Management

Another one straight out of the Harvard Business Review, this time from well before I was born!

The authors of this article assert that there are five stages of growth in a business, and that they are non-linear in nature. Not all companies will go through all stages, and the stages don't progress in the same order for every company. Here they are:

1. Existence - getting customers, meeting their needs. These two things mean that a company exists.
2. Survival - Switching focus from existence to the relationship between revenues and expenses. Here is where you worry not only about whether you can make money or not, but whether you make more than you spend!
3. Success - This isn't the end of the road, by any means. By the time you're here, you've created a viable business that brings in sufficient profit. You have two things that you can do:
1. Use the success of the company to finance the owner's lifestyle/other activities, or
2. Use the success of the company to finance further growth.
4. Take-off - After making the decision for more growth, your primary concerns are managing the growth and financing the growth.
5. Resource Maturity - The authors say that this is the point at which you have "arrived" in your business. Less than one percent make it here, but that is by choice for most. Here, you must take hold of the business after its high growth stage, and implement systems to help control the company.

1. Company Specific
1. Financial Resources (cash and borrowing power)
2. Personnel Resources (how many people, how awesome are they, what level are they)
3. Systems Resources (Business Process Automation, planning/control systems, info systems)
4. Business Resources (customer relations, manufacturing/distribution processes, reputation, etc)
2. Owner Specific
1. Owner's personal goals and business goals
2. Owner's operation abilities
3. Owner's managerial abilities, and willingness to delegate
4. Owner's strategic abilities

The interesting thing about these "key factors" is that they are ALL important, but that in each stage some are more important than others. According to the authors, here is what you should focus on in each stage:

1. Existence
1. Business resources - what little you do have needs to be quality.
2. Owner's operation abilities - your ability to do what the business does.
3. Cash - For without it, nothing survives.
4. Matching personal and business goals - if your business goals and your personal goals are dissonant, get out now.
2. Survival - at this stage, doing what your business does, and keeping an eye on revenue & expenses is your focus.
1. Owner's operation abilities
2. Cash
3. Success - There are two sub-stages here, disengagement and growth.
1. Disengagement
1. A little less on your ability to do, but that's still the #1 focus.
2. Of the eight factors, all are rising in importance but cash, ability to do, and business resources.
2. Growth
1. Matching business and personal goals. This is a risky and stressful time, make sure you really want it!
2. Operational abilities
3. All of the rest are important here, but not the PRIMARY focus.
4. Take-Off - It's ALL important in this stage, but here's the order of focus according to the authors.
1. Cash - if you can't finance growth, you'll fold
2. Strategic planning - You must have the road map to get there.
3. Systems and controls - Since you can't do everything personally in a high growth stage, you must have systems in place to bring you the results you're looking for.
4. Business/Personal goals
5. People - Do you have the right kind of people, in the right positions? How's your culture here?
6. Delegation - if you can't delegate, you carry the weight of the world on your shoulders. Your people are there for you, to do what you tell them to. Give them things to do, and let them!
7. Your ability to do - Since you're delegating and focusing on growth (strategery), you shouldn't be in the day-to-day of doing what your business does. It's less important, but since you're a teacher in this stage (delegate!), it's still important.
8. Business resources - these are becoming increasingly a natural byproduct of business operations. Manage your relationships, but don't give it all your attention.
5. Resource Maturity - in this stage, the systems are in place. Most things are important, but managed - not a CRUCIAL focus. The only crucial focus is:
1. Strategic planning. Many companies forget that the market moves with or without the company, you might as well move with it.

• Every business goes through these stages differently. Some stages may even be skipped or not touched.
• Use this as a guide to what you should be thinking about in the future. If you're in the Survival mode now, but you intend on getting into the Growth stage, make sure you account for the crucial factors of the growth stage.
• When considering advice from other business people, consider how their businesses evolved. The evolution of Wal-Mart was not the same as the evolution of Facebook, so Sam Walton's and Mark Zuckerberg's advice about the same business issue may vary quite a bit.

