This week's podcast is brought to you by the 2012 State of the Business Owner Report.
Today, we talk about quantification.
In order to grow your business systemically, you must have a goal in mind and a way to track your progress.
In this episode we discuss:
Why You Can't Afford to Ignore Quantification
Next Week's E-Myth Business Challenge:
"Alexandra owns A+ Tutoring based in Minneapolis. After three years of solid success, Alex has been struggling to decide whether to expand into other cities from her base in Minneapolis. She eventually chose to enter Austin, Tx., where she found a great manager.
A+ began tutoring students this month. She has “big expectations” for herself and her company, but continues to struggle. She would like to find a way to stop working 15-hour days. She wonders whether to pursue a more aggressive expansion plan within Minneapolis.
Most of all, she knows that her somewhat haphazard approach to growth isn’t sustainable and vows to begin planning in earnest. She believes finding good managers is the key. Do you agree?"
You can give us your answer below, or email us at podcast@e-myth.com. Be sure to listen next Friday to hear the answer.
Quantification of any business element is always nested inside that element's qualification. Numbers by themselves don't mean anything. Only numbers in application tell a story. So, in trying to quantify elements of your business, it is critical to ask the question “why?" Why do you want to get a particular set of numbers to quantify a specific element of your business? It may be that you have never properly developed a P&L statement. In this case, the why is staring you in the face every day you wonder how your company is performing. To continue developing quantification models without a purpose that is tied back to your Strategic Objective is a dead end. What are the five or six key metrics that determine the health of your business? Are you wasting a lot of time and effort by reporting on metrics that aren't your business’s actual leverage points? Asking why is the critical qualification process required before you embark on any quantifying project.
Your Strategic Objective is the guiding light of your company – all quantification efforts are downstream of it. Your business's leverage points are the metrics that translate what your business performance is relative to your Strategic Objective. As Yogi Berra so eloquently stated: “You've got to be very careful if you don't know where you're going because you might not get there.” If you don't ask why, you won't have a link between where you are, where you want to be, and the leverage points in your business that will help you get there.
Making money is not the sole purpose of your business. It’s about creating something of value about which you are passionate and to which you are committed.
But unless you carefully track and quantify how money is flowing through your business, your vision will never reach its full potential.
If you want your business to be successful, then you must manage it carefully and ensure that it becomes profitable, cash positive, and maintains a healthy position over time.
In order to achieve your vision, you need a plan.
The 2012 State of the Business Owner Report shows that owners who had written plans for revenue growth, and the means to track it, grew their revenue 60% faster than businesses with no written plan in 2011.
Creating a plan to track and manage your financial goals consists of two phases:
In order to establish clear financial targets, you need:
In order to track your financial performance, you need:
The financial targets you set for your business must be based on what your business needs in order to break even, at the very least. However, you really want to aim for what you want your business to achieve in order for it to fully realize your vision.
It is essential that you have a vision for your life and get to know yourself well enough to understand how much money your business needs to earn in order to provide you with the life you want.
You need to educate yourself on the basics of business finance and work closely with financial experts, advisors, and professionals as much as possible. You don’t need to be the financial expert, but you need to be the financial leader and find experts who can help you pull your business’s financials together.
You want to establish financial targets for your business at least three to five years into the future. Financial targets should be linked to your businesses profitability, cash position, and financial health.
Once clear targets are set, the next step should be to create a budget and cash plan that breaks down your plan to get from where you are now to those targets in incremental periods. For example, to reach your target revenue goal three years from now, you need to reach a certain point after two years; and to reach that two year mark you need to be at a certain point after one year, etc. This allows you to focus on how you’re going to achieve your goals in the first year.
After you have targets in place and a budget and cash plan to achieve those targets, you need to carefully track whether your business is on track.
That is the purpose of financial reports, and there are only a few basic financial reports that you need in order to quantify how your business is working.
These include your Income Statement, Cash Flow Statement, Balance Sheet, and your Budget and Cash Plan Variance Reports.
It is not enough to just track sales or net profit, you need to understand and pay attention to every line item to understand more fully the controls you have over these important indicators.
Your Income Statement tracks your revenue, expenses, and your profitability. Many business owners are familiar with their Income Statement, but few actually learn how to use it as a strategic management tool.
Many business owners routinely check their bank accounts to confirm their cash balance, but few actually create a cash plan for their business and understand how to use cash to their advantage
Your Cash Flow Statement tracks the actual flow of money into and out of your business, and increases your awareness of predictable patterns.
