From – $10,000 to $0 Net Profit
In the large scheme of things in entrepreneurship, the biggest things are profit and return on investment. If your books are showing none of these, then you know, things are bad and bordering on worse. When your business is strongly on the left side of the number line that starts at 0, therefore, there is cause for sleepless nights and nail-biting days.
This article bears the sub-title, “From – $10,000 to $0 Net Profit” deliberately. Many of the articles written in various forums are for or by people who have stories of “$0 to $1,000 and beyond”. When you are sailing in the ocean of losses, it is important to keep yourself motivated and in the company of those who are making fruitful efforts to get to the beyond zero-margin level.
Here are 7 pointers I have picked up in this tremendous journey of transforming a family business from loss to breaking even.
1. Establish the management structures
Before you get to give each other job titles, management structures is about agreeing and respecting the role that each family member plays in the business. You may all be directors but chances are that not all of you are qualified to sign contracts or cheques on behalf of the company. One may be good with customer service while another is good with team management or supplies and purchasing.
Position titles like Chairman, Managing Director, Chief Finance Officer, Director etc are purposely for the external world. If you walked into a networking forum and you were introduced as the CFO of your family business, people will most likely give it the interpretation that it carries for a Fortune 500 company. When you are explaining performance to your other family members who are silent in the running of the business, that title is worth zero. In the confines of your business, what is important is delivering on your role/ assignment to the satisfaction of all concerned.
The same applies when it’s a sole proprietorship with employed staff. At the beginning, yes, you have to be everything to your business. You will be the one at the counter selling and you are still the one taking stock and going to the suppliers to replenish. You are also the one to determine price and discounts, collect debt, attend trainings/ workshops, do customer service and manage your social media platform among many other roles. However, it gets to a point where that is no longer feasible and you have to get a team of people.
Surround yourself with people who have the skill and can deliver what you need. It is better if they are more knowledgeable than you in that area. From my experience, not being as qualified as your staff in a certain area of work, is a good thing because, you learn, you get to make suggestions that cause them to think beyond what they are used to and above all, you build conversation and you end up with a vibrant team that has healthy business conversations.
2. Identify what you have working in your favor
Usually when the business is on a downturn, the most prevalent thought is about everything that is not working for you. It was a challenge for me when I took on our family business. Customers were churning daily, employees were going out to interviews and leaving at the same rate as customers, we were running on empty bank accounts with staff salaries and major business costs coming out of our pension funds! It was horrible. Night after night we wondered why we were keeping the doors open and all of us would retreat to individual corners and hold one-man pity parties!
That was until one day when someone came to the office and proposed to buy the property that the business was sitting on at a ridiculously high price. As a family we came together to analyse the offer and the question that caused us to reject the offer was, “What goldmine is here that would make a total stranger give such an offer?”
That one event marked the beginning of a rise. We started seeing all that was working in our favor and we rode on it. We made improvements, we strategized, we marketed, we prayed and we hoped. In a span of 12 months, the business is able to run itself to break even.
There must be something working for you and you need to ride it out for all its worth and for as long as it yields a benefit – social goodwill, existing infrastructure, loyal customers, technological advances, time? Identify it and you will be on your way up from losses.
3. Kill the reverse gear on strategic, well-thought out decisions
At the point of picking up the family business, it was coming from being single handedly managed by one of the family members. The rest of us had not been significantly involved until that time. Our decision making was therefore not very commendable. We would make a decision today and its implementation would be delayed because one us had woken up with a different mind set.
Point 1 above, establishing structures, helped us deal with the situation as we were able to assign roles, give deadlines and make follow up on progress. We also made it mandatory to have structured meetings in the office where minutes were taken and reviews done. Was it easy? Heck, no! Did we have arguments? Yes, but we resolved them respectfully and when the results of sticking to our decisions came through, the discomfort started to ease.
Lack of commitment and consistency in fulfilling your business decisions will be one of your main hurdles when it comes to getting out of the negative zones. You must identify this weakness and deal with it decisively especially for well-thought out decisions and and strategies.
When it looks like finances are the ones hindering implementation, then you need to deal with it. Chances are that, in a well thought out decision, the issue of limited finances was foreseen and some measures were applied on paper. Follow through, despite the difficulty.
4. Be present
Running a business entails walking around, rolling up your sleeves and getting your hands dirty. If you run a school, and a driver texts you that he can’t wake up in the morning due to a bad flu, you have to be ready to get on the road and drive the school bus. If your receptionist/ counter sales person has to attend a child’s graduation, you move from your office to the front and interact with customers.
You can’t manage your business from a different site especially while it is in it’s infancy stages or it is loss making. Unfortunately a lot of people learn this lesson after they decide to quit their jobs and concentrate on their businesses; after they have invested their life savings and much more.
While trusting people and empowering your team is a good and recommended thing in successful businesses, it is not to be done at the expense of your business and investment. Empower by doing and being there so that the day you are not there, they will have a reference point of how it should be done from you.
5. Learn. Innovate. Review. Repeat
Brought up in a system of learning where mistakes were responded to by caning, we may have developed a resentment for and fear of mistakes. We therefore want everything perfect. If you are going to break even and beyond, you need to get ready to make mistakes. From the mistakes made, choose to take the lesson without you feeling like you are a bad person.
Aside from mistakes, you must take the time to read books, articles, journals and even interact with others so that you can learn, get ideas to apply in your business for improvement or growth. As you learn, you innovate. Innovation as defined by Sir Ken Robinson, is putting new ideas into practise. Don’t be an information sponge, learn and put in practice. Once you start applying different ways of doing things, you review their effect on the business and make the necessary amendments.
The one extra thing you will then do, is repeat until continuous improvement is an undeniable culture of your business.
6. Accept genuine help, advice and criticism
No one likes being told they are wrong. Yet, being wrong is a feature of being in business. Accept the criticism and correction that comes to you genuinely. If analysed well, it will be seen to benefit you and the business. Help is also given to people whose businesses are perceived to carry a greater good for a majority of people. It is also given when people believe in you and they can see that you have great potential to accomplish great things, if only you had a little help.
Accept and appreciate it; not only by applying it but also by sharing the fruits that emanate from there.
7. Appreciate your team and customers
One of the biggest free-of-cost motivators in an organisation is appreciation. Letting people know that: they are valued, their contribution is important, the success of the company can be traced back to their actions, and their input will be required in the future is a big motivator.
Chances are that beyond the role of a salary and financial benefits, genuine, heartfelt recognition of effort gives people a reason to come back to your business every morning to work with you to get it out of the red line.
The same is to be said of your customers. They choose to come to you when they could easily spend their money at your competitor’s business premises. So, appreciate them. Let them know that they are the reason you are in business. That message tends to resonate with many because, for them, you have shifted your attention from yourself to them. You care that they come to you.
The price tag for product/ service loyalty is customer appreciation