Category Archives: management

9781496932259_COVER.inddThis article is from Chapter 4 of Uncle Ralph's, "Don’t Do It the Hard Way”.  Read the book.

Challenge #1: Strategic Leadership + Management Effectiveness

Start with a plan.

 As we started our e2eForum on a bright sunny spring morning, this was on the flipchart:

The Entrepreneur’s Challenge:

Strategic Leadership + Management Effectiveness

It is my favourite theme and I had been asked to decide on today’s discussion topic, so there it was. Some around the table had heard me rant on this subject before, so I was trying to approach it a little differently.

“Today I’m going to start by admitting to you my own biggest mistake as an entrepreneur – failing to continually think strategically. I was too often pre-occupied with operating issues and short-term problem solving. Stuck in the old dilemma of too busy fighting fires to ever work on fire prevention.”

“This was especially true in my first business, computer products distribution. There was so much detail to keep on top of – markets and technologies, customer service issues, managing employees and learning everything I had to know as a new entrepreneur about the running a business - from accounting systems and freight rates to lines of credit and payroll deductions.”

“I had all the usual excuses for being drawn into the daily crises and never getting back to the drawing board to review the original strategic plan and see if we were still on track. To be honest, our original plan was not very strategic and never looked past the first two or three years. It was only focused on making our numbers, not on strategic positioning and managing our important business relationships. We made good short-term decisions to maintain profitability and win our share of competitive battles, but did not effectively protect ourselves from conflicts with our major suppliers and were not prepared for the rapid decline in profit margins as competitors flooded the market.”

“We started business in the mid ‘80’s when IBM personal computers and the clones and compatibles were first landing on desktops everywhere – in offices, schools and homes. With our one primary product, computer monitors, we were initially competing with only about six major brand names and four other regional distributors.”

“Our customers were primarily the local computer stores that were on every second street corner and in every shopping centre. We were selling a few hundred monitors a month and average profit margins were at 12% to 14%; pretty healthy we thought. But high profits and fast growth brought a lot of competitors into the market. By the mid ‘90’s we had over forty competing brand names and at least twenty competing distributors. Profit margins in distribution slid to about 4%; no longer healthy. Our volume was up to ten times over our second or third year, but net profit was the same and we now had huge risks in inventory and receivables.”

“That’s when I made the decision to enter into the merger which would have helped us to diversify our product mix and customer portfolio and reduce the risks. Unfortunately, the merger didn’t work so we wound it down and I subsequently left the computer hardware industry about two years later. Very quickly after that consolidation eliminated most of the players in the personal computer market – only a few major brand names, three large multinational distributors and three or four national retail chains remained by the year 2000.”

“Any survivors from that era had to be very good at re-positioning their businesses to keep up with the rapid evolution of the computer business.”

“Your own business may not see rapid change like the computer industry, but I’m sure that whatever business you are in, technology and the Internet continuously affect how you do business. You have to adapt to keep up with changing competition and new customer expectations.”

“Don’t make the mistake I did of getting lost in the operating details and neglecting to raise the periscope and scan the horizon for oncoming threats or opportunities. Be prepared to respond.”

Keep your head up

“I do try to keep aware of what’s on the horizon,” said Dave, “but sometimes I have very limited choices available for my response. We expect our manufacturers to keep up with the technology and the competition and our bike dealers to do a good job of attracting customers and making the sale. As the national distributor, we provide the pipeline to market, but we need the people at both ends to work with us.”

“And it is true,” he added, “even if we’re in ‘old economy’ traditional businesses, we all have to keep up with technology – both to remain competitive and to rise to new customer expectations. The devices and applications all keep getting cheaper, easier to use and more effective at delivering the results. We simply cannot afford to stand still – the competition will beat us and the customers will leave us if we don’t keep sharpening our tools.”

Looking around the table it seemed we all agreed with Dave. Strategic vision and leadership need to be constantly applied to daily decision making.

Lack of strategic direction, in my opinion, may be the biggest mistake for entrepreneurs and can be fatal to the business.

