Creating Strategy in a Small Business

Presented By: Chuck Jerome

Chuck Jerome– Vice President, Business Development

• previously, VP Operations

• Professional Roles:– Software Developer & Business Analyst– Ops Manager – Distribution, Manufacturing & Retail– Consultant, Business Applications

• Partner with BDO Dunwoody LLP, 12 years• Business Owner – last 16 years, 4 companies

Presenter

E-Myth Revisited

E-Myth Revisited:

Why Most Small Businesses Don’t Work and What to Do About It

By Michael E. Gerber

• Who is business owner?• Who is thinking of starting a business?• Who is a part of a management team that’s

involved in strategic planning?• Do you or your organization have a Strategic

Plan?

Questions

“I pledge to be honest with myself and step back to take a good hard look at my business”

Pledge

• Annually• 1 million+ new businesses start in NA• At least 40% will not make it

• Year 5• 80% of businesses will fail

• Year 10• 80% of those businesses will fail

• 40,000 of 1,000,000 survive – 4 %

Startling Facts

To change those odds you need to understand:• what a business

really is• what it takes to

make it work

Startling Facts

NoYes

• Romantic Belief that small businesses are started by entrepreneurs – most are not

• Fatal Assumption: if you understand the technical work of a business, you understand a business that does that technical work

Entrepreneurial Myth

“Why am I working for this guy? I know as much about the business as he does. Why not start my own business?” So you go into business for yourself.

Entrepreneurial Seizure

• Do I want to start a business because I want to be my own boss?

• Do I want to start a business just because I am good at and enjoy doing the technical work?

Questions to Ask Yourself

Technician Manager Entrepreneur

Doer Pragmatic Visionary

Supplies the Output

Does the planning, keeps things in order

Creates a great deal of havoc around him

The Entrepreneur, The Manager and The Technician

The typical business builder personality is:10% Entrepreneur 20% Manager 70% Technician

Split Personality

A very good business builder would be:33% Entrepreneur 33% Manager 33% Technician

• Do I have a vision of where I want my business to be in the next 5 years? 10 years?

• Do I have an orderly system of doing business? Is it documented?

• Am I thinking about how the work should be done and how it can be improved?

• Do I see my business as something apart from myself and my life, or am I the business?

Questions to Ask Yourself

• Businesses, like people, are supposed to grow; and with growth, comes change

• Three phases of a business’s growth:– Infancy– Adolescence– Maturity

3 Growth Phases of a Business

• The owner and the business are one and the same thing

• Without you there would be no business• Then subtle changes begin to occur:

– You begin to fall behind– More work than you can possibly get done– Drop some of the balls!

• Change or Death is inevitable

Infancy: The Technician’s Phase

• Do I feel like no matter how hard I work, there is always more work waiting for me?

• Do I only see the work that has to get done rather than learning how to grow my business?

• Do I ignore financial, marketing, sales and administrative accountabilities since I do not want to do anything besides the technical work in my business?

Questions to Ask Yourself

• Owner makes the decision to let the business grow– Hires new employees– Handle the work that they don’t want to do

• Management by Abdication - the owner completely lets go of some of their responsibilities without supervising the quality

Adolescence: Getting Some Help

• Do I hire people to do what I do not want to do?• Do I assign my employees work that I do not

know how to do well?• Do I review my employees’ work to ensure ?• Do I feel that nobody is willing to work as hard

as I am? Do I feel like I’ll be better off doing all the work by myself?

Questions to Ask Yourself

Person Boundary Defined byTechnician How much he can do himself

Manager How many technicians he can supervise effectively

Entrepreneur How many managers he can engage in pursuit of his vision

As a business grows,it invariably exceeds its owner’s ability to control it.

Beyond the Comfort Zone

• A Mature business knows:– how it got to be where it is– what it must do to get where it wants to go

• Maturity is not the result of the 1st 2 phases• Mature companies started out that way• Mature company goes through Infancy,

Adolescence and Maturity in an entirely different way

Maturity and the Entrepreneurial Perspective

“How must the business work?”• Sees the business as a system for producing

results• Starts with a picture of a well-defined future,

and then comes back to the present with the intention of changing it to match the vision.

The Entrepreneurial Perspective

Thomas Watson’s 3 steps to Success:

1. Clear picture of what the company would look like

2. Determined how this company would have to act

3. Began acting that way from the start

The Entrepreneurial Perspective

• Know who their Customer is• Meet the Perceived Need - Innovative• Not about the commodity – it’s about the way

it’s delivered is• Focus on Differentiation

The Entrepreneurial Model

• Do I have a clear vision of my business in the coming years?

• How does my business stand out from my competitors?

• Do I know how my business looks to the customer? – Do I know what my customers want now? – Do I anticipate their needs in the future?

Questions to Ask Yourself

Part II: The Turn-Key Revolution:A New View of Business

• Creating an effective, consistent, and orderly system of doing business

• Aim to build a successful business model and then sell the business format

• Construct a Franchise Prototype – a business that is system-dependent rather than people-dependent

The Turn-Key Revolution

• Can the system I wish to create operate without my constant presence?

• Do I want my business to work so well that other people would want to buy it?

• Do I want to see my business expand yet still manage to deliver the same value?

Questions to Ask Yourself

• Franchising refers to the Business Format Franchise – entire system of doing business

• Provides the way to run a system that provides products or services rather than the way to make the products or services

The Franchise Prototype

• Can my business transform into a system that works predictably, effortlessly and profitably?

• Does the vision of my business allow me to get free from controlling it?