Your Balance Sheet gives you a picture of the financial health of your business at any given moment in time. Surprisingly few business owners pay enough attention to their Balance Sheet, even though it is the one statement that can convey critical information such as the equity value of their business and how leveraged the business might be.
Nothing ever works out exactly as planned, but you still need a plan.
You need to know what the difference is between what your business is actually doing and what you planned on.
Budget and Cash Variance Reports simply show your business’s actual performance compared to what you anticipated and projected in your budget. A regular review of your Variance Report helps you fine-tune your projections, predictions, and expectations for the next budget cycle.
You should consult with financial experts and professionals who can advise you competently.
Confronting what you don’t know and seeking expert counseling is a sign of a mature business owner.
Good financial management software can help you ease the seeming drudgery of financial report-generation. Automate as much as possible with programs such as QuickBooks.
Seek recommendations from your accountant in order to assure alignment with the system they’re using.
To learn more about how planning and tracking is key to building a thriving business, check out the 2012 State of the Business Owner Report.
This week's podcast is brought to you by the 2012 State of the Business Owner Report.
Today, we talk about effective messaging.
You can only begin to reach the right prospects when you know who your best customer is, and what they need to hear.
Today we discuss:
How to Create Your Marketing Message
Next Week's E-Myth Business Challenge:
"Katy and Bob Patterson own an upscale restaurant in a prominent mall. After a flat period from 2008 to 2010; they embarked on a marketing campaign, which resulted in a return to growth, with a 10 per cent increase year over year in 2011.
When they sat down to plan for 2012, Katy and Bob realized they had little idea about how to quantify the results of their marketing. They had tried tracking some activities, but it proved difficult and they weren’t consistent. Bob was almost ready to give up, but Katy insisted they had to find a way to quantify their lead generation activities to best take advantage of what was working and what was not? How can they track what caused their new customers to come in?"
You can give us your answer below, or email us at podcast@e-myth.com. Be sure to listen next Friday to hear the answer.
We all get stressed out looking for that next great message, the one that will have customers lining up at the door. The key to finding it is looking for it in the right place. It’s not a marketing thing, at least not yet. There’s a primary step before that, and it starts with you.
First, ask yourself the question, “What messages am I sending out today?” If someone asked your employees why the company exists, would you like their answer? How would you answer? Do your employees feel good about the product or service your company offers? When was the last time you talked with them about their individual value and how they fit into your long-term vision? I don’t mean to be critical; it’s tough to find the time to focus on this softer side while your inbox piles up – believe me, we know.
And as hard as it is, until you change the conversation – write a new story at your company – you are communicating with your customers, and they are not getting your intended message.
People want to feel good about doing business with you, but how can they if you don’t? If you don’t truly believe the promise you’re making to your customers – deep in your bones – then you haven’t found your message yet. Invest in that moment, it’s worth it. When you find it your customers will tell you. And, for most small businesses, they’ll do all the advertising and messaging you’ll ever need.
Your business needs more sales.
Right?
While many owners want to focus their attention on sales, to start there is an exercise in futility.
You might like to think that the answer to “more sales” is simply a matter of better sales training, more seasoned sales people, or a more aggressive ad campaign, but there are many conditions to be uncovered before any of these initiatives will have an impact on sales.
Think about it.
What good is an advertising effort that draws massive amounts of attention if it doesn’t reach the right people?
You may experience a temporary bump in sales with a “shotgun” approach to advertising, but it will not be sustained if your initial engagement doesn't generate loyal, trusting customers who are touched by your message.
Your Lead Generation (or advertising) System is a collection of sub-systems that works only when these two results are achieved:
That's it. The sole purpose of your Lead Generation engine is to deliver qualified leads to your door.
The practical components of your lead generation activity include selecting the most appropriate channels and matching them to specifically-tailored messages, and then managing the technical execution of the campaign, and measuring the results.
Effective Lead Generation is equal parts art and science.
Your first step in resolving “not enough sales” is to find the sources of information on which your best customers regularly rely on.
It does you no good to invest in channels that potential customers won’t see or trust.
To generate leads –qualified leads – you need to capture and attract the attention of those who are most likely to have the interest, desire, and ability to take advantage of what you have to offer.
The “science” of effective lead generation is understanding your target market enough to know what channels of communications are relevant and credible parts of their lives.
Do they live for coupons or do they consider them crass and find them embarrassing? Do they get their news from TV? Yahoo? The Wall Street Journal? Are they faithful to local AM radio or dedicated to regional public broadcasting?
You need to know.
