As we approach the new year - there are a number of things on the plate for all of us. We need to close 2010 and finish the current year strong. We need to plan and put on paper our goals for 2011 - to have SMART goals that can be measured and watched over time so we can be accountable to execute them consistently and completely. We need to celebrate our blessings and be grateful for all the good things we have experienced. A new year is a time of new opportunity.
Unfortunately I have been watching with some amazement the reaction, or lack there of, to the new Microsoft MPN partner program. I wrote about this back in August and encouraged partners to begin planning and putting their strategy in place. It seems many have ignored or failed to take any action, and now as we move into the key season of partner renewals, there is panic and frustration that partners are not ready for the transition. This program has definitely raised the bar - but that is not news either. In fact, it has been the plan and came at the request of partners from around the world. This has been in planning stages for some time, and was covered in my blog post back in April as well as dozens of communications from Redmond as well.
The landscape has changed and it is time for true Microsoft partners to jump on board and embrace MPN. Diane Golshan wrote a great blog post last week addressing some of the key misconceptions. Putting things off is not the right answer. Just living under the grandfathering of benefits is not the same thing as embracing the program and putting your strategic plan in place and becoming fully engaged with MPN. Take a read of Diane's post - check out some of Eric Ligman's posts as well. This transition is a change - none of us like change - but it is the future and we need to get on board - embrace it and take advantage of the differentiation that all of us desire. Don't miss the boat on this important opportunity. Spend some time - leverage the resources available - and put your company in a place that will be different than most of your competitors who are just sitting back and waiting. We don't see a lot of chances like this in the channel to really be different. My advice is to get after it and do it quickly.
Thursday, December 30, 2010
Monday, December 27, 2010
Vendors Matter
This is the seventh blog post regarding the 10 Things I Accidentally Learned on the Path to Growth. There is little question that many folks in our industry seem to feel that the vendors are the enemy. Why - I am not exactly sure. But I can tell you without question that an attitude like that is 180 degrees the wrong way. Not only are vendors necessary and important - if you really want to grow - they are one of the most important factors I have seen and experienced.
So before you tune me out - listen a bit. Unless you are some super giant company - you do not have everything you need in order to serve your clients. Even Microsoft and HP use vendors - lots of them - to bring together things needed to serve their end clients. So what makes us as IT owners believe we are self sufficient and can run our business without any vendor relationships? I know the answer and it is in one word - stupidity! I know because I used to think that way a long time ago. I thought my job for the day was to beat vendors and distributors up on pricing and accuse them of trying to take my customers or take advantage of me through one of their programs somehow. Is that how you see your vendor relationships? Wrong approach - way wrong. Here are the facts as I have seen them over the years:
Vendors and Distributors exist to sell stuff
At the core of our attitude toward vendors is the failure to understand what they are in business for. Just like us - they exist to make a profit - and serve their customers. We tend to want to cut that first part out. If you want to succeed in this area - you have to understand that they are in business to sell things. And the way you embrace that is pretty obvious - you buy them. But not based on where you can find the lowest deal of the day or beat down the last penny of profit. You consolidate your purchasing and become a loyal buyer. Nothing says relationship like those two words. Get over finding the cheapest place to source products. Pick a distributor and a few key vendors and buy their products the same way from the same companies every day. I am often amazed at discussions where someone saved $10 a product by shopping. They wasted two hours of valuable time that could be used on productive work - but they got the best deal. Until they look a little more and find out that had they spend the whole day they could have saved $12. How ludicrous. We are in the value business. We sell our solutions and services based on value - not cost. We should buy the same way and quit worrying about getting every last dime out of someone. You will never grow or succeed as long as you are focused on spending your time here rather than building value for the customer.
Learn who your reps are and how they get paid
Relationships happen between two people. Every vendor has people resources that we can leverage to help drive our collective business. Your assignment is to find out who they are and build a relationship with them. It starts by buying as described in the previous paragraph. Most vendor reps are not crazy about working with companies that don't buy anything. But assuming you figure that one out and become a loyal partner - then it is time to begin the treasure hunt to find out where the people resources are. This takes determination and hard work - but is very much worth the effort. Once you build a relationship by consistently executing - you will find that these folks offer to bring resources to the table to help you grow. After all - they are paid on selling stuff. You need to ask that question and understand their compensation model - but inevitably it will have some component of sales in the mix. So find them and help them succeed. No one in their right mind won't partner with you to sell more if you are helping them earn more. This is key - building a win - win relationship. It is so powerful and I have seen significant results from learning to partner closely with vendor reps.
Participate in their programs
Vendors spend millions and millions of dollars on our behalf. The sad reality is that most of us don't take advantage of those investments. We don't like what they are offering for this reason or that - so we just ignore them. Bad decision. We need to not only understand what our key vendors are doing to support the channel - we need to participate in every possible way whether it is exactly how we would like it or not. It is their money after all. They are spending it on our behalf. We don't get to decide how. But they do care about our participation. They very much care about how involved we are in taking advantage of their investments. And they do keep score. Not getting much attention from your vendors? Begin by looking at your support and participation in their programs. More often than not you are getting what you deserve based on your committment.
Provide customer evidence
Vendors really love customer success stories. And in our IT channel two tier distribution model they have a difficult time getting those because we are in the middle. If you want to win some big points with both field reps and folks at corporate offices of your key vendors - capture and write success stories on how their technology delivered by you made a difference. That is like gold to reps and gives them some great evidence to bring back to their company. You can use it with your customers too - so it is something we should all be doing anyway. Just be sure to include your vendor reps and help them look good with their managers.
Get your team trained
It amazes me at how many partners complain about having to invest in training to get attention from vendors. Is it really that difficult to understand. It not only prepares us to actually sell their products as designed, to install them the best possible way, to succeed with their programs and use their references - but it also shows loyalty and our willingness to put skin in the game. Do I ever think some of the training is a little worthless? Yep. Do I think most training could be done better? Yep. Do we participate and get our people trained? Absolutely. Why? Because it shows that we are committed to the technology and company we are representing. It is part of learning how they intend to help us succeed. We need to bite the bullet and get our people trained, and then use what we learned to sell and implement more solutions.
Plan and be accountable to them
One of the most important things you can do to take vendor relationships to a whole different level is to truly plan together. Each year in the last quarter we hold our annual vendor planning session. We invite our top 4 or 5 vendor partners and our disty partner to the table - all at the same time - with our management team to strategize for the coming year. This has turned into one of the most important things we do to drive relationship with our vendors. It is a day and a half to two days focused on how we collectively grow each others business. There are competitors in the room - but we are clear that our approach to the market is solution selling and we sell products from a few vendors to build our solutions so they have to learn to play together in the sandbox. It opened some eyes the first time we did it. Some were pretty quiet and careful - but over the years it has become a true collaborative time and vendors leave knowing our collective approach. We also make committments to them, and they to us, that both sides are accountable for. We do quarterly reviews to make sure we are on track through the year. You have to be transparent and accountable if you truly want to make vendor relationships work.
There are lots of ways to engage vendors. Here are a few ideas we have utilized:
•Marketing Development Funds (MDF) - come in a variety of shapes and sizes
•Technology adoption programs
•Rapid deployment programs
•Beta programs
•Case studies – video and print
•Advisory councils
•Technical and sales training
•On site visits where we have corporate folks in our office to see what really happens
The bottom line
If you want to truly grow your company - you have to get this area right. I have seen NO company of any size do it alone. There always is a very strong and deep strategy to leverage vendors as part of the growth. You just aren't going to get there if you don't embrace them. They truly are a great resource and ally if you build deep relationships. It is work. It takes time. But it is very much worth it. Get after it and don't listen to the majority who will never figure this out. Go deep and find out just how far great vendor relationships can take you on your path of growth!
