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Production skills vs. Business skills

Posted on by Russ Coltman in Management and Leadership

It doesn’t matter if you can build a house faster and better than your competition, if you can’t pay the bills on time, you will spiral down and out of business.  Most of us start a business born out of passion – for building or creating something that gives us joy.  When you started your business, no one told you that production is only one component of being a successful entrepreneur.

Here are six areas that exceptional entrepreneurs need to do well in:

  • Management and Leadership
  • Wellness
  • Finance
  • Sales and Marketing
  • Technology
  • Production

How do your skills stack up in these areas?  Want to learn more?  Download the Success Score Card and see for yourself.

What is the Success Score Card?  It is an assessment tool that forces you to look at the connections ACROSS your business.  It is a benchmarking tool that shows what is possible and your comparative strengths and weakness.  It provides a valuable outside viewpoint to help evaluate your business skills.

What you don’t know can kill your business.  Find out where you stand.

Mental Monday

Posted on by Russ Coltman in Management and Leadership, Personal Growth, Wellness

I truly admire Jenny Lawson.  Her post this morning really struck a cord with me:  http://thebloggess.com/2018/01/31/escape/

We are all stronger than we think we are.  Jenny fights a thousand demons each day, and yet manages to write books, blog posts, and keep on moving.  Entrepreneurs must do the same thing.  Some days you win, some days you lose.  But each morning, you get up and get back in the game.  We are stronger than we think we are.

But be careful.  Strong as we are, the mental illness rates for entrepreneurs is significantly higher than the general population.  Alcoholism, drug abuse, divorce, depression, anxiety, anger issues, suicide, you name it, we have got it in spades.  There are some games you DON’T want to win.  We tend to push ourselves harder, take on more stressors, and not take care of ourselves.  Pay attention to your mental health, because without it, you risk losing much more than your business.

Cycles…

Posted on by Russ Coltman in Management and Leadership, Wellness

I see patterns of failure in businesses. Over the life cycle of a business, the first reason for failure is lack of sales. The sales may not be there for a multitude of reasons, but at the end of the day, the sales are not there.   Business crashes.

Succeed in building sales to a sustainable level and the next hurdle will be finances. Perhaps it is trying to cash flow rapid growth, or maybe you are not monitoring your cost of production properly, but there will be a financial issue that comes close to killing your business. Solve it, and you advance to the next level of problems.

Make it this far and you will face a wellness issue brought on by the stress of running a business. It may be a heart attack, depression, divorce, substance abuse, or a multitude of other issues, but it will come. Be prepared, build a support network and have plans to take care of your mind and body as you run this marathon of building a business.

The next issue you face will be how to effectively managing the people you need for continuing growth. People skills are often overestimated and always in short supply.

Master the issues of managing people and guess what? You have to start all over again, because running a business with lots of people requires more sales, which changes your finances, adds to your stress levels and means you need to hire even more people. An ever growing circle of complexity for you to figure out.

The good news is, others have figured it out before, and have laid out paths for you. It is your job to apply these concepts to your business. Turns out, building a business is half art, half science.

Good luck!

Business Killers

Posted on by Russ Coltman in Management and Leadership

There are things that kill your business; beasts that you don’t see, let alone know how to defeat. For some, its marketing – you are unable to build sales fast enough to support overhead. For others, it is finances. You are so focused on the next sale, you didn’t notice that you are losing money with each sale. Perhaps it is the stress of running a business that beats your brain up so much that even simple decisions become complex. Or maybe you have grown so fast that you need to hire people, but you have overestimated your people managing skills.   Every business owner faces their own unique monsters. The question is, do you let the typical entrepreneur mentality of “I know what I am doing” rule your decisions? Or do you adopt the mindset of I must learn fast to survive? It is your choice.

Feedback Loops

Posted on by Russ Coltman in Management and Leadership, Personal Growth

 

An interesting read about “overnight successes”:

https://medium.com/personal-growth/how-ernest-hemingway-became-an-overnight-success-3277b482c39c

I found “Section 3: Realize that Feedback is the Only Shortcut” to be particularly thought-provoking. I often think of production metrics and financials as the feedback loop you set up to monitor your business. So the better job you do on setting up the metrics, the better feedback you get, the better your performance.

Hope you enjoy the read and let me know your thoughts in the comments!

The Mental Game

Posted on by Russ Coltman in Management and Leadership, Wellness

Running a business is stressful; who would have guessed! So what happens to your decision making skills when subjected to long term stress? Do your mental skills improve? A pressure makes diamonds scenario? Or do you get tunnel vision and decision paralysis? It is important that you recognize your mental state and know when and what your body needs at what point in time. Know when to push through it, and know when you are making bad decisions and need to mentally recharge. I have seen too many veterans with PTSD to ignore the effects of constant stress.

