Category Archives: strategy

 

Responding to Challenge #1:

Strategic Leadership & Management Effectiveness

Keep your Balance

balanceIt is easy for owner-managers to get pre-occupied by the daily demands for attention – chasing opportunities, resolving customer complaints, managing employee performance, satisfying business partners, governments and the bank.  Stepping back to look at the big picture and assessing performance against the original strategic plan is easily neglected.

That remains the entrepreneur’s No.1 Challenge: balancing the need for strategic leadership with the demands for operational effectiveness.

Too busy fighting fires to work on fire prevention?

To succeed in building a long-term sustainable business, it is essential that owner-managers find the appropriate balance in applying time, effort and resources to both strategic leadership and operations management.

Two issues, three steps to success

My approach to managing that balance is to apply the same three steps to each issue.

Strategic Leadership

1. Assess performance

Continuously assess market conditions, customer feedback and the competitive landscape. Check that your intended strategic positioning, branding and corporate culture are in line with current customer and employee perceptions.  Confirm that you are correctly matching your strategic and competitive advantage to market opportunities

2. Revise the plan

Review and revise, if necessary, your strategy, concept and business model.  Update your Business Plan and marketing communications strategy.

3. Make improvements

Launch the new plan internally and provide strategic direction and support to the management team. Prepare new marketing communications and sales tools and take them to market.

Management Effectiveness

1. Assess performance

 Regularly assess operating and financial performance by monitoring key indicators against your plan, industry averages and the best performers in your business.Survey employees and customers for satisfaction levels and feedback on areas for improvement.  Maintain current and effective employee performance reviews for management and staff.

2. Revise the plan

Identify deficiencies and set new objectives for performance improvements. Update the Business Plan and internal performance objectives for management and staff.

3. Make improvements

Define and develop improvement projects and provide necessary management support and resources to achieve the objectives.

A simple process, but not easy. Achieving balance in managing business strategy and effective operations is still a challenge.

But worth continuous attention.

Your Uncle Ralph, Del Chatterson

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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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Stick to the plan until the match is over

Jordan Spieth's strategic error cost him a win

jSpeith Masters 2016-2After an excellent first nine holes, he decided he could play safe with a six stroke lead. That's when the wheels started to wobble and then fell off at the 12th. In three holes he lost six strokes, while Danny Willett continued the best round of the day with two more birdies. Suddenly Spieth was behind. In spite of regaining control for birdies himself on the 13th and 15th, he finished tied for second. After winning last year and holding the lead for seven consecutive rounds, he lost the chance to make history by joining only Jack Nicklaus, Nick Faldo and Tiger Woods in winning two consecutive Masters Championships.

In commenting on his shocking fall from the lead, Spieth admitted that he had adjusted his strategy to playing cautiously for par, instead of continuing to strive for birdies. “I took just a little off my swing and the ball started to float right. On the 12th I just compounded the error.”

The lesson for entrepreneurs

So the lesson appears to be to stay with your winning strategy, until it doesn’t work anymore.

Do not adopt a new strategy until a correction is clearly required. Avoid continuously assessing and adjusting your strategy, focus instead on execution and the results. Monitor feedback and adjust only the tactics, techniques and processes to achieve the desired performance.

 You will never win every round, but you will win more often if you stick to the plan and execute well. And you will continue to get better at the game. 

Your Uncle Ralph, Del Chatterson

Read more articles like this one at: Business is Like Golf Blog

Visit LearningEntrerpreneurship.comand join our mailing list for more ideas, information and inspiration for entrepreneurs.

Check outUncle Ralph’s books, "Don't Do It the Hard Way" and "The Complete Do-It-Yourself Guide to Business Plans" Available online or at your favourite bookstore in hard cover, paperback or e-book.

 

Start with a SNAP Review Business Diagnostic

SNAP: Strategic Needs Assessment and Performance Review

business challengesA comprehensive business diagnostic will assess your strategic position, your plans and objectives and analyze your current performance to identify opportunities for improvement.

