Thick Skin and Open Mind

It takes a thick skin to be in business. We don’t get better by ignoring the bad news, we get better by fixing the bad news. The problem is, we are hardwired to get defensive when someone points out flaws. In today’s culture, the attitude of you are either with us 100% or you are against us 100% promotes knee jerk reactions that leads to hiding issues that would normally wither under the light of day.

The balancing act of seeking out solutions to problems while remaining positive is difficult. I have never had a problem finding someone willing to complain and find fault. And it is usually not difficult to find someone who doesn’t believe there is a problem either. Finding a balanced solution can be difficult.

In my career, I am often in the position of pointing out problems to business owners. Things like your target demographic is not big enough to support a business. Your financial controls are inadequate to grow your business. Your sales force is cutting your margins to unprofitable levels. There are hundreds of other examples, but what really stands out is how a person responds to the problems. Someone who gets defensive, denies the problem and attacks the messenger is not going to perform as well as someone whose response to negative feedback is to ask questions and seek understanding.

So what does it take?

First of all, a curious and questioning mind. One that is open to the possibility of being wrong. One that is looking for a better way. Embrace the scientific method of testing hypothesis and coming to well thought out conclusions. A mind that is more interested in progress than always being right.

Second, there must be trust. Trust that the person bringing the problem to light will not be punished, but heard. Trust that a problem is not a personal attack, but a means of improving the current situation. Trust that a solution developed by all stakeholders will be make life better.

It takes a thick skin and an open mind to admit there is a problem and create a solution. Develop those skills and you will go far.

Focus. On the Important Stuff.

I grew up on a commercial dairy farm and we had to grow hay to feed 300 cows. As you can guess, that’s a lot of hay. One of the things that was common knowledge was if you harvested hay at the beginning of July, it had grown as much as it would and started to dry down, making it easier to harvest and giving you the most tons of hay per acre. With this time frame, you could then harvest again in September and maximize the tons of hay per acre for the year.

Then came the new ideas. Harvest the hay as soon as it starts to bloom, and then every 30-40 days afterwards depending on the weather. In Northeast Ohio, you could usually get 4 cuttings per year this way. The total tons per acre was about the same as 2 cuttings, and often less. And you did double the work.

So why in the world would anyone consider doubling their work? Because we discovered that tons of hay per acre was not the important thing. It was the protein content of the hay that made cows give more milk. By cutting the hay as it was just starting to bloom, the protein levels were peaking at 18-20%. The plants were storing up energy for blooming and reproduction, protein levels were at their highest. If you wait until the plant hits full growth, the protein has been used up and is only 3-5% of the total weight. This hay is bulky filler with little nutritional value outside of fiber. From the standpoint of producing hay to feed to dairy cows, the important thing to maximize is not tons of hay per acre, it is tons of protein per acre.

All of this is a very nice lesson in agronomy and feeding cows, but most of you don’t milk cows for a living. What lesson is there for you? As entrepreneurs, we do many things, but what we all have in common is we spend time producing or selling a product. And most of us measure our efforts in hours per day or week. We take pride in knowing that we can outwork just about anyone else. We know what it takes to make our business go, and we’re not afraid of the hard work to get there. But what if we are measuring the wrong thing? The tons of hay per acre, not the protein per acre. Would it be better to measure productivity in a way that did not involve hours per day? Something that relates to the value of what you produce? And even more shocking, what if working fewer hours actually produced more value to your business?

I can tell you with absolute certainty that time is even more important for you to budget than money. And on top of that, not every hour is equal in terms of productivity. But as long as we measure productivity as working hours per week, we will never find out what is truly important.

 

The curse of being of too busy

Small business owners are notoriously busy.  I grew up on a commercial farm with 800 acres of crops and 300 cows to milk and I have managed multiple businesses at the same time.  I know busy.  I know long hours.  I know what it takes to make things run.

All of my clients are busy – from the online sales-based businesses to the farms and machine shops.  Not to mention the inevitable curve balls that crunch your schedule even more, tiny windows of opportunity that force 24 hour days, tax season for CPAs,  the death of a key employee.

The response of just about every business owner to a curve ball is put their head down, pull harder, and work longer.  These are managers who are already too busy to read, too busy to hire new person, too busy to keep up with the never-ending stream of deadlines.  But that’s the coveted work ethic that is hard wired into entrepreneurs.  We make things happen.  Somehow, we find a way to push through and get it done.

When I meet with a client I will often say “Perhaps you are spending too much time working in your business and not enough time working on making the business stand by itself.  What if there is an easier way that you don’t notice because you have your head down and are so focused on the work?”

Here are three changes I made to break the “too busy” cycle and transition to balance in my life.

#1 – I walked away from low margin customers.  After telling a brand new BIG customer three times that I could not meet with them when they wanted because a low margin customer already had something scheduled, I stopped and said you know what, I will make it work to fit your needs.  That move made me more in 2 weeks with the new customer than I did in 2 months with the low margin customer.

#2 – I set aside time to work on MY business and MYSELF.  Not my clients, but me.  Time thinking about what I want the business to give me in return for my time.  Time spent in deliberate learning and expansion of my knowledge base.  I set goals, develop new products, and plan how to reach those goals.

