by MHolland | Dec 6, 2019 | Business Tips
Michael Gerber, whose business books are huge bestsellers (millions sold) has coined some powerful, memorable phrases that hit you like a bullet, and you never forget.
One of those phrases is that business owners need to work “ON their business, not IN it”.
What exactly is Gerber getting at?
He is pointing to the truth that most businesses are started by technicians, not entrepreneurs, people who are really good at the technical skill of their business; they are not born entrepreneurs.
A lawyer starts a law practice, a plumber a plumbing business, a grower a gardening business; you get the idea.
The pull for a technician who is good at the operational side of the business will always be pulled into doing the technical work of the business.
The doing it, doing it, doing it in an endless cycle.
Can you relate, dear reader? (I know, I can, even after studying Gerber and practicing what he preaches the pull is to, as Nike says, “just do it”).
What Does Work “ON” Really Mean?
Working ON simply means taking a bigger view. When you work ON a project that is IN your business, you are not working ON you are working IN.
Let me explain.
Imagine (yes, this is an unlikely business!) that you sell model airplanes – fully assembled (would kind of take the fun away right!).
You are working ON assembling a model airplane. But raise your vision slightly.
You are in what department of your “assembled model airplane business”?
You are working in “operations”. So, imagine you were working ON the systems of your “operations” department.
You might start with Performance Standards for how you want the models assembled. You may create a detailed Systems Manual such that an average person could follow your system and do it the best way possible that produces a consistent outcome.
You could do the same for “marketing”, “finance, “human resources”.
Is that working “ON” your business?
Yes, and no. It is at a higher level than just working the shop floor.
The Eagle Eye View
Now rise up, take an eagle’s eye view of your business. Look at it as a whole.
How do all the moving parts work together.
Do you have a completed organizational chart?
Do you have a mission, values, a strategic action plan? A marketing plan?
When you work ON your business you are standing at the highest level, tinkering with your business as a whole.
This is when I tell people that, if you want to remain a kind of “technician”, just apply your technician mindset to the whole of your business.
Now, do you see a problem?
Go back to the beginning of this blog – most people that start a business are technicians – with very specific skills related to the work of the business.
The skills required to do the work of the business (assembling model airplanes, plumbing, real estate, accounting, you name it) is an entirely different skill set!
When I started my first accounting practice, I only had accounting skills. I knew very little of what it takes to run a business as a whole.
So, in the beginning I was the business. The business was not separate from me. If I stopped working, the revenue stopped, because I was the biggest earner.
I am Too Busy to Work On
Many of you reading this may be thinking “I am way too busy to work ON my business, I just don’t have the time, as much as I would like to work ON my business, I just cannot find the time”.
What is a busy person supposed to do?
As you are working IN your business, doing the work of the business, take some extra time to document what you do, as if you were delegating this work the very next day.
Start with bold, big steps and then drill down from there.
You must, (absolutely must! – I am shouting here!) write the steps down. It is not enough to think about them, you must document them.
So, write down systems as you are doing them or shortly thereafter.
I can hear the protests – I don’t even have time for that!
Ok, I won’t fight you on that – then you will have to accept always having a “business” that is almost entirely dependent on you.
And, if you are run over by a truck tomorrow, will your business continue smoothly without you?
Probably not.
You didn’t build anything to last.
Not Me, Who?
When you are working IN your business, before you jump into a task or work project, do this – STOP-WAIT, not JUMP-DO.
Then ask yourself this critically important question – “Not Me, Who?”
These three simple words will re-direct your thinking to who else could do it.
Ultimately – and this will take time – in a business that is done, complete and operating like a well-oiled machine, the only things left for you to do are – vision, planning, direction, motivating, and tinkering (with your systems, not the work inside your business).
What if I Love Working IN my Business?
That’s ok if you love working IN your business – so do I!
I love accounting, playing with numbers, connecting with clients.
Even after your business is operating like a synchronized swim team, you can choose to work in it. The difference is you are choosing it, you don’t have to!
I Don’t Have Great People
I have heard this complaint about not having good people in various forms my entire business career.
You must hire good people – you cannot make up for the bad child rearing many adults had!
With systems though, and high Performance Standards, your Team can excel in unimaginable ways!
