http://angelnetwork.com/ammlive/ – Tip Of The Day – Greg shares how the way we treat our employees rolls over to our customers and customer referrals.
**What is Angel Investors Network?
Angel Investors Network (AIN) was created by a group of successful entrepreneurs, investment bankers, angel investors, marketing and management experts, lawyers and accountants who have built companies in a diverse set of industries.
AIN offers investors an opportunity to participate in the buying and selling of businesses, making equity investments, and providing debt financing to businesses with the opportunity of managing risk and creating wealth.
AIN also works with investors, marketing strategists, management experts and financial gurus who combine their skills and experience to work with our target entrepreneurs and make them highly successful business owners.
We are more than just Angel Investors. We are a community of experts that invest our time, expertise, and money in exchange for equity with the objective to perpetuate free enterprise, capitalism and support the entrepreneur spirit while creating wealth, happiness and fulfillment for all those involved.
Building a business doesn’t happen overnight. You don’t build a business and then wait for it to grow. You start with a barely feasible idea and you nurture it, guiding it through several phases of evolution until it becomes almost unrecognizable. If you’re lucky, it will keep evolving until you start generating a substantial profit, and become stable enough to consider an exit strategy.
If you keep pressing, you’ll find that there are seven main “stages” of business ownership, each with its own challenges and opportunities. Learning more about these stages can help you plan for your business’s growth and give you key insights on which to build your organization.
The idea stage is a bit more than just coming up with the original idea for your business, though it is that as well. Once you’ve got some solid business idea, the remainder of this phase is spent putting together all the pieces of how, exactly, you can pull this off. That means creating a thorough business plan you can use as the blueprint for your business, working out all the kinks you didn’t think about when you came up with that initial spark, compensating for the competition you anticipate, and figuring out how you’re going to finance everything.
This phase marks the “official” start of your business, though you can still consider yourself an entrepreneur in the first phase. At this point, you’ll have all the resources you need to begin operations. You’ll find an office (if you need one), secure equipment (if you need it), and start looking for your first clients and customers. This is a hectic stage, but usually doesn’t carry any financial risks–you’ve secured enough funding to see you through this phase. The big problem lies in facing the first line of problems you didn’t anticipate in your business plan–and they will come up.
The next stage is probably the most volatile, because it’s a make-or-break point for your business plan. You’ll start to run out of your initial funding, but it’s still too early to have any manageable flow of revenue. You’re likely changing things in your business daily, so your structure is volatile, and all the while you’re scrambling to pick up enough clients to keep you afloat. Your business will either learn to adapt quickly or burn out in a flash–it’s up to you and your team to decide which. Adaptation is the key to surviving the “survival” stage, and it isn’t easy.
Though the process will be slow and gradual, eventually you’ll secure enough clients and revenue to pull yourself out of the survival phase. At this point, you’ll be able to float steadily, breaking even or making a profit on a predictable basis, and all your internal processes will start to stabilize. You’ll learn to count on your core team, your products will be consistent, and you’ll start to think that theoretically, your business could sustain itself forever–and if you let it, it just might. Some businesses stop at this phase and self-sustain indefinitely, and there’s nothing wrong with that unless you’re after something more.
The growth phase involves acceleration beyond your floating steady setup, and though it can happen naturally through word-of-mouth and high client retention, it’s more likely that you’ll instill this growth through some effort of your own. You can achieve this in a number of ways, usually involving heavy leaning on your sales and marketing teams. The more you promote your business, and the better job you do at retaining your existing customers, the better your chance at scaling your business upward. However, be aware that with growth comes volatility–growing too quickly or too slowly can put too much pressure on your resources.
Generally speaking, as your business reaches a certain point of growth, it’s going to need to change in some drastic way to continue growing, or even to survive. For example, it may need to split into different companies, or it may need to acquire a new company to help it in some key area. It may need to branch out into different locations, or it may need to adopt a new model for some of its central processes. This evolution will be difficult, as your business has been consistent for some time, but it’s necessary to keep moving forward.
