Archive for category: Build A Better Business

One of the benefits of the global upheaval caused by the pandemic has been the willingness of many businesses to try out working arrangements – like remote work – that they would never have previously considered.  An idea that has started to get some attention (they even have a dedicated website spawned from a book) is a four day workweek.  This idea isn’t right for every business, but every business should at least examine the idea.

Historical Workweeks

In 1890, the US government estimated that a full-time worker in manufacturing worked an average of 100 hours a week.  By 1926 this started to change, but not due to great empathy for the working class, but because Henry Ford had instituted a 40-hour workweek at his factories, guessing (correctly) that this would give more leisure time to his workers who might then opt to buy cars that they could use in that off time.  Other companies and sectors followed suit, and thus we had a 40 hour workweek that some consider a “given” but is not even 100 years old.

So too whenever companies consider raising prices on a product, they examine how many customers they might lose at the new price point.  If that is financially counterbalanced by the number of customers who will stay on at the higher price point, then there’s at least some merit to make the change, just on a financial level.

So too, when considering a four day work week, the thinking cannot be to simply put 40 hours into four days, instead.  The thought has to be to reduce the expected number of working hours.  This obviously means an implied raise for both hourly and salaried workers.  What can employers expect to get for that investment?

Counterintuitive Improvements

One thing they can rightfully expect is a massive jump in productivity.  An oft-cited study is one done at Microsoft Japan, in 2019 (before the pandemic) in which productivity jumped 40% and employees took 25% fewer days off during the same time period.  It doesn’t take complicated mathematical modeling to prove that if you reduce your work week by 20% (going to a four day week) but get a 40% jump in productivity, you’ve realized a massive gain.  Even if your company were to only achieve half of Microsoft’s results, you’d still be at the same level of productivity across fewer days.

This correlates with the fact that of the ten most productive countries in the world (the US recently fell out of the top ten in several versions of that index) only two of them have average workweeks of more than 30 hours (Ireland and Switzerland).  While it is an accepted truth in the US that the greater the number of hours worked, the greater the productivity, the statistics simply don’t back that up.

The Microsoft Japan study is also particularly interesting given that it was conducted in a country that has an actual word – karoshi – for death by overwork.  It doesn’t take peer-reviewed studies to show what common sense would point to: a shorter work week means:

• More help for parents who want to spend time with their children (which leads to a more balanced and diverse workforce)
• A recruiting edge among new hires
• A cost savings on utilities and energy for almost 10% of the year for companies that operate in-office (the same Microsoft study showed an electricity savings of 23% and showed printing down by almost 60%)

How to Evaluate If This is Right For Your Business

As we noted above, this isn’t right for every business, but every business should examine whether it might make sense for them.  Key questions to ask:

• Do employees want it? (just because employees don’t ask for it doesn’t mean they wouldn’t be open to it)
• What day of the week would it be? (Mondays and Fridays may be key days for your company, so those might not necessarily be the best days)
• How would we test/implement it? (a trial period, as Microsoft Japan did, allows everyone to “try before they buy”)

Tips for Success

The companies that have successfully moved to a four day week consistently do the following:

1. They limit the length and frequency of meetings (something even five day workweek companies would benefit from)
2. They allow undisturbed “deep work” blocks for their team members
3. They are smart about technology use (people aren’t expected to respond to emails sent at 9pm on Saturday night)

A reminder that this is a non-starter if you’re simply trying to compress 40 hours into four days instead of five.  Not only will this fail to produce the same effects of the studies cited above, but you’re likely to have a detrimental effect on your team.  You have to think the way that Henry Ford did: fewer hours at work means more hours of personal life, and those workers with more personal time tend to be more productive during the fewer hours of work time.  Even better, you can test this theory before committing to it as a permanent change for your company.

One of the most important assets in a business sale is your team.  If you’re wondering how to make sure they stay on during a transition, we’ve got some tips and ideas to help you with that.  Give us a call!

