You must define the purpose of your business!!

“The first principle of ethical power is Purpose. By purpose, I don't mean your objective or intention-something toward which you are always striving. Purpose is something bigger. It is the picture you have of yourself – the kind of person you want to be or the kind of life you want to lead”. ~Ken Banchard

Most businesses have a mission and vision statement, normally developed during a strategic planning session. However, these statements very rarely address the real purpose of your business, and I feel that purpose trumps mission and vision statements every time.

I am not saying that vision and mission statements are unimportant. I am only saying that a business must first have a clearly defined purpose. Otherwise, it is too easy to get off track when developing mission and vision statements.

A statement of purpose should be very short – no more than one sentence – and should provide a foundation on which mission and vision statements build. Take for example the Jim Moran Institute’s Outreach Program. The purpose is, “To help entrepreneurs be more successful and profitable without ever a charge.”

When our kids were around five years old, they had a favorite question. They must have asked this question at least 25 times every day, driving us absolutely nuts! You guessed it. That question was, “Why?”

As crazy as it made us to hear it over and over again, asking “why?” was their way of trying to understand this very complicated life we live. Now, my daughter has to listen to her very special son ask, “Why, mama?”

So what does this little anecdote have to do with purpose statements? “Why?” is one of the two questions that entrepreneurs must ask themselves when generating their purpose statement. “Why are we in this business?” And the second question: “What do we really want to get out of it?”

In addition, while mission and vision statements are typically crafted without any emotional hooks, a purpose statement should generate some emotional feeling in order to really be accepted by the staff. Staff may not know or understand your mission and vision statement, but they need to understand and be able to express the purpose of your business.

A financial institution’s purpose statement might be something like, “To provide exceptional financial services to our customers while ensuring a reasonable rate of return.” The purpose of a men’s clothing store might be, “To be a family business that strives to make each customer look and feel good about their clothes.” An awards/trophy store might say their purpose is, “To sell products that make people feel good about their accomplishments.”

Conceived by founder, James Dyson, Dyson’s purpose is as follows: “To make things that work properly.” Not only is it very clear, it is easy to get behind because it makes most people feel good to have this as their purpose.

Now go out and make sure that you identify the real purpose of your business and develop a statement that encompasses it. This must be done in order to ensure your staff is on the same page.

You can do this!

Do Not Get Involved in the Minutia of Running a Business

There are two levers for moving men – interest and fear. ~Napoleon Bonaparte

From employees to finances to marketing, there are so many issues for entrepreneurs to deal with when running their businesses. These concerns are always going to exist, but it is critical that you do not let the minutia overwhelm you.

We were dealing with a very successful entrepreneur whose business was having some sales issues. He had recently moved the person in charge of sales to another position, and now there was no one to run the sales operation. He was the ideal candidate to step in, but he just could not seem to do so.

After much discussion, he finally admitted that he just did not feel that he could step away from running the business to tackle these sales issues. When asked why, he said he felt he had to stay involved in the business or it would implode.

Upon closer analysis, it became apparent that he was involved in every detail of running the business. He felt that it was his responsibility to ensure every mundane task was accomplished.

The true irony of the situation was that he thought he had to deal with every little thing in order to keep his business from falling apart, but he was so caught up in the minutia that he was letting his business slip. Even though he knew what the real issues were, he felt that he could not step away from the tasks that he considered so vital.

No matter how much I tried to convince him to jump in, handle the sales and let go of the day-to-day details, he just could not do it. He was so wedded to what he had done in the past, and he just did not see how his behavior was causing the firm to hemorrhage.

Although we do not know what became of this entrepreneur, there is so much to be learned from his example. Entrepreneurs must continually remind themselves that their time is worth at least $100 an hour. Consider whether the business is getting value from what you are doing. It is so easy to get involved in tasks that are urgent but not important. Reminding yourself that your time has high and measurable value to your business will help you remain focused on those tasks that are in its best interest.

I have found that one of the best tools for time-starved entrepreneurs is a time log. Record what you do every 15 minutes for three days. For most people, this is a very illuminating exercise as it allows them to look back and see how much time they are wasting on interruptions. If you can free two or three hours a week, then you can work on the important elements rather than the urgent ones.

