Vision

Vision

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Where are you looking?

As an entrepreneur, there are numerous issues clamoring for your attention. Which ones get your time and focus?

If your business is a vehicle hurtling down the highway, where are you sitting in the vehicle and where are you looking?

  1. Driver’s Seat
    The now defunct automaker, Pontiac, once used the tag line “Built for Drivers.” Many years ago, a good friend owned a Pontiac Grand Prix. As I got in, and looked for the seat adjustments, I found that there were not many and they were manually controlled; whereas his driver’s seat had full power adjustment and more. As I poked fun at the lack of amenities in his car, he casually fired back, “Built for drivers.”
    The driver’s seat is command central. There is little that cannot be controlled from the driver’s seat, and practically nothing can be controlled elsewhere which is not controllable from the driver’s seat. The control is centered here.
    In your business, the metaphor of the driver’s seat is not just a seat for one (I am sure you do not want a culture of autocracy in your business). With whom are you sharing control? Do you all have the same goal for where the business is going, or are you all tugging at the wheel trying to change direction, arguing over heat versus air conditioning, or fiddling with the radio?
    Maybe you are sitting in the passenger seat, providing navigation assistance and influencing the decisions of those in the driver’s seat? Just be aware that if you are in the passenger seat, it takes a more concerted effort to see what the driver sees. Read on…
  2. Dashboard
    Truck DashbaordThe more comprehensive the dashboard, the better. Personally, I am highly frustrated at vehicle dashboards that have only three gauges and a plethora of warning lights. By the time any of those warning lights appear, it’s too late, the damage has been done. Whereas a a dashboard full of gauges allows me to monitor all the critical functions of my vehicle (my business.) My ideal dashboard looks more like this photo.
    Are you looking at your dashboard? Is your dashboard full of gauges or warning lights? If you have ignored the gauges, you will still get a warning light (and possibly an alarm) indicating your working capital is depleted, your staff is unproductive (maybe even leaving your employ), or your overhead has gotten out of control. These alarms could come from your banker, your key managers, or your accountant. But once the alarm has sounded, is it too late? It is much easier to proactively respond to an overheating engine by watching the gauge on the dashboard rather than getting an alarm telling you “it’s too late, now pull over and stop.”
  3. Rear View Mirror
    While most drivers fail to look in their rear view mirror enough, entrepreneurs tend to look there too much. While it is human nature that our past experiences shape our future decisions, it is impossible to move forward if you are only looking back. (Notwithstanding, I continue to be amazed at how many drivers do not look back, even when their vehicle is in reverse!)
    Take a look back regularly. Acknowledge the decisions that created the path left behind. Learn from them. Make better decisions going forward.
  4. Out the Windshield
    New drivers tend to look down the hood of their vehicle at the road immediately in front of them. By doing so, they often fail to recognize a hazard up ahead. This practice can result in severe reaction to avoid a hazard which may put the vehicle out of control which may result to a collision, injury, or worse.
    New entrepreneurs often have the same behavior: they tend to look only at what is immediately in front of them. Like the new driver, this can result in extreme adjustments from a reaction to avoid a hazard whether perceived or real. Does this apply only to new entrepreneurs? Sadly, no.
    By keeping your eyes up and on the road ahead, the driver can identify potential hazards early and adjust strategically. She can scan the landscape to the left and right for wildlife and intersecting traffic. Doing so allows her to be prepared to respond quickly and accurately versus panicked and severely.

Plan for Prosperity

Whether you sit in the driver’s seat or the passenger’s seat, you have the best perspective to see what is ahead. Discuss the observation and decide how to respond. (Vision/Strategy)
There is a reason the rear view mirror is a fraction of the size of the windshield. Use each of them accordingly. (Progress)
Build yourself a dashboard that allows you to quickly and easily monitor the most critical functions at a glance. This dashboard information is only useful if current and accurate. (Monitor & Control)

Where are you looking?

Growth subtopics part 1

Sub-Topics of Growth (Part 1)

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Last week, we opened up the discussion on the many facets of growth, and then touched on the many sub-topcis of those different facets. This week, we’ll being digging deeper. Here is a graphical reminder of what we started.

Facets of Growth 1

Customers

A foundational rule of the investment advisor world is KYC: Know Your Customer. When I was a part of that world, it was paramount that Know Your Customer protocols were religiously adhered to. The main tenet of this requirement was that an advisor could not offer proper investment advice without first knowing some very important information about their client: age, retirement goals, income, risk profile, and net worth are but a few of the critical details that must be signed off. No exceptions. By offering advice and/or selling investments to a client without proper KYC, the advisor is risking his or her career. Yes, it is potentially that severe.

