An ongoing entrepreneurial and executive challenge is blocking out all distractions and focusing and executing upon what is important above all else - pursuing opportunities of high value and potential for our companies.
These distractions are of various and nefarious types:
The most successful businesspeople I know fight through these distractions and instead everyday do and focus on that most important thing - winning at business everything else be darned.
For Media Distractions, they insulate themselves as much as possible from the "anxiety-driven" news as is presented on the news networks (Fox, CNN, MSNBC, et al.), and instead nourish their minds and spirits with "business success" - based media like CNBC and Fortune, Entrepreneur, and Inc. Magazines.
Media that focuses on those that are winning at business, how they are doing it, and how they are overcoming strategic and tactical challenges in pursuit of those victories.
For Naysayers Distractions, for that lovely group of “friends” and family who drain our motive force and positive momentum through their negative thoughts and lack of encouragement, well the best businesspeople are just too busy with constructive action, with working on their businesses and themselves to have any time for the sideway glances and half - hearted words and efforts of the “Eyeores” chirping at their heels.
Yes, this may sound harsh, but it is a harshness in service of a greater good:building profitable, high cash flow private sector businesses.
Both because this is what we as businesspeople are uniquely trained, empowered, and positioned to do and because it is what this world of ours (and our Eyeorian friends too!) need so much more of.
For the Distractions of Self-Doubt, of maintaining the enthusiasm, stamina and willingness to make the sacrifices of time, energy, of life force to achieve big business success.
To this I say malarkey!
Pursuing business success is not a burden, but a blessing, one of the miraculous opportunities modern life has to offer, and one that only a very small percentage of humans that have walked the earth have had the privilege to do.
Embrace it, enjoy it. Let’s be happy warriors - businessmen and women that find and relish the fun and excitement that is the game of business.
And as we do, the news of the day magically starts sounding a bit less distressing, the naysayers among us a bit less discouraging, our self-talk more opportunity-focused and yes the hard work we do in and on our businesses starts yielding more and faster results.
Everything else really is malarkey!
A great best practice for all companies of ambition is to establish and hold regular meetings of a well-qualified and experienced Board of Strategic Advisors.
Let’s set aside for now some of the mechanisms of setting up a quality board (of which more can be read about here) and instead focus on some of the “Tough Love” feedback a board can offer executives on what they are doing right…
…and far more importantly what they are doing wrong and how to fix it.
1. That Often It is Better to Receive than to Give: While advisory board members, unlike a formal board, do not have liability nor fiduciary responsibility, their time and energy requirements to participate are significant.
And for most smaller companies, the financial incentives it can offer advisory board members are relatively little compared to the value of a board members’ time.
A good if imperfect analogy is that for many senior executives their involvement with a smaller company advisory board is almost a philanthropic endeavor - where they give of themselves without expectation of direct reward - financial or otherwise.
Correspondingly, the owners and managers of the small company must approach the sage advice and good energy offered by their advisory board fully in “receiving” mode.
For businesspeople of the mindset of always trading value for value and reciprocal obligation, this is hard. But only by clearing this space can the board’s counsel be best received.
And somewhat counter-intuitively, often only by management fully accepting the “gifts” of its advisors will the board member’s experience be richest.
2. Begin with the End in Mind: For companies beyond the startup phase, its operating executives are naturally pulled to the shorter-term challenges and realities - this quarter’s revenue and profits, this month’s sales, the challenges and angst of a difficult employee decision, etc.
In contrast, an advisory board discussion, by both its nature and by the kinds of folks attracted to serve on it, naturally pulls to the long view, to the big questions that all businesses should be regularly asking themselves but rarely do.
Or, as they say, the “Why” and the “Which.”
The Why questions are hopefully embodied in the Company’s mission and its values, and need the regular attention of strategic planning sessions like advisory board meetings to keep them from just existing in “hot air.”
The “Which” questions are in many ways the harder ones that an advisory board dynamic can help address.
You see, ambitious entrepreneurs and executives are naturally drawn to expanding their sense of their market opportunity, and correspondingly their list of product and service offerings.
This can lead to a diffusion of focus, of trying to be all things to all people.
A thoughtful advisory board will challenge management to more clearly define where they are aiming to be 1 year, 3 years hence and beyond, and from this vision where resources and attention should be focused today.
3. Speak Little, Listen Much: Managers and owners of emerging companies are often also the lead salespeople, the lead “evangelists” for their companies.
As a result, their default mode is to always be selling, always be pied-pipering their incredibly bright futures.
