Bubbles2

Bubbles

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One of my investment advisers forwarded an article to me recently that contained an especially compelling paragraph. The entire article is US focused, penned by a US writer and published in a US publication (reprinted in Canada in the Financial Post.) Still, the applications of these two sentences are broad and deep:

“…it (recent economic growth) is driven by another round of financial engineering that converts equity into debt. It sacrifices future growth for present consumption.”

– Steven Pearlstein, June 15, 2018

The comparison was being made to the US housing crash that kicked off the global financial crisis in 2008. We all know what happened there; no need to rehash it here.

Yet here we are, barely 10 years later, standing at what some people feel is the precipice of another recession.

“Those who cannot remember the past are condemned to repeat it.”

– George Santayana (Ref.)

The statement from Pearlstein referenced above does have application locally: the recent rapid appreciation of farmland has provided a financial backstop to farm businesses that would have otherwise found themselves painted into a very tight corner. The present consumption, elevated operation costs and living costs driven by high priced equipment and higher living standards, is what, in this space, is leading to the sacrifice of future growth. Here is what I mean…

Les Henry recently penned an article titled Saskatchewan Farm Income and Land Prices which was published in Grainews. He compares farm income and land prices having converted both to 2018 dollars to quantify his position. An example Henry uses in the article describes how a friend of his purchased a brand new loaded Lincoln in the mid-1070’s and how the equivalent number of bushels of wheat, the staple crop in those days, was approximately 1,500 bushels needed to purchase that car. My dad used to make the same argument using the example of the only new tractor he ever bought: a 1974 CASE 970 that arrived in the yard with the plastic still on the seat. The qualifying statement was that it only required 2,870 bushels of wheat in 1974 to buy it; about 7 bushels per acre on his small farm. What does 7 bushels of wheat get you today on your farm?

Les Henry believes that current land prices are unsustainable. If he is correct, then we are almost certain to experience a bubble, even if it is a small one simply because of the amount of “equity” being used to backstop present consumption. Equity is in quotes because it was not earned equity from retaining profits in a business, but rather windfall equity from land value appreciation (similar to what set off the US housing crisis.) The rise in land values created the equity that, in many cases, has been turned into debt. Should land values pull back, lenders will be quickly re-evaluating their security and making some difficult phone calls where warranted.

If there is a bubble happening here, all that “equity” that was converted to debt has certainly helped create it.

Plan for Prosperity

We have dedicated a lot of space to discussions on growth here recently. It saddens me to think that future growth may have been sacrificed for current consumption. However, unless the wolves are near the door there is still opportunity to right the ship. Profit opportunities can be found, but it will take work, intention, and likely having to answer some uncomfortable questions.

The last five weeks we have discussed business cycles, elasticity of demand, the power of a network, intentionality in your business, and your vision in your business. It is no surprise that each of these topics, if parlayed into tangible action within your business, translate into a stronger entity that would likely provide a view from high on “success mountain” looking from a safe vantage point well above the “precipice of economic recession.”

If you want some ideas on how to climb higher up onto Success Mountain, please call or email.

 

Cycles

Cycles

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“It’s cyclical.”

This statement applies to so much in our world. From interest rates to fashion trends, from climate to markets, so much of what we see, hear, do, say, and feel is cyclical.

In meeting with commercial bankers recently, here are some of the points I took special note of in the conversation:

  • Many of our clients are struggling through a slow-down right now.
  • Very few applications are for growth. Most are to restructure, especially in preparation for increases to interest rates.
  • So many of our clients do not understand their balance sheet or how it affects their business.

The first bullet above led to a longer portion of the total conversation. The banker who made this statement went on to describe how the boom years we have recently enjoyed led many people (entrepreneurs and employed folks alike) to create some bad habits, such as not preserving cash (working capital) and increasing their debt. When things slowed down and business got tight, the debt payments still need to be made, as does payroll, and utility bills. Somehow, the elevated lifestyle expenditures that cycled up during times of easy prosperity did not cycle back down when profitability and cash flow did.