Now go out and make sure that you are doing what is necessary to keep your company viable without getting caught up in the minutia.

You can do this!

Select Your Business Lawyer Very Carefully

“If you come to a fork in the road, take it.”~Yogi Berra

Most business owners wind up needing a lawyer at some point. This can be for a whole variety of reasons, but often, businesses need a labor attorney to defend them against aggressive attorneys who are representing ex-employees.

We were helping a partner in a business who wanted to buy the other partner out. The partners could not come to an agreement on the price, so they ended up going to court.

After months of dealing with the complex legal system, a hearing was finally scheduled. The judge would determine the value of the business and how to divide the assets.

Because of the intricacy of the case, the partner we were helping had to hire a personal lawyer, a corporate attorney and a forensic accountant. Both the personal attorney and the corporate attorney were selected based on recommendations. The personal attorney was suggested by a very good friend, and the corporate attorney was referred by the forensic accountant.

Relying solely on recommendations when selecting attorneys can be dangerous. In this case, the personal attorney turned out to be a criminal defense attorney, and the corporate attorney was a labor attorney. Neither lawyer had in-depth experience in business litigation, nor were they certified in business litigation by The Florida Bar.

Clearly, I am not an attorney, but I have had to deal with them on a continual basis. Over time I have learned that all lawyers are not the same. Just because someone has a law degree and passes the Bar does not mean they are competent in the area that you need assistance. You need to find an attorney that specializes in the issue you are having.

When shopping for an attorney, I suggest you start by asking friends and relatives. Take those recommendations then do some research. Consider how many similar cases the attorney has taken through trial. Narrow your list to several possibilities and meet with each. It is important that you talk to more than one so you have a comparison on which to base your selection.

Another great way to find an attorney is via referral from your local Bar Association. Again, you must select one that specializes in your type of case.

The Florida Bar defines a certification as follows: “Board certification recognizes attorneys’ special knowledge, skills and proficiency in various areas of law and professionalism and ethics in practice.
Certification is the highest level of evaluation by The Florida Bar of the competency and experience of attorneys in the areas of law approved for certification by the Supreme Court of Florida.”

The Florida Bar’s website, www.flabar.org, is a helpful resource. The site shows if an attorney has had any problems with The Florida Bar and how their peers have evaluated them. It also lists any certifications the attorney holds, and allows you to search by certification and location.

In addition to the lawyer’s experience and certification, you will also need to consider whether you want to go with a large or a small firm. Large firms charge for any and all individuals that help in the case. These fees can add up in a hurry.

On the other hand, small firms charge lower rates, and you will receive much more attention. However, smaller firms will not have the network of associates that larger firms have to pitch in and help with your case.

Hourly fees are important, but when shopping for a lawyer, there are other factors that could mitigate a higher fee. For example, one attorney might charge more than another, but the individual’s experience level could result in lower total fees.

Finally, you must have a written document that lays out how any retainer (advance) funds will be used and when more funds will be needed.

The bottom line here is that if you need an attorney, you need to put in the time and do your due diligence to determine whether or not the attorney will be an asset in your case. The selection process boils down to one critical factor: whether or not the candidate is experienced with the specific issue that you are having.

You can do this!

Reward Staff When You See Them Doing Great

"Men do not value a good deed unless it brings a reward." ~Ovid

We were helping one entrepreneur who said he never recognizes and rewards good behavior because he is afraid that for every good thing he sees, there could be several bad things that he does not. When asked about it, he said, “If I say anything about good behavior, I may not have the opportunity to reprimand the employee when they do something wrong.”

When I heard this statement, I honestly almost fell out of my chair. I was shocked to hear this from him because I had thought he was a great manager! The sad thing about it is that he thought he was a great manager too.

If you are really going to be a great manager, I believe that you must recognize good behavior whenever you see it. After all, one of the objectives of a manager is to make sure their employees feel good about what they do. Good behavior must be recognized on the spot in as public a manner as possible.

So many managers tend to hoard these complements, not realizing that there is no limit on the amount of rewarding they can do. When our children were small, we repeatedly read them a story about “warm fuzzies” and “cold pricklies.”

