The following is a guest post from Todd Smith, Business Development Executive at The CEO’s Right Hand, Inc.
Operating an emerging business can be an immense challenge. New employees, new customers, new processes, new equipment. The growth phase of any business can be daunting. Having run a number of businesses myself, and consulted with many more, there are a number of ways to significantly improve productivity and ultimately operate more efficiently.
1. Time Management
Many business leaders fail to properly manage their time. The most significant value a business leader can contribute to a business is in developing the business itself. In the new digital economy, there are countless things to steal your time and pull you off task – I call them “time sharks.” They are everywhere; each taking a bite here and a bite there of your time. Before you realize it, you’ve lost valuable time in the day and are working long hours, which can quickly lead to burnout. On average, most CEOs or leaders get in less than two hours of productive time in a given day! Email is a major contributor. Constantly checking email wastes mountains of time. Taking phone calls, people “popping in” to your office, unproductive meetings, and a number of other distractions, chip away at your time. Unless you set boundaries, and ruthlessly guard your time, people will continually take it from you. Think of it this way, as a business leader, you want your time to be worth $1000/hour, and in many cases much more. You should be adding value to your business. If you’re not, are you using your time wisely?
2. Leverage Technology
In the digital age, quite of bit of day to day activities can be managed using software and other technology tools. Manual processes consume resources and drain significant employee time – time that could otherwise be used productively. E-commerce, customer relationship management (CRM), sales pipeline management, payroll & benefits, advertising/marketing, and many other industry-specific tasks can be integrated and managed with a few clicks of a mouse. Often, these tools are fairly inexpensive and can replace the labor of several full time employees. Think about that. For several hundred dollars a month, you could replace the work of several employees, often making tens of thousands a month, and be more productive in the process. Meanwhile, those employees can focus their time on tasks that add value to your business.
3. Fail Fast
Many top level business managers simply can’t let go of failed projects or initiatives. They get hung up on the sunk costs (money already spent), and try to justify using continued resources on something with little or no return on their investment (ROI), or worse yet, a negative ROI. It’s the old poker story – you know you have a bad hand, you ante up anyway and now the pot is large, and you just can’t bring yourself to fold. You’re throwing good money after bad instead of getting out and keeping your losses to a minimum. By measuring things properly, and looking at them objectively, you will know when it’s time to throw in the towel and move on to something else. Sticking with the status quo, because “that’s how things have always been done,” or thinking things will turn around because you’ve already invested a great deal, are unproductive ways of thinking. When something’s not working, fail fast, learn from the mistake, and move on.
Attempting to do everything is tough on any business leader. Working with other companies and partners can create a lot of leverage for a business. Building a business is about building a team, whether it’s key employees, mentors, attorneys, investors, or consultants. Leveraging the knowledge and expertise of others and allowing them to share the load can push your business ahead quickly. Sharing equity can be a way to bring these experts on board in the early stages of a business, and their contacts and insights can be invaluable. In addition to key team members, working with other companies can make you much more efficient. Sharing infrastructure, creating referral relationships, and bundling products and services are great ways to lower expenses and drive additional revenues.
Micromanaging leaders have a hard time delegating tasks. They don’t trust anyone to do things the right way, so they have to do everything themselves. Sometimes allowing a subordinate to do things 80-90% correctly, will free up your time to be better spent elsewhere. Good is good enough. It doesn’t have to be perfect. On many occasions, I have taken an active long-term role with a client only to see this type of micro-managing behavior manifest itself in the business. It almost never ends up well. Not only do these type of leaders feel compelled to do everything themselves, but they often will not take good advice from others (see #4 “Collaborate” above), which can hurt a business as well. Recognizing this behavior in yourself is a critical first step. You don’t have to give up control of everything, but try delegating a few small things and resist the urge to over-manage, while making sure you set proper expectations. This type of trust in your employees can lead to a much happier workplace, and much greater efficiencies.
