While a business plan has its purposes (bank financing among them), an inspired, action-oriented success plan will prove to be far more effective. They key is to set inspiring goals and identify the strategies (actions), to complete them and then set a time-frame for completion. Don’t forget to incorporate ownership for critical tasks and measurements to evaluate success. When it comes to planning, consider the words of General George Patton, ‘A weak plan that is executed will deliver better results than a great plan never executed.’ Sometimes simple is sophisticated. Other factors to consider when preparing your success plan are:

Look Back Before You Plan Ahead. Know where you are today before you start planning where you want to go. Look at your financials and key performance indicators. How do they compare against your last year goals and your industry? Then take a few minutes to write down your accomplishments (big and small) for the previous twelve months or last quarter. It’s important that you recognise the things you did well. Finally, make a short list of the things you didn’t accomplish and ask yourself what held you back and what lessons did you learn. Don’t dwell on these, but apply lessons learned as you move forward.

Chunk, Chunk, Chunk. Big goals are nothing more than a series of much smaller ones. If a goal you want appears too big to conquer or takes a long time to accomplish, chunk it up into smaller ones over shorter time periods. For example, a business sets a goal to reduce employee turnover by a certain percentage within twelve months. To accomplish this, they may have 5-10 goals and strategies they will employ, including communicating business goals, implementing monthly team meetings, creating effective job descriptions, developing team incentive or performance bonus program, creating a strong recruiting and hiring process, etc. These smaller goals and strategies are much easier to handle and together will move them to the bigger goal.

Think Big. It pays to think big when setting goals. The old saying ‘shoot for the stars and if you fall short you will hit the moon’ explains why. Often we set ‘safe’ goals because we fear failure or simply can’t figure out how we can get there. Sure it’s safe to set a 5% growth or improvement goal — but what if you chose instead a 30% improvement and asked for advice on how. Employees, alliances, suppliers, other business owners and yes a business coach are all great sources for new ideas, but you need to ask. What if you fall a little short and only grow 20%? You are still better off than you would have been with a 5% improvement! So think big and believe you can.

Measure, Measure, Measure. Would you ever play a round of golf and not keep score? Not likely, because you want to know if you improved or beat your previous best. The same is true in business. If we don’t link measurements to our goals, we have no way to evaluate how we are doing. What we measure, we can improve. So what types of things should you measure and track? Revenue, gross profit margins, fixed expenses and net profit are obvious and most owners track these. Most businesses have other factors that drive their success. Depending on your goals, industry and type of business, these will vary. Here are a few examples of some common Key Performance Indicators: number of leads, sales conversion rate, average £ sale, gross margin, customer and employee satisfaction ratings and labour as a % of sales.

Make it exciting and share it with your team?

An exciting goal is a motivating goal. How much more energy do you have when you are working towards something that you really want to achieve rather than some dull old target? Also if your team are equally motivated by the goal then how much easier is it if you all work together to achieve it? Being an open and honest business owner will build trust and commitment from your team and enable you to make progress far quicker than taking on the responsibility all on your own.

So ditch that dull boring business plan and create an inspired, action plan for success!!

Last month I explained the differences between the three types of people who start business: the Entrepreneur, who has a great idea and vision of the future; the Manager, who is good at managing people and processes, and the Technician, who is good at getting the job done.  We also saw that it is the Technician who is most likely to get off to a fast start with the business, as they can quickly turn what they do into making money and that this is probably why over 80% of businesses are started by Technicians.  However, the facts show that 80% of businesses do not make it past 5 years and herein lies the danger for the Technician who gets off to a good start.

Given the choice between visualising and planning the future and doing something that makes money and puts food on the table, most people I know, including me, would do the latter.  The problem starts for the Technician when they get good at what they do.  The better they are, the more work they get and the more money they make, so they get busier and busier, until they cannot cope anymore and they start taking on people to help them.  Of course, these people need managing, which is fine while there are just a few, but as the business grows it becomes harder, so the Technician stops doing the job they love and starts managing people, which they don’t enjoy.  Life becomes an endless drudge of sorting other people’s problems out and they feel like nobody else has any initiative or is capable of doing the job as well as they could do it. So the Technician starts to reminisce about life was like when they had just started the business and they were in control of their own destiny.