If you've found your business growing to the point that you no longer have a hand in the day to day grind, you might realize that there are several things concerning you about the way your employees handle business. These little annoyances can have a large impact on the company if not taken care of. I've seen excellent ways to set employees on the right track, such as incentive plans, meetings, and team development. Those work great for existing employees, but for new employees there's another way - New Hire Training!

Why Have New Hire Training?

New employees are excited from day one. They come to work eager to learn how everything comes together, meet new people, and make a good impression on their new place of business. If Day 1 confuses your employee with conflicting messages from different sources, they won't come back on Day 2 with the same attitude. If you channel their energy from the start to help create the results you're looking for, it's much easier to get consistently high quality work, and everyone is happier because of it.

What To Include In New Hire Training.

Ideally, New Hire Training will give your new employees the information they need to succeed in your company. This includes HR information such as time off, pay, the Org. Structure, specific legal requirements; it may also include any job specific information such as accounts, clients, ways to find information not covered in training. In my industry (Information Technology Consulting), new hires should learn how to quickly find almost any piece of technical information they are looking for. The old adage about teaching a man to fish is the sole purpose for New Hire Training.

What NOT To Include!

It's worth mentioning that there are a few things you don't want to include in your training:

• What happens on your last day
• What happened on somebody else's last day
• Information that is not relevant to those being trained
• Information your new hires already know

Your New Hire Training should be informative, interesting, involved, and a slew of other words beginning with i. Make sure you spend plenty of time developing your training plan, and ensure that it includes all of the information your new hires need to avoid the annoyances of the every day grind. After you train your employees, monitor their performance. See what information they retained. What information are they spreading to your existing employees? Are they able to help each other out? Once you've seen some areas of improvement, make note of them and include them in your next training class.

Used effectively, New Hire Training will help keep your company on track. It will help focus your new hires' energy towards the right things. It can create a culture of continuous improvement, and really set you apart from the competition.

I have an acquaintance with an excellent business idea, enough funding to be getting on with, and excited companies ready to buy his product, and yet is making $0 in sales. I have another acquaintance who hesitated submitting numbers that had too much speculation involved in them. Yet one more person I know doesn't like getting involved with anything until he knows everything about it. What do these three people have in common? I think the answer is that they are waiting for an event that can never happen.

Many young entrepreneurs get pretty wrapped up in their product or service. They insist that it must be just right before it is capable of making money. The truth is that it's better to have a mediocre something making a difference in people's lives than it is to have an excellent something making a difference in nobody's. For instance, I've developed a piece of software for websites that makes keeping your website up to date as easy as sending an email. I made it just for myself, and had no intention of selling it. I had a few people that found the same problems with their websites as I had with mine - they were time consuming to update. Having this program that I made, I was able to help them along with their sites. The software is nothing spectacular, it simply gets the job done. If I didn't release the software because I wanted it to be perfect, I don't think I would have ever completed it. It is more valuable being available to people in its simple form than it is not being available at all because it's not yet perfect.

If I can impress upon you any single piece of advice for your company or idea, it's this: DO IT. Don't wait for some idea of perfection. Make it good enough to have value, and get it out there. If you're capable of making it fantastic in the same time period, then do that too. Then, let your customers tell you what there is to improve, and improve!

As a young entrepreneur, you may find yourself in a position where you begin accepting résumés. If you've ever spent time creating a résumé, you might remember how much time you spent on it. If you are anything like me, you may have ensured that you used high quality, watermarked paper. You probably spent a good 30 minutes making sure that no ink was smeared, the watermark was as close to the center of the page as possible, and that when held up to the light, it was readable from left to right. When you accept a résumé in person, remember your experiences creating one. Here's a list of what you should consider doing when given a résumé:

• Smile
• Sincerely thank the applicant for their interest
• Review the résumé for a few seconds while they are there to let them know that you will at least read it

Here's a list of what you should NOT do when given a résumé:

• Frown
• Fold or crease the résumé
• Set it upside down on a big stack of papers
• Give the applicant the impression that it will not be read
• Throw it away

What other items can you think of to add to the lists of "do" and "don't" above?

