I find it amazing how many entrepreneurs and business owners get burned by thinking about things incorrectly.
Here’s an example from a recent conversation I had with an entrepreneur who sells professional services. His sales were strong, but his profits were weak. In trying to figure out a solution, he started by suggesting he layoff part of his staff. If he cut his staff, costs would go down and profits would go up.
However, he then realized that if he had less staff members, he couldn’t close as many sales nor complete as many projects. So, sales would go down about the same as costs, and profits would remain flat.
The solution I gave him was to cut costs by reducing his staff (either through layoffs or natural attrition) and to boost employee productivity. Because if he were able to serve the same number of clients with a smaller staff, then profits would rise. In fact, if the staff were pared down enough, he could even afford to pay each staff member more than they currently make.
There are several great example of this “reverse logic” of paying employees more to increase profits.
One example is The Container Store. The Container Store has just one employee for every three their competitors have. But, they pay their employees double the industry average and spend 160 hours training them.
What is the result of this strategy? The Container Store employees are better trained and happier, and thus provide superior service. All this at a 33% lower cost than competitors.
Interestingly, when The Container Store opened in New York City, it had 100 times more applications than available positions. With numbers like that, they can hire the best of the best each time.
Similarly, Harry Seifert, CEO of Winter Garden Salads gives employees bonuses just before Memorial Day, when demand for its products peak. The bonuses boost morale and cause the company's productivity to jump 50% during the busy period.
Paying employees more to improve performance and boost company-wide profits is a historically proven tactic. In fact, back in 1913, Henry Ford doubled employee wages from $2.50 to $5.00 per day. The move boosted employee morale and productivity and caused thousands of potential new workers to move to Detroit.
Your employees can and should be a source of your competitive advantage. Recruit them slowly and wisely. Train them well. Give them a voice in your company and respect them. And pay them well. When you do this, you’ll have employees that perform at three times the level of your competition. And even if you pay them double the industry average, you’ll still have huge profits and outperform your competitors.
Probably the most important question to ask when developing a business or strategic plan is who should be involved in its creation. Only when driven by the right people does a plan have any chance to be:
...“post plan” strategic projects and tasks actually get done and new ideas and initiatives are born and maintained.
The respective responsibilities for these 3 plan components naturally fall to:
And finally, a word as to getting outside help on one or all of the above components of the plan.
It is often overlooked that the only way to increase value of a business is to actually increase its sales and revenues, or to have a “high likelihood” plan in place to do so in the future.
And, in turn, the only way to put that “high likelihood” plan in place is by making it more more strategically sound, more tactically “real”, and more transformationally capable..
Given this, for all but the smallest businesses with the most limited of ambitions, the leverage gained through improving any one of these aspects is so high that it almost always makes sense to bring in a trained consultant to assist.
Whether you decide to reach out for help or drive the planning process yourself, just be sure to have the right people focused on the right components of the plan then just maybe the strategic excitement in your business will grow to be so great that good things start happening all by themselves.
On Wikipedia, I found the word "angel" defined as "a supernatural being or spirit, often depicted in humanoid form with feathered wings on their backs and halos around their heads."
While this might depict an "angel," it certainly is a far cry from the definition of an "angel investor."
Below I define exactly what an "angel investor" is along with answers to the other most common angel investor questions.
1. What is An Angel Investor?
The term "angel investor" is officially defined as a private investor who offers financial backing to an entrepreneurial venture.
When several private investors form an organization to collective fund ventures, they are known as an "angel investor group."
The act of providing the financial backing is known as "angel investing."
The amount of angel financing is significant. According to the Center for Venture Research at the University of New Hampshire, each year over 60,000 ventures raise over $20 billion from angel investors.
2. Will an angel investor invest in my ______ (insert restaurant, hotel, technology, website, product, app, salon, etc.)?
The answer to this is "yes."
Software is the top sector that receives angel funding, representing approximately 23% of total angel investments annually.
Healthcare Services/Medical Devices and Equipment (14%), Retail (12%), Biotech (11%), Industrial/Energy (7%) and Media (7%) are the next top sectors.