Finally, at some point, you’ll reach the level you wanted to achieve, and it’ll be time for you to move on. That might mean selling the business, passing it to one of your team members or a family member, or simply retiring and letting someone else figure out what to do (though I don’t advise this).
The hustle and bustle of the working world can make it difficult for employers to stay in tune with their employees. However, not doing so can be costly — think decreased engagement and job satisfaction, and increased turnover. Employers don’t always get a behind-the-scenes look at the goings-on within various departments and their employees, but it’s time to remove the curtain.
In an effort to hold on to the company’s best and brightest, employers need a bit of a reality check when it comes to their workforce. Here are five data-backed facts every employer needs to realize about their employees and what to do about them:
Employees might appear happy in their current positions, but what employers don’t know is that many employees are actively searching for new work. According to LinkedIn’s 2015 Talent Trends survey of more than 20,000 employed professionals worldwide, nearly one in three said they are actively looking for a new job.
What to do about it: Keeping employees satisfied in their positions requires communication. Consider meeting with employees on a regular basis to elicit feedback and discuss job expectations and concerns. Employees won’t always speak up when there’s a problem, but giving them a safe, comfortable environment to discuss work-related issues and goals will encourage and support ongoing communication.
An engaged employee is a productive employee. Unfortunately, for every engaged employee there are a handful of disengaged employees. Gallup’s 2014 employee engagement study of more than 80,000 employed adults revealed that more than half of employees are not engaged (51 percent) or are actively disengaged (17.5 percent) on the job.
What to do about it: The key to employee engagement is purpose. Employees need to feel that their work efforts contribute to the overall company goals. Actively communicating these goals to the rest of the organization can help employees connect their individual goals to the company vision, which employees find both rewarding and motivating.
Take it a step further by sharing company success with the entire organization. Celebrating successes with employees is a great way to build momentum and organically create engagement.
Compensation is a leading driver of employee attraction and retention. In fact, according to Tower Watson’s 2014 Global Workforce Study, regardless of employee age, base pay is the reason most frequently cited by employees for joining or leaving an organization.
However, while 61 percent of the 600 employees surveyed by SHRM reported compensation or pay as a very important job satisfaction contributor, only 24 percent were very satisfied with the benefit, according to SHRM’s 2015 Employee Job Satisfaction and Engagement report.
What to do about it: Don’t hesitate to spark the discussion with employees. If employees aren’t happy with their pay, employers need to know about it before they look for better compensation elsewhere. While giving a pay raise or bonus isn’t always an option, there are plenty of budget-friendly ways to compensate employees for a job well done, from providing professional development opportunities to offering creative workplace perks.
The employee-manager relationship has a huge impact on performance and overall job satisfaction. So much so, that one in two employees have left their jobs to get away from a bad manager, according to Gallup’s 2015 State of the American Manager Report of more than 2 million manager-led teams and 27 million employees.
What to do about it: Improving the employee-manager relationship requires managers to do more than just manage. Successful managers act as coaches, mentors and teachers.
The study by Gallup found that employees whose managers help them set work priorities and goals are more engaged. So play a role in helping employees succeed in their roles by taking part in the goal setting process and meeting with employees on a regular basis to discuss individual development.
When it comes to motivating and engaging employees, there’s only one thing that truly matters: respect. In a study of nearly 20,000 employees worldwide by Harvard Business Review, being treated with respect was revealed to be more important to employees than recognition and appreciation, useful feedback and even opportunities for growth.
When employers respect employees, the rest follows. Unfortunately, more than half of employees claimed that they don’t regularly get respect from their leaders.
What to do about it: Employee respect begins with inviting employees into the circle of trust. Respect means trusting employees enough to be transparent with them. When it comes to company successes (and failures), keep employees in the loop.
Not only will keeping employees informed make them feel valued and respected, but knowing the goings-on within the company can help them better contribute to successes and solutions.
Imagine this: you are a small business owner, and you notice a specific product you offer is moving off your shelves at an unprecedented pace. You want to get this inventory back in stock ASAP to meet the rising demand. You check in on your bank account to make sure you’ve got enough cash to cover this unexpected purchase. Shockingly, you only have a few hundred dollars in there. You think, “Wait — when did this happen? I don’t remember draining out my bank account.”