A similar sentiment was gleaned from an ag banker (who asked to remain nameless while granting me permission to include the response below) serving North West Saskatchewan and North East Alberta. When I asked about what the trend has been in that part of the province for farm land prices and rent rates, the response included the following:

“Profitability and cashflow has been squeezed the past 3 years, due to a combination of the weather anomalies (in most cases, more moisture than needed), increase in production costs, and financing needs (and in some cases may be “wants” vs actual “needs”).  Those producers/files with the stronger balance sheets and working capital positions, have fared better through this, compared to some others.”

For any of you who think that your business (or industry) is the only one to have to manage cycles, please understand that cycles are industry agnostic. The market does not care what you’ve been through, what your plans are, or what your name is. Your business plan needs to include M.O.C. – Management of Cycles.

Long time readers of my commentaries know that I have referenced Moe Russell of Panora, IA on more than one occasion. It was from Moe that I first heard the term M.O.C. – Management of Cycles. Moe tells the story of how he picked it up during a chance conversation in an airport with Matthias Grundler, the then Head of Procurement for Daimler. When asked, Grundler admitted that M.O.C. (management of cycles) was his greatest concern.

What cycle are we headed into right now? If we knew, if anyone truly knew, business would be so much easier! The risk, of course, is that we tend to get caught up in recency bias:

Recency bias occurs when people more prominently recall and emphasize recent events and observations than those in the near or distant past.
www.morningstar.co.uk/uk/news/…/why-recency-bias-is-dangerous-to-investors.aspx
By putting more credence into recent successes rather than recognition of impending change, we set ourselves up for what is happening in many small to medium sized businesses right now: financial stress leading to major upheaval in the business.

Plan for Prosperity

Trying to fight against the market cycles (or industry cycles as it may be) is like trying to fight gravity. Like it or not, it will affect you. Cycles have been happening for a lot longer than you’ve been in business, and will continue to occur long after you are gone!

“Bullet proof your balance sheet during the good times, so you can catapult ahead of your competitors during the bad times.
If you get greedy during the good times, you’ll likely be on your knees in the bad times.”

Moe Russell
President, Russell Consulting Group

Look back to the response above from my ag banker colleague; those (businesses) with the stronger balance sheets and working capital…have fared better through this…” The businesses that built a balance sheet to protect them during a down cycle are the businesses that are ready, and as such will take advantage of the opportunities presented by a down cycle. Those opportunities range from additional labor (that may have been laid off from a financially weaker competitor), picking up assets (land, equipment, or buildings) that may have been relinquished during the down cycle (and are likely far cheaper now,) or possibly even buying out a competitor who has been left in a weakened state by the market cycle.

“Market cycles will hurt some, but offer opportunity to others.
The difference between who suffers and who prospers is…Who’s Ready.”

– Kim Gerencser (March 2013)

Which side of that line do you want to be?

Elasticity

Elasticity

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Elasticity is an economic term that assesses the change in demand of a good or service relative to changes in other factors, such as price, consumer income, or supply. Goods and services are said to be elastic when they are more sensitive to changes in other factors. Examples of elastic products and/or services would be new home construction, extended vacations abroad, and (sadly) savings accounts. Inelastic goods and services have very little change in demand when other factors, such as price, are changing. Examples are gasoline, utilities (natural gas, electricity, water) or an ambulance ride (no one dials 911 for an ambulance, but then shops around for the best price…)

When considering what your business provides, whether it be products or services (or both), what types of elasticity affect the demand for your offerings?

The most common type of elasticity is price. How does a change in the price of your product or service affect demand?
Another type is supply. How does a change in supply affect demand for your product or service?
Another type is customer income. How does change to your customers’ income affect demand for your product or service?

One factor that contributes to elasticity of your product or service is the availability of a substitute product or service. Who are your competitors? What makes you different from them? Are they local? Do they operate online? Etc.

