Business, especially start-up business, is all about change. No matter how well you have planned, the amount of detail and research, it is guaranteed that you will need to change to the realities of implementation. Those changes can be a small nudge in employee responsibilities or processes. Or, as is more often the case, those changes are a major shift in direction that requires pushing your employees off a cliff into totally new responsibilities and processes. Managing that change, and specifically, employee expectation, is the key to success. You have to answer questions about long-term expectations as well as simple fears about job security and daily expectations. This process follows the exact same cycle as the grieving process.
Managing the death of familiarity for employees
1 – Loss – sentiment for the past.
Employees begin to idealize the existing systems. They fill their minds with the familiarity and security of what they know.
2 – Anger- apprehension of the unknown.
Employees become angry and defensive about the changes. They want to fight for their loss. This usually means arguing and lack of openness to conversation.
3 – Bargaining/Skepticism – listening but looking for problems.
Employees are ready to listen and try but they will look for gaps in the new. They will process with caution, but, they will proceed.
4 – Possibilities – looking for application.
Employees now see some improvement in the change. They will become more willing to try out the new system and expect positive outcomes instead of negative results.
5 – Excitement – actively implementing change.
Employees have become integrated to the change. They are now working with the change and pushing it forward.
Control the process
1 – Know where YOU are at in the process.
Remember that you are also going through the grieving process. You will likely move through the steps quicker than your employees. Stay ahead of the curve. Consider where you are at in the grieving process and make sure you have processed each step before you ask your employees to. You cannot lead change if you are not in front of your employees.
2 – Control the buy-in.
Respect the hierarchy of the company. Allow your managers to manage. This means giving them the ability to process ahead of their employees. Give them information before their employee and allow them to be a part of the change management. Let information flow down through the ranks.
3 – Respect where OTHERS are at in the process.
Watch and allow employees to go through the process. They cannot be forced into the next step. They must go there themselves.
- LOSS – ask for concerns and listen without giving detailed or lengthy solutions. Acknowledge their sense of loss and apprehension. This is best done in small groups by department or team. It is helpful for the manager and executive member to both be present and lead the discussion.
- ANGER – give them time to process with less conversation. Don’t allow them to take over with side conversations and recruiting to their cause. Isolate problems with individual conversations. Give them high level and long-term answers. Encourage them to try the new system and return with specific concerns.
- SKEPTICISM – tell stories. Give specific details about the outcomes and how the process fits into the long-term picture. Answer questions and go back to group discussion to address concerns. Encourage conversation and do not punish the employees for asking questions or brining concerns.
- POSSIBILITIES – give detailed application. Give as much personal attention as possible. Reward new ideas and implementation of the change.
- EXCITEMENT – review and discuss application. Give public reward and acknowledgement of implementation and success.
Change is inevitable in business. So is the grieving process when change arises. The time and depth of the grief will vary based on the employee and scope of the change. You must manage the culture and feeling surrounding the change as well as the technical implementation. Employees will move with you through the process and embrace the change.
In my experience, the hardest thing for business owners to do is believe what they see and stop doing it. Most business owners know what they are supposed to do. Some have formal education, a lot have natural instinct. Business owners usually see some sign when their business is going off the tracks. They also have some idea of how to fix it. But actually doing it, that isn’t as easy. Most problems don’t slap you in the face, if that is firing an employee or cutting a major expense, the particulars are always more complicated. Firing an employee that steals is easy. Firing an employee that is under performing becomes another thing entirely. Most business owner begin to question their part in the situation, which is good. But, it is easy to get lost in that conversation. At some point, the employee needs to be responsible for their lack of results. You can give them extra support, supplies and time. But if they aren’t getting results, they don’t belong in the business. Usually these are “good” employees. They are trying to get results and you like them. Sometimes, they are your friend. Maybe even before you hired them.
Friendship can pull any good idea down if you let it.
Don’t be afraid to loose friends.
Even better, set clear, written, expectations of the relationship before you begin
Don’t wait for a slap in the face to act. Don’t wait to be out of money, customers, product, etc.
1 week of inaction can be the difference between success and failure.
