There’s no better teacher than experience. That’s especially true when it comes to starting a successful business. Having built one profitable business from the ground up doesn’t guarantee success in your next venture. However, it does provide for some valuable lessons that can be applied to most any business as it grows.
Excitement about the possibilities is a natural part of any new venture. In fact, you should have a passion for your business. But that enthusiasm cuts both ways, and it can cloud judgment and hamper you in making sound business decisions.
So keep that in mind and make decisions with a clear head as much as possible. Turn to your advisers and trusted confidants to keep your zeal in check so it doesn’t run your business into the ground.
One of the main lessons you learn when running a new business is fiscal restraint. Your most precious commodity is the money you have on hand to invest in your business, especially during the start-up phase. Minimize your overhead. Don’t overspend. A good rule of thumb is to have enough capital on hand to get you through at least one year.
The last thing you want to do is end up underfunded, where you have enough cash to get you 90 percent there, but then it runs out just before you get to the finish line. If that happens, you will end up spending the majority of your time looking for new investors — and not on growing your business.
Don’t let perfection be the enemy. You will always be focused on perfecting your product or service — or at least, you should be. For sure, your competition will be, and they will leave you in the dust if you’re not constantly improving. However, it’s critical to get out to market as soon as you can — even if you recognize the need for improvements. Otherwise, you will miss opportunities and give your competition an opening.
Once your business is up and running, you can secure valuable feedback from paying customers and clients that can be used to continually improve.
That leads to another tenet entrepreneurs learn early from their first start-up. Once your business is operating, you must focus on the user or customer experience. In the Web-based companies we have built, that meant making sure that the websites are easy to use and that all client and potential clients understand their value. The same principle holds true whether you sell widgets, insurance, cars or a Web-based service.
As you focus on customer experience, you will find that it is probably very different from your own perceptions. Remember, your audience is not you. It’s paying customers. And you must make sure that they have the best experience possible to keep them coming back and, with hope, referring others to you.
My partners and I learned in building our first Web-based company, an online document management service called Document Nation, that we’re not building a site for hard-core users or “techies.” To succeed, all of our customers — from the entry-level employees to a company’s CEO — must be able to not only use the site but recognize how it makes their lives easier.
We’re applying the same principal to spendLO.com, a website that matches consumers’ service needs with reliable neighborhood companies. Document Nation and spendLO are two very different companies, but they’re the same in the sense that a user who has a basic understanding of the Web can use both.
The same holds true for any product or service. If your customer doesn’t understand how your business will help them, the prospect of success becomes dim.
Finally, a common challenge many entrepreneurs must overcome with their first start-up is finding partners and employees who complement their skills, rather than duplicate them. If you are strong in marketing, you need to find people with the skills to help in finance. If you’re the technical guru, you need to find a top sales executive.
That’s how you build a team that will take your company to the next level, whether it’s your next start-up or current venture. <<
Corey Leff is founder and CEO of spendLO, an innovative Web-based company that allows consumers to shop for local services at the lowest prices. Leff also serves as managing partner and director of business development for Document Nation where he has helped oversee the company’s dramatic growth from a start-up to one of the top small businesses in Florida. Reach him at email@example.com.
Here we are in December approaching the end of another year. My parents were correct when they told me that time goes by faster the older we get. It’s funny how time just slips by, and I often struggle with the passage of time. However, as I get my hands around the concept of time, it is not time I want to control; it’s controlling how I spend my time that’s most important. We start the New Year with a list of resolutions hoping that 2013 will bring a different outcome, streamline our goals and aspirations, and free up our time. Ironically, we believe that by making resolutions, these changes will automatically occur.
How does one affect some meaningful changes in the New Year? To get prepared, make a list and identify items in these general categories:
- What do you want to stop doing?
- What do you want to start doing?
- What do you want to continue doing?
Leave yourself room in each category, and then narrow down the choices to a few that you can successfully manage. Now that you have these entries on the lists in front of you, ask yourself what would you do with your time if you only had seven years left to live? What items are important? What items are imperative?
As you look at those items on your lists and you contemplate these questions thoroughly, do you feel your items on the lists coincide with the central core of your life’s purpose for the next seven years? Will the items on your lists achieve your purpose or are you just creating more items for your “to-do” list?
This illustration merely touches the surface of the inner work each one of you needs to pursue to make financial and life planning a thoroughly meaningful experience. Most people have only experienced the transactional dimension and walk away with no long-term meaningful solution. The transaction may have been only a temporary Band-Aid to the problem. The root of the problem needs to be addressed to complement your inner emotions, attitudes, values and purpose beneath that surface transaction. When those underlying emotions and purposes are identified and vocalized, the purpose then clarifies the choices.
In my definition of the world of personal financial and life planning, the transaction side of the equation overshadows the client-adviser conversation. The transaction driven-process is akin to where the adviser draws his convenient “arrow” from his quiver to solve your current problem. In today’s vernacular “I have an app for that.”
The purpose-side and value-side of the conversation is rarely entertained. The purpose-side involves the qualitative components of your wealth management journey. Wealth management and life planning is much more than just dollars and cents. Typically, people expect dollars and cents to dominate conversations they have with a wealth adviser, but when it comes to life planning, topics of discussion extend to matters far more personal than money, addressing your deepest life dreams and goals — and how to make them a reality through sound financial planning.
When developing a life plan with your RAV adviser, there are a few key factors that must come into alignment: mutual trust, understanding and working with a wealth adviser who has the integrity to tell you whether your current reality can support your future dreams. But you, as a client, also bear a large responsibility in the life-planning process — particularly if you long for a future that looks very different from your current reality. Investing time and energy in the discovery of your purpose and intention will make the journey more relevant and more powerful.
Vision and purpose go hand-in-hand. Vision is the definition of your tangible and intangible goals. Purpose drives your outcome, interrelated within your goals and objectives. So where do you want to be in 2020? Decide today to embark upon an experience where your purpose and vision are at the heart of your life-planning journey.
