The hard work of un-fooling yourself...........

The hard work of un-fooling yourself………..

As I’ve written before, during the 1st quarter of the new year I find myself trying to take extra time to plan and evaluate. Some of this is an natural reaction to reviewing the financials in preparation for filling taxes. Some of it is just my reaction to something I’ve heard or read somewhere.

During a recent walk I was thinking about something I read in a blog article by Michael Hyatt, by the way, if you are unfamiliar with him I recommend his blog. He writes a lot of good stuff about business and some interesting stuff about managing life. In one of his articles he hinted at something that I reformulated for my own use. What I’m talking about is trying to identify the business and personal habits, processes or practices that I automatically assume make sense but on closer investigation I’ll find out the idea either was never a good idea or it’s an idea who’s time has passed.

Once I decided to take a look I couldn’t believe how difficult it is to then decide which things to look at! I decided I’d look back at the prior week for some clues or direction. I had thought that the prior week was really pretty uneventful and not very interesting nor complex. But then I started breaking down the events and connecting the dots it got messy. I’m now convinced that many things are simple but few things are uncomplicated.

I then made the leap of logic that goes like this, “If I’m trying to figure out what I’m fooling myself about, then obviously I’ve already fooled myself and how will I recognize it?” Now what do I do?

It wasn’t nearly as difficult as I thought. Here’s what I did. I went to someone in our office and asked the brilliantly insightful question, “What do we do that’s dumb?” Much to my surprise (and a bit of disappointment) they didn’t need to think about it at all, nearly before the words came out of my mouth the person had listed 3 things…. bang..bang..bang!

To shorten this post I won’t bore you with the details but here are the results of looking into the 3 things identified for me:

  • #1 –  I didn’t realize we were even still doing it, it was a policy I had put into effect a few years back and it was absolutely redundant. Cancelled.  
  •  #2 – This was an item a service provider required and it is very important, except we had dropped the vendor long ago but kept the process. Cancelled  . 
  • #3 – This is something that actually makes sense but the person didn’t understand why we needed to do it. Once I explained it better the person was on board.

There you have it. This entire process took about 20 minutes and the result – eliminated 2 things that we were wasting money on and helped an associate understand a process they thought was a waste of time. All in all a pretty good return on my investment of 20 minutes.

Moral of the story… If you want to “unfool” yourself you’re probably going to need an opinion other than your own.

It’s a new year, winter is raging and opportunities await….

This time of year I like to take several days away from my day-to-day business, hide out somewhere cold but with a good fireplace and sort through the current opportunities and challenges of my business. I make it a point to seriously limit email and phones so I can think more clearly without the usual “noise” of day to day activity.

I’m always curious about how (or if) other business owners do the same and what approach they take to an annual review or plan. Please let me know your routine and your success with it.

Here’s my approach:

  • I spend very little time comparing what I planned to do with what I actually did. This seems to be an exercise with little benefit. What I do is focused on what surprises I had last year and try to figure out if I could have done something so that the surprises weren’t surprises
  • Next, I try to forecast areas of my business that could create surprises, both good and bad, this year. For example, I’ve spent some time on interest rates. Interest rates are low now but if they suddenly jumped up it could have a bad effect on my business. Is there anything I can do now to mitigate the effects if higher rates do materialize? I think so.
  • Next, I look at changes in my industry during the last year to try to determine if our people need training or education in areas where the industry has gotten a little ahead of us. For this year, I’ll be doubling our efforts in SEO and social media…but we’ll need some help.
  • Another area I look at is my personal productivity. Have I gotten sloppy anywhere, in what areas can I support our people better?
  • Lastly, I try to focus on approaching opportunities and try to figure out if we can get ahead of the curve. There are huge advantages in all businesses to be first..but not to early. That’s a delicate balancing act.
Drop me a line on how you approach the strategy side of your business and what you do to make sure your thinking is clear.

Thinking about buying a business? Here’s a way to figure what is possible

If you want to own your own small business there are really only two ways to get into business. You can start a business from scratch, often called a start-up. Or you can buy an existing business from a business owner who is ready to sell their business.

There is much written about starting a business. The biggest problem with a start-up is in the time it takes a start-up to become cash flow positive and unfortunately many never become cash flow positive and they fold.
Buying an existing business is often a good choice. If you do it right you can be cash flow positive immediately and financing for purchasing a business is often very favorable. In a previous post I wrote about “Why would someone sell be their perfectly good business?” and it talks about why business owners choose to sell good businesses.