Decide how you will handle the situation before it occurs. Practice the conversation.
Make sure everyone knows it’s coming. Look at performance regularly and compare it to expectation.
Most importantly, don’t pretend it will get better if you ignore it or even if you spend more and more time and money trying to fix it. Set your expectation and stick to it.
Forethought and Follow through
Running a business, even with solid planning, is usually a little crazy. You are constantly making quick decisions to solve an immediate problem and then ignoring the consequences until it becomes a new problem. What ever you say in an official meeting or have in a contract is irrelevant. How you act and interact is reality. If you treat an employee as though they are a manager, they will think they are the manager. It doesn’t matter if you have a contract for a 6 month review or loose performance “quotas”. If you are paying them a large salary, ignoring performance and asking them to hire, train, and build processes they think you made them the manager. All of that comes from their expectation of how they are being treated.
Don’t treat employees one way and expected them to perform another.
- Don’t ask employee to do things that are outside of their job description. I understand that you need help because this is a start-up, or this is the crazy time of year. If you ask employees to perform managerial or administrative duties, they EXPECT to be compensated for it. And, they expected to be treated as a managerial or administrative employee. In fact, they are. By definition, performing those duties puts them in that position.
- Someone has to do it. Why is it reasonable to ask employees to do your job? What else are you doing that can be passed on? If you don’t trust that employee to do the job long-term, why do you trust them in the short-term? Short-term decisions are the job. Really think about what you need to be in control of. What do you expect your employees to be concentrating on?
- Forethought. Think about the precedent you are setting. Don’t “accidentally” hire or promote your right hand employee. If you plan on demoting or taking tasks away when you get things under control, be prepared for a very confused and upset employee.
- Follow Through. If you did have to forethought to get a contract or have the right conversation, back it up! People act like the are expected to act. That has more to do with quick assignments, lack of conversation and ignored goals or time lines. If you don’t have the 6 month compensation review, they assume that means they are performing and deserve the pay.
Back up what you say. Think about life as an employee and how you would react. Don’t kid yourself if you think you would go by the contract or upfront agreement. You build expectation on day to day treatment. So do your employees. Manage their expectations. Don’t create accidental job descriptions or promotions.
It is very rare to start a business and have nothing else going on in your life. Most of the time you are working at your “other” job or pursuing other opportunities. You are amazing and you know you can focus on everything at once. Somethings fall through the cracks or aren’t as perfect as you would like them to be. But, it’s ok because you haven’t really launched your new business yet. This is all just preliminary stuff. Once, “This” happens, then it’s serious. Then you’ll really start doing things with all of your focus.
Proceed with Intention
Your business has launched! If you are making decisions about it, it’s is here and should be treated as such. You are building image, culture and habits for how to proceed. Most business owners have ideas about how they want their business to run. They know a lot of good principles and have ideals about how their business will look and feel in the future.
Unfortunately, they are so busy doing other things while they build a foundation, decisions are not make with the right intention. They are made with the intention to finish it later. The owner thinks,”once I am really working in the business”, or “when we launch”, then I’ll start doing things how I am supposed to.
Proceed with the intention of building things right. Proceed with the thought that this is going to work. You may have to finish up some other things, but make decisions like you intend to.
- Make decisions that don’t need to be fixed.
- Don’t do something “quick” because you have to.
- Stop for a minute and think about it.
- Connect decisions to your budget, branding and long-term goals.
- Do all of those little, business principle things that you know you’re supposed to do.
Proceed with the intention of this being it. This is the business that will get you what you want. Act like you are 15 mil in. Otherwise you’ll be making decisions to correct mistakes and to stop bleeding. Don’t bleed in the first place. Proceed with the intention that you can building the foundation. Before you know it, you’ll be standing on the roof wondering why things are leaning. No matter how much scaffolding you add, you can not fix the foundation. Proceed with intention.
Now that you know WHY, let’s talk about HOW. Before we get into the details, you need to realize that there is enough information out there for you to know what your doing. Information in combination with a little thought and intuition will give you more than enough details to proceed.
How and Where do you go to do market research?