So before you tune me out - listen a bit. Unless you are some super giant company - you do not have everything you need in order to serve your clients. Even Microsoft and HP use vendors - lots of them - to bring together things needed to serve their end clients. So what makes us as IT owners believe we are self sufficient and can run our business without any vendor relationships? I know the answer and it is in one word - stupidity! I know because I used to think that way a long time ago. I thought my job for the day was to beat vendors and distributors up on pricing and accuse them of trying to take my customers or take advantage of me through one of their programs somehow. Is that how you see your vendor relationships? Wrong approach - way wrong. Here are the facts as I have seen them over the years:
Vendors and Distributors exist to sell stuff
At the core of our attitude toward vendors is the failure to understand what they are in business for. Just like us - they exist to make a profit - and serve their customers. We tend to want to cut that first part out. If you want to succeed in this area - you have to understand that they are in business to sell things. And the way you embrace that is pretty obvious - you buy them. But not based on where you can find the lowest deal of the day or beat down the last penny of profit. You consolidate your purchasing and become a loyal buyer. Nothing says relationship like those two words. Get over finding the cheapest place to source products. Pick a distributor and a few key vendors and buy their products the same way from the same companies every day. I am often amazed at discussions where someone saved $10 a product by shopping. They wasted two hours of valuable time that could be used on productive work - but they got the best deal. Until they look a little more and find out that had they spend the whole day they could have saved $12. How ludicrous. We are in the value business. We sell our solutions and services based on value - not cost. We should buy the same way and quit worrying about getting every last dime out of someone. You will never grow or succeed as long as you are focused on spending your time here rather than building value for the customer.
Learn who your reps are and how they get paid
Relationships happen between two people. Every vendor has people resources that we can leverage to help drive our collective business. Your assignment is to find out who they are and build a relationship with them. It starts by buying as described in the previous paragraph. Most vendor reps are not crazy about working with companies that don't buy anything. But assuming you figure that one out and become a loyal partner - then it is time to begin the treasure hunt to find out where the people resources are. This takes determination and hard work - but is very much worth the effort. Once you build a relationship by consistently executing - you will find that these folks offer to bring resources to the table to help you grow. After all - they are paid on selling stuff. You need to ask that question and understand their compensation model - but inevitably it will have some component of sales in the mix. So find them and help them succeed. No one in their right mind won't partner with you to sell more if you are helping them earn more. This is key - building a win - win relationship. It is so powerful and I have seen significant results from learning to partner closely with vendor reps.
Participate in their programs
Vendors spend millions and millions of dollars on our behalf. The sad reality is that most of us don't take advantage of those investments. We don't like what they are offering for this reason or that - so we just ignore them. Bad decision. We need to not only understand what our key vendors are doing to support the channel - we need to participate in every possible way whether it is exactly how we would like it or not. It is their money after all. They are spending it on our behalf. We don't get to decide how. But they do care about our participation. They very much care about how involved we are in taking advantage of their investments. And they do keep score. Not getting much attention from your vendors? Begin by looking at your support and participation in their programs. More often than not you are getting what you deserve based on your committment.
Provide customer evidence
Vendors really love customer success stories. And in our IT channel two tier distribution model they have a difficult time getting those because we are in the middle. If you want to win some big points with both field reps and folks at corporate offices of your key vendors - capture and write success stories on how their technology delivered by you made a difference. That is like gold to reps and gives them some great evidence to bring back to their company. You can use it with your customers too - so it is something we should all be doing anyway. Just be sure to include your vendor reps and help them look good with their managers.
Get your team trained
It amazes me at how many partners complain about having to invest in training to get attention from vendors. Is it really that difficult to understand. It not only prepares us to actually sell their products as designed, to install them the best possible way, to succeed with their programs and use their references - but it also shows loyalty and our willingness to put skin in the game. Do I ever think some of the training is a little worthless? Yep. Do I think most training could be done better? Yep. Do we participate and get our people trained? Absolutely. Why? Because it shows that we are committed to the technology and company we are representing. It is part of learning how they intend to help us succeed. We need to bite the bullet and get our people trained, and then use what we learned to sell and implement more solutions.
Plan and be accountable to them
One of the most important things you can do to take vendor relationships to a whole different level is to truly plan together. Each year in the last quarter we hold our annual vendor planning session. We invite our top 4 or 5 vendor partners and our disty partner to the table - all at the same time - with our management team to strategize for the coming year. This has turned into one of the most important things we do to drive relationship with our vendors. It is a day and a half to two days focused on how we collectively grow each others business. There are competitors in the room - but we are clear that our approach to the market is solution selling and we sell products from a few vendors to build our solutions so they have to learn to play together in the sandbox. It opened some eyes the first time we did it. Some were pretty quiet and careful - but over the years it has become a true collaborative time and vendors leave knowing our collective approach. We also make committments to them, and they to us, that both sides are accountable for. We do quarterly reviews to make sure we are on track through the year. You have to be transparent and accountable if you truly want to make vendor relationships work.
There are lots of ways to engage vendors. Here are a few ideas we have utilized:
•Marketing Development Funds (MDF) - come in a variety of shapes and sizes
•Technology adoption programs
•Rapid deployment programs
•Beta programs
•Case studies – video and print
•Advisory councils
•Technical and sales training
•On site visits where we have corporate folks in our office to see what really happens
The bottom line
If you want to truly grow your company - you have to get this area right. I have seen NO company of any size do it alone. There always is a very strong and deep strategy to leverage vendors as part of the growth. You just aren't going to get there if you don't embrace them. They truly are a great resource and ally if you build deep relationships. It is work. It takes time. But it is very much worth it. Get after it and don't listen to the majority who will never figure this out. Go deep and find out just how far great vendor relationships can take you on your path of growth!
Saturday, December 25, 2010
Teach The True Meaning of Christmas
Just a week before Christmas I had a visitor. This is how it happened. I just finished the household chores for the night and was preparing to go to bed, when I heard a noise in the front of the house. I opened the door to the front room and to my surprise, Santa himself stepped out next to the fireplace.
"What are you doing?" I started to ask. The words choked up in my throat and I saw he had tears in his eyes. His usual jolly manner was gone. Gone was the eager, boisterous soul we all know. He then answered me with a simple statement . . ."TEACH THE CHILDREN!" I was puzzled. What did he mean?
He anticipated my question and with one quick movement brought forth a miniature toy bag from behind the tree. As I stood bewildered, Santa said, "Teach the children!Teach them the old meaning of Christmas. The meaning that now-a-days Christmas has forgotten. "Santa then reached in his bag and pulled out a FIR TREE and placed it before the mantle. "Teach the children that the pure green color of the stately fir tree remains green all year round, depicting the everlasting hope of mankind, all the needles point heavenward, making it a symbol of man's thoughts turning toward heaven."
He again reached into his bag and pulled out a brilliant STAR. "Teach the children that the star was the heavenly sign of promises long ago. God promised a Savior for the world, and the star was the sign of fulfillment of His promise."
He then reached into his bag and pulled out a CANDLE. "Teach the children that the candle symbolizes that Christ is the light of the world, and when we see this great light we are reminded of He who displaces the darkness."
Once again he reached into his bag and removed a WREATH and placed it on the tree. "Teach the children that the wreath symbolizes the real nature of love. Real love never ceases. Love is one continuous round of affection."
He then pulled from his bag an ORNAMENT of himself. "Teach the children that I, Santa Claus, symbolize the generosity and good will we feel during the month of December."
He then brought out a HOLLY LEAF. "Teach the children that the holly plant represents immortality. It represents the crown of thorns worn by our Savior. The red holly berries represent the blood shed by Him.
Next he pulled from his bag a GIFT and said, "Teach the children that God so loved the world that he gave his begotten son." Thanks be to God for his unspeakable gift.
Santa then reached in his bag and pulled out a CANDY CANE and hung it on the tree. "Teach the children that the candy cane represents the shepherds' crook. The crook on the staff helps to bring back strayed sheep to the flock. The candy cane is the symbol that we are our brother's keeper."
He reached in again and pulled out an ANGEL. "Teach the children that it was the angels that heralded in the glorious news of the Savior's birth. The angels sang Glory to God in the highest, on earth peace and good will toward men."