A business that had exclusive distribution rights on a high quality brand name product felt that its business was immune from price elasticity. While not over-charging, they did become complacent in their marketplace because they believed that their competition provided inferior products. When competition arrived in their marketplace which their customers felt was better value (price vs quality), the business suffered.  At this point, they were forced to react to their market’s pressures. Reactive is never as good in business as proactive.
(How many specific examples can you think of that are aptly described by this generic story?)

If you have experience recent changes in the demand for your product or service, one of the many factors to consider is elasticity (customer service and product/service quality are the foremost factors to understand in this realm.) However, this will be very difficult to quantify without sufficient business record keeping and information.

Plan for Prosperity

There are many factors that affect your marketplace and your position in it. This becomes even more complicated in the current age of technology. How are you planning to stay relevant? Or better yet, how are you planning to innovate, to lead the market and not just keep up with it?

Understanding the elasticity of your product or service is an important piece of knowledge that accentuates your ability to position your business in your marketplace. It will give you more power to prepare for how those multiple factors (such as price, supply, and customer income) will affect your business.

Elasticity is not a perfect function, nor is it the only measurement you should employ. There are anomalies: I think it is sad, and a little dangerous, that new electronic devices (like smart phones) and consumer debt appear to be inelastic, yet should be highly elastic.

Shaking Hands

The Power of a Network

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Networking…it is critical to the success of many businesses. Numerous companies have become global juggernauts just by being a networking platform (Ref. LinkedIn, Facebook.) “Social Media” is built on connecting people in one way or another.

However, nothing replaces person to person interaction.

Recently, the Canadian Association of Farm Advisors (CAFA) hosted a conference in Regina. It was the first that CAFA has held in Regina in 5 years. The topic was “what the top farms are doing” in the face of current challenges and opportunities. Nine different presentations filled the agenda on all of the most critical topics that farming businesses must manage. Coincidentally, the topics are very similar to those of businesses in other industries.

Easily half of the people in attendance were people I had not met prior to this event. The feedback from attendees was very positive on not only the quality of the content presented, but also of the people in attendance. Many new connections were made.

Clients have expressed to me that one of the many benefits I bring to their business is a network of experts whose expertise is different than mine: lawyers, accountants, lenders, marketers, etc. I give much of the credit for that to the opportunities created by having membership in a professional organization. It is still up to me to make the most of the opportunity, but the organization does provide an open door.

It is from this networking that I have compiled a list of experts who I trust will do good work for my clients.

On the other side of the argument, many people take the position that they won’t refer their customer to anyone for fear of that referral not doing right by their customer and reflecting poorly on them for making the referral. While I cannot argue with emotion like that, I will suggest then that you do a better job of networking so that you have greater confidence in the people to whom you are referring your customers. If you leave your customer to find their own expert elsewhere, that person might be referring your customer to someone other than you!

Plan for Prosperity

In our ever connected world, it is more and more important to develop business relationships that are complimentary and mutually beneficial. We cannot be an expert at everything our clients need; trying to do so would make us generalists and leave us unlikely to truly satisfy any of our clients’ needs. Whereas if we remain a specialist with a developed network of other specialists whose expertise is different, yet complimentary, to our own, then we are better able to provide value to our clients in a variety of ways.

When is your next networking opportunity? I’m always interested in expanding my network; give me a call for a coffee sometime!

 

Adding Value

Sub-Topics of Growth (Part 2)

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As we continue our discussion on the many facets of growth (which is about far more than just “size and scale”) we will look this week at two types of capital: monetary and human. Here is another look at the graphic which provides the basis of our conversation, which, again, is not an exhaustive list within the conversation of business growth.

Facets of Growth 1Finance and Cash Flow

One of the first questions I get asked during interviews with prospective clients is usually related to cash flow or financing. As many business experts have written, these are the symptoms not the problems. Before we can understand how cash flow and financing have become an issue, we need to clarify your desired business goals.