The Manager’s story is nearly as sad.  Having bought a franchise, or taken over managing an existing business, there is an initial growth spurt due to the new energy that they bring to the business.  However, after a few years the business finds itself on a plateau.  The systems and people are all working fine, chaos has been eliminated and there is control over everything, but the energy has gone from the organisation.  Nobody is stepping up with ideas and what good staff they did have in the team have moved on.  So the Manager starts to reminisce about the early days of the business, when things were new and exciting.

And so to the Entrepreneur.  The real fact is that most never even get their business launched; it is never the right time or the finance is not there. Of the 5% who do get their business going, most will probably fail at least once along the way.  But the true Entrepreneur who has the resolve to get up more times than they are knocked down will be the one that does go on to build an extremely successful business.  But when they have done this, they start to get bored. They are no longer needed as the business works fine without them and their team may resent it when they come up with a new idea or try to improve things.  So the entrepreneur starts to dream about turning their next new idea into reality

So what can we learn from this that will help anybody starting their business in 2013, or anybody in business who can see recognise themselves in these sad tales?

Learn from the Technician – make money as soon as you can.  Cash is always King and the quicker you can make it the better.  From this you will gain confidence that what you are doing is right and be able to reinvest in the business.  So Technicians, go out and get work. Managers, buy businesses that make money quickly and easily.  Entrepreneurs, test and measure your ideas as soon as you can.

Learn from the Manager – the only way to get control of a business is through good people and systems.  You are building a commercial profitable enterprise that works without YOU.  Technicians need to understand that they will have to let go of doing the job, Managers will have to learn to employ people better than themselves and Entrepreneurs have to learn that ideas stay ideas unless there are good people around you to implement them.

Learn from the Entrepreneur – the only way for a business to keep growing is to keep growing the vision.  If you cannot visualise what you want your business to look like then it will never get there.  Technicians need to think more about the future than they do about the here and now.  Managers need to get their managers involved in the vision and Entrepreneurs need to realise that they are good at starting and building things but will become bored once they reach maturity, when it is time to move on.

The conclusion we can draw from this is that to be a successful business person you are going to have to think like all three types, and the better you become at this the better business you will build.  The great thing is that wherever you start the only thing that will stop you from building a great business is your ability to change and learn new skills.  After all, Darwin said evolution is about the survival of the most adaptable to change, so go on, take ACTION and build the business of your dreams.

In 2012, thousands of individuals were overcome by the desire to start their own businesses and that trend looks likely to grow in 2013.  So what possesses somebody to give up a steady monthly income, guaranteed holiday and sick pay, a risk free working environment and a team of people to support and help them, to work on their own, twice as hard, for much less money, with no guarantees and loads more risk?  Well, the answer is not as simple as you first might think.

According to his studies, Michael Gerber, author of “The E-myth” concluded that there are 3 types of people who set up their own businesses.  The first type and the one most people associate business with is the:

Entrepreneur – these people are normally identified by their vision of the future and constant need for change.  They may well have had a number of jobs over the years but they have ever really satisfied in any of them.  They will usually regard their bosses as slow moving and lacking in vision.  They will never feel that their bosses and peers understand them and they are more than likely to take risks that don’t go down too well in the organisation that they are in.  Whilst many entrepreneurs go through this phase when they are very young, such as Richard Branson and Alan Sugar, this is not always the case.  Duncan Bannatyne did not start his first business until he was 30 and Ray Kroc, the founder of McDonalds, did not start until he was 57, although there were many signs of his entrepreneurialism before that point. The reason that entrepreneurs decide to leave the rat race to set up their own business is because they have a bigger vision than the people they are working for.

Managers – these people are normally identified by their need for control and stability.  Good managers will have built up a lot of experience in a few positions over the years and as their confidence grew, so did the importance of their role in the organisation.  This advancement was probably the biggest driver for them, until the time that they reached the top of the tree they were in and then they stayed put.  Unlike the entrepreneur, the manager is rather risk adverse.  They have spent most of their working life managing people and problems, reducing risk and creating calm out of chaos.  There reason why managers decide to set up on their own is because they are forced to, either through redundancy or lack of support from their superiors.  Either way, this is normally aided by the fact that something in their mind makes them believe that they will not be able to get an equivalent or superior job elsewhere.

Technicians – these people are the people that do the work: the plumber, electrician, accountant, solicitor, hairdresser etc.  They live in the moment and as long as they are able to work their trade and get suitably rewarded for it, they are happy.  They generally take pride in what they do and like to be left alone to get on with it.  If they were appreciated and had interesting work every day then they would probably stay employed forever.  The technician does not want to manage people or necessarily have a vision for the future, they just enjoy what they have trained for years to do.  Like the manager, they generally do not leave employment unless they are forced to do so, either by redundancy, or more likely the fact that the organisation where they work is not allowing them the freedom to do what they do best and they feel over managed and underappreciated.  They might be able to get a job elsewhere but fear that all employers will be the same.