And, here’s the thing. You will never have consistent PERFORMANCE without Performance Standards.
Even good people will each do it “their own way”.
Just imagine a fabulous, winning sports Team, do they not operate as one? Even with super stars, like Michael Jordan?
Written Performance Standards that are granular, simple, and can be monitored in physical reality are what I am talking about here.
The difference between a real Performance Standard and a fake one is that the fake one is a motherhood statement that cannot be monitored in physical reality.
Here’s an example – Performance Standard 1 – We provide awesome service to all our customers. The customer is King, and we treat each one like Royalty.
How do you track that? You can’t.
Here’s one we have (of seven or so), just for our Phone System – Performance Standard 1 – Smile to the point of a grin before answering the phone.
With that one – you can see when someone is doing it or not.
We once had a great Team member who was a bit on the stoic side – and rarely smiled when on the phone, so we put a mirror right behind her phone, as a reminder!
Two Last Things Before You Go
Write out your systems at times when business is slow, rather than squeezing it in to the cracks of time when busy as heck.
And, lastly, block the time to document your systems – it is the most important work you will ever do.
Tinker away dear technicians, ON your business!
Thanks for reading…
by MHolland | Nov 27, 2019 | Business Tips
How much is enough? It is a question we can all ask ourselves, especially when it comes to consumption. The greatest joy in life comes from creating versus consuming.
When we are creating, we are most fulfilled. Whereas consuming is like any addiction – we get a momentary shot of pleasure, followed by a crash, followed by the desire for more, followed by a crash, followed by a gripping addiction…
The beautiful thing is that creating is always available to us. We can create from nothing, or very little.
A Little Boy’s Toy
I remember about 2 years ago we saw a little child in Kenya playing on a dirt road with what I thought was a pull toy (perhaps a discarded Mattel toy from the West). As I got closer, I could see that it was a little truck, and on closer glance that it was entirely handmade!
The body was cut out from a plastic bleach bottle, the axles were re-fashioned from a coat hanger, the wheels were bottle caps, there was a pole and on it little fruits he attached, stones were inside, and he was pulling it with a discarded nylon!
He was so – rightly – proud of what he had built.
I would assert that this boy was much happier, more fulfilled, than a child who just receives a toy, plays with it for a while and then in boredom wants another.
The Fulfillment Curve
Joe Dominguez who co-wrote a book called, “Your Money or Your Life” was a New York financier who became very unhappy living inside the consumption cycle of work hard, spend, and then work harder for more.
He gave it all up to learn how to live on less and be happier.
A Chart in his book really changed my life, and I never forgot it. My wife and I use it as a test all the time to help guide decisions in buying things.
On the vertical axis is “fulfillment”, on the horizontal axis is “money spent”. Initially, as you can see from the steep upward curve that there is a lot of fulfillment up to “survival”, and it continues up further to “comforts”.
So, what is this telling us?
It is telling us that if we are starving, with nothing to eat and no shelter, the money we spend on basics really does fulfill us. We need to eat, and we need clothing and shelter, clearly.
The curve starts to taper off – slightly – as we gain some comforts. So, fulfillment is continuing to rise. This may come from having, say a car, or a coffee machine.
To test this, go back in your mind to when you had your very first apartment, maybe out of high school, or after College. It may have been a studio or small 1 bedroom, yet, it was your very own, and it felt great!
Or how about your first old beater when you were 17!
Fulfilling, wasn’t it?
When the Curve Tips to The Other Side
Take a look at the Fulfillment Chart and see how it starts to go down.
What is causing this?
It is happening because – for all of us – at some point, the next purchase brings less fulfillment.
How is that possible?
It goes something like this…
You are living a comfortable life, you have a family, a good business, and all your family’s needs are taken care of. You can send your kids to the best schools and so on.
Then, you decide to buy a bigger, fancier house. You sell your lovely, smaller home and take out a mortgage.
The mortgage is a monthly fixed expense and so you need more income, so you grow your business.
The economy is down and that is stressful, so you end up putting more hours in at work.
You see your family less, and even miss family dinners from working late.