Too often, financing is a reaction to a need or to a problem. When financing becomes the reaction to a want is when the business is beginning to create its own problems. “Needs” should be mapped out as part of a business’ 3 Year Plan. “Problems” need to be anticipated (as best as possible at the time) so that contingencies can be considered in advance. Reckless management of financing and cash flow hinders growth.

Where does your cash inflow come from? Whether it be from the sale of a product or service, or a little of both, it is important to make this obvious distinction. While it is obvious to you as the owner/manager of your business, is that obviousness directing how you invest your other resources (time, expertise, people, etc.)? At what stage of your sales process do you collect all, or part, of the payment from your customers? Does the timing of your cash inflow match your obligations for cash outflow? Insert financing…

Seeking financing when you are short of cash is reactionary. Because of the time it takes to go through the levels of due diligence that lenders must utilize before granting credit, reactionary Finance and CashFlowborrowing is challenging for everyone, borrower and banker alike. In general, seeking financing from a position of weakness usually doesn’t achieve the desired results.

The appropriate financing strategy can reduce costs (interest, fees, etc.), increase efficiency (pre-approved credit, overdraft protection, etc.), and reduce stress. Does your business have sufficient financing available to not just get you through the next production cycle but more than one production cycle? Is your business “borrowing from Peter to pay Paul?” If so, then cash flow and financing are two exceptional opportunities to seek growth.

Human Capital

We have all heard it before: hire for skill and you will fire for attitude; hire for attitude because you can train for skill. Anecdotal, yes, but incredibly accurate. Some things cannot be taught. Have you amassed a staff of people with the right skills or the right attitude? Ideally, it is both!

More anecdotes?
Middle Manager: “What if we train all our people and they leave us?”
CEO: “What if we don’t train them and they stay?”

Investing in your people is a growth strategy that is often overlooked in small business, but is par for the course in large corporations. Many large enterprises have made it a part of the corporate culture to invest in the skills of their employees. As business owners, we are often told that the best investment we can make is in ourselves, and if that is to be true, then the second best would be in our employees. How much training do your people need? Are you paying them fairly based on their experience, skill, and attitude relative to the competitive marketplace? Remember, the soon to be largest segment of the workforce, millennials, are said to place less importance on rate of pay. How are you adjusting your overall compensation strategy?

Human Capital matrixResponsibility and accountability are hallmarks of a great staff member. Most people crave it in their work. Sadly, many small business owners are reluctant to “let go of the reigns.” If you have managed to find good people only to wonder why they eventually left, consider how you allowed them to take on more responsibility. If they felt like they were held back, it is no wonder they would seek out a different opportunity elsewhere.

 

Peter Drucker has been credited as saying “Culture eats strategy for breakfast.” This means that even the best planned and executed strategy will fail without the appropriate culture in place. What is the culture in your organization? Is it one of respect and accountability, or is it a culture of mistrust and blame? The way to tell is to observe how people in your business respond during a time of crisis. When observing the behavior and acknowledging the type of culture in your business, remember the culture is an extension of you, as the owner/manager/leader because the culture is either from what you have tolerated or what you have set as an example in your own behavior. But do not despair! A poor culture can be changed, it just takes a lot more work and an incredible amount of consistency.

Plan for Prosperity

This week we touched on the two most powerful growth opportunities in your business: monetary capital and human capital. In reflection, remember these important points:

  1. Manage things. Lead people. Your people are not to be managed, but led. Then watch them perform.
  2. If your leadership skills are lacking, then make an investment in yourself right away. Or relinquish leadership from your duties and hire someone to do it for you.
  3. Get the right people in place before adding property, plant, or equipment. It’s far cheaper to be overstaffed for a short time than to under-service clients at anytime.
  4. Acquiring financing from a position of weakness will always be more difficult than during the execution of a strategic plan. Proactive vs. Reactive.
  5. Do not underestimate the impact of the right culture in your business. Spend a little time online reading about corporate success stories from implementing a specific focus on culture. If it can work in a large entity, it can work for you because you are much more agile as a small-to-medium sized enterprise.