Not only do you now have the stress of finding out where you money went and when you can bring that balance back up, but you’re missing the opportunity to take advantage of selling a hot product.
How could this have been prevented?
Mostly, it comes down to spotting the signs of trouble long before they can impact the long term health of your business. To do this, you need an objective viewpoint, a loyal team that isn’t afraid to tell you the truth, and knowledge of which warning signs are the first and best indicators of challenges around the corner.
Here’s how business owners can best recognize early indicators to avoid financial headaches down the line.
There’s a reason entrepreneurs are so often called irrational optimists. After all the blood, sweat and tears you’ve put into building your business, it can be almost impossible to remain objective about what is and isn’t working.
You believe in your product. You believe in your business model. You’re convinced that your business will succeed. Otherwise, why would you keep trying so hard?
However, that unending optimism also makes you susceptible to enormous blind spots in your business. That’s why it’s hugely important to regularly step back and take an objective look at how your business is doing financially. What are your weaknesses and trouble areas? Where are you most likely to hit financial challenges? Answering these questions requires viewing your business as it is, not just as you want it to be.
Often your employees, especially top level operations personnel, can see the financial red flags long before you realize you’re in dangerous waters. That’s why it is so important to cultivate open lines of communication with your highest level managers. Invite feedback often. Ask employees to speak up about issues and warning signs that you may be missing.
Sometimes owners of very small businesses try to cut corners financially by handling their own accounting. While this may save you money in the short term, it is a recipe for disaster in the long term. Hiring an expert to keep watch for financial issues is a necessary expense for the health of your business.
Don’t make this mistake. Invest in a knowledgeable financial advisor who you can trust to notice and communicate any red flags that may be lurking in your business finances.
Once you’ve gathered your team of advisors and financial truth-tellers, you need to plan regular, objective reviews of your financial standing. A good rule of thumb is to review financial documents once per quarter. Look at your financial standing compared to previous quarters and for the same time frame year-to-year. Paying attention to how your sales, profit margins, and growth change in those time frames will tell you a lot about where your business is headed financially.
This can be one of your best and earliest indicators, visible well in advance of hitting true financial challenges, if you know to look for it. Without paying close attention, most business owners would assume that any growth in sales is still a positive sign. However, knowing how that growth compares to past seasons really shows you whether you’re sustaining the same level of progress for your business.
Every quarter, compare your rate of sales growth to the previous quarter as well as year to year. If you notice your growth numbers slipping, look for ways to bring in new revenue long before that slow growth turns into stagnant sales.
No matter how much they love what they do, every entrepreneur is in business to make a profit. But if your overhead is growing and sales aren’t rising to meet those costs, your profit margins could quickly be shrinking.
Divide your net profit by your sales to determine your net profit margin. Compare that number to previous quarters and the same quarter in previous years. How does your net profit margin compare to what you’ve done in the past? If your margins are shrinking, it’s time to reduce overhead or find some new customers to make up the cost.
Are customers taking too long to pay you, or not paying up at all? Low accounts receivables turnover can kill businesses by tying up cash in unpaid invoices.
To calculate your accounts receivable turnover, divide your annual sales revenue by your average accounts receivable. How does that number compare to last quarter or to the same time last year? If turnover is lower than in previous quarters, that may be an early sign of trouble ahead.
Many financial experts will tell you that the number one reason businesses ultimately fail is not because of a business model flaw, but due to issues with cash flow. Even if your business is long-term profitable, if you don’t sustain enough cash on hand to cover your overhead, you can’t survive. If you find that you just barely have enough cash on hand at any one time to handle expenses next month, or even next week, that’s a big indicator of trouble on the horizon.
If reading through any of these early warning signs of financial trouble has given you that sinking feeling in your stomach, don’t panic. There’s a reason we call them “early” warning signs—and every business owner is likely to come across one or a few of these issues at some point. By staying objective about your business, communicating with your advisors, and spotting potential sore spots before they become huge issues, you still have the opportunity to right the financial ship well before you reach dangerous waters.