Building a Business – When it starts to Suck

Why are you building a business?

Why are you doing this?

I know, you’ve heard this before but I’m going to take it to another level.

I don’t mean that you need to know why you’re building a business. Your why needs to be written down somewhere. The vision you have for your business needs to be so detailed, so defined, that when other people read it there is no doubt in their minds that they understand what you want out of building a business.

Do you have your Driving Vision for your business written down and in a place where you can put your hands on it in less than 30 seconds?

Having a Driving Vision is so important that I won’t take on a coaching client until they have written down what they want from their business and given me a copy.

Because building a business is so challenging you need something that will point you back to ‘True North’ when you get frustrated. A Driving Vision serves as a reminder of all the things you’re looking to accomplish and how.

When your Driving Vision is written down it makes it so much easier to get what you want from your team.

And it starts in the interview process. When you’re looking to hire motivated talent there are very few tools as influential as being able to email that potential employee a copy of your Driving Vision before you meet them face to face.

Think about it. If you were an employee, would you rather work for someone who knew where they were going, why they were going there, and exactly how they were going to get there, or would you rather have a job and mark time?

The best talent wants to work for someone who knows what they want and who isn’t afraid to put it in writing.

Leadership – You’re stuck as a Manager/Doer

In order to build a business, to really scale it, everyone who’s working for you has to know exactly what they’re supposed to be doing and what your expectations are for getting it done.

If you feel like you have to do everything yourself then you have one of two problems, or maybe both.

Either you haven’t created clear and specific job descriptions that explain the ‘what’ and the ‘how’ for each role in your business, or you haven’t hired the right people.

If you’ve never created a written job description for your business and you’re frustrated with what/how your team is doing then now is the time to sit down and get this done.

Here’s one important rule to follow when you’re doing this. Limit the number of primary responsibilities a person can have in your business.

Ideally, a person should have between 5 and 8 primary responsibilities in their job. If they have fewer than 5 then they don’t have enough to do, or the role is simpler and lower paying than most roles in your business. There shouldn’t be very many of these sorts of jobs in any business.

If an employee has more than 8 primary responsibilities then they won’t be able to give each one the attention it deserves. Things will get missed or done poorly. Having this many things to do will lead to two things: a) you won’t be happy with how things get done, and b) your employees won’t be happy in their jobs.

As you sit down and write out the descriptions and responsibilities for your employees if you see that they have too much or too little to do make note of it. Once you finish the job descriptions there’s one more step before you meet with your employees.

This is a tool that was made popular by Michael Gerber.

Based on what you learned from this exercise draw up your current ideal organizational chart. You should include boxes that don’t currently have employees. Put job titles in each box – even if there isn’t currently a person employed in that role. Where there are no names this tells you how your business needs to grow.

Next, you’ll meet with each employee and explain how you see their job today and how you see it changing in the near future. Let them know if you see the role changing because of growth and give them a rough time frame that this will all happen in.

If someone has fewer than 5 things to do then consider which activities it makes sense to give them that are being done by someone else. Have a similar conversation with this person and explain how growth is going to change their role in the business.

When you do this, you’re making yourself accountable to your employees. Making yourself accountable makes it easier for you to hold them accountable for their actions. If you’re not accountable, don’t expect your employees to be.

Your processes are broken

If you feel like your processes are broken it’s usually because of one of a few issues. It’s either because your employees aren’t doing the right things (which we’ve just addressed) or you’ve grown or the outside world has changed and therefore you need to change the way you do things.

One thing I can promise you is that processes are rarely 100% scalable in their original approach. They require a massage every now then.

I liken it the difference between cooking dinner for two and having your entire extended family over for a huge celebration. Clearly you can’t take the same approach to serving both meals. If you do, you won’t be able to feed everyone at the same and the recipe won’t work at that size.

What worked when your business was 3 people won’t work when it’s 10 people, and that won’t work at 25 people.

Systems get out of balance.

This is another aspect of your business that requires frequent communication between you and your team. When you’re building your business just throwing more people at a problem is rarely the solution.

One thing I suggest every business owner do every time their business grows by 50% is a Time Audit. A time audit will let you see where everyone is your business is spending time and wasting energy. It’ll show you where your processes aren’t working and where you’re losing money.

Why every 50%?

That’s just often enough to catch issues as your business grows and not so often that you’re doing it every month. You have a business to run and you can’t spend every day looking at your systems. You need a rule that tells you when to look at these things.

This approach will let you see what happens inside your business when things change outside or inside.

Your clients are costing you money

This happens.

It happens in every business. It’s just a matter of how good you are at catching it and how good you are dealing with it.

Why and how does this happen?

As your business grows your cost structure changes. And over time things become more expensive. The price of raw materials go up, you add overhead costs, and the price of the services you need to buy goes up. But you might not be keeping track of these things real time.

Because of these issues and the fact that you’re not tracking your profitability by client and by product or service offering on a monthly basis, clients that you brought on at a low profit margin will become money losers as time goes by.