#3 – Focus.  I keep my values, mission, goals, and task list aligned and focused.  I know that 80% of the output of my business is controlled by 20% of the input.  I find that 20% and leverage that knowledge by sharing it with everyone in my business.  I say no to things that are outside of the mission.

You have heard about my journey.  What is yours?

 

 

Why do we have managers who can’t manage finance?

The failure rate of startups has always dismayed me. In my consulting, I see two main reasons for business failure. First, people don’t have a firm grasp of their financials. They just don’t know their numbers. Second, people underestimate the toll on their physical and mental health. Depression, divorce, heart attacks and strokes from stress are all too common and dismantle many companies that have everything else going for them.

Let’s look at the first reason for failure – Managers who can’t manage finances. The bulk of our entrepreneur class consists of people who start a business out of passion – I love to bake, to farm, to fix computers – but they don’t have any business background. How do they get their start? They are disgruntled employees who are so fed up with the way their boss does things that they quit and start their own business, with the barest of plans.

If you think about it, the entire restaurant industry has managers who do nothing but sooth irate customers and make sure people show up for work. Manufacturing is no different. From line managers to shift managers, financials are hidden from people. The focus is make your production numbers, or we will find someone who can. Anyone who has had a sales job knows it is all about hitting the sales quota. Just sell more, more, more. Rarely does anyone get to see the whole financial picture.

Is it any wonder todays entrepreneurs are missing critical skill sets? Budgeting. Reading financials. Financial controls. Cash flow. Profit and loss. Balance Sheet. Net Worth. Top that off with the misconception that having a CPA do their taxes once a year is more than enough and you have a small business at a disadvantage.

Here is a news flash. If you can’t put your hands on rock solid financial numbers to back up a decision and plan for the future, you are not managing. You are working hard and hoping for the best. Maybe it’s time to start working smarter, not harder. Focus on your financials.

Focus, but on the right thing.

Last week I met with a sales professional who was pretty darn good. At sales. She told me “last year I made 88 thousand. But in November, things got slow, and now in February, I have nothing left. I have been eating off of credit cards, and I don’t know where all that money went. I have over $12,000 in credit card debt.”

It’s not an uncommon scenario among people who make a living off of sales commissions. Real estate agents, car sales people, insurance agents – all of them are able to “sell” their way out of a financial hole. So how did she get in this financial hole? For starters, she was focused on one goal. Sell as much as possible. Generate lots of income. Period. Strong sales compensates for weak financial management skills, and when the sales dry up for whatever reason, the crash is hard and fast.

The solution?

First step: Change your focus. From sales, to net worth. Choosing the right metric makes all the difference in the world. Set realistic financial, sales, and personal goals.

Second step: Find out where you spent all the money. Download your check book register to QuickBooks, Excel, or any other program that lets you sift through the data easily and find out where you spent your money.

Third step: Create a budget. Replenish your cash reserves, plan not only your income and expense, but also your assets and liabilities. Make the budget robust enough to handle the variability in your income stream while adding to your net worth.

Fourth step: Develop processes that support your goals. Formalize your sales process to fill your sales funnel from prospects to sales. By keeping your sales funnel filled at the top and following your process, sales droughts are leveled out and financial stresses are reduced. Follow the sales processes religiously! Develop financial processes that alert you well before any financial issue becomes a business threatening disaster. Build in automation to make sales and finance functions efficient.

Fifth step: Breath. Control your thoughts and don’t panic. Decisions made in the heat of the moment are rarely good decisions. Gather data, develop a solid plan, and implement.

That’s the path out.

 

Do you know what you don’t know?

I met with a plant manager a while ago about training his line managers to become proficient at Excel. You know, that fun number crunching spreadsheet program that people love to hate? So we sat down and I started asking questions. What skills do your line managers currently have? How many people? What do you want them to know how to do? So after about 10 minutes, I have a pretty decent idea of the skill level they were at, and where he wanted them to be.

I asked if he was going to be in the classes, and he quickly said, no, I know more about Excel than all of the line managers. I responded no problem, just checking.

Then I asked him to pull up a spreadsheet that he wanted the line mangers to be able to use so I could tailor the training to something they would use every day. He loved the ideas, and quickly pulled up a spreadsheet the mangers would need to use daily and a calculator, punched some numbers on the calculator and said “We take the daily production numbers, divide by hours of operations and plug the hourly rate in this cell right here”.

I stopped.

I stared.

I shut my mouth and tried very hard to be diplomatic. Because this self-proclaimed Excel expert that didn’t need training had missed an easy one. For those of you who don’t know anything about Excel, it is basically a giant glorified calculator with a monster memory. If you have Excel open, you don’t need a calculator, it is the calculator. On top of that, every time you reenter data, you double the chance for data entry error. I responded, “Is there a reason you don’t use Excel for the calculations?” He looked at me blankly and said “What do you mean?” So I showed him how to enter a formula in Excel to do the calculations automatically. He looked at me sheepishly, and said thank you. That was it. Never mentioned it again, never showed up for class.

Here is my question to you: Do you know what you don’t know? Because that’s what can hurt your business.

And if you don’t know what you don’t know, that’s ok. Call us. We can help fill in the gaps.

Mental Monday

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.

Feedback Loops

 

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!