 

facets of growth

Facets of Growth

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It’s been said that we should think of our business like a tree…
“What is a tree always doing?”
“Growing.”
“If it’s not growing, what is it doing?”
“Dying…”

The analogy ends there. A tree can only grow one way: bigger. Our business must grow many ways.

“Better is better before bigger is better.”

-Danny Klinefelter, Professor and Extension Economist, Texas A&M University

Over my nearly 15 years as a lender and business adviser, I have seen dozens of examples of businesses that grew in only one way. These businesses are not industry specific, they are quite agnostic actually. From construction to farming, from trucking to consulting, many businesses drive themselves straight into the arms of failure simply because they overlooked getting better before they rushed out to get bigger.

Facets of Growth 1The graphic represents a snippet of the numerous facets that drive growth. All have a significant effect on the success of growth aspirations. This graphic is certainly not exhaustive; we are merely dipping our toes in the water. However, each spoke in that wheel has numerous sub-topics, and like a diamond, the many facets have varying purposes, importance, and brilliance.

RE: Customers – How can you grow your customer base? What do your customer like about you? What do they dislike? How do customers find you? How do you find them?

RE: Product/Service – What is your product or service? Is demand growing or shrinking? Which is your link in the value chain (IE. do you manufacture the raw product or do you retail to the final user, or somewhere in between?)

RE: Finance/Cash Flow – Are you financially strong enough to support and sustain the growth you desire? Will the growth you desire help or hinder your cash flow? Can you access the financing you need?

RE: Human Capital – Have you built a team of highly valuable people who drive results in your business? Will your business operate just fine in your absence? Do you people have the ability and desire for more responsibility?

RE: Information Management – Do you have systems in place to provide you with current and accurate information readily available anytime, specific to working capital, accounts receivable & payable, inventory, days to cash, etc?

RE: Management Capacity – Do you, as the manager, have the capacity to literally handle the growth you desire? What skills do you have that are better used in another part of the business? What skills are you lacking in your current role?

Seventeen questions related to six facets of growth; if you were to answer them with brutal honesty, is there room to improve on any of them? Is there opportunity “to grow”? If it is true that better is better before bigger is better (HINT: it IS true) then we’ve just provided you with six major factors in your business where growth can occur. There are more, but if you’ve looked after these first 6, the results will amaze you.

Plan for Prosperity

Growth is not a result or a destination.
It is a process.
It is a mindset.
It is a culture.
It is complex.
It is difficult.
It is worth it.

growth

Prerequisites for Growth

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Last week we began a discussion on Avenues to Growth, and in introducing the concept we described how employing tactics to achieve that growth is meaningless without first defining your business goals, “your WHY”. The reason: how do you quantify actions without a desired outcome with which to measure those actions against?

Just get in your truck and drive. Go. Which way do you turn out of your driveway, or at the corner? Where are you going? After driving for an hour, aimlessly, where will you be?

It may be anecdotal, but there is truth in saying “If you don’t know where you’re going, how will you know when you get there?” Every time you get into your vehicle to drive, you have a goal of getting somewhere. It may be to the rink, the bank, or the store, but the point is you have a goal of where you want to go. And somehow, quite amazingly sometimes, you reach your declared destination.

Your business is no different.

Pursuing growth in business without defining what it is you’re trying to achieve is as fruitful as getting into your truck and driving aimlessly for an hour. You will have used up valuable resources (time, capital, fuel/energy, etc.)  and found yourself somewhere you didn’t expect to be. Then you have the challenge of figuring out what to do when you’re there. Turning the truck around and heading home is much easier than doing the same in business. Metaphor ended.

Step 1. Define your business goals for growth.

