Ready to hire your first sales rep? Hiring can be tricky, and salespeople (the good ones at least) are smooth talkers. If you do find that perfect rep, you need to make sure you can sign and keep him or her as well.
Objective data shows that less than 10% of sales hires ever produce an ROI for their employer. This starts because most employers don’t know how to source, interview, land, and on-board new sales hires. – Joe Zente, CEO of The Alternative Board, Austin, TX
Here are five key things that should all be considered as you start sourcing talent:
Different sales people have different skills and strengths, and, of course, every candidate is going to have different experiences. Start by drafting a detailed job description so you know exactly what you need.
- Will this person do more cold calling or in-person sales?
- Does your business focus on inside or outside sales?
- How important is developing customer relationships?
- Are you looking for someone who has worked with a startup before?
- Are you looking for someone with experience in a similar industry?
- Do you need someone who is self-reliant?
- Does your rep need an established book of business?
The “right” answers, of course, depend on your industry, your niche, and your audience, but be open to what a candidate has to say. Maybe you think you’re looking for someone with startup or industry-specific experience, but the perfect candidate turns out to be someone with neither — but who really believes in your brand.
Draft the details, but make some mental notes about priorities. Which features are non-negotiable, and which might be compromised to find the best candidate?
2 – Sales Compensation Structures
There are several options for compensation: straight salary, annual base salary plus commission, commission only (with the option to draw from commissions in advance), and straight commission.
- Straight Salary — The security of a straight salary can communicate trust, and ease a sales rep’s mind (especially through the initial learning curve), but there is less incentive to perform.
- Annual Base Salary plus Commission —This ensures that they will always receive a paycheck, but also that they can look forward to being rewarded for their sales efforts.
- Commission Only (with the option to draw) – This is similar to a straight commission structure, but with the option to ‘draw’ a small loan from advanced commissions.
- Straight Commission —The very best salespeople prefer a commission-only structure, as this often nets them the highest revenue. Employers often find this enticing as they pay based purely on results.
Which model is best for you will depend on your industry, your sales rep, and your budget. Most reps prefer an annual base salary plus commission, and will explain that it provides incentive but also the security needed to have confidence in their employer. Straight commission is often favorable to employers, but it also relinquishes some control, because the sales rep is more of a contractor than an employee.
Weigh the pros and cons of each scenario, and be prepared to discuss it during the interview process. Ask your candidate which he prefers, and why. It’s okay to have a couple options in mind, and be flexible.
3 – Employee Training
- Start Simple — Give your new sales rep the easy sales first for a confidence boost.
- Check In — Make a point to check in every week. Review progress on Fridays, or start the week with a review and some support on Mondays.
- Celebrate Successes — Especially if you’re still doing some sales yourself, celebrate your wins together and review each case to learn from each others’ challenges and strategies.
- Generals — Your first hire of any kind is an opportunity to start working on general employee training. How does your business (and/or your industry if they’re new to it) work? What is your vision and what are your goals? Don’t overlook those things that every employee will one day need to know.
- Continued Learning — Especially if your industry is a technical one, consider how you will continue educating your sales team. If you produce a regular newsletter, or host a blog, about your business, insist that he/she reads it. Alternatively, you might spend time every week reviewing industry news, or copy links to articles you’ve been reading into a weekly email.
By the time you’re ready to hire, business is probably picking up speed and you’re hoping to do less work, not more. But just hiring someone and leaving her to figure out the lay of the land on her own is a recipe for disaster. Plan on thorough training at the beginning to make growth easier on everyone down the road.
4 – Sales Managing
Many sales teams have a manager whose job it is to continually manage and coach their reps. That will fall to you too.
HR Data shows that more than 50% of first sales hires are gone before the end of the first year. Sales hires leave for a wide variety of reasons, only some of which have to do with a sales management deficit. – Joe Zente
The developing salesperson will need more managing and encouragement. The rockstar salesperson can sometimes be a bit of a — well, rockstar — which makes him difficult to manage.
If you’re a natural leader with reserves of charisma and a thick skin, then your sales rep’s personality won’t be as much of a concern. If you’re naturally quiet and more reserved, keep that in mind during interviews and try to hire someone less likely to walk all over you. Not all salespeople are loud and pushy.
5 – Consider Benefits and Other Perks to Entice Top Sales Reps
Many companies offer bonuses on top of regular commissions and salary increases as a way to reward and recognize their top-performing sales reps. Consider offering a registered retirement savings plan (RRSP) matching, annual ‘President’s Club’ trips, or company profit sharing to encourage success.