Start with a good night’s sleep and load your tool box with skills to help you cope with stress. For some, it is exercise. Others find peace in meditation. Others turn to support groups, others to nature. Find what works for you, and pay attention to what your body and mind need before they hijack your business.

Financial Focus

Posted on by Russ Coltman in Accounting, Management and Leadership

Entrepreneurs often progresses through four stages of financial management focus – Check book balance monitoring, cash flow monitoring, net income monitoring, and net worth monitoring. Each change brings its own learning curve, and the change of focus brings increasing rewards.

Often a new entrepreneur will gauge their financial health by looking at their check book balance, and very little else. As time goes on and the flaws with this system come to light. A bounced a check or two and the stress of being chronically short of cash pushes your focus to cash flow and timing. First with a week, then a month and eventually working up to focusing on yearly cash flow. Lack of cash flow management will kill a business faster than lack of profitability. Businesses with high debt can easily be profitable but have crippling cash flow issues that shut down a business.

The next step in a company’s progression is to start focusing on managing net income. Cash flow is more important in the short term, but in the long term, you have to make a profit. Cost control measures and sales systems are put in place to insure profits. Plans and processes that put money towards the bottom line.

The last step is one that few entrepreneurs think of – managing net worth. Opportunities that provide the fastest growth to net worth are prioritized and funded. The impacts of debt on growth are understood and exploited. It is a subtle change, but focusing on net worth is what builds lasting wealth.

As a business matures, the monitoring of financial progress must adapt as well. Where are you at on the learning curve?

Think like an Entrepreneur

Posted on by Russ Coltman in Accounting, Management and Leadership

I was waiting at the doctor’s office one day when the receptionist asked a waiting room full of people “Does anyone speak Spanish?” The lady sitting beside me happily jumps up to help out. I jokingly tell her to ask for an application, she giggles and says $20 per hour, and said she will get rich! If you do the math on $20 per hour, 40 hours per week, 52 weeks per year (no vacation, you are rolling in the money!), you have a gross income of $41,600. That is where many folks stop and say wow, much better than my minimum wage job!

While that may sound like a very good wage to someone who is used to working for others, it won’t support a business for very long. When you have been trading dollars for time all your life, there are many things that slip by you because you have never had to think about them.

For starters, as a self-employed person, you have to cover both the employer and employee shares of Social Security, unemployment insurance, workers compensation, and insurance just for starters. These can easily take 25% or more of your hourly rate to cover your costs. Throw in a computer, continuing education, cell phone, transportation, and a small office and you are racking up all kinds of costs. Now here is the real kicker. Rarely do you get 40 billable hours per week. As a fledgling entrepreneur, you have to spend time tracking your time, marketing your business, making sales calls, billing your new customers and everything else you have to do when you are your own boss. So here is the real math on that $20 per hour job.

 

Dollars per hour  

$           20.00
Hours per week

x

                 30
Weeks per year (you might get sick)

x

                 50
Gross income

=

$         30,000
25% taxes and Insurance

–

$           7,500
Net Income

=

$         22,500
     
Dollars per hour at 40 hours per week, 52 weeks per year  

$           10.82
     
Percent Difference  

           54%

When you look at the percent difference, you will see that your original numbers were off by almost 50%. By taking a bit of time to run through some numbers, you can avoid making some big mistakes! You can use this same framework when pricing out your services to customers, looking for all of the hidden costs you are facing. A very handy thought process to keep your new business alive.

What do you need to know…

Posted on by Russ Coltman in Management and Leadership

If you were to lay out your entire business in front of your banker, odds are that she would say, ‘you need to borrow more money, consolidate debt’ or some other bank solution. Ask your CPA, they would likely give you a different variation, perhaps with something along the lines of pay off debt. Ask an sales expert, and they may point to changing your brand.  Find any expert, and they will give you their version of a solution to your business.

I have lunch once every couple weeks with a friend who is a top ranked insurance agent in the nation. One of his favorite sayings is when you are a hammer, every problem looks like a nail. That’s exactly what I am trying to avoid!  Are you a hammer or do you have a full tool box?

Finance in Entrepreneurship

Posted on by Russ Coltman in Management and Leadership

Numbers. It seems these days that everyone and everything is data-driven, but how do you make that work for you and your business? How can you learn the skills necessary to create (and stick to) a budget? How are you going to react when everyone’s favorite time of year–Tax Season–comes around?

Check in regularly or subscribe to keep up with our blog series on the finance skills necessary to run a business: Finance Fridays.