A Leap of Faith... in Business!

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The phrase leap of faith came to mind recently on my walk along the canal path, a canal boat called leap of faith gently passed me by as I headed for my train to work. I’ve heard this phrase used frequently in business and often about start-ups, e.g. when someone takes that first step from whatever work they had before into founding a business; this is right, it is a leap of faith. However, I’m interested in this post to consider the future ‘leaps of faith’ we make as business leaders.

In our company we get to talk one-to-one with business leaders and these sessions often reveal fears, worries or concerns that leaders have. Our role is to work with that leader and leave them in a place where they have a plan to move beyond the concerns and can see the steps to success. One frequent fear for founders is that their company is getting too successful and as a consequence they worry about keeping pace with the business.

One young tech-entrepreneur shared this week that they realised after a few years that running a company they founded that had grown to nearly 200 people was boring. They did not want to develop it, they wanted to start another; so, they made a leap of faith and handed over to a CEO and developed a spin-off company from scratch once again. That was brave, leaving financial security yes but also recognising their limits and then pursuing their passion accordingly before they damaged their first business.

Another entrepreneur shared in the middle of a leadership course that she realised she must change to be the right type of leader her company now needed. She was nervous, uncertain and worried she could not do it in that moment but she saw that her business had changed and so she needed to stop being the ‘start-up’ leader and be a leader who had the skills to build a business and a management team around her.

Running a business is rarely a destination, it is a constantly evolving journey. Humans are a species that likes habit and routine; therefore, a leader can find it comfortable to rely on the skill-set that got them to where  they are now and no more. The thinking that a business needs to stay successful next year, is not necessarily what it needed last year. A courageous leader frequently re-assesses their strengths and weaknesses and how they set new goals to evolve. By definition the leader will have to initiate this change for themselves – no grown up is going to drop by and order it!

So, my takeaway question is:

When was the last time you took an objective look at your skills, knowledge, experience or influence on your business and set yourself the target to change once more?

If you want an idea on how to do this give me a call and I will share some tools we’d recommend. Supporting leaders to change is something my colleagues and I enjoy doing and sharing ways to achieve success if part of our reason for operating.

Have fun in your leap of faith and enjoy setting yourself a new challenge today!

What advice would you give to a new business owner?

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Our company is in its tenth year of existence and when I open my old note book from those very early development days, which started way back in 2009, I find it hard to remember all the feelings around starting-up a business venture. Looking through the frayed pages it seems we were obsessed with a name and logo, with so many variations being drawn and discarded. I am very proud we chose ‘Know and Do’, it still says exactly what our business is about – ‘helping leaders learn to solve their problems by effectively applying the knowledge’ – but I’d probably not focus as much time on these things next time round.

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My trip down memory lane came from a recent discussion I was invited to join with Tech Manchester as part of the UK Fast webinar series. Talking with some passionate, clever and insightful colleagues from around Greater Manchester we discussed the wide array of support and advice to start-up businesses.

You can access the video of the whole conversation and others in the series here 

If I was re-starting a business today, I’d share the advice we give to many new or emerging companies. Essentially, there are a few core factors that in my view make a huge difference to a new business idea moving from paper to become a thriving company:

1. What is your purpose? Setting out your mission for starting the business helps you look to create a strategy and culture to the business that is consistent and coordinated. It can draw investors, partners and employees to your business as they buy-in to your purpose. (Check out our tips on strategy here).

2. Is there a demand for the product or service? Without this you may only ever sell to yourself! A great idea is nice (and great ideas are needed). However, it is only commercially viable if it is wanted by others.

3. Is there a profit in the product or service? The price you can charge customers has nothing to do with the cost of production, but you do need a profit margin in it. The value a customer places on what you are selling determines if the market will sustain your new business. A business needs that profit buffer and to know if it is (or is not) there (as we share here).