A number of years ago, a new, small car was introduced. Given its design and cost, the target market was young adults.
The well-funded car company’s marketing department, working under a company wide strategic directive to “use cutting edge technology,” chose text messaging as an appropriate lead generation channel.
At the time, texting was the cool means of communication among teens and young adults.
I polled my clients as to whether they’d heard of the new car.
The results of my informal study were fairly conclusive. A few had noticed it on the road, but the only ones who actually knew anything about it either regularly texted or were close to a young adult who did.
This avenue was deliberate and achieved a specific result.
Once you’ve identified the most reliable channels, your next task is to pair them with irresistible messages.
Your messages must speak to your probable customers’ needs and desires in ways that will touch them.
Sending irresistible messages through channels that are outside your customers’ sphere is a recipe for failure.
So is finding the perfect channel and flooding it with uninspiring messages.
An effective message not only broadcasts the promise of what your business will deliver, but does so in a way that compels your potential customers in your target market to take action.
It’s important to note that the lead generation channels you use shape your message.
Some of the constraints are obvious.
Radio does not accommodate visual images, and print channels don’t accommodate sound. Your beautiful tri-fold brochure with large amounts of text may be perfect to convey your message to the leisure reader at her kitchen table, but might frustrate her need for instant gratification if it’s reflected on your website. The impact of an image on a billboard is not going to be the same when viewed on an iPhone.
Words, images and sensory elements are the basic ingredients of your message. Assembling them to form an integrated, compelling and magnetic message is the art that makes the creation of effective messaging more than a science.
Online resources, like copyblogger.com’s internet marketing and copywriting courses, can help you improve your skills in this area. They, and any other marketing professionals, will tell you that your message should be crafted to get specific results.
An effective lead generation message must do a number of things:
This process takes time to perfect, so start with a few of your best attempts when reaching out to a group of prospects. Then, test which efforts work best, use them, and continue to learn more about creating the most effective message.
This week's podcast is brought to you by the 2012 State of the Business Owner Report.
Today, we talk about recruiting and hiring.
It is important to know why you're hiring and how to choose the person who best fits your company culture.
We discuss:
Next Week's E-Myth Business Challenge:
"Jack and Barbara own a successful independent computer retail store. As former Mac technical specialists and consultants they started out as independent contractors working for themselves and grew into a million dollar business with two locations offering retail products, consulting, service and repair, and training and education. Business was great until the debut of corporate Apple stores. How can they compete and continue to grow?"
You can give us your answer below, or email us at podcast@e-myth.com. Be sure to listen next Friday to hear the answer.
Recruiting and hiring are pivotal moments when your business is truly relational. You have the opportunity to communicate your vision to the potential candidates that help you build this vision into a reality. The more clear you are on your vision and the results you want from the position, the easier it is to recognize the right candidates and make the perfect hire.
Your recruiting message must attract the ideal candidate – some of your best information can come from your current employees. What brought them to your company? Why have they stayed? The more data you can collect from your employees, the better your ability to find the right person and the more likely you are to find exactly who you want for each position.
The single greatest factor in achieving your desired results is hiring great people, and most importantly, the ones who are the best fit for your company. Company culture and values compatibility should be assessed as strongly as one’s skillset. Too often, businesses only focus on skill-level and never consider the full scope of all that a candidate brings to the workplace. Unengaged employees create a disconnected and disjointed work environment, resulting in low productivity; while employees who are inspired by your vision, culture and mission are highly engaged and extremely productive.
Research shows that most hiring decisions are made in the first seven seconds. Your challenge is to balance the impact of your emotions regarding the hiring decision with more objective, rational perspectives.
Think through ‘who’ you want to hire before interviewing, and ask questions that elicit the evidence that tells you whether they fit the profile or not. And remember, your most important interviewing technique is your ability to listen. You should be doing no more than twenty percent of the talking during an interview.
Congratulations! You’ve hired a new employee.
Now that the hard part is over you can get back to business, right?
Not quite yet.
Getting your new team member “on-board” and successfully integrated is a process in itself. And it doesn’t happen on its own.
Too many business owners and managers believe that people will naturally find their own way through the policies and cultural distinctions that make up their business.
Beyond the anxiety of the actual recruiting and hiring process, the most nerve-wracking experience for a new employee is their first day on the job.
Trying to make a good impression while having to digest overwhelming amounts of new information can be daunting.
The term “on-boarding” is often used to describe the intentional and structured approach for ensuring that new employees get to know you, your company, the culture, and…well, where everything is! Like the restroom or the photocopier.
