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Hiring Case Study: Resumes are a waste here’s what’s better

As crass as the above image is it hits the nail right on the head. At the end of the day as business owners we must take responsibility for everything that happens within our business. I personally was sick and tired of hiring the wrong people for mine. What I’m about to show you has saved me thousands of dollars in outsourcing to the wrong outsourcers or hiring the wrong employees as well as countless hours of frustration, resentment and basically everything that makes me procrastinate and hate what I do.

Have you ever hired someone to build you a landing page or a website? And instead of making your life easier it just made it harder? And instead of saving you time and money it made things more expensive and consumed more of your valuable time? This used to happen to me all the time. Keep reading on as I show you the EXACT processes and systems I developed for screening and hiring employees till it reached the point of minimum effort and maximum gain (Typically called the Pareto principle but you get the idea).

The most commonly used methods to screen applicants when recruiting and hiring are also the most useless yet somehow most companies persist in this idiotic behavior.

You don’t need to be like them, you can improve your hiring results and decrease your time spent extremely easily through some simple changes to your process.

Today we’ll explore one of them – the alternative to resumes.

I should mention in advance this particular technique is designed for low and medium skilled positions.  Although it can in theory be applied to high skill and executive positions the application there serves a different purpose.

We’ve used this method successfully to screen:

  • Labourers
  • Sales people
  • Engineers (electrical, mechanical, geotechnical, etc.)
  • Trades people (welders, machinists, mechanics, etc.)
  • Technical people (computer programmers, technicians, etc.)
  • Many others

 

You can grab our whole step by step process with examples by downloading our recruiting process templates

 

Background – The Screening Problem

bad hire

I owned a recruiting company for 7 years we screened tens of thousands of applicants, often we’d get literally hundreds applying for a single job.  There’d also be times where we wanted to go back into our database to find someone who fit what we were looking for…how do you do that when you’ve got literally tens of thousands to weed through?

This was an exhausting process to say the least.

Let me do some quick math for you.

If you sit down and review resumes thoroughly say they are on average 2 pages and you read 1 page per minute that’s 2 minutes per resume to read it over.  Frankly, some are longer and you probably won’t be giving much attention to detail but consider what this does to your hiring costs.

2 minutes per resume multiplied by say 200 resumes is 400 minutes of time…just screening resumes.  That’s over 6 hours!  And that’s without accounting for distractions, etc.

If your time or the time of the person screening is worth $50/hr (it’s almost certainly more by the time you consider operational overhead, etc.) that’s over $300 you’ve spent and for what?  You’re not going to remember most of those, at best you’ve got a very long short list.

What’s the alternative?

Most people develop biases that allow them to screen resumes faster.  I’d train our staff to screen a resume in about 20 seconds each looking for very specific things based on the position.

What’s the problem?

The biases are almost always at least partially wrong, things like “do they have a university degree” becomes a way to screen because you’ve got to do something to narrow the candidate list even if a degree has absolutely nothing to do with whether they’ll make a good hire.

The other solution involves technology.

Software can parse the resumes and make them searchable, decreasing how much time you spend opening files and reading through information.

The problem?  The resume itself is the problem!  It doesn’t matter if you can parse it, it rarely includes the information necessary to properly screen the person for the next step.  Search works based on keywords and a great applicant might through no fault of their own not use the keyword you’re searching for.

Why?  Because they don’t know what you’re looking for.  The candidate has created a form resume designed to be submitted to dozens of possible jobs so it’s generally generic and often includes irrelevant information while missing key points that matter to you.

What often ends up happening is whoever is screening the resumes doesn’t look through all the applicants but just settles for one near the top meaning they could be missing someone way better but because they don’t have the time to go through them all they’ll never know.

I’m as guilty of this as anyone and it felt bad to know that the squeaky wheel would get the grease or someone really good was missing out because they weren’t as aggressive in following up.

 

Resumes are Irrelevant

 

There are some voodoo consultants who claim to have magical powers to determine candidate fit from resumes.  It’s rubbish.  Complete and utter nonsense.  Here’s why:

  1. Often resumes aren’t even written by the person applying for a job they might have used a template or gone to a third party resume writing service so what you think you’re gleaning from that resume might have little to do with them.

 

  1. Often the best candidates have poor resumes because they aren’t used to having to write resumes because they are busy doing great work, they are throwing one together quickly to apply when they are otherwise busy. By contrast some of the worst candidates are professional job seekers who might have great resumes.

 

  1. A good resume is designed to sell you not give you objective information about whether the candidate is a good hire so it’s at worst lies and at best highly filtered data, neither of which tells you accurately whether the person is a good candidate or not.

We tried all kinds of fancy voodoo, language profiling, NLP writing analysis, learning for different personality patterns in the writing, etc.  We consistently got the same result…frustration as what the resume said or how it was written failed to correspond to on the job performance.

Think a spelling mistake or grammatical error means the person is a poor candidate?  First, in the real world a spelling or grammatical error is rarely high impact, second, anyone can make a mistake and it doesn’t prove anything as much as you’d like to think it does or should.

These are the kinds of biases people form reading resumes.

Bottom line isn’t to bash on resumes it’s to point out that they are a waste of time…quit wasting your time.  You’re literally throwing money down the drain unnecessarily.

 

The Disqualification Process

The goal of the resume or what we’ll call the application process isn’t to select someone to hire it’s to decide who not to move to the next step in the process.

