Generational Transition

by  David M. Barry, CEO

dMb Group Inc.

        Take a quick look at the picture and what do you see?  “Old School Business”  of course.  Perhaps it would be better viewed as the  “Business Foundation.”  All multi-generational companies were started by the true Entrepreneur, the risk taker or the product developer.  So why would some make it and some struggle?  Of course that would depend on which member of which generation you ask.  But in truth, what we have found with our clients going through this process is that there is a tendency to over complicate the transition. However, there must be a plan for the process.

So you want to hop into the CEO seat, semi-retire, but still keep an eye on your new President?  Well that would seem to be a natural business event.  At this critical juncture all organizations, big and small,  must understand that change can be uncomfortable.  So “Old School” and  “New School”  have to ask tough questions.

For the Founders, the goal would be to create a legacy and a source for lifetime income.  But of course the founder must be open to change.  Adjusting to delegation in business takes a certain amount of humility and guts.  Imagine if  Henry Ford had said “This company will run this way till I’m gone!”

This would never have happened!

    

For the “New School”, heir apparent so to speak I suggest you take the time to reference  Inc. Magazine, May 2011, “Are you CEO Material?”

Succession planning is serious business, especially in closely held companies where the long-term survivability will affect multiple generations. The younger management should take to heart the various questions in the Inc. Magazine article.

We have found that companies in the midst of succession planning focus heavily on the logistics of change as opposed to the culture of change. So I would ask the founders the following questions:

1. Understanding that your Son or Daughter will now be managing peers or perhaps employees who watched them grow up, have you empowered them with knowledge and expertise that will elevate them in the eyes of the employees?

2. Has the company adjusted the daily practices to make sure modern and current business practices are in place? A major pitfall can be the assumption that these practices will be developed by the next generation of management.

3. If income stream is expected, does your Company have tight internal controls so as to make adjustments to fixed burden and cash requirements forecasts?  Remember, you are creating additional fixed burden that the company has never had before.  Can you seamlessly adjust for the ramifications of the new financial pressure?

 And Finally               

“The Teacher Will Appear When the Student is Ready” 

Don’t assume the next generation is as driven as you were or  as big a risk taker.  Make sure the “school” is modern and the “textbooks”  relevent.  Most founders of companies learned by DOING!  The second and third generation should have the luxury of adapting and growing.

So to the founders, I would say step back, enjoy because you planned it and earned it.

To the new leader of the Company I would say congratulations and don’t forget to say “Thank You.”

Are You Ready ?  

Do You Set SMART Goals?

A key part of achieving your goals rests in the goals themselves. They can’t be too lofty, or too simple, and it’s smart to give yourself reasonable deadlines. Here are some guidelines to follow as you create your strategic business plan:

         Specific
         Measurable
         Attainable
         Relevant
         Timely

Specific – A specific goal has a much greater chance of being accomplished than a general goal. Be precisely detailed.  Make sure the goal is specific to one item.  Use the categories of financial, production, career and personal as a way to keep focused specifically on what you want to achieve.

EXAMPLE:    A general goal would be “Make more money.”  A specific goal would be “Make $275,000 in net profit in this fiscal year.”

Measurable – Establish concrete criteria for measuring progress toward the attainment of each goal you set. When you measure your progress, you stay on track, reach your target dates, and experience the exhilaration of achievement that spurs you on to continued effort required to reach your goal.

To determine if your goal is measurable, ask questions such as……How much? How many? How will I know when it is accomplished?

Attainable – When you identify goals that are most important to you, you begin to figure out ways you can make them come true. You develop the attitudes, abilities, skills, and financial capacity to reach them. You begin seeing previously overlooked opportunities to bring yourself closer to the achievement of your goals.

You can attain most any goal you set when you plan your steps wisely and establish a time frame that allows you to carry out those steps. Goals that may have seemed far away and out of reach eventually move closer and become attainable, not because your goals shrink, but because you grow and expand to match them. When you list your goals you build your self-image. You see yourself as worthy of these goals, and develop the traits and personality that allow you to possess them.