It includes a review of the issues with management, employees and customers and an analysis of financial results, sales and marketing performance, customer service and operating effectiveness. It will lead to a new plan that is more in line with your strategic objectives and delivers higher profitability and performance.

Our recommended approach

Start with a survey of the competitive landscape and your position in it. How do you fit in to meet customer needs? Do customers see you as a Porsche or a pick-up truck? Are your marketing campaigns and sales pitches all aligned with your strategic plan, on message, and directed at the right prospects with targeted opportunities?

Internally, the business diagnostic should include a survey of management and staff perceptions. Are you fun and friendly or severe and stressful? Do they see you supporting personal development and encouraging initiative in pursuit of business objectives?

Financial performance should be measured not only against your plans and forecasts, but also against industry average ratios and the performance of the best in your business.  Look at your operating margins, leverage ratios, inventory and receivables turnover, sales performance in dollars per square foot or per sales rep or per dollar invested in plant and equipment. How do you compare?

When the business diagnostic is complete, share the results with your management team and develop a realistic plan to improve on the key performance measures and accelerate progress toward your strategic objectives.

It starts with a comprehensive and objective diagnostic and ends with a new plan.

Consider a Quick SNAP Review from DirectTech Solutions

Fixed Fee Diagnostic – only $1795

Includes:

  • Initial review of company background, sales and marketing performance and financial results.
  • Discussion with management of the strategic plan and objectives and current key issues.
  • Survey of up to three key staff members and three key employees.
  • Presentation of our analysis and recommendations

Visit DirectTech Solutions to learn more.

Limited offer to qualified clients. Standard consulting agreement applicable.

Please contact us to discuss your needs and how we may be able to assist you in doing better for your business.

Your Uncle Ralph, Del Chatterson

And check out two new books by Uncle Ralph, "Don't Do It the Hard Way" and "The9Don't Do It the Hard Way Complete Do-It-Yourself Guide to Business Plans." available online or at your favourite bookstore.  To learn more or buy a copy: Click here

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.

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.)

Take the time to get a wider perspective and adjust your plans.

Review recent performance against your current bFocusedusiness plan and expected results before we get too far into 2015. Seize the opportunity to make improvements and enhance the value of your business.

Here are some ideas to inspire you to do better than ever.

1. Check your numbers against the top performers.

You probably already know the key variables to manage profitability in your business - gross margin, sales per square foot or sales per employee, for example – but have you compared your numbers to the top performers in your industry lately?

How has the current economy affected their growth rates or performance ratios compared to yours?  You will have to do some homework to get the answers.  Be sure to find the most comparable companies by industry size or type of business and then try to select the top performers.  You may get useful comparisons from available data on public companies, from trade journals or from industry data bases.  Your banker likely has access to RMA (Risk Management Association) data that is used by the banks to assess your credit worthiness.  It is worth knowing what they are looking at and how they assess your performance so you know what they know.

2. Ask for key stakeholder opinions.

In addition to the bank’s assessment you should also regularly solicit feedback from your other key stakeholders.  Those would be your employees, your customers and your major suppliers.

The key questions to ask are:

  • How would you describe our company relative to our competitors?
  • What do you think we do best?
  • Where do you think we need to improve?
  • What opportunities do you think we are missing?

3. Listen and learn.

Often business owners are surprised to find that the perceptions of their employees, customers and suppliers are quite consistent, but very different from their own.

You may think that your business is best known for low prices and fast service, but others see you as having expertise that is valuable and worth paying the perceived higher price and accepting relatively poor service.  Oops!

Now you have something to work on.  First, try to ensure that your perceived strategic position in the market is the one that you want; then work on delivering what is expected.  And finally, assess the feedback on perceived opportunities that you are missing.  In asking customers that question, recognize that you will have now established receptive prospects for new initiatives, so follow-up quickly.

4. Verify your readiness for growth

In order to pursue new opportunities and grow your business it is also timely to verify that you have a solid foundation for growth.  The foundation needs to be resilient, flexible, and expandable in all the dimensions related to organisation, facilities, financing, and infrastructure.

A fitness test on all these areas is a necessary first step before launching new initiatives.