It is interesting in this age of technology that we want and can have immediate access to all types of information. Access to your innermost purpose takes a little longer to uncover, and it is essential to the personal and business financial and life-planning experience. Only then will you feel fulfilled in the outcomes of your decisions and choices.
So make a decision that by January 2020, your personal and family vision will be clearly 20/20. Hopefully, this will give you a time frame to unearth your inner destiny, so that a strategic financial and life plan will incorporate your unique values into its outcome.
You don’t have to wait to find a financial and life-planning firm. For more than 30 years, RAV Financial Services has been working in partnership with those individuals and families who understand that the road from success to significance is achieved by interweaving purpose, values, and intention into their financial and life-planning experience.
Wishing you a happy holiday and a healthy and prosperous New Year.
Robert A. Valente, CFP®, AEP®, is CEO and Managing Member of RAV Financial Services LLC. He can be reached at (216) 831-4900 or firstname.lastname@example.org.
Insights Wealth Management is brought to you by RAV Financial Services LLC
I recently read two books discussing somewhat unique concepts, both of which initially appeared to be oxymorons and completely unrelated to leading serious organizations. However, upon further research, I found that they were actually quite relevant to the challenges that every CEO faces.
In his book, “Lead by Greatness,” David Lapin talks about “corporate soul.” At first, I thought it was simply another book about the need for leaders to have strong values and character. Yet as I read further, it became clear that Lapin was discussing something much deeper than what is offered by most other books on leadership.
Most leaders strive to create a long-term sustainable competitive advantage. However, trying to anticipate the future moves of your competition is typically a losing game. Lapin makes a compelling case to instead say it is often the unique passion and commitment of individual leaders that creates unique organizations. It’s the very nature of this authenticity that competitors simply can’t copy; in fact, this is what gives an organization its “soul.” According to Lapin, “It is impossible to generate human energy, a sense of purpose or tap human greatness in a soulless organization.”
Soon after, I went on to read “Get Lucky” by Thor Muller and Lane Becker. Muller and Becker talk about how serendipity, which they define as “finding what you’re not looking for,” can play a large part in your success. The authors take readers on a journey to explore how some innovators and companies have taken specific actions to ensure that they “get lucky” more often.
Although it is still difficult to predict precisely when your good luck will strike, Muller and Becker have identified eight skills that promise to generate more luck in your life. These are the essence of “planned serendipity.”
1. Motion — A classic definition of insanity is doing the same thing time and again and expecting different results. To make something happen, you need to get out and meet new people, experience new things and shake things up.
2. Preparation — We must be observant for anything new and approach these things with pure curiosity. When we use our “beginner minds,” as if we know nothing about the subject, we are able to see things in a whole new way.
3. Divergence — My favorite poem is “Two Roads Diverged into a Yellow Wood” by Robert Frost. It’s necessary to explore new paths if we are to find new ideas and fresh ways to think.
4. Commitment — I have noticed that many, many more ideas are generated when CEOs are clear about their goals and intentions. A request for ideas to help stimulate growth is too vague and too broad — most people will have trouble identifying ways to help. However, when a CEO is crystal clear about his or her vision and goals, the clarity triggers all sorts of connections in our brains.
5. Activation — CEOs who want to generate creativity and “luck” on a regular basis design structures and experiences that force people to engage with each other in ways they wouldn’t normally do. Steve Jobs personally designed the new offices for Pixar so that all employees would have to mix with any and all other employees.
6. Connection — The Internet has enabled us to connect with virtually anyone else in the world. To make these connections valuable, it is necessary for people to take actions to help other people solve their problems or achieve their goals, even when they don’t know each other.
7. Permeability — To maximize the exchange of new ideas and information, leaders must create ways for their organizations to effectively communicate with the outside world — and, even more importantly, for the outside world to be able to communicate with those inside.
8. Attraction — It’s the passion and “soul” of great leaders that attracts great employees, customers, investors and strategic partners who want to align with the vision expressed by the leader.
It is worth leaders’ time to think deeply about their personal passion and how it relates to their corporate vision and “soul.” When you’re clear about your vision, you enable others to take specific actions that help you and your organization “get lucky.”
Paul Witkay is the founder and CEO of the Alliance of Chief Executives. Based in Northern California, the Alliance of CEOs is a strategically valuable and innovative organization for CEOs. If you have ideas or observations for generating breakthrough ideas more frequently and more consistently, contact him at email@example.com
Business valuation is an increasingly critical aspect in many financial planning, tax, reporting, and litigation matters. Perfect transactional evidence available between willing and knowledgeable buyers and sellers provides an accurate indication of business value, but in reality, such evidence is rarely available. Conclusions of value must be derived through a delicate combination of analysis and objective professional judgment.
Why Do You Need a Business Valuation?
A business valuation will let you, the business owner, know what your company is truly worth for management purposes and keep you informed of what investors look at when considering the value of your business. Once you grasp the worth of your business, you can plan for its future and determine a preferred course of action, whether that is succession planning, selling the business, or depleting its value either immediately or sometime in the future. A valuation will allow you to comply with the IRS requirements for gift and estate taxes, or purchase price allocations, without burdening your family or estate and can also settle irreconcilable differences with a spouse.
How Do You Arrive at Value?
There are three common approaches to developing business valuations:
Asset Approach – This approach is best suited for businesses that hold real estate or investments, start-up or early stage companies, capital intensive companies, or companies that may be experiencing losses. Basically, the company’s assets and liabilities are reassessed at market value. Consideration is also given to tangible and intangible items that may not be on the balance sheet for book purposes. The difference between what you own and what you owe is the indication of value.
Income Approach – Using this approach, the expected future economic benefits (or free cash flow) is converted into a present value. Often historical earning are analyzed and used as a basis for probable future earnings. If changes are anticipated, then a forecast could be used. The “conversion” considers the cost of capital, which can be viewed as an opportunity cost or the rate the market would require to attract an investor to your company.