Relevant – To be relevant, a goal must represent an objective toward which you are both willing and able to work. You will accomplish what you value most.  But be sure that every goal represents substantial progress. A high goal is frequently easier to reach than a low one because a low goal exerts low motivational force. Some of the hardest jobs you ever accomplished actually seem easy simply because they were a labor of love.  Your goal is probably relevant if you truly believe that it can be accomplished.

Time-Oriented – A goal should be grounded within a time frame. With no time frame tied to it there’s no sense of urgency. If you want to lose 10 lbs, when do you want to lose it by? “Someday” won’t work. But if you anchor it within a timeframe, “by May 1st”, then you’ve set your unconscious mind into motion to begin working on the goal.

Once goals are set you have a clear understanding of what you want, and your mind can wrap around it. It is then much easier to set a path to make those goals happen!

This Economy Has Its Gifts

The savvy business owner will be the last man standing in his industry!

 Will that person be you?

Do you know what is happening to your competition?  As more and more businesses collapse in this demanding economic climate, the savvy business owner is poised and ready for managed growth. Preparations to take advantage of the increase in opportunity will be in place. A prudent business owner understands the favorable aspects of this economy, and is not complacent and does not procrastinate. Procrastination and Complacency are the two deadliest sins of privately held companies in America today. Many are spoiled by a past flush economy and seemingly operate in the current marketplace with blinders on, assuming that stability is just around the corner. Quite a few have given up, excusing themselves, due to the difficult economy. Many are simply trying to ride the storm, not knowing what to to, but knowing there certainly is a way to the future.

“Smart people surround themselves with other smart people.”

It is not necessarily common knowledge that best business practices change rapidly. This is due to 1) competition and 2) increases in knowledge and 3) technological advances. What was considered ‘smart’ even three years ago may no longer be the best choice. Imagine that your company is a rose bush that you planted 15 years ago. Did you only water it once? Did you only feed it once? No! There is an ongoing responsibility  for its health and growth. SUCCESS AND STABILITY in business requires ongoing attention to detail and to best business practices in every segment of a company.

The intelligent business owner is continually forging ahead, but in this century, we are all on ‘information overload’! It is impractical to keep up in all the ways that matter most. There was a research project done in 1995 that predicted that in ten years, 92% of all businesses in America would be ‘Service Oriented’.  A great example is that women don’t do their own manicures and pedicures anymore. Working couples primarily ‘eat out’. Accountants have replaced the office bookkeeper. Think about yard services and car washes. The list of specialization is long!

We go to those who ‘know’, in order to save time and money. 

Who knows best about business? Accountants are not business experts, but tax experts, so it is a mistake to put your business planning and strategy into their hands. It is a common error. As a business owner, it is wise to surround yourself with those who absolutely ‘know’.  It is important to find scholarly yet compassionate business experts with depth of experience to provide the support you need to keep you at the top of your game in the marketplace today.

                                                                               Sherry Matteson, MA

A struggling economy is never an excuse!

Sustainability in 2011–Do you Improvise?

By Sherry Matteson, MA

Economies always cycle – throughout the year, from year to year and from decade to decade.  A solid approach to business as well as to life, is to be your best during the worst!  This is rarely the case, however.
Inherent problems tend to be overlooked under the best financial conditions and shine sharply when profits are slim.  If we are the best when profits are down, it stands to reason that the best times will be phenomenal.

So what are the keys to being the best?

1. Plan-The football team knows the whole play ahead of time. The ballet company dances to a complex series of pre-planned movement. Obviously, communication of the plan is critical in both scenarios. If the ballet company doesn’t know the Prima Dona’s next move they will look foolish and finally leave the stage. There will be no dance, except maybe a solo, which is a common scenario in small business with incredible burden on the owner. The same is true in music- the analogy is obvious. All the players need the score in advance. The results of improvisation can end up at either end of the spectrum- lovely or disastrous. Improvisation is not a good idea in business.

2. Trust– Trusting that the football players want to be their best, the dancers want to perform fabulously and the orchestra members desire to make beautiful music is an early step in building a foundation for success. Without this inherent trust, performance suffers, employees are anxious, confused and feel devalued. This climate is not conducive to high performance. This lack of trust in business usually indicates that leaders feel themselves to be unassisted, even isolated. This translates vividly to team members. It is prudent to hire people you can trust and then let go!
It is conversely a dangerous practice to give full autonomy to employees that are untrustworthy.  Either practice can split the very fabric of a company’s morale.

