In Good to Great Jim Collins uses the concept of “The Flywheel” to describe the growth of a great company. At first you push hard against a heavy flywheel and it barely budges. But you keep pushing steadily and pretty soon the flywheel is moving. Each time you push it it gets going a little faster, until before you know it the flywheel is FLYING. The speed and momentum of the flywheel is made up of the accumulation of the thousands of pushes made all along. It’s this steady effort, that produces incremental results that I have seen over and over in successful businesses. It’s not the one breakthrough call, but the 10 calls a week, every week that produce the big sale that puts a company over the top.

However, that’s not the story we see in the movies, or on TV. Media loves to tell “The Lottery Story”; American Idol, The Social Network, the one big event that will change your life forever (can you hear the reverb there?). The lottery story says that I don’t need to make those 10 calls a week, I just need the one right call. I need to meet “that person” who is going to give me a chance. If that wealthy person would just give me $100K (They wouldn’t notice it), if I could land that Fortune 100 client, if, if…

One problem with the lottery story is that it sometimes happens so that occasional happening provides reinforcement of the dream that it might happen to me (You can’t win if you don’t play!). We see an acquaintance who was once on our level, “suddenly” working on bigger deals, with a larger staff and think, “Wow, he must have it it big!” What’s more likely is that you haven’t noticed the hard work that your acquaintance has put in over a long period of time to reach that goal.

The other problem with the lottery story is that there is no clear next step to winning the lottery. If that’s my plan, what do I do on a daily basis (other than buy lottery tickets) to win? As a result, I see people who are trying to “win the lottery” being unfocused, chasing potential lottery tickets in all sorts of directions. “That direction didn’t work, but THIS one will for sure!”

In conversations with experienced sales people and non-profit fundraisers alike I have heard the same story, success comes from consistent work in one direction over a period of time. In fact I’ll go further, I have seen some lighting strikes of success, but they have always come to individuals who are working hard, doing the little things, making their follow-up calls, sending thank-you notes, then all of a sudden a big deal floats their way. The people that I have seen who are running after the big deal, and not working daily on the little things that lead to success don’t seem to find the “big deal” that they are so desperate for.

Maybe that’s the point. When we are being consistent, and working everyday for the deals that we find, we find deals. And doing what we are good at, actually delivering work, in big deals or small deals, leads to competence. That competence, that comes from working daily on our craft over a period of time puts us in position to act when a bigger deal comes along, which gives us experience for the bigger deal, and so on. We need the training & experience that comes from that consistent practice in order to attract the deal of our dreams.

Are you pushing the Flywheel or playing the Lottery? How have you seen consistent effort, or practice pay off?

It’s 5:30, you are still at your desk working when suddenly you hear it; silence. You are the only person in the office again. You think, “That’s OK, my team must have been really productive and burned through things today.” But as you walk past desk after desk you see that there are critical projects that are still unfinished. Despair and even panic starts to rise in your gut. “How can people do this, don’t they see what this means to our business and our clients? Why aren’t they more committed to the work?”

This is a common story that I hear from business owner after business owner. The owners know how critical the work is, and they are willing to sacrifice to accomplish it, but employees? Not so much. Why don’t employees care? Is there anything we can do to turn that around?

First, lets look at why you care. As a business owner you are in a pretty unique position. First you started a business that (hopefully) scratches an itch you have. You see a way in which other people struggle with something that you can do easily. Knowing the pain and challenges that the clients are feeling you also know the relief that comes once they are solved. When you put in that extra more hour or complete one more deliverable you see the difference it makes. That satisfied customer pays their bill and offers you another project and may even tell a colleague about their experience. You get to see how your work is making a difference in a way that is particularly meaningful to you.

Does your team have that same experience? How many times have they heard the client gush about the difference the work has made, not just second hand from you, but face-to-face with the client? Have they made the connection between exceeding the clients expectations and getting paid? Many team members (especially if they are young) haven’t had that experience, and don’t really understand on a visceral level the value that they can create, for the client and the company, from that one extra hour’s work. People want to make a difference, they need to see with their own eyes how their work is making a difference.

Then sometimes there are those clients or projects. The ones where no matter how hard you work, or how much extra you do it doesn’t pay off. At those times the whole team needs to understand that all our work is part of a larger purpose. Even if the client doesn’t appreciate it, we know that our work is connected to a larger, more important change we are making in the world. That’s the itch that you started this business to scratch. Maybe your work brings beauty to interior spaces, or creates clear and compelling messages, or you develop software that’s easy for people to use. Whatever you do, somehow you are making a difference in a way that matters to you.

