Posts Tagged business owners
25% of SME owners say they would rather retain average or below average performers than fire them, given the current lack of skilled individuals in the market place.
So, a question posed at the Business Exposure Group meeting asked whether retaining poor staff for the sake of retaining the current makeup of the team was sensible. Research has shown that one bad apple in a team can bring down productivity by 40%. In simple terms, if you expect revenue generation of £100K from an individual in a group of four then the £400K revenue at only 60% productivity translates to a loss of revenue of £160K per year. It’s an expensive way of burying your head in the sand!
The message of retaining an underperformer rings loud to your other employees, as well as your competitors. ‘These people don’t know how to manage properly’ and ‘They can’t be doing well if you have still got him on-board’ were just two of the comments made at the meeting. All agreed that firing an underperforming employee saves you money in the long run. It takes away a strain on the team, removes the need for additional oversight, and in reality many of these workers contribute little. In fact, one of our members commented that getting rid of an underperformer was like having additional perks for the other staff, who always rallied round and had a new spring in their step for the benefit of the business when the underperformer was removed.
Some other points raised were:-
- Dealing with an underperformer is not easy, especially when the employee took a chance on the business.
- A business can lose good employees by being slow to deal with the underperformer.
- Good workers are discovered, poor workers are found.
- A comprehensive job description is essential so that an employee knows exactly what is expected of them.
- Have we surrounded ourselves with a few underperformers because during the recession we lowered the recruitment bar, just to fill the vacancy, and now realise that we recruited from the best of a bad bunch.
A business can only show continued success by attracting and retaining top performers who have the competencies that we need now and in the future. They will be agile and can multi-task. They will have sound personal goals, low error and absentee rates. They will provide high customer satisfaction, inspire and train others in your business and generally stay longer and produce a higher rate of return.
The impact of top performing employees is more than 3 times that of an underperformer, yet the difference in pay is often minimal. Perhaps a look at the make-up of your team and the remuneration package for those in your business would be a timely and useful exercise.
Business people live for the struggle of launching their business. But one thing they often forget, is that decisions made one day can have huge implications down the road. It is not enough to build a business, we have to make sure that we have an exit strategy to get the money back out.
This subject was discussed at the last round of the Business Exposure Group meetings. Businesses that scale and ultimately maximise their value are the product of an owner’s almost obsessive focus on building value.
Most of the members agreed that whilst a lifestyle business was fit for purpose today, we should always have an eye on the opportunity to develop a mind-set to exit if the correct opportunity presented itself.
Generally it takes at least 18 months to prepare for exit, but by growing the management structure, spreading the customer base, improving the IT, and minuting all meetings the value can significantly increase because this is all evidence of a well-run business.
During the discussions 3 core areas of value were suggested.
- Creating sustained profitability
- Having clear records and processes
- Building a brand
It was even suggested that the economic climate has presented a great opportunity to sell our businesses to bigger players, because over the last 2 years they have made strong profits and are now sitting on cash in the balance sheets, which could easily and should be used to invest in strategic acquisitions. The market now has more trade buyers than for many years.
It was however surprising how few of the members actually engaged in dialogue with their bigger competitors, eg at trade fairs, in an attempt to make their bigger competitors become aware of the value and strength of our smaller companies. Such, off the record discussions are key, because companies don’t get sold – they get bought, and the need to keep close to the big guys is obvious.
Buyers are not looking for businesses that are chasing revenues, this can blur the proposition. Buyers do not understand revenue streams derived on the hoof. Multiple and varied revenue streams introduce unnecessary complications and additional risk. So the main conclusion from the discussion was to keep the brand simple and focused to attract a strategic fit.
Some of the members had been approached over the years by foreign buyers, willing to pay a premium to secure a new base in the North of England. Others had found real value in finding an appropriate advisor, who would look at the business from an objective viewpoint rather than the owner’s emotional subjective view. The advisor would focus on the key areas of the business and suggest the areas to be worked on to achieve maximum value. Such areas include a business audit on marketing, sales, customers, pricing, operations, management structure and compensation.
It is important that existing owners identity and resolve issues within the business before a potential buyer discovers them. Equally, ensure that the existing management team is sufficiently incentivised to stay, to maximise company value.
All in all it’s about a story and if you are selling the existing management team as the value, then they have to be as strong as possible.
Some of the more pro-active members of the group have their businesses valued by their accountants on an annual basis, so that they can fully understand the areas of weakness and the areas of opportunity in case an attractive offer comes along.