If you want to buy an existing, profitable, business you need to answer a couple of questions about your situation before you begin your search.

First, how much money do you have available for a down payment before borrowing any money from any banks, credit cards, etc. It will be very, very difficult to buy a good business without a down payment.

Second, what’s the minimum amount of money you need to make from the business to live on once you buy the business.

If those two numbers are reasonably close to each other you have a decent shot at buying a business.

Here is a “typical” deal:

Business earnings (Seller’s Discretionary Earnings)  $75,000
Selling Price of business   $200,000
Down payment    $50,000
Earnings/Salary you need  $50,000
Get an SBA Loan for $150,000
Annual Payments for your SBA Loan $20,500 (10 years @ 6.5%)

Business earnings $75,000 – $20,500 (debt payments) = $54,500 to you the new owner.

Also, when thinking about your down payment there is a mechanism to use you 401(k) funds to buy a business without incurring early withdrawal penalties nor tax obligations.

If you want to be in business for yourself it’s always a good idea to get informed and look at all your options.

Why would someone sell me their perfectly good business?

Often small business buyers wonder about this. There is an all too frequent buyer attitude that says “If it is a good business they wouldn’t be willing to sell it to me!”
Here are some reasons we see business owner want to sell:

  1. Divorce of husband and wife owners
  2. Partnership disputes
  3. Owner health issues
  4. Kids don’t want the business and the owner has gotten to retirement age.
  5. The business has gotten bigger than the skills of the owner
  6. The business needs professional management
  7. The industry is changing faster than the owner wants to change (in this case the owner is always convinced the market is wrong and he is right).
  8. The business is totally debt free and the owner doesn’t want to take on debt to grow.

There are many other reasons that make sense to the seller, even if it doesn’t always make sense to the buyer. the tricky part is, because confidentiality is so important it takes some work to locate a good business to buy. Finding a good business for sale and buying it from a seller who has a good reason to sell could be a formula for success in a business acquisition.

Holiday Reading Ideas for a Better Business

My New Year’s resolution (well, one of them anyway!) is to provide more tools for small business owners to start or buy a business, then grow it profitably and sell it! As part of that I am kicking off the New Year with a specific book recommendation. Although I can’t say I agree with everything in this book it is loaded with ideas that might help get you focused on creating a business that you run, instead of a business that runs you.

Making Money is Killing your Business contributes greatly to the argument that running a business by the seat of your pants is not always a great idea.

A core and unique concept of the author Chuck Blakeman is that a business should throw off money and time. If you start thinking about your business this way I think it will change some of your decision making. In an earlier post, ‘Tis the season…  I warned about creating an atmosphere in your business where you are cynical about your business and you lean on an “it’s me against the world” view of ownership.

This book gives clear ideas and examples of how to mange that natural tendency.
Don’t get hung up in the references to a specific industry. Analyze the concepts and I think you’ll be able to apply improvements to your business quickly. Good luck and let me know what you think about the book.

‘Tis the season for presents…..want to give yourself one?

This post is for all the hard working business owners and those who one day hope to become business owners.

Far too many business owners live in a constant state of stress. Their reasoning is “it’s a good stress”. I’m no doctor but I doubt that stress 24/7 is really good for your health.

What do small business owners worry about most? Here’s my list based on discussions with thousands of business owners:
  •  Cash flow – too many bills at the wrong time.
  •  Employees – too many need baby sitters, not bosses!
  • Customers – Is perfection a reasonable expectation?
  •  Family – Why doesn’t my family appreciate me working 7 days a week? After all, I’m doing it for them.

Ok, here goes. You knew it was going this way didn’t you. The Uncle Joe talk… know, the uncle who told you exactly what he thought about your hair brained thinking when you were 12 years old. Well, I’m your Uncle Joe.

Here’s my recommendation for your New Year’s resolutions for 2011.
  1. Stop feeling sorry for yourself.
  2. Stop using your business as an excuse for not doing the family things that you just don’t want to do. Helping your family hate your business is not a good plan.
  3.  Start thinking about your cash flow problems before you have them instead of waiting until you have them.
  4.  Give your employees written and detailed systems so they know what you expect and how to do it. Believe me, they’d rather not listen to your rants any more than you claim you don’t want to give your rants.
  5. Only promise your customers what you KNOW you can deliver… then do it. Most unhappy customers are created by you. Did you tell the customer what to expect? Did you deliver? Did your employees deliver (see #4 above)?

There’s your simple 5 step program to giving yourself a Christmas present that will benefit you, your family, your employees and your customers.

Merry Christmas and Happy Holidays!