3. Support- This is a multi-dimensional concept. How does a football coach support the players? How does an orchestra conductor support the musicians? Support is an unflagging attitude but it is also a series of actions. The conductor makes sure that the players have what they need- music, supplies, sound system, auditorium, and and practice. The business leader is the same. To make certain that employees have everything they need to do their job is imperative and it is the business owner’s responsibility.

 4. Adapt- Sustainability in today’s marketplace requires resiliency and the expertise to recover quickly from difficult situations. Complacency is most often the origin of an underperforming business. Imagine if an orchestra played the same symphony over and over again at each venue, because they were good at it. Soon they would lose their audience. What if a great football team executed the same plays over and over at each game, or kept trading out players, hoping the situation would turn around. Without renewal of process, both would die a slow death. It is a fact that we love our habits, but the fact remains that uncritical satisfaction with one’s achievements spells mediocrity in any human endeavor.

A sustainable future requires planning, trusting, supporting and adapting. Where do you stand with regard to these concepts?

Do You Have Control of Your Business…or the ILLUSION of Control?

by Donald Miller, President

Let’s start this discussion by defining our terms. The Oxford American Dictionary defines control as: “The power to influence peoples behavior or the course of events”.

The definition of illusion is “a false idea or belief” and “deceptive appearance of impression.”

Which best describes your company and your position in it? Most of the small to medium sized businesses we encounter have some things in common.  Usually the owner has expertise or some experience in the product or service the company is providing.  For example the Master electrician owns the electrical contracting company.  The homebuilder becomes the General Contractor etc. We know that they understand the technical side of their business however by choice that isn’t their job anymore.  They are now the President but they haven’t had the training for this job so by nature they revert to performing pieces of their old job which cannot have the desired results. The result creates the ultimate firefighter that works very hard but never seems to get ahead. After years of this they begin to accept things like breaking even or even financial losses as “well that’s the nature of this business”.  Or worse yet “you know the economy is bad” instead of saying what do I need to do to become President of this company?

Jack Welch former CEO of General Electric during its largest period of growth is someone I was able to spend some time with some years ago. He vocalized some of the basic tenents I’ve been managing with all of my life. For example:

An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage. (This is virtually the credo of The dMb Group)

• Change before you have to.
• Control your own destiny or someone else will.
• Don’t manage- lead change before you have to.

The point of this discussion is face reality as it is, not as it was or as you wish it to be. The mirror of every organization is its President. If you are willing to constantly learn your people will also be. If you are set in your ways and stubborn, so will your people be.  When I hear a President look at his work force and say “well look at them! What am I supposed to do with them?” I don’t look at them, I look at him.

The good news is there are solutions. There is no “Presidents School” but there are tried and true management methods and measures. As soon as you, the President, learn them and embrace them your profit, work effort and effectiveness will improve. As soon as you are committed to learn everyday your workforce will embrace that same ethic. So strive for knowledge and stretch your personal limits.

Remember the school of hard knocks leads nowhere but some hard bruises.

The Betty White Phenomenon

Behold the Betty White phenomenon.  At 89, she is one of the hottest and bankable stars in the industry.  She is in strong demand, and has shown she can create a demand where there normally would be none.  A mere two years ago, she was in the background as one of those actresses who “used to be on TV.”  So what happened?

A Superbowl Snickers commercial. At a young 88, she could have opted to sit back and relax for her remaining years. But as a Hollywood commodity, she understands the need to try something different. In doing so, she was the first to go where no aging star has gone.  In case you don’t believe in the power of the internet, within hours she was the most searched name and topic on social media sites and search engines.

That demand landed her on Saturday Night Live.  She was highlighted in almost every scene, and sportingly went along with the writers(I don’t know if I could have been so accommodating—some of those skits were less than acceptable). I admired her ability to “go with the flow.” She decided to take a chance, to extend beyond her comfort zone, and by doing that reach an entirely new generation of fans.  She admitted she has no use for Facebook, but that’s not the point.  That new tool called “social media” has garnered her countless guest appearances, and several new series.  And she is in control.