Your Uncle Ralph, Del Chatterson

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Three challenging steps to selling your business

 If you’re thinking of selling your business someday, remember it’s a long, complicated process that you should start well in advance. The recent sale of a client’s manufacturing business, reminded me once again that a successful sale requires considerable time and effort – before, during and after the deal is made. Rigorous planning and preparing for the sale, working hard to get the price and terms you want, then closing the deal and managing the transition to new ownership.

This deal began about five years ago with the casual comment, “I’m thinking it’s time to sell. What do you think my business is worth?” Always a challenging question, loaded with high expectations and a lot of ego. I did the analysis and presented my estimated range of potential values based on standard valuation techniques. As usual, the owner was disappointed that the number, but was eventually persuaded that the rationale was reasonable.

It helps to ask, “How much would you pay to buy this business if you were not already the owner?” And it also helps to remember that every investment is justified on the expected rate of return and any sale, including the equity in your business, only happens when the buyer values it more than the seller. Never when it’s the opposite.

Pride and ego can persuade the owner to price the business much higher than any rationale buyer can see or be willing to pay.  We could look for a crazy person with lots of money, but the two are not often found together.

So, once the decision is made, what are the three steps required to sell your business?

First Step: Packaging for Sale

If we have agreed that the current valuation is not sufficient, then we have to work on short-term action to improve on the value and make the business more presentable to prospective buyers.

The value is always increased if the business can improve on net income and reduce the risk associated with sustaining it. The immediate requirements to stabilize revenue, reduce costs and clean-up the balance sheet are usually obvious, if looked at from the perspective of an outside investor. But often the most difficult and important issue to be resolved in order to enhance the value of the business is to reduce its dependency on current ownership. That may mean introducing a stronger management team and removing the owners from an active role. You cannot sell and exit the business, if it will fail immediately after you leave. (Seems obvious, I know.)

Ideally, the business should already be managed to make it as valuable as possible by continually addressing the key issues of sustaining growth, reducing risk and building a strong management team.  When those issues are all reasonably resolved and the tough questions can be answered, then you are ready to start presenting your business for sale.

Second Step: Presenting for Sale

Preparing for sale requires some strategic planning. We need to know how to present the business for sale and to which potential buyers.

Strategic buyers will always pay the best price because they will have access to synergies in reduced overhead or expanded sales that will add to their return on the investment and consequently to their perceived value. Who are they and where do we find them? Would you consider selling to a competitor? What if they plan to buy your business to close it?

Are you willing to consider passive investors who are seeking low risk returns and will probably offer the lowest price? Would a new owner-management team be a better scenario for continuity of the business and a smooth management transition?

What are your preferred terms to maximize the after-tax cash value and to accelerate the payout? What is negotiable and what is not?

When these strategic questions are answered you can prepare a marketing pitch and Offer for Sale to attract interested and qualified buyers. The package should have enough information to appeal to an investor without disclosing too much confidential or competitive information. You may even wish to remain anonymous and have the initial package presented by an agent or business broker. After the prospective interested buyer sold!has been qualified and signed a non-disclosure agreement, then a more detailed package should be available to provide the company background and financial history and support the valuation and asking price.

As proposals are exchanged and alternatives are considered, negotiations can begin. There may be several prospects that do not lead to an accepted offer, but eventually a deal gets made. Unfortunately, you’re still not done.

Third Step: Closing the Sale

The third step is closing the sale, completing the transaction and making the business transition to new management.

This final step can be a grinding process with all the conflicting, complicated and costly input of your accountants, lawyers and bankers. (Of course, they should all have had some prior warning and the chance for input before the deal is signed, but now it gets more serious.) You need the professional expertise to properly document and process the negotiated Buy/Sell Agreement to avoid any subsequent liabilities, minimize the tax consequences and maximize the cash payout. You will get conflicting advice, especially from the buyers’ advisors, as the best terms and conditions for you may not be in their best interest. More negotiating and compromises will be required.

Then, once the deal is properly documented and the closing gets done as planned, the parties can all work together on the transition to new management and ensure that the business stays on track for continued profitable growth any balance of sale gets fully paid.

Now you can make your graceful exit and focus on managing, or spending, all that cash.