However, don’t get carried away by the one off offer, as 70% of all business sales processes collapse. Stay focussed on your core business and have an eye for attracting multiple bidders to secure the sale. On the other hand, put everything into place, and gradually release yourself from the day to day role of running a business and sit back a little and continue to reap the rewards on a monthly basis of your robust lifestyle business.
Either way it’s all positive as long as you have the right mind-set
Meetings can be the death of a business. Yet they seem to make some people feel important. For whatever reason, having a calendar of meetings seems to validate the existence of some, yet so many people leave meetings commenting that they are often a waste of time.
Research shows that staff meetings should be limited to 30 minutes, preferably held on a Tuesday morning, have an agenda, and never allow an ‘any other business’ section.
The topic was well debated at the Business Exposure Group with the following points being raised.
- Take the meeting responsibility seriously, and make attendance mandatory.
- Ensure that they are run on added value not just on habit. The value is in the team building, re-affirming core values, and explaining the bigger picture on a regular basis, to communicate and keep staff engaged with the business.
- Staff meetings are not for making decisions, they are for ratifying decisions.
- Ensure that meetings are for sharing information, and do not allow one individual to use it as an excuse to ‘show off’.
- Better decisions are made in meetings because group creative solutions are discovered.
- Meetings are an expensive resource. It can easily cost several hundred pounds of time spent, which is a reduction in profit and one that is often overlooked. So, ask if the issue can be better addressed in a simple email, can the issue wait for another time, or is it better to reduce the time waste of the group and sit down for a one to one with the individual that has the burning issue. Understanding the cost of unimportant meetings will result in fewer meetings being called and a workforce that is not just going with the flow.
Meetings do have enormous value if they are relevant, well controlled and have action points which are followed through, but many of the Business Exposure Group members felt that they struggled to keep the regular internal meetings fresh and engaging.
One of the members put forward an alternative approach to engage individuals, using the one to one discussion in an effective way. They explained that they received tremendous feedback and creativity from staff when they used one or more of the following questions.
- ‘What policies and ideas are getting in the way of you doing a better job?’
- ‘What special talent do you have that we are not using in the business?’
- ‘If you were the owner, what would you be concentrating on right now?’
- ‘What are you working on that has little value and what would you replace it with?’
- ‘What do you need to know about our Company/Industry that would help you do your job?’
How do you operate your meetings? Do you measure effectiveness and are staff and management held accountable?
In conclusion, it was felt that the follow up and follow through were the benefits of a meeting, not the meeting itself.
Bold companies have used the economic situation to make their sales operation not only less expensive but also more effective.
At a recent Business Exposure Group meeting, we discussed how our sales strategies have changed over the last couple of years. We asked if employers should tinker with the sales force that gets the job done, even imperfectly. Most people have moved away from piecemeal ongoing repairs and put in place a resource that allows the business to understand their customers and cut waste not value.
One of the members admitted to getting it wrong. He had reduced his back office sales staff, thinking it would hurt the business less than removing some front line sales people. The result was that the front line sales reps began undertaking support tasks. He conceded that after a few months his business had made the support function essential to the business effectiveness and he had to go out and replace those that he had only just discarded.
The following pints were raised round the table.
- Not all sales effort should be equal. It is important to understand how much effort really goes into each customer. Then, considering which are the profitable customers, allocate more resource to developing them. Understanding customers allows companies to focus sales resource where they are needed and to cut waste not value.
- Cutting across the board risks losing quality customers and the salesforce are left without the resource to capitalise on new opportunities.
- Do customers want and need expensive face to face interaction? A shift to telesales may increase satisfaction because it can easily develop consistent and regular contact rather than relying on reps visiting every few months both small and large clients on a rota.
- Time spent on the road by reps should be reviewed. Rather than visiting remotely interested prospects and travelling long distances on a lukewarm lead, it is better to spend more time in the office qualifying and understanding the potential buyer’s requirements before getting in the car.
- Companies that analyse bids and conversion rates centrally have a more confident attitude to their sales process, because they are internally applying all the lessons learned from their sales process and addressing buying queries in a professional and consistent way.
- Squeeze out the inefficiencies after the sale. Stop sales people having to waste time dealing with mistakes.
- Major on a client’s buying history, to decide how your sales team should operate first.
- Consider alternatives to expensive trade fair exhibitions just to get 3 – 5 leads. Possibly a good telesales operator could get 3 – 5 leads in one morning and not over several days at an exhibition.