Market Approach – Your company is compared to transactions in similar businesses using the market approach. Typically public companies are vastly different than closely-held private businesses. Valuators will look to databases that report transfers of privately-held companies and select a population of similar companies based on the reported data. Price multiples are calculated based on revenues, earnings, assets, equity, or other facts, and then the multiple is applied to your company. The logic of this approach is that the prices paid for similar businesses are a market indication of what your business would be worth.
Discounts and Premiums
Different approaches used to determine the value of a business will arrive at different levels of value. These levels of value may be affected by factors regarding control and marketability.
Minority versus Control deals with ownership rights. Some elements of control include the rights to change board members, set compensation, set policy, acquire or sell property, select vendors/consultants, and decide what markets to serve and what products to offer.
Discounts for Lack of Marketability deals with the ability to liquidate ownership quickly, at low cost, and for a relatively certain price. Factors affecting degree of marketability may include:
- The greater the dividends/earnings, the lower the marketability discount – investors will rely less on selling the investment to realize their return.
- The wider the pool of potential buyers, the less the discount.
- Transfer restrictions increase the discount.
- Imminent prospect of a sale will lower the discount.
Two distinct discounts may be applied to the preliminary indication of value, which will reduce the value of the ownership transfer. Business owners may benefit from transferring ownership interests without transferring the same level rights. In other words, ultimate decision making remains with you.
Valuations need to consider the following factors:
- The nature of the business and the history of the enterprise from its inception;
- The economic outlook in general and the condition and outlook of the specific industry;
- The book value and financial condition of the company;
- The earning capacity of the company;
- The dividend paying capacity of the company;
- Whether the company has goodwill or other intangible value;
- Sales of stock and the size of the block of stock being valued;
- The market prices of stock of companies engaged in the same/similar line of business with their stocks traded on an exchange or over the counter.
Companies do not operate in a vacuum. Valuation analysts will relate relevant economic and industry factors to your company using comparisons made using industry benchmarks and trade reportings of your peers. Outside influences and trends will be considered when determining the true value of your business.
The valuation professionals at Zinner & Co. have extensive expertise in accounting, taxation, economics and valuation theory. Just as important, we possess the practical experience and business savvy needed to identity issues at the industry-specific level and evaluate subjective factors that drive business value. We work closely with clients and advisors and develop objective, independent valuations that are tailored to meet our clients’ needs.
Gabe Adler, CPA, is a Partner at Zinner & Co. LLP. Reach him at (216) 831-0733 or firstname.lastname@example.org.
Modern Distribution Management/Gale Media, 128 pages
Grover’s “Little Black Book” covers the critical pieces of creating a strategic plan for a wholesale distribution company, including case studies, exhibits and end-of-chapter questions for the wholesaler-distributor’s management team. These days companies are almost always focused on “the now,” and the recession exacerbated that tendency. This book will help shift that mindset. Its insights will help distributors organize a strategic planning project, gather the needed information and build a one-page plan. Execution is the final step, and that is where many distributors fail. This book gives distributors what they need to put their plan into action.
Amazon Digital, 149 pages
“5 Fundamentals” is a guide for wholesale distribution branch managers to help improve their business and leadership skills. Ambrose asserts that the branch manager is the key to success for wholesaler-distributors. Expectations for managers’ performance are higher than ever, and the traditional advancement from inside sales to outside sales to branch manager is no longer the assumed track. The branch manager who follows this track with no leadership skills will struggle as companies push for improved performance at the branch level. Regardless of the company’s structure, the branch manager will need the fundamentals outlined here to keep the company profitable and provide the best value for customers.
Modern Distribution Management
Gale Media, 192 pages
MDM’s “Wholesale Distribution Economic Factbook” is widely regarded as the best source for accurate statistics about the wholesale distribution industry, including segment and overall industry revenue trends, inventory levels, 2012 sales forecasts and other critical benchmark data. Executives who manage, sell to or invest in wholesale distribution companies can use this report to stay on top of key economic and market trends. The report is produced by MDM, which has been researching and reporting on the wholesale distribution industry since 1967. MDM uses that experience to compile an accurate, comprehensive picture of the wholesale distribution industry in this report.
Family businesses typically enjoy employee loyalty and deep-seated pride because the family and the business are one and the same. However, with those advantages come certain risks.
“I tell people often, family business is the best and the worst form of business,” says Jonathan Theders, president of Clark-Theders Insurance Agency Inc. “You’ll do anything for family. It’s always amazing to me how family businesses aren’t run like typical businesses.”
Theders says 90 percent of the businesses in the U.S. are family businesses — a massive segment of the economy.
Smart Business spoke with Theders about the unique risks these businesses face and how to mitigate them.
What unique risks do family businesses have to consider?
One is an informal or complete lack of company policies or business plans. You should document your responsibilities and expectations for each family member in a family charter, but it is rarely done. It might be called an employee handbook in a typical business. If someone doesn’t perform in a regular business, you remove him or her, but it’s hard to do that with a family member.
At the end of the day in a typical business, the employees go home. But you can’t always separate the family business from the family. On holidays or birthdays, it is still business. You also know more of what’s going on in their personal lives than you would know with regular employees, which can pose challenges.
The majority of a family’s assets are tied up in the family business. Everything links to it, and it’s the source of all good and frustration. Divorce, illness and financial hardship normally create productivity issues for employees, but in a family business, it’s more complicated. You have to consider who owns shares of the company and the valuation of those shares. Maybe the business was worth $100,000 when the founder got married, but now it is worth $1 million and a soon-to-be ex-spouse is entitled to half of it. Where is that half million coming from? It’s probably coming from the sale of the business because the founder doesn’t have half a million in cash to pay off the divorced spouse.
If you have HR policies and procedures for general staff for sick days, absenteeism, behavior and dress and a family member is not adhering to those same standards, it also creates problems.
How do you handle special treatment concerns?
You have to be extremely cognizant of how you treat and compensate family and non-family employees. Make sure you are consistently selecting the most qualified individuals to fill roles in the company. This is a huge problem, because most of the time companies fill holes with family members that are not performing as well and other employees subsidize that. Take the family aspect out of it, and it could be easier to have the right people on the right seat on the bus.