When we talk to potential clients about listing their businesses with us, we speak about value drivers early in the process.  Often these value drivers are aspects of the business that have been developing over many years so they aren’t things that can be scrubbed or tweaked over a period of weeks or months to add some “curb appeal.”  The more time that you spend developing these five basic value drivers for your business now, the more you will be able to ask for that business in the future.

1. Market Position

How much of the market share does your business own?  The relevance of this number will, in part, depend on whether you are a local, regional, national, or international business.  But it will also indicate the potential for growth.  

You don’t have to be number one to be valuable.  For years Avis took advantage of being #2 in the rental car industry to drive an advertising campaign: “We Try Harder.”  

While business buyers like to see some potential to grow a market position, even if you are in the #1 spot, you’ll leave money on the table come sale time if you don’t develop some of those potential markets yourself.

2. Brand Name

As with market position, the quality of your brand name is related to the relationship of your brand to your market.  A classic example in our home market of Kansas City was the iconic “Oklahoma Joe’s” restaurants.  One of the locations was in a gas station and Anthony Bourdain famously listed it as one of the “places to eat before you die.”

Because of a business buyout between the original partners of Oklahoma Joe’s, a decision was made to change the names of the Kansas City locations to Joe’s Kansas City Bar-B-Que.  Because the brand had built a following based on the quality of their ingredients and because the new name wasn’t that different, the business continued on just as well under the new name, and for some years after people still called it “Oklahoma Joe’s” the way that people called the Willis Tower the Sears Tower.

Business buyers like to see strong, recognizable brand names with proper legal protections when necessary.  Make sure that your brand does the quality of your products and services justice.

3. Customer Lists

When it comes to customer data, there’s no such thing as “too much information.”  You should have a CRM (customer relationship manager) that collects as much information as you can about your customers.  You should also be communicating with them in a regular manner so that they are used to receiving information from you (and forwarding it to potential customers).

Business buyers are always more interested in customer lists that are current and customers that are kept in contact with regularly.  Take the time to communicate with your customers on a regular basis.

4. Barrier to Entry

Some businesses require extensive accreditation and others have high capital requirements.  But many businesses just have the regular barrier to entry: a willingness to work hard.  

If your business doesn’t have a high barrier to entry, you can deliver your service so desirable that you create a preference in the marketplace and erect a de facto barrier.  Jimmy John’s did this years ago with their “freaky fast” delivery promise.  Most people did not realize that Jimmy John’s had done this by carefully mapping their delivery areas, accounting for roads and traffic patterns, in order to be able to deliver this service.  They then raised the bar in a cutthroat industry as satisfied customers began to turn to them more often than to the competition who did not offer “freaky fast” service.

What barrier to entry can you create by excelling in an aspect of your product/service delivery?

5. Proprietary Anything

Related to barriers to entry are proprietary methods.  We are familiar with KFC’s special blend of herbs and spices and Coke’s “secret formula” but some businesses today use proprietary software or processes to catapult them into strong positions.

In addition to being popular with customers (when executed well), proprietary aspects of your business give employees a point of pride: it’s always great to work at a business that has that something extra.

Do you do something that none of your other competitors do?  If you haven’t leaned into that and communicated that to your team and customers, you’re missing a chance to drive the value of your business.

Are you unhappy with your business’s position in any one of these categories and want to improve?  We can offer advice and resources to help you do just that.  Give us a call!

As entrepreneurs build their businesses they often have to figure out not just how to keep track of everything that is going on in the day-to-day, but also have a solid grasp on long-term planning.  Some find this balance, but many do not.  The Entrepreneurial Operating System (EOS) is an answer to this dilemma: it’s a set of concepts and tools to help entrepreneurs consistently get what they want out of their businesses.

Origins

EOS is outlined in Gino Wickman’s landmark book Traction.  We obviously can’t explain every part of the system in this article, but we can look at the broad outlines.  There are six categories that Wickman thinks every business should master:

• Vision – where are we going and how are we going to get there?  Does everyone know the answer to those questions?
• People – are the right players in the right places?  Do we have A-players or warm bodies?
• Data – what story do the numbers tell us?  Does everyone who should have access to relevant numbers have access to them?
• Issues – what are we consistently working on both short and long term?   How are we tracking them towards completion?
• Process – do we have documentation for all we do?  Do we have a process for updating that documentation?
• Traction – do we have focus, discipline, and accountability in the management team?  