By clearly stating this purpose, this “Way you are making the world better” to your team, your clients and your vendors & partners, you will attract people that value that purpose too. If when you talk about an assignment with a team member you can connect the work to that purpose it helps people to see how doing this work is making a difference. Very few people actually work for money. Yes, money is important. If you pay people too little they can get very dissatisfied. But paying people too much doesn’t motivate them to work harder or do better work. People want to make a difference, they want to be connected to something bigger than themselves. To the extent that we can give that to them, we will see more commitment, engagement and excellent work.

Are there times when your team was extra committed? What was different in those times? Have you tried connecting purpose, and results to the job that’s getting done?

White House White Board: Austan Goolsbee on Startup America

I saw this video today and it got me thinking. What does small business need? What can the government do to aid the growth of small business? Before you read on, take a minute and watch the video to see what Austan Goolsbee, the Chairman of the President’s Council of Economic Advisors says that Obama and his administration are doing.

My experience with small business isn’t that they need capital. I’m not saying that no one needs capital, and if you offer someone money they tend to find a reason to take it. But money doesn’t solve real problems that most businesses have. If your business is growing and making money there is usually someone willing to give you the growth capital you need to make it bigger. Instead, the businesses that I see chasing venture capital are usually selling a dream, something that they haven’t proven out, even on a small scale, and many fail. I would rather see entrepreneurs chasing customers than capital. Making capital hard to get is a useful barrier to make sure that only good businesses get started. VC’s have terrible success rates as it is, making that less costly is likely to create businesses that are destined to fail.

Most small business people need to focus on finding customers and making their business better every day. So the idea of reduced regulation sounds fantastic. I’ve been working with small business owners over 10 years and I’m still discovering more regulations and rules that have to be navigated. The less of this the better, so I applaud this effort without reservation.

Once business owners have gotten past the survival stage then they need training, but not classroom training. They need to have someone who has done what they have done work with them to solve the problems they face. So if that’s what the mentoring is, again, bring it on. I don’t know anything about the examples he uses in the video, but most government provided “support” for small businesses is weak.  The SBA, and other similar efforts are usually evaluated based on the number of hours of counseling they provide, rather than the satisfaction of the clients, or the results that those hours produced. Real mentors will only stay with it if the business owner is really making progress and that tension is helpful in overcoming the inertia that we all feel when faced with changes, or new initiatives.

The last issue that Goolsbee reviews is tax relief. I’m all for tax relief; but this question of eliminating capital gains on small business stock sales is really puzzling. Do we really think that people are going to rush out and start more businesses because any business started this year will not have any capital gains when sold (likely 10 or 20 years from now)? It just seems like an idea that will make some headlines (O% Capital Gains Rate on Small Business) but isn’t really effecting anyone that I know, or that I am likely to know. Honestly, I tell clients to be proud they are paying taxes, that means they are making money! Successful business owners will be glad to hire an army of accountants to make sure they are paying the lowest tax rate possible. But what is really discouraging to businesses is the cost of everyday fees, licenses and other “taxes” that are levied on the successful and unsuccessful alike. These amount to the death of a thousand cuts for may start-up businesses and mostly cannot be ameliorated regardless of the administration.

So what could Government do? What would make a difference?

Be Consistent. Most small business owners are in it for the long-haul. Changes in policy, in regulations and rules can make a perfectly good business suddenly grind to a halt. I know that politicians assume that they are elected to create change, but all of those changes produce uncertainty and risk for small business.

Create a great workforce. Businesses are looking hard for workers who are well trained, hard-working and motivated. Much of that isn’t the government’s job, but there are ways they can help. Invest in education, not just subsidizing college, but finding better ways to teach and prepare students for the marketplace they will be entering.

Recognize entrepreneurs as part of the solution. What was most encouraging in this video was that it felt like the administration saw entrepreneurs as something other than a source of revenue. Business owners are the engine of our economic growth – most of the growth of big companies comes from acquiring smaller companies. Taxing and regulating them more doesn’t make it fun to come to work, or worth it to risk your capital. The small business community doesn’t pay for lobbyists or Political Action Committees; so they need a champion in government who values their contribution.

Those are my thoughts, but I’m anxious to hear yours. What do you think government can do to aid the formation and growth of small businesses?

You are sitting in your third meeting of the day. This is no ordinary meeting, you have several of your key team members in the meeting and you are working on an issue that is really important to the success of your business; but you keep getting sidetracked. In fact, you have lost track of what the team is talking about and instead you are staring at your to-do list and fantasizing about getting some of that done.

