takes to improve it.

“Every day on Earth is another chance to get it right.” Steve Earle

We recently went through another election cycle, or should I say, a continuous election cycle. The recounts are over and now it’s time for good, old-fashioned political arguing.

The results are interpreted based on one’s perspective. A Democratic leaning business writer wrote how the Democrats picked up seats in the House in spite of the gerrymandering issue. The Wall Street Journal editorialized that the gerrymandering issue isn’t real because the Democrats picked up seats.

The Democrats are glad because with one chamber of Congress under their control they can influence some legislation. The Republicans are glad because the Democrats don’t have both chambers and therefore can’t revise recent legislation.

What about in your business? Isn’t is also all about perspective?

  • The owner worries about cash flow and the employees wonder about bonuses and raises. The same amount of money is coming in and there are different perspectives about where it should go as it goes out.
  • Is the economy at a peak? A lot of people think it is. Some business sellers want to base the valuation on the last 12 months. Buyers and now banks want to look at multi-year averages.
  • With the economy where it, is and to use a sports analogy, do you play to win or play not to lose? In other words, do you take aggressive but smart moves to grow or hunker down waiting for an economic correction, which may be soon or in many years. FYI, in my opinion, in sports, teams who play not to lose usually lose.

Tough decisions all and our individual perspectives are what influences us.

“I don’t think we all have to take the same coordinates to reach the same destination.” (Singer) Janelle Monàe

Dead or Playing Possum?

In honor of Black Friday and Cyber Monday, and other big shopping days, here’s an opinion on the retail industry, trends, and sticking with it.

“What goes around comes around” is an old saying meaning things eventually return to their original value after some sort of cycle (and it’s a hit song by Justin Timberlake).

How long ago was it when every pundit and everybody you spoke with was saying “retail is dead?” Other comments included the Internet passed retailers by, the cost of stores is too high, people don’t want to shop, they want to get a package at their door, etc.

Guess what? A Wall Street Journal headline was, “Retail Stocks Roar Back On Consumer Strength.” The S&P Retail exchange-traded fund was up 16% this year at the time of the article and many major retailer stocks were up 30-50% this year (and are bouncing around like all other stocks). On September 4 The Seattle Times had a business section headline of, “Retail trends drawing shoppers into stores.”

Retailers seem be figuring it out. They took a hit, regrouped, found where they can shine, and appear to be doing so. Some of their tactics are new and some are the same as before including racks of clothes, fitting rooms, private brands, personal assistance (think Nordstrom not Walmart), etc.

Think about this in regard to your business. You can jump onboard with the latest greatest software, marketing program, manufacturing scheme, etc. but I’ll bet there are things you do the same way as before (or come back to them), because they work.

I recently spoke with the owner of a company that bids on jobs. I asked if they used any industry software or ERP system to bid. The answer was no, they use Excel and Access, because it works for them (to me working means the bids are right and they make money on their jobs). I’m not sure how time-efficient it is, but it works.

I remember from a past business life an industry leader talking about a marketing program and saying something like, it worked so well for so long we decided to do something different. If it works, keep doing it, but always look for ways to do it better.

“There seems to be some perverse human characteristic that likes to make easy things seem difficult.” Warren Buffett