One common notion that young entrepreneurs have is that they need a partner in order for them to really have a business. I had partners in my first four endeavors, and I'm pretty sure that unless I can't get by without one, I won't have a partner in my next venture. My experience with partners is that you have to be 100% open about expectations, or there is too much room for "misunderstanding."

Partnership #1 - The Equity Lesson

In my first partnership, I was the sole financial contributor. We both did quite a bit of work when it was time, but I felt like my work was equal to my partner's, while I had a financial contribution as well. Since we were both 50% owners, we felt that we had to talk about every single decision. Because of that, many decisions weren't made that needed to be. When it came time to make another investment, my partner was not in a position to do so. He is not really a risk-taking guy, so he wasn't prepared to toss a paycheck into the business not knowing what would become of it. I wasn't too thrilled about the idea of "dumping" more money into the business and still being just a 50% partner, either. I valued the friendship much more than the business, so slowly we let the company die.

Partnership #2 - Open Communication

In my second partnership (different partner this time), both of us invested equally. We both had the knowledge of the industry, and knew which decisions to make and when. Having learned from my first partnership, if one of us wasn't around to make a joint decision, the other would do their best to make the right decision. This type of trust is important, but uncommon. We both worked gruelling hours through the summer developing a foundation for the company, made a fair amount of money, and hired a contractor to help us out when we needed it. We were both college students at the time, and once the school year got busy, I let my grades suffer (no second thoughts there, I'd do it the same way again). My partner let the business suffer. He felt bad that he was not able to dedicate himself to the company, and he didn't really want to communicate that he wanted out. He decided that the best way to handle the situation was to avoid it. After cornering him a couple times, we talked about the company, its future, and each of our parts in it. We both decided that the best thing to do was to let it go, and pursue other paths.

Partnership #3 - Partners' Skill, Honesty

This partnership was started in order to participate in a business plan competition. We were a group of seven with an excellent idea, two well-respected scientists, an existing line of product (owned by one of the scientists), and a big geographic divide. We all took part in the creation of the plan, and had a good time raising over $35,000 for a feasibility study. Unfortunately, there were a few patterns that I was uncomfortable with.

Our financial guru turned out to not be such a guru. She had a hard time projecting numbers, and each time we came across a breakthrough, she wanted to take a step back and review the process. Entrepreneurs like myself find it hard to not just do something when the opportunity presents itself. The team had a discussion which went rather badly, and two of us (myself included) expressed that we were not proceeding if she insisted on remaining. She resigned, in a very bad mood.

Another pattern I found was in one of our partner's life experiences. He, being a typical college student, was still into partying hard - all play, and little work. He did not feel comfortable enough in himself to make a solid impression on those he worked with, and we weren't hoping to ride along with his self-development. We requested that he consider not being involved, and he left. He was in a much more pleasant mood than our financial "guru."

That's not to say that I was perfect the entire time - I had my downfalls. This partnership ended on a sad note after our two scientists' tests on the feasibility of the products didn't come back as expected. By this time, I was pretty used to terminating partnerships, and considered this to be a great learning experience!

My take-away from this is if you have a hard time working with one partner, DON'T TRY SEVEN.

Partnership #4 - The Good One

This partnership is still hanging in there. I partnered with the same person as in Partnership #1, only with expectations set up front. We also brought in a third partner, a promising entrepreneur who has vision and the desire to succeed. He's not scared of hard work. We aren't making progress as quickly as we had hoped, so the first partner gracefully backed out of the partnership. If we start making headway, we'll probably ask him to join us once more, since he is a very valuable part of the business concept. The other partner and I both maintain full time jobs, and focus much of our time on them. We are geographically separated, but will travel to meet when we need to. I have to say that he pulls more than his fair share of the weight, which is excellent, and he's pretty good at communication. I recognized his good work ethic and positive attitude, and took a chance on asking him to work with me on the project. I would gladly add him as a partner on any business that he can add value to.