How did this happen? You are the boss, and you are roped into spending time in meetings that you hate, that aren’t getting you closer to your goal. I think I know, you forgot to invite the most important person to the meeting, Warren Buffet.

Before you write me off as a loony, go along with me on a thought experiment. If Warren Buffett was in this meeting with you how would it go? Who would set the agenda? Would people come prepared and stay on topic? What kind of meeting would you have? So if Warren Buffet came to the meeting you would have a meeting that wouldn’t drive you batty? Then invite him, only you play the role of Warren Buffett.

If you walk into a meeting and you can’t see that there is a clear agenda, either set one or walk out. If the discussion starts to drift, ask folks to stay on point, or schedule another time to deal with the issues that are coming up. You be the person who’s time is too important to waste but has tremendous value to add, if the discussion can stay on point.

Many times we get the results we tolerate, and if we tolerate mediocre time wasting meetings, that’s what we get. But if we believe that our time is valuable, that we have important things to do outside of this meeting, then we will do what we need to do to complete the important work that you have to do in the meeting in the shortest possible time. What’s the best part? If you keep your meetings crisp and on point, your team will love you! Everybody hates time wasting meetings, if you set the example it will become the norm and everyone will be happier.

What works for your to keep meetings in your organization focused and productive?

Strategic Planning, we all know it something that we should be doing, but I’m not sure that we all even know what those words mean? Are we locking ourselves in a conference room for a day and dreaming about the future? Or do we argue for a day about the words in our “mission statement”. As challenging as our business environment is today we can do things that don’t hit hard on our bottom line, so why should we think about creating a strategic plan?

1. A strategic plan is like a road map – it shows you where you are going and how you will get there. You can measure your progress along the way to determine if you are off course or need to pick up the pace.
2. The whole team builds it together. So now everyone has that map, and as each person on the team encounters a question or roadblock they know what decision to make to keep the business moving forward.
3. We need all the energy and creativity of our team members, and this is one way to engage them at a deeper level and get them more invested in where we are going as a business.

These are all good reasons to do a strategic plan, no matter what the economic environment, but when things are more difficult it’s even more important.

When sales are down and people aren’t as busy as they want to be they may start inventing new services, or projects in an attempt to improve things. Without a plan those experiments won’t be coordinated and may in fact be counter productive. Each person acting independently is using only the data and tools at their disposal and don’t have a complete picture. The Strategic Planning process helps to fill in the blanks.

Being opportunistic can be great, and following the money is a time honored way to evolve your business, but it can also lead you into some lines of business that are less profitable, or that are less enjoyable. Instead of reacting to each opportunity you can filter or prioritize them based on criteria you develop together in the strat planning process.

David Allen likes to say that we can’t think and act at the same time. We need to do our thinking first, then it frees our mind to act. Strat planning does that for us, we do our thinking together, where we have the most information and most diverse input then we act together based on that thinking.

How do I get started? Great question – we have a brief one page PDF of ideas for planning your strategic planning meeting on our website at www.anchoradvisors.com.

Maslow's Hierarchy of Needs

In 1943 Abraham Maslow proposed that humans operated within a hierarchy of needs. Until our basic needs for food, security and shelter are met, we don’t worry about our higher level needs for love, esteem or importance. As businesses grow their owners have a similar progression of needs; at first we have a basic need for customers. Soon, we start to realize higher level needs.

When small businesses start their needs are simple. What start-up businesses need most is a customer (or another customer). The bottom step on the pyramid is “busy”. When businesses are getting started the owners have a lot of time, and their goal is to turn that time into customers.

Persistence with a competent business development process rapidly turns a business owner from not so busy into very busy. At this point the need changes from a process that keeps us busy to one that keeps us profitably busy.

Many people would guess that owners that are lucky enough to develop a business that is busy with profitable work have “made it” and don’t have any more work to do. But that’s not the case. It turns out that just making money doesn’t make most people happy, there’s still a higher rung on the pyramid. Being profitably busy with work we enjoy; work that challenges us, that connects us to people we have fun being with. Work that keeps us sharp, learning new things and finding new challenges.

Finally, there is the bonus round. Being busy with work we like still doesn’t make most people happy. We want to be more than cogs in the business machine (even if it’s our business); we want to have a life, a family, and give back to our community.

Each of those stages require the business owner to learn new skills, and to give up old things that they may have been very good at (and that may even be earning them money!) Each stage is a transition, a role change for the business owner; and like Maslow’s hierarchy, we can get stuck at any of these stages.

Where are you in your journey from “not busy” to “busy with profitable work you love”? What things do you need to do to move to that next level? What do you need to give up?