Many people think that the majority of business are started up by the entrepreneurially-minded people, those with visions of creating something new, who will go on to be the next Bill Gates.  Gerber’s research proved the exact opposite.  About 5% of businesses are started by entrepreneurs while 15% were started by managers and 80% by technicians.  So what does this tell us about how to get a fast start in business if we are one of the three categories of people?

A business starts when it sells something.  There is nothing better than picking up your first job and getting paid for it.  I still remember with joy collecting my first ever cheque from my first ever client.  So the quicker you can start selling something the quicker your business will start.  This is where the technician has an advantage as they can get up and running very quickly just by doing what they did previously, sometimes even to the same customers that they had.

 Managers need something to manage, so the quickest way that they can get started is to buy an already established business, or more commonly, buy a franchise, which is basically a business in a box so that they do not need to be able to do the work, just manage the process. 

Entrepreneurs probably have the toughest start, which is turning their idea into reality.  To hit the ground running, most entrepreneurs will have done most of the initial work while they had a job elsewhere, working evenings, weekends and sometimes during work-time, to get the product to market.

So the best way to get a quick start in your business is to understand whether you are an entrepreneur, manager, or technician.  At this stage, the technician has the advantage, but as I will explain in my next blog, this advantage can be short lived.

Last month, we considered why most businesses never make it to the point where they can be sold profitably.  But what if you are one of the lucky few and your business does grow into a commercial, profitable enterprise that works without you, and you are in a position where you would be happy to sell?  Well, when you get to this situation there are a several possibilities but unlike most commercial transactions, where it is a case of “buyer beware”, with business sales it is very much “seller beware.” 

The challenge comes when you consider that this is never going to be an arm’s length transaction and it will be hard for you to negotiate the best selling price.  Also it is very unlikely that you will be able to let go completely, especially if you are handing over to the younger generation, who may see you as a crutch to rely on in times of difficulty.

The best way to overcome these challenges is to make the ground rules really clear from the outset.  Let your buyers share your compelling vision for the future, put in place clear roles and responsibilities and remember that, if you are staying involved in the business, a shareholder does not have the same responsibilities as a Director, so you must ensure that you back off from the day to day as soon as you can.  I would even recommend an extended break from the business so that they get a feel very quickly of what it is like to manage without you. 

Oh, and one final thing.  Let them make the mistakes in getting there.  Protecting them from failing will mean that you will never get to leave and they won’t get to learn from their mistakes.

2.      Selling to your suppliers, customers or competition

This is an often overlooked possibility, but in reality it makes total sense.  Your suppliers and customers should know your industry well and you may well be a major part of their success.  Buying your business will give them more control of the supply chain and a chance for scalability.  The challenge comes in making them interested without making them worried or losing credibility.  To do this well, start making relationships with them well before you plan to sell.  Find out what their plans are for the future, research their financial position and ask who their big suppliers and customers are; you never know, you could both make a strategic sale to somebody further up the line.

3.      Selling to external investors

This is the form of sale that most people think of, but it is actually the one that happens the least.  Professional buyers are notoriously ruthless when they want to buy.  Venture capitalists want to make big money quickly, so your business needs to be at the start of a high growth curve and they will put in senior management to “help” you run the business.

Angel investors are more entrepreneurial, but they will want you to stay as they have no interest in the day to day running of the business.  This could be a good option, if allied with a management buyout.  Both parties have large amounts of cash to pay you, but only expect a good payout if you have a sound profitable business that works without you and has good potential for growth over the next 2-3 years.

An open market sale will usually be to people with a windfall, looking for a new venture.  These are good potential for you as they will want to take control very quickly, allowing you to exit fully.  They have cash, so you have the security of money in the bank.  The only problem is that they may have limited funds and they are rare.  Business brokers can be a good source for such buyers, but you will need to start early and hold out for a good price.

4.      Franchising

This is my favourite form of sale, because you can retain ownership of the franchising company while selling the operational part.  It also gives you great scope for growth and when you come to sell the franchise, your profit multiple will be much higher, as you will be selling a tried and tested system that has a bigger upside than one business.  The challenge is that this will take a good deal of effort to set up and you have to realise that you will be running two businesses for a period.  One will be the business itself and the other the marketing and selling of the franchises.