Compartmentalize

One of the most cited aspects of EOS is how issues are dealt with.  Wickman proposes four different boxes:

1. Goals  These are items that must be achieved in the next twelve months.  There should be no fewer than three but no more than seven of these.  Less is more.  They will be reviewed and assessed annually.
2. Rocks  These are items to achieve in the next three months.  As with goals, you are looking at 3-7 items.  These will, unsurprisingly, be reviewed and assessed quarterly.
3. Issues  This is subdivided into two parts:
   • Items to be dealt with in the medium term (will take more than 90 days)
   • Items to be dealt with in the short term (will take fewer than 90 days)
     Issues can be reviewed and assessed on a monthly basis.
4. To-Do  These are items that must be dealt with in the next seven days and should be reviewed every week for completion.

Traction

Busy entrepreneurs can get stuck in firefighting or in simple list-conquering mode.  While fighting fires and smashing your to-do lists are part of running a business, they aren’t coherent and sustainable practices that can run a business long-term.

Business owners who want to implement EOS have to face up to three things if the deployment of it is to be successful:

• Change is hard but necessary – even if things are not going well, people often prefer the chaos they know.  Make sure you get buy-in from your team about moving to a better system of accountability, and one that isn’t dependent on personality but on metrics.
• Expectations can’t be met if they aren’t defined – part of why so many businesses thrive on EOS is because the management team is better acquainted with long-term and short-term numbers so that they can focus on what’s important to hit them.
• Creativity and energy should be deployed where they are most needed – Wickman says to “systematize the predictable so that you can humanize the exceptional.”  You want to use the talent of your team members (and yourself) where it can really take the company to the next level, and that can’t happen when you’re just attacking to-do lists and fighting fires.

Do you feel like you’re just fighting endless fires?  Check out Wickman’s free tools here.  If you want some help with those fires and how to build a better business, we can help with that.  Give us a call!

In 2020 more than 100M Americans listened to a podcast at least once a month.  While some of that might be attributed to staying at home more, that number was the culmination of a 54% growth in popularity of the medium over the preceding three years.  39% of small business owners listen to podcasts, and of them, 65% listen weekly.  Podcasting continues to grow in popularity, and like any platform, it can be used to benefit your business.

1. A podcast provides effective, persistent, low-cost marketing

There are all sorts of ways to get your business in front of potential customers.  They can vary in cost and most of them disappear after you have finished paying for them.  But podcasts (like blogs) are persistent.  They show up in relevant search results for your business and will be searchable for a long time to come.

While the low-hanging fruit of a podcast is interviewing current clients and vendors and other inspiring people in your orbit, a well-known technique is to invite a potential client onto a podcast.  By inviting such a person to share his/her expertise, you also give that person an opportunity to know you better and potentially do business with you in the future.

2. A podcast increases your authority and number of opportunities

While “podcast host” doesn’t quite have the cachet of “author” it does indicate you’re someone who is comfortable chatting with almost anyone and as a result, you’ll have a chance to meet and talk to people you might not otherwise have been introduced to.  Your friends and colleagues will start identifying potential good guests for you.

3. A podcast improves your brand associations

Hosting a podcast gives you the opportunity to demonstrate credibility to people who may have never heard of you before without giving away all the “secret sauce” your company has.  You can be helpful to people who would not have become clients but who can refer you to people who would be.  By being generous with your knowledge, you’ll often find generosity in return.

4. A podcast is straightforward to start and maintain

Many of us grew up in a “radio” era and so we take some of those associations (expensive equipment, professional studio) and overlay those onto our expectations for podcasts.  This is simply not the case.  If you have a computer, a decent microphone, a quiet place to record, and podcasting software, you’ve got everything you need to get started.  Of those, the only two you might need to obtain are a microphone (very good ones can be had for $100) and podcasting software (prices vary between $5-$25/month).  