Suddenly I heard a soft twinkling sound, and from his bag he pulled out a BELL,. "Teach the children that as the lost sheep are found by the sound of the bell, it should ring mankind to the fold. The bell symbolizes guidance and return.
Santa looked back and was pleased. He looked back at me and I saw that the twinkle was back in his eyes. He said, "Remember, teach the children the true meaning of Christmas and do not put me in the center, for I am but a humble servant of the One that is, and I bow down to worship him, our LORD, our GOD."
(reposted from http://llerrah.com/)
I too, hope to be found a humble servant of the One that is, and I bow down to worship him, our LORD, our GOD. - Merry Christmas!
Arlin
"What are you doing?" I started to ask. The words choked up in my throat and I saw he had tears in his eyes. His usual jolly manner was gone. Gone was the eager, boisterous soul we all know. He then answered me with a simple statement . . ."TEACH THE CHILDREN!" I was puzzled. What did he mean?
He anticipated my question and with one quick movement brought forth a miniature toy bag from behind the tree. As I stood bewildered, Santa said, "Teach the children!Teach them the old meaning of Christmas. The meaning that now-a-days Christmas has forgotten. "Santa then reached in his bag and pulled out a FIR TREE and placed it before the mantle. "Teach the children that the pure green color of the stately fir tree remains green all year round, depicting the everlasting hope of mankind, all the needles point heavenward, making it a symbol of man's thoughts turning toward heaven."
He again reached into his bag and pulled out a brilliant STAR. "Teach the children that the star was the heavenly sign of promises long ago. God promised a Savior for the world, and the star was the sign of fulfillment of His promise."
He then reached into his bag and pulled out a CANDLE. "Teach the children that the candle symbolizes that Christ is the light of the world, and when we see this great light we are reminded of He who displaces the darkness."
Once again he reached into his bag and removed a WREATH and placed it on the tree. "Teach the children that the wreath symbolizes the real nature of love. Real love never ceases. Love is one continuous round of affection."
He then pulled from his bag an ORNAMENT of himself. "Teach the children that I, Santa Claus, symbolize the generosity and good will we feel during the month of December."
He then brought out a HOLLY LEAF. "Teach the children that the holly plant represents immortality. It represents the crown of thorns worn by our Savior. The red holly berries represent the blood shed by Him.
Next he pulled from his bag a GIFT and said, "Teach the children that God so loved the world that he gave his begotten son." Thanks be to God for his unspeakable gift.
Santa then reached in his bag and pulled out a CANDY CANE and hung it on the tree. "Teach the children that the candy cane represents the shepherds' crook. The crook on the staff helps to bring back strayed sheep to the flock. The candy cane is the symbol that we are our brother's keeper."
He reached in again and pulled out an ANGEL. "Teach the children that it was the angels that heralded in the glorious news of the Savior's birth. The angels sang Glory to God in the highest, on earth peace and good will toward men."
Suddenly I heard a soft twinkling sound, and from his bag he pulled out a BELL,. "Teach the children that as the lost sheep are found by the sound of the bell, it should ring mankind to the fold. The bell symbolizes guidance and return.
Santa looked back and was pleased. He looked back at me and I saw that the twinkle was back in his eyes. He said, "Remember, teach the children the true meaning of Christmas and do not put me in the center, for I am but a humble servant of the One that is, and I bow down to worship him, our LORD, our GOD."
(reposted from http://llerrah.com/)
I too, hope to be found a humble servant of the One that is, and I bow down to worship him, our LORD, our GOD. - Merry Christmas!
Arlin
Sunday, December 19, 2010
Sales Matter
This is the sixth blog post regarding the 10 Things I Accidentally Learned on the Path to Growth. There is little question that many small business owners really dislike the whole sales process or anything that is related to it - particularly in the IT industry. But sales is not a four letter word - well it is - but it isn't a bad one. And there is little question that sales really do matter. That could be the understatement of the century actually.
Why is there such an aversion to sales by so many IT firms? Well for many of us, we came up to leading our company via the technical side of the business. We were engineers that were good at what we did and then decided to hire a few more like us and form a company. That works for a while but soon we hit the wall because we don't sell - we can fix anything under the sun - but we don't sell. I use don't rather than can't here intentionally. Anyone can sell - maybe not equally well - but it isn't that IT owners can't sell - it is because they almost despise the idea and certainly the notion of what being a salesperson is all about. Time to get over it!
Nothing happens until something gets sold. Let me say it again - nothing happens until something gets sold. OK - I have admitted it in public. We need to sell if we want to have a business. And sales is not a matter of luck. It happens when we build a sales process and system that makes sales happen regularly. We have to make the investment to put the right system and tools in place to make it happen. It can't be a hope and a prayer. That is not a sales strategy. Sales happen when we build the right foundation, hire the right people and execute the plan consistently. It really is not magic - it just takes consistent hard work doing the right things every day.
Most sales people fail because of a lack of support and management. It is common in the IT small business space to have a revolving door of sales people. We hire a person, let them flounder around on their own for 3-4 months and then fire them because they haven't sold much or anything at all. We blame them. Here is a newsflash - they likely are NOT the problem. You are. We set most new sales hires up for failure. We don't give them the right tools. We don't have a system in place. We don't manage or support them. We wish them well and sit back waiting to count the money. It just doesn't work like that. Owner attitude and support will make or break the sales engine in any company. Take a good look in the mirror and you will likely find the problem with your sales people.
When we do find that super human who is able to defy the odds of our lack of support and systems and actually sell something - it only lasts for a while. That is because without marketing support - every sales person will eventually run out of opportunities and people they know to sell to. It is our job to create leads for our sales people to follow up on. That is called marketing. It is hard work. It costs lots of money. It is somewhat luck - often more magic than science from my experience. But without marketing support - without aircover and other supporting tools to help drive leads and open doors - even a veteran sales person with many years of success will stub their toe. It is necessary to spend money on marketing to have consistent sales performance.
The pendulum is rapidly swinging toward sales. I see some major changes that are already in motion and will change the landscape as we know it for IT for many years to come. The cloud will force us to become sales organizations. You can resist, hide you head in the sand, and wake up one day wondering what has happened to your customer base. Or you can accept the fact that change is coming and make some changes. Some of these changes have been in motion for a while. Others are more a result of the current market and the move toward the cloud. But no matter the reason - they are coming. Here are some observations:
•From technical to sales focus
•From answering the phone to creating demand
•From selling products to selling solutions
•From T&E to flat rate services
•From on premise to the cloud
No longer will the company with the most technical genius necessarily win. I predict that those with most mature sales approach will actually come out on top. This new reality is that the IT business is moving toward a transactional relationship and those who can sell will win in that landscape. The reality is that companies must become sales organizations. We have to deal with these realities:
•Sales people are not the enemy
•It requires new thinking and management
•It requires new compensation models
Along with that we must become marketing organizations:
•Referrals are great but go only so far
•Most companies have just continued to sell new solutions to their current base
•We must become lead generators for the sales team
• Lead generation is not the vendors responsibility
Here is the reality as I see it. If you don’t embrace sales, growth will be stagnant and you will be frustrated. That is - if you survive. There will be plenty of companies that fail completely because they refuse to adopt the notion of becoming sales organizations. You don't have to like it - but it does work better if you do. You do have to do it and the time to begin is immediately. You can't afford to wait on this one. Begin now to learn to sell. Put the right systems in place. Hire someone and invest in them. Manage them closely and carefully. And begin to see the results - the sooner you begin - the sooner you will reap some of the goodness that comes with selling something. Remember - nothing happens until you sell something. Get after that today!
Why is there such an aversion to sales by so many IT firms? Well for many of us, we came up to leading our company via the technical side of the business. We were engineers that were good at what we did and then decided to hire a few more like us and form a company. That works for a while but soon we hit the wall because we don't sell - we can fix anything under the sun - but we don't sell. I use don't rather than can't here intentionally. Anyone can sell - maybe not equally well - but it isn't that IT owners can't sell - it is because they almost despise the idea and certainly the notion of what being a salesperson is all about. Time to get over it!