4. Never loose site of the cash. If you are the owner, you need to understand the money. If you run out of cash your bank account will not clear payments on good will. Even when you grow, it is easy to let costs rise and your cashflow suffer.

5. Focus on the marketing and sales. Great ideas rarely sell themselves; they will still need mechanisms to share and promote their value. These processes need constant attention, assessment and energy (we have some ideas on this).

I know there is much more to a business than the five points alone. Things like structure, premises, people, equipment, legalities, suppliers, and so on matter. However, if you have a clear purpose, products and services that people be sold at a profit, manage your cash well and market the idea you have the engine of a business.

If it sounds like hard work, that is because it is. According to my maths (from reading reports) less than 1 in 10 people start a business and only around 25% of them create a company that can employ someone other than themselves. So, if you have the desire to try, then we’d love to talk with you and help you focus that motivation to be successful

3 Ways to Check if your Plans are Sanity or Vanity

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Many business owners aspire to grow their company and see size as a factor of success. However, as a business grows one area that can easily suffer is the profit margin; and this is a core marker of a successful enterprise. Falling profit with rising sales might seem counter intuitive but a business in the process of scaling ignores this probability at their peril. A helpful saying summarises this view:

Turnover is vanity, profit is sanity.

A new client came to my colleague last year for assistance. The business they had founded some years ago had grown significantly, turnover had more than doubled in 18 months and all was looking good for continued growth. However, they were not happy, as they’d seen their profit fall over this period. In effect, they employed more people, serviced more clients and worked harder but for less return. This might have been acceptable if it was a planned and brief stage in growth but all they could see is the industry demanding their margin of profit to shrink further. [What happened next is not part of this post but if you want to know what Andrew did to assist in changing this dilemma contact him direct!]

Profit can fall as a business grows for a number of factors. Outside forces such as an increasingly competitive market can demand a fall in price just as your sales rise. External factors and their impact may / may not be out of your control, but internal ones are not. It is easy for a business to find the price of growth means their business model does not look so good at a greater scale.

Let’s consider three key areas that costs rise too easily and profits can start to fall unnoticed:

1. Decision Making.

Can you answer some fundamental, but crucial, questions about the numbers in your business? For instance:

• When and where does the business make a profit?

• Which of your products or services are loss leaders (and why)?

• Who are your most profitable customers?

If you feel these questions are too simple, try stopping right now and writing out the answer for your business. You will not have every fact in mind but if you cannot begin to sketch an answer within a few minutes you might want to go back and double check the data!

2. Cost control.

How well can you understand the different cost elements in your business model? For instance, can you explain:

• If / how an extra sale effects your costs?

• Which costs vary with each sale and which ones are fixed?

• What expenses in your business are directly related to your product or service and which ones are indirect?

Though each business will have their own answers, essentially all costs can be divided in four areas: variable or fixed costs; direct or indirect costs. Each one needs slightly different monitoring and therefore expectations of control.

3. Costs Do Not Make Prices.

Costs are the easy part of managing a business compared to setting the right price. Too high a price and you are afraid of scaring off customers; setting it too low and you are undervaluing the business.

Though cost can be a guide to calculating the price you might need to earn, they have no bearing on the value a customer places on a product or service.

Think about the different sizes of a coffee in those well-known high street chains. Often you get a choice of a small, medium or large drink. The customer pays more for the largest coffee because it is just that - much larger - and it is only marginally more expensive than the other sizes. Yet the cost of producing it is almost exactly the same. It is the same shop with the same business rates, same lights, same furniture, same barista, same coffee machine, same tap for the water, same portion of coffee, etc. This means a coffee shop will want you to buy the big cup as it looks good value to you (the customer) AND it will make more profit for them (the seller).

So, my question is, how do you understand the value to the customer of your product or service? Will they pay only £1 for something that costs £5 to make, or would they value it as a good price at £10?