Keep in mind that you are looking for the size of the AVAILABLE market. In other words, how much money or how many customers are out there. Then you need to compare that to your projections. How much of the market do you need to capture to reach your goals?
**You need to rethink your projections if you are expecting to get more than 15% of an available market!
First, define what you’re looking for; number of women, number of households, number of children below the age of 18, average household income, or a combination. This helps you search and narrow down. There is so much information out there that it can easily become overwhelming.
Second, don’t be afraid to do some math. Take the information that is available and narrow it down. Multiply the total market spend by the % that is in your demographic.
- For example, there is $20,000,000 spent on ice cream in your market (zip code).
- You are targeting high school students.
- After some research, you find that 7% of the zip code population fits your demographics (high school students).
- This means that you have an available market of $1,400,000.
- ** You are not going to capture this entire market!
- You have projected that your business needs $300,000 in revenue.
- This means that you need to capture 21% of the market.
Now you need to prove to me that you can do that. 21% is high. How are you going to do it? This allows you estimate marketing spend. Set marketing channels. And build an expected/needed ROI.
Here are some good websites that have HUGE databases of information.
- Information by SIC (industry) codes. This is for researching your competition, benchmarking your estimates and / or if your market is businesses.
- Historical information. This is used to estimate the current population, usually for consumer markets.
- Economic indicators. This is used to estimate growth and future market.
Don’t be afraid to “play” in the website. You are not going to break it. Also, searching for very specific information will usually get you to the right sub-page within the site. Search with zip codes, SIC codes, cities, etc.
Market research is another one of those common business terms that has several different meanings. It is something that everyone feels like they are supposed to understand, but don’t know where to begin. Market research is where everyone should begin when they are building a business plan, looking to expand, or even analyzing why their business isn’t performing like it should. And, it is the one thing so many business owners avoid. It seems like math and school. It is hard to interpret or even hard to begin.
What is market research?
There are 2 main purposes for market research, finding out how much money you can make and how you talk to your market.
- The first is about demographics; how many people are out there, how much money do they have, how much money are they spending, where are they.
- The second is about 2 things, first, competition; what other choices do your customers have, what are those choices, what are they saying, how many of your potential customers do they already have.
- And, psychographics; what does my customer like, what do they spend time doing, what else do they buy, how do they feel, how do they think.
Demographics, competition and psychographics, that is what you are looking for. But, what are each of those things telling you? Why are you looking for that information?
- Demographics: This is proving that you are able to bring in the revenue that you want. You have to be able to show WHERE all of those customers are. That they are even out there. You can not tell me that you are going to bring in $1,000,000 in revenue if your city only has $1,000,000 worth of business. That doesn’t mean you give up. That means you look at the surrounding areas. Figure out where the money/people/need is, and realize that you are going to have to be there to get it.
- Competition: Now that you know where the market is and how big it is, you need to know how much of it is available. Is enough available? How much (what %) do you need? Are you going to have to take it from someone else? What are those other people saying? What can you say to distinguish yourself?
- Psychographics: How do you get your customer’s attention? What do they want? How do you talk to them? How can/should you change and improve your product or service for your customer? What else do they want? What will they want next?
These questions give you the backing to make what your doing and projecting real. It is absolutely necessary if you are asking for money. Market research gives you direction and the push to go further. It also eliminates a lot of the uncertainty and surprise when running a business.
One of the first thing most start-ups do is project revenue and profits. That makes sense. They figure out that they will be bringing home at least twice as much as they are working for someone else. They have the skills and the resources. So they start. Now, unfortunately, they didn’t consider the cash flow. On the books, accounting statements, it looks like you have cash galore. But there is one large problem, accounts receivable vs cash and accounts payable. In other words, when do your customers actually give you cash and when do you have to pay your employees and vendors. Those two sides of the balance sheet don’t always align. Income statement profit is good. A large balance sheet is good. But those two things don’t always translate into day to day operations, checking balances and cash on hand.
How do you manage and project cash flow?
The basic answer is that you need to know, not only how much, but WHEN cash is coming in and WHEN cash needs to go out. Take this problem down to something tangible. Let’s look at your “future” checking account.
