Business Development Associates
Main PageServicesThe BDA WayEventsAbout BDAResourcesTestimonialsBDA
spacer
spacer
spacer
spacer

Tag Archive for 'marketing and sales'

Forewarned is Forearmed: Understanding the Small Stages of Business Growth-Part 1

In our experience, business owners tend to approach growing their company as one long continuum from the day they open to the day they retire.

And, while growing the business may seem like a foregone conclusion for most entrepreneurs, they soon find out that the reality of growth is much more organic, much messier and far more likely to create new challenges that will stress the owner and his or her management team in ways they never imagined.

We often have the opportunity to see this firsthand as we help restorers grow their businesses by turning on their “marketing engine.” Even so, we are emphatic that “handling the new business will be harder than getting the new business.”

Given the fact that most restorers find growing their business in today’s market one of their biggest and most difficult challenges, they have a hard time accepting this statement. Perhaps they are so focused on having found a new way to grow that they figure that handling the growth will be a nice problem to have and they’ll figure that out as they go along.

This is a problem. They fail to realize there are distinct stages of growth, with different challenges, stressors and potential outcomes. Growing companies can greatly profit from advanced knowledge of the challenges they are likely to face at each step.

Facts of business

Before we get into these distinct stages, let’s look at some general truths about growing companies. The most important is that “growth increases complexity.” What most owners do when confronted with increased complexity is to throw people at the problem, meaning that they simply hire to add the necessary capacity.

But what is the real effect of this strategy? After all, the point of growing a business should be for the company to produce more net profit. If the increased gross profit — and therefore net profit — of a growing business is simply consumed in the salaries and related overhead expenses necessary to handle the growth, then all that a business owner has accomplished is to create a bigger, more complex set of headaches for the same net profit as before.

So, while some new labor resources may be required, the reality is that growth and its attendant complexity requires changes in the way the company operates — a new paradigm that requires new processes, systems and procedures and new ways of measuring and thinking about the business.

All of this requires a transition away from the old, comfortable, safe and yet moribund paradigm that got the business from Point A to Point B, but will not take the company from Point B to Point C, something that is likely to be extremely uncomfortable for the owner and many employees who simply may not be able to make the transition.

Another truth is that for companies to grow, the owners and management team will have to learn new skills to support that growth. Companies embarking on a growth strategy must consider how they will gain this education. There are several industry specific consultancies and programs that can help dramatically, but an intensive self-study program is highly recommended, starting with Peter Drucker’s “The Practice of Management.”

This new, more complex, more demanding paradigm will require not only a revision of all of the company’s processes but also a way of codifying those new processes and integrating them into “the way we do things around here.”

It will also require running the business “by the numbers,” and an owner and key managers must have job and overall profitability numbers in near real time in order to insure that margins are met. For this reason, growing restoration contractors simply must be looking at “enterprise” software solutions as the software backbone to support their growing companies.

There are many theories and models of small business growth, and one of the classic papers on this topic was published by Neil Churchill and Virginia Lewis in the Harvard Business Review. Understanding the stages of small business growth helps owners understand what to plan for, what changes there will be in the company’s structure, the owner’s responsibilities and focus and can serve as a way of diagnosing problems that arise.

This month, we will look at the first two stages of growth, and next month, the final three.

Stage 1: Existence

This is the start-up phase where the focus here is almost exclusively on getting enough business to start your business model.

Overhead costs will be, or should be, at a minimum because the owner will be performing most tasks personally with the help of a few employees of average skill. There will be few, if any, formal systems or planning processes as the business will be run largely “in the owner’s head.”

In the very beginning, the company’s very minimal requirements and nascent capabilities often allow the company to generate business relatively easily. This is especially the case if there is an existing business (such as a carpet cleaning operation) that can support the basic needs of the owner as he begins his foray into the brave new world of restoration.

The first crisis for a start-up will likely be managing cash flow. This is often the biggest problem and impediment to growth, causing owners to develop skills in accurate estimating, efficient management of company and sub-contractor labor so that jobs are profitable, negotiating with adjusters and policyholders for payment, understanding the impact of customer service on getting paid, etc.