The three fundamental issues above target the core knowledge a business owner needs to make good decisions about the current needs and future aspirations. The role of leading a business is dynamic as the context, opportunities and challenges change all the time. However, if you understand profit and cost within your business you can respond better to the change.

If you want to explore your answers further to make sure your business grows in a secure manner contact our team on 0161 2804567.

5 Ways to Stop Your Growing Organisation Becoming Chaotic

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Last week I spent several hours with a group of brilliant business leaders who want to scale their companies on another cohort of our Inspiring Business Leaders series. We delved into the leadership they need to grow their businesses and explored how to generate high performing teams in a context of constant change. They left the session with tools to assess their own leadership skill set, ways to motivate teams and an approach to measure success.

Although many topics were explored in the seminar, one that was most revealing came when we mapped the organisational structures in the room. Everyone could draw (albeit some more neatly than others!) their current organisational map. However, thinking ahead 2 or 3 years and drafting how the people in a business should connect was much harder. Running a company of 10 or 20 people is busy; but leading a fast growing business or 50, 80 or 100 will be very, very messy without a plan. Success, in the case of these entrepreneurs really could ‘kill’ their business.

So, we shared 5 ways to get control of these impending changes and stop organic development or employing ad hoc roles that will unbalance a fast scaling business.

1. Know your purpose. Have your purpose written down in a succinct, clear manner so everything you do can reference it maybe even add your core values. Without this guide, your memory of the reasons you state now will fade as you become busier and events will shape your business, as your decisions will not be made to a consistent plan.

2. Remove yourself from the mix. If you are the founder or leader now, try mapping the future of the business without your name in the chart. This way it forces you to think through your role and responsibilities and divide them up. It can also stop you building a business that just amplifies your weaknesses!

3. Draw, draw it again and then re-draw some more! An organisational map is not the only plan you will need but by writing it down and putting pen to paper the thoughts in your head become clearer and also you can share this plan with others and continually refine it.

4. Chose a scale. If you do not have business plan with targets choose a multiplier, e.g. in 3 years time the business will have 10 times more customers. Then you can consider what functions are needed as specialisms or what teams you do / do not need in a future business to serve that demand.

5. What does it mean for you? When a future organisational map is drawn look at the difference to how it is now and consider the skills, knowledge and experience you role needs to develop in. If you are a leader, you need to set a plan for your own development so you change with the business and do not hold it back. What training, what experiences, what change do you need to make to be ready for the ‘new’ shape to your business?

If you have begun to map the future you can then set the plans to transition from your current state of business to the desired state. You have a barometer to judge the decisions the business leadership make as opportunity and challenge come your way in the next few years.

If this challenge seems to new for you, reach out to someone more experienced or to an appropriate consultant to help. Clients often tell us that their problem was solved because they had the right people with them to explore an issue and set a plan to change.

Finally, what do you do to map the future of your business? Have you found an effective way to visualize the future? I’d welcome your views and insight in the comments section below or contact me direct on @berneeclarke.

NHS Mentoring cohorts 3 + 4

Know+Do have just completed another 2 days mentor training for cohorts 3 + 4. This exciting new programme has been developed for Health Education England and is aimed at supporting senior NHS professionals to mentor colleagues who are returning to work. After an initial day’s training on mentoring skills the cohorts then undergo Action Learning training and form an action learning set to continue to support each other.

Formal mentoring programmes are known to make a highly positive impact on organisations, those being mentored and the mentors themselves. Know+Do are passionate about mentoring and the difference it makes. Many people we train have experienced more informal mentoring which whilst useful has a tendency to fizzle out. Plus, individuals talked about not being sure what to share with a mentor and being confused as to whether a manager can and should be your mentor. This new programme helps to offer a clear defined programme of mentoring support across the North West.

The NHS is under increasing pressure and the men and women staffing the service do incredible work. We are very pleased to be helping them to support their colleagues through this programme. If you’d like to know more about how mentoring or coaching could help you or your organisation please contacts us info@knowanddo.com.