Have you decided to sell? Then it’s time for you to get started on the first step.

Your Uncle Ralph, Del Chatterson

Read more at: Learning Entrepreneurship Blogs. 

 Join our mailing list for more ideas, information and inspiration for entrepreneurs.

Click Here to check out Uncle Ralph’s books, "Don't Do It the Hard Way" and "The Complete Do-It-Yourself Guide to Business Plans" Both are available online or at your favourite bookstore in hard cover, paperback or e-book.

Earn the right to brag

It worked for me running marathons. Long after my rational brain and aching body were telling me to quit, my ego kept reminding me that I would lose all bragging rights, if I didn’t finish. I knew it was much more satisfying to work into the conversation, “Yup, the full twenty-six miles, 42.2 kilometers, and I wasn’t last. In New York there were even nine thousand runners finished behind me!” (No need to mention there were twenty-five thousand ahead of me. Just a humble telling of the facts that put you in the best light.  Getting too boastful can lead to distressing put downs, like “Did you win?”)

Pride is a great motivator.

No need to deny it; earn it and use it. Don’t exaggerate and don’t take credit where it is not your accomplishment, but if it’s true, let the world know.  Sometimes it’s not clear why we’re so proud, but if the feeling is there, share it. And if you are proud of your team, your family, your staff, or your associates, it’s worth sharing. Being recognized and appreciated is a great motivator for everyone.

What about the things we do we’re not so proud of? The question then is “Would you do that if anybody knew?” The opposite of pride is shame and it’s a good deterrent to bad behaviour if you imagine it being exposed. If you anticipate embarrassment, humiliation or loss of respect, then don’t do it.

Imagining an audience works both ways. Keep in mind that you may not be just imagining it.  In today’s over-exposed world somebody will notice, whatever you do.

Your Uncle Ralph, Del Chatterson

Read more at: Learning Entrepreneurship Blogs. 

Join our mailing list for more ideas, information and inspiration for entrepreneurs. Click Here to check out Uncle Ralph’s books, "Don't Do It the Hard Way" and "The Complete Do-It-Yourself Guide to Business Plans" Both are available online or at your favourite bookstore in hard cover, paperback or e-book. 

Enlightened Entrepreneurship – Part 3: The Action Plan

Enlightened Entrepreneurship requires us to practice it, promote it and defend it.

Does accepting that mission make us missionaries? Yes.

And the mission has a three part Action Plan:

  1. Practice enlightened entrepreneurship and lead by example for employees, customers, suppliers, strategic partners and stakeholders.
  2. Help other entrepreneurs be more enlightened and thereby more successful.
  3. Advocate for entrepreneurs and defend entrepreneurship against the unfair critics. “We are not evil!”

Start with awareness followed by leadership and management that confirm the value of merging business goals with social responsibility. It is not sufficient to have a charitable effort or community project outside of company operations to serve as a “guilt-eraser” or to counter-balance irresponsible behaviour in daily business operations. It is essential that daily business operations reflect your enlightened business culture and social values.

There will still be critics and non-believers. They cannot be ignored. So enlightened entrepreneurs must continuously advocate, explain and defend the contributions of entrepreneurship to a better society. As more successful entrepreneurs join the conversation, the more convincing we will be.

We need you. So step up and join the cause. Be a missionary for Enlightened Entrepreneurship.

I look forward joining you,

Your Uncle Ralph, Del Chatterson

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Visit also: LearningEntrepreneurship.com:

And check out two new books by Uncle Ralph, "Don't Do It the Hard Way" and "The Complete Do-It-Yourself Guide to Business Plans." available online or at your favourite bookstore.  To learn more or buy a copy: Click here

 

 

The need for Enlightened Entrepreneurship

My mission with LearningEntrepreneurship.com is to promote what I call “enlightened entrepreneurship.” I didn’t coin the phrase I’m sure, but here is my definition.

Enlightened entrepreneurship: business leadership that recognizes that doing better for the business also means doing better for employees and their families, for customers and suppliers, for communities and the planet. Enlightened entrepreneurship manages a business to achieve its economic objectives while also recognizing and meeting its social responsibilities.

