Hard Work Is Not What You Think It Is

Year after year I come to understand a single principle more clearly. Business owners who out perform their peers are hard workers. Further their employees are hard workers. Further still, they have invested in creating a culture of hard work. But just what is hard work? It is not what you might first think.

As business owners we have the flexibility to choose what it is we want to do each day. There is little accountability. There is much freedom. To the uninitiated it is easy to move from idea to idea, initiative to initiative and to do so whenever the urge strikes. This often leads to a trail of unfinished projects, abandoned goals and forgotten strategies. The hard workers are those that invest in the planning to decide what things they should be doing. And then these same hard workers execute, tie up loose ends and get closure. That's it.

I talk a lot about the planning piece in this blog. And many business owners actually enjoy the process, even if they must learn how to do it effectively. It is disciplined execution that separates the leaders from the rest. I will give you three examples of what effective execution looks like.

First, leaders execute within a predictable schedule and set of processes. These might include daily meetings, weekly meetings, monthly planning sessions, quarterly goal setting and annual strategy reviews. Vern Harnish describes a rhythm in organizational life built around such processes. It is not easy to do. The discipline to do the same things every day, week in, week out is not sexy. Business owners like the fact that they can set their own schedule. But unless they subject themselves to the type of structure their team needs to communicate and receive feedback their goals will be hard to attain.

Second, leaders do the hard things, the unenjoyable things. Sometimes you will hear successful business owners attribute their success to working smart, not hard. When questioned further I have found that most of the time this boils down to doing the unenjoyable thing first. To understand this consider the business owner that knows she must reconcile customer accounts before the team can move forward with several important proposals. Rather than sit down to reconcile the accounts the undesirable task is pushed off all morning while less pressing business is completed. After lunch the owner does a complex proposal herself because staff cannot complete it without the reconciliation. Finally, as everyone else is leaving for the day the dreaded task is begun and by 8 pm it is done. The next day everyone considers what a "hard worker" they have for a boss.

By contrast the business owner who shuts the office door and tackles the task at 8 am is done by mid morning, turns over the proposal for staff to complete and spends the afternoon golfing with a customer. Is this working smart or just doing hard things first?

Third, leaders live lives of public accountability. Accountability is in short supply for business owners. No one does their annual reviews. No one pats them on the back for a job well done. Yet they understand the need for someone to hold their feet to the fire when things start to look bleak. While it is true many leaders will join peer groups and hire business coaches their ability to create accountability for themselves goes far beyond having a handful of people look over their shoulder.

Leaders make their vision and goals known to as many people as possible. Whether it is a business or personal affair, they proclaim their intent for all to hear. After all, the prospect of a public failure is much more motivating than a private one. They make public statements about leading their industry. They talk openly about passing competitors. They don't mince words or talk in vague language. One of my favorite examples of this type of behavior is Sir Richard Branson, chairman of the Virgin Group. Sir Richard's shenanigans are legendary and when he does something to land on the front page he knows how that public spectacle will serve as motivational fuel to succeed in the future.

The next time someone talks about hard work think intently about exactly what they mean. Working hard is not the same as doing hard things. Working hard conjures up images of long hours, bleak prospects and calloused hands. Doing hard things is more about determination and discipline, two things that can get you back on the golf course that much faster.

What is an SBA 7(a) Loan?

It seems like this has been the year of the SBA loan. For the last few months we have been working with several small business owners as they obtain their SBA funding. It has been interesting to me just how little the SBA’s programs are understood so I thought I would take a few posts to highlight the SBA’s 7(a) program and shed some light on the subject for business owners who might be interested in pursuing this type of financing.

Loans under the 7(a) program are primarily for business expansion, working capital and startups. Commercial real estate loans backed by the SBA are commonly referred to as 504 loans. We may save those for another post. My focus here is the 7(a) program since it is the one we have dealt with the most in recent months.