Who are your customers? What do you know about them? Do you know enough about them to be able to anticipate their needs? Is their business growing? What are their challenges?

Who are your potential customers? What do you have to do to find them, attract them, keep them? This is a lot like dating; pursuing a courtship you might say…

The list of anecdotal evidence as to the importance of customers is long, as is the list of reasons why keeping your existing customers is easier and less costly than constantly finding new ones.

How do you market to your existing clients? Your future clients? Anecdotal, but it is amazing how often you can hear it said from an existing customer, “Oh, I didn’t know you had that!” Do your clients know about all the products and services you offer?Customers matrix

People appreciate being appreciated. Often as simple as a Thank You note, appreciation cannot be undervalued in your eyes. Convert your clients to “raving fans” and they will do your marketing for you by telling others about how good you are. Give them a hat or jacket, and they become a mobile display of your branding.

Service sells. It sells more products. It sells more service. It sells an incredible number of books. Often times it can even sell a crappy product…several times over! Most importantly, service creates loyalty. What are your service standards? Do you have an established procedure for how you provide service?

There are many ways to segment customers, but for this conversation the important distinction we will draw on is whether your customers are relationship customers or transactional customers. One isn’t better than the other. Wal-Mart has built a global empire on doing business with transactional customers. Other retailers try to create relationships with their transactional customers by implementing loyalty programs (Ref. Canadian Tire money, PC Optimum Points, etc.) Again, it is not that one is better than the other; what is important is that you know which space you play in. If you are a relationship business but treat your customers as transactional, you are probably losing customers and wondering why. If you are in a transactional business but you treat your customers as relationships, you’ve probably got incredibly happy and loyal customers which might confuse why your net profit margins are so poor.

To toss out one more anecdote, “Customers are your reason for being in business.”

Product or Service

Whether your business deals with products, services, or both, it is best to know what you do best, which of your offerings is most profitable, which is least profitable, and where to dedicate your time. This can only be done with accurate data on business performance (we will discuss more about Information Management in Part 2.)

Where does your product or service fit on the value chain? Do you manufacture from raw materials? Do you retail to the final user? Do you provide logistical solutions? Are you providing ancillary services somewhere along the value chain? Every step in the process is important, some more than others. If the link you occupy can be internalized (consider Wal-Mart (again) which owns its own trucking fleet) or eliminated altogether, taking some time to examine your business’ future would be advisable.

How do you market your product or service? Is your marketing reaching the right audience? How do you know? As mentioned above, if any of your current or future customers says, “I didn’t know you had/did that!” then marketing offers tremendous growth opportunity!

I cannot recall where I heard it, so if any readers of this post know who said it first, please let me know so I can provide attribution:

“Innovate or die.”

-please help me fill in this blank

Any product or service that is not under consistent evaluation for opportunities to innovate will find itself on the trash heap of great ideas/products that failed to keep up! Apple was making a runProduct_Service matrix at being the largest company (by market capitalization) in the United States, if not the world, from consistently introducing a new product that was nothing more than innovation to an existing product (which an innovation of a previous products….and on and on…) In this day and age where the consumer has an insatiable appetite for the new & improved, latest & greatest, “give it to me right now”…well, innovate or die takes on a very important meaning.

What is the return you are achieving on the investment you have made in your product or service? Keep in mind, your investment is more than monetary; it also includes time. The time you spend on low profit products or services will leave you less time to invest in the higher profit products and services that you offer. Remember, this time investment must also include family time lost (or otherwise allocated.) Obviously, businesses cannot just ignore anything that does not provide the highest profit, but knowing where your best returns are stemming from will allow you to maximize your return on investment.

Plan for Prosperity

Last week we offered six facets to growth; this week we delved into two of them and provided nine sub-topics, each of them a growth opportunity. By looking into any of these subtopics and leveraging the growth opportunities you have available, can you improve your entire business by 1% this month? If you can do that this month, can you do it every month. An improvement in your whole business of 1% per month means that your business will have grown by 12.68% more than if you had done nothing. That’s 12.68% better than you would have done, 12.68% better than last year, 12.68% straight to your bottom line.

Who’s ready to get growing?

 

Interruption

Interruption

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This shouldn’t be here.

It shouldn’t have gotten done.

But the thought of missing a Tuesday for the first time in 172 consecutive Tuesdays has me doing something I probably shouldn’t be doing. I should still be in bed. I’m very weak.

Actually, I should be in Boston to attend a conference I’ve been looking forward to for a year. But, illness can have a way a derailing all of our best laid plans.