How can you mitigate the risk of unhappy employees who are also family members?
If a normal business’s goals don’t match up with an employee’s personal goals, that employee can find a new job. It’s not as easy in a family business. It’s difficult to tell a parent you’re leaving or tell a child, ‘You’re not right for the business.’
That added family dynamic makes failure much more intense, and why it’s important to devise a plan that balances the family goals and business goals. For example, one family business had 70 employees; 36 were family members. The matriarch mom believed everybody with the same last name should be compensated equally whether they were pushing a broom or the president of company. That causes major problems when you have such differences in roles and responsibilities and abilities. Everybody wants mom’s wish to be true, but it doesn’t make good business sense.
How can you stop family conflicts from bleeding over into the business?
The adage ‘Leave your personal problems at the door’ doesn’t apply in a family business. It’s too difficult to separate family and business conflicts.
There’s a lot of sibling, and even cousin, rivalry. You grew up fighting for the last piece of chicken or the last point on the basketball court, and it continues on when you come into the business.
It’s unrealistic to believe that all family conflict can be removed from business, but you have to work harder at establishing those boundaries. Understand the potential family conflicts that can come up and try to address them ahead of time.
Family decisions are often extremely emotional and irrational. One recommendation is family council meetings that encourage members to get together and talk about where the business is, estate planning and other long-term issues. A third-party moderator often needs to be involved because it is so emotional. Another way is involve your board of directors or advisers, which brings an objective view to company performance and future strategy.
How are the transition risks different in family businesses?
The failure rate of businesses moving to the second generation is very high. Statistics show that 85 percent of family businesses don’t make it to the third generation. That’s often because the first generation has trouble letting go or hasn’t prepared the second generation to take it to the next level.
Often, family business owners do not have succession plans or an exit strategy. At 70 or 80 years old their entire personality, their every breath is related to the company; they’ve put 40 to 50 years in, through hard times and good times. They don’t know how to get out, but they are not the ones to lead it into the future.
Jonathan Theders is president of Clark-Theders Insurance Agency Inc. Reach him at (513) 779-2800 or email@example.com.
Insights Business Insurance is brought to you by Clark-Theders Insurance Agency Inc.
When Al Crawford visits Disney theme parks, he’s thrilled by the rides, the theatrics and the entertainment. But what really leaves him in awe are the park’s employees.
“I’m absolutely amazed by an organization like Disney,” says Crawford, chairman and CEO of the Southwest Ranches, Fla.-based Bankers Healthcare Group Inc. “I’ll walk through their parks and I’ll ask, ‘How do they handle this? How do they control everything?’ … For just one park, you wonder how do you get the right people being responsible?”
At the time they founded BHG in 2001, Crawford and his partners didn’t have to worry about any of these questions. Among the three of them, they had all the skills they needed to launch a successful venture on their own.
As president, Robert “Bobby” Castro, was “the guy who brings the business in” and “makes it rain.” His brother Eric Castro —BHG’s COO and the “glue” between the three founding partners — put the systems in place to help the company scale. Then there was Crawford, who handled finances and built the balance sheet for the company, which provides financial services to medical professionals.
“One of the unique things about the company was that you didn’t have to go out there and hire people to do things that you didn’t know how to do, because the original three owners had expertise and experience in really all areas,” Crawford says. “So you didn’t rely on anybody else. You knew that you had the experience and that your partners had brought a tremendous amount to the table to get the job done and to grow the company.”
But as growth accelerated, so did the demands on the three partners. Soon enough, the notion of doing it all was feeling more like a burden than a joy. Like the Disney parks, they needed to assemble a team of people who could run the organization’s day-to-day operations and could be trusted to make decisions and take care of customer needs independently, so that the owners could focus on expansion. Yet this was easier said than done.
“When you’re doing everything yourself, you know there’s accountability,” Crawford says.
“As we grew, one of the challenges has been letting go of those reins and finding people who had the passion and dedication that we did in all three areas.”
Recognize when you need help
Flash back to 2005, the three owners were drowning in the responsibilities of day-to-day business. They no longer had the time and resources to run the company on their own. But when you’ve been handling certain parts of your business independently for years, it’s hard to recognize when it’s time to delegate some of your job to other people.
One way to gauge whether you need to reallocate some responsibility is by asking, “Can I take a vacation?” For instance, whenever partner Bobby Castro was out of town, it showed up in the bottom line.
“It was where you just couldn’t handle it all by yourself, and the fact that you were trying to handle it all by yourself was actually hurting the company,” Crawford says.
“I could tell you when Bobby was on vacation because there would be a drop in originations, which is unacceptable when you’re looking at $15 million of small ticket $100,000 loans on a monthly basis. All of a sudden Bob’s on vacation so we do $7 million that month because he was gone for 10 days. We can’t have that. We’ve got to have other people that, though maybe not as good as Bobby, are close.”
Another question to consider is how many hours are you working? Working nights and weekends may be necessary when starting out, but 60-hour workweeks may not be the best use of time for the CEO of a growing business.
As the head of finance, Crawford found himself struggling to juggle too many tasks while also trying to finance business growth. COO Eric Castro faced a similar dilemma.
“Eric was close behind me in saying I can’t build all of these systems myself,” Crawford says. “I need to hire people, and we need to grow proportionately.
“So I had to grow my section — I can’t run around talking to banks for the rest of my life, because I’m also trying to handle accounting. We’re trying to handle legal. And I need to be a little more grounded. Consequently, I need some people who can do what I’m doing and do it just as well and not drop the ball.”
In the end, each of the partners felt the strain differently and independently. But acknowledging that they needed to let go of the reins was a critical step in preparing the company for the next stage of growth.
“As your plate starts to grow beyond an average of eight to 10 hours a day and you truly to see growth from a P&L standpoint — you’re making money and you’re becoming more profitable — you need to put the money out and start to mentor somebody,” Crawford says.”
“From a real microeconomics look, as the tasks become so vast that you find yourself just about getting to none of your to-do list, it’s time to find somebody who can start to take some of those tasks.”