It wasn’t so long ago that I would ask people if they were on LinkedIn and they would say, “Yes, but I don’t know why, I don’t get anything out of it.”  I used to agree with that statement, but I stopped recently and noticed that LinkedIn had quietly crept up to be the #1 social media site in my tool kit. In fact, according to my stats on Safari, it’s the #1 most visited site in my browser.  This lead me to pause and think, why am I visiting LinkedIn so often? Here’s how I’m using it.

1. To follow up from a face-to-face meeting.

   Most instances when I meet someone face-to-face and have a significant conversation I will come back to my office and look at their LinkedIn profile.  This cements into my mind what they do, and what their background is. It also tells me who we both know, what kind of circles do they run in? Lastly, I will add them to my connections on LinkedIn if I think there is a good chance that we can do business together in the future.

2. Research on prospects.

   Whenever I get referred to a new prospect I will look at their LinkedIn profile. I look for all the same thinks as I do with a new contact, background, career path, who do we both know. But I also look for, where they might be headed and what are the things that I think I can help them with. If their blog or slideshare presentations are showing on their profile I can get to know them a little better. I might check out there twitter stream if that’s there as well.

3. Finding new prospects.

   LinkedIn is my favorite alternative to cold calling. I use the advanced search features to search for people who are in my target market. I can specify geography, industry, job title, years of experience, company size, almost anything I might need to hone down my search.  It gives me back up to 100 prospects; some of whom I can get a warm referral to (we have contacts in common). Others I still have to approach cold, but look at the wealth of information I have available about them.

4. Find talent that I need right now.

   My business requires that I keep a broad array of talent “at the ready” for when a client has a specific need that I may not be able to fill.  LinkedIn gives me access to resources I couldn’t keep on the payroll, and, if I’m connected to them, has someone I can call to verify their skills.

5. Requests and In-Mails.

   I don’t make a lot of requests through LinkedIn, If I’m trying to reach someone through one of my contacts I’ll usually call my contact directly rather than using LinkedIn. But I do get a lot of event announcements, and requests from others. Many of these are useful.

6. Find employees, for me or my clients.

   LinkedIn is a terrific recruiting resource. Use the advanced search as I mentioned above and you can get a list of potentially qualified prospects. But more often I’m using their LinkedIn Direct Ads to target qualified people that I don’t know with an ad that is linked to an on-line job application.  It’s usually cheaper than the big job boards and produces targeted results.

7. Advertise for events.

   When I am hosting an educational event I will usually spend a few hundred dollars on LinkedIn Direct Ads to promote it. Again, it’s highly targeted, and you can easily track the results.

8. Create offers to attract prospects.

   I have also used the LinkedIn Direct Ads to attract prospects, usually through an intermediate offer. I will advertise for a free download of a white paper or e-book which will be of interest to my ideal prospect. I can then follow up with those who download it to see if they have a need for further help.

9. Keep me up to date on what’s happening in my business community.

   I use twitter for this much more frequently than LinkedIn, but I do belong to several LinkedIn groups that I will drop in on from time to time. There can be some excellent discussions there that keep me coming back.  This isn’t a prime mover, but I do visit and participate.

Wow, there are a lot of ways that I’m using LinkedIn and Safari’s stats don’t lie, I’m there all the time!  How are you using LinkedIn?  Is it moving up the ladder of your useful tools list?

Think about the time that you spend working with the bottom 20% – 30% of your workforce. What are you getting back for the time you are spending? What’s your return on investment with that time? If you aren’t getting substantial performance improvement why don’t you let them go? Most business owners tell me that they hold on to marginal talent because are not sure they will get anyone better. They don’t create a big enough pool of qualified candidates and they aren’t being selective enough when they are hiring so the are settling for “good enough” people.

I was thinking about this as I read about one of The Container Store’s “Foundation Principles” called 3=1 in this article by Mike Jagger. He was at a conference and sat next to Garrett Boone, one of the founders of The Container Store where Garret explained the concept:

“Garrett explained to me that 1=3 means that one great person equals three good people. When you have a great employee, you get three times the productivity and can afford to extensively train them, communicate to them and pay them much more than what a competitor could afford to pay. Garrett argued that if you’ve hired appropriately, you could pay your people double what they’d get somewhere else while still keeping the overall payroll numbers consistent with, or lower than, competitors. Dead weight is expensive.”

I was really struck by the truth in this. We can all pick out those top performers in our organization that make the whole place work. What if we held out for the top 5% – 10% of the talent available in every position in the company. We aren’t talking about hiring MBA’s to be your office administrator, but looking for only top notch talent for that office administrator position when it is open.