Importantly, that leaves an "other" amount of 26%. And ìotherî includes every type of company there is. So, yes, there is an angel investor out there who would fund your type of business.
3. What is the difference between angel investors and venture capitalists?
Venture capitalists differ from angel investors in that they typically provide more money (generally at least $2 million) and focus on companies that have achieved more operational milestones than companies generally funded by angel investors
Other key differences include the following:
4. What return on investment do angel investors want?
There is no set formula for the return angel investors want. In general, they simply want a "fair" return. "Fair" might imply millions of dollars if your company eventually goes public and is valued at billions. Or, "fair" may be a 15% return, or a reasonably higher return than they would receive if they invested in the less-risky public stock market.
The key is to figure out what the prospective investor deems to be ìfairî and offer it to them.
5. Where can I find angel investors for my company?
The best place to find angel investors is through networking. Who do you know? Who do your friends know? Who does your attorney know? And so on.
And then once you meet those referrals, ask who they know. And so on. By networking, you can reach tons of prospective angel investors and raise the funding you need.
Importantly, the vast, vast, vast, vast (yes, I know I just said ìvastî four times!) majority of angel investors are what I call "latent angel investors." That is, they don't know or walk around thinking of themselves as angel investors. But, they have the means, interest and ability to make angel investors.
Latent angel investors are the BEST for entrepreneurs, since they arenít seeing tons of potential companies to fund. As a result, if they see one good deal, thereís a good chance theyíll fund it. Conversely, those investors who see tons of deals are less likely to fund any particular venture.
Now that you know the answers to the five key angel investors questions, use this knowledge to raise this great funding source for your business.
As we are now near the half-way point of 2016, it is a great time to review your 2016 business plan, decide on your key goals for the second part of the year, and start thinking about your 2017 business plan.
This article will explain precisely how to accomplish these key tasks. Importantly, what you’ll learn today is far different than what you would have learned just a few years ago. That’s because markets and customer needs shift far more quickly today than they ever have. And the goals you set often don’t stay relevant as long.
Let’s start with reviewing your 2016 business plan. Specifically, think about the goals you set for the year. Have you accomplished half of them at this point? Are you on track to completing them by the end of the year?
What often happens is life and business “get in the way” of us accomplishing our annual goals. That is, things come up that distract us (sometimes rightfully so) from focusing on and achieving our big objectives. Other times, you try tactics (e.g., a new online marketing strategy) to achieve certain goals and they simply don’t work as expected. The bottom line is that you mustn’t get discouraged if you’re not on pace to achieve your 2016 goals. Rather, it’s time to modify them. Specifically, it’s time to create new goals for the second half of 2016 and an action plan to achieve them.
In deciding what goals to accomplish in the second half of 2016 think about your long-term goals. For example, is your ultimate goal to sell your company, grow revenues to $100 million, etc.? Whatever your long-term goals, think about what your business would have to look like at the point you achieved it. For instance, how many customers will you have? How many employees? How many office locations? What type of systems will you have in place then?
Next, work backwards. That is, answer this question: What does your business have to look like at the end of 2016 for it to be on the right trajectory to achieve your long-term goals? This same question should guide you to start thinking about your 2017 goals. Specifically, what do you need to accomplish in 2017 to put you on the right trajectory to achieve your long-term goals?
Importantly, in planning out the remainder of 2016, think about how you can get a “running start” into 2017. For example, if it takes 4 months to hire and train a new salesperson, maybe you should start the process now, so come January you’re in a position to grow more rapidly.
Business plans are critical documents to small and large companies alike as they force executives to think through what they’d like to achieve and how they will achieve it. But, in today’s world, flexibility is also important as environments change. That’s why it’s so important to review your annual goals now, reset goals as needed for the remainder of this year, and start thinking about how to start 2017 on a great note. This will put your company on the path to achieving the long-term success you desire.
Check out this Growthink Business Plan Slideshare for additional information.
In his classic tome, "The History of the Decline and Fall of the Roman Empire," Edward Gibbon famously theorized why the Romans, who ruled the Ancient World for close to 1,000 years, fell to such a depth that in the early Middle Ages not only was Rome repeatedly sacked, but was done so without a fight and with the great city’s once proud citizens reduced to cannibalism and to the killing of infants as their parents did not wish to bring children into a world of such suffering and so devoid of hope.
