New Year, New You. It’s an apt saying for small business owners who can use the start of the year to reflect and revitalise. To get you started, we spoke to world-leading business coach Arjen van den Broek at Tenfold Coaching His top tip? Business success in 2016 is personal – here’s what he had to say about how to plan for small business success in 2016.
REVISIT YOUR GOAL
Many SME owners will say their goal is to turn a $1m company into a $25m company. However, that’s not a goal. A true goal has emotion. Your business is a vehicle for you to achieve a particular outcome in your personal life. I’ve found there are two types of powerful emotions within people: wanting to walk away from something out of anger or fear; or wanting to move towards something out of a love. Once you know what yours is, you find your passion. [Did you know only about 3% in the world’s population set goals, but they own 97-98% of the world’s wealth in the world.]
RELOOK AT WHAT’S IMPORTANT TO YOU
Once you know your goal, you need to consider what you want from your private life, what’s important to you and your values (ie. the rules by which you want to play your game). Sit down on your own or with your wife/husband/family and ask: what do I/we want to achieve out of life? Once you have that sorted, you need to translate that private goal into a dollar figure and your business is the vehicle to get there.
SORT YOUR STAFFING
First up, if you have to motivate people, then you have the wrong people on board. Secondly, the values important to you need to be walked and talked, and you need to hire and fire against them. Importantly, as an employer, you have a duty to help unlock what your staff members want in their lives and translate that into a dollar figure. How can your business become a vehicle for your staff members to achieve their goals? Having staff who know why they are going to work and knowing that they are on a path to achieve their goals means you create a collective emotion towards the same goal.
IMPROVE YOUR JOB DESCRIPTIONS
Job descriptions need to indicate where a staff member should allocate their time. Set them up in a task framework, divide them into a 38-hour week and put percentages of time against each task, then set an outcome for each. This means a staff member can monitor their own performance. So when it comes time to do a performance review or for coaching purposes, a manager or leader can ask: how are you tracking against those outcomes on your job description and where do you need some extra support? As a manager or leader, you should discipline behaviour, but treat staff members as human beings. So this style of job description helps you manage behaviour and outcomes, but not create a strain between manager/leader and staff member.
ENSURE YOUR BUSINESS IS MEASURABLE
Most SMEs are not set up to be measurable. However, it’s important to know that if you can’t measure it, you can’t manage it. And that’s where data comes into it.
PRODUCT Firstly, set up your P&L from a business perspective. Often P&Ls are set up by accountants and book-keepers, so only show collective sales and the cost of goods. To make a P&L work for you, you need to know the gross profit of each individual product you sell. You need to know which range is making a profit and which one is not doing so well, then you need to keep your strong performers and move out your poorer performers.
PRODUCTIVITY What is your productivity rate or that of your staff? If you don’t have those numbers, you don’t know what’s happening in your business. However, it’s important to know that improving productivity will immediately translate into profit for your business – here’s how to measure it:
If you are a dentist who works 38 hours a week, determine how many patients you can see each hour. If it’s two per hour, then that means you are 100% full at 76 patients a day. If you are seeing 50, then your productivity is sitting at only 65.7%. Your productivity (profit) can improve by 34.3%.
If you own a plumbing business and you’ve quoted eight hours to do a job, but your employee takes 12 hours, then your productivity is shot. In this case, you need to revisit quoting or have a talk to the staff member to hear what happened.
If you own a business that bills out staff, determine how many hours you bill them out. If someone works 38 hours a week, but you bill them out for half of that, then they are only 50% productive. If you have six people running at 50% productivity, then you either need to adjust your staffing or increase the workload to improve your productivity rate.
SALES How many prospects do you convert to leads? How many leads do you convert to quotes? How many quotes do you convert to sales? Once you understand those conversion rates (the average business should be sitting on a conversion rate of about 35%), you know how your business is performing. If it’s too high, you are too cheap; if it’s too low, you need to look at dropping the price or retaining your price, while increasing your productivity.
SECURE YOUR SALES PIPELINE
Make your lead flow predictable. This is like a fishing trip. If your goal is to catch snapper, then you need to choose the right season, a salt-water location, their favourite food (bait) and a location in which you’ll find the highest concentration of snapper. As a business owner, this means you need to find your niche in your target market, then adapt your business to that niche and target that market where they are in the highest concentration. Lastly, you also need to understand your own value proposition and align that with your clients’ needs – that will secure your sales pipeline. Then it’s up to marketing: consider an inbound marketing strategy, an outbound strategy or do both. For instance, you may hire someone in social media and get active to promote your business; hire sales people to build relationships and connect with your potential target market; run a print marketing campaign; or find strategic alliance partners.
BECOME A BETTER VERSION OF YOURSELF
Become better at what you do. For that, you need to focus on client retention. Look at yourself and ask: what do I need to do better to service the pants off these people? Arjen says his clients will only stay if he gets results. So he measures client retention in terms of months. If that is not good, then he needs to work harder on himself – that could be knowledge, self-development, his own psychology… He has a coach who challenges him to become a ‘better version of himself’.
SYSTEMISE YOUR BUSINESS
Growth costs money. So, to grow your business [or to take advantage of unplanned investments with companies like us], you need to be as efficient as possible. To do this, look at what happens between contact with a client and their money landing in your bank account. Pull your whole system apart, look at what you can improve and what can you make faster – and document it. You know a system works if you can pull anyone off the street and they can do the job after they have read a how-to sheet (people qualified to do that job, of course). You will find that you can do more with less or more with the same – often it’s more with less.
KNOW YOUR ENDGAME
At the end of the day, every business should have an end in mind. Ask yourself: when is it finished? What will it look like when it finishes? That’s when you start looking at the quality of your people and staff training. Once that’s done, you are moving to a business that’s profitable and can run without you. That’s the holy grail. From that moment, you either set a new goal and grow it, or you sell it. If you want to keep it at the level it is now, it will die. For more information about how you can acquire a line of credit for your small business you can apply here.