Over the last week-and-a-half, both of my children have been affected by a different iteration of  the virus that is currently going around. My oldest took the least of it; my youngest was nearly hospitalized. I managed to dodge it, until I didn’t. It caught up to me on Sunday, the day that was all planned out: tidy up work before my trip and, of course, pack for the 5 day venture. As my condition worsened, I made the call at 5pm to cancel my travel plans. By 8pm, I was headed for emergency.

This has been the first time I haven’t gotten out of bed in 2 whole days since, well, that story is a little personal.

I have heard a disappointing number of business owners over the years express how they need to hold on to the reigns and keep control; their justification is that they need to be needed. They feel that their purpose is to control the business. How unfortunate.

What happens to the business of an owner with that mindset who suddenly took ill? Does the business stop? What should be told to customers, employees, suppliers?

If you are a business owner, ask yourself the following to gain some insight into your business continuity plan:

  1. Can your business run without you there every day?
  2. Is there someone, or several others, who know what you know so that your business can operate uninterrupted in your absence?
  3. Do you have health insurances (disability, long term care, critical illness) to cover your personal financial obligations during an illness so that you won’t be draining cash from your business during that time?
  4. Do your loved ones and/or your key people know who to contact and what to do in case of your severe illness or sudden passing?

As a solo-preneur, I am my business. If I’m not working it, my business stops. So for the last few days, things have stopped. Can your business afford to stop?

Plan for Prosperity

There are few guarantees in life, and yet it happens too often that we don’t plan for that which is guaranteed. Maybe us weak humans have difficulty facing our own mortality? Maybe it’s something more narcissistic? No matter what it is, we’re all going to get sick now and again (whether it’s a minor illness from which we recover or something more serious) and we are all going to die…someday. If we aren’t prepared for the inevitable, the people left behind are the ones who will be hurt the most.

Take some of that (perceived) unpleasantness onto yourself and do this hard work so that you can save your loved ones, your employees, and your legacy the pain of trying to keep things afloat while you’re out of the picture.

Tragedy Broncos

When Tragedy Strikes

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It hits hard. Like a body blow from Mike Tyson. You didn’t know you could feel that much pain. Suddenly, everything else seem to not matter except for what you’re feeling in that moment.

When word began to spread during the evening of April 6, the feeling of shock touched everyone. A Junior “A” hockey team in their charter bus on the way to play Game 5 of the league semi-final series collides with a loaded semi tractor-trailer.

Shock instantly turned to devastation. Twenty-nine on the bus. Fifteen would perish. Ten of those lost were players on the team, aged 16 to 21.

It took me until the next morning to be able to gather any sort of rational thought. The realization that so many families would be more profoundly affected than most any of us can imagine can take some time to sink in.

Then the world took notice. To make an already told story short, in less than 60 hours people from around the world have donated, at the time of this writing, nearly $6million to help support the families of the victims of this horrible tragedy. https://www.gofundme.com/funds-for-humboldt-broncos

I lost one of my oldest friends in our senior year of high school. She was a passenger in a car, unassuming on a Friday afternoon, her dad’s birthday of all days, when a tragic collision took her…three weeks before her 18th birthday, six weeks before her high school graduation. It will be 25 years next month since she’s been gone.

Life is fragile, it can change in a blink, and must not be taken for granted. Facing our own mortality is not easy; it is something that young men playing junior hockey, nor my old friend, had not likely given much thought.

None of us is immune to the tragedy that the world can bring our way. If tragedy strikes your business, how will it carry on? Are all your affairs in order? What if you or a key person in your business didn’t come home tonight?

Plan for Prosperity

Proper business planning has us strategizing on how to handle the “what if”. This type of preparation also applies to our person. Get your will, powers of attorney, and organ donor card in place; share your wishes with your loved ones; don’t take the inevitable for granted.

And hug those you love…often. Life is never fair, and is always short.

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.

marking a bench 4

Benchmark Against the Best

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Who do you look up to? It doesn’t have to be another business like yours, it can be anyone or any business. Why do you look up to that person or entity? What have they done that you want to emulate?

“If you benchmark yourself against the average you’ll be out of business in 5 years.”

Dr. David Kohl

What Dr. Kohl is referring to is that “average” is not success. As one client said this past week, “Average is the best of the worst, or the worst of the best; either way it’s not where we want to be.”

Personally, I’ve never been a fan of using averages when analyzing business performance. The sample pool will skew the calculation up or down; extenuating circumstances create anomalies in year-over-year business results; the list could go on. In my opinion, average is a useful tool to make yourself feel better about where you’re at. I prefer to make clients uncomfortable about where they’re at so that they are motivated to “Be Better™”.