Nothing happens until something gets sold. Let me say it again - nothing happens until something gets sold. OK - I have admitted it in public. We need to sell if we want to have a business. And sales is not a matter of luck. It happens when we build a sales process and system that makes sales happen regularly. We have to make the investment to put the right system and tools in place to make it happen. It can't be a hope and a prayer. That is not a sales strategy. Sales happen when we build the right foundation, hire the right people and execute the plan consistently. It really is not magic - it just takes consistent hard work doing the right things every day.
Most sales people fail because of a lack of support and management. It is common in the IT small business space to have a revolving door of sales people. We hire a person, let them flounder around on their own for 3-4 months and then fire them because they haven't sold much or anything at all. We blame them. Here is a newsflash - they likely are NOT the problem. You are. We set most new sales hires up for failure. We don't give them the right tools. We don't have a system in place. We don't manage or support them. We wish them well and sit back waiting to count the money. It just doesn't work like that. Owner attitude and support will make or break the sales engine in any company. Take a good look in the mirror and you will likely find the problem with your sales people.
When we do find that super human who is able to defy the odds of our lack of support and systems and actually sell something - it only lasts for a while. That is because without marketing support - every sales person will eventually run out of opportunities and people they know to sell to. It is our job to create leads for our sales people to follow up on. That is called marketing. It is hard work. It costs lots of money. It is somewhat luck - often more magic than science from my experience. But without marketing support - without aircover and other supporting tools to help drive leads and open doors - even a veteran sales person with many years of success will stub their toe. It is necessary to spend money on marketing to have consistent sales performance.
The pendulum is rapidly swinging toward sales. I see some major changes that are already in motion and will change the landscape as we know it for IT for many years to come. The cloud will force us to become sales organizations. You can resist, hide you head in the sand, and wake up one day wondering what has happened to your customer base. Or you can accept the fact that change is coming and make some changes. Some of these changes have been in motion for a while. Others are more a result of the current market and the move toward the cloud. But no matter the reason - they are coming. Here are some observations:
•From technical to sales focus
•From answering the phone to creating demand
•From selling products to selling solutions
•From T&E to flat rate services
•From on premise to the cloud
No longer will the company with the most technical genius necessarily win. I predict that those with most mature sales approach will actually come out on top. This new reality is that the IT business is moving toward a transactional relationship and those who can sell will win in that landscape. The reality is that companies must become sales organizations. We have to deal with these realities:
•Sales people are not the enemy
•It requires new thinking and management
•It requires new compensation models
Along with that we must become marketing organizations:
•Referrals are great but go only so far
•Most companies have just continued to sell new solutions to their current base
•We must become lead generators for the sales team
• Lead generation is not the vendors responsibility
Here is the reality as I see it. If you don’t embrace sales, growth will be stagnant and you will be frustrated. That is - if you survive. There will be plenty of companies that fail completely because they refuse to adopt the notion of becoming sales organizations. You don't have to like it - but it does work better if you do. You do have to do it and the time to begin is immediately. You can't afford to wait on this one. Begin now to learn to sell. Put the right systems in place. Hire someone and invest in them. Manage them closely and carefully. And begin to see the results - the sooner you begin - the sooner you will reap some of the goodness that comes with selling something. Remember - nothing happens until you sell something. Get after that today!
Sunday, December 12, 2010
Growth is Hard Work
This is the fifth blog post regarding the 10 Things I Accidentally Learned on the Path to Growth. There is little question that many small business owners really don’t understand just how difficult the growth process really is. The common misconception is that if you show up every day and work hard – it just happens. That has not been my experience. There are many steps along the path to growing a business, and it must be done intentionally and executed continually to keep moving forward.
It all starts with you. You started your business because you wanted to be your own boss. You wanted to call the shots. There is a likelihood that you worked for someone else and decided you could do it better. But when you make the decision to grow – it can’t be about you anymore. Growth means you have to involve others – inside and outside your company. And that is the first step. You have to hire someone.
I remember those days well. It was a scary proposition. All of a sudden I was responsible for payroll which meant we had to be generating revenue. I sort of convinced myself it was ok to work some of the time and not pay myself – after all it was my company. But when you bring on that first employee they typically don’t quite see it that way. They come to work with the expectation they will get a paycheck and they should. So we have to know how we will generate enough revenue and keep them busy so we can pay them.
This is usually when the first lesson of growth occurs. It isn’t a straight line up. We have steps – take a few forward and then one backward. It looks something like this for many:
Seldom do companies grow with the green line – just up and to the right continually with no hiccups. Nor do companies maintain their situation like the red line – stagnant without change. I am a believer that if you are not growing – you are shrinking because I seldom if ever see a company just stay the same. But growth is a series of ups and downs and that is normal. It isn’t a mistake – and there isn’t anything wrong with you when it happens – it is the reality of how growth occurs.
There are a half dozen key stages I see in the growth cycle. The following chart shows some of them and areas where they may show up in your growth pattern.
You won’t necessarily experience all of these in the same order or at the same level as the chart describes, but as you grow your IT firm you are likely to experience all of them along the way.
That takes us to the second step – which is the need to become a sales organization. To be totally honest – this is the one where many companies get hung up. It may happen with 2-3 employees or you may make it to 7-8, but at some point sales will be your blocker to growth. Why? Nothing happens until someone sells something. I will go into much more detail on sales in a future blog post. It is essential, so embrace it and accept the fact it has to happen if you want to grow.
This is the first of what I consider to be the five key areas to growth:
1. Become a sales organization
2. Learn how to market
3. Put in place and execute process
4. Develop leadership
5. Understand the power of strategic relationships
My experience is that if you understand and work through these key blockers – you will grow and grow significantly. But each one can plateau you for years or for life. You can’t skip any step – the order may change – but all are essential to continually growing your company.
Realize that your business should serve you – not the other way around. If the business controls your life – you have a job. You probably left a job to start your business so don’t just trade one for the other. Dreams should be coming true. You should have more freedom – not less. It has to function without your presence – if you are required to make it work – you have a job with a different title on it. It should be predictable in meeting your goals and needs. It should not require you – or the 4 P’s from you:
· Your presence
· Your personality
· Your problem solving
· Your persperation
As you build your sales organization you begin to feel like you are losing control. Not everything goes through you anymore. You have to trust others. It is a huge step. But if everything flows through you – then you are the bottleneck to growth and not only will you restrict that – you restrict profit potential as well. You cannot be the center of your company forever. The only way you escape the problem is to keep growing and putting others in places you once were responsible. That is called delegation – not something many entrepreneurs are comfortable with – because no one does it quite like we do. But we have to get over that and let others do the work.
So you have began to build a sales team and hired a sales person or two. They are selling and then hit the wall. They run out of people they know and places to call on. That is when marketing has to kick in. Marketing is key to keeping a sales team productive. They don’t manufacture sales – they close leads and turn them into sales. Many small business owners make the mistake of thinking that just hiring a sales person fixes all the sales issues. In fact it just creates more needs. They have to be closely managed and there has to be a consistent lead generation system to keep them productive. They can’t just make this stuff up. It has to be fed to them so they can do what they do – go build relationships and close deals. That is what we hire them to do so now we have to equip them with the tools they need for success.
Next comes the need for some sanity in the midst of chaos. Many companies go for years without any process, procedures or policies in place. And then as they have some success and grow – things quickly get out of control because you can’t scale without processes. So in the teens for number of employees you have to get things written down and folks trained to follow them. It is hard work. We never have time for it. And changing behavior to follow is a difficult task because we are upsetting their world. Why do we need this all of a sudden? It is far easier to do this step early with few employees than wait for the chaos to require it. But most of us don’t make the time until it is mission critical. And that is driven as we grow to a certain point. Take it from me – it is far easier to write a process for two than for twelve. Do it early – do it well – and set the example to follow them.