And if your budget isn’t ready for company retreats just yet, include them in your financial forecasts, assign a target deadline for when those perks might kick in, and talk about them with confidence. A sales rep — especially an experienced one — applying for a position as the first rep with a growing startup isn’t really expecting stock options right away. What they are looking for is a small business owner with vision, confidence, and the intent to share his success with the team who helps make it happen.
You Will Only Ever Have One First Sales Rep, Make the Right Choice
Hiring your first sales rep is a big step, and an exciting transition. While there’s no magic formula for building an effective sales effort, a thoughtful strategy that combines recruitment, training, and continued management will give you a huge head-start.
If you’re prepared, and you stay objective during the entire process, you’re sure to find the best fit for your brand.
 Consider your existing client base when you draft these requirements. A sales rep who is good at cold calling might seem like a great asset, but where are your customers actually coming from?
 Add this to the job requirements, but keep it to yourself. Let your ideal candidate talk you into his favorite compensation model, but decide (before you interview) how far you’re willing to go for a mediocre-but-trainable candidate.
Emma Siemasko is the Content Marketing Specialist at Grasshopper, the entrepreneurs’ phone system. She writes about startups, small business, marketing, and a host of other topics. She has written for KISSmetrics, Entrepreneur Magazine, Shopify, Yahoo! Small Business, and more.
We’ve already explained the 5 steps in TAB’s strategic business leadership process:
- Vision – Personal and business
- SWOT analysis – Strengths, weaknesses, opportunities, threats
- Plan – Personal and business
- Make it happen – Communication, review, accountability, planning team
- Turn the wheel – continuous review and revision as needed
And we’ve already discussed the importance of having a strategic plan for your business, the kind of plan that will make you remember the big picture: why you started your business in the first place.
But while having a vision for your business and having a strategic business plan to grow it are both keys to success, how do you get from A to B? How do you even know you need a strategic plan?
That’s when a business assessment comes in handy. Business assessments are a crucial aspect of understanding what your business plan should look like, what’s working the way it should, and what isn’t.
Think of your business as a car, and a business assessment as the blueprint for its design. While you might know your vehicle’s exact make, model, and mileage, you probably can’t remember all the details about its construction, such as the exact diameter of each of its hoses. The same goes for small businesses. If you install a hose that’s not the exact fit, the car will come screeching to a halt – and in this particular analogy, there are hundreds of hoses in varying sizes.
So much happens and so many decisions are made on a monthly basis — without a business assessment it can be incredibly difficult for business owners to remember all of the details that can make huge differences in their operations and bottom line.
We recently interviewed hundreds of small business owners about what they wish they could do differently, if they could build their companies all over again. Out of all the aspects of running a business, the entrepreneurs wish they would’ve spent more time on strategic planning. Only 2% of respondents thought that a better product would have helped their business more than a better strategy.
That’s why a business assessment is so important. If you have a vision for your business but don’t know where to start when it comes to figuring out a strategic plan for growth, it’s probably time for a business assessment. From there, you can build out your strategic plan and outline specific goals, as well as outline how you’re going to achieve them.
Different firms offer different business assessments, each with their distinct advantages, but all business assessments are fundamentally lead to a balanced SWOT analysis of the organization.
A SWOT analysis looks at internal and external factors that are helpful or harmful to your business and the way it’s run. This type of assessment is particularly interested in identifying factors in the following 4 categories:
- The strongest parts of your business model and your best selling points. The core competencies of your team and your investments.
- The weakest parts of your business model and weak spots in the sales funnel. What’s lacking in your team and missing from your investments.
- Potential leads, investors, events, and even new target markets.
- Potential competitors, reasons investors would cut funding, or negative market developments.
At a glance, it’s easy to see where most small business owners (and most business owners in general) like to spend their time – among the tropical shade and white sands of their company’s Strengths and Opportunities.
Rare is the business owner who takes the time to sit down and honestly assess weaknesses in his business model as well as potential threats (which can be difficult to see without another pair of eyes). This is why many small businesses fail — entrepreneurs often have a vision, but no strategic plan for growth. And they have no strategic plan because they never conducted an honest business assessment.
They thought they were doing just fine when, in reality, weaknesses were eating away at their business model and threats were looming large in their market.
When’s the right time to get a business assessment?
That’s why we offer TAB Business Vantage. “Vantage” (our informal name for our “business advantage” assessment tool) is a business diagnostic tool we developed over years of research working with thousands of business owners that lets you comprehensively identify your competitive strengths but also key gaps in your business. Think of it as an MRI for your business that compares your business to others in the same industry. Not only does it identify the gaps but it also helps you prioritize, so you’ll know what challenges and opportunities you need to focus on first.