How does The Container Store do that? If one great person is worth three average people, they can afford to pay double the going rate, provide terrific benefits and training and still come out ahead. Where could you do that?  What would it do for your business?

Photo courtesy Dave Fayram via Flickr

OK, what started out as a week long series on pricing has stretched to 10 days, part one, and two, discussions on hourly billing, project billing, and alternative billing, along with a post on creating information products have gone before. My final thought when it comes to pricing for professional service firms is: Your price is probably too low!

How can I say this with such certainty?

Who tells you about your pricing most often? Your prospects, right? What do they say? They tell you it’s too high, and from their perspective it is. But let’s look at this from your perspective.

If you are a service firm with a cost structure where you have 50% sales going to pay staff, 25% of sales paying for overhead, and the rest going to partner profits, then a 10% price increase provides a 40% increase in profits. (If your profits as a percentage of sales are lower, then the profit increase from a 10% price increase is even more dramatic.) So far, increasing prices is a really good thing, right?

“But wait a minute, Brad – if I increase my prices, I lose some of my clients. My sales will drop.”

That’s true – so how much would your sales have to drop to reach the same level of profits? If you are billing $2M, with profits of $500K (25% of sales) and you increase your price by 10%, you could bill $1.43M and still make $500K. Wouldn’t you rather do 25% less work and earn the same amount?

Also, who would buy your services at that higher price? Only those companies who knew they would really benefit from your work. Only those companies who really needed you and would do anything to improve their situation. Do those sound like clients you want to work for, ones who follow your advice, get great results, and tell their friends and colleagues how great you are? You bet.

So what’s stopping you from raising those prices? In my experience, what stops most people is confidence. You know that if they raise you prices, people will expect more from you. You will, in fact, have to deliver more value and that scares you. But I want a service provider who is confident in the value they offer, has a boatload of clients who agree and has the confidence to ask me for a price that makes me gulp (Looking for that kind of confidence? Maybe The Business Owner’s Champion is for you!).

So what could happen if you raised your prices? You could make more money; or you could make the same money, but just deliver better work for fewer people who love you more because you are making a HUGE impact.

Are you priced right, or is there room to charge more?

Photo Courtesy of a4gpa via Flickr

It’s ok. We all did it. When things got tough, our mindset got pretty tactical. We weren’t thinking about taking over the world anymore – we were thinking about making it through to lunchtime. Instead of looking for where we wanted to go, we started looking for how we could survive. Where once we were building our dream team, for the last year or so we’ve been holding onto whomever we can.

But the clouds are starting to break up, the wind is dying down and we are starting to feel a little better. It’s not all better – our bank balances are still a little lower than a comfortable level, customers are still pushing for better deals and demand is still uncertain–but it’s getting better, slowly.

The tactical work that we have been doing has made it possible for us to survive, but it’s not the work that’s going to help us to get healthy again – we need to start thinking some bigger thoughts, and dreaming again.

Tactical thinking is good for keeping things the same, for making small changes to keep us on a path – but during the “great recession” things have shifted, and unless we can step back from the day-to-day, assess the situation, and make a new plan we are going to miss the many opportunities out there. Whenever there are major shifts, opportunities are created. Change creates new market opportunities, and products and services have to be created that can meet those new opportunities. If we spend every day with our nose to the grindstone and our hand on the tiller, we are not going to do the THINKING that we need to do to find those opportunities.

Am I suggesting that you launch out in a new venture, or invest a ton of money in a new campaign? Not necessarily, but I do think it’s time to step back, do some review, and press the reset button on your strategy. That means taking some time away to review three key areas:

1. What does my competitive environment look like? What has changed for my clients and prospects? How is their mindset different than it was 18 months ago? What are they worrying about now that they weren’t worrying about then? Who else is in their ear?
2. How have we changed? What have we learned or developed while in survival mode? What have we jettisoned? How have our competitors and strategic partners changed? Where do our strengths lie now?
3. Based on our competitive environment, and our current situation, what things CAN we commit to that will start to move our business forward? What things can we try, experiment with, or test out that could be the next big move for our company?

Once you’ve answered these questions, you can dig in and make a plan – specific tactics that you can commit to that will make your dream into a reality.

Building a plan like this shouldn’t be work you do all by yourself, your team needs to start thinking big again too. I doubt that they joined your company to be a “survivor” or grow by 3% year on year.  They want to know that they are on a mission with you; and if they aren’t, they are going to start looking for someplace else to work.

What are you doing to think bigger?