Many of the Business Exposure Group members felt that it was important to communicate cost cutting plans to the entire workforce. Explain what and how you intend to make savings and then what you are going to do with the savings. It is important to consider it from the employee’s viewpoint. They need to know what’s in it for them, so that a strong culture of cost saving and revenue generation can be implemented from the bottom to the top of your business.
Are businesses turning to apps to improve business efficiency, generate sales leads, win new business and keep existing customers engaged?
This was a question posed at the Business Exposure Group meeting.
The discussion was split into two halves. Firstly, using applications to organise your business life and secondly, the value of a bespoke business app for your business.
Included in the value of applications to assist your business many of the members were regularly using Dropbox, Google Docs, Evernote, Hip Chat, Re Quall, Campfire, to name but a few.
It became clear from the outset of the discussion that very few businesses ask where does a downloaded app fit into their business? Some felt that most apps add another level of complexity into the company’s business processes, which are not always welcomed by staff who exhibit strong resistance from these business tools, as they become disruptive to familiar work patterns and create additional stress.
In the groups there was a clear difference between those businesses which operated and were heavily reliant on organisational apps, as opposed to many more conventional businesses who had not embraced the advantages of introducing this technology into the day to day functioning of their employee’s job roles. In fact, this supported research which showed that only 22% of SME’s provide apps for their employees to use at work.
One of members explained that his salesmen had increased their van sales by 450% in the last 6 months since he gave all his drivers an app that enabled them to check stock and pricing in real time, process orders and print instant invoices.
Whereas, another member stated that cash strapped business people are tempted by free online apps that promise to simplify any number of business functions, but in reality the apps require a significant amount of effort to use them effectively.
Moving the discussion onto the question of the value of providing a bespoke app was unanimously discounted for those operating in the B2B world. A good app is built to engage customers and encourage loyal customers to come back through in-depth functionality. Which is great for B2C but B2B members preferred the option to upsell with a face to face opportunity rather than an application.
Apps are only any good if they are regularly used by the customer, otherwise they just become a fad and are easily forgotten. The consensus of opinion was that money was far better spent on ensuring that a business website was up to date, functional and fully mobile enabled, instead of squandering monies on an app which many members were unclear as to how to determine a return on investment from an app, which may show evidence of a contemporary business but not necessarily one that has found the need for an app to succeed in adding significant value to their customers.
80% of businesses don’t have a mobile strategy, so the conclusion around the table was that our money is better spent improving our customer’s mobile experience rather than building a mostly useless and profitless app.
Business owners commonly find themselves unable to delegate tasks because of the illusion that they are the only ones who can do the job properly. But if SMEs are to succeed in the long-term, entrepreneurs need to occasionally take a back step to allow their employees to drive business forward.
Business owners should prevent themselves from falling into the trap of micro-managing every aspect of their organisation. Staff should be allowed to flourish and get on with it.
Because if you check everything your employees do before long they will be less careful and you have given yourself another job.
Entrepreneurs need to consider how it would feel if every time they did something, it was pulled to bits by the boss.
Dispose of the tasks you don’t want to do by outsourcing non-key resources such as health and safety, administrative roles or accountancy. Also, hiring a good office manager can take away a large part of the burden, you can specialise on strategy and the important issues affecting your business .
The key is managing by exception rather than managing everything.
Build a system whereby you can spot check, but do not interfere with simple processes.
Last month’s Business Exposure Group meetings around the region were excellent and again generated some quality suggestions.
With 9 groups now operating across Manchester and Yorkshire, the main issues across several discussion groups included: –
– Is there a need for a business plan, particularly during a recession?
– Is social media a scary problem or a great business opportunity
– Whether to rely on freelancers or employ full time staff
– Techniques to control sales staff and make them accountable
– Methods used to get your business message out to a new market
– The value of purchasing a competitor in distress, purely to use it’s strong brand
– How to let go and have the confidence to allow your business to flourish
The high value of the group advice was commented on by the majority of the members.
Are you a Business owner or Director around Manchester?
Please let us know by return if you would like us to reserve a place for you around the table at our next meeting in Manchester city centre on the afternoon of Monday 4th July 2011.
The numbers are limited to 15 and this groups is getting full.
Outside the Manchester area, there are groups in Leeds, Bradford, Wetherby and Sheffield. Please let us know if you would like to attend any of these events during July.
Please email email@example.com for more information.