This is an extremely demanding phase for any business, but perhaps even more so for restorers given the peaks and valleys nature of the workflow and the challenge of keeping a solid team on staff to do the work properly and profitably.

It is easy for restorers at this stage to want to move too fast in terms of growing their organization without putting into place the necessary systems, processes and procedures.

The people selected may be chosen more for industry familiarity and the “show up” factor (they just showed up on my doorstep — must be serendipity) than possessing the necessary management or other skills that the company will require to grow.

This can also be a time of really challenging stress for business owners, especially if they don’t have a carpet cleaning or other business to fall back on.

Stage 2: Survival

The good news here is that the company’s basic premise has proof of concept. The crisis is now one of generating a necessary profit as the company grows to the next step.

Owners are likely putting out fires on a daily basis and the toll of the start-up phase may have drained them of energy and financial resources.

If the business is growing, the problem becomes a very serious one — can the company generate enough cash flow to stay in business and add the necessary fixed expenses (equipment, trucks, technicians, first managerial position such as Project Manager) as well as maintain the current capital assets and replace them as they wear out?

Again, in the restoration industry this can be dramatically exacerbated by unforeseen circumstances like “The Winter That Wasn’t of 2011-2012″ where the expected work from frozen pipes, ice dams, etc., never materialized.

Keeping a talented crew together at this point to handle the peaks in the work is extremely challenging, and many companies at Stage 2 are unable to keep everyone working on a full-time basis. This creates a quality problem as well as massive training problems, as there can be a revolving door of technical talent.

The Project Manager at this stage is a key employee, and owners typically do everything possible to keep this person in place, often ignoring whether or not they have (or can develop) the necessary managerial qualities that will help the company grow.

At Stage 2, the company is still relatively simple; systems are still rudimentary at best, requiring the involvement of the owner in practically every decision. Planning will mostly revolve around cash flow forecasting and it is now critical that the company utilize a basic accounts receivable process to get paid as quickly as possible.

The crisis of cash flow at this stage also creates a dangerous potential pitfall for restorers. When a company is desperate for cash, it is easy for the emotional demands of running the business to spill over when negotiating payment with adjusters.

If Stage 2 companies manage their challenges effectively, they may grow to Stage 3. However, many Stage 2 companies do not meet these challenges and stay in a perpetual crisis where the owner wonders why he ever got into the restoration business in the first place. Given the boom and bust cycles of the industry, he may lurch onward from one fortuitous job to the next, hoping that the lean times in between doesn’t exceed his ability to cover payroll and stretch his suppliers.

Our experience is that many restorers can stay in this place for a long time — even 20 years — never doing what is necessary to understand and break free of Stage 2 and move on to Stage 3.

But if they are able to get past Stage 2… they will find Stage 3 quite interesting. Stay tuned for Part 2, Coming Soon!

Hiring The Right Consultant For You

If you’ve decided to hire a consultant — Congratulations! You’ve taken the first step in making the strategic and necessary changes to grow your business to the next level, or help you with some current business challenges.

But with many consultants to choose from, how do you choose the right consultant for you? Here’s a few tips on how to seek out and secure the right consultant that’s a perfect fit for you:

Assess What You Really Need
First, you need to understand the specific skillset you are looking for that aligns with the goals you want to achieve. Make sure your consultant or consulting agency offers solutions that will resolve your business challenges and at the same time, gauge their ability to understand the business and the issues. Looking at their website, social media platforms and any published works (ie: articles) are a good start to seeing how they speak about and understand your business and industry.

Also, are you looking for an advisor, implementer or both? If there is hands-on work that will be produced out of hiring the consultant, you will want to find a consultant that is also an implementation company to help make the process more fluid and your project output that much more powerful for maximum results and ROI.

Always Check Testimonials, Referrals and Current Clients

There’s several ways to obtain the opinions of those who have used the services of the consultant you are seeking out. Social media and the internet is one of the easiest methods; start by checking the consultant’s company page on LinkedIn, or head straight to their website. If the consultant has truly moved their business in the right direction, meaning they are delivering powerful results with the strategies they are implementing, they will give you a list of the consultant’s current clients who can share their experiences with you.

Which Of Their Current Clients Are Similar to Your Situation?