The Take-Away

After four partnerships, I think I've got a grasp on the do's and don't's when it comes to picking a partner for me. What I look for is

• Good communication
• Ability to take financial risk
• Set expectations properly
• Hard working

Unfortunately, my biggest problem in choosing partners is that I tend to not think about each person from a neutral point of view. I lean towards looking at the best in people, which has gotten me in trouble a few times. If you absolutely have to have a partner, make sure you choose wisely. Think about the qualities that you value the most, and think about what benefit your partner will add to the business. If there's any doubt or hesitation, talk about it with the potential partner. If you can't do that openly, it's just not going to work. And if you decide to partner with a friend, do a little role-playing. Practice yelling at each other, and act like you mean it. You'll find yourself in a similar situation eventually, and you need to know that after the fights are over, the business will still be there.

When I worked for Dell, I had an opportunity to learn about how they make improvements to their business processes, resulting in better customer satisfaction and profit. They called it Business Process Improvement (BPI for short); it is similar to Six Sigma, and really helps to find where problems are in your business, giving you the opportunity to resolve the issues before they become out of hand.

Six Sigma

Six Sigma is a process developed by Motorola with the goal of improving manufacturing processes to the point of only having 3 or 4 defective parts per million produced. Using multiple quality control methods and tools, those who practice Six Sigma can, in theory, analyze their processes and change what doesn't work well. I say "in theory" because Fortune magazine mentioned in 2006, "of 58 large companies that have announced Six Sigma programs, 91 percent have trailed the S&P 500 since." Don't let that deter you though - as an entrepreneur, you should be used to taking what works and integrating it into your own systems in some sort of "mixed martial arts" approach.

Business Process Improvement - Step One

In BPI, the first step is to pick a process that you intend to improve. At Dell, they stressed that to really be BPI, you couldn't have an idea of how to improve the process before starting your BPI. Bull! Just try not to let your idea for improvement get in your way of recognizing other ways to improve. After you have your process, you should detail every single step, from start to finish. An example might be:

1. Answer incoming phone call
2. Document prospect's request, name, number, etc.
3. Email the sales manager with this information
4. Distribute prospects to salesmen based off of workload
5. Determine feasibility of prospect's request.
   1. If feasible, pass to project management for a quote
   2. If not feasible, research alternate ways to accomplish same goal
      1. If found, call prospect back and propose looking into new approach
         1. If accepted, repeat step 5
         2. If declined, refer customer to company with better fit
      2. If not found, call prospect back and refer to company with better fit

You can see that documenting a process can get pretty detailed. Once you have the process documented, there are opportunities to see where time, money, or resources are wasted. For instance, the wait time between emailing the sales manager and having a salesman work on the request may be 1 day, with no good reason why. The goal is to only do the steps that add value to the customer/client.

Business Process Improvement - Step Two

After you have documented your process and analyzed it for waste, brainstorm different ways of eliminating the wasteful steps. After you have a list (and remember, no idea is too stupid to not brainstorm), determine what effect each method will have on the process. Consider its effect on resources used, time used, and cost. Using the above example, I might decide to implement a system which gives the receptionist basic information about which salesperson has the bandwidth to accept the next prospect. That might eliminate the 1 day of waiting because of the sales manager. It might also cost $10,000, which in my case could be worth it. You'll know whether your idea is or not.

Business Process Improvement - Step Three

You should have had at least one idea about improving your process, several more if it was an extremely wasteful one. Your goal now is to implement the process. Spread the word! If your company's culture supports it, you might even explain why you're changing the process. Keep an eye on the process and determine if there were any unforeseen changes. Is the process working? If so, take note of the savings: time saved, customer satisfaction, new sales, or pure profit. If your company has more than one branch or similar processes in other areas of the business, share your results with the people who can help make the same changes in those areas.

The best part about BPI is that it's something you can do right now, immediately. You can grab a process that's been bugging you, dissect it, and come up with a much better solution. If you want a little bit of practice, go buy a box of Legos and try and build something. Then after you have it built, analyze the process you took building it, and make it better!