How your business got here.
If there’s ever been a business that’s grown perfectly smooth without any growing pains, I haven’t seen it…
Think back to the day you started your business. You were simultaneously anxious, proud, concerned and hopeful…
When you started you maybe had one or two good clients, or maybe you didn’t but you had a decent location or enough cash reserves to market yourself well and gain some traction.
Working every chance you got, nights and weekends, after a year or so your accounting and bookkeeping was strictly reserved for the kitchen table in the evening because during the day you were too busy talking to clients and doing “real” work.
At some point you asked your spouse, girlfriend, or significant other to help you out and they gladly obliged. After all, you were making it happen – getting it done.
Then it all came to a head…
There was simply too much work to do for one-and-a-half people…
She demanded that you find someone to help you operate your business either because the business was taking so much of your time and she only saw you to clarify an invoice, or she didn’t like the person you were becoming under all the stress.
And so you caved, or maybe you couldn’t have agreed more…
You hired your niece, the son of a friend, or the first decent college student you could trust to the work while you weren’t looking.
Like most companies, there was no thought put into company culture with your first hire. You just needed someone to help get the work done. And besides, you still blindly thought of your core values as being your company’s core values.
Very few founders set aside time to consider company culture in the early days when there’s “real” work to be done…
A couple weeks after your first formal employee started it became clear that you were going to have to work out some form of understanding about who did what when and what it was supposed to look like when it was complete. You sat down, worked it out, and came to an understanding.
Everyone (both of you) understood the process…
But nothing was written down. Nobody had time for that. There was “real” work to be done…
Together, the two or three of you continued to hustle like nobody else. Your mantra was “grow baby, grow.” You continued to hunt any work that would pay…
Maybe 6 months or so later the phone rang. It was the phone call you knew would one come…
You didn’t know the person on the other end, but they knew who you were. They had a project they needed to have done and through a mutual acquaintance they heard you might be the right person/company to do the job because you always did great work…
They weren’t certain that you’d be interested but as they described the project you thought for sure that you could pull it off. It’d require you to stretch a bit since the work wasn’t exactly what you did but it was close enough. And you’d need to get your hands on some added technology and probably hire some people, but no matter this was the break you’d been busting your butt for…
You put on your sales hat and told them that you’d have a proposal for them in two weeks.
When you hung up the phone the two of you high-fived. When you got home that night there was more celebration…
The next two weeks were spent working even harder to pull together a winning proposal, and you submitted it just as you’d promised. You were told that all of the proposals would be reviewed in the next 30 days and that work would start about eight weeks after that.
Thirty days later the phone rang. It was the call you’d been waiting for. The work was yours!
Exhilaration set in, followed shortly thereafter with a bit of “Holy crap! I need people, equipment, and some software!”
As you started working through the numbers you realized that you were going to need a loan, so off to the bank you went to get the money. Your banker was all too willing to help as much as their rules would allow, but they weren’t going to loan you the full amount. You’d need to put in some personal money, some “skin in the game.”
Apparently the last two years of effort wasn’t enough skin to satisfy the banking gods…
A little brainstorming and you came up with a short list of people that you might be able to borrow the last $50,000 from to pull this off. And so you dialed…
Your Aunt Sally and Todd, your best friend since grade school, were willing to help out. They just wanted your word and some kind of financial projections to show them they’d get their money back…
The bank didn’t move quite so quickly. It took a crash course in accounting and after several late nights you were able to create the three years’ worth of cash flow, income statement, and balance sheet projections they required.
Time was short. You had less than a month to get the money, people, and equipment you needed but the bank finally came through…
Congratulations! You got the loan and some off-balance-sheet debt to Aunt Sally and your buddy Todd. No matter, you had the money. Life was good…
The next three weeks were a blur. You bought the computers and hired three more college students to get the project rolling. And you kept serving your existing clients as good as you always had…
Training?
Yeah, you trained your new staff…
Just like you trained your first hire…
It really resembled the proverbial “drinking from a fire hose” kind of training backed by a solid dose of tribal knowledge. They observed the work being done a few times followed some verbal instructions, and you were off to the races…
You now had four full-time employees, some decent clients, and one really good client who was 75% of your revenue…
But nothing was written down…
Nobody had time for that. There was “real” work to be done…
Your first hire graduated from college a few months later and was easily promoted to manager based solely on seniority and the fact that they’d been reliable to this point. The fact that they weren’t really the best person to lead wasn’t really considered. You didn’t really have the time to evaluate that situation yet…
As you walked into your accountant’s office, you had been dropping your receipts off to her every three months, you hoped for good news.
“I have good news, and I have bad news,” she said as she entered.
“Good news! Great, I could use some good news. This calling clients every other Monday to get enough checks in to make payroll by Friday is starting to get old.”
“Bad news? We’ve had a good year. I know because I’ve never had this much work,” you thought to yourself.
And she informed you that while you’d had your best year ever you still needed to come up with an extra $10,000 to pay your taxes by the middle of next month. The good news was that because of the ability to depreciate things, if you were to buy a piece of equipment, you could totally avoid the tax bill.