- Get a calendar and write down your cash balance on your starting day in Black. It is OK if that is in the future. Just pick a day to start.
- Mark the day/s (of the week or date of the month) when cash payments will be received. e.g. check mark on the 15th
- Mark the day/s (of the week or date of the month) when cash payments will be sent out. e.g. check mark on the 15ht
- Now add the actual amounts. Accounts Receivable (when customers payments are received, not the billed date) in Blue. This can be actual A/R or projected A/R. Accounts Payable (when employees and vendors are actually paid) in Red. This can be actual A/P or projected A/P.
- Begin your “mock” business by writing down your cash balance for every day going into the future. Add Blue amounts and subtract Red amounts as they come up in the calendar. If your balance is negative, write it in Orange.
- Continue this for at least 3 months. Go further if you continually have a negative balance.
- Now look back and see how much you are in the negative at any given time and how often you are in the negative. This is your needed cash float. Or, how much you need to have available from an investor, in savings, business loan or a line of credit.
Needing money to start a business is not bad. It is typical. Your projections are still good but you need to be realistic about cash flow and cash conversion. How long will you have to wait to operate on business cash instead of borrowed money? How much will you need? Are you willing to risk the money you need to borrow and are you willing to wait as long as you need to get your return? Income statements and balance sheets are great managing tools. But, cash flow projections connect hopes and wishes to day to day operations. Knowing your cash flow will make decisions easier and you’ll be less worried and frustrated when you are operating on borrowed time and money. Be realistic and stick to your plan.
So often it comes down to having no time to change. You know what you should be doing. You have ideas about how to grow the business. But, you never seem to have the time. There are always fires. Employees that need to be trained, helped or disciplined. Money that needs to be shifted around to make payroll or buy more product. You don’t have time to get more time.
How do you get more time?
More time isn’t about changing the clock. It is about reconfiguring what you do with your time. Every task can be put into one of three categories; things you Want to do, things you Have to do and things you can/should Give Away to someone else.
- Want to do: These are tasks that you enjoy and want to keep on doing. Now don’t fool yourself. Many business owners say they want to do things simply because they don’t think anyone else can do it. You have to ask yourself this: “If you were a millionaire, would you still be doing this.” In reality, there are very few tasks that would fit into this category.
- Have to do: As a business owner, there are certain things that you simply have to do because you are the owner. Such as, financial planning, branding management, deciding long-term culture and growth. Just like wants, there are many things that your employees can do. Or that you can sub-contract out. Don’t assume no one else can do it.
- Give Away: This should be the biggest category. Don’t get stuck if you don’t know who or how to give those tasks away. We are talking about the ideal situation. You can figure out the next step of give away items after you identify them.
But you need to know what you’re doing with your time before you can change. Take this one small assignment at a time.
- What are you currently doing with your time? Get a small notebook and at the top of the hour, write down everything you have done for the past hour. e.g. bid jobs, talked to clients, paid bills, etc. Be consistent and do it for a week. At the end of the week you’ll have a good idea of where you are spending your time.
- Want to, Have to, Give Away: Take your list and write next to each task if it is something you Want to do, Have to do or something you should Give Away.
- Give Away: Now that you have your give away list, identify task by if you have someone to give the task to right now, you have someone but they need to be trained or if you don’t have anyone (right now) that could take that task.
- Give Away Right Now: Any task that you have identified an employee, that is trained or needs little training, to give the task to should be assigned to that employee immediately. Get rid of the jobs you can. This will instantly give you more time.
- Give Away, after Training: Set a training schedule. If you can identify an employee that is capable of taking on more, give them the chance to. How long will it take to train them? What information do they need? Give yourself a specific time line and date that those tasks will be handed over.
- No One to Give to: This last category is easy. Organize the tasks that are similar into one job description. Add some expectations for education, skill set, etc. Then start looking. Don’t stop yourself because you will have to pay a new employee. Think about all of the time you just created for yourself. If you do this well, that new time will give you the money to pay for the new employee.
