- Do you want to succeed as an entrepreneur or business manager?
- Do you want your business to be profitable?
- Do you want your business to grow and flourish?
- Do you want to feel more in control of your time and feel like you are working on things that really have an impact?
- Do you want your business to be worth something substantial when you wish to move on or retire?
Most people answer all these questions with an emphatic “YES!” yet few business owners or managers are deliberate or proactive about growing their business, making it profitable or managing their time better so that they are productive and effective in their leadership role. Research shows that the average surviving new business in the USA never grows past $100 000 (approximately R800 000) per annum in revenue and never takes on more than two employees. Data suggests that the situation in South Africa is even worse. South African business owners are struggling to establish enterprises that make millions in profits or allow them to become financially free.
One of the primary reasons that smaller businesses fail to grow and to create attractive sustainable profits is that business owners and managers fall into the trap of working ‘in’ their businesses and fail to take the time or effort to work ‘on’ their businesses. It is incredibly easy to get caught in this trap. You start, buy or launch a business and initially, to keep costs down, you do almost all the work yourself. You develop products, make sales, service customers, issue invoices and keep the financial records yourself. The motivation of working for yourself and being your own boss enables you to work hard and focus on delivery to clients. As you deliver to clients so you win more work, requiring you to work harder. As the owner of the business you get busier and busier, working late into the night and also on weekends, just to get everything done.
This level of activity is not sustainable. Soon you get tired, your family starts to complain and your positive upbeat attitude becomes sour and negative. You miss a few deadlines, fail to return phone calls and your clients, who were initially very impressed with your service, wonder what’s happened. Some people realise that this cannot continue so, after some moments of self-reflection, they decide to scale back and operate at a level that is more sustainable. Others just continue to operate at a frantic pace but because of declining service levels some clients leave and the business stops growing. Whichever route the owner takes, the business reaches a level where it stops growing. The business owner has been caught in the trap of only working ‘in’ their business.
To break out of this cycle, the business owner needs to make a transition from working ‘in’ the business to working ‘on’ the business. Working ‘on’ the business means taking time out from the day-to-day operations of the entity to focus on, and implement, critical bigger picture issues such as strategy, structures, systems and skills development. It is about building a platform for growth within the business that is not dependant on any single person for success. If you want to leave a legacy and make real money as an entrepreneur, then this is probably the most important lesson you can learn.
Working on one’s business takes discipline and effort. It does not come naturally to most people to work on their business; the natural default is to work in the business. There are many reasons why business owners avoid working on their businesses. Some use the excuse that they don’t have time, others say that they don’t want the operation to get too bureaucratic or corporate while others are oblivious to the difference between working in and working on a business. I believe that one of the primary reasons why so many entrepreneurs avoid working on their business is that they don’t really understand how to. A business owner may decide that from next month he is going to devote a morning a week to working on his business but when that morning comes, he is uncertain of what to do with the time so he defaults to dealing with a client or preparing invoices.
Working on ones business is a cyclical process that involves thinking and decision-making about strategy, designing and implementing new structures and strategies, and facilitating the development of new skills. T
Strategising is about taking a step back and making some decisions about where you choose to operate and how you plan to win in those areas. In running a business it is so easy to get swept up in what customers demand that you never really take a step back to question whether your business is heading in the right direction. Many entrepreneurs invest a great deal of time and energy in devising a strategy for their business when they first launch, but they never revisit their strategy once the business is operating. You are in a much stronger position to make important strategic decisions after you have been operating for a while because you then have experience in the industry and greater insight into the markets, competitors and business model alternatives.
In the strategising phase of the cycle you should spend time addressing the following issues:
VALUE: What value are we creating, how are we creating value and for whom are we creating this value? How will we create value in the future?
MARKETS: Are we operating in the right markets? Which markets will we focus on growing in the future?
COMPETITIVE ADVANTAGE: Are we winning in our markets? What can we do to have an even greater competitive advantage in our markets now and in the future?
ACTIVITIES: What are the core activities of our business? What do we choose to do and what do we choose not to do?
GOALS: What are our goals for the next 3 – 5 years? What do we need to do to deliver on those goals?
To effectively deliver on a strategy a business needs structure. Structure is the right people in the right positions to do what is required to make the strategy happen. Even in the smallest, simplest businesses it is important to have some element of structure and as a business becomes larger so structure becomes more and more important. If you are in a small business with just one partner, structuring involves identifying your individual responsibilities and what you are going to outsource to external service providers. In a larger business it is about giving each person in a business a clear understanding of what they are required to do and how they will be held accountable for carrying out those tasks. As a business grows a business owner can easily lose sight of what everyone in the organisation is doing and this can result in duplication of work, lack of accountability and work overload. Working on the business therefore requires the leadership to review the structures and lines of responsibility to establish an effective and efficient organisation that can deliver on the strategy.