The expectation may be hopelessly ambitious or naïve, but I believe it is in fact the only way to build and grow a long-term sustainable business. We should expect nothing less. If the entrepreneur is focused only on making money, then the consequences for everyone, including the entrepreneur, are likely to be very negative. Growing a business is never as simple as making short-term profits. (Mistake #4 of the Seven Biggest) It requires looking at the bigger picture and managing assets and resources to support long term business value.

Bplan strategyEnlightened entrepreneurship is not a moral or ethical imperative, it is simply good business management. It’s not a new idea, it’s just a logical extension of the principles of building sustainable long-term value in a business by continuously satisfying all the stakeholders – employees, customer, suppliers, shareholders, governments and local communities. Ultimately, they will decide whether they are willing to support you in making your business succeed. It is never entirely up to you.

So start thinking “enlightened entrepreneurship”. There is no other way that works.

Read more at: Learning Entrepreneurship Blogs…

Your Uncle Ralph,

Del Chatterson

Visit also: LearningEntrepreneurship.com:

And check out two new books by Uncle Ralph, "Don't Do It the Hard Way" and "The Complete Do-It-Yourself Guide to Business Plans." available online or at your favourite bookstore. To learn more or buy a copy: Click here

 

Forget forecasts

They're useless.

CrudeOilPriceForecastsChart

It is that time of year when everyone seems compelled to make forecasts. The experts insist on giving us their version and they decide either to be safe and predict more of the same or to be outrageous and predict something extreme - Canadian dollar at US$0.59 or oil back to $100!

We should ignore them all; they're useless. I have worked on many; in plans and projections for my own businesses and for clients.

It is useful to remember before starting that they are all part of the fiction we are writing to convince ourselves or someone else what we hope will happen. It would be better to describe them as "reasonable expectations." All we know for sure is that the forecasts will be wrong. We just do not know by how much or in which direction.

So if we cannot predict the future, what can we do?

Our primary objective should be to understand our business environment - the competitive landscape and the economic conditions. The real issues to understand are the trends, the causes and effects, the alternative scenarios we need to be prepared for and the most likely ones to occur.

Then we have something we can work with.

Happy forecasting!

Your Uncle Ralph, Del ChattersonDon't Do It the Hard Way

Visit also: LearningEntrepreneurship.com:

And check out two new books by Uncle Ralph, "Don't Do It the Hard Way" and "The Complete Do-It-Yourself Guide to Business Plans." available online or at your favourite bookstore. To learn more or buy a copy: Click here

Share the love and the joys of life. ‘Tis the season.

Ignore the headlines, Donald Trump and ISIL for a few days. Set aside your worries about the declining dollar and tumbling markets. Find the time and the means to celebrate the joys of life. Focus on the people close to you; friends, family and business associates that also need to share the love and the joys of life.

It can be a stressful time of year with all the conflicting objectives and priorities: last chance to meet year-end business objectives, finalizing plans and budgets for next year, personal pressure to spend time with unfamiliar family members, and expectations for unnecessary and unappreciated gifts. It can be hard to get in the spirit of the season.

So it’s up to you to decide on what’s important at this time of year. The holiday season can be a distraction and temporary set-back to pursuing business goals and objectives or it can be an annual opportunity to celebrate and confirm your values and beliefs as an enlightened entrepreneur. Now is the time to focus on the non-monetary objectives: doing better for your employees and customers, your suppliers and strategic partners, the community and the planet.

Be creative and engage all your staff in committing to projects and activities that show theyHappy employees support each other; the people who are your customers and suppliers; your community and the planet.

Share the love and the joys of life. ‘Tis the season.

 

Wishing you and your family all the best of the season,

Del Chatterson, your Uncle Ralph

Strategic Leadership + Effective Management

It is my favourite theme and the owner/manager's biggest challenge: balancing strategic leadership with effective operating management. Lack of strategic leadership may be the biggest mistake made by entrepreneurs and can be fatal to their business.

Don't Do It the Hard Way(Following is an extract from "Don't Do It the Hard Way" by your Uncle Ralph.)