But there is often more insight to be gained from Negative Thinking, from grappling with all the things that can go wrong and are difficult / well-nigh impossible to overcome.
Even if, especially if, so doing is buzz-killing and / or depressing.
Why? Because it is often only in this low energy state that a certain kind of reflective creativity can flourish and completely new approaches to solving vexing problems can be discovered.
4. Brevity is Next to Godliness: Strategic planning sessions in a modern business context should be tightly scheduled to last not more than 2 hours. After this length of time, diminishing returns starts setting in fast.
A tight frame also requires all participants to come to the meeting prepared. And, in turn, that the meeting organizers select the right meeting homework and then plan and moderate the agenda with the proper balance of structure and free-flowing dialogue.
Doing all of the above requires work – a good guide is that for every hour of strategic meeting time there should be 5 hours of planning time by the meeting organizer and at least 2 hours of preparation time by each participant.
Conclusion: Given that the only way to increase the value of a business is to either a) increase its bottom line financials and/or b) to improve its strategic positioning and growth probability, creative planning sessions like advisory board meetings should be a FIRST priority of any responsible manager.
They are classic Eisenhowerian, “Non-Urgent and Extremely Important” activities.
Ignore them at your peril, and benefit from them in ways well beyond predictable expectation.
The smartest, most creative, and effective business men and women more often than not can be best described as "Investor – Entrepreneurs,” evaluating and pursuing opportunities through the complementary perspectives of the two mindsets.
As investors, they do so dispassionately - with the lenses of risk and reward, and of expected value.
As entrepreneurs, they are more holistic - knowing that numbers on financial statements are byproducts of collective, human effort - of sales, marketing, and operational strategies and project plans, all underpinned by cultural commitments to excellence and to winning.
Now, when things get dicey is when these Investor - Entrepreneurs don't properly distinguish in their otherwise able minds where investing and entrepreneurship do NOT intersect.
The problem reveals itself in a number of ways.
For the entrepreneur, it is a Cognitive Dissonance, a denial of the simple fact that an incredibly large percentage of their net worth and earnings power is often concentrated in a single, and very high risk asset - i.e. their own business.
For the investor, it is the dark and dangerous side of that usually, admirable human quality of Commitment and Consistency.
This is the tendency we all have to stick to decisions that we have made in the past even if and when the original evidence that underpinned those decisions has changed dramatically.
The classic example of this is basing an investment decision on the original purchase price of an asset, its sunk cost, even though the faulty logic of doing so is almost self-evident.
Yet, following this truism, because of our emotional human wiring, is always far harder to do in practice than in theory.
So, how should - let’s call them “Entrepreneur Mind” and “Investor Mind” - properly work together?
Here are three ideas:
1. For Investors, view with an extremely jaundiced eye records and claims of past performance.
Let's be clear, doing so is extremely hard.
Both because of the aforementioned “human wiring” matter, and because the brokerage and insurance industries have a massive, vested interest in manipulating and exploiting this wiring to prevent us from doing so.
To best resist this manipulation, invest like an entrepreneur - pointed toward the future and leaving the past where it rightfully belongs, in the past.
2. For Entrepreneurs, just for a few moments, step in the space of not believing one’s own “propaganda.”
This too, is hard as of what makes entrepreneurs who they are is their unshakeable and often irrational self-belief, in spite of often much evidence to the contrary.
This self-belief serves them well as leaders and as creators, but as shareholders not so much.
And as shareholders, the irrefutable principles of diversification, of long-term and global planning, and of the overriding importance of small differences in return, multiplied over time, so fundamentally apply.
3. And finally, as Investors - Entrepreneurs, to recognize good professional guidance as a success requirement, for the simple reason that our most dynamic competitors are getting it.
And if you are not, then you are wanting.
And in both investing and entrepreneurship, this wanting, this disadvantage, even if small, multiplied over time is usually the difference between failure and success.
What does this look like in practice?
Well, for one, a best-functioning team of professional advisors should include a great strategy and exit planning advisor, a great accountability coach, and a great wealth manager.
And they should all work together, especially and effectively toward those most appropriate and highest priority goals of all entrepreneurs and of all investors: building assets and earning power.
Both slowly and methodically over time as an investor and in sudden, large, and creative shoots as an entrepreneur.
Over the past few weeks, I have written about the amazing growth and financial progress of Business Intelligence (BI) companies like Domo, Birst, and Looker and how their rise to prominence and value signifies a shift in how we think about the best way to manage and value an enterprise.
I described this shift as "changing the world of business from one done by gut and hand to one done by statistics and evidence," and how this next generation of software companies can "finish the job" of the IT revolution and enable a level of predictability and automation to business and investment processes like never before.