What do you do about this?

First things first.

Get with your bookkeeper or account and set up a system that allows you to have your monthly profit and loss statement every month by the tenth of the month. This has to be concrete. If you start letting this slip pretty soon you’re managing the month of May according to what happened in February and you’re 80 days too late.

It’s like never looking away from the rearview mirror while driving 45mph through town. You will get blindsided.

It’s very likely that you know another business owner who files their taxes in October instead of March because they don’t have the money to pay the tax they owe. This is usually a very good indication that they aren’t looking at their financial statements every month.

Yes, I’m serious. You need to look at each product or service line closely for profitability every month. If your business is more client specific or project oriented then you would evaluate each client or project.

You need to understand why you did or didn’t make a profit. Did you fail to record an expense real time? Did the cost of an input go up? What happened and why?

When costs go up and you catch it quickly you’ve got a better chance to fix it quickly. If you’re unable to correct the situation with your vendor and if you’re unable to create a new efficiency in your business then you need to have a heart-to-heart with your client about passing the costs through to them or redesigning what you do for them so that it works for both companies.

If your client is unwilling to work with you on this then you’ll need to develop a plan to replace them with a profitable client. When you add the replacement client don’t add staff.

When you part ways with the unprofitable client do it politely. Sometimes they find out that you are worth the money and come back to you.

Your Team isn’t getting it done

Teams underperform for many reasons.

Some of the bigger reasons include: leadership, culture, training, burnout, poor selection and employee turnover.

We’ve already talked about Leadership.

Let’s address how you hire employees. This is a learned skill. Nobody knows how to do it well at birth. It takes doing it wrong several times before you learn how to hire well.

I suggest you read Top Grading by Brad Smart.

While you’re waiting on that to arrive at your house, let me ask you a few questions: Do you hire using your gut? Do you tend to hire people after interviewing them only one time? Have you written down the key skills a person needs to have in order to be successful in the role you’re filling? Do you try to understand the tendencies of the people you hire before you hire them?

How about your employee turnover?

If your employee turnover is over 30% per year you certainly have a problem. Employee turnover is caused by things you can control and things you can’t control. Don’t worry about events like spouses who are transferred or children being born. Focus only on the things you can control.

You can control your leadership style, your vision for the business, career paths for your employees, and whether or not you burn them out.

Burnout and employee turnover are pretty closely tied to each other. One begets the other.

The overall process for reducing employee burnout is simple:
1) Review your financial performance and forecasts every month;
2) Talk to your employees frequently about their work so that you understand their concerns and stresses;
3) Commit to hiring additional staff when you need to;
4) Ask for your employees patience and give them dates by which you’ll fix it;
5) Follow through.

Avoiding employee burnout is really pretty simple if you follow the steps above.

How’s your employee training?

If you’re like most small companies, it’s tough to do well because of a lack of resources. Often times employee training is more of a trial by fire based on tribal knowledge with a pass/fail test at the end. Sound like your business?

Thankfully today there are many new options and possibilities.

Often, software companies provide video trainings and overviews for their programs that you can plug new employees in to. Sites like Udemy {link} provide incredibly good training resources at an economical price. And there is always YouTube.

Additionally, there’s your own team who can train your new employees. I highly suggest a blended approach where you use the online resources to give your new employee some context if they’re completely new and you follow that up with reinforcement from your senior team members.

Finally, have a onboarding plan for new employees and make sure you set aside the time for them to either watch the videos or work with other team members on specific topics.

You’ll find that employees of smaller companies understand the fact that you can’t provide a university setting for them to train in, but if you take even this approach to training them they’ll feel so much more confident in their ability to do the job.

Our Sales are unreliable or slumping

You won’t maintain your business, much less grow it without sales. So let’s ask a few questions.

Do you have a marketing plan and budget that you follow religiously?
Do you know who your clients are, what they want, and where they hang out?
Does your sales team touch enough people every day to bring in the number of new clients you need?
Do you even know how many people your sales teams need to touch every day?
Is your sales team trained? Do they know how to close?
Does your company and your product have a good reputation if the market?
Do make the effort to follow up on opportunities when you get them?
Do sales get neglected in the name of “getting the work done”?

If any of these sounds like your company then I’d say you need to sit down and put together a plan that you live by.

In a large company there are generally three V.P.’s that report to the C.E.O. They are the V.P.’s of Finance, Operations, and Sales. You’ll find others, but you won’t find a company that’s missing these three. They are the holy trinity of running a business.

If your answer to any of the questions above made you uncomfortable then you’re not treating sales with the respect that you should be treating it.

If you don’t consider yourself a salesperson or don’t enjoy that part of your business, then my suggestion is that you fill this role with someone who love this kind of work.

If you have a person in this role but you haven’t discussed any of the above questions with them, especially the question about the number of leads they have, in the last month then put it on both your calendars for this week.

When you’re trying to build a business you should be talking about your leads and closing rate almost daily.

I don’t have the time to fix all of these things