N.B. - no allowance for tax planning is made in this article; all decisions need to be supported by appropriate tax and legal advice.

The best way to get a good price when you sell of course is to build your business with the potential to fit all the options above.  If you have more than one party interested in buying your business then the price you get will not only be higher but you will have a better chance of ensuring your legacy continues in the way you want.  So go on, take ACTION, build a great business and sell it for a fortune.

Imagine yourself after ten or more years of running your business.  You have made a reasonable living out of it, built a good team, have some great clients and overall, things are going OK. But the business is not quite as exciting to you as it once was.  The motivation you had in the early years is a distant memory, the new challenges you enjoyed overcoming are now just tedious repetition.  Bringing on board a new client does not have the excitement of the old days, and if a client leaves, good riddance.

So how did you end up here?  This is not what you envisaged your business to look like when you started it.  I’ll bet you said to yourself, “I am going to start my own business and take control of my own destiny.  I am going to build a business I am proud of and one day will sell it and live a happy and contented life on the sale proceeds.” But the fact is that less than 1% of business that start today will actually be sold for a good profit in 10 years’ time.  90% will fail along the way and the rest will be into the hands of somebody else for a pittance. 

So what goes wrong in so many cases, and why are people not learning from the mistakes of others?  The problem is that most businesses are not started by entrepreneurial types, the Richard Bransons and Alan Sugars of this world.  They are started by normal, work-minded individuals who believe in “an honest day’s pay for an honest day’s work.”

In his book “The E-myth Revisited, Why Most Small Businesses Fail,” Michael Gerber’s studies show that over 80% of businesses are owned and operated by “Technicians,” i.e. people that are good at the job that their business carries out, and herein lays the problem.  Subconsciously, if you love what you do then why would you want to stop doing it and if you did stop, what would you do next?

So in fact, most business owners start off thinking that they will sell their business when they decide they no longer want to work anymore, rather than setting a specific timeframe for the sale, but because they love working, that day never arrives and they keep working until finally they wake up one morning and realise that they no longer want to carry on.

So here they are, 10+ years after they started, with a business they no longer really love. The business has probably stagnated a little, the team are reflecting the owner’s lack of motivation and the whole business looks a bit shabby.  And now the business owner decides it is time to sell, they put the business on the market and wonder why nobody is really interested, or those that are interested offer them a fraction of what they think the business is was worth or what they need to retire on.

Now the business owner has have no choice but to go back to work, now doing something that they are beginning to resent, their team are fed up with working for a business that is going nowhere, so they leave, causing the business owner to work even harder and become ever more resentful of the whole situation.  This stress and strain causes tension at home and can even cause illness and things deteriorate until a point in time when something major happens, because the owner was too busy working IN the business to see it coming. This is the final nail in their coffin, forcing them to give up and either close the door on the business or take the only offer on the table.

I know this story is true as I see it with business people I meet all the time and in fact, it is almost exactly the story of my father, 20 years ago.  If this resonates with you, even if you are only in your first few years of business, then what do you need to do to avoid the trap that so many business owners fall into?  Well the solution is actually very easy and you can start right now.

In order to sell your business for a sum you can retire on, you firstly need to set the date you want that to happen – the age by which you wish to be financially independent, i.e. you no longer have to work. There is of course nothing stopping you from working if you want to, but there is only so much golf a person can play.

Secondly, you need to determine the amount that you need to retire on.  Remember, at today’s interest rates of say 5%, a £1 million retirement fund will only give you £50,000 of annual pre-tax income - being a millionaire is not what it once was!

Then you build your business into one that a potential buyer would pay that amount of money for.  On average, from my experience of all the business I have worked with, I estimate that this process takes about 3-10 years.  The key factor though is that you must sell before you have to.  You don’t own a job for life, you own a business that is there to be sold to give you a life. 

So go on, take ACTION, set down what your business needs to look like when it will be ready for sale, and then make it happen.  In my next blog posting I will show you who you could sell your business to.

In sport, if you don’t know how to score then you can’t play the game successfully.  You can’t just take the scoring system from one sport and try to impose it on another – that clearly won’t work.  But the reality is that this is just what is happening in business all over the country, if not the world.  Business owners are playing the game of business without knowing how to keep score correctly and worse still, in some cases, are using the wrong scoring system entirely.