 

 

To achieve your growth goals, you will need sufficient resources. This opens up a plethora of subtopics that is suited to a separate discussion. For today, we will look at only one: financial.

Part of the activity in defining growth goals is to include discussion on the business’ financial resources. Does your business have, or can it acquire, the resources required to successfully implement the tactics that will achieve your goals?

Ask any banker, any financial analyst, and you’ll probably get a response akin to the importance of cash to your business. Cash is critical, often suggested that “cash is king.”

“Cash is not King…it’s the Ace!”

-Phil Symchych

To suggest cash is king would indicate that something else is the ace, meaning something else is more important than cash, and I’m here to tell you that cash is the lifeblood of your business and draining the cash from your business is similar to draining the blood for your body.

It’s true, cash is not king…it’s the ace.

“Growth, however, is king!”

-Kim Gerencser

By letting growth be the ace and cash be king, you’re placing growth ahead of cash; this is incredibly dangerous. Many aggressive businesses have grown themselves to the brink of bankruptcy by making this mistake. I recall dealing with some young farmers who pursued growth so rapidly that their working capital couldn’t keep up. They began borrowing more and more operating credit to keep the business afloat and found themselves using their operating line of credit to make their term loan payments (HINT: bankers get real squirrelly real fast when this happens.) This business didn’t have sufficient cash when pursuing their growth actions. They had no defined goals, only (what now appears to be) reckless abandon. They might have one year left, and if that year isn’t stellar they could be forced into liquidation.

Step 2. Compile (or acquire) sufficient resources for growth.

 

 

Because of my work in agriculture, I often get asked by non-farming people “How big is too big” when it comes to the size and scale of modern farm operations. My reply: I can tell you exactly when a farm is too big (as the audience waits with baited breath)…it’s the moment that the farm has outgrown the management ability of the manager! For some it’s 40,000 acres, for others it’s 400 acres. It all comes down to management capacity and ability.

Too often, businesses feel they must expand to remain relevant. As such, they pursue growth before they are ready. This can lead to management burnout, employee dissatisfaction, and lost customers. Consider a elementary school aged child; if that child has not successfully exhibited sufficient competence in math, reading, and writing, the child should not (by rights) be advanced to the next grade. Doing so will cause the child to be unnecessarily stressed in the next grade from having to learn new concepts before the base knowledge has been established. Such a situation can lead to all kinds of issues better left to the educational professionals. There is great similarity in the abilities of the manager in your business to the example of the school age child. Asking management to manage a business that has grown beyond their ability is a recipe for failure.

Step 3. Perform an audit of management’s ability & capacity for growth.

 

 

Plan for Prosperity

Aspirations for growth are born out of the desire for prosperity. Both must be planned. Accidental prosperity from fortuitous growth is not sustainable.

Growth is exciting, invigorating, maybe even intoxicating…especially when growth happens systemically, systematically, and successfully.

Conduct the 3 Step Growth Audit laid out above to evaluate your likelihood of successful growth. If you need some guidance, give me a call or email.

 

Growth Avenue

Avenues to Growth – an Introduction

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There are many tactics that can be implemented to achieve growth in your business. Listing them right off the hop would be meaningless, because first we must understand your goals.

What is it you are trying to achieve in business? Why are you in business? As Michael Gerber wrote in The E-Myth Revisited, “the problem is not that the owners of small businesses don’t work; the problem is that they’re doing the wrong work.” Gerber has built a career and a successful enterprise on breaking down why most small businesses fail. In my opinion, it is summed up nicely in what Gerber calls the Fatal Assumption.

The Fatal Assumption is: if you understand the technical work of a business, you understand the business that does the technical work. And the reason it’s fatal is it just isn’t true.  The technical work of a business and a business that does that technical work are two totally different things!

Michael Gerber – The E-Myth Revisited, page 13

So, if the reason you’re in business is because you are an expert at the technical work being done in your business, you may be wondering why your dreams and aspirations of growth, wealth, and freedom haven’t transpired as imagined when you took the leap.