Reset your priorities
Delegating responsibility to other people is a relief for some leaders, but incredibly difficult for others. Either way, it helps to start small.
As Crawford and his partners began unloading some of their mounting job responsibilities, they handed off their lowest priority items first.
“If I made a list of everything I had to do today, there’s probably a bottom 10, 15 or 20 percent that somebody else could do,” Crawford says. “And they could do it just as efficiently as me. If I’m just running around in circles and constantly trying to catch up, constantly not getting to things, I’d be better off and more efficient doing the bigger things better and allowing somebody else to do that bottom 20 percent.”
Instead, take that bottom 20 percent and give it to a new employee, who can give it his or her utmost attention.
“Give it to the person who is looking to ride something in that department and let them make it their top priority, so all of the stuff on your list is always getting high priority,” Crawford says. “You’re getting effective representation if it’s customer service stuff. Your customers are being serviced better.”
If it’s taking you two or three days to get back to a client or customer, ask yourself if there’s an employee who could take the task of following up on phone calls or even an entire account. A new person will also be excited and eager to get back to them, Crawford says.
“Maybe they are not dealing with you, but that’s OK,” he says. “Because dealing with you is really hurting the relationship because you haven’t gotten back to them in three days. That type of delegation makes the whole organization better, when you can take a look at your list and say, ‘What am I not doing well here?’
“Delegate that to someone who’s anxious, who’s looking to climb, looking to grow within your organization, and they make it No. 1 through 5 on their list, so it gets done extremely well.”
Help new people learn the job by staying close to them — literally. As Crawford began delegating to new leaders, he frequently had them in his office or next to his office to shadow and learn from him. He also confesses that finding the right people tends to be a process of trial and error.
“It’s no different than a professional baseball team or a football team,” Crawford says. “They can go out there and they can literally go after what they think is going to be the best quarterback in the country. And he can be a flop.
And just because someone has pedigree or experience doesn’t mean that he or she is going to be a success.
“We’ve had people who we’ve hired that have been tremendous,” he says. “We’ve had people that we’ve hired who we thought were going to be tremendous who were horrible. And then we’ve had people who we hired that we cultivated, homegrown and have become superstars.
“It’s finding the right candidate with the right degree, the right experience and the right attitude that you bring in and put in close proximity to you. You look for them to just really absorb everything you’re doing. You try to share what you’re doing, and you look to grow them into your spot, honestly, so they could replace you.”
Find people like you
Since 2001, BHG has grown from its original three partners to 150 people. And as a result, Crawford doesn’t see the “young, aggressive, talented person” anymore. Instead, most of the hiring decisions are pushed down to different department heads, who are given the freedom to hire, fire and mentor the people who work within their area.
“We use that model where you’re counting on people who you’ve trained, people who are moving up the corporate ladder, and they have earned the respect of their peers, earned the respect of the owners,” Crawford says. “Now they’re making the same decisions that you were making two or three years ago, and they’re looking to grow that department by implementing the same type of strategy.
“So they’re going to find that person. They’re going to find a person that fits with them, and they’re going to mentor that person in the same way.”
As people become more independent, they’ll take on larger roles in the company and eventually their own disciples. This tiered mentoring ensures that new leaders are continually being developed at all levels of the organization.
“It’s important for me, Bobby and Eric that people within your department respect you and they look up to you, and your personal traits and business traits appeal to them,” Crawford says. “If we can get that out of the individuals that work for our department heads, it’s a home run because they’re the people that have to do the entire day’s work with their peers.”
Furthermore, managers in the company can be more effective because they’re able to surround themselves with people who share their working style, whether it’s fun and laid-back like the BHG marketing department or more structured like in accounting. For example, the company’s lead treasurer, Angela, is always one of the first to get to work and last to leave, so she looks for this work ethic from everyone in her department.
“I can guarantee that she’s going to surround herself with people who are like her,” Crawford says. “It’s going to run in straight contradiction to her if you’re coming in at 9 a.m. and you’re leaving at 5 p.m. You’re taking an hour and a half for lunch ... It’s just not going to work. Angela probably works longer hours than I do. So if you’re in her department, you’re probably going to log some hours. And she’s got to hire. She’s got to fire.”
Hiring and mentoring people who share your values is important, but it doesn’t mean you want to fill your company with a bunch of “yes-men” either. That’s why Crawford always abides by the rule to hire intelligent people who are passionate about keeping the business innovative and thinking for themselves.
By developing and mentoring new leaders for the company, the partners grew BHG to $155 million in revenue in 2011, making the company a staple on Inc.’s list of fastest-growing companies, with six appearances in the last seven years. The company also received the Ernst & Young Entrepreneur of the Year 2012 Award in the Financial Services category in Florida — evidence that the new generation of leaders is carrying on the vision of its owners.
“We love to hire people that are smarter than us, that can bring ideas that we’re not bringing and that can just really push the envelope,” Crawford says. “In the future, we have the right people in place to challenge us daily, to come up with new products, to bring better solutions to the customer. And with those solutions, you’ll see a growth in business.” <<
How to reach: Bankers Healthcare Group Inc., (866) 297-4664 or www.bhg-inc.com
- Recognize when you need to transfer responsibilities
- Delegate some duties to a new employee
- Encourage managers to hire and mentor people like them
The Crawford file
Chairman and CEO
Bankers Healthcare Group Inc.
Born: Troy, NY
Education: BA from Gettysburg College, 1984
On being a worry wart:
I’ve been told that, ‘Geez Al, you worry a lot’; and it’s interesting, because Bobby [Castro] – he doesn’t worry. He’s so type A. The glass isn’t half full with Bobby. The glass is 7/8 full. And so that’s been a real help for me, because I’m a positive person. But a positive person can still worry about what’s coming around the corner.
What’s the best piece of business advice you’d give to another leader?
I don’t think it’s bad to worry and to be concerned that the world changes daily now. You have to be concerned. There are so many things that don’t last forever. For me it’s been a trait of always looking over my shoulder to see what might be coming at us from behind us and worrying about that, yet still not dwelling on that.