Gibbon considers, and then rejects, causes like the weight of empire, the rise of Christianity and the development of new military technologies by rivals, and instead settles as the main cause on how the citizens of Rome slowly but surely lost their “virtue” defined by Gibbon as such:
“derived from a strong sense of their own interest in the preservation and prosperity of the free government of which they were members. Such a sentiment, which had rendered the legions of the Roman Republic almost invincible, made but a very feeble impression on the mercenary servants of a despotic prince.”
Now leaving aside the foreboding comparisons to our current political age, it can be well argued that cultivating virtue should be a high goal and touchstone of any organization of ambition.
Virtue, where all of the stakeholders of a company - employees, contractors, customers, shareholders - find solid alignment between their personal interests, goals, and aspirations, and those of the organization of a whole.
Virtue, where those stakeholders have full faith and belief that if the organization prospers, then they too as individuals will prosper - spiritually, professionally, and financially.
How do we cultivate virtue like this? And more poignantly, how do we know when it is slipping away?
Well, let’s look at three classic symptoms of “declining virtue” organizational environments - high employee turnover, brand diminution / pricing pressure, and lack of innovation, and what to do about them.
High Employee Turnover. The ultimate sentiment that one no longer sees alignment with the interests of an organization is to decide that one no longer wishes to work there. Almost by definition, organizations plagued with high employee turnover have declining virtue.
What To Do About It: Address the cause of turnover at its source - in recruiting, on-boarding, position expectations, cultural and managerial norms and styles, opportunities for advancements, etc.
Recognize that more than growth itself, the footing of leadership toauthentically attempt growth is one of the best ways to “walk the talk” of virtue and earn organizational respect.
Brand Diminution/Pricing Pressure. Do customers see an organization's offerings as interchangeable with those of competitors? Is pricing pressure such that business is only won in low bid environments?
Commoditization like this is a classic symptom of declining virtue, and because of its awful impact on cash flow, perhaps more than any other factor can quickly threaten the very survival of an organization.
What To Do About It: Start with Why. Find/rediscover answers as to what the purpose - beyond paying the bills, making payroll, living to fight another day, etc. - is of our business. Because as was famously said, if we have enough whys, we will figure out the hows.
And almost always the best way to quickly identify that purpose and inject it back into an organization is through undertaking a formal strategic planning process (and ideally, one led by an outside facilitator).
Lack of Innovation. Is one's organization selling the same stuff in mostly the same way as it was five years ago? Is there an inability to start and sustain new initiatives because management is “just out of juice?”
“Heaviness” like this, is a sure sign of organization - threatening decay.
What To Do About It: Outsource it. Accept that as organizations age, their ability to effectively innovate naturally diminishes.
Big companies like Johnson & Johnson and Cisco accept this and don't even attempt to internally innovate and instead do so through acquisitions of entrepreneurial teams and technologies and through hiring consultants to drive key change initiatives.
While internal leadership of course must rate innovation as a high priority, in modern business its actual day-to-day implementation can be bought.
The Romans were great, and then they fell. And too many businesses, once they start to decline, never recover.
But history is also full of companies that rose, fell, and then rose again to even greater heights.
Let's be like them.
I regularly engage with entrepreneurs and executives to help them determine the right long-term strategic plans and goals to pursue, toward the end of maximizing their businesses’ valuations and their likelihoods of selling their companies down the road.
This, as I have discussed before, is the highest ROI work that a business manager can do, yet most of us invest way too little time in it, and even more vexingly the results we get from the time we do spend are middling at best.
Now, in addition to just not knowing how to strategic plan (and for those interested in a quick primer, I recommend Dave Lavinsky’s excellent book Start at the End), an under-rated reason why otherwise talented businesspeople are poor strategists is because of what I would describe as Business Dissonance - the sad feeling that even if we do manage to arrive at the right plan, it won't make any difference.
Why not? Well, at least partly because for too many of us and the organizations we lead feel incapable of implementing and maintaining the big changes that are almost always required to attain the long-term plan.