In the structuring phase of the cycle you should spend time addressing the following issues:
SKILLS: What skills do we require in the organisation to deliver on the strategy? Do we currently have the right skills to deliver on the strategy? Where can we find the missing skills?
ROLES: How do we put people in roles that leverage their skills and enable us to deliver on our strategy? Describe each person’s roles and the responsibility that goes with that role?
ACCOUNTABILITY: How will people be held accountable for delivering on the requirements of their roles? What will we measure? Who will do the measuring? How often will we measure performance?
Systems invariably depend on people and for people to operate effectively within a system they often need to be trained. It is therefore essential to see skills development and training as a critical element of working on your business. If you don’t train and develop people then all your efforts in structuring and systematising your business are likely to be in vain. You do not necessarily need to do all the training yourself but you should oversee the training and take an active interest in the skills requirements and development of all the people in your business.
The process of working on your business by strategising, structuring, systematising and developing skills is a continuous cycle. Therefore, once you have been through the cycle after having developed or refined your strategy, created a structure, established systems and developed and trained people with the requisite skills then you need to start again with development and refinement of strategy. The more times that you go through the cycle the more your business is likely to grow.
In the skills development phase of the cycle you should spend time addressing the following issues:
PERFORMANCE REQUIREMENTS: At what level do I need the various people in my organisation to perform in order for the business to be successful?
PERFORMANCE GAPS: At what level are the people in my organisation currently performing? What are the gaps in their performance between what is required and what is currently happening?
TRAINING PRIORITIES: In what order should I address the skills gaps for maximum success and survival of my business?
TRAINING METHODS: How should I address each of the skills gaps? Which gaps are best addressed through formal training and which are best addressed through on the job coaching and mentoring? Who will I get to do all the required training?
To build a business with a real platform for growth, it is critical to identify the key activities relating to that business and to build systems that allow those key activities to be replicated effectively and often. When most businesses start out, entrepreneurs perform most of the critical activities in the business themselves. The only way that entrepreneurs can facilitate real growth in that business is to translate what they do into a set of processes that others can execute. The critical systems within a business may vary slightly depending on the nature of the industry in which the business is operating but most businesses require systems and processes that relate to marketing and selling, product or service delivery, financial management and reporting, buying, and product development.
In the systematising phase of the cycle you should spend time addressing the following issues:
KEY PROCESSES: What are the key processes that create value for our customers and/or allow our business to run effectively and efficiently?
PROCEDURES: Do we have established, documented procedures to deliver on our key processes easily and often? For which of our key processes do we still need to establish and document procedures?
AUTOMATION AND OUTSOURCING: What could we automate to reduce the dependence on people? Are there procedures within our processes that could be more effectively executed by external organisations?
Making the transition from spending all your time working in your businesses to consistently dedicating time to working on your business in not easy. It takes discipline and dedication to get this right but such discipline and dedication should yield handsome returns in the long-term. Smaller business owners should aim to spend 20% of their time (the equivalent of one day a week) working on the business. Larger business owners or managers within larger enterprises can aim to spend as much as 80% of their time working on the business. Therefore the amount of time you aim to dedicate to working on the business should depend on the size of your business and how much you want it to grow. The higher your growth aspirations, the more time you should spend working on your business.
If you are currently caught in the trap of working almost entirely in your business, make the transition over time. Start off by setting aside two hours a week to work on your business. In your first two hours review your strategy, in your second two hours examine your structure, in your third two hours evaluate your systems and in your fourth two hours consider your skills development. This will establish the platform for working on your business in month one of the transition. Then in month two dedicate three to four hours a week to working on your business and take the time to address some of the issues that were identified in the review sessions in month one. Work with other senior people in the organisation on these issues. As you move into month three, try to dedicate a full half a day a week to working on your business and continue to increase the time you spend on these issues over time until you are working on strategy, structure, systems and skills development for a full day a week.
The effect of moving from a place of working entirely in your business to a place where you regularly dedicate time to working on your business will be amazing. You will realise a year down the line that you have a happier, more empowered, more focused workforce. You will discover that customers that you personally had nothing to do with are raving about your company’s service. You will discover that you have more time for yourself and are able to approach work in a more balanced fashion and that the business is growing in a sustainable and profitable way. A well-known business philosopher, Jim Rohn, says: “If you go to work on your goals, your goals will go to work on you. If you go to work on your plan, your plan will go to work on you. Whatever good things we build end up building us.” It is for this reason that we need to remove ourselves from our businesses to work on our businesses if we truly want our businesses to work for us so that we can make millions and leave a legacy.