The story said that we have the capacity to dole out endless amounts of either of these. The ultimate message was that we should give out “warm fuzzies” at every opportunity as they make other folks feel good. “Cold pricklies,” on the other hand, make folks feels bad. Managers should apply this same theory to recognizing good behavior among their employees.

Many managers refuse to give out “warm fuzzies” because they rarely got anything from the people around them. However, they must learn to give rewards, or their staff will not respond very well to them.

There is a school of thought among some managers that an employee should get their reward from simply doing their job. However, as human beings, we need to be told that we are doing well and are appreciated. Remember, your staff spends more time with you than they do with their families. Sure, they are paid, but every employee needs to be rewarded as frequently as possible.

Just recognizing good behavior is great, but you must do so with true sincerity, otherwise the message will not be heard. To illustrate, take this for an example. How many times have you had a restaurant manager stop by your table and ask how your meal was, all the while demonstrating about as much concern as a golf club would? The point is that with any type of reward, it must be done with sincerity and honesty.

As I go around helping businesses, I often can tell which ones make their staff feel good just by watching their employees interact with customers. If you start being conscious of your employees’ good behaviors and rewarding them accordingly, I promise that the morale of your business will improve dramatically.

Now go out and make sure your management team has made it a high priority to reward good behavior when they see it.

You can do this!

Growth is Not Always a Good Thing

“Slow buds the pink dawn like a rose from out night’s gray and cloudy sheath; softly and still it grows and grows, petal by petal, leaf by leaf…”

~Susan Coolidge, “The Morning Comes Before the Sun”

We were helping a young entrepreneur who started a business four years ago with $10,000. Through hard work and smart decisions, she has grown the business to $8 million.

Her goal each year has been to grow sales by at least 30 percent, and even in a difficult economy, she has been able to meet or exceed this goal every year. Now she wants to continue this growth path.

She financed her business and growth with internal or retained earnings, and doing so has left her with very low equity. Now, she has financed 99 percent of her assets, and debt financing is her only means of obtaining the capital necessary to continue growing.

She came to us for help because, with her debt ratio so far out of whack, banks would no longer lend to her. She was at a loss as to how she was going to finance this year’s growth. She knew something was not right, but she just could not articulate or diagnose the problem.

This entrepreneur suffered from what I call “Growth At Any Cost Syndrome.” She thought that if she did not grow, her business would fail.

The problem with growth is that even though sales are up, cash flow needs can easily reach double the sales amount. To support increased sales, you must be able to finance additional receivables and larger inventories on top of a multitude of other costs.

If a firm has too much debt and is trying to grow, they have only two options. First, they can try to raise additional equity capital. The problem here is that so many small businesses cannot attract minority shareholders. This is because there is no control with minority equity interest in a small business. In addition, minority shareholders will not have any liquidity. The bottom line is that acquiring new equity capital from outsiders is very difficult – if not impossible – for most small businesses.

With option one ruled nearly impossible for a small business, only one alternative remains: to slow the growth down – even stop it altogether – and allow equity to build up through retained earnings. This is a very slow process, but it is the only dependable way of setting the stage for future financing. Growth sucks up cash, and slowing its progression is the only way to allow your cash stores to replenish.

Our advice for this entrepreneur was to slow her growth rate. While resistant at first, she quickly realized that this was the only way she could get where she wanted to be.

Increasing sales is not always the best strategy because it normally does not allow you to build up the infrastructure you need to grow your company. If you find yourself in a position like this entrepreneur, slowing your growth to allow cash and profits to build up is a very viable alternative.

Now go out and make sure that you have a growth plan in place, and that the plan ensures you are not taxing your resources.

You can do this!

You can deal with problem employees

“The tougher the job, the greater the reward.” ~George Allen

Problem employees are the bane of every manager’s existence. By “problem employee” I mean an individual whose behavior negatively affects the morale and operations of the entire business in a significant way. For some reason, every organization seems to have at least one of these. Examples of some problem behaviors I commonly see are as follows:

1. An employee just does not do what he or she is asked even after repeated requests.
2. An employee’s temper causes everyone to tip-toe around them in fear of inciting their anger.
3. An employee is habitually late.
4. An employee’s extreme negativity detracts from the business’ mission.