A business assessment does not take a lot of time but the results are invaluable. The output of the assessment is fed into the SWOT process. This helps identify the key areas of the strategic plan. Taking the first step in this process will put you on a path to running your business more strategically.
If you’d like to know more about how a business assessment can change the outlook of your business, contact us about our Proprietary Business Assessment Tool. Once completed, TAB can help you develop a strategic implementation plan, focusing on the most important needs of your business.
In 2013, Bazaar Voice, an aggregator of customer reviews for major retailers and industry, analyzed over a billion online reviews. Of the seventy percent of these posts found to be neutral or positive; nearly 30% contained the word “love.” So what motivates a customer to post a positive comment online about a product or service? And what effect does this have on the company?
It goes without saying that the Internet has disrupted the way we do business. What is less well-understood is how organizations are using different approaches to business online, with varying degrees of success, and what disruptions they are causing in how business is conducted on the internet. Profit may drive business, but as study after study shows, profit is not a primary motivator for the individual, and the Internet has given voice to the people. Wikipedia is a perfect example. It’s an encyclopedia considered the most comprehensive repository of knowledge in the world, produced exclusively by people providing content and editing for free. It has flourished where the traditionally based and massively funded Microsoft Encarta version of the encyclopedia has failed. In an information economy, where an individual can broadcast knowledge, opinion or innovative ideas, the idea of “disruption” is the key to business success. How does business harness this disruptive power of the masses? How does business connect with customers and employees in an environment not motivated by the values we are taught in business school should motivate them?
As part of a study, I interviewed individuals in organizations $150m – $5 billion, who had posted comments or online reviews. Looking for motivators other than money and profit, I asked how can organizations engender positive affect online? I found that a company’s default reaction was to attempt to “control over” the online interaction in an effort to end the conversation and avoid negative feedback. More successful organizations do something very different. They give up a great deal of control and jointly create something new; they co-create online with their customers and employees. These organizations recognized their online customers are not the final recipients of their message. Online, customers are a bridge for their message – a means for broad dissemination enabled by the Internet. When organizations interact online and co-create with individuals, the factors that most resonate are creating a sense of self-efficacy, empathy, and authenticity as well as shared control. These factors engender “online customer love” and build an organization’s brand sentiment. Customer love is a huge opportunity for organizations to create disruption and competitive advantage in the markets in which they compete.
Bill Paolillo is a small business owner, executive coach and TAB certified facilitator. Over the years, Bill has been involved in all aspects of running a business, from the tough early days of a startup right through to the sale of a successful business; helping companies go from losses to profit and dramatically grow sales and market share along the way. Bill consults in sales, marketing, management, as well as organizational assessments, and is currently a Doctoral Candidate of Management at Case Western Reserve University. A native of Long Island, Bill enjoys golfing, running and CrossFit. He competed in the New York City Marathon in November 2013, and the World CrossFit Games in 2014.
The Alternative Board likes to know what entrepreneurs and small business owners are thinking — how optimistic are they going into 2015? Are they happy with their decision to go into business? What things would they have done differently, looking back? As small business owners work on the front lines of the economy, they have an important perspective to offer about changes and trends impacting business at large.
We recently conducted a Small Business Pulse survey of hundreds of business owners to find out how they feel about the coming year, what changes they’d make if they had the chance to start all over again and where they think entrepreneurs should spend their time and resources.
Strategic planning, marketing and sales were some of the most common areas where business owners wish they had spent more time and resources. In particular, the entrepreneurs we surveyed wish they had sought out the advice of experts and mentors on these challenging subjects.
A Profile of the Entrepreneurs Surveyed
Of the entrepreneurs we surveyed, the vast majority are veteran small business owners, with 95% having owned their own business for four or more years and most running businesses that employ fewer than 50 people. The majority build their businesses from the ground up, while 17% took over a family business. They span a variety of industries, from professional services to manufacturing and engineering.
How would entrepreneurs have done things differently?
We asked our respondents two sets of questions to determine how they would have spent their time and money differently, given the chance to start over again. Despite their overall sense of confidence, in hindsight, the business owners we surveyed would make several changes in planning and resource allocation.
Given the chance to focus their time and budget on different things, respondents said they would invest more in marketing, finding and turning leads, strategic planning and hiring the right talent.
If they could turn back time, respondents would devote more hours to:
- Strategic Planning (27%)
- Sales (20%)
- Marketing/Advertising/PR (18%)
- Hiring and training employees (11%)
And they would spend more money on:
- Marketing/advertising/PR (20%)
- Hiring and training employees (18%)
- Sales (17%)
- Strategic planning (15%)
Strategic planning made the top four in both categories and was the primary area where respondents would have spent more time. Strategic planning helps entrepreneurs lay out where their business is, where they want it to go and how they’ll get there, from expanding operations to reaching new market segments.