So how do you know what scoring system to use in your business?  Well, if we think of numbers as being the language of business then the scoring system is financial accounting, so an understanding of what accounting is all about is a great place to start. 

The earliest records of accounting date back to around 5000 BC in Babylon, Mesopotamia and Egypt, where temple priests kept track of loans to merchants and goods traded.  The Greeks invented the banking system to help stop the need for carrying coinage while on a journey.  The Romans calculated a system for charging interest on loans and the Jews became masters of money lending and rent collection.

However, it was the Merchants of Venice who developed the modern day accounting methods.  A Monk wrote the first accounting manual and coined the phrase ‘double entry bookkeeping’ because of the simple fact that every entry must have an equal and opposite entry for the books to balance.  From this the common phrase, ‘balancing the books’ originates.

So if accounting has been with us as long as money, it really should not be that difficult to understand but many business owners seem think it is a foreign language that they will never get to grips with.  However, when you think about it simply it all makes sense.  Money flows in and out of your business like a stream.   All accounting does is monitor the progress of that money, in the form of credits and debits.

Credits - Where the money is from

A business first starts with a zero position and the first transaction is always money coming into it, normally from the business owner or as a loan from somebody else (creditors).   Then you start trading and you receive more money for the good and services you provide (income).  All this money into the business is recorded as a credit in the accounts.  But then you need to do something with the money you have collected.

Debits – where the money has gone

If the flow of money inwards is a credit, then the outflow is a debit.  Money flows out to buy goods that are used to make what you sell (cost of sales), pay rent, wages and other running costs (expenses) or you may spend that money on equipment that will last a few years, stock that you will eventually sell or if you have a bit left over you will put it into a bank account for safe keeping.  Stock, equipment and the bank balance are all referred to as assets of the business.

When you make something you are converting one debit into another, e.g. materials and labour into stock, and when the stock is sold, that debit becomes cash again.  Even when things get a little more complicated and you start buying and selling on credit, this simple system works.  If you give your customers time to pay, the money has changed from stock to a debtor, while suppliers are in effect lending you money so are creditors.  Because there can be many types of transaction and accountants are very clever people, accounts can get very complicated, but underneath this is a very simple system of money in and money out.

So how do we keep track of the inflow and outflow?  Well, that is where the financial reports – the Profit and Loss Account and Balance Sheet come in.

Profit & Loss Account (P&L)

The P&L is a record of all the ins and outs during trading in a particular period, be that a month, quarter, or year.  Simply stated, all the income (credits) less all the expenses associated with those sales (debits), leaving a balance that is the net profit or loss for the period.  If there is a profit, this is extra money coming into the business, so it will be a credit.  If it is a loss, it is extra money gone from the business so it is a debit.

Balance Sheet (B/S)

While the P&L is for a period, the B/S is a ‘snap shot’ at one particular time so you can see where all the money is at that date.  Some funds will be tied up in assets and your customers will owe you money.  In turn, you will owe money to your suppliers and those that leant you money to buy things.  The balance between money in and money out will probably be in the bank.   Finally, the profit or loss figure from the P&L will appear on the B/S. 

So if you have taken care to ensure that every in has an out then your double entry will be correct and your books will balance. Simple!

So now you have your financial statements but these don’t mean much on their own.  You need to look at them in comparison to something - last year’s results, last month’s figures or your budget.    After all, every sporting score board will have a comparison with your opposition.

So go on, get hold of those accounts that have been sitting on your desk for the last year, take ACTION and learn the language of business!

Within any business, marketing is one of the most important but least understood skills for a business owner to master.  Many businesses manage to grow without any knowledge of what their marketing really consists of, what aspects of what they do actually work and what alternatives they have to maintain that growth, even when the market place in which they are trading is flat or in decline. 

So what is marketing and how it should be used?  Well, let’s start with what it is.  There are many definitions of marketing, but a typical example from the Chartered Institute of Marketing states that it is “the management process responsible for identifying, anticipating and satisfying customer requirements profitably.”   Whilst I am not going to disagree, to me, this definition is long-winded and confusing and if you don’t understand what something really is, then there is no way you can actually use it effectively.

My definition is a little easier to understand: “Marketing is the activity of communicating with and educating our existing and potential customers on why they should buy from us”.  Now when we look at it this way, hopefully what we need to do starts to become clearer:  we need to know who we are talking to, what we want to say and how we are going to say it. Or to put it even more simply: Target, Offer, Copy.