Restoration contracting companies come in all shapes and sizes. And, while there are some general similarities amongst them, like any business, each is unique in nature. The consultant you choose should have strategies that are tailored to your unique business situation, challenges and goals.

Be Crystal Clear About Your Objectives, and “No” is OK!

In order to make sure the consultant’s solution is a right fit, make sure that you are upfront and crystal clear about your objectives and your business situation. The right consultant for you will want to assess your situation and determine if their services are the right fit for you. Many times, a consultant will say just about “Yes, we’ve got your answers!” to anyone in order to secure the business. A great consultant does not have the fear of saying “no” or turning down the business, because they have a tailored, unique solution for a specific type of customer and want to make sure that their solution is right for your situation and challenges.

Are You Looking For a Long Term or Short Term Fix?

With the bevy of consultants to choose from, also comes the choice of the type of solution you are seeking. And while many solutions out there do well at implementing some short-term changes, it’s really just putting a band-aid on the wound, versus truly healing it. If you’re serious about implementing long-term changes that get to the core of your challenges, make sure the consultant you choose and the solution that comes with that is one that is long lasting, versus the “silver bullet” approach that is commonly sold, but rarely cures the issues in the long-term.

Another thing to consider when choosing a consultant is the exclusivity factor. Many “silver bullet”/short-term solutions are being sold to hundreds, possibly thousands of others, including your direct competitors. That can bring the value of the solution, plus the ROI on your investment in the solution, down significantly if everyone else is using the same strategy. Be sure to ask your consultant of how many people in your area are using the same solution they are trying to sell you.

How’s The Rapport?

A good consultant will want to talk with you several times to ensure that their services are a good fit for the goals you want to achieve and the challenges you are facing. If they try to sell you on the first time talking, a flag should go up that they are likely selling a blanket solution that is made for the masses versus selling a solution that was designed for a particular problem set. And that could very well be what we mentioned before – a Band-Aid that provides a short-term fix versus healing the deeper, underlying issues.

Also, while you are talking to them, make sure if you see them as a valuable partner and a critical part of getting where you want to go. Your indicators should be saying “yes, this is my consultant!” If you don’t respect them or see them as a subordinate or just any other vendor, then it’s probably not a good fit.

At BDA we talk with many restoration contractors about their business challenges. And, while we are not a perfect fit for everyone, the restoration contractors that usually come to us find the following issues:

• What grew their company from Point A to Point B is not working to take them from Point B to Point C.

• They have stopped growing or are actively shrinking,

• Or, they are growing but want to grow faster,

• They have full time salespeople but they don’t know if their activities are actually growing the business,

• Ultimately, our clients want to predictably control their company’s growth and not be at the mercy of program work, the weather or good fortune.

If you are facing any of the above issues, give us a call at 773-294-7400 or email us at info@theBDAway.com. We will be happy to talk with you to see if BDA is the right fit for your company!

Beware Electronics: 23.4 Million Lightning Flashes Increases Chance of Loss

Between 2004-2006, the cost of insurance claims for lightning strikes nearly doubled, although the actual number of claims shrank dramatically. An industry trade group says “fancy new TVs and videogame consoles are to blame.”

With 23.45 million lightning flashes being recorded nationwide in 2011, and as the general public consumes more and more technology each day, the risk of loss due to a lightning strike grows as well. Electronics such as flatscreen TVs, computers and videogame consoles are all susceptible to power surges.

These types of insured losses related to lightning strikes totaled almost $1 billion in 2011 alone!

Are policyholders protected when they incur this type of loss or to that note, do they have enough coverage if the lightning was to cause damage to the property?

Our BDA Client Network, which is made up of restoration contractors nationwide, find that in times of loss, many policyholders do not have sufficient coverage to fully cover the damages incurred to their contents or property. And when that happens, it can creative a negative impact on the relationship between the policyholder and the agent, as the policyholder almost always assumes they have enough coverage.

If you are a restoration contractor that has come into this type of situation, we’d love to hear about it! You can reply to this blog post or email us at info@theBDAway.com

You can also read the full story at:

http://tinyurl.com/cgeewbr



spacer
spacer
www.gobda.com
spacer
©Copyright 2011 Business Development Associates, Inc.