Mapping out your sales, operations, advertising, marketing, public relations and growth strategies can all fall under the strategic planning umbrella. Experts and mentors can help shape the plan, but the biggest investment is the time it takes to fully understand your business and develop a well thought out roadmap for its future.
Interestingly, some commonly discussed aspects of starting a business were not mentioned in the responses. Operations, technology investments and product development were all ranked low on the wish list, and only 1% of respondents would have spent more time seeking investors and venture capital.
Incidentally, only 1% of respondents reported having received any venture capital to start their business, with the majority of them using their own savings. So if you’re starting a business but stressed out about making the fundraising rounds, don’t worry too much — many have achieved success without the help of outside funding. According the entrepreneurs we surveyed, it’s more important to have a strong strategic plan for business growth.
It would be easy to assume that funding is the most important factor at the start of any commercial venture, but given the choice to have invested more time or money from the start, 40% of respondents wish they’d spent more time on their businesses.
They would have spent their time more efficiently, investing more in planning and organization. No matter how much money you have in the bank, there are only so many hours in the day. Respondents wish they had prepared themselves to go into business by spending time improving their time management skills (33%) and strategic thinking (41%). Again, almost none of the respondents said they wish they had spent more time trying to raise money.
Getting (and keeping) customers matters more than developing new products
Weak sales and lead generation programs can stop a company from reaching its potential and cripple the growth of the business. Even if you have the world’s greatest product, you need to develop strong relationships with your customers to get your product out the door.
The majority (80%) of survey respondents said that developing customer relationships mattered more than developing new products and services, and 35% said that a system or plan to generate more leads early on would have helped them grow their business. It’s not that the product quality doesn’t matter. Most business owners probably had a solid product or service to launch their business. The important take-away from these findings is for new owners to place a high priority on lead generations and customer relationships in the early stages.
And don’t be shy about it — 86% of respondents reported that they wish they had been more aggressive, rather than cautious, at the start of their business. Stronger marketing and strategic planning may help make that possible.
Your product might be a “game changer”, but the way to grow your business is to create happy customers who will consistently deliver referrals and new leads. One of the best ways for a new business to get there is to seek expert advice, then build a plan for sales and marketing that looks years — not months — into the future.
Surrounding Your Business with the Right People
Many respondents feel that leveraging a stronger network would have given them a leg up on their business. The number one response from those surveyed was that they would have benefited most from better coaching and mentoring. The second most common response expressed regret for not having built a better network of experts for advice.
“We found that entrepreneurs are confident in their products and services, but feel they would have benefited from better planning and more guidance,” says Jason Zickerman, CEO of The Alternative Board. “24% of entrepreneurs say that better coaches and mentors would make the single biggest difference in their businesses if they did it over. Only 2% say that a better product would.”
What advice would seasoned business owners who act as mentors offer to newly minted entrepreneurs?
“Find your customers, and surround yourself with smart people,” says Zickerman. “It’s one thing to think about what you would do differently, but it’s another to have that guidance when you’re just starting out. That’s why business owners are looking at solutions like The Alternative Board — they’re realizing that there are entrepreneurs who have been there and done that, and can help them avoid learning these lessons the hard way.”
Turning insights into profits
There’s one thing that’s absolutely clear from these survey results: entrepreneurs can benefit greatly from strategic planning and expert help at the outset of their business. Every entrepreneur has gaps in his or her knowledge about some aspect of the business they’re building, whether it’s in sales, marketing and PR, lead development or building customer relationships. These are all areas where expert help and advice can make the difference between stagnation and success. Why spend time and resources reinventing the wheel?
While a plurality of respondents became entrepreneurs because of a desire to be their own boss, nearly a fifth of respondents were motivated to start their businesses because of the faith they had in their product or service — a passion born from their “lightbulb moment.” Although that passion can help a business grow, a solid foundation in strategic planning, marketing and sales can help turn an entrepreneur’s zeal into a successful business.
Business owners are as optimistic as ever, with 82% of survey respondents expecting an increase in revenue in the next year. This is not surprising, given that in the past year, 78% of respondents saw their sales increase or hold steady. In this positive climate, it makes sense that the vast majority of respondents reported that they’re still happy with the decision to start their own company.
Community support helps entrepreneurs thrive
This general satisfaction is bolstered by family and community support. The vast majority of respondents (93%) said that the people around them provided necessary emotional support while they built and ran their businesses. With so much financial stress on entrepreneurs’ shoulders, that emotional support can be crucial to a business’s success.