There is one big problem, however.
A problem that threatens the ability of these companies to deliver on the promise of their amazing technologies…
…and along with it any meaningful ROI for their customers.
That problem is people.
You see, the vast majority of us are a combination of unable and unexcited to actually use business intelligence tools and technologies on a regular and consistent basis.
Because doing so is hard.
And harder still when one does not have a rigorous quantitative background in things like statistics, cost accounting, behavioral economics, and managerial finance.
As tough, managing by data requires a lot of “pig-headedness”- not getting distracted by the "noise in the numbers" and a deep humility that when the inevitable conflicts between and our gut and the numbers arise to consistently choose the latter.
None of this sounds like much fun. So we avoid it.
However…let's juxtapose this difficult reality against why so many very smart people and investors are so excited about BI.
Because when Business Intelligence is done right, everyone makes a LOT more money.
A good analogy is eating better and exercising more – we all know it is really good for us but doing it requires education, habits re-training, and consistent, diligent work.
And those most successful at eating great and being in awesome shape usually have coaches – personal trainers, chefs, nutritionists - to help them define goals, put action plans together, and provide ongoing measurements, accountability, and course corrections to achieve success.
And enabling Business Intelligence tools and technologies within organizations is no different.
Luckily, a whole generation of companies have arisen to help companies implement and integrate BI into their management practices and work processes, and to train, teach and coach managers how to use and profit from them.
For sure, some day using BI to drive our daily work and business decision making will become, for most of us, as simple and natural as using a word processor or a spreadsheet.
But that day is a long way off.
And between now and then, the best managers looking to get BI working in their organizations quickly and correctly will hire coaches and consultants to help them.
And the values of the firms that do this work right and truly help managers and companies unlock the huge profit potential of Business Intelligence could someday approach that of the companies that build the software empowering it all.
On this great day when we celebrate America, its freedoms and way of life, please enjoy (and as you are moved share with the hashtag #SpiritofAmerica) this list of thirty - five of why this is the greatest country in the history of the world:
#35. Apple. Google. Facebook. $1.38 Trillion in market value - capitalized here.
#34. YPO. Vistage. FoundersCard. Entrepreneurial Leaders - networking here.
#32. Uber. AirBnB. WeWork. The New Economy - a reality here.
#31. Silicon Valley, Silicon Beach (Los Angeles), Silicon Alley (Manhattan), Silicon Hills (Austin). Technology - leading the world here.
#30. Gettysburg. Guadalcanal. Bunker Hill. Heroes lived here.
#29. Contract Rights. Judges. Juries of One’s Peers. Redress for grievances - practiced here.
#28. Yosemite. The Grand Canyon. Yellowstone. Natural Wonders - in abundance here.
#27. The Interstates. State Highways. County Parkways. The Open Road - Great to be on it here.
#26. Uber. AirBnB. Lending Club. The Economy – Shared Here.
#25. Lexington. Concord. Saratoga. Yorktown – Life, Liberty, and the Pursuit of Happiness. Fought for here.
#24. The Bill of Rights. The Supreme Court. The Rule of Law. Justice served here.
#23. The Stock Market. Home Ownership. Low Inflation. Assets built here.
#22. Driverless Cars (and Electric too!). Wearable Devices. The Internet of Things. Tomorrow’s Technologies – Imagined Here.
#21. Diamandis. Kurzweil. Saffo. The future - abundant here.
#20. Hollywood. Disney. Broadway. Entertainment happens here.
#19. The World Series, The Super Bowl, The Masters. Sports are spectacle here.
#18. Jesus. Moses. Mohammed. The Buddha. Religion gets along here.
#17. Gates. Jobs. Page. Zuckerberg. BIG stuff - invented here.
#16. Murphy. Martin. Seinfeld. Rock. Life is a laugh here.
#15. Madonna. Mariah. Whitney. Elvis. Michael. Frank. Songs are sung here.
#14. Faulkner. Hemmingway. Roth. Franzen. Stories are told here.
#13. Kaiser. Pfizer. Genentech. Merck. Healing happens here.
#12. Boeing. Caterpiillar. Deere. UPS. FedEx. Stuff gets built here and gets there.
#11. Amazon. eBay. Ecommerce - transacted here.
#10. Facebook, Twitter, LinkedIn. Networks - connected here.
#9. Google. Yahoo. Bing. Information - organized and accessible here.
#8. Kleiner. Sequoia. Mayfield. Ideas - backed here.