5. Focus on maximizing long-term value.

During the performance review there will be some obvious and easy “quick fixes” to generate revenue or cut costs.  But as Einstein apparently once said, “For every serious and complex problem, there is an easy and obvious answer that is wrong.”

For businesses the error is usually to focus on short-term profitability, rather than long-term value.  In fact, the accumulation of short-term decisions to control costs or pump revenue may actually diminish the long-term value that arises from sustainable and profitable growth.  Typical examples are under-qualified staffing, low cost facilities and equipment, cutbacks in marketing or product development and chasing big customers with low profit margins or accepting questionable credit risks.

6. Identify and select the priority opportunities.

After completing the review and assessing the opportunities, the list of potential action items may be long.  A selection of priorities to address in the immediate future is required.  And more than three priorities means you have not yet made a selection, only a ranking.  Try harder.

7. Make a new plan. Then make it happen.

With a short list of priorities you can make a realistic and achievable plan to improve performance.  Simply list the steps required with names and dates assigned to each step.

Take this opportunity to rethink your business and make something happen.  Remember if nothing changes, nothing happens.

Be better.  Do better.

Bplan strategyWe start the year in uncertain and dangerous times.  We have been here before and it has been even worse in the recent past, but planning and management in this environment has us wondering about the impact on our businesses. What are the right management strategies and action plans to get through this year and build a more resilient and successful business?

Here are the lessons we have learned in the past:

1. Do not react to the headlines. They are primarily trying to get your attention and a train wreck, death and disaster are always more interesting than a business success story. You will not likely get balanced or insightful input to your planning or decision making. You will have to dig deeper. Make sure your market feedback and competitive analysis are current and accurate.

2. Communicate. Communicate. Communicate.  Keep employees and customers informed. They are also worried and confused and need to be reassured that they can count on you. You may not have good news for them, but it will be appreciated that they are hearing directly from you and are not left guessing what's next.

3. Keep on Selling. Now is not the time to cut back on marketing and sales. Your efforts now will be even more conspicuous and effective if your competitors are reducing their marketing and sales efforts. Be selective and very focused. Work on building stronger customer relationships by being relevant and responsive to the current circumstances.  Calmness, confidence and competence are much more appealing to those potential buyers who are still spending and want reliable, long term suppliers.

4. Do quickly what obviously needs to be done. If it’s clear to you it's also clear to the people affected. They are waiting for you to act and will be more confident and proactive themselves if they see you taking action. Face the facts, don't fight the facts. 5. Adapt. Remember Darwin's "survival of the fittest": those who adapt to their environment are most likely to survive; not the strongest or the biggest. This is not the time to be stubbornly persistent about your plans. Look around and be creative. Your destination may still be the same, but the route, the vehicle and the passengers may need to be changed.

6. Be confident, but cautious. Recognize the difference between taking a calculated risk and taking a wild swing hoping for the best. Make a decision if the potential outcomes and the probabilities are reasonably clear, but hold fire if they are not.

7. Show conspicuous leadership. This is not the time to hide in your office.  Strong leaders understand the need to be the most conspicuous communicator on current issues. No one can do it better than the one who is ultimately responsible for taking action. We may not all be adept at it, but we can all speak with more sincerity than any spokesperson or intermediary on our concerns, our strategies and our plans.

Good management will be tested again this year, but good decisions will mean a better business for the future.  Keep at it and better times will follow soon. Stay hopeful and optimistic.

Happy New Year,

Del Chatterson

© January 2015

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.

My story recently shared story with Jonathan Chevreau at his Findependence Hub.
 

It’s better to have a plan

My unplanned retirement at 52 seems to have been successful, if I look back over the last 15 years, but I could have done it better and suggest that you can too, if you have a plan.DelBanff

Here is my story and the lessons I have learned. I am sharing them on the assumption that it’s never too late for you or me to do it better. At age 52, I quit my day job and headed into the unknown. At that time I certainly did not call it “retirement”. It was more “seeking new opportunities”, “time for a change of career plans” and other appropriate clichés.