But beyond your friends and family giving their vote of confidence when you embark on your venture, fellow entrepreneurs also play an important role, both as mentors and an overall support network for people starting a business for the first time. The takeaway for those considering making the move to entrepreneurship? Find other business owners. They’ll offer not only valuable perspective and wisdom, but also a sense of camaraderie for when times get tough.
Still want more?
With thousands of members across the globe, The Alternative Board offers business owner advisory boards, executive coaching and business training to help budding entrepreneurs and seasoned professionals grow their businesses, increase profits and improve their lives. If you want to find out more about how your business can benefit from strategic planning, mentoring and more, contact us today.
The beginning of the year is a great time to step back from the day-to-day operations of your business and make time to cross a few items off your to do list. Here are 10 tasks that will help you begin 2015 on a great note!
Strategic Planning - Review the strategic objectives you set for your business last year. Did you meet your business goals? If not, why not? What can you do differently this year to make sure you achieve your strategic goals? What new objectives do you want to add to your plan? Don’t forget to ask your TAB coach for help!
Personal Planning – A lot of people make New Year’s resolutions. The beginning of the year can be fruitful for “soul searching” – especially when it comes to reviewing your work/life balance. Take some time to think beyond your business goals – about whether your business is giving you what you want out of life. If not, how can you change that? This is an area where your TAB board members may have advice.
Revenues – If your business picks up during this time of year, stop reading and bookmark this post for later! Everyone else, don’t relax and put up your feet just yet. There are many ways you may be able to maximize revenue this year. First, put yourself in your customers’ place and think about what is important to them. Are they worried about this year’s budget (and could be sold on the money-saving offers you can make)? What’s on their to do list that you can help with?
Budgeting – Speaking of budgets, if you haven’t completed yours for 2051, don’t delay any longer. (For a good primer on small business budgeting, see 6 Steps to a Better Business Budget.)
It’s also important to understand how your competition is budgeting, especially in the areas of marketing, sales and staff. For example, recent surveys show that many small businesses plan to increase their marketing budget in 2015, and to spend more than in the past on email, websites and social media marketing. If your biggest competitor is upgrading their website or making the move onto Twitter, you may have to follow and budget accordingly.
Customers – The beginning of the year is the perfect chance to say thanks to your customers! A lot of businesses send holiday cards, but when was the last time you got a New Year’s card from a business you patronize? It’s a sure way to stand out from the crowd, and of course, show appreciation to your clients. Another idea is hosting a survey to find out how you can help them better in the new year (try to discover their issues, as opposed to a “how are we doing?” questionnaire).
Here’s some advice from TAB member Tracy Fisher on understanding customer needs: “Every time you talk to a Customer you should inquire whether there any unfulfilled needs of the Customer. This simple step will educate your company on what additional products or services to provide in addition to your current mix.”
Operations – The new year is a great time to clean house, or in the case of your business, apply the principles of 5S. This simple technique originated in Japan but has become popular around the world, because it offers a way to organize your operations for efficiency – and keep them that way. The five S’s stand for: Sort, Straighten, Shine, Standardize and Sustain. By applying each step in order to your work areas, you end up with streamlined spaces that contain everything employees need to do their jobs efficiently. Although 5S was originally designed for manufacturing environments, it works for any work area that could use a little decluttering. You can find many 5S articles and primers online, or visit Amazon.com for a list of how to manuals.
Employees – Is it time to make any key employee changes? Do you have the right team going into the New Year? Employees are your number one asset. You already know if anyone on your team is not helping you meet your business goals. The timing is always delicate with staff changes but in the interest of your business and your other employees, be sure you have the right people on the team.
Projects – Now is the time to review your other “to do” lists, and ask your managers to do the same. Are there items on your list you never get to? Any unfinished projects? Assign a deadline to finish these tasks by year’s end or agree to take them off your list. Of course, this may not be possible in all cases, but you might be surprised at how many items fall off the list simply because they’re no longer important – not to mention how many get done because they have a looming due date!
Human Resources – Many businesses do year-end reviews with employees, so this may already be on your radar. If not, remember that the biggest complaint many employees have is that they don’t know what their managers expect from them. Even if you’ve already completed a formal review at the end of 2014, the new year is a good time to sit down with your employees and revisit their goals.
Here’s a performance review idea from TAB member, Richard Duggan: “When scheduling an employee performance review, I always ask the employee for their feedback on my performance as well. Not only does it validate their experience and company involvement, it also generates some great ideas for me, too.”
Celebrate! - Whether it’s an office gathering or just a way to remind your employees that they are appreciated, take advantage of the new year and hold a special event for employees. It doesn’t have to be expensive, just something out of the ordinary that brings people together, and reminds everyone that there’s more to their relationships than “work.”