You’ve got to be positive. You’ve got to be thinking outside of the box. And I think the two traits go well together, where you’re willing to push on your people and willing to push on yourself…because nobody wins the Super Bowl every year.
On trusting your partners:
It’s trust in what they’re bringing to the table to the company. I’m dealing with two brothers who are 66 percent. People say to me, are you ever concerned about that? Could you be voted out? It’s not even a thought. They trust my opinion. They respect my opinion when it comes to growing the company, being the CEO of the company. And I feel the same exact way about them as individuals.
On loving what you do:
We’ve never been interested in even looking at a sale of the company because to sell the company and then have a non-compete clause and have to do something else – we like what we’re doing. To a point that might be not a good thing because maybe there’s a time where every company should be sold, but for us, it’s kind of like; well, what else would we want to do?
Don Knauss has built a career transforming new brands into household names, from debuting Simply Orange at the Minute Maid Co., Coca-Cola Zero as president of Coca-Cola North America or launching Green Works — one of the most successful new products in consumer packaged goods in the last decade — as chairman and CEO of The Clorox Co.
While the road hasn’t always been easy, Knauss says there’s one characteristic that will never change when it comes to what makes brands successful: People trust them. “At the end of the day, a brand is a promise of performance,” says Knauss, who joined Clorox in 2006. “It really is about creating trust with the consumer.”
Advances in technology have only magnified the role trust plays in consumer decision-making, Knauss says. Before people even set foot in a store to buy a product, they can research user reviews, look up product information and find out what other people think about the best practices of the brand as well as the company that makes it.
Coming on as the new CEO, Knauss quickly realized that Clorox, a company with products in more than 100 countries, needed to meet consumers’ need for trust and transparency if it was going to continue to get their vote as customers.
Here’s how Knauss created a corporate responsibility strategy at Clorox that’s not just good for consumers; it’s also good for business.
Make it a priority
One of the most important steps in the success of Clorox’s corporate responsibility initiatives dates back to 2006, when Knauss and his executive leadership team first formalized the company’s commitment to corporate responsibility (CR).
What began with a meeting about Clorox’s centennial business strategy — the company turns 100 in 2013 — quickly turned into a call to action as the group examined four “megatrends” going on in the business world, including health and wellness, sustainability, multicultural shifts and, of course, affordability. As Knauss and his team dove into the causes behind each trend, they kept coming back to the issue of corporate responsibility.
“Consumers were not only evaluating brands on strictly the performance of that brand, but they were also evaluating it on who was providing the brand to them,” Knauss says. “Was it a company they trusted? Was it a company that had the same core values that they espoused? And was it somebody that they wanted to do business with?”
Over the years, Clorox has grown from its trademark bleach and cleaning products to manufacturing and selling everything from salad dressing to water filters, cat litter and trash bags. And like many other brand-driven enterprises, it’s spent years focusing on its commitment to build trust with its customers.
But in that meeting, Knauss and his team realized that it was time to take the extra step. They needed to make the company’s commitment to corporate responsibility a formal strategy with clear metrics and goals.
“It was that insight to seeing the connection consumers were making between brands and companies that made us even drive it harder,” Knauss says.
“As an offshoot of health and wellness and sustainability, it really got us doubling down on our corporate responsibility of what do we want to stand for?”
They narrowed Clorox’s focus to five pillars of corporate responsibility: performance, planet, people, products and purpose. And they went about setting goals for each pillar. Some of these included making sustainability improvements to 25 percent of the product portfolio by 2013, reducing waste and moving to more sustainable product materials.
They also structured the goals in phases — annual goals as well as a three-year plan — allowing the leaders to adapt the strategy over time as consumer or economic trends play out. As you build a foundation for CR in your organization, the most important thing to consider is whether the goals you set are realistic, so that people internally and externally will take them seriously, Knauss says.
“If you set unrealistic goals, you can create some pretty bad behavior throughout the organization,” he says.
“So we thought it was a combination of getting the strategy right, getting the strategy focused on trends, sustainability being one of those trends, and then linking that to how do we do a better job from a corporate responsibility standpoint against the planet, against our people, against the purpose of the company.”
Creating a formal CR strategy gave Clorox the foundation it needed to drive the commitment throughout the organization. From there, Knauss says it was up to the company’s leadership to build alignment on the strategy, or “tone at the top.”
“It starts with the top,” he says. “So a CEO or COO really has to drive this thing if you’re going to get traction with the rest of the company, and then get traction with outside constituents.
“You have to keep people informed. So it’s not just me talking to the executive committee. It’s me sending out voice mails, emails, connecting with the rest of the organization on the kind of progress we’re making.”
As a leader, Knauss says he utilizes a piece of business advice he received from Don Keough, the former president of the Coca-Cola Co., when he’s trying to get buy-in from stakeholders.
“When I took over as president of Coca-Cola North America, I asked him, ‘Don, what kind of advice would you give me?’” Knauss says. “And he said, ‘Don’t act like a big shot.’
“One of the things I’ve learned is that as you move up in an organization, you’re given more power. The less you use that power, the more authority you’re given by people — in the sense that power is the ability to compel people to do things. Authority is really more about persuading people to do things.”
To get buy-in from shareholders about the CR strategy, Knauss simply reminded them how the integrity of the company that produces a brand translates into a consumer’s buying decisions, and therefore, profitability.
“Everyone understands the evolution of the consumer over time and how the consumer isn’t just evaluating the brand but the company that provides that brand — and is it somebody they really want to do business with,” Knauss says. “I think people intellectually get that. They get that intuitively. It’s just reminding them how important it is that our values and the focus on our corporate responsibility align with the values of our consumers.
“It was easy to make the leap from building trust with consumers — anchored in the performance of the brands — to building trust with investors by anchoring the trust in the performance of the stock and the company’s ability to deliver shareholder returns.”
Having a strong CR strategy means nothing if you don’t accomplish any of the goals you set out to achieve. So to keep your organization accountable for progress, you need to find ways to keep them engaged in the goals and focused on their success.