You get the idea…
A Multi-Millionaire’s Greatest Joy
Growing up in Calgary, two of my best friends, identical twins, came from an entrepreneurial family and their father was very successful. In fact, the chain of mega-building supply stores became so successful that when they cashed out the family was richer by hundreds of millions of dollars.
What I remember brought the greatest joy to the father was spending weekends, all their holidays, and as many blocks of time as he could in a little cabin just outside Calgary at Bragg Creek.
The cabin had no indoor plumbing (just a pump out back) and, yet he loved being there!
He loved chopping wood and living a simple life.
The Money Workshop Exercise
In a Money Workshop we created 10 years ago we designed an exercise (I have written about this before) that had people go out as a group with a very small amount of money and make sure everyone got fed well.
The creativity of the different groups was mind-blowing. One group convinced a restaurant manager to bus tables and they got so much free food they had to box it up and gave the excess to street people.
They were bubbling over with joy when they returned to the workshop after lunch!
They got to experience – to their very bones – the difference between consuming and creating, and also, how little it takes to fulfill us.
The Millionaire Who Lost It All and Then Gained It All
I read a story years ago about a man – a Canadian – who lost it all. It was a public company and he was very rich. His entire personal fortune was, though, tied up in the shares of the public company. When the company tanked, he lost everything, even his principle residence.
So, what did he do?
He was quite a bit older (early 70s as I remember).
He started a small business at home in wood working and furniture building.
What I always remember from the article I read about him was that getting a $5,000 contract to build a beautiful piece of furniture gave as much, if not more, fulfillment and satisfaction than when he was a high roller, closing multi-million dollar contracts!
Hmmm, very interesting…
What Are Your Values?
We each must know what we value and move away from one of the biggest killers of creativity and fulfillment – comparison.
Comparing to our business associates and friends, who may have more, is what can drive many to fight to achieve more, in order to consume more.
And, for what?
So that you can feel like you are keeping up?
How really fulfilling is that?
If You Had 6 Months to Live?
A little exercise to determine what you really value most can emerge from answering the question – what if I only had 6 months to live?
Where would I spend my time? What would I purchase?
You may want to spend more time with your family.
Thanks for reading…
by MHolland | Nov 22, 2019 | Business Tips
I often get told that we accountants must dream in “black and white” because most reports are, well, “black and white”.
For me, I love color, and it is amazing how even the two colors “green” and “red” can really make a set of reports come alive and make more sense.
In fact, the program Color Accounting, a breakthrough in learning accounting uses colors (green, yellow, purple) as a tool to teach people how to deeply understand the dynamics of accounting. It is an amazing program taught in one day and is really a breakthrough in learning. Without color it would be boring and would, frankly, just not work.
Cash-Flow in Color
Take a look at this cash-flow statement in black and white, and tell me whether it is easy to understand:
Boring, right?
Now look at this one, the one we present monthly to our clients:
This shows money coming in and going out as if it is flowing down a waterfall, with money coming in colored in green and money going out colored in red.
All of our clients now understand their cash-flow, as it has come alive, visually.
Key Performance Indicators
Most businesses must track a few Key Performance Indicators, and again, showing in black and white can be quite bland, non-attention grabbing and not emphasizing critical decisions that need to be made by using “red” and “green” to highlight key numbers.
Let me show you an example of how presentation can drive you to know your business better, ask better questions, and then, as a result, make informed, trackable business decisions
Take a look at these two common reports – an Income Statement and a Balance Sheet:
All of the information contained therein is rather meaningless without two things:
- Something to compare it to
- Ratios and indicators derived from the above numbers
Finally, by adding color, they sparkle and pop, coming alive!
First, let’s see the impact of adding comparative numbers to the two standard reports above:
The above Income Statement now has a comparative column showing the month before and a variance column showing the changes. When it is a positive variance it is green, when negative, red. There is also a column showing the year-to-date figures.
We could compare the numbers to a Target or Budget.
You see, without a comparison, the first column has no meaning (or very limited meaning).
Now, take a look at this Chart:
All of the numbers above are derived from the two reports above. However, what a simple dashboard like this gives you is the following:
- A goal to aim for – the Target and whether you hit it, or not
- When you hit it, you get a green checkmark
- When you don’t, you get a red cross
- These numbers can be compared to Benchmarks as well
This simple dashboard can give you, the business owner a condensed, summarized view of your business.