#7. The Inc. 500. The Fast Company 50. Entrepreneurs - inspired here.
#6. Alaska. Montana. Wyoming. Space - open here.
#5. Chicago. Boston. San Francisco. NYC. Cities pulse here.
#4. Jefferson, Lincoln, and Roosevelt walked the Earth here.
#3. The first guy in charge here voluntarily gave up power, when he could easily have been named ruler for life. Character stands here.
#2. The current guy in charge was born to an immigrant father and a teenage mother who was so poor that she received government assistance in raising her only child. Possibility abounds here.
#1. The Greatest Generation was born here, fought and won there. And then they came home, put their heads down, and built a new America. Civil rights, cities, suburbs, highways, schools, and more.
So on this day especially, we say thank you!
Happy 4th to You and Yours!
An endearing, but dangerous quality of entrepreneurs and small business owners is their propensity to go all-in -- not only pouring all of their lives, hearts and souls into their business, but all of their money too.
Of course, many entrepreneurs simply need every penny they have and more to fund their businesses and there just isn't any money left to invest in anything else.
But once an entrepreneur gets beyond the survival stage, they need to think about how and where money is working for them in their own business, and where it could do better.
Often times, a lot better.
The first challenge: Entrepreneurs live, breathe, and too often suffer their own businesses so much that when it comes to investing, they can’t think straight.
I encounter a lot of entrepreneurs who have this massive built-in bias toward ongoing, disproportionate investment in their own businesses and correspondingly are often just blasé, disinterested, and even, dare I say lazy when it comes to thinking about money and investments outside of their “baby.”
So they take one of two approaches. The first is the passive one -- outsourcing money and investment decisions outside of one’s business to a wealth “manager.” While there are compelling financial planning reasons to do this -- i.e. "we need to save and invest this much and earn this rate of return by this date to comfortably retire" -- the expectation for actual investment returns via this approach should be kept pretty low.
In fact, the S&P Indices Versus Active Funds Scorecard (SPIVA) shows that average "managed money" returns trail the index averages by almost the exact percentages of the fees charged for managing the money.
The second approach is more scatter shot - whereby investments in “one-off” real estate, startups, oil and gas, and collectables opportunities, among others, are presented to the entrepreneur by a varying lot of well-meaning and potentially pilfering parties.
And entrepreneurs, as they are wired fundamentally as optimists, find these opportunities naturally appealing.
So they invest – sometimes to good and lucky effect, but often disastrously so.
Is there a better way?
Can the hard-working entrepreneur have his or her money earn a good rate of return? While managing risk?
And dare we dream – adoing so in a way that is in alignment with their entrepreneurial values and leverages their entrepreneurial skill sets, experiences, and industry knowledge?
Of course there is!
An approach built on diversification and one that leverages traditional managed money vehicles like public market stocks, bonds, and mutual funds, but also offers the opportunity for above average, and with a little good fortune, potentially excellent investment returns.
It looks, quite simply, like this: Invest in what you know.
Or, in other words, a restaurateur could invest in other people’s restaurants and food service businesses.
Healthcare entrepreneurs could evaluate investment opportunities in healthcare.
Those owning distribution or light manufacturing businesses, look at other people’s distribution and light manufacturing businesses.
Now, of course there are caveats to this approach.
The first is to be cautious and conscious as to industry risk – factors such as an uncertain regulatory environment or perilously fast changing technological change that create risks beyond the control of any one or several companies in an industry.
Secondly, to undertake this form of investment, especially when owning minority positions in private companies, transactional and deal term sophistication is a must.
So if you don't understand aspects of private equity investing like valuation, capital structure, control and anti-dilution provisions, it is probably better to either avoid this form of investing, or do so through a managed or private equity fund vehicle approach.
You may be asking: Why go through all the trouble?
Well, when done right, a properly executed and diversified "angel" investment approach like this can earn a very high investment return.
Research from the Kauffman Foundation Angel Returns Study and the Nesta Angel Investing Study, compiled by Dr. Robert Wiltbank, have demonstrated that the "…average angel investor (across the U.S. and UK) produced a gross multiple of 2.5 times their investment, in a mean time of about four years."
Returns like this will not be found via traditional managed money approaches, and rarely -- especially when accounting for the huge opportunity costs of running a company -- in one’s own business.
So for those entrepreneurs with the stomach and the work ethic for it, an "Other People’s Business" investment strategy like this is one well-worth considering.
To Your Success,
P.S. To listen to a replay of my Friday Webinar, “Characteristics of SaaS Companies with Breakout Potential,”, click here.