What other items are on your new year to-do list? Leave a comment and let us know.
Whether your industry is health care, marketing, or whatever else, asset protection is vital to your business’s success. The fact is, when you own and operate a company, you naturally open yourself up to a number of risks. From the lengthy list of expenses you take on when you launch (including business loans) to the threat of lawsuit, natural disaster or product malfunctions, there’s a strong possibility that something can arise to harm you and your business. Because of the reality of these risks, it’s crucial that you take steps to minimize potential loss. By safeguarding your assets, you insulate your business from disasters, like the repercussions of faulty products, claims of harassment, or partnerships that go sour–should they happen down the road.
How to Protect Your Key Business Assets
So what goes into proper asset protection? What should you be doing to protect your firm? Step one is to start thinking about your asset protection now, before a problem occurs. According to Greene & Markley, commercial lawyers, “The very best advice is to assess your risks and take steps to protect your assets before there are any signs of financial problems. When the sun is shining and the sky is clear, you have a better chance of protecting yourself than if you wait until the storm clouds are on the horizon.” With that in mind, here’s a look at six key strategies for keeping your assets secure and your business moving forward.
- Set up an LLC or corporation. Making your business a limited liability company (LLC) or a corporation is a smart first step for reducing business risk. An LLC is designed to help you avoid personal liability for debts that your business incurs and make the business liable instead. Since there are different regulations surrounding LLCs in different states, it’s still worthwhile to get legal advice on this decision. Make sure you understand what this does and doesn’t protect in your area.
- Store important paperwork in fireproof cabinets and/or safes. One of your best protections in case of audit or lawsuit is keeping detailed, accurate records — but those records must be secure in order to be useful to you. By storing detailed records digitally and/or in fireproof cases, you ensure that you have access to them when you need them, even if unthinkable disasters occur before then. Safes can provide effective protection for high-value products, cash, or debit gift cards.
- Use digital video security systems. Another key way to increase the insight you have into your operations is through video security systems. Should you face claims of improper employee conduct or other behavior caught on video, you’ll have proof of what did or did not occur. This protects you against false claims with hard-and-fast evidence.
- Invest in insurance. “Asset protection planning should not be a substitute for liability and professional insurance,” says Jay Adkisson at Forbes, “but rather should supplement insurance.” So don’t make the mistake of confusing the two. Asset protection planning helps you minimize risks of lawsuits and other damages; liability insurance provides help when those lawsuits occur. Your insurance company will step in to handle your defense and settlement.
- Keep personal financial backup strategies in place. When you own a company, it’s easy to want to put all your resources into making that company succeed — but draw the line at retirement accounts. Your IRA or 401(k) is your emergency backup plan and will be protected even if your company fails at some point, so don’t touch it.
- Engage in scenario planning to highlight risks. Tim Stoll, Owner of The Alternative Board – Metro Baton Rouge says “If more businesses in New Orleans asked, ‘What if a catastrophic hurricane hit?’ they may have been better protected. We don’t know what we don’t know.” Engaging with a peer advisory board helps Stoll analyze his business assets from every angle. “We help each other see things from a different perspective.”
- Put a business succession plan in place: According to attorney Kenneth J. Laino, “More businesses collapse from lack of a business succession plan than from a lawsuit bought by a party unrelated to the business.” So think about it: what will happen to your company if something happens to you or another executive? If you want to protect your assets, you need to get a plan in place for this situation.“Securing the intangible knowledge base that allows your company to operate is both the most important and most neglected item on this list,” says TAB San Antonio President John F. Dini. “No owner likes to anticipate the day he or she doesn’t show up for work, but it does happen. Make certain that the people you expect to step up know the roles they are expected to assume, have agreed to take them on, and have documented incentives to stick around through the transition.”
The entire concept of asset protection planning is built on the concept of worst-case scenario: you prepare for disaster, so if it happens, the results aren’t as catastrophic.
According to TAB York facilitator Philip Spensieri, “Most business owners don’t think about asset protection until it’s too late. Take the time to speak with your financial, legal, and technology advisors about strategies you can implement to protect your business from internal and external threats.”
Is your company prepared for what could go wrong?
If not, why? Follow the above tips to prepare your company to survive whatever comes.
About the author:
Wes Wernette currently oversees marketing at FireKing Security Group in New Albany, IN. The company specializes in products and services to secure your business assets, including safes, cash management products and file cabinets.