Whatever the problem behavior, there are two ways of dealing with it. One is to do nothing, and the other is to take action. However, in about 99 percent of cases, ignoring the problem only makes it worse. Why does this happen? In my opinion, it is because doing nothing and pretending the problem will go away on its own is tantamount to encouraging – even rewarding – the undesirable behavior.

You must also consider that allowing one employee’s bad behavior to persist destroys your credibility as a manager. Whether you acknowledge it or not, your entire staff knows that there is a problem, and when you do nothing, your staff wonders why you do not act. In the end, your inaction dilutes your effectiveness as a manager.

One firm that I was assisting had an employee that was habitually 15 to 30 minutes late. Sometimes the manager took corrective action, and sometimes he ignored the problem. When dealing with these less severe kinds of behavioral issues, consistency is critical. If employees perceive you or your policies to be inconsistent, your credibility will be non-existent, and problem behaviors will escalate.

Where more serious problems are concerned, you must address the issue no matter how important or valuable the employee is. No employee should become so valuable that you cannot do without him or her. The minute an employee becomes invaluable, you allow that employee to take you hostage. The goals and mission of the department must be given a higher priority than the welfare of one problem employee.

One effective way to approach a problem employee is to ascertain the real issue, then address it in a meeting. The sooner this meeting takes place, the more quickly the problem can be resolved.

Without exception, when a problem employee is removed, the morale of the entire business improves dramatically. While terminating employees is not a pleasant experience, the price is much higher when you allow a problem behavior to continue. Additionally, in so many cases, termination was exactly what that employee really wanted. They just did not have the courage to quit.

Problem employees affect every single staff member, and I guarantee you that your staff would rather work harder and longer than put up with bad behavior. They will all be willing to pitch in if it means their working environment will be improved.

Problem employees can have devastating affects on the morale of your entire department. By dealing quickly and fairly with these employees, you ensure that your business remains a wonderful place to work.

You can do this!

Getting a Loan: The Rules Have Changed

“If you don’t like something, change it. If you can’t change it, change your attitude.” ~Maya Angelou

So many of the entrepreneurs we help at the Jim Moran Institute are expressing frustration with financial institutions and their new lending processes. In the past, entrepreneurs could get bank loans without too much hassle. However, because of the recent credit crunch, these financial institutions have adopted much stricter loan requirements.

Financial institutions have a gross margin of less than five percent. That is, the differential between the rates they lend and the rates they pay depositors is very low. Under normal circumstances, financial institutions have to make 20 good loans to make up for one bad loan.

Because of the collapse of the real estate and construction industries, many financial institutions have experienced large losses. As a result, their ability to take on risk has been significantly diminished. In general, bad loans reduce income, which in turn, reduces a bank’s equity. Once the bank’s equity goes down, their ability to lend decreases dramatically.

While financial institutions would like to give more loans, they are simply unable to do so. If banks or credit unions are making commercial loans at all right now, they are requiring so much more in an effort to minimize their risk. For example, they now want great business plans backed up by documented facts, not projections.

Many entrepreneurs are taking these heightened requirements personally. However, things have changed, and entrepreneurs just need to understand the new rules.

First, if you are going in for a loan, you just need to expect it to be a much more exhaustive process than previously. Just about all financial institutions are now requiring some form of collateral to cover the loan. While this might seem onerous, it is just a precaution these financial institutions are taking to ensure they do not lose any more money. The more collateral you offer, the higher your likelihood of getting a loan.

Additionally, financial institutions are carefully evaluating a borrower’s ability to repay the loan. We are working with a business that is looking to secure a loan for the property they are using. In this case, the financial institutions are requiring personal guarantees (which is normal), but they also want documentation showing the business’ past financial performance. They want to ensure the business is going to be able to make rent payments back to the owners, thereby minimizing their probability of loss.

If you are currently in the market for a loan, you just have to realize that the rules have changed drastically. Getting a loan is much tougher, but understanding the new rules and being able to anticipate what financial institutions are now looking for will make the process far less frustrating.

You can do this!