How did I get to that point? Well, I was just another engineer/MBA with a career in corporate positions and management consulting followed by twelve years in my own business. My business in computer products distribution grew fast and did very well during the booming PC revolution of the ‘80’s. Then in the ‘90’s the PC market rapidly changed and smaller players were squeezed out by the few surviving big manufacturers, distributors, and retailers. So the business become less fun and less rewarding as I went through the challenges of a merger, wind-up, re-start and finally an exit. My decision to leave was simply based on the lack of personal satisfaction. The stimulating challenges and my motivation had evaporated. It was time to move on.

During most of the 25 years after my MBA, I had earned good compensation and was apparently smart enough to manage a sound savings and investment plan (encouraged by the wise and practical advice of Jonathan Chevreau, the Wealthy Barber and many others.) The biggest bump in compensation and savings happened, of course, during the good years in my own business when sales and profits were booming. But when I quit working and starting searching for new opportunities there were two things missing: I did not know what I really wanted and I didn’t have a plan

Financially, I was able to carry on without income and live off my investments. My savings and investment plans, starting in my early 30’s, were based on reasonable risk and return assumptions in a well diversified portfolio. I started with a brokerage account and a commission-based broker. But after some bad advice and a couple of big losses, I switched to another broker for a few years and then finally decided to go 100% self-directed. I had learned that my choices were as good as those of the big brokerage research advisors and I now had the luxury of boasting about the winners and keeping quiet about my mistakes. I remained cautious on 85% of the portfolio, although it was 95% in equities, as I could never justify the low returns of fixed income and was willing to be patient through the downturns. I often explain (usually to aggressive wealth management sales people) that my decision to continue to manage my own investments is not for the better returns, but for the education and entertainment value. Admittedly, sometimes an expensive education and sometimes more horror story than action-adventure.

Over the years, however, I had achieved acceptable average returns and at age 52 I could quit working and earning income. I could “retire”.

My Rule of 15

How did I know that? Well, being an engineer and MBA, I did have spreadsheets to run through various scenarios that showed I could live well and still leave an inheritance behind whenever I checked out. I even developed a simple “Rule of 15” that saves you all the trouble of preparing those spreadsheets. If you have fifteen times your annual spending invested, then you are good to retire. That’s it: if you need $50,000 a year to live on, you can retire on $750,000. That amount will take thirty years to decline to zero if you can earn at least 5% a year return on it. The experts of course, will tell you it’s more complicated than that and you need to consider inflation and volatility of returns, housing, health and family issues, but they are not predictable anyway and you have some room for error and the ability to manage within the 5% return and the thirty-year time frame assumptions. Don’t make it complicated and suffer paralysis by analysis. The Rule of 15 is a simple reality check on your retirement plans

But financial independence, findependence as Jonathan Chevreau calls it, is not enough. You may know how you are going to spend your money during your retirement, but how are you going to spend your time? That turns out to be even more important to your long-term health and well being.

In my own case, I meandered aimlessly into my unplanned retirement and tried to keep it interesting by dabbling in everything from Internet start-ups to building a consulting business; from running marathons to running for MP, playing golf to playing guitar. I dealt with some family issues, separated and divorced and did some voluntourism by helping entrepreneurs in developing economies and aboriginal communities.

After fifteen years of wandering between consulting, semi-retirement and self-unemployment, I recognized that this approach was not giving me much satisfaction. I needed more passion and purpose in my life.

Since my own process was clearly not working, I started soliciting input and advice from professional resources to help figure out what I really needed for personal fulfillment. It began with a personal assessment of who I was and what I wanted. Better knowledge of myself helped me focus on what I should be spending my time on to achieve the goals of personal fulfillment. Clarity helps.

Here are the most important lessons that I learned in my unplanned retirement:

  1. Do not make decisions by neglecting them until events decide for you.
  2. Have a plan that recognizes your personal needs, goals, resources, limitations and timetable.

 Assess who you are and where you are now; decide where you want to be and when; and then start acting according to your plan. Hope for a little luck along the way, but don’t count on it.

Have a happy retirement