Here is an example of how that report can drive business decisions. Firstly, let’s look at the first red X – Accounts Receivable Days.
The target is 45 days. The actual is 72 days. What does this mean, you may ask? It means that on average it is taking you 72 days to collect your accounts receivable. This is a long time to wait to be paid, and it is definitely longer than your pre-set Target.
This observation can lead to more questions:
- Have we softened our credit terms, allowing people to take longer to pay us?
- Have we taken on poor paying customers, just to get a sale, and now they cannot pay us?
- Do we even have a credit policy, and should we change it?
Now, you can really dig in and get some answers which will lead you, as business owner, to take action in the critically important area of your business – cash-flow!
Trends
Looking at what is happening as a Trend, again in color, and in an attractive visual way can really help spot things you might not see looking a black and white row of numbers.
Option 1 is to present your numbers in a simple table, like this:
Although the image below is a bit smallish to scale for this Blog, look at the difference, with the exact same numbers as presented below.
What pops out first is that big drop in August, which just doesn’t stand out in the first Chart above. This can lead to more questions and further investigation.
As you will note, on the side bar, in addition are included the operating margin for the current month, compared to the Target, the positive change from the month before, and from the same month in the prior year, and, finally, the rolling 12-month average.
Conclusion
How your numbers are presented to you has the following critically important benefits:
- Your understanding of your business deepens
- The numbers will often lead to asking better and more relevant questions
- The decisions you make will have more meaning when tracked by the numbers.
Here is an example. We recently implemented a powerful software that helps improve the speed of collections on our clients accounts receivable. Because we track Accounts Receivable Days for all our clients, we can spot numbers off-Target and provide solutions.
We could see quite quickly that this powerful software had an impact on the Accounts Receivable Days. It went down, which is favorable.
Finally, even more important than nice visuals are having reports that are impeccable, with reliable, solid numbers. That is what we provide, and without that, nothing else will work.
Thanks for reading…
by MHolland | Nov 15, 2019 | Business Tips
Common sense would dictate that fear as a motivator in business is a really bad idea.
Yet, we all know, a gazillion bosses never got that memo!
How did that all come about?
By people taking seriously a really evil guy’s advice from about 500 years ago – Niccolo Machiavelli, who wrote a book called The Prince where all his “principles” were laid out for others to follow.
It is possible to be loving and firm, and the balance is something we each have to work out for ourselves.
I just read a great Blog on this topic (it is very short, so I would encourage you to read it). It is from a “twenty-something” man, who is letting the world know that love is a much better motivator than fear, especially for younger people. I would add that it is better motivator for ALL people, of any age.
We have certainly experienced that on our Team. Everyone refers to us as a family. I love each and every one of my Team. I work hard for my Team, and they, in turn, work hard for our great clients.
Productivity is high. So is happiness and work fulfillment.
Here is the Blog for you to check out:
Blog on Love Versus Fear
Thanks for reading…
by MHolland | Nov 7, 2019 | Business Tips
What is a Single Point of Failure?
It is when your business can tumble drastically, or even collapse if one major dependency fails.
Look carefully at your business. Can it operate without that one person, machine, system, or even one huge client?
In various ways almost all businesses have some weak point of failure, and it is critical to know what those are.
Are You Dependent on One Person?
You may not even know it, yet your business could fail without a particular person. It could be you as business owner, or it could even be someone you could not even guess would be a Single Point of Failure.
A very public example of a single point of failure in a public company is, in my opinion, Steve Jobs of Apple. A lot of people experienced a drop in quality and innovation after Steve Jobs sadly passed away at age 58. His charismatic personality, focus on innovation and demanding personality was so embedded in Apple’s way of doing business, yet, it was not fully embedded in the Apple Culture, and as a result not easily replaced.
At one point in our own business, when we operated as a traditional public accounting firm, I was the single point of failure.
We had purchased a firm in a small town in the Cariboo Region of BC from a Chartered Accountant who was retiring.
We leased a lovely new office space, furnished it in a style fitting a large city, upgraded the systems, including adding cutting edge computers and software.
My office was at the front, right behind the reception. Clients would walk in, by-pass the reception, sit down (often without an appointment) and ask me questions.
