Part 2: How to identify and overcome challenges
This is part two of a four-part series by business advisor Phil Symchych, looking at how you as a business owner can plan for profitable growth. Find part one in our Fall 2022 issue and online at Manitoba-inc.ca.
The optimistic entrepreneur expects challenges and has plans, energy, and confidence to overcome them. What challenges do you see facing your business in the next year? How will these challenges impact your chosen strategies and your ability to implement those strategies?
After growing up in a family business (Clear Lake Lodge) when interest rates were 23 per cent, I’m surprised by the concern over the current rising interest rates. That is, until I realized that many business owners have never been through a tough recession or double-digit interest rates.
Let’s summarize many of the major challenges that you are experiencing right now with your employees, suppliers, and customers.
The key to retaining people has always been to give them important work that matters and recognize them for their efforts and making progress. As we know, keeping track of exactly what people are doing and how well things are going is much more challenging when they are working from home. This measurement may be less important than we think.
What if, in an eight-hour day, every employee spent:
- two hours on deep work and the company’s number one priority
- two hours on their personal work-oriented number one priority
- no more than two hours on email and in meetings, and
- two hours socializing and communicating with their project teams on how to improve results.
That brings us to an under-used but highly valuable activity I see lacking in most small/medium businesses: training.
Many people use only a small portion of the full power of their software. They over-use their email in the false pretense that playing email ping pong is making progress towards goals. They don’t protect their most productive time because they want to keep their bosses happy. Worst of all, this instant accessibility and communication with internal chat platforms is absolutely destroying a person’s ability to focus and get important things done.
Email and chat systems are hurting company performance and reducing employee productivity and morale.
When did we decide that instant communication was a more valuable business process than generate results for the company and the customer?
Is this formula true: Instant communication > Business results
I recommend companies consider training their employees on how to use email more efficiently, with better subject lines, only including those absolutely necessary, and being clear on what action or response is required by when.
Speaking of technology, the current layoffs from huge technology companies is helping the companies to shift the balance of power back to the employer and require people to work in the office. This big stick, that is, fear tactic, and the reality of keeping your job may work for big tech companies.
However, many companies large and small are seeing success and retaining their well-trained employees with a hybrid approach. Employees can work from home and perhaps have a couple of designated in office days where people can communicate, socialize, and make progress on important goals.
For your business:
What is the best model for your business and customers?
What is the best model for your employees?
In my consulting and coaching work, I have clients who are experts in global supply chain management for large companies. They unanimously recommend making your suppliers valuable strategic partners in your business.
That includes a level of open book management where costs wins are shared by both parties. Give your suppliers a seat at your production and operations planning meetings so they can contribute how to optimize your business. You can request them to optimize inventory levels, workflow, kitting, or numerous other factors. This open communication is a valuable approach to improving your productivity, costing, and delivery to your customers.
Costs don’t include only the product cost. This is where the accounting system is weak in identifying your total cost of ownership. Another accounting weakness is using an aggregated inventory turnover number. If you have inventory, I’ll bet you lunch that you probably have too much inventory, and that 20 per cent or more may be obsolete. Factor in your warehouse, insurance, overheads, and people costs, and the cost of carrying excess inventory can be in the 30 per cent to 50 per cent range or higher of that excess inventory.
If you are carrying one million dollars of inventory, and $200,000 is obsolete. That means your carrying costs could be another $100,000. What would a $300,000 improvement in working capital due to your business? What would a $300,000 improvement in EBITDA do to your valuation? Hint, valuation could be three to five times earnings for a small business, and five to seven times earnings for a mid-market company.
For your suppliers:
Have you created strategic partnerships?
How do you share cost wins?
How are you helping each other improve your business models?
The same approach can be taken with your customers because you are your customers’ supplier. Thinking and acting like a consultant to proactively help your customers will win you more business and loyalty than low prices alone.
Your customers have access to more information now than ever before. They are also very busy writing emails and sitting in meetings, and stressed about inflation, rising interest rates, and retaining their people.
In other words, your customers have many similar challenges to you and your suppliers. You may use the three supplier questions above to analyze your key customers.
We are all in this together.
Take your best customers and suppliers to lunch (not at the same time, perhaps) and talk about all the business factors affecting them, not just about your product or service.
The current economic challenges will give you an opportunity to strengthen your business performance, enhance your value to your customers, and increase your profitability. Those things happen by you taking proactive control of what you can control.
Train and support your people productivity enhancing technology, not distracting technology.
Build strategic partnerships with your suppliers.
Call your best customers and act like a consultant to help them grow.
These economic challenges are temporary. The improvements you make in your business can be long lasting.
Full speed ahead!