And so you bought a piece of equipment you didn’t need, and for which you had no idea how long it would take for it to pay for itself. Instead of paying your tax bill, you wound up with a $35,000 payment book. But hey, you didn’t have to pay Uncle Sam, and that’s what’s important…
And so here you sit today wondering how and when you’re going to get off this hamster wheel…
And you’re taking inventory: One client who controls most of your revenue, a manager who isn’t really a manager, no documented procedures so you can’t train new employees the way you’d like, and it’ll be hard to get rid of your one manager because you don’t really know quite how to do everything they do, $50K in off-balance sheet debt, a big loan to the bank, expensive equipment laying around that you rarely use and which has never paid for itself.
This is a common story. Sure, the sequence of events is sometimes different. Maybe it’s a second location instead of new major client. The roles could be reversed and you got your husband to help with the books in the evening.
But the endpoint is often similar…
You had a singular focus to get your garden started and your rose bush grew wildly for several years. Some of the branches are crossing each other, and sometimes it draws blood when you just try to remove a single bud.
Good news!
You have cash flow! Sure, there’re some issues, but with focus and determination you can get through them.
Just getting your company off the ground is a major accomplishment!
And guess what…
You’re not special. Entrepreneurs go through this all the time because we don’t all do the same things well.
Where do you start pruning your rose bush?
Start by thinking about what you want your company to look like in three years. What has to be different? And what should be the same…
When you first started out it wasn’t easy to see conflicts inside your business. And at the moment it may not be perfectly simple either.
How you start toward a place where your business is running much more smoothly is based on three things:
First, Who you’re going to serve (types of clients).
Second, How you’re going to serve (company culture).
Third, When you intend to get there (metrics and goals).
Clients
Because you have clients and cash flow you can take a little time and decide who you want to serve. You can’t take a year, but assuming you’re profitable you can take a two or three weeks and get crystal clear about the type of client you want to serve.
Think about the profitability of the clients you have. Which ones tend to be the least and most profitable?
Which client types tend to be more headache than they’re worth? Are they the same ones that aren’t very profitable? If so, then they don’t need to be your clients.
Think about your mix of clients. Is your mix missing something and that makes your revenue inconsistent? If you’re a service provider maybe you can serve a mix of commercial, residential, and government. If you’re running a restaurant, do you do good with the lunch crowd but not so good with the dinner crowd?
Having a healthy mix of client types helps insulate your business from problems in one client type. When one type is down another is up.
Once you know which kind of clients you want more of, resolve to stop chasing the ones that are like those you don’t want. It’s okay to not serve everyone. Someone else will serve the group you don’t want to serve.
Company Culture
A company’s culture starts with the first person you hire. At that point you have two people who bring their personal values to the table. In those early days there isn’t always a clash of values.
But by the time you’ve hired a group of 5 to 7 employees you really start to see who gets along and who doesn’t…
It’s time to decide which behaviors work inside your business and which behaviors don’t. You should be able to identify and define 5 to 7 core behaviors that people must have to succeed in your company. You’ll often find that successful employees are hard-wired with 2 or 3 of them and the others can be learned.
Once you’re clear about this you need to put it into place in your hiring and firing practices as well as your performance reviews. You shouldn’t hire anyone who doesn’t fit with your company culture, period. By the same token, you should fire anyone who doesn’t fit.
The firing part is often the toughest because there always seems to be something a business owner likes or appreciates about the person they need to remove. I hear responses like “but they’ve been here since the beginning”, “they’ve been loyal and reliable”, or “they know so much about how things work around here.”
These may all be true, but if many of the people on your team that exhibit the behaviors you want can’t get along with that ole’ reliable employee, then you’re going to have an incredibly difficult time building a team around that person and their reliability won’t mean a thing. You’ll be capping the size of your business and your income because you can’t bring yourself to fire the person you know you need to fire.
Goals and Metrics
You got your business off the ground in part because of pure hustle. Some of the first metrics in your business were “am I making a living” and “can I make payroll.”
Those are not the metrics that will get your company to the next level…
It’s time to become a goal-driven metric-lovin’ business…
The best place to start is with your own historical performance. Become your own best competitor first…
To do that, you need to know what you’re already capable of. When I say “know”, I don’t mean “think you know”. If you sit down for about 5 minutes it’s likely that you already have 5 to 8 key metrics that you keep track of in some way shape or form so that you know if you’re on track to pay all of your bills every month.
The next step is reviewing your books over the last year or two and find your best performances in each of the metrics. They may not all be in the same month and that’s fine. Write down your metrics and the best you’ve ever done.
If you achieved your best in each of these categories in the same month what would that mean for your business? How well would it have to run that month?
Better yet, what would your business have to look like for you to meet or beat your best performances three months in a row? What would your culture have be like? How solid would your systems and procedures have to be? What would your client base look like?
When you’re just trying to make your business run well for what it is right now, that’s where you start.
Become your own best competitor first, then you’ll be able to take on the competition.
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