“Today I’m going to start by admitting to you my own biggest mistake as an entrepreneur – failing to continually think strategically. I was too often pre-occupied with operating issues and short-term problem solving. Stuck in the old dilemma of too busy fighting fires to ever work on fire prevention.”

“This was especially true in my first business, computer products distribution. There was so much detail to keep on top of – markets and technologies, customer service issues, managing employees and learning everything I had to know as a new entrepreneur about running a business - from  accounting systems and freight rates to lines of credit and payroll deductions.”

“I had all the usual excuses for being drawn into the daily crises and never getting back to the drawing board to review the original strategic plan and see if we were still on track.  To be honest, our original plan was not very strategic and never looked past the first two or three years. It was only focused on making our numbers, not on strategic positioning and managing our important business relationships. We made good short-term decisions to maintain profitability and win our share of competitive battles, but did not effectively protect ourselves from conflicts with our major suppliers and were not prepared for the rapid decline in profit margins as competitors flooded the market.”

“Don’t make the mistake I did of getting lost in the operating details and neglecting to raise the periscope and scan the horizon for oncoming threats or opportunities. Be prepared to respond. Strategic vision and leadership need to be constantly applied to daily decision making."

 (Read more in "Don't Do It the Hard Way" by your Uncle Ralph.)

Some ideas for better results in your business

9781496932259_COVER.inddA few years ago, I came up with “The Seven Biggest Mistakes that Entrepreneurs Make and How to Avoid Them” for a breakfast seminar presentation. The presentation was well received and has since been used many times, eventually expanding into several chapters of my latest book for entrepreneurs, “Don’t Do It the Hard Way”.

This is a short version of my list of the seven biggest mistakes followed by my recommendations to avoid them by seeking balance.

#1   Too Entrepreneurial

Certain characteristics of entrepreneurs are necessary for them to be successful.  But if over-indulged they can lead to big mistakes.  These include the tendency to be too opportunistic and not sufficiently selective and focused; to be too optimistic and miss or ignore the warning signs; to be too impatient and expect too much too soon.

Entrepreneurs usually have great confidence in their instincts, but the mistake is to neglect or ignore market feedback and analysis of the facts.  Being action-oriented, the tendency is to “just do it”.

Entrepreneurs are expected to be decisive and demonstrate leadership, but both can be overdone – deciding too quickly and providing too much direction so that input, initiative and creativity are stifled.  All these mistakes can arise from being “too entrepreneurial”.

#2   Lack of Strategic Leadership

Another tendency of many entrepreneurs is to get lost in the daily details and completely forget their original strategic plan. Operating decisions demand continuous attention and there is seldom time dedicated to stepping back and looking at the business from a strategic perspective. The common observation is that the owner is too busy working in his business to effectively work on his business.

Defaulting to continuous short-term decision-making can result in the business not having consistent strategic direction and straying far from the original plan.  Lack of strategic direction may be the single Biggest Mistake that Entrepreneurs Make.

#3 “That was Easy, Let’s Do It Again!”

Another common mistake that can have devastating consequences on the business is the over-confident entrepreneur who concludes, “That was easy, let’s do it again!”  So he or she jumps into new markets, new product lines, or even a new business or investment opportunity without doing the homework first.

It’s important to remember: Making money doesn’t make you smart.  Look at every opportunity with the same detached analysis as the first time you started a business.  Many successful entrepreneurs have made the mistake of jumping into a new venture – merger, acquisition, restaurant franchise or real estate investment – and blown away the equity value they generated in their original business. Another big mistake to avoid.

#4   Focused on Profit

Being focused on profit doesn’t seem like a mistake.  After all, isn’t that the whole purpose of running a business?  No, actually. The primary financial objective of any business is “to enhance long-term shareholder value.”

A focus on short-term profits will do exactly the opposite. It is easy to improve short-term profit by reducing the maintenance and marketing expenses, neglecting product development, cutting employee wages and benefits, ignoring safety and environmental regulations and avoiding taxes, but these actions can all destroy long-term value. Paying attention to these requirements will help to build it.

Managers need to look at all their key performance variables and react quickly to avoid big mistakes.