After some more growth and success we begin to run into a leadership void. We typically expect our people to learn by osmosis and just being around us. Unfortunately it doesn’t quite work that way from my experience. So we have to make investments and train folks on leadership. That is essential as we will need to grow practices around key technologies, vertical markets or opportunities. Many companies don’t have nearly the leadership they need to continue growing. It is a sad reality. It happens because we have been too cheap to invest and too busy to notice than no one else is really stepping up to lead. This costs money and takes time – intentional and significant time – which far too many small business owners never take. We seldom invest in our own skill building let alone that of others. But if we want to keep growing we have to build leadership and a team that can help make that happen.
At some point along the curve we grow past our ability to drive continued growth on our own. That is when the value of strategic relationships kicks in gear. I find it happens somewhere past 50 employees and it becomes essential to learn to leverage the investment other partners in the ecosystem are making. We need to use their marketing, lead generations, services and tools to help to continue drive the business. But it is all about building and maintaining strong relationships. It won’t happen accidentally and I find this one area to be a key blocker for many companies that are trying to grow. More on this topic in a future blog post as well.
Growth has many steps. They don’t all move upward and to the right. It is hard work and requires determination, dedication and a very big desire. But you can grow if you truly want to and commit to it. We have experienced it even on the farm in Iowa where our business is operated. It isn’t magic – it is hard work and execution day after day to work toward a strategic objective. Plan for growth and then execute to achieve it. Realize it means change often along the way. But you can achieve it if you want to!
It all starts with you. You started your business because you wanted to be your own boss. You wanted to call the shots. There is a likelihood that you worked for someone else and decided you could do it better. But when you make the decision to grow – it can’t be about you anymore. Growth means you have to involve others – inside and outside your company. And that is the first step. You have to hire someone.
I remember those days well. It was a scary proposition. All of a sudden I was responsible for payroll which meant we had to be generating revenue. I sort of convinced myself it was ok to work some of the time and not pay myself – after all it was my company. But when you bring on that first employee they typically don’t quite see it that way. They come to work with the expectation they will get a paycheck and they should. So we have to know how we will generate enough revenue and keep them busy so we can pay them.
This is usually when the first lesson of growth occurs. It isn’t a straight line up. We have steps – take a few forward and then one backward. It looks something like this for many:
Seldom do companies grow with the green line – just up and to the right continually with no hiccups. Nor do companies maintain their situation like the red line – stagnant without change. I am a believer that if you are not growing – you are shrinking because I seldom if ever see a company just stay the same. But growth is a series of ups and downs and that is normal. It isn’t a mistake – and there isn’t anything wrong with you when it happens – it is the reality of how growth occurs.There are a half dozen key stages I see in the growth cycle. The following chart shows some of them and areas where they may show up in your growth pattern.
You won’t necessarily experience all of these in the same order or at the same level as the chart describes, but as you grow your IT firm you are likely to experience all of them along the way.That takes us to the second step – which is the need to become a sales organization. To be totally honest – this is the one where many companies get hung up. It may happen with 2-3 employees or you may make it to 7-8, but at some point sales will be your blocker to growth. Why? Nothing happens until someone sells something. I will go into much more detail on sales in a future blog post. It is essential, so embrace it and accept the fact it has to happen if you want to grow.
This is the first of what I consider to be the five key areas to growth:
1. Become a sales organization
2. Learn how to market
3. Put in place and execute process
4. Develop leadership
5. Understand the power of strategic relationships
My experience is that if you understand and work through these key blockers – you will grow and grow significantly. But each one can plateau you for years or for life. You can’t skip any step – the order may change – but all are essential to continually growing your company.
Realize that your business should serve you – not the other way around. If the business controls your life – you have a job. You probably left a job to start your business so don’t just trade one for the other. Dreams should be coming true. You should have more freedom – not less. It has to function without your presence – if you are required to make it work – you have a job with a different title on it. It should be predictable in meeting your goals and needs. It should not require you – or the 4 P’s from you:
· Your presence
· Your personality
· Your problem solving
· Your persperation
As you build your sales organization you begin to feel like you are losing control. Not everything goes through you anymore. You have to trust others. It is a huge step. But if everything flows through you – then you are the bottleneck to growth and not only will you restrict that – you restrict profit potential as well. You cannot be the center of your company forever. The only way you escape the problem is to keep growing and putting others in places you once were responsible. That is called delegation – not something many entrepreneurs are comfortable with – because no one does it quite like we do. But we have to get over that and let others do the work.
So you have began to build a sales team and hired a sales person or two. They are selling and then hit the wall. They run out of people they know and places to call on. That is when marketing has to kick in. Marketing is key to keeping a sales team productive. They don’t manufacture sales – they close leads and turn them into sales. Many small business owners make the mistake of thinking that just hiring a sales person fixes all the sales issues. In fact it just creates more needs. They have to be closely managed and there has to be a consistent lead generation system to keep them productive. They can’t just make this stuff up. It has to be fed to them so they can do what they do – go build relationships and close deals. That is what we hire them to do so now we have to equip them with the tools they need for success.
Next comes the need for some sanity in the midst of chaos. Many companies go for years without any process, procedures or policies in place. And then as they have some success and grow – things quickly get out of control because you can’t scale without processes. So in the teens for number of employees you have to get things written down and folks trained to follow them. It is hard work. We never have time for it. And changing behavior to follow is a difficult task because we are upsetting their world. Why do we need this all of a sudden? It is far easier to do this step early with few employees than wait for the chaos to require it. But most of us don’t make the time until it is mission critical. And that is driven as we grow to a certain point. Take it from me – it is far easier to write a process for two than for twelve. Do it early – do it well – and set the example to follow them.
After some more growth and success we begin to run into a leadership void. We typically expect our people to learn by osmosis and just being around us. Unfortunately it doesn’t quite work that way from my experience. So we have to make investments and train folks on leadership. That is essential as we will need to grow practices around key technologies, vertical markets or opportunities. Many companies don’t have nearly the leadership they need to continue growing. It is a sad reality. It happens because we have been too cheap to invest and too busy to notice than no one else is really stepping up to lead. This costs money and takes time – intentional and significant time – which far too many small business owners never take. We seldom invest in our own skill building let alone that of others. But if we want to keep growing we have to build leadership and a team that can help make that happen.
At some point along the curve we grow past our ability to drive continued growth on our own. That is when the value of strategic relationships kicks in gear. I find it happens somewhere past 50 employees and it becomes essential to learn to leverage the investment other partners in the ecosystem are making. We need to use their marketing, lead generations, services and tools to help to continue drive the business. But it is all about building and maintaining strong relationships. It won’t happen accidentally and I find this one area to be a key blocker for many companies that are trying to grow. More on this topic in a future blog post as well.
Growth has many steps. They don’t all move upward and to the right. It is hard work and requires determination, dedication and a very big desire. But you can grow if you truly want to and commit to it. We have experienced it even on the farm in Iowa where our business is operated. It isn’t magic – it is hard work and execution day after day to work toward a strategic objective. Plan for growth and then execute to achieve it. Realize it means change often along the way. But you can achieve it if you want to!
Thursday, December 9, 2010
The Power of Peer Coaching
Peer groups are the rage in the IT industry today. Lots of options exist and many people are spending significant resources of time, money, and brain capital to participate. Is it worthwhile? At HTG we believe it has the potential to be the most impactful thing that people can participate in. But the value is very dependent on folks doing a great job as peer coaches. In fact, if groups fail at that core level, it quickly loses value and causes consideration of whether it is a worthwhile investment or not. Harvard Business review wrote a great article on the topic of peer coaching. It was written by Stewart D. Friedman who is Practice Professor of Management at the Wharton School. Following are his thoughts and I encourage you to read and consider how you can hone your skills as a peer coach.
The Directive Approach — Giving Useful Feedback
The essence of directive coaching is providing feedback. Take this approach when your goal as a coach is to instruct others on what they've done well and what they can do to improve.