Yes, to paraphrase a famous scene from The Godfather, it can often feel like every time we think we have freed ourselves from Business as Usual, we are pulled back in and nothing changes.
As a result, we sabotage our grand plans by frittering away our precious time and energy on the mundane, the petty, and on the "urgent" but not really important stuff that can so easily consume our day.
Like round and piles and endless streams of email.
Meetings with weak agendas and even weaker follow-up.
The daily "just getting through” client and customer “crises” (versus finding and fixing their root causes).
On chatter, and on frenetic activity that feels like hard work, but doesn’t progress us toward important goals.
Paradoxically, this state of affairs does point us to the strategic breakthrough: by gaining control of our day to day schedules and to dos, we will free up time and space to focus on the important projects as dictated by our strategic plan.
And how can we empower ourselves in such a glorious way?
Well, for those that can describe themselves as Knowledge Workers (almost all of us these days), here’s an extremely simple daily “hack”: For the first hour of our day, shut off the technology.
No email. No text. No tweets. No posts.
And if an hour feels too much, then start with 15 minutes.
Sound simple? Well, it is, but not easy. (Try it, and if you can keep it up for just a month write me back, and I'll send you a card for a free cup of coffee on me).
When we clear our minds and spirits like this to start our day, almost magically will our capacity grow to make steady progress toward our most important (and almost always extremely proactive) projects and goals.
And the deep peace of mind of knowing that today’s work is in sync feels really, really good, too.
What do they have in common? Well, for one, they are businesses that were not started and grown from scratch by their original founders.
Rather, they were all started by others and then bought by ambitious and talented entrepreneurs - i.e. Sam Walton, Ray Croc, and Howard Schultz - who propelled them to a new stratosphere of growth.
And while high profile, statistically they are not atypical.
Census Bureau statistics show that a purchased business is eleven times more likely to still be in business 5 years from time of purchase as compared to one started from scratch.
However, for most business owners, the business “transaction” path is far too often overlooked.
The main reason is lack of know-how.
You see, the vast majority of business owners have never even attempted to buy or invest in a business other than their own.
As such, they have big knowledge gaps – ranging from the strategic, such as in how to identify the right kinds of companies to target for purchase…
…to the tactical, such as in how to best review and evaluate historical and projected financial statements prepared by sellers.
And bridging these gaps can only be accomplished experientially – i.e. by actually trying to buy or invest in a business.
Please let me emphasize try because the majority of attempted business purchases and sales do not consummate.
This is just fine, however, because the attempt itself always leads to unique wisdoms being gained.
These include being forced to really think about the evolving industry and competitive conditions in a given market.
And to getting real as to the level of expertise, effort and resources necessary to translate a business’ potential into actual results and profits.
Now, even in those rare circumstances when a business is bought, for cash, on a "straight from the treasury" basis, the deal maker still must make a strong financial and strategic case to justify a deal’s opportunity cost.
Of course, for deals requiring outside capital, this case must be made that much more thoroughly.
Again, there is no substitute for experience.
Only by going through the exercise of actually building and defending a financial projections model can one acquire the knowledge base and savoir-faire to effectively deal make.
Let me close with a few words about deal advisors - management consultants, business brokers and investment bankers.
In spite of the mystique these sometimes fine folks like to maintain around themselves, when one cuts through the haze the best of them offer three critical value-adds.
First, as intermediaries, they massage and facilitate the naturally combative negotiating process of a one-off transaction that is a business purchase and sale.
Second, they act as accountability coaches.
Like other undertakings that require great proactivity - such as committing to a fitness or diet regimen - having an outside agent who is paid to keep you doing what you say you want to do has enormous and tangible value.
Now, on their own, these two value-adds are usually more than enough to justify the expense of an advisor.
It is a third value, however, that the best advisors offer that creates the really high ROI.
And that is working with an entrepreneurial and executive team to envision and articulate a business’ future value.
And then, helping to create and maintain existence structures that translate this visioning into day-to-day business reality and results.
THIS is the highest form of business work.
And the highest ROI.