Business is complex. There are many facets to successful business, far more than simply “doing the work.”
Understanding that is the first step.
Asking for help is the second step.

Because if you are an expert at the technical work of your business, then is it likely you’ve struggled managing the business which does that technical work.

And growth has possibly eluded you…
Or, at least the potential for growth that your industry may present?

As a former bank lender, and having had several conversations with current bankers over the last half-dozen years since I left banking, the sentiments are the same. One banker was recently describing a client, who was a good client but could be so much better, by saying, “He builds a helluva road, but can’t manage his cash to save his life.”

Change the character to either he or she, and change the activity to almost any technical work. She/He:

  • Builds a helluva road,
  • Installs a helluva wiring system,
  • Designs a helluva house,
  • Welds a helluva bead,
  • Grows a helluva crop,

…the list can go on and on.

Just doing the work will grow your business to a point, but that point is reached when you, as the owner/manager, run out of capacity.

Dr. David Kohl spoke recently in southern Saskatchewan. He described how success requires alignment of your expertise, your capacity, and your market.
Clearly, you have expertise or you would likely not be in business.
If you operate in a market that is hungry for your product or service, then growth is ready for the taking.
Is your capacity is sufficient in ALL areas that need to be covered in order to sustain growth: management, finance, reporting, staffing, logistics, facilities & equipment, etc?
(**Did you notice that facilities & equipment was found at the END of that list?  That is symbolic.)

All too often, the “technician” owners put emphasis on the facilities & equipment because that’s where their expertise is found. It’s why the “technician” owners are more apt to fail. Getting additional equipment is the easy part; managing the cash flow, bankers, and staff is the hard part.

So in this Introduction to the “Avenues to Growth”, we have described that:

  1. You need alignment of your expertise, your capacity, and your marketplace;
  2. You need clarification of your reason for being in business; and
  3. You must define your business goals.

Plan for Prosperity

Over the coming weeks, we will be exploring the Avenues to Growth in greater detail. The explicit certainty in any growth plan is that growth must be intentional. Accidental growth or fortuitous growth is not sustainable unless the owners & management team conduct a postmortem on how and why the growth occured so that lessons can be learned, mistakes not repeated, and good decisions leveraged further in the future.

The other explicit certainty to growth: there are many avenues to get there, none are a straight line, and there is no “Easy Street.”

 

**The featured image is a screen shot from a Google street-view of Fort Wayne, Indiana. In a weird twist of irony, Growth Avenue in Fort Wayne is a dead end street.

Coach

Who Needs a Coach?

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Muhammad Ali.

Wayne Gretzky.

Tom Brady.

Professional athletes…emphasis on “professional,” the best at what they did (do). Evoking cries of “The G.O.A.T.” which stands for “Greatest Of All Time,” these legends all used a coach.

Football teams have more coaches than they are allowed players on the field at any one time. Baseball, hockey, soccer, olympic squads, the list goes on…all have coaches.

Individual success, such as Tiger Woods, Venus Williams, Michael Phelps, even many CEOs of Fortune 500 companies, all use a coach. One of the best, if not the best coach of corporate executives, Marshall Goldsmith, uses a coach himself.

Right now, I have three. Each has a specific purpose, yet they compliment each other in how I benefit from having them. This does not include the advisers I use for accounting, legal, investments, or insurance where the number then increases to more than ten.

Back to the professional athlete, who is so skilled at what he or she does that they make a living doing it (and a exceptionally good living at that.) If you’re already top of your game, what good is a coach? If that were true, then everyone at the top of their game (see a small sample list above) would have fired their coach. Just because we might be at the top of our game doesn’t mean there is no longer room for improvement. None of us is perfect.

Can you and your business benefit from a coach? What aspects of your business could use some coaching?