Make an Impact! Make a Fortune! Leave a Legacy!
Some believe that entrepreneurship relates only to people who are starting and growing a new business. Yet time and time again I am struck by how the principles of entrepreneurship have application within many different settings.
Entrepreneurship is primarily about the creation of value and the concept of value creation has relevance within many different spheres of society. We need people who are willing to take risks and be innovative in order to create new value in government, business, education and the non-profit sector. Thus, the principles that are consistently applied by successful entrepreneurs can be used in many different circumstances to enhance the world in which we live and to enable individuals to make a significant contribution.
For the bulk of Jack Welch’s career he was employed by one of the world’s largest corporations, General Electric, yet it would be difficult to argue that he was not entrepreneurial. Tom Boardman used the entrepreneurial principles he learnt in establishing Boardman’s furniture store early on in his career to turn around Nedbank, one of South Africa’s largest financial services institutions. Nick Binedell showed entrepreneurial flair as an academic professor in establishing and growing the Gordon Institute of Business Science. Therefore, no matter where you find yourself, if you are able to apply and implement the following fundamental entrepreneurial principles, you are much more likely to be successful and to leave a legacy.
Establish and define a compelling purpose for what you are doing
The world’s greatest entrepreneurs establish a purpose for themselves and their business that focuses on more than just making money. The Google Guys see their purpose as organising the world’s information and Walt Disney felt his purpose was to make people happy.
People are compelled by purpose; they are energised by being part of something that they feel is bigger than they are. They want to work for something that they feel is meaningful. Therefore, if you wish to really succeed in you career, whether you are in a large corporation or in a small start-up, whether you are in government or an NGO you need to work hard to clearly understand, define and focus on your purpose.
Establish a point of differentiation that gives you a sustainable competitive advantage
Entrepreneurship is about being innovative and creating an advantage by being distinctly different from competitors. Doing more of the same will seldom, if ever, make an entrepreneur truly successful. Anyone who wishes to create long-term success needs to build distinctive points of differentiation. In a career, you need to establish a set of skills and competencies that set you apart and make you irreplaceable. It is by becoming irreplaceable that you are able to command higher compensation and yield more decision-making power within a corporation, government institution or any other organisation.
Focus on the creation of value for your chosen market
Entrepreneurs launching a new business need to focus intensely on giving their chosen market something that they need and want, if they wish to have any chance of surviving. It is this intense focus on the needs and wants of the customer that enables them to create value. Anyone who wants to succeed in a career needs to understand what he or she can do to create value for the organisation for which they are working. Take the time to understand what is valuable to your organisation and then focus intensely on delivering whatever that is effectively and consistently.
Work on your situation, not just in your situation
A related article in this magazine highlights how critical it is for entrepreneurs to work ‘on’ their business and to avoid the trap of just working ‘in’ their business. Working on your business involves stepping back and taking time to review strategy, establish structures, build systems and develop skills. In your career it is easy to get so wrapped up in what you are doing on a day-to-day basis that you never take the time to consider where you want to go and how you are going to get there. Working on your situation involves regularly giving yourself the time and space to redefine your goals and establish a plan for achieving those goals. It has been shown time and time again that those people who take time to reflect on where they have been and readjust where they want to go are more likely to be successful and have an impact than those who get caught in the trap of just working, working, working without ever reviewing where they going or what they doing.
Being successful as an entrepreneur is a simple formula. You need to sell things for more than they cost so that you make a profit. Any money you spend in the process of generating revenue causes you to make less profit. Entrepreneurs therefore learn to spend as little as possible in order to avoid going into the red. Within a larger corporation people often lose sight of this simple equation causing them to spend irresponsibly without having anything to show for it. If you develop the habit of spending without thinking, you will be eroding value over time. You may be able to get away with this for a short period of time but it will eventually catch up with you. If you continuously think and act like an entrepreneur, questioning every item of spending, over time you will develop good, wealth generating habits in both your personal and your business life.
Warren Buffet said: “Chains of habit are too light to be felt until they are too heavy to be broken.” If, in your career and your life, you get too used to doing things in ways that do not create value and waste time, money and other resources, your career will be trapped on a downward spiral that will be very difficult to break out of. If, however, you try to think and act like an entrepreneur, focusing on purpose, differentiation, value creation, effective use of time and frugality, then you are likely to establish habits that will set you apart, causing you to be successful and leave a legacy.