So whether you decide to go it alone, or to work with a talented and ethical advisor, the business purchase and sale process is one that all serious business owners and investors should engage in regularly.
Because yes, even when a deal is NOT consummated, the return on time and investment will be VERY high.
And when a deal DOES get done then the stars align…
…well it is THE fastest and most predictable path to business wealth and success known to humankind.
Just ask Sam Walton, Ray Croc, and Howard Schultz if you have any doubt about that.
Today, almost all businesses interact with and relate to their perspective and existing clients through multiple channels: in-person, on the phone, over e-mail and increasingly text, via social media and through Web Reputational Means of which we are usually only partially aware.
For many folks, even just reading the above paragraph arouses feelings of anxiety, frustration, and sometimes even disgust.
Golly they say - wasn't it an easier and better time when everything was just "analog" and “human” sized and paced?
And they go on, in the end doesn't all of this digital stuff cost more than it is really worth? In the day-to-day time, energy, and focus to pay attention to and consistently communicate on them all?
Well Too bad. Multiple Touch Point Business - digital and otherwise – is now the very air that we as modern executives breathe.
And we can choose to either have those breaths be deep, nurturing, and effective, or shallow, distracting, and ineffective.
It really just comes down to in all of our communication no matter its form whether or not we are one thing: Authentic.
Now for most of us this is most easily and naturally done in the traditional channels: Over the telephone and In-person.
So a great prism through which to manage and judge our digital efforts - Email, SEO, SEM, social media, etc. - is simply by how much they lead to high-quality telephone conversations and in-person interactions.
Car dealerships understand this better than anyone: that the over-riding purpose of their digital efforts is to make their phones ring and drive visitors to their lots.
Now, for those businesses in selling modalities (usually lower-priced products) where the telephone/in-person outcome is not desirable nor possible, then the guidance is to work to enrich the “virtual” experience so that it feels as real and natural as a telephone/in-person interaction.
Simple but powerful ways to do this include the use of photos in marketing efforts, along with stories and testimonials from successful and happy clients.
Online Photo Sharing, now so ubiquitous in the personal digital domain, is utilized far less often and effectively in business contexts.
But given that social media stats show that for both business and personal purposes that photos are shared more than 5 times as much as written posts, incorporating imagery into one’s business communications is a simple and inexpensive way to emulate the power and emotional appeal of in-person marketing.
Video is another inexpensive and simple way to improve digital authenticity and effectiveness.
This can be of two forms - Recorded Video in the form of Explainer Videos, Thought Pieces, Case Studies, and Testimonials, and Live Video in the form of upgrading phone calls and presentation to video through free and inexpensive tools like Skype, Google Hangouts, and GoToMeeting.
Does this video need to be of high production quality?
It can't hurt, but a video strategy I find easily effective is to “Share the Webcam” and live video of myself at the start of a call, and then turn it off and conduct the call as normal.
This usually creates that lovely “Ah-Ha” moment when we first see the other person’s face that I am sure all of us have experienced on a Skype call or a Facetime chat without the awkwardness and work of “staying on camera” for an extended period of time.
The key caveat here is that if even for only a few moments in business contexts “staging” is important
So invest in a quality webcam, have well-lit and professional backdrop, and “Dress for Success” in whatever way that means for your business.
And finally, don't hide behind the lazy virtues of “Branding” and “Goodwill” but instead relentlessly and ruthlessly work to quantify the ROI of these multiple touch point efforts.
Yes, doing it all right requires a lot of hard work, but once in rhythm really just requires the simplest and most natural thing in the world: Giving and Sharing the Best of Ourselves.
Just remember to keep measuring and focusing on incremental improvement as we do so.
“Work on Your Business, Not In It”
This popular, and somewhat cliched refrain, has for many years been suggested as a managerial and entrepreneurial best practice, and as "the dream" of business owners everywhere.
Because if only...
...We could extract ourselves from all of “the stuff” that takes up our business day: customers, prospects, employees, contractors, regulators, meetings, emails, texts, social media, and more...
...and we were good enough at delegation, at process improvement, at separating the truly important from the chaff and the noise then...