Dave Scarola, Chief Marketing Technologist, TAB
I’m amazed at the number of people – including executives – who do their job without a plan. They come into the office, attend scheduled meetings, answer emails and address the urgent things that come up during the day. They are not operating off of a strategic plan to improve productivity. At TAB, we call this the tyranny of the urgent. Those people that come in each day with a purpose make a difference in the business.
Fast Company’s December edition was focused on how to improve productivity. It included 151 secrets of the most productive people. Lots of great ideas in there. We took some time to wade through them and highlight our top 10.
- Read Each Email Once: Fighting a war against your inbox? Author and professor Jonah Berger never reads an email more than once. “If you read now and reply later, you end up having to reread the original note. Only read when you have the time to reply.”
- Avoid unnecessary phone calls: “Unless I recognize the number or have scheduled a call, I don’t answer the phone” says information designer Nicholas Fenton. “I try to force most exchanges to email.”
- Hunker Down Before Leaving: Don’t make yourself available for appointments 60 to 90 minutes before leaving. Instead, asses your progress and reprioritize. Use this time to wrap up the most important tasks and push everything else to tomorrow.
- Set Your Priorities: Near the end of your day, write down your top three most crucial tasks for the next day and pick one to complete before 10 am. When you arrive at work at your productivity peak, you’ll know exactly what to do.
- Stand-up Meetings: Improve collaboration in meetings by removing the chairs from the conference room. Researchers at the Olin Business School at Washington University in St. Louis used body sensors on two groups of participants and found that team members who stood were more engaged, less territorial about their ideas and generated more creative results.
- Improve Email Efficiency: Don’t open email unless you’re prepared to deal with it right away, says Charles Hudson, author of Inbox Freedom: The Zen Masters Guide to Tackling Your Email & Work. “Instead of camping out at your inbox all day, only open it when you have time to respond, archive, delete or turn emails into tasks.”
- Stick to the Agenda: “If it’s not on the agenda, we don’t talk about it.” Adora Cheung, CEO of Homejoy.
- Managing Your To-do List: Use a to-do list as an intake document and not as a working document says Peter Bergman, author of 18 Minutes: Find Your Focus, Master Distraction and Get the Right Things Done. Make a list of what you need to get done and assign it a time on your calendar. Then run your day from your calendar, not your to-do list. “You’re more likely to complete a task if you give it a when and where.”
- Create a To-Don’t List: Gary Friedman learned from Mickey Drexler at Gap Inc. to ask “what are we doing dumb?” The things that will make a difference are on the margins: things that are really, really important and things that are really, really unimportant. You want to focus on the important things and get rid of the unimportant. What are the dumbest things we are doing? We have to stop doing those things. Great organizations are able to edit.
- Get Things Accomplished in the Morning: Make mornings about execution and not assembly, says Julie Morgenstern, author of Never Check Email in the Morning. You are at your peak productivity in the morning. Everything you need to start your day should be premade, packed or prepped the night before. Don’t leave decisions for the morning.
Is selling your company part of your exit strategy? One type of potential buyer is a strategic buyer, someone who has a specific, strategic interest in purchasing your company.
Let’s look at 5 big considerations a strategic buyer is going to be looking at when evaluating the value of your business.
1. Purpose for Buying
The first thing a strategic buyer will consider is their own purpose for being interested in purchasing your business. Some reasons a strategic buyer might be interested in purchasing your business are:
To gain market share and increase sales volume simply by eliminating a piece of the competition. Think about your company’s position in the market and how that position will help or hurt your ability to sell at a premium price.
To help the strategic buyer gain industry competencies in areas that their current organization is lagging. Take a look at your potential buyers and learn about their businesses. How does your organization differ from theirs in a way that will appeal to their long-term success?
To enter a new market. They may be interested in entering your geographic market, appeal to your demographic market, or to diversify their products or services—just as a couple examples.
2. Dependency on Current Owner(s)
The less dependent the sales and operations of the business are on you and/or other owners, the more valuable your selling price is going to be. A general rule of thumb is that no more than 10% of the sales of your business should be dependent on the efforts and connections of any one person—particularly the owner. Operations also need to be largely independent of your direct involvement. Ask yourself (or, better yet, try it): Would my business survive for 90 days without me? If not, it’s time to start developing and executing a plan to make your business run without you.
3. Strength of CFO & Financial Records
This is a critically important factor that a strategic buyer will certainly assess. The lack of strong financial management and statements will usually cost you much more in the selling price than the cost of preparing them. If you are lacking in this area, consider working with your CFO to bring in a 3rd party financial expert who can help bring systems and statements up to date.
