July 2020

July 15 2020

Create Your Team of Trusted Advisors

Being a business owner can be lonely. But it doesn’t have to be.

“I never had anybody to talk to.”

My dad was a sole proprietor for 35 years. He was the first licensed audiologist to open a private practice in Erie, Pennsylvania in the late 1970s.

He started his business from scratch and learned as he went. He never had a business mentor. He never had a trusted advisor. If he encountered a problem, he figured out how to fix it like MacGyver, just in a business sense.

Like most business owners, my dad experienced very high highs when things were going well and very low lows when the bottom occasionally fell out.

While my dad did fairly well for himself, he always lamented that he never had anyone to talk to when he needed some general guidance or was just looking to vent. He explained to me several times about how lonely being a business owner can be.

My dad’s story underscores the importance of business owners and CEOs to have a team of trusted business advisors to turn to when general or specific advice is needed.

Here are some ideas for how to put together your own team of trusted advisors.

Who should be on my team? At a minimum, you should have the following professionals on your team of trusted advisors:

Attorneys, Certified Public Accountants, Financial Planners, Business Consultants, Insurance Representatives and Bankers

Your team of trusted advisors should work together as a team – with you as the quarterback.

Your team must work together. Important business decisions need input from everybody on your team. For example, the decision whether to structure your business as a partnership, S-Corporation or C-Corporation can have different legal, tax and risk consequences that need to be discussed as a group by your attorney, CPA and insurance agent.

You must be the quarterback. You can’t assume that your attorney will talk with your CPA, or that your insurance agent will pick up the phone and call your financial planner when necessary. You need to direct your team to talk to each other. Some business owners request an in-person meeting of the entire team once a quarter or twice a year. But you must be the person to initiate the teamwork.

Take each team member out to lunch two times a year at a minimum. Each team member should be intimately involved with your business and know pretty much everything that is going on. While keeping in touch can definitely be done via phone or web conferencing, nothing is as effective for building business relationship than meeting in person.

Creating a team of advisors who have a vested interest in your business take significant time and effort. Chances are you’ll need to cycle through several individuals for each professional slot until you find someone you connect with. But once you have the right group of people in place, you’ll always have someone’s ear to bend – in both the good times and not so good times.

July 15 2020

Business Lessons From COVID-19

Key takeaways on how to better prepare your business for future black swan events

It’s probably extremely unfair to think that businesses could have been prepared for the economic downturn caused by the COVID-19 pandemic.

Even forward-thinking business owners who normally do a great job planning ahead could be forgiven for not being prepared for the magnitude of the financial hurricane that many are trying to navigate this year.

There are, however, some key takeaways for what businesses can at least try to do differently about being better prepared for a once-in-a-generation (maybe once-in-a-century) black swan event.

Run a worst-case scenario twice a year. What happens if your business lost 80% of its customers overnight? What about if it had to completely shut down for three to six months? These worst-case scenarios may have been unthinkable a year ago, but now they are reality for many small businesses. A worst-case scenario for your business should be updated at least twice a year so you have a plan ready for action in case the unthinkable happens.

Are you able to build a sizeable emergency fund to fend off the next black swan event to hit your business?

Prioritize an emergency fund. It can be tough for an owner to leave retained earnings untouched for a rainy day that may never come. Every business should, however, do their best to have an emergency fund that covers at least 3 to 6 months-worth of expenses. That’s obviously easier said than done for businesses in some industries that operate on slim margins. But the attempt to accumulate a sizeable cash cushion should still be made.

Review your business interruption insurance policy. Some business owners were greeted with the unwelcome news that their business interruption insurance policy did not cover the COVID-19 pandemic. A visit to your insurance agent should be on your calendar for sometime soon to go over your business interruption policy with a fine-tooth comb. Discuss with your agent all the events that are excluded from your policy and if there are separate riders available for these excluded events.

Have a team of trusted advisors ready to interpret new laws. Multiple new laws were enacted in response to the COVID-19 pandemic for U.S. citizens and all sizes of U.S. businesses. While it’s helpful for business owners to understand the basic framework of recently passed legislation, you should rely on your team of attorneys, CPAs and other professionals to properly interpret and apply new legislation to your specific business.

Strengthen your banking relationships. Some businesses were left empty-handed when COVID-19 relief loan programs became available because these businesses didn’t have an existing relationship with a preferred loan administrator. Consider meeting with your banker twice a year to go over your financials and discuss various lending program. Even if you’re a cash-only business who shies away from any form of debt, it’s always a good idea to have an existing banking relationship in place in case a once-in-a-century black swan event shuts down your business for a period of time.

July 4 2020

Begin with the End in Mind

Begin With The End In Mind

Visualize what you want your business to become before setting out on your journey

My first job out of college was working as a sports reporter for The Meadville Tribune in Meadville, PA. Covering high school tennis matches and taking rec league bowling scores over the phone wasn’t the most lucrative job for a recent college grad, but working in a fast-paced newsroom for half-a-decade was a bunch of fun.