...We would be left with the time and the clear and reflective energy to:
A business hero of mine that does all this and more is Richard Branson. Branson is rightfully admired for having built from scratch one of the most iconic and successful brands and family of companies in business history, and having a ton of fun while doing it.
When studying a business legend like him, I look for "lever points" - small areas of emulation that when mindsets and behaviors are modified (sometimes just slightly) to match, big productivity gains result.
Here are three great Richard Branson “work more on your business” lever points to emulate:
#3. Write. Wherever he goes, Branson famously carries with him a journal. He says there is “strategic magic” in writing, greatly because most of us learned to think in academic environments at impressionable ages with pen and paper in hand.
Because of this early-age imprinting and because writing is inherently a "quiet" activity, business work done this way is naturally more reflective and strategic.
#2. The Day’s First Hour: Sharpen the Saw. In Richard Branson’s “Why I Wake Early” post, he notes:
No matter where I am in the world, I try to routinely wake up at around 5am. By rising early, I’m able to do some exercise and spend time with my family, which puts me in a great mind frame before getting down to business.
Investing in ourselves, from the day's get go - with exercise, meditation, spiritual reading, etc. - counteracts the entropy that can downgrade our business day into just a frenetic "one task to the next" squabble.
#1. The Proactive Comes First. Good executives react well to business stimuli - they return calls, they answer emails, when a co-worker says hello, they smile and say hello back, etc.
Great executives proactively create their business reality. They define and prioritize the most important projects. They cultivate the right relationships. They invest in their physical, mental, and spiritual well-being and in their capacity for creative work. They are the masters of their domains, of their fates.
And from this confident, unhurried, centered place, easily completed are more of their mission critical “on the business” projects, tasks, and to dos.
What is more fun in business than that?
The fundamental challenge of modern business is finding that right balance between tactics and strategy, between execution and innovation, between management and entrepreneurship.
Typically, as companies grow and age, they naturally become more tactical, more execution - focused.
In contrast, the “tabula rasa” of startups has traditionally been the best milieu for out-of-the-box strategy and innovation to thrive.
Now in the old days, businesses could do ok by being very good at just one of these.
Big businesses could sustain profitable franchises for years by leveraging their resource advantages to keep smaller competitors out and margins high.
As for startups, it was easy to stay in the “idea bubble.”
Investors were more patient and it often just wasn’t that obvious if your team and technology had the right stuff. You had time on your side.
But no longer - businesses must now be either good at both or they perish.
This is extremely stressful for most entrepreneurs and business owners, and especially for investors working to determine which of them to back.
Luckily, there is an easy shorthand to separate the superstar company wheat from the chaff.
It is the simple idea that super business PEOPLE must be all of these things too.
And superstar companies are really just ones where lots and lots of superstar people work.
So, find the superstar people, and the money will follow.
In his excellent book “The Global Achievement Gap,” author Tony Wagner flags seven crucial “superstar” skills to look for:
1. Critical thinking and problem solving
2. Collaboration across networks and leading by influence
3. Agility and adaptability
4. Initiative and entrepreneurship
5. Effective oral and written communication
6. Accessing and analyzing information
7. Curiosity and imagination
To this, let me add one more: Ambition.
Now I am not talking about the garden variety get good grades, go to a nice college, start a small business, complain about taxes and regulation and how hard it all is type ambition.
In this multi-billion person, highly educated, hard-working world of ours, that just doesn’t cut it.
No, the ambition I am talking about is one that burns so deep and hot that it is deeply dysfunctional.
An ambition that usually translates for sure into an insane, other-worldly work ethic, but one that goes beyond that.
It is an ambition that is channeled daily into ongoing personal and professional improvement and learning.
An ambition that leads to goals beyond the realistically possible.
Like Steve Jobs leading Apple into the music business, or Richard Branson Virgin into airlines, or Tony Hsieh with Zappos putting his life and considerable fortune on the line, for of all things, to sell shoes online.
This kind of ambition is the unifying force. It demands that everything be done right – strategy, tactics, innovation, execution, entrepreneurship, management.
Find this kind of ambition – channeled to ethical, capitalistic ends – and back it.
And you and the world will be better for it.