4. The Strength of Your Management Team and Information System (MIS)
Excluding yourself, how strong is your existing management team? Is it strong enough to stay in place and be able to run the business when you are gone? How strong is the relationship between your management team and suppliers, clients, and employees? Does it consist of young blood that a strategic buyer can expect to develop to improve processes and assets in the future? A strategic buyer will be considering these questions when reviewing the strength of your existing management team when determining if they want to buy, as well as how much your company is worth.
Similarly, how effective is your MIS? Even though a strategic buyer might replace it with something they prefer or are using elsewhere, the lack of a state-of-the-art MIS is usually an indication that you don’t have all of the management tools you need to run your business in its most profitable manner.
5. Strength of Sales Team
Strategic buyers will look at the professionalism and turnover of your sales team. Lower turnover will give them more confidence in the continuity and accuracy of sales projections. Again, they will also look at how dependent your company’s sales are directly on you as the owner. The less dependent sales are on you, the higher they will value your business.
Strategic plan planning horizons. Are yours as short and chopped up as a horizon seen between downtown buildings, or are they like an open prairie that lets you see for miles and miles?
It is November, coming up on Thanksgiving. Are you taking this time to reflect on the year and review your strategic plan?
Imagine this: A business contact of yours calls you and says, “I have a great opportunity that is going to present itself in the second quarter of next year. I need to know, quickly, whether you want to participate in this. It will take about a half-million dollars, but it is a golden opportunity.” As he outlines the opportunity, it does sound good. But you say to him, “My budget isn’t ready for next year. We’re just in the budget process right now. I don’t know if I’m going to have room in my budget to participate in this venture.”
If your budget is an annual calendar budget that runs through Dec. 31, you have no way of objectively testing the impact—financial or operational—of an opportunity that won’t arise until the second quarter of the next calendar year. Your strategic plan planning horizon is too short.
Start putting together a 36 month rolling horizon for your strategic plan goals. Don’t limit your planning horizon to budgets, but also set a three-year rolling horizon for staff, markets, capital formation—everything that has importance to your strategic plan goals.
At the end of the first three months, the details for the next 12 months are adjusted or revised with a new starting point. You are always maintaining between 12 and 15 months of a detailed plan, and you add an additional 24 months of a non-detailed plan beyond that. If you never have a horizon of less than 36 months overall, you will be able to test the impact of your decisions before you make them.
How do you test the impacts? If you have a financial model of your business, you plug the decisions into the modeling. You project the investment level the decision will require; you project whether you can afford those dollars in your capital structure; you project whether your cash flow is sufficient. Try out the decision in your operation plan to see whether it would take people away from other critical parts of your operation to the detriment of those operations.
Your planning team should create options that supplement the goals set forth in your company’s strategic plan. The team must identify each of its members’ responsibilities. Collectively, these responsibilities should integrate into all the activities needed to achieve your company goals. Once the planning team has reached a consensus on the goals that collectively make up the strategic plan, the team can focus on the specific activities needed for each area of the company to reach those goals.
Your planning team must identify the critical success factors required to reach each goal. Each proposed success factor must be challenged as to why it is critical in attaining its specific goal. There must also be clear time frames for achieving each success factor. Otherwise, there is no way to monitor whether you are making adequate progress toward your company goals.
Your company might have a brilliant strategic plan in terms of growth and competition. But does it take your manager incentives into consideration?
Denise’s company, for example, implemented an incentive plan for top management that was tied to improving the company’s per-share earnings on an after-tax basis. The company had an opportunity to grow by acquiring another business in a synergistic field. But by structuring it through a stock swap, the acquisition would dilute the per-share earnings of Denise’s company. Is it any surprise that management found ways to foil the acquisition? How can you expect managers to make a whole-hearted effort to follow a strategic plan when it will cost them money out of their wallets? Russ’ company’s strategic plan called for 10% growth in annual revenue each year over five years. After the plan had been in place six months he realized that projected growth wasn’t occurring, even though profits were improving significantly. Why? In formulating the plan, Russ made rewards contingent solely on improved profit. It didn’t take management long to realize that the way to get greater compensation was to reduce expenses, even if those expenses could have led to future growth and profit. As a result, research and development were slashed, as was investing in hiring additional salespeople.
The message of both examples is that performance measurements must be based on a business’s strategic plan.
Measurements for incentivizing performance must support the broader objectives and goals of the company. At the same time, performance criteria should lead managers to focus on the company’s objectives as well as their own. Identical performance measurements cannot be used for every aspect of the company. As measurements affect different people and departments, different goals must be set. But each goal should lead in the same ultimate direction. Each element of the company must be united in achieving the strategic plan. A good strategic plan takes into account the managers’ best interests as well as the company’s goals. Furthermore, managers’ performance measurements and compensation need to align with the company’s strategic plan and goals.