There is a valuable business lesson here. Doing the same thing you’ve always done will not produce the same results.  Sitting back and resting on past laurels, thinking they will carry you through isn’t what it’s all about.  The world changes.  Customers’ expectations change. Economics change.  Betty White is a brand name, and she clearly understands the business fundamentals.

Ms. White has always had the courage to change as times dictate in order to stay in demand. What about you? As a business owner, do you cling to the “way we’ve always done it” or are you willing to make the necessary changes to keep your business sustainable and profitable?

The Sales Myth

Let us start by saying that only an imprudent business owner would not want an increase in revenue! But the myth that “sales will hide all evil” is at best exaggerated and certainly misunderstood.

Over 15 years of analyzing and helping small and medium size businesses, I find this is one of the first “solutions” a client will ask for. There is a perception in this business sector that revenue equates directly to profitability and cash flow improvement. In reality, the only true contribution to profit derives from the Gross Margin/Profit associated to this new revenue. The second factor is the effect on overhead that would result from this increased revenue and the associated activity. So before I would say “lets drive this thing up” I would ask myself a few questions:

1. Does my company have a formal Sales and Marketing Plan in place which clearly identifies end goals? Does this plan identify new customer base, pricing parameters, distribution methods, manpower performance standards, compensation methods?

2. In my company do I currently have the Financial Management Systems in place to have fingertip control of direct expenses which will have a direct effect on the Gross Margin?  Direct Expenses are defined as any expense directly related to the creation of revenue. Common examples would be Material and Labor. These two factors alone are the predominant expenses in most companies. When a company does not have fundamental Budgets, Cash Forecasting and Balance Sheet Management in place, a growth in revenue can have devastating effects on the back-end.                      
                                  

Lets stop. If you as President of your company answered no or maybe to these first two questions, then slow down and rethink. I have found the majority of the small to medium size companies I have analyzed are ill-equipped in these areas. The good news is that any company can make the leap as long as they understand that there are massive differences in what separates a $1 million firm from a $10 million firm in terms of an operating culture, and methods. Trust me when I say that “growing out of business” can be a reality.

Another reality you must face is that in many cases for companies in this revenue range the sales of these firms are limited by various demographics that would logically not change. Can you increase your market share in these demographics? Of course. But how and at what price must be a consideration.

When most entrepreneurs start a company, it is because there is a confidence in the ability to exceed competition performance or capture a new product opportunity. But the business side of the business cannot lag or be left behind. This will limit your ability to act in the role of President, which is essential in any company. Certainly this position is critical in any company over $1 million in revenue.

Advice! Act … Feel… Look… Function like a $ 10 million +++ Company. Learn to maximize true profitability at your current level. Then grow that thing to the Moon!

So next time someone is advising you that you need to “Grow your sales”… just tell them “Only a fool wouldn’t want more revenue! But what I really want is profit!”

Are You Ready?

The business climate in today’s economy is like no other in history. Innovative and ever-changing competitors, viral marketing, e-commerce, shrinking financial resources, and a vast discerning consumer base create challenges for businesses of all sizes.  Growth and success depend on precise controls and methodology in place to monitor change and make adjustments.So you made it through the decline, but that doesn’t guarantee you are ready for the future! Many of the elements that left you in a vulnerable position probably still exist within your firm. How are you different today than you were eighteen months ago?  Our focus is to make sure our Clients have the fundamental processes in place as we head into a recovering economy.

 

Ask your self these questions:

1. Have you strengthened your administrative functions to better plan and control?

2. Have you installed budgets and forecasts both for profit and cash management?

3. Have you installed a plan to take advantage of a reduced competition field? We have seen a historical percentage of companies fail since 2008. Now is the time to grow…. but correctly.

4. Have you taken advantage of this period to improve and hone the skills of yourself and your staff?

Challenges can often be overwhelming and seem complicated, but the solutions often incorporate basic business concepts that are logical and achievable.

Make sure your company is set to thrive no matter what the future holds!