As a coach, one of the main gifts you have to offer to anyone who you've seen in action is to express to them your observation of that action and its consequences. It's best to present your impressions straightforwardly and with compassion. The quality and sensitivity of a coach's feedback can make a huge difference in spurring growth.
On the other side, to be an effective peer, the primary challenge you face is to remain open and manage your natural tendency to be defensive in reacting to feedback — information about your actions and their consequences — that is in some way inconsistent with how you currently view yourself. Getting good at both giving and receiving directive coaching requires practice. Very few people are naturally gifted in this essential skill.
In providing directive feedback, your main responsibility is to identify strengths and clarify areas for improvement that address your peer's goals, while at the same time finding ways to reduce defensiveness. You produce value as a peer coach when you give feedback that, first and foremost, addresses goals that are a real priority for them, not for you. It's useful, too, for you to push your peers to stretch and go as far as they can in pursuing the goals that matter to them.
I've found that the best way to offer feedback is to prepare what you're going to say in advance and to make sure it's balanced, not overly positive or negative; a mix of both is best, not least because it enhances your credibility and your peer's trust that you're being candid. Be direct and specific about what you've seen and the consequences of your peer's actions. Of course, if you are being constructively critical — pointing out a peer's mistake or area for improvement — you've also got to offer a constructive suggestion or two.
When you give directive feedback, you want to make sure that what you've said is what has actually been heard and understood by your peer. The easiest way to do this is to simply ask your peer to repeat back to you how she took what you said and what it means to her. Finally, it's almost always a good idea to conclude an offering of directive feedback with an expression of your interest in providing follow-up assistance, leaving the door open for future opportunities for you to help.
The Nondirective Approach — Asking Smart Questions
The essence of nondirective coaching is simply asking useful, probing questions. Many people fear change because it forces them into unknown territory, where things are unpredictable and unfamiliar. And yet there are predictable stages people go through when they undertake intentional change. In taking the non-directive approach, your goal is to help others to see and feel the need to create meaningful, sustainable change. Here are the stages and some of the key questions to ask in helping your peers to face the challenges associated with each:
What's the problem?
The first step is identifying the need for change. This can be difficult, as many of us ignore information that disconfirms our current perceptions or threatens the status quo. Coaches can help identify blind spots — by encouraging self-reflection about things that aren't obvious to their peers. As a coach, basic questions to ask to increase awareness are:
-As you think about your goals, what's not working well in your life?
-What are the consequences of this issue for you and for the important people in your life?
-What is the source of the need to change — is it in you or is it external?
Why bother?
The next stage is about the belief that the need to change is urgent enough to take action. Because we naturally tend towards continuing the status quo, if doing something new doesn't feel urgent, it's not likely to occur. Coaches can help raise urgency by asking questions such as these:
-Looking ahead, what will happen if you don't change?
-What will happen if you do change?
What's your decision?
The decision to change is a crucial moment because it marks the point when your mind shifts and you begin to see a different future. It is also a fragile point in planned change processes, fraught with temptations to revert to the way things have always been and distractions away from the focused effort that's required to do something new and make it stick. However, coaches can help peers reach and move beyond this point by asking:
-What have you decided to do differently and why?
-What is the ideal outcome?
-What are your new goals?
What steps exactly?
What are the possible step-by-step actions the peer can take to make this decision real in his or her work and life? Good coaches ask peers to think aloud about what to do differently, how to overcome obstacles, and what skills or sources of support are needed. You can help your peer discover specific ideas for how to better accomplish goals by asking:
-What exactly will you do, and when will you do it?
-How will you measure progress?
-What stands in the way, and how will you overcome these barriers?
-How will you generate needed support?
Are you really in?
Generating sufficient commitment to follow through is one of the most challenging aspects of any change process. Because commitment wanes without a sense of urgency, coaches should continually test for this. Coaches can ask:
-What if this is harder than you think?
-What are the first steps — and the next steps — you will take?
-How will you maintain your sense of urgency?
How will you sustain it?
Even if a peer has made it through all of the prior stages, it is crucial that he or she receive reinforcement for the positive outcomes gained. Encouragement at every small step builds momentum, and coaches should provide frequent reinforcement and celebrate their peers' successes to bolster confidence and help peers avoid slippage. The key questions here are:
-What impact has your new behavior had on you and others?
-What accomplishments are you proud of achieving?
-Is there a smarter step that might help you build momentum?
-How can I (as your coach) reinforce your commitment to action?
Get in the Game!
Directive and non-directive peer coaching can make a real difference in helping people change. Try both methods and then find out what works and what doesn't by asking your peers to critique your actions. Like any other skill, practice as a peer coach — with follow-up assessment of what works and what doesn't, along with support from people (that is, your peers) who are dedicated to helping you become more adept at helping them — makes perfect. (end of HBR info)
This is some fantastic guidance on how we can most effectively help each other as we gather and work on our task in HTG of helping each other achieve business and personal growth. It is work – it requires thought – it takes a lot of effort – but the rewards are significant. We need to focus on being better peer coaches for each other! Let’s get after it!
The Directive Approach — Giving Useful Feedback
The essence of directive coaching is providing feedback. Take this approach when your goal as a coach is to instruct others on what they've done well and what they can do to improve.
As a coach, one of the main gifts you have to offer to anyone who you've seen in action is to express to them your observation of that action and its consequences. It's best to present your impressions straightforwardly and with compassion. The quality and sensitivity of a coach's feedback can make a huge difference in spurring growth.
On the other side, to be an effective peer, the primary challenge you face is to remain open and manage your natural tendency to be defensive in reacting to feedback — information about your actions and their consequences — that is in some way inconsistent with how you currently view yourself. Getting good at both giving and receiving directive coaching requires practice. Very few people are naturally gifted in this essential skill.
In providing directive feedback, your main responsibility is to identify strengths and clarify areas for improvement that address your peer's goals, while at the same time finding ways to reduce defensiveness. You produce value as a peer coach when you give feedback that, first and foremost, addresses goals that are a real priority for them, not for you. It's useful, too, for you to push your peers to stretch and go as far as they can in pursuing the goals that matter to them.
I've found that the best way to offer feedback is to prepare what you're going to say in advance and to make sure it's balanced, not overly positive or negative; a mix of both is best, not least because it enhances your credibility and your peer's trust that you're being candid. Be direct and specific about what you've seen and the consequences of your peer's actions. Of course, if you are being constructively critical — pointing out a peer's mistake or area for improvement — you've also got to offer a constructive suggestion or two.
When you give directive feedback, you want to make sure that what you've said is what has actually been heard and understood by your peer. The easiest way to do this is to simply ask your peer to repeat back to you how she took what you said and what it means to her. Finally, it's almost always a good idea to conclude an offering of directive feedback with an expression of your interest in providing follow-up assistance, leaving the door open for future opportunities for you to help.
The Nondirective Approach — Asking Smart Questions
The essence of nondirective coaching is simply asking useful, probing questions. Many people fear change because it forces them into unknown territory, where things are unpredictable and unfamiliar. And yet there are predictable stages people go through when they undertake intentional change. In taking the non-directive approach, your goal is to help others to see and feel the need to create meaningful, sustainable change. Here are the stages and some of the key questions to ask in helping your peers to face the challenges associated with each:
What's the problem?
The first step is identifying the need for change. This can be difficult, as many of us ignore information that disconfirms our current perceptions or threatens the status quo. Coaches can help identify blind spots — by encouraging self-reflection about things that aren't obvious to their peers. As a coach, basic questions to ask to increase awareness are:
-As you think about your goals, what's not working well in your life?
-What are the consequences of this issue for you and for the important people in your life?
-What is the source of the need to change — is it in you or is it external?
Why bother?
The next stage is about the belief that the need to change is urgent enough to take action. Because we naturally tend towards continuing the status quo, if doing something new doesn't feel urgent, it's not likely to occur. Coaches can help raise urgency by asking questions such as these:
-Looking ahead, what will happen if you don't change?