One way to do this is by tying those goals to monetary incentives.
Because Knauss knew he would rely heavily on his executive committee to communicate and lead progress on CR initiatives, he decided to pay the company’s senior executives part of their annual compensation based on Clorox’s ability to deliver against its environment goals, such as for greenhouse gas emissions, wastewater reduction, energy use and solid waste.
“If you really want to get traction, you not only have to measure it, you have to pay people on it,” Knauss says. “So it’s first, getting the focus right, including defining the metrics that you want to measure progress with, second, getting alignment throughout the organization that these are the right pillars and the right metrics, and then lastly, the discipline — putting the routines in place to monitor the progress against those on a quarterly basis, at least.”
In addition, people throughout the organization need to understand how important CR programs are to the consumers you sell your brands to, Knauss says.
So to help people see this link between CR and company performance, the organization released its first official corporate responsibility report in 2010. It also highlighted its CR strategy throughout the 2011 annual report, titled “Think Outside the Bottle.” In both instances, Clorox emphasized how CR ties into the company’s vision and mission for employees and consumers.
Building this kind of high-level engagement with employees is important short-term because it drives progress on your goals and long-term because it also helps you attract and retain the best talent, Knauss says.
“That’s what it’s all about, is the best talent,” he says. “So when you look at what we’re trying to do from a business standpoint and not what we’re trying to do from a corporate responsibility standpoint, all of that together really drives a high level of engagement with our employees. At the end of the day, that’s how you win.”
The No. 1 way to stay accountable to your CR progress is probably the most obvious. Because CR also reflects corporate values, you need to also link the goals and programs back to the wants and needs of consumers.
With the increasing availability of information, many companies have, at times, suffered financially because of their lack of transparency in corporate practices — think Wal-Mart, British Petroleum and Nike.
Demonstrating transparency with consumers is increasingly important for companies who want to prove that their commitment to the customer is genuine.
“It’s so fundamentally different in terms of the consumer’s access to information — the ability to really say, ‘Look, I want to do business with people whose values align with my own,’” Knauss says.
“You’re really putting your brands at risk if those brands and the company don’t connect and communicate this sense of value.”
Instead of going on the defense, Clorox has used the transparency of digital and social media as a way to increase the amount of information it shares with its consumers.
For example, when Knauss and his team saw that consumers across segments were showing more concern about what kind of ingredients were in products, and especially cleaning products, they implemented an initiative to disclose all of the preservatives, dyes and fragrance ingredients in the company’s U.S. and Canadian cleaning, disinfecting and laundry products.
Although the company was the first in its industry to do so, it eventually became a leader in ingredient disclosure as other businesses followed suit.
“A consumer can go on our website, pull up any one of our brands, and it will give full disclosure of whatever ingredients are in there,” Knauss says. “So it’s an example of the transparency that we’re not only trying to bring to the financial side … but to the consumer side of the company by letting consumers know exactly what they’re buying.”
Another example is the website for its brand Green Works, which offers users tips on how to create a greener lifestyle and features a sustainability blog called “Green Mommy in a Plastic World,” with posts such as “Seven things to do with your kids’ artwork.”
Because the ability to connect and get feedback is now so immediate, most companies can only benefit from policies such as increased transparency, communication and disclosure, Knauss says.
“There are just so many different ways of connecting, so you’ve got to be where the consumer is,” Knauss says. “So I think everybody intuitively gets that. But we’ve certainly seen a big payout.”
In addition, many initiatives that have helped Clorox reduce its environmental footprint, such as using greener packaging, have also reduced cost. Today, all of its segments have bounced back from recession lows, bringing the company to $5.2 billion sales last year. And the fact that 90 percent of Clorox brands are No. 1 or No. 2 in the spaces that they compete in is just further proof that corporate responsibility and profitability can — and do — go hand in hand.
“If you don’t have a solid strategy around corporate responsibility and articulate that strategy to people in a compelling way, you’re missing half of the demand creation equation,” Knauss says. <<
How to reach: The Clorox Co., (510) 271-7000 or www.thecloroxcompany.com
- Create a formal commitment.
- Get key groups on board.
- Find ways to raise engagement.
The Knauss File
Chairman and CEO
The Clorox Co.
Born: Highland, Ind.
Education: Indiana University
First job: Officer in the United States Marine Corps
What is one part of your daily routine that you wouldn’t change?
Senior corporate jobs are very demanding, not only mentally but physically, particularly given the extensive travel needed. I work out six to seven days a week. That physical exercise is a great release, and a high level of fitness is critical to being able to execute my job with excellence. I highly recommend a vigorous exercise program for everyone, but especially for those in high-pressure jobs.
If you could have dinner with one person you’ve never met, who would it be and why?
Margaret Thatcher. She was an incredibly effective prime minister during a very tumultuous time. I would like to understand her approach to leadership — the traits she valued the most in people for them to be truly effective and drive real progress whatever their role in life.
What is your favorite part of your job?
The aspect of my job I most enjoy is helping to define and sustain the values of our culture. The CEO must set a ‘tone at the top’ to win in the marketplace and, importantly, to win in the right way. It is extremely important to define the traits you expect from your leadership team and your entire company. I believe a values-based culture anchored in integrity, optimism, compassion, humility and curiosity will attract and keep the best people engaged.
If you own or operate a business, you have probably experienced slow periods where revenue was declining and you didn’t have enough leads coming in. But there is actually a way to market yourself so that you are not at the mercy of the season or economy again.
There are two things that you need to control your revenue year-round: an integrated marketing approach and an organized marketing plan.
Here’s how to do it.
Integration means that each piece of your marketing works together in a coordinated way. For example, an integrated approach might look like this: You have a direct mail postcard campaign that drives traffic to your website. Your website is optimized to convert that traffic into leads by getting them to fill out a form.
Then, that form populates your email database and your leads receive pre-determined emails from you for the next six months. During that time, your sales team follows up with the prospects over the phone.