If someone on your team can’t be tasked with editing the audio and typing up some show notes, there are plenty of freelancers who can do that for you at very reasonable rates.

5. A podcast can fit into your schedule

Whether you choose to do an interview or monologue style podcast, you simply need to set aside some time to jot down some notes on what you’re going to speak on and then the time to record.  If you don’t have any margin in your business life to do that, there are bigger problems looming than the ability to create a podcast.

6. A podcast accustoms you to public speaking

We don’t all have frequent opportunities to speak in public.  Podcasting, like Toastmasters, provides you with practice.  You’ll find yourself cutting out “ums” and “ahs” when you hear them played back to yourself, and you’ll find your listening and questioning skills improving as you interact with different guests.

7.  A podcast is a chance for you to have fun

All things considered, people prefer to do business with those they know, like, and trust.  A podcast gives you the chance to put a human face on your business, and, when appropriate, “let your hair down” a bit.  You’ll be surprised how much fun you can have (and how much value you can add to others) once you get started.

If you still need some encouragement getting started on a podcast, we can refer you to a few people we know who are doing well with it.  You might even get on their podcasts!  Give us a call.

With any purchase in life, if there’s a large item at the bottom of the bill that you don’t see coming that makes your grand total larger than you expect, you’re generally not pleased.  When you are talking about business transactions, working capital is precisely one of those “didn’t think about that” amounts that buyers don’t realize is a necessary part of running a business after a transaction is completed and should definitely be on their minds as they move towards closing on a sale.

Definition

In this particular case, the textbook definition of working capital isn’t helpful.  That’s because it’s defined as your current assets minus your current liabilities.  The other unhelpful definition, which is used by too many systems-less business owners, is “the business checking account balance.”  The proper way to think about working capital is the amount of money you need to keep the business going: paying for your overhead and your staff and a little extra.  

Factors

Working capital needs are going to vary based on the type of business.  Think, for example, about the seasonal fireworks stands or Christmas tree businesses.  They have a lot of their working capital essentially tied up in inventory that needs to sell over a period of a few weeks.  Their working capital needs are much higher than, for example, a training business that collects all of the payment upfront and then uses those funds over a period of weeks or months to pay for the resources needed to complete that training.  

When calculating your working capital needs, the four categories you need to explore are:

• Receivables (when do you get paid)
• Payables (when do you pay your vendors and staff)
• Inventory (how much do you have in stock and how quickly does it turn over)
• Time (how do the three previous categories interact)

How to Obtain It

On some larger deals working capital can be negotiated into the transactions, with the buyer taking on some of the payables in exchange for some of the receivables and cash.  On many Main Street transactions, however, like the ones we handle here at Apex, we simply counsel our buyers to make sure that they have the working capital in place, whether that’s by setting aside some additional capital or by getting a line of credit or a combination of the two.  

Communication with the seller is key here and when it comes to working capital, you’re never going to get penalized for having too much of it to start off…but too little, and you’ll have the worst kind of problems imaginable.

Growth

So far we have been talking about working capital as a means to sustain a business.  But what about if, like most buyers, you want to grow a business?  Well, you’re going to need more.  Where can you obtain that working capital?

• From your retained earnings.  This is the easiest place to find the funds.
• From a line of credit or crowdfunding.  This needs time to get set up (having a bank relationship or preparing the proper paperwork for an offering) so you’ll want to do it before you need it.
• Alternative financing.  This is typically used if you can’t find other means of financing, but it should be considered against the profits you are hoping to gain in growth, as this is the most expensive form of financing out there.

This is also another conversation that can be had with the seller.  “If you had more money to grow the business, where would you deploy it?” and the natural follow-up, “How much do you think that would cost?”  The seller wants you to succeed: it’s part of the motivation behind the transaction.  However, to err on the side of safety, when it comes to working capital, always remember to add at least 20% onto any estimate they give.  If you have some extra, again, that’s better than not having enough.

Do you have questions about whether you have the right amount of working capital in your business or are you considering buying a business and want help calculating how much working capital you’ll need?  We’re here to help.