-What will happen if you do change?
What's your decision?
The decision to change is a crucial moment because it marks the point when your mind shifts and you begin to see a different future. It is also a fragile point in planned change processes, fraught with temptations to revert to the way things have always been and distractions away from the focused effort that's required to do something new and make it stick. However, coaches can help peers reach and move beyond this point by asking:
-What have you decided to do differently and why?
-What is the ideal outcome?
-What are your new goals?
What steps exactly?
What are the possible step-by-step actions the peer can take to make this decision real in his or her work and life? Good coaches ask peers to think aloud about what to do differently, how to overcome obstacles, and what skills or sources of support are needed. You can help your peer discover specific ideas for how to better accomplish goals by asking:
-What exactly will you do, and when will you do it?
-How will you measure progress?
-What stands in the way, and how will you overcome these barriers?
-How will you generate needed support?
Are you really in?
Generating sufficient commitment to follow through is one of the most challenging aspects of any change process. Because commitment wanes without a sense of urgency, coaches should continually test for this. Coaches can ask:
-What if this is harder than you think?
-What are the first steps — and the next steps — you will take?
-How will you maintain your sense of urgency?
How will you sustain it?
Even if a peer has made it through all of the prior stages, it is crucial that he or she receive reinforcement for the positive outcomes gained. Encouragement at every small step builds momentum, and coaches should provide frequent reinforcement and celebrate their peers' successes to bolster confidence and help peers avoid slippage. The key questions here are:
-What impact has your new behavior had on you and others?
-What accomplishments are you proud of achieving?
-Is there a smarter step that might help you build momentum?
-How can I (as your coach) reinforce your commitment to action?
Get in the Game!
Directive and non-directive peer coaching can make a real difference in helping people change. Try both methods and then find out what works and what doesn't by asking your peers to critique your actions. Like any other skill, practice as a peer coach — with follow-up assessment of what works and what doesn't, along with support from people (that is, your peers) who are dedicated to helping you become more adept at helping them — makes perfect. (end of HBR info)
This is some fantastic guidance on how we can most effectively help each other as we gather and work on our task in HTG of helping each other achieve business and personal growth. It is work – it requires thought – it takes a lot of effort – but the rewards are significant. We need to focus on being better peer coaches for each other! Let’s get after it!
Sunday, December 5, 2010
Cash Matters
This is the fourth blog post regarding the 10 Things I Accidentally Learned on the Path to Growth and is a topic many of us as small business owners don’t deal with well at all. After 25 years in this business, it has become more apparent than ever that access to cash is a key to success. I hear and see so many small businesses strapped by a lack of cash resources. They may even be doing well from a sales perspective, but because of poor cash management they have totally limited their options and ultimately stymied their ability to grow. Cash is king and we must never forget that reality.
A strong balance sheet goes a long way during tough times
One of the common mistakes I see owners make is to rob their companies of all the cash they accumulate as profits during the year. That assumes that they are generating a profit, but for any company to survive that has to be one of the outcomes of doing business. But removing all the cash leaves the company vulnerable in the event of tough economic conditions, or even a temporary downturn. That is particularly true if you don’t have a bank credit line in place. There are varying opinions on how much equity to leave in a business – but my advice is to be conservative and leave as much in as you possibly can. Now if you have to take all you earn just to survive each year – you really don’t have a business – just a job that is meeting your basic needs. A true business will generate cash and I suggest you leave as much as possible inside the company until you need it – for an M&A or tough times.
Risk is part of the equation
Spending cash on growing the business is risky. There are no guarantees from my experience. You can make some bets that are more likely to succeed than others, but there is an element of risk in every growth decision. So if you can’t afford to lose the cash you are spending – don’t do it. I have lost money when I thought it was a sure thing, and had success when I expected less than stellar results. If you can’t stomach the risk – don’t spend the cash. But you won’t grow if you don’t take calculated risk. It is part of the equation. And some people just don’t deal with it well at all. Know your risk tolerance, and that of your spouse, before you go too far.
Profit is not bad – you are not taking advantage of your customer
I struggled with this reality for a very long time. My focus was on providing the maximum value as long as I didn’t lose too much money doing it. Profit was almost a bad word. Could I cut the price another point or two so they get a really good deal. Here is the reality – a failure in your business is not in the best interest of your customer. If you ask them if they prefer to save a few dollars and buy from you driving you out of business, or pay a little more to have a stable business partner, they will take the latter every time. No one wants to have to change IT providers because they saved a few bucks. Profit has to be part of the equation. In fact – you should start there – with the amount of profit dollars you want or need to clear and work backward to determine sales, margin and expense lines on your P&L to make sure you end up making money.
Profit should not be a mistake
Too often we just take the leftovers when it comes to profit. It is more of a hope and prayer than a strategy and planned outcome. That is the wrong way to run your company. You need to plan for it, expect it, and make sure you achieve it. When you do it should be celebrated through rewarding your team with some of the bounty. Profit doesn’t happen by accident. It requires planning and focus to achieve it every year!
Paying tax is a good thing
If you had told me 10 years ago I would write a blog with this sub heading I would have called you crazy. I ran my company for a long time with a goal of zero tax liability. Just break even so I didn’t have to pay the government any taxes. Now don’t get me wrong – I hate paying tax – but I have come to appreciate the fact that only profitable and growing companies are in a position to pay tax. And if you want to grow – continually producing a P&L with no profit is a limiting factor. Bankers are not crazy about lending money to non-profitable companies. There is no leverage to be had with zero as the result of a year’s work. We have to be wise in how we manage our income, but tax is not an evil thing. We need to make money which means we will pay taxes. That is just as reliable as the fact that we will all die someday.
Bankers are your friend
So many partners think of bankers as an adversarial relationship. I often hear the comment that “the bank won’t loan me any money when I need it”. That is exactly true. They are not looking for companies that are barely holding on by a thread and in need of a cash infusion. Banks loan money to companies that have a track record showing they will be able to pay them back. They aren’t looking for long shots or hopeful returns. You have to build a relationship and a track record if you want to borrow money for growth. Invest the time – build the relationship – give them access to your plans and numbers. They are critical for growth.
Here are some other ideas around getting cash in order.
• Conserve cash – don’t spend it all
• Get your bank credit lines expanded
• Update your vendor and distributor credit lines
• Clean up your financial house
• Evaluate your staff and trim unnecessary
• Evaluate all expenses and make cost cuts
• Talk with your team so they understand why taking care of cash and profits matter to them
• Create profit sharing options to drive the team to join the chase to generate cash
Cash does matter greatly if you want to grow. In fact, I will boldly say you won’t grow without it. Some are able to have some short term success without generating regular profits and cash – but it is unsustainable and won’t scale. The more you want to grow – the more cash you will need. And the sad reality is that many don’t learn that lesson until they need it for a deal or some other great opportunity and have to pass because they don’t have any. It isn’t rocket science. Cash matters – and it doesn’t come accidentally. Plan to generate cash and then manage it well. It is a critical growth factor – cash is truly king!
A strong balance sheet goes a long way during tough times
One of the common mistakes I see owners make is to rob their companies of all the cash they accumulate as profits during the year. That assumes that they are generating a profit, but for any company to survive that has to be one of the outcomes of doing business. But removing all the cash leaves the company vulnerable in the event of tough economic conditions, or even a temporary downturn. That is particularly true if you don’t have a bank credit line in place. There are varying opinions on how much equity to leave in a business – but my advice is to be conservative and leave as much in as you possibly can. Now if you have to take all you earn just to survive each year – you really don’t have a business – just a job that is meeting your basic needs. A true business will generate cash and I suggest you leave as much as possible inside the company until you need it – for an M&A or tough times.