Here’s someone we all know about who is never not trying to be better: Warren Buffett. Now don’t get me wrong, I’m not suggesting the Oracle of Omaha is without flaw or that he is somehow worthy of unwavering praise, but it cannot be denied that his approach to building wealth has enjoyed success beyond most of our wildest dreams. Recent articles in the Financial Post indicate that Berkshire Hathaway is currently sitting on about $116 Billion in cash and other short term investments. This cash is sitting idle for the purposes of making acquisitions, but Buffett has admitted that he’s struggled to find acquisitions at sensible prices. Also, the article states that Buffett is unwilling to load up on debt to finance deals at current prices.

“We will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own,”

Warren Buffett.

It has been written in this series of commentaries that during the elongated commodity super-cycle which ran from about 2007 to 2015 we could find many “average” businesses who appeared to be “excellent”. The appearance of excellence was fed by strong yields and high commodity prices. To translate: everybody was making money, even the worst managers and the high cost operators. To paraphrase Dr. Kohl: when the bottom 20% of producers become profitable, we’re in trouble! It didn’t take much prudence to be profitable during the boom; how did you compare during the boom? How do you compare now?

So when considering who you want to mirror, is it one who has been racking up debt balls-out on the expansion train or one who has been quietly amassing a war-chest of financial strength that can be deployed when the right opportunity presents? Is it one who operates with reckless abandon, or strategic execution? Is it someone who is average, or is it the cream of the crop?

Plan for Prosperity

Benchmarking data is hard to come by; not everyone is willing to share the details of their successes or failures. So to start, benchmark against yourself. How did your most recent year stack up against your best year ever? How do your 2018 expense projections compare to your 2003 expenses? What has been the 10 year trend of your working capital, EBITDA, net profit, total debt, and total equity? Is it something you’d be proud to share? Let me know; I’d love to hear from you on what you learned from this exercise.

push pull

Push and Pull

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Push and pull.

Passive aggressive.

Proactive or reactive?

Okay, passive aggressive doesn’t REALLY apply…or does it?

A recent conversation with a banker had him using terms & phrases such as:

  • they have no idea what they owe, to whom, or what their payments are;
  • they leave out information in what they send to us;
  • after a year of battling over their lack of cash management, the bank is viewing their risk profile as ‘high.’
  • the promised to put together a plan months ago, but it seems there was always ‘something more important’ to do. Now that the bank is downgrading them, they’re in a hurry to get the plan in place.

The borrowers that this banker was speaking of have consistently displayed a behavior that is reactive. They:

  • only provide info to their lender when threatened;
  • do not follow the terms set out in their borrowing agreement;
  • only got serious about making a plan when the bank indicated that their credit risk profile was being downgraded.

Situations like this are, sadly, not uncommon. All too often, financial professionals see impending challenges and offer advice that is pertinent based on their experience. Whether the advice is heeded or ignored is out of our control.

What can be done? At risk of sounding like a broken record…

  1. Preserve cash by building strong working capital;
  2. Do not acquire capital assets with working capital…borrowing is still incredibly cheap!
  3. Drive down overhead costs so you can produce at the lowest Unit Cost of Production.

The challenge, of course, is now during a period of low commodity prices, how does one go about preserving cash to build working capital. A pessimist might say “that ship has sailed” with the end of the commodity boom. Notwithstanding any significant production issues somewhere on the globe, this may be true. And to bring it back around to the open of this commentary, proactive or reactive, it seems that by and large farms are reacting to the profitability challenges and positive cash flow challenges of the day. Proactive would have acknowledged that the good times were cyclical and would not last forever…

Plan for Prosperity

PUSH yields. In commodity production you need the bushels, but focus on optimum yield for profitability, not maximum yield for coffeeshop bragging rights!

PULL efficiency. You need to do more with less in low margin environments.

PUSH costs down. The lowest Unit Cost of Production (UnitCOP) wins. Period.

PULL management effectiveness to new heights. During times of questionable profitability, it is management that will rise to the top.

 

 

Super Bowl

Contrasting Behaviors in Outcomes

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Seth Godin recently wrote a blog titled The Super Bowl is for losers. In it, he describes the reasons why the only winner in Minneapolis’ bid to host Super Bowl LII is not the city or its residents, but the builder of that new $1,129,000,000 stadium. In this particular piece Godin contrasts the decision to pursue grandiose “stadiums” that often lead to a loss versus investing in projects with purpose that would have a less conspicuous result. His description of the human behavior that allows these types of decisions to keep happening is insightful and can be applied to the small-to-medium sized enterprises, the family businesses, that you own and operate.