Innovative. Nimble. High energy. Opportunity - focused.
Stuck. Ponderous. Tired. “Hanging in there” - focused.
Which set of the above best describes your business? Which would your employees use to describe it? Prospective investors? Your family?
Or really pulling back the facade, which set are reflected in your financial results? Those of a fast-growing, profitable company? Or one with slow to no revenue growth and profits non-existent and / or stubbornly low?
Yes, the tough reality in developed economies with slow overall economic growth rates is that most businesses don't grow all that fast nor profitably and more to the point, don’t do so anyway near as much as their owners think they should be doing.
“Think they should be doing” is interesting, isn’t it?
Being the congenital optimists that they are, entrepreneurs and business owners truly believe in spite of all of the evidence - from the actual historical results of their business, from the meager growth rates in their industries, from the economy as a whole - that somehow/someway their businesses will be the exception and soon start growing very fast and very profitably.
While this optimism can be endearing, it is just delusion to think this when it is not backed up with actually doing different things so as to effect a different result.
This is because almost always those different things needing to be done are either risky, filled with uncertainty as to whether they will actually work out and / or identity - challenging, requiring us to be different kinds of managers and workers than we have been in the past.
As I have written before, risk is the “unsaid” four letter word in business. Contrary to popular belief, most entrepreneurs and business owners are risk -averse, personally conservative and normally preferring of maintaining a certain business comfort versus really taking the bigger risks necessary to drive growth like:
And doing (and sticking with) risky things require us to evolve our identities and become different kinds of managers and workers than we have been in the past, fighting through our fears of loss and our desires for security, and letting go of our notions of what a business should look like and what our role in it should be.
These include coming to terms with and adjusting to powerful and accelerating business themes like globalization (how can we make it work for our business and not threaten it), virtualization (how can we lead geographically diverse teams to peak performance), and organization design (what functions of our business make the most modern sense to do internally and which should be outsourced to partners, service providers, software platforms, etc.)
Sure, taking risks and changing who we fundamentally are and what we believe is difficult, especially for those who lead businesses that are moderately successful and have something to lose.
But the alternative is far worse - believing the future will be better than the past but not taking any real steps to make it so.
This is the land of pretending, of dilettantes.
But when we walk the walk - taking the risks and doing the work to evolve ourselves, we become something very important and very admirable.
A business man or woman of substance, vision, and guts.
Exactly what every business needs and wants.
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.
I have written often about the peaks to valleys to peaks dynamic of a typical strategic planning process, and how without a Breakdowns leading to Breakthroughs flow it is difficult to attain truly actionable projects and to-do's (i.e. turning the strategic planning work into something concrete and useful for the actual running of the business).
You see, to make strategic planning sessions and undertakings great, a critical ingredient needs to be stirred in.
That ingredient is research - into a business’ industry, market, and customers, and into and about the other businesses competing for those customers.
Research that goes beyond the "obvious” and digs in and gathers intelligence on what is important right now to customers and competitors.
And almost always, the only way to gather great intell is through a primary research undertaking.
To be clear, secondary research involves surveying information, reports, and data that has already been collected - by professional research organizations like IBIS, Frost, IDC, and Euromonitor and as found in Trade and business publications like the Wall Street Journal, Fortune, Fast Company, TechCrunch, et al.
A lot of it, especially as done by organizations like the above, is very insightful, and given the choice between no research or secondary market research only, then of course we choose the latter.
Primary research, in contrast, involves directly surveying an industry, customer, and/or competitor contact list that we as the business principals design and determine.
This points to the first benefit of the primary approach: To do it we first need to develop the right list of questions to be answered!
This need - to distill the business problem into questions that an anonymous third-party can (and will!) understand and answer - is beneficial even if no one answers the questions!
Now we do want and expect answers to our questions, which leads to the next benefit of the primary approach: creating the right Survey Contact List requires us to think hard about whose opinion is truly important to us as an individual business.
This then forces us to confront our Conventional Wisdom - those individual and group biases, prejudices and stuck thinking that so impede entrepreneurship and innovation.
Yes, research like this takes more time and effort than just basing decisions on one's gut or on a cursory Google search.
And because it is hard, most executives don’t do it and their strategic decisions are just okay as a result.
We, however, strive for much more than okay.
The precision of thought and hard work that primary research requires is both its own reward and far more often than not it pays for itself immediately…
…in new market and customer ideas and contacts, in competitive intelligence, in strategic “aha” moments and breakthroughs that are the lifeblood of business growth.
I encourage you to try it for your best business challenges and opportunities.
And leave the “just okay” to 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.