These five simple steps can minimize the stress for your new hire, reduce the time needed to get them “up to speed,” and provide a high level of comfort and confidence – preparing your new employee for success.
Just as the first impression you make on a new customer informs their long-term expectations and behavior, your new employee’s orientation communicates your culture and management style.
Every aspect of the new employee orientation process should be planned and documented; and it should begin before that first day on the job.
Nothing can be more disconcerting for a new employee than to be bombarded with multiple forms to sign, manuals to read, and then be shuffled off to an empty office or cubicle for the remainder of the morning.
Paperwork is going to be required, and an agile organization could easily provide many of the necessary legal forms and an employee handbook ahead of time. Required reading from your company website may provide a wealth of information for a new hire. Not only can your new employee show up the first day already familiar with your Strategic Objective, vision and mission statements, and an organizational chart, but employee testimonials and short presentations by key leaders can help set the stage on or even before that critical first day. (Nobody gets through the door here without having read The E-Myth Revisited).
Ideally, everyone will have been apprised of the new arrival, the employee’s computer will be set up, instructions for logging in, accessing programs, using the phone system, etc. will be ready.
Allow for some “free” time in the day and arrange for a “buddy system” so that the employee is not left feeling lost or uncertain as to what to do next.
Make sure the new employee knows ahead of time what to bring, where to park, who to ask for when they arrive, etc. A tour of the facilities is essential and all of the key people they will interact with should be introduced during the day.
Through all your best efforts to create a smooth and seamless transition from new hire to team member, keep in mind that every employee is different and requires a slightly different approach and level of attention.
Many managers and owners ply their new employees with information and instructions, but fail to listen to them and really get to know the person they have just brought on board. Learning more about the individual’s personal goals, their perceived role in the business, and their working (and learning) style can set the stage for creating a winning career path.
Plan some type of informal activity to allow a more relaxed interaction with other employees. Many businesses have developed new employee “rituals” for introducing everyone and creating the beginnings of a team relationship. Facilitating these relationships from the beginning can be crucial for fostering the team environment you seek to maintain in your company culture.
How long does the on-boarding process take? That depends on your company, the position, and the employee. It is safe to say that the process of becoming a part of your team, your culture doesn’t end after the first week. Your plan should extend to include the first two to three months of the new employee’s tenure in your company.
Your on-boarding process should include short and long-term benchmarks and expectations. Your new employee should be able to sit down with his or her manager and be told: “This is what you should know or be able to do on your own in the first week, after three weeks, within the month, and after three months.”
Having these expectations expressed in writing drives and informs your training agenda, supports your monitoring of their progress, and gives that new person a valuable way to chart their own progress – marking off small, progressive victories in acquiring new skills and knowledge as the time goes by and not having to worry that they’re not meeting expectations; the expectations are clearly outlined!
As the leader of a company that wants to demonstrate the value of innovation and continual improvement, always be on the lookout for insights and feedback that allow you to refine and improve any of your processes or systems, from recruiting, to hiring, to orientation, to training.
A new employee is not coming to you from a vacuum and their previous experience and knowledge make them perfect “test kitchens” for your existing systems and procedures. If there are holes in your systems (only natural, because they’d been developed by experienced employees who made assumptions about what a person would know), the new employee, not subject to those assumptions, will be the best person to expose them.
Make it clear to your new employee that while you are expecting them to use your existing systems, their feedback about unclear sections or gaps they discover are especially valuable and anticipated.
Preparation is one of the hallmarks of effective leadership.
Setting the stage for the future success of any employee is crucial, and it begins at the beginning.
The entire process of finding and hiring a new employee can be seen as a type of relay where the baton is passed at critical points along the course. The final pass occurs when that new employee finally accepts your offer.
If you are actively recruiting, or plan to hire soon, consider now how prepared you are to successfully bring someone on-board.
This week's podcast is brought to you by the 2012 State of the Business Owner Report.
Today, we talk about meeting customer needs.
It is important for every business owner to know the pivotal moment to begin rolling out the red carpet for customers.
We discuss:
Next Week's E-Myth Business Challenge:
"John and his business partner, Kimberly, started up a new online business in 2011. They have been operating the business themselves, supported by a team of freelance programmers. Last fall they went out to a group of venture capitalists and received funding to develop and grow the business. As they build out their business plan, the question of how to approach recruiting and hiring 20 new people over the next 18 months has them concerned. How do they do it? What do they need to think about first?"
You can give us your answer below, or email us at podcast@e-myth.com. Be sure to listen next Friday to hear the answer.
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