Below are three of Godin’s version of “valuable lessons about human behavior” (as excerpted from his blog being referenced above) with my insight in how it applies to family business.

  1. The project is now. Investing in long term strategy or knowledge/practice improvement takes time, the results are aren’t always obvious from a quick glance, and usually requires some “not fun” work for the owner/manager. Whereas, that new pickup truck out front or that bigger tractor in the field has immediate impact to our image and our ego. One is tangible (you can see it, smell it, percolate in the feeling you have when driving it) and one is not (no one can see it immediately, or touch it ever…)
  2. The project is specific. We have been conditioned to believe that our businesses must get bigger to survive. This is not absolute. Yes, our businesses (and ourselves) must always grow (and grow all ways) but don’t let yourself get pigeon-holed into the thinking that growth is only “size and scale.”
    Analyzing the opportunity to increase in size is fun (and easy if you limit your parameters) because it’s usually done to justify the desire (IE. we can lower our fixed costs per acre.) Whereas, the work required to analyze the opportunity to “Be Better™” is less intriguing, often subjective, and less sexy. 
  3. The end is in sight. It is easier to sell ourselves on something where we can see the final result. A building, an upgraded fleet, new computers…versus…creating a culture, implementing systems, strategizing cash flow. 

Godin’s final thought: “For me, the biggest takeaway is to realize that in the face of human emotions and energy, a loose-leaf binder from an economist has no chance. If you want to get something done, you can learn a lot (from) the power of the stadium builders. They win a lot.”

To paraphrase, we get caught up in what some people call “shiny object syndrome.” Our decision to chase that which is new and appealing versus what is boring but meaningful is what contributes to results that are less than what they could potentially be.

Plan for Prosperity

As an advisor to business owners and managers, it is my job to draw out the desired results my clients want for their business. While everyone says they want stronger cash flow and improved profitability, behavior often indicates otherwise (Ref. shiny object syndrome.) When actions deviate from what are declared desired outcomes, then we shouldn’t be surprised when actual outcomes deviate from what was desired.

Last week at a presentation I was giving, a woman in the crowd tearfully shared that her farm profitability was not as high as it could be, but the fact that her teenage children could live and work on a farm to develop life skills and work ethic was something she felt was more valuable. This is an example of how different each business owner views success, and will therefore determine what is a desired outcome. Understanding what is most important for you and your family in business is most often discovered when working on…

(wait for it…)

…A PLAN!

 

 

S&P500

Don’t Panic

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The markets are on a wild ride over the last week. After an elongated bull market, we’ve seen huge drops in the value of the S&P500, which have created ripples in Canada as well as in foreign markets. Right on cue, we hear investment advisors insist that staying the course and not panic selling is the best thing to do. The markets always go up and go down. After every crisis, brighter days returned which left us to quickly forget how we felt during said crisis.

“This, too, shall pass,” I heard an investment advisor say today in the media.

“Markets take the escalator up, but the elevator down,” is what I’ve heard from many commodity market advisors. This also applies to equity markets it would seem.

It must be asked, “Why is the best advice to hold? Why not get out before the market falls any further?”
The answer: because staying in the market is part of your PLAN!

*Anyone getting tired of hearing about planning yet?

If your PLAN is to buy and sell, in other words trying to time the market to maximize return and even “outperform” the market, then you’ll probably have to go it alone because no investment advisor would work with you. CyclesBut your PLAN, when beginning your investment activities, was to create wealth from long term growth. If that wasn’t your plan, you’d need to be a day-trader; I’m going out on a limb here, but if you’re reading this blog, you’re probably not a day trader.

Back to your PLAN: jumping in and out of the market looks more like this graphic, because as weak humans we’re emotional creatures who make dumb decisions when emotion creeps into the equation.

How does this apply to your business? Have you made emotional marketing decisions in the past? Have you tried to time the market? Read through every point on the graphic; tally up how many apply to you (as in, how many of those have you said in your career?)

 

Plan for Prosperity

If you find yourself wandering, unsure of how much you might benefit from planning in your business, consider the metaphorical genius found in the children’s fairy tale Alice in Wonderland.

When Alice asks the Cheshire Cat, “What road do I take?” his reply is, “Where do you want to go?”
When she says “I don’t know,” his apt response is, “Then it really doesn’t matter (which way you go), does it?”

In essence, what the Cheshire Cat is telling Alice is that “if you don’t know where you’re going, any road will take you there.” There are many different people who have been attributed to that specific statement, so I cannot confirm who said it first. But nonetheless, it applies…to life and to business…to your investment strategy and to your business strategy…

Don’t panic, just decide where you want to go.