Of these three areas, by far the most important is the Target, i.e. who we want to talk to, because as soon as we get real clarity around that, the rest of the marketing gets so much easier.  Let’s take an example:

I run a hairdressing salon and I want to educate people on the fact that we have the best stylists in the area.  Now think about what would happen if I try to educate everybody about this.  It would be like being a professor and trying to teach the whole of the university quantum mechanics; I would be wasting a lot of time and energy trying to teach people who have no interest whatsoever.  So let’s look how we can start to home in on who we really want to communicate with and educate.

Firstly, we need to consider whether we want our existing clients to come back more often, or whether we want new clients.  Whilst the former should be out first point of call, I am going to assume that there are already strategies to keep in contact with them and that we are looking for new customers.  However, looking at our existing client base is actually a good place to start in identifying who we want as new clients.  I like to categorise a client base into A, B, C and D grade clients. 

A’s are our “Awesome clients”- those that buy everything we sell, are a joy to work with and pay on time.  B’s are our “Basic clients”- they buy a fair amount of our products and create no fuss in buying from us.  C’s are our “Could do better clients”- they only buy a small percentage of what we sell and don’t seem to get why we are so good.  Then there are our D graders, “Dead end clients”- they quibble over price, complain about what we do and take up more time and effort than is right for the amount of business they bring.

Of course we want more A grade clients, so by writing down what it is exactly that makes an A grade client, we can start to see if there are any common themes that we can look for in our new clients.  So for our hairdressing business, let’s say our A grade clients are 40-50 year old professional women living in Winchester.

Now we know who we are talking to we can decide what we want to educate them to think about us, i.e. create a compelling offer.  Our Winchester ladies are probably money rich and time poor, so when they do things, they want to make the most of the experience.  So we need to educate them on how we can save them time and make them feel special.  I would therefore be thinking of showing how we provide e.g free Wifi, top grade coffee and tea, perhaps a hand and foot massage while they’re at the salon, appointment reminders by text and offer special deals to local top quality shops and restaurants.

So we now have our target and a compelling offer.  The next step is to find the best way to communicate with our potential new customers.  For this we need to think about where they live, socialise, what they read, listen to and what other people they buy from. This will then lead to our form of marketing (copy), be it print, radio, online, etc. The list is long, but a few options will stand out as being the most cost effective and most likely to succeed.

I hope this has helped you to recognise that spending the time targeting your market makes marketing so much easier and more fun too.  You must always remember to test and measure all marketing you do - that way you will know what works and what does not.  So go on, take ACTION and get your target market in your sights today.

Over the last few years, the world has gone leadership crazy; books, seminars and coaches, all banging on about how we should be better leaders of people.  Even I have used the expression, “you can’t manage people, you have to lead them.”   Well of course leadership is important and without it you will never get the best out of your team, but what most purveyors of leadership skills often fail to recognise is that leadership is just the tip of the iceberg.

Let’s look at this in context of a team sport such as football.  Choose any club and you will see that the head has the title of “Club Manager”.  Do great managers like Sir Alex Ferguson have good leadership skills?  You bet!  He has an inspiring vision of what the team is striving to be and understands how to motivate his players to give their best.  But my guess is that this is 10% of what he spends his time doing.  The other 90% is managing the process of how he intends to get the team to achieve that year’s goals, and after as many years managing Manchester United as he has, I think he has a very clear and simple system that he manages to.  And therein lies the key to successful management: you manage the people to follow the systems.

The truth is that most people want to be told what to do.  Now I am not talking micro management, talking down to people or manipulation, I am just saying that most of us want clear directions for what we need to do, the rules we need to follow and whether what we have done is right or not.  We want a simple system that we can follow to get the results we want.  Think about all the systems we rely on in our lives: e.g. banking, queuing for events, traffic control etc.  and how you felt when these systems broke down.

So let’s bring this back to basics of human psychology.  The brain has two sides, the left and right, with the left dealing with logic and structure and the right emotion and creativity.   To allow us to perform at our best we need to use both sides.  Having more structure allows us to be more creative, because we need less brain power to worry about the basics of what we are doing.

Now we know that people need, in fact like, to be managed, what is the hidden art of management and how do we master it?  As mentioned previously, there are 3 key facets of great management:

1.       Planning

All great managers need to know how to devise a plan and put it into action.  I don’t think this is as true for great leaders; my view is that the leader comes up with the inspiration, gets their team excited about where they are going and then leave the managers around them to work out how they are going to achieve it.  Look at Ford, Kennedy, Churchill for clear examples of this.  However, it must not stop at just the plan.  Think of a plan as “who does what by when” and this brings in the resourcing capability as well, i.e what people, equipment, finance and materials are going to be needed to deliver the plan.  So great managers have the ability to think macro and micro and work out how one leads to the other.