I have set foot in countless businesses, and it never ceases to amaze me the conditions I find in companies that have been around for many years. Dirt, clutter, decay, darkness, disorganization, and/or total chaos. Very early in my career, when I was just out of college, I took a temporary job at a car dealership. Part of that dealership was a service department, and part of the service department was performing warranty work on cars sold through the dealership. The long and short of it was once the work was performed, the dealer billed the manufacturer for this work, and got paid for it. The back office of this dealership was a nightmare. Dark, dank, and dimly lit with boxes and invoices thrown haphazardly around. My job was to come in and file this stuff in file cabinets. In the process, I discovered that some of the service techs weren’t giving the invoices to the admin people, and in the process, there was literally more than $100,000 in warranty work that had never been charged to the manufacturer. This was all a result of clutter and confusion in the office! Not only can clutter lead to mistakes and losses in the business, but a poor work environment leads to lower productivity. Environment matters. Light matters. I spent several years before graduate school working in finance for a large health insurance company. The endless rows of gray cubicles under fluorescent lighting was extremely depressing and didn’t provide much pride or motivation in employees. As a result, there was a virtual stampede at 5pm for people to get out of the building. Creating an organized, stimulating environment can make a huge difference.
Leaders can spend a great deal of time focusing on the wrong things in their businesses. I had a client in the hospitality space who had an amazing business model that generated a lot of enthusiasm from investors and potential customers. He had a lot of experience in the industry and was a fantastic salesman. I encouraged him to quickly set up operations in his HQ region so that we could roll out a beta test to a number of local and regional customers. A successful beta test would have generated some much-needed early stage revenues as well as providing investors and other large customers with proof of concept that likely would have tipped the scales in his favor for further engagement. Instead, he focused his attention on trying to land a very large multi-million dollar resort customer right out of the gates, with no capital to back it up, and without the infrastructure and systems needed to fulfill such a deal. He burned through the precious startup capital we had raised trying to impress this customer, and ultimately landed a deal with them. Unfortunately, because he lacked capital and operational capabilities, he could not live up to the deal, and he ended up wasting huge amounts of time. He finally took my advice, but the time and resources that were wasted in the process were significant. While he may ultimately be successful because of the strength of the business model, he would be light years ahead of where he is now, had he properly prioritized his growth strategy. Countless companies are guilty of something similar, focusing on low margin products when they could be generating substantially more revenue by focusing on a higher margin product. A friend of mine calls this “stepping over dollars to get to dimes.” Sadly, this is an all too common occurrence. Often, this type of behavior is not intentional. It comes from a lack of understanding of the numbers in the business, and how to track and measure them.
Doing everything “in house” can have both pros and cons. While it can be difficult to manage people who are not under your immediate supervision, the value added and cost savings in properly managing outsourced services can be tremendous. For growing businesses, cash is the lifeblood of the business. It keeps the lights on, it keeps the employees paid, and if enough is left over, it allows you to grow. Without it, a business can stagnate, or die. Certainly, outsourcing IT functions such as web development or computer infrastructure is very common. Such labor can often be found much less expensively overseas or even locally from independent contractors. The danger, however, is losing control of your own infrastructure, or having to deal with long delays. Finance and accounting is also a function that makes sense to outsource. Emerging companies often can’t afford the payroll and costs associated with having their own in-house staff, or if they do have such, the burden relative to the benefit just doesn’t make sense. Added to which, hiring an outsourced finance team can give you access to a deep bench of talent on an as-needed basis while keeping costs very reasonable. Various sales and marketing functions can also be outsourced. These can often be tied directly to the success of the business when paid in the form of commissions or incentives. Outsourcing can provide tremendous leverage in the early stages of a business, giving you more runway so that your business can take flight!
Implementing even a few of these relatively simple steps can have a profound effect of the success of your business. The trick is often stepping out of the current day to day way you operate to try to incorporate them into your daily routine. Start with one of them, and see the impact. With the productivity you gain, try one or two more. Soon, your business can be firing on all cylinders, building value, freeing up your time, and generally making your business much more enjoyable.