An SBA loan is a loan backed by the Small Business Administration, an agency of the federal government. It is important to note that the SBA does not make the loan. It only guarantees a portion of the loan so that the bank making the loan is not at risk of total loss. This guarantee can be up to 90% but tends to be around 75% of the loan value.

Guarantees are important because they encourage banks to loan money that they might not lend in a conventional scenario. Still, the banks are going to require collateral and guarantees of repayment. Borrowers in an SBA product can expect to have most of their assets tied up as collateral for the loan.

Banks also expect the business owner to have skin in the game. SBA loans typically require equity injections of 10-25% meaning that if a business needs $500,000 for expansion the business owner is going to need to put up $50,000 - $125,000 and will only borrow between $450,000 and $375,000. It is important to note that having too much cash can be a bad thing when it comes to SBA applications. If an individual can afford to fund the venture out of liquid personal or business funds the SBA guarantee may not be available.

Another thing to consider, probably the most important thing to consider, is the bank making the loan. Every bank is unique and the process of applying for an SBA loan at two separate banks can be vastly different. Just because one bank passes on the loan doesn’t mean another might not like the opportunity.

Too often I’ve heard stories where business owners were told “the SBA won’t make this type of loan.” That statement is wrong on several levels. First, SBA doesn’t make the loans. The bank does. Second, as we’ve already said, different banks have different loan criteria. Third, the landscape for SBA loans is constantly changing. What was once a sure thing for approval may be impossible today and what was once thought impossilbe might now be receiving special treatment. If someone tells you the SBA just won’t do the deal it’s a sure sign you need to seek different counsel.

Finally, when it comes to choosing a bank to work with you are probably better off using a bank in the SBA’s Preferred Lenders Program (PLP). These banks are able to close loans with SBA guarantees on their own without having to submit them to SBA for approval. SBA still reviews PLP lender loan portfolios and PLP lenders are subject to the same guidelines as other lenders. However, these banks have demonstrated an ability to process, close, service, and liquidate SBA loans.

Non-PLP lenders must get the SBA’s approval on loans before they can obtain the all important SBA guarantee. This can often slow down the process considerably and it may be evidence of the bank’s inexperience with SBA rules and procedures.

There is a lot more to the SBA 7(a) program but these are some of the basics most clients want and need to know before sitting down in front of a bank. Stay tuned in the upcoming days for more information on these interesting and useful products.

Numbers Bring Understanding

Accounting is a scary subject for most business people. For those of us involved in the trade this is easy to forget. We've come to understand accounting as the language of business and its use opens up a world of understanding and insight we find invaluable in helping clients diagnose and fix problems. At it's heart accounting is simply measurement. It's counting, plain and simple.

Measurement is a wonderful thing. It defines hard edges. It facilitates judgement. It helps us make decisions. I was reminded of this recently during a casual conversation with a client. Trying to understand more about her business I was asking some questions about her ideal customer. As part of one of her answers she volunteered that her clients spent somewhere between $3,000 and $10,000 per month on her services.

All at once my perception of her business, her clients and her service offering congealed into a better, more concise and meaningful picture. This is the power of numbers. This is the power of measurement.

When business owners set goals and finalize their quarterly, annual or strategic plans I encourage them to add lots of numbers to those plans. When you plan don't let yourself off the hook with warm fuzzy, soft-edged targets. Make them concrete with numbers. Here are some questions and ideas to help you do just that.

How many new customers do you want over the next 12 months?
How many customers do you expect to lose through natural attrition, death, relocation and other factors beyond your control during that same time?
How much do you want your customers to spend with you on an average sale?
How many times do you want them to buy from you during the year?

These are not "rocket science" type questions but the answers are rarely available to business owners when first asked. It takes some thinking and some research to come up with good, numbers focused targets and goals. And it takes a good information system to measure progress. More on that next time.