• Can I create an orderly system for my business to run by itself so I can have time to live?

• Am I comfortable with learning a way to transform my business from people-intensive to system-intensive?

Questions to Ask Yourself

• Mistake: spend their lives serving their businesses, when the businesses’ original purposes were to serve them

• Franchise Prototype:– Provide excellent yet predictable value to

customers, employees, suppliers, lenders– Run with people having the lowest possible level

of skills– Documented in Operations Manuals

Working On Your Business, not In It

• Do my products and services vary based on different employees?

• Is my business dependent upon highly skilled people?

• Does my business have an unorganized structure

• Does my business lack clear, uniformly predictable values to my customers and employees?

Questions to Ask Yourself

The business development process has seven distinct steps and a foundation of three key activities:

– Innovation– Quantification– Orchestration

The Business Development Process

Innovation• Process of brainstorming new ways to do

things• Increase Efficiency & Effectiveness• Keeps the business alive and competitive

Business Development Process

Quantification• Comparing and measuring the impact of

different innovations in the business• How the business is doing, how close it is to

achieving goals, and identify problems earlyOrchestration• Coordinates, assimilates and implements the

effective innovation with Change Management

Business Development Process

• Do I constantly think about new methods to improve the way my business work?

• Do I know all the important numbers relating to my business?

• Do I know how my business is doing relative to my competitors?

Questions to Ask Yourself

Business Development

Process

Step 1: Primary Aim

Step 2: Strategic Objective

Step 3: Organization Strategy

Step 4: Management Strategy

Step 5: People Strategy

Step 6: Marketing Strategy

Step 7: Systems Strategy

Business Development Process

7 Distinct Steps

• What kind of life do you want – your values, your beliefs, and your dreams

• Your business is an instrument for you to realize your Primary Aim in life – your dream

• Knowing what you expect from it will shape the way your business develops

1: Your Primary Aim

• Do I live my life intentionally? Do I know what I wish my life to look like?

• Do I know what I would like to do 5 years from now? 10 years from now?

• Do I know how much money I will need to do the things I wish to do and when I need it?

Questions to Ask Yourself

• Vision of your finished business– Principles concerning money– Kind of business you would like to be in– Who are your customers

• Build goals for your business first– Decide whether or not they are realistic – Are they worth your time

• Product of your Life Plan

2: Your Strategic Objective

• Do I know how my business will fulfill my life’s goals and Primary Aim?

• Do I have a clear vision of my Prototype and when it will be finished?

• Do I know how much money I want from my business?

Questions to Ask Yourself

• Must have to succeed• Difference between owner and employee• Responsibilities that owners easily miss or

ignore• Define positions needed and responsibilities

they are accountable for

3: Your Organizational Strategy

Shareholders

Chief Operating Officer

VP Marketing

Sales Manager Marketing Manager

VP Operations

Production Manager

Service Manager

VP Finance

AR Manager AP Manager

Organizational Strategy

• Do I see myself as an employee of my own business?

• Do I understand every position’s job descriptions, goals, responsibilities and how they fit together in my business?

• Do I understand how I can later replace myself with a system of doing business so that other employees can fulfill all the responsibilities

Questions to Ask Yourself

• Business that will run smoothly and actually work without problems

• Manage the system – system will manage the people – consistent results

• Self-reporting, self-correcting and QA

4: Your Management Strategy

Simple systems will be put in place which will allow ordinary people to produce extraordinary results.

• Does the system I created provide my employees with a clear, step-by-step description of tasks they have to do?

• Can the system I created produce consistent results over and over again?

Questions to Ask Yourself

• Beyond the system, people are your variant• Must follow the systems standards perfectly

to ensure quality and consistency• Motivation comes from understanding the big

picture - the value of the work rather than the work itself

• Not merely a “job” but a device to fulfill their own Primary Aim in life

5: Your People Strategy

• Do I hire my employees because their personalities, core values and primary aim are “fitted” for the business?

• Do I make sure my employees understand the vision and value behind the business and how the work they do impacts the business as a whole?

Questions to Ask Yourself

• Acquiring and Retaining customers• Clearly define:

– target customers’ preferences– buying behaviors– how to capture their attention

• Know your customers’ demographics and psychographics

• Focus marketing on competitive strength

6: Your Marketing Strategy

• Do I know what my customers want? Do I know what my customers expect to get from my products and services?

• Do I know who my customers are? Their age? Sex? Income level? Education? Preferences?

Questions to Ask Yourself

• A system is a set of things, actions, ideas, and information that interact with each other, and in so doing, alter other systems

• 3 kinds of systems:– Hard System – Equipment, Furniture, Brand Colour– Soft System – Dynamic i.e. Sales System– Information System – provides you with data about

how the other two systems interact to produce the best results

Your System Strategy

• Information Systems examples:– Inventory control– Cash flow forecasting– Sales activity summary report

• Support the business objectives:– Increase Effectiveness – Increase Revenue– Increase Efficiency – Reduce Cost– Compliance – Mitigate Risk

Your System Strategy

• Financial Impact Assessment– Cost not to Solve the problem– What new Opportunity needs to be supported

Why do companies hold off on investing money in business management systems when it will support their business objectives?

Business Case for Investing

• Does my overall business system provide consistent results every single time?

• Does my system incorporate an effective selling system?

• Do I know how to effectively use my information system to construct, improve, and perfect my Franchise Prototype?

Questions to Ask Yourself

E-Myth Expert Series

http://www.michaelegerbercompanies.com/