Don’t be afraid to let someone else help you. Even if you have to pay them. Giving away tasks is the only way you are going to gain control of your business and be able to take it to the next level. Remember why you even started the business. If it was for time and money, you should be spending your time getting those things.
Ok – you have set some goals. You finished your math. You know that this venture has potential and you’re tracking. So you start down the path. Looking at the numbers regularly. Everything looks great. You’re almost hitting your numbers. So close, but not quite there. After 3 months, you have no cash and you can’t figure out why. What went wrong? You have no more money but you can’t give up. You’ve come so far.
When is close, close enough? How much are willing to put in? When do you get out?
Let’s take your Have, Want, Change to the next level. At this point you should know what your numbers (goals) are. You are tracking your performance and comparing the two. The problem is, you aren’t quite making it. Adding small “by when’s” to your numbers is the connection between day to day operations and your long-term goals.
More specifically, know exactly WHEN you MUST hit numbers. For example, if your goal is to have $300,000 in profit at the end of your first full year, you MUST be at $150,00 within 6 MONTHS or close to $150,00. So what is close. Define the BEST, TWEAK and CUT & RUN for your goals. Given this example, $150,00 by 6 months is the BEST.
Now calculate your CUT & RUN. This is the point at which you have sacrificed all you’re willing to give. Think of this like going to Vegas. You go with $500. That is the maximum you are willing to spend. Your CUT & RUN is when you have lost your $500. You will not reach into your pocket and place any more money on the table. You will not go to the cash machine. You will not borrow from your family & friends. Before you go down the business path, decide how much you are willing to lose. How much are you bringing to the table and when are you unwilling to reach in for more?
So what is TWEAK? TWEAK is that in between point. It is where you haven’t hit your bottom, but you haven’t met your goal. It has to be at place that give logical hope for continuing. Now, be specific. Decide up front what that point is. What is that number? It is not just, above your CUT & RUN. Setting a specific TWEAK point allows you to make decisions based on your previously rational mind. Not your adrenaline filled, insane, “can’t lose” mind. A TWEAK is what saves you from going and going until you get past your CUT & RUN.
- BEST: What do you want?
- CUT & RUN: How much are you willing to lose?
- TWEAK: When you have hope to get to your best. (trending up, obvious changes available, etc.)
Don’t overestimate how interesting your business is. Your target audience is drowning in the marketing abyss. What you have to say about your business needs to penetrate through all of that other junk. Marketing is about creating an opportunity for conversation. It is not about selling. Remember that you need to give them a reason to keep reading, to look for more information, to call, etc. If you inundate them with information they wont see any of it. Your target audience is LAZY! I am lazy. I wont read more than 2 or 3 words when looking at ads, even if it is a product that I am interested in.
How do you penetrate the marketing abyss and push past people’s lazy?
Make sure you are speaking to your target at multiple levels. You’ll hit each type of audience, incredibly lazy to incredibly patient. You’ll also allow targets to get the message and read further if they want to. So here it is. My list of the levels of lazy and how you reach each of them.
- Incredibly Lazy (I fall into this category): They will not read complete sentences. These people are looking for a picture or 2 to 3 word heading. That’s it. They will not read more so you better get their attention without explanation. These people will not search for contact or next step info either. Make sure the next step is clear. Your website, e-mail, phone or address should be very obvious. Remember, not all of them equally. Emphasize how you want them to get more information.
- Somewhat Lazy: Will read 1 sentence at a time – no paragraphs. Usually this target will only read on if you hit them with the incredibly lazy images and words. Only if they are interested will they read the first, maybe second sentence in the description.
- Patient: Wants more information available right away. This target is rare. They also usually need to be prompted by the incredibly lazy images and words before they will read on. But, they do want to read on.
The best marketing pieces hit every level of lazy. Start with pictures and 2 or 3 words. Move onto 1 sentence descriptions. Finally, add copy. Remember that you have to have all 3 elements. These can all be on 1 marketing piece, like a 3 panel brochure. Or, the target can be sent through a series of marketing pieces; TV ad to website, website to brochure request, etc. Control your audience and remember to market like a consumer NOT a business owner.