Bob, the sports editor and my boss, knew that most of the reporters he hired wouldn’t call The Tribune home for more than a couple of years before moving to a larger newspaper that featured more visibility – and more money. Bob was very upfront that his goal was to provide the training and experience that would help us move to a bigger, better newspaper.

“My goal is to get you out of here in 2 or 3 years,” Bob told me during my interview.

Businesses must always be innovating their products and services.

Bob was embracing the idea of “beginning with the end in mind,” a philosophy which was made popular by author and motivational speaker Stephen Covey in his book “The 7 Habits of Highly Effective People.”

In his book, Covey argued that people first need to visualize who you are and what you want in life, then empowering other people and circumstances to shape you and your life by default. You need to imagine where it is you want to go before deciding what actions you have to take to get you to your destination.

When Bob first hired me, he was already planning for my exit several years later. Not only was he thinking about how I was going to leave The Tribune at the same time he was hiring me, he wasn’t afraid to discuss my eventual exit with me, in person, during my interview.

Do you begin with the end in mind when thinking about your business? Can you visualize where you want your business to be in 5 years, then construct the steps necessary to achieve your vision?

Here are three ways you can think about your business starting with the end in mind:

Form strategic partnerships with employees. My former boss Bob began with the end in mind when he hired employees at The Tribune. Do you? Let’s face it. Most of your employees will leave your company. Some may stay 1 year, some may stay 20 years. But eventually, most of your employees will leave to go elsewhere for a job.

Will you maintain good relationships with former employees after they’re gone? They could be a potential referral source for future employees or provide value in another completely different way that you can’t think of right now. At the same time you hire an new employee, mentally prepare yourself for when that employee turns in their two week notice. Tell that employee that you’ll do whatever you can to help them in the next chapter of their career.

Always be innovating. Your award-winning product or service today may not be your award-winning product or service tomorrow. You need to think about your product or service’s lifespan, and what will take its place when that time comes. That may be 5 years or 25 years down the road, but you don’t want to be caught without a Plan B once it’s time to retire Plan A.

Plan your exit strategy. Your business career (and everyone’s business career, for that matter) will eventually come to an end. There are three choices: a.) You liquidate your equity holdings while you’re still alive; b.) Your equity holdings are transferred to a person or persons of your choosing after you pass away; c.) Your equity holdings are transferred to a person or person of the probate court’s decision after you pass away. It’s your choice how the story ends.

The moment you start thinking about starting a business, you should start thinking about how you will exit that business. That way you won’t be caught off guard if unexpected life events occur that force you to choose a non-preferred exit option.

July 4 2020

Be a Socratic Business Owner

Always be asking questions to gain new insights about your business

Business owners always need to be looking under the hood of their vehicle and asking questions. What’s the name of each part? How does each part work? How do I diagnose a problem? How do I fix each part when it breaks? Asking and answering questions is the foundation of the Socratic method, a form of argumentative dialogue whose purpose is to stimulate critical thinking. It is named after the Classical Greek philosopher Socrates.

Ask your employees, partners and outside advisors plenty of questions to gain new insights about your business.

Asking questions about your business is no different than asking questions about your favorite car or truck. You need to be looking under the hood of your business and asking questions to understand how each part of your business works, how to diagnose a problem when it arises and how to fix each part of your business if it breaks.

There are potentially hundreds (maybe thousands?) of questions we could brainstorm for you to ask about your business. Here are three important questions to get you started.

What’s our customer retention rate? You want to be able to rely on revenue figures from period to period so you can prepare accurate forecasts. You can’t do that if your business has a high customer churn rate. It also costs more money to attract a new customer than it is to keep an existing customer. High customer turnover means spending more money on a sales funnel to keep qualified leads coming in.

What’s our employee retention rate? While employee turnover may fluctuate from year-to-year, it should be steady over a period of 5 to 10 years. If it isn’t steady, you need to find out why. If turnover is decreasing, that’s obviously great news – but you should still find out WHY it’s decreasing. Is it because of great managers? A new compensation plan that was implemented? Maybe there was a nationwide recession and people were afraid to change jobs?

On the other hand, if turnover is increasing, you definitely need to get to the bottom of why it’s happening. Is it because of poor managers? Is there limited room for advancement? Do you pay below-market wages and salaries?

Who’s our most profitable customer? Customers come in all different shapes and sizes. Some customers buy high volume, others buy low volume. Some customers are high maintenance that require a lot of tender, loving care from your employees, others are low maintenance that don’t require a lot of hand-holding. At the end of the day, you want customers who contribute the most to your top line revenue with minimal expenditure of financial resources made to service those customers.

Create a mini income statement for each customer to discover which is most profitable. Start with the total revenue generated by that customer. Then list all the resources your company used to service that customer. Don’t be afraid to use an estimate of expenses for each customer if you need to. You’re just trying to get a general sense of which customers contribute the most to your bottom line.