#5   Neglecting Key Relationships

The key relationship for any business is the one between management and staff. Good communications are essential to providing strategic leadership and ensuring that management and staff are working effectively as a team toward common goals.

Sometimes we are distracted from our key relationships by the most annoying and challenging employee or customer. Often your biggest customers are not the “squeakiest”; just the most important.  And do you need to squeak more yourself?  Do your suppliers appreciate you enough?

Another important relationship is with your banker: Is your bank a welcome and willing partner in your business? Building and protecting these key relationships are essential to keeping your business on track and meeting your strategic objectives.

#6   Poor Marketing and Sales Management

There are usually obvious signs of poor marketing and sales management. Feedback from customers will also highlight your failures in customer service. Opportunities for growth are being missed and current customers are fading away.

No business can survive without effective marketing and sales management supported by consistent customer service. All three functions need to be done well to build loyal, long-term profitable customer relationships.

#7   Distracted by Personal Issues

Personal issues can seriously affect business performance regardless of whether they come from the owner, management or staff.  Family businesses introduce particular challenges to managing personalities and corporate culture. Can you include family members in the management team without excluding others?

In summary, my list of the Seven Biggest Mistakes that Entrepreneurs Make:

  1. Too Entrepreneurial
  2. Lack of Strategic Direction
  3. “Let’s do it again!”
  4. Focus on Profit
  5. Neglecting Key Relationships
  6. Poor Marketing and Sales Management
  7. Personal Distractions

How to Avoid Them? 

Each of these Big Mistakes is a result of the entrepreneur failing to achieve balance between opposing forces.

The Answer is Balance!

Avoiding these mistakes requires the entrepreneur and business owner to:

  • Balance Energy and Drive with Planning and Analysis
  • Balance Strategic Vision with Operational Detail
  • Balance the Logical Head with the Intuitive Heart
  • Balance Short-term Profit with Long-term Value
  • Balance Personal Priorities with Strategic Objectives.

Balance these issues to grow and prosper in your business and avoid the Seven Biggest Mistakes that Entrepreneurs Make.

Enjoy the Holiday Season and have an outstanding New Year.

Del Chatterson

An excerpt from Don’t Do It the Hard Way, A wise man learns from the mistakes of others: Only a fool insists on making his ownby your Uncle Ralph, Delvin R. Chatterson

I am not referring to the policing tactics that lead to so much turmoil, but to the never-ending management of your own personal  profile. It is essential to your personal branding and the presence of so many online profiles on different platforms is extremely important to perceptions of your reputation and credibility.

Profile maintenance is never-ending, requiring continuous revision your life story on LinkedIn, Facebook, Twitter plus your website, CV, and other marketing and PR bios and blurbs. It's hard to be consistent and effective in presenting yourself. And you may be fighting other versions of your story that are still found on the Internet. Aren't you the guy who ...?

I'm reminded of the story of Dizzy Dean, a baseball hero of the 1940's. (I know, before your time and mine, but there was a movie....) Apparently after his first game with the Yankees he created a media frenzy with his sensational pitching.  He spent hours in the dressing room after the game with one reporter after Dizzy Dean2another asking  him to tell them his life story. The next day in the papers, remarkably everybody had a different story.  His manager asked him, "What happened?"

"Well," Dizzy Dean replied, "I just didn't think it was fair to give them all the same story."

Maybe not a good branding strategy, but perhaps an early example of "mass personalization"?  Everyone got a story that was interesting and original to them.  It is part of every pitch to adjust for the particular target audience and appeal to the areas you have in common.  So long as it's all true and you're not inventing a new life story that is complete fiction. Unless you are writing your biography, keep your profile concise, simple and consistent. Focus on the key points that are important to your chosen target audience and do not try to appeal to everybody.

Del photo 2008-11In my own profile I am re-branding myself as your Uncle Ralph.  It's the persona I want to present as the experienced, wise and friendly advisor for entrepreneurs. Not an academic management professor, not a celebrity CEO and not a new techie billionaire.  Just a former business owner and entrepreneur who is now consulting, advising, writing and cheerleading for entrepreneurs.

Del Chatterson is your Uncle Ralph.