2.       Rules

“You cannot play the game unless you know the rules.”  Managers must be both the makers and keepers of the rules.  The leader might set the values of the business but the managers must apply these to the day to day activities.  I mentioned earlier about managing the systems not the people.  If you think of systems as being a set of rules, then this makes total sense.  If people are clear what the rules of the game are and they choose to play the game, then when they break the rules they should not question being held to account.  Just look at most sports; when a rule is breached, the referee blows the whistle, a foul is called and the transgressor is reprimanded according to the severity of the breach.  If all is clear then this usually goes by without discussion (except in football, for some reason!)

3.       Communication

Communication is the critical factor in management, and this is the area that lets most managers down.   The saying goes, we have two ears and one mouth so we should listen more and talk less.  Stephen Covey in his book “7 habits of highly effective people” said, “Seek first to understand, then to be understood”.  But while listening is important, it is giving the team feedback of how they are doing that is the real sign of a successful manager.  This involves communicating results through Key Performance Indicators, and whether they are living to the culture of the business, both good and bad.   A Great manager must always remember though that results are yesterday’s news and there is nothing you can do today that is going to change them.  The important thing is to make sure that the team learn as much as they can from what went wrong and what went right, and communicate what needs to be done differently today to affect what the team can achieve tomorrow.

So there you have it.  While we do need to strive to be great leaders, we must also remember that great management is just as important a skill.  So go on, take Action and learn to master the hidden art of great management.

There is a myth that entrepreneurs are born that way, just like there is a myth that talented sports people are born with a superstar gene.  When you see Usain Bolt running, it is easy to say that he wins because he was born with the attributes that make a world class sprinter.  Well, the reality is very different.  If you saw the documentary on Usain’s training regime it was totally clear that while he may possess some useful physical attributes,  it is his commitment and discipline at putting in the training that make him special.

If you look into the history of any successful entrepreneur, you will see a similar story.  No child is born with an entrepreneurial gene, or one that makes them likely to be more successful than anybody else.   Starting at an early age doesn’t seem to matter – while there are cases of teenage entrepreneurs, such as Alan Sugar and Richard Branson, there are many more successful entrepreneurs who started later in life, such as Duncan Bannatyne (30) and Ray Croc, founder of MacDonald’s, (52).  What they had learnt is that if you want something in life you have to go out and get it, be prepared to fail, take risks, work very hard, ask for help, learn from your mistakes and never give up

In his book “The Emyth, why most small businesses fail”, Michael Gerber’s study showed that only 5% of business owners were, what he classed, true entrepreneurs, (i.e. they were in business for the sake of business itself); 15% were managers (i.e. they were good at managing a business that was already up and running); while 80% were technicians (i.e. they were technically competent at the trade or profession that they were carrying out).

So if we are not born entrepreneurs and only 5% of business people actually become real entrepreneurs, then how do we increase our chances of becoming one of the 5%?  As I said above, being successful in anything is hard work.  Studies have found that it takes 10,000 hours to master a skill, so if you dedicated 8 hours a day 5 days a week, 50 weeks a year to one skill you could be a master in 5 years, although the norm is 10 years, because you cannot keep such a high level of training up. 

This is why children who start a sport young, generally go on to be more successful - not because of their genetic talent, but because they have had a longer time practicing.  Tiger Woods and Lewis Hamilton started when they were 4, so by the time they were 14 they were masters of their sport and by the age of 24 they were superstars.

The difference between business and sport is that it business is more complex and so it is difficult to start learning at a very early age.  The good thing is that it is more mental than physical so we can continue participating far longer than in sport.  In fact the ideal scenario might be to dedicate yourself to a sport from the age of 4 to 30, then to business from 30 to 60. If only my parents had told me this!

The key to successful sport stars’ success is that they want to be the best, they want to win and they  are prepared to work hard to achieve it. So in business you first have to decide to be a successful entrepreneur and what that success looks like to you.  Then you have to start thinking like an entrepreneur. Entrepreneurs look at a business not as a job, profession, or vocation, but as a game where the score is money and the more money you make, the more successful you are.  Duncan Bannatyne said that he woke up one morning aged 30 and just decided he was going to be a millionaire and the quickest way to do that was to start a business, any business, so he chose an ice cream van, not because he knew anything about ice cream, just that it was available and it could make cash.