Sometimes I just couldn’t get any work done at all!
Also, my name was on the door and on all the signs, so clients felt if they didn’t get me, they didn’t get the best.
So, I switched my office to a smaller one at the back, down the hall, and put a key person, my right-hand woman, an accounting technician in my former office.
What happened? Clients walked in as before and entered Bonnie’s office instead of mine, and this caused her to develop and grow, and surprisingly most of the questions could be answered by her, as they were not complex tax questions for the most part.
Hidden Single Failure Points
Sometimes it is not so obvious who the Single Point of Failure is.
We once saw a large client experience a massive loss of productivity in their accounting department when an administrative person, who was secretly, (thinking that she was helping), by-passing the organizational systems in place and doing work for many, many department heads.
This person got sick and was off work indefinitely and it was then that everyone quickly saw what she had been doing.
She thought she was helping, yet this ended up being a massive impact from a Single Point of Failure.
The entire systems needed revising with extensive training as well.
The solution was to spread the work out over many people by-passing this dependency on one person.
Single Point of Failure – Machinery
A machine can be a Single Point of Failure as well.
Ask yourself, what machine are we so dependent on that if it fails, we have a total collapse in our ability to perform as a company?
It could be a productive machine that is old. Or perhaps it is almost obsolete or maybe it was purchased overseas and not easily maintained nor easily replaced.
For our firm, once we transformed our traditional accounting firm into a virtual, outsourced, online accounting firm it was our servers.
If they failed, we were hooped!
So, we had more than one server, and they were installed in an air-conditioned vault with a tumbler lock.
Even then, though, we had points of failure. The air conditioning could have failed on the weekends when we were not there to monitor, the servers could have over-heated and failed.
Once cloud-based computing took off we quickly switched to being fully in the cloud and recently finally shut the servers down.
The redundancies built into the cloud is such that very little could happen to us that would stop us from continued operations. (Larger cloud-based accounting software programs use Amazon or Microsoft servers with backups at separate physical locations).
Single Point of Failure – A Supplier
You may have a supplier that is a Single Point of Failure.
We have seen a client in the food industry having to source ingredients from remote locations around the globe.
The way to counteract this kind of failure point is to look for redundant suppliers and, as well, purchase in larger quantities.
Single Point of Failure – A Customer
The rule of thumb in accounting is that a client or customer that provides more than 20% of your sales revenue can create an economic dependency. This can be a Single Point of Failure if that customer were to go out of business or stop doing business with you.
I recommend you go over your client/customer list and do a quick calculation to see if you have any client making up 20% or more of your sales.
Another twist on this Single Point of Failure is to look at a particular industry you may be dependent on that if that industry fails or declines it could severely impact your business.
An example could be if all your clients are in the real estate industry and the market is in a steep decline for a few years and that impacts your business.
What is the Solution?
One solution – especially when it comes to people as a Single Point of Failure – is to create systems that are documented with enough detail for people to follow easily.
Then use those systems to really train more than just that one person for each major function in your business.
You must document those systems. Just assuming you have systems without writing them down will not work.
Too many people have what they call systems “in their head”, that is just another way of saying, you have a Single Point of Failure! The person with the systems in their head gets hit by a bus, and there go your systems.
A system is not a system without documentation and training.
It is also not enough to just document either – you must train everyone in the system, and then when you have a failure, blame the system, not the person!
How to Test?
To discover how many (not if, by the way) Single Points of Failure you have in your business, do an “audit” and ask these questions:
- Do we have a completed organizational chart? Is there a person in each role?
- Do we have a job description, performance standards and systems in place for each key role/function?
- What will happen if that person is not in that slot tomorrow? Do you have a backup plan?
- Do you have people cross trained in your business?
- What happens if you, as the business owner/key executive cannot work?
- What equipment are you dependent on? What will you do if that equipment fails? Is it insured? Is it easily replaceable?
There Will Always be Some Dependencies
There will always some dependencies in your business. Highly skilled people are not easy to replace. One antidote is to create such a compelling, attractive culture that you can replace key people in a crisis because people will want to work in your business.
You cannot plan for every single thing going wrong, just make sure the most vulnerable points of potential failure are covered.
Thanks for reading…