Risk is part of the equation
Spending cash on growing the business is risky. There are no guarantees from my experience. You can make some bets that are more likely to succeed than others, but there is an element of risk in every growth decision. So if you can’t afford to lose the cash you are spending – don’t do it. I have lost money when I thought it was a sure thing, and had success when I expected less than stellar results. If you can’t stomach the risk – don’t spend the cash. But you won’t grow if you don’t take calculated risk. It is part of the equation. And some people just don’t deal with it well at all. Know your risk tolerance, and that of your spouse, before you go too far.
Profit is not bad – you are not taking advantage of your customer
I struggled with this reality for a very long time. My focus was on providing the maximum value as long as I didn’t lose too much money doing it. Profit was almost a bad word. Could I cut the price another point or two so they get a really good deal. Here is the reality – a failure in your business is not in the best interest of your customer. If you ask them if they prefer to save a few dollars and buy from you driving you out of business, or pay a little more to have a stable business partner, they will take the latter every time. No one wants to have to change IT providers because they saved a few bucks. Profit has to be part of the equation. In fact – you should start there – with the amount of profit dollars you want or need to clear and work backward to determine sales, margin and expense lines on your P&L to make sure you end up making money.
Profit should not be a mistake
Too often we just take the leftovers when it comes to profit. It is more of a hope and prayer than a strategy and planned outcome. That is the wrong way to run your company. You need to plan for it, expect it, and make sure you achieve it. When you do it should be celebrated through rewarding your team with some of the bounty. Profit doesn’t happen by accident. It requires planning and focus to achieve it every year!
Paying tax is a good thing
If you had told me 10 years ago I would write a blog with this sub heading I would have called you crazy. I ran my company for a long time with a goal of zero tax liability. Just break even so I didn’t have to pay the government any taxes. Now don’t get me wrong – I hate paying tax – but I have come to appreciate the fact that only profitable and growing companies are in a position to pay tax. And if you want to grow – continually producing a P&L with no profit is a limiting factor. Bankers are not crazy about lending money to non-profitable companies. There is no leverage to be had with zero as the result of a year’s work. We have to be wise in how we manage our income, but tax is not an evil thing. We need to make money which means we will pay taxes. That is just as reliable as the fact that we will all die someday.
Bankers are your friend
So many partners think of bankers as an adversarial relationship. I often hear the comment that “the bank won’t loan me any money when I need it”. That is exactly true. They are not looking for companies that are barely holding on by a thread and in need of a cash infusion. Banks loan money to companies that have a track record showing they will be able to pay them back. They aren’t looking for long shots or hopeful returns. You have to build a relationship and a track record if you want to borrow money for growth. Invest the time – build the relationship – give them access to your plans and numbers. They are critical for growth.
Here are some other ideas around getting cash in order.
• Conserve cash – don’t spend it all
• Get your bank credit lines expanded
• Update your vendor and distributor credit lines
• Clean up your financial house
• Evaluate your staff and trim unnecessary
• Evaluate all expenses and make cost cuts
• Talk with your team so they understand why taking care of cash and profits matter to them
• Create profit sharing options to drive the team to join the chase to generate cash
Cash does matter greatly if you want to grow. In fact, I will boldly say you won’t grow without it. Some are able to have some short term success without generating regular profits and cash – but it is unsustainable and won’t scale. The more you want to grow – the more cash you will need. And the sad reality is that many don’t learn that lesson until they need it for a deal or some other great opportunity and have to pass because they don’t have any. It isn’t rocket science. Cash matters – and it doesn’t come accidentally. Plan to generate cash and then manage it well. It is a critical growth factor – cash is truly king!
Thursday, December 2, 2010
The Problem with Best Practices
HTG peer groups have been focused on best practice sharing since the first group was founded back in 2000. Those learning’s have helped numerous companies grow and become more successful in their markets. But over time we noticed that the value of best practice sharing seemed to diminish. Why? Ron Ashkenas wrote a great post on “Why Best Practices Are Hard to Practice” on Harvard Business Review online that explains some of the issues we found. Here are some excerpts from his excellent article:
“It would be easy to say that processes and tools cannot be picked up and moved from one organization to another. After all, each organization is unique — with different markets, commercial forces, structures, histories, leadership, and cultures. But if there weren't any universals, the sharing and transferring of best practices would be a waste of time, and there would be little learning across companies (or even within companies). But in truth some firms are exceptionally good at "stealing shamelessly." (In HTG we call it SWIPE – steal with integrity and pride every day). For example, think of all the companies that have benefited from Toyota's production model.
So why do some organizations succeed at utilizing processes and tools developed elsewhere while others fail? Here are two common pitfalls of applying best practices, and how to avoid them:
Lack of adaptation: The first pitfall is the temptation to take on a process or tool without tailoring it to the new environment. Because companies are so different, it is rare that a practice developed in one place can be applied elsewhere without significant customization. This not only requires learning the tool or process, but truly understanding the principles behind it. Practice comprehension calls for hard work — far beyond making road trips or sending a few people for training.
Lack of adoption: The second pitfall is to utilize a borrowed process or tool without full leadership support and commitment, as though just having the tool itself will generate the desired results. A former client at GE called this "the difference between doing it and really doing it." Often the wrong people are tasked with driving the process.
One of the characteristics of great companies is that they actively learn from others. But to be successful at doing this requires more than just identifying and borrowing best practices; it also requires adaptation to your culture and full adoption by your leadership. Without paying attention to these two steps, it is unlikely that best practices will actually be put into practice.”
To make best practice sharing valuable – HTG members have to learn how to adapt them to their situation. Seldom do you receive a best practice from a company exactly like yours. There are differences in your market, staff, skills, strategy, focus, management and on it goes. You have to take it and make it your own.
You also have to adopt it wholeheartedly. A best practice that is dumped on your staff to execute will become a failed practice. Ownership and executive management must drive best practice adoption by leading that charge. You can’t throw it over the fence and expect the right results. If you want it to work in your company, then you must own it until it does.
There is still much value to the learning’s we can glean from sharing best practices with each other. But the reality is that unless we adapt and adopt – there is no impact at all. And that makes it a matter of hallucination!
“It would be easy to say that processes and tools cannot be picked up and moved from one organization to another. After all, each organization is unique — with different markets, commercial forces, structures, histories, leadership, and cultures. But if there weren't any universals, the sharing and transferring of best practices would be a waste of time, and there would be little learning across companies (or even within companies). But in truth some firms are exceptionally good at "stealing shamelessly." (In HTG we call it SWIPE – steal with integrity and pride every day). For example, think of all the companies that have benefited from Toyota's production model.
So why do some organizations succeed at utilizing processes and tools developed elsewhere while others fail? Here are two common pitfalls of applying best practices, and how to avoid them:
Lack of adaptation: The first pitfall is the temptation to take on a process or tool without tailoring it to the new environment. Because companies are so different, it is rare that a practice developed in one place can be applied elsewhere without significant customization. This not only requires learning the tool or process, but truly understanding the principles behind it. Practice comprehension calls for hard work — far beyond making road trips or sending a few people for training.
Lack of adoption: The second pitfall is to utilize a borrowed process or tool without full leadership support and commitment, as though just having the tool itself will generate the desired results. A former client at GE called this "the difference between doing it and really doing it." Often the wrong people are tasked with driving the process.
One of the characteristics of great companies is that they actively learn from others. But to be successful at doing this requires more than just identifying and borrowing best practices; it also requires adaptation to your culture and full adoption by your leadership. Without paying attention to these two steps, it is unlikely that best practices will actually be put into practice.”
To make best practice sharing valuable – HTG members have to learn how to adapt them to their situation. Seldom do you receive a best practice from a company exactly like yours. There are differences in your market, staff, skills, strategy, focus, management and on it goes. You have to take it and make it your own.
You also have to adopt it wholeheartedly. A best practice that is dumped on your staff to execute will become a failed practice. Ownership and executive management must drive best practice adoption by leading that charge. You can’t throw it over the fence and expect the right results. If you want it to work in your company, then you must own it until it does.
There is still much value to the learning’s we can glean from sharing best practices with each other. But the reality is that unless we adapt and adopt – there is no impact at all. And that makes it a matter of hallucination!
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