Once you have committed to being a successful entrepreneur you then have to do something about it.  So where do you go to learn the 10,000 hours to be a master entrepreneur?  I suggest that traditional education such as college or university is not the answer – whilst it can give you useful tools, it relies on traditional teaching methods and teachers who are most likely not entrepreneurs themselves! 

If you ask Alan Sugar, he will say the school of hard knocks worked for him and I would agree.  The good thing though is that you already started the course with your first job.  You have been in and around business all your working life.  The problem for most people though, is that they were not paying attention in class, they were too busy learning a technical skill – be it accounting, plumbing, or selling - to actually see what business was all about.  Even if you worked for the worst run business on the planet, there were learnings to be had.

The best way to learn is to do.  For those that have started a business then keep going, keep learning, but above all, avoid just employing yourself in a JOB.  For those of you that have not started your business yet, Take ACTION and go for it, but just remember - a true entrepreneur has a profitable business that works without them, not one where they work the hardest and get paid the least!

I often get asked what is the most common mistake business owners make when they are growing their business.  While I could say it is not setting goals, planning their time, generating enough sales or having effective marketing, the true factor must be the lack of financial understanding. 

Businesses go bust because they run out of money.  Even the most badly run business will survive if it has a constant supply of cash.  I have come across businesses run by people who have never taken  penny out of it for themselves, relying instead on investments, family or,  even worse, borrowings to fund their personal life.  The worrying thing is that they have no idea of their financial situation so they continue to bury their heads in the sand and do the same old thing.

Even good businesses that make profits can fall foul of cashflow problems when they start to over trade.  Overtrading is where the sales of a company are increasing but the money from sales is coming in more slowly than the money is going out to pay the suppliers.  When the money runs out, the business cannot continue, even though it has a growth in sales.

Not all financial risk factors relate to the business itself, but to external factors or conditions.  For example, we are currently in a time when our customers are finding it tough and if they are unable to continue trading, they may well leave us with an unpaid (bad) debt that can have a serious impact on our own business.

However, one significant financial risk factor that is the fault of the business owner is where the business model does not actually work.  The overheads are too high, the profit margin on each product / service is not enough, the systems are inefficient and team are underperforming. All these factors combine to produce a business that will haemorrhage cash and ultimately fail.

So how can we reduce the risk of our business failing becasue of these factors?  Well, the simple answer is that we need to know our numbers!

In business, as in sport,  if you do not know how to score, how can you play the game? Can you imagine how pointless most sports would be if you did not keep score?  How would you know if you were improving, identify your weaknesses, compare yourself to the competition, or if you had actually won anything?

Keith Cunningham, in his book Keys to the Vault,  says that “If you do not understand your financials you should not be in the game of business.”  I am not saying that you need to be a financial wizard, but you must know the basics and be able to ask the important questions that will impact on your business.  If you have a real problem with numeracy and accounting, then employ somebody you can trust who can help you.  Not understanding the rules is no excuse when you are playing the game.

There are 6 key financial items you need to understand and look at on a regular basis, that is at least monthly.   (For some businesses this could be more often - weekly, or even daily.)

1                     Profit & Loss account – key to monitoring your sales, costs, and profit margins for the period

2                     Balance sheet – a snap shot of the business showing where the money invested in the business is tied up at that point in time.

3                     Cashflow forecast – a week by week projection of the flow of cash in and out of the business.

4                     Aged Debtors & Creditors – how much you are owed and owe and how many days the amounts are outstanding.

5                     Budget – prepared once a year and reviewed monthly, to ensure that costs are kept in check and sales are meeting targets.

6                     Key Performance Indicators – KPI’s that are specific to your business are the pulse that tells you how fit you are.  They can cover any aspect of the business from the number of leads coming in, the rate of conversion into customers, right through to wastage and down time.

When you start learning about your financials it can be hard and confusing, but it is no different to learning a new language.  You can put in the effort, read books , take a course etc.  Or you can dive right in, speak to people who talk the language, use what you learn daily and pick it up that way.  But remember the old adage still applies, “the more you  learn the more you earn”.

There should be no embarrasment in asking for help to understand your financials; after all, if you did not know the rules of golf you would have no problem in asking somebody for help learning them.  The only embarrassment is if your business fails because you misread your score or didn’t keep score at all!

So the choice is yours - take ACTION now, learn the rules of the game and become a financial master!