Efficiency: is your efficiency all it could be? The old adage that I lean on is “You don’t know what you don’t know”, so is the perspective from an expert a worthy pursuit?
Finance: this relates to banking, borrowing, and investing. Is your approach more reactive to these important facets of your business, or do you regularly analyze your situation to proactively position you and your business? I couldn’t tell you how often I’ve seen something as simple as monthly account fees going totally unmonitored and therefore costing 2-3x what would be charged if a regular review was done.
Growth: this can take so many forms; I could write a book! Growth is not just about size and scale, there are many ways to grow (both personally and business.) If growth is your desire, considering how varied and complex growth can be, having a growth coach can save hours of stress, create multiples of efficiency, and help avoid pitfalls along the way.

The list is almost endless: from technology and social media to HR and governance/policy development, there is an expert available who is willing to help you take your business to new heights.

Plan for Prosperity

It is not reasonable to expect that you, as an entrepreneur and business owner, can know everything related to the successful operation, sustainability, and life-cycle of your business. And yet, considering that your business is the driver of your family’s lifestyle and a big part of your legacy, it is tragic to leave to chance so much of what is critical to business success.

Do what you do best, and get help for the rest.™

-Kim Gerencser

The quote above is a major cornerstone of my advisory work with clients, that’s why I’ve trademarked it. It’s been said that we can spend our entire lives trying to improve on our weaknesses and all we’ll end up with are a bunch of strong weaknesses. Whereas if we leveraged our strengths, the potential they create can grossly overshadow the drawbacks of any weaknesses…especially if we leverage others whose strengths are in the areas of our weaknesses.

 

 

Contrast

Contrast

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Did you ever wonder how so much expansion is going on during what is supposedly challenging economic times?

In this part of the world, in fact in this part of Canada, we are experiencing economic growth that is far less than we’ve enjoyed over the last decade. Government spending has been reduced provincially, and the federal government deficit has grown exponentially; we were teased with drastic changes to our federal business income tax structure; we’re paying higher levels of consumption tax; unemployment has grown; overall confidence has declined.

And yet, we continue to see businesses growing, we see new construction in housing, commercial, and industrial levels, consumers continue to buy new cars and take vacations. On Boxing Day, my thermometer read -32 Celsius but there was a line up outside the doors of the Visions Electronics store prior to their 6am opening. How tough can these times really be?

Notwithstanding the socio-economic challenges that our society faces (none of which I am trying to discount here), behavior would indicate that the “tough times” aren’t as tough as we’re being led to believe.

Contrast the difference between 2 businesses in the same industry: both make widgets, both have sales forces, both face the same challenges of staying relevant in the sleepy industry of widget production.

Company A wants to corner the market and pursues a mission of expansion that leans hard on the idea that “bigger is better,” and expecting it to lead to greater efficiency, sales, and profits. Company A increases debt and increases cash flow spending on capital assets, technology, and marketing to fuel its expansion aspirations.

Company B recognizes the truth in the adage “Innovate or die.” While the widget production industry is sleepy, Company B knows that the status quo is not sustainable. Five years ago, Company B developed a 5 year plan to position itself to be an innovator in widget production. It carefully managed margins and cash flow so as to create a “war chest” of resources.

Which company is building a new production facility in 2018? Which company is at risk of losing not only its market share, but its best people,  to its competitor? Which company will blame the tough economic times for the decline of its business?

The best businesses, and it doesn’t matter which industry they are in, the best businesses plan. They plan for cycles, growth, innovation, and the unforeseen (like the 4 D’s: death, divorce, disability, disagreement.) Businesses that do not plan leave themselves at the mercy of the market, the fickle nature of consumerism, or “tough economic times.”

Plan for Prosperity

Planning, in and of itself, does not guarantee prosperity. Even execution of the best plan does not guarantee prosperity. But in contrast to your competitors who do not plan, who make decisions based on short term perspective and emotion, or who are happy just floating along, there is a clear and obvious line separating the grain from the chaff.

Which side of that line do you want to be on?