MyStrategicPlan.com Brings Planning to the Cloud

When we do strategic planning with clients the tools we use most often are whiteboards, flip charts, excel spreadsheets and junk food. Over the years we've adopted and adapted several templates, paradigms and models while assembling a quiver of arrows to help clients envision, articulate and execute their plans. After being introduced to mystrategicplan.com (MSP) through The C12 Group I was excited to see what this robust planning tool had to offer. After a couple of weeks of poking and prodding here are my initial impressions. 

1. It is robust. MSP looks like a web page version of a tired MS Word business plan template...until you get into the goals section. Most strategic plans fall off the tracks because businesses can't set measurable goals. MSP allows businesses to track goal progress in any number of ways and if those goals aren't measurable you start to understand that problem early in the process. The reporting and delegation features make MSP ideal for management groups and the executives charged with overseeing their plan progress.


2. It starts out easy. Going through the MSP process feels like starting a liesurely hike along gently rolling trails. There are examples and queus to help you understand what mission, vision and values look like. The information on strategies, customer groups and competitive advantage is really good. Then you get to the part on setting organization wide goals and it feels like you are standing at the base of the Matterhorn. In my opinion MSP doesn't offer the user enough assistance in transitioning from 3-5 initiatives, to 1 year goals, to quarterly priorities. You can do it but it is tortuous.


3. It is probably not suited to small business. Companies without a professional management layer will feel swallowed up by the process. The same robust reporting and granular progress tracking that make MSP a standout dictate that customers adopt the MSP way of assembling, executing, monitoring and revising their plan. In other words, in for a penny in for a pound. If you are going to use MSP use all of it. Don't build reporting and monitoring tools in Excel, Sharepoint, Access, Saleforce, etc. Bight the bullet and commit the time to getting everything in MSP. If your business doesn't have a middle management layer there probably will not be enough margin in the participants schedules to implement and monitor in MSP.


4. It is a paradigm. As robust and flexible as MSP is you quickly understand that it is almost impossible to build a tool like this without imprinting a paradigm on top of it. I have become a big fan of Verne Harnish's planning paradigm and more than once I felt like I was trying to shove a square peg in a round hole. For companies that have never done strategic planning MSP can serve two valuable functions. It can show you what a planning process looks like and then it can help you put legs under that process. Those companies would still be wise to hire a planning expert to assist them in the process, but the tool itself is a good roadmap. If your company has been doing strategic planning or if your leader is already strategy minded the migration to MSP's paradigm may be painful until you finish pounding that peg through the hole.

Overall I like the tool. MSP appears best suited for organizations with a CEO champion who determines once and for all that the company is going to do strategic planning. There are lots of these companies in the middle market. They are run by executives long on operations and sales expereience and short on leadership and strategy background. I think it would take a bully pulpit and a clean slate free from prior planning to make an efficient run at MSP by a company with the DIY mindset MSP seems to be pushing.  Consultants looking at MSP for their clients need to buy into MSP's paradigm and tailor their planning process to the tool. That is easier said than done because different tools fit different clients in different ways. 

In summary, if a client came in dead set on using MSP I'd be more than happy to make it happen. I like it a lot. But when I am asked to come in and do strategic planning for a company MSP won't be my starting point. I think most experts in the field will be able to assemble a strategic plan and help the company build the tools to monitor progress more efficiently using their year's of experience and the arrows they have already assembled in their quiver.

Unhappy News for Florida Business Owners

My email inbox started filling up yesterday with messages from clients receiving a notice of special assessment from the Florida Unemployment Compensation Fund. Business owners are starting to feel the brunt of fiscal policies enacted last year to extend unemployment benefits to out of work Florida residents. All that federal money came with a catch. Employers are being forced to ante up for their share of interest on funds borrowed from the US government since those funds will not be repaid by January 1, 2012. Notices were supposed to be delivered by February 1st, but not everyone has them yet.

Jennifer David, our local Paychex representative, did a great job of getting out in front of this as quickly as possible. You can read her synopsis of the assessment for yourself here. Thanks Jennifer!