Of course, the specific strategies that make up an integrated campaign vary by industry, but what follows is a good general outline.
In order to fully integrate your marketing approach, you will need the following systems in place:
- Lead generation. For this, I suggest direct-mail postcards. There are other options such as television, radio, billboards, letters and more. But I have found postcards to be the most cost-effective.
- Lead reception. Receptionists should have a predetermined way to handle callers and gather their contact information. Your website needs to be optimized to gather prospects’ contact information, which is easily done by offering free downloads where the prospect is prompted to fill out a simple form.
- Follow-up. You’ll want to go with an email service for this, because email is the most affordable follow-up option available and usually yields great results when used in this capacity. Postcards and phone calls are also great for follow-up, too.
The Internet is also a great resource to learn more about each of these elements.
It is one thing to have an integrated marketing approach, and it is another thing to have an organized, fully integrated marketing plan.
It may sound obvious, but you need to be intentional and organized about exactly how the pieces of your marketing plan will integrate. For example, how many days will go by before an online prospect receives the first email from you? How many days will you wait until you call your prospects? Does the design on your postcard match the design of your website?
The best way to handle this is to sit down with your marketing staff — or by yourself if you don’t have a marketing staff — and evaluate the process, beginning with lead generation and continuing all the way to the sale. You’ll also need to answer the questions that come up along the way.
Some of these questions you’ll want to ask and answer include the following:
- How am I going to generate leads?
- How am I going to receive these leads?
- Is the method of reception going to immediately let the prospect know they are in the right place?
- How am I going to get prospects’ contact information?
- How am I going to follow up with leads?
- How are my different follow-up methods going to work together?
- How often should I contact my leads?
Once you have built a solid structure for your marketing campaign, you can get to work implementing it. As you do, you will notice that your revenue numbers follow a pattern that correlates to your marketing output. And when that happens, you’ll have confidence that, even in your off seasons, you can get the leads you need by simply increasing your marketing output.
Joy Gendusa is the owner and CEO of direct mail marketing firm, PostcardMania. Joy began PostcardMania in 1998, with nothing but a phone and a computer, never taking a dime of investment capital. Since then, PostcardMania has expanded to offer its clients more services including website and landing page design and development, email marketing and full marketing evaluations — all while continuing to educate clients with free marketing advice. In 2011, PostcardMania reached almost $45 million in annual revenue and the company now employs more than 195 people, prints 4 million and mails 2 million postcards each week, and has more than 53,000 customers in over 350 industries.
Branch Rickey, the Hall of Fame big league baseball executive of the 1940s and ’50s, famously coined the expression, “Luck is the residue of design.” This grand concept of cause and effect, which essentially says that good things don’t usually happen by themselves, stands as the cornerstone for anyone looking to build a successful business.
While it is possible to stumble into early success, if you’re in it for the long haul, you need to gain a thorough understanding of what it is you’re selling and how it relates to the needs of your potential customers before you act on it. It’s one thing to have a good idea and to make a few dollars at it, and quite another to duplicate that success on a larger scale or to sustain it for an extended period of time.
Get in the mainstream
Many years ago, I was brought in to be the public face of a protein bar that was successfully sold in health food stores and gyms, targeting body builders and active males. As popular as the bar was, it occupied a narrow niche, with limited potential for growth outside of its very specific market.
The company behind the protein bar wanted to get into the mainstream retail arena — big box stores and supermarket chains — but didn’t know how to do it. So I had a meeting with one of their executives in which he asked for my advice. He placed one of the jumbo-sized bars in front of me, and after thinking about it for a moment, I took out my pocket knife, cut the bar in two and slid it back toward him. He gave me a puzzled look.
“The original bar is designed for body builders — you need a smaller bar for everyday consumers,” I said. “You also need to make it fit a lower retail price point for the mass market. Oh, and put my picture on it, too.”
I went on to tell him that there were countless other protein bars out there, but if the average consumer sees my picture on the wrapper, they’d be far more likely to at least take a look at it because they recognize me.
The suggestions were simple but game-changing. The company implemented these changes, and in short order, we got the product into all the places we wanted, becoming the No. 1 protein bar in the U.S. Understanding the difference between what body builders and mainstream consumers wanted, while also taking steps to make our product stand out from the crowd, was critical to our success as we expanded.
Stay fresh and topical
It is also important for your business to stay fresh and relevant over time. Every day we hear about another well-known company filing for bankruptcy protection or folding altogether. The poor economy is partly to blame, of course, but if you look closer, it’s interesting to note how many businesses have struggled or failed to adapt to the changing marketplace.
Whether it’s a department store, a snack-food company or a company that specializes in photography, part of planning for continued success is being willing to do things differently than in the past. Simply saying, “This is the way we’ve always done it,” is a surefire path to disaster.
Because I’m pretty well-known, it surprises some people when I tell them that, by definition, I am still a small business owner. That is, I own my company, and I operate it independently. I partner with many large corporations, and together, we’ve enjoyed a number of great successes over the years.
Stay ahead of the pack
But I’m still always concerned about maintaining or improving my position in the market. For that reason, I take it seriously when I notice that someone I’ve worked with is not staying ahead of the curve. I may notice that I’m not seeing new products from them, not getting any new proposals or hearing about them moving ahead in innovation.
So as much as I may have enjoyed working with them in the past, I know that I need to take charge and develop products on my own or find other companies that are just as concerned as I am about staying relevant.
Staying ahead of the pack means meeting your customers’ demands by keeping up with innovative technologies, diversifying and introducing new products. And if you’re proactive and smart with your business, you just might wind up with a reputation as one of the luckiest people around. But, of course, you’ll know better.
Tony Little is the president, CEO and founder of Health International Corp. Known as “America’s personal trainer,” he has been a television icon for more than 20 years. After overcoming a near-fatal car accident that nearly took his life, Tony learned how to turn adversity into victory. Known for his wild enthusiasm, Tony is responsible for revolutionizing direct response marketing and television home shopping. Today his company has sold more than $3 billion dollars in products. Reach him at firstname.lastname@example.org.