Ideally, this step helps you build an easy to reference database and gather some market data.

The way to do this is to determine your “disqualifiers”, which are objective in nature and then screen out anyone who doesn’t meet them as quickly as possible.

Please note, these disqualifiers should be data driven, meaning there’s no interpretation involved.  A huge part of the problem with resumes is they are so open to interpretation that you can out think yourself.  You want to eliminate thought from the process and make it robotic.

What does this accomplish?

It means you can outsource this step for $2/hr. saving thousands.  It means it can be done extremely quickly saving thousands.  And it means you can make better quality decisions, which will likewise save you thousands.

 

If you’d like you can download our disqualification templates here.

 

The Resume Alternative

We generally refer to the resume alternative as a disqualification email simply because we deliver it by email but it could just as easily be an application form you have applicants fill out on your website or in person when applying (less practical today).

What you’re aiming to do here is to reduce your cost per hire and decreasing the time to hire while simultaneously increasing your quality of hire.

Bottom line your objective here is to improve your hiring ROI.  Remember everyone you hire should be making you money not costing you money and the less they cost you including the cost to hire and manage them the better off you are.  Literally, hiring can be a huge competitive advantage.

When we started doing this it felt so much better.  It’s more efficient, it’s clearer, and more organized for the future.

Process wise what you’ll do is have everyone who applies fill out this form you’ll create for them.  Literally you’ll never read an email they send or look at a resume those are both a waste of time.  On your website or in your ads you’ll encourage them to fill out the appropriate form and if they send you a resume you’ll reply with this instead.

It’s highly efficient and actually will allow you to give better service to the candidates, which they appreciate.

Literally, for the initial point of contact you can use an auto-responder or templated email.

Download a sample in our copy and paste recruiting template pack here.

 

Disqualification Form

Really it’s very simple.  You’re going to ask them for every objective piece of information you’re looking for rather than relying on them to guess what you need to know.

You’re going to remove emotion from the screening process by standardizing how you gather the information.

The key here is to ask for OBJECTIVE information.

In other words, you’ll never ask something like “are you a hard worker?” or “are you a team player?”

You’ll ask about whether they have particular certifications and ask them to provide a copy or a certification.

You’ll ask logistical questions like what schedule they are available to work.

You’ll ask about experience only in an objective manner like “please name 3 projects of such and such type that you’ve worked on” or “please list the heavy equipment you’ve operated”.

The idea here isn’t to provide perfect screening on the quality of how well they’ve done it only to establish with relative accuracy that they have done it so it’s worth your time to screen further.

These questions should be tailored to the individual position you’re hiring for and not be generic though of course you’ll have some overlap between positions.  What this should also do is match.

What you’ll end up with is a form you can fill out that corresponds to the position profile you created so you can see at a glance the quality of match.  It all works perfectly together.

To get a copy of the position profile, disqualification form template, etc. download our copy & paste recruiting template swipe file here.

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Case Study: How We Grew One $2 Million Company 72% Year Over Year in 3.5 Months

A few years back I formed a company with a partner where we’d go into companies, roll up our sleeves and actually do the work of growing them fast in trade for a piece of the upside.

One of our first clients was a trucking company that wasn’t doing badly in fact they were doing well about $2 million/yr. in sales with just under 20% margins but they’d been stuck at that level for a while and were looking to go to the next level.  This is the story of what actions worked and which didn’t, resulting in a 72% year over year growth in 3.5 months…pretty good for any business.

 

Starting Point

Initially the company was primarily relying on owner operators, people who owned their own vehicles and would do the trucking work involved.  These drivers were each paid 80% of the gross earned for each job.  The company owned a few of their own vehicles and had both the cash and cashflow to purchase others if necessary.  Most of the owner operators were Class 1 drivers meaning they could drive larger trucks but a fairly large percentage of the jobs didn’t require larger trucks being direct point A to B trucking within a 6 or so hour radius though some were multi-day trips.

Scalability in terms of trucks and drivers was relatively easy and dispatch could handle considerably more capacity so the primary goal was to increase sales and grow margins.

The industry was full of a fair number of smaller and similar sized competitors with a difficulty etching out a competitive advantage due to the low barrier to entry nature of the work.  The primary defense was the requirement of various safety programs to work for various large and lucrative clients.

 

What Didn’t Work

The owner had previously been sold on a call service to businesses within the surrounding area to generate leads and had this supposed leads list untapped.  We had a sales person call the leads to little success noticing most of them weren’t very targeted and not particularly high value.

One of the administrative operations people wanted to streamline office procedures, buy new equipment, etc.  Although we did replace the office administrator and implement the documentation of various systems, which made life somewhat easier for the owner the cost savings were minimal because the administrator needed to be around regardless so streamlined procedures didn’t reduce working hours.

Part of the graphics team wanted to implement a rebranding effort (new name, logo, and website).  This had relatively little effect in large part because it wasn’t embraced by the owner who wanted to stick to the older brand, which was recognized by existing customers.  Although the branding could have been leveraged to greater effect it’s questionable whether it was or would have ultimately been the driving force in dramatically increasing sales even if it was embraced given the relationship nature of the business.

 

What Got the Results

The real breakthroughs occurred as a result of 4 inter-related changes:

  1. We sat down and identified the 4 most profitable types of customers and created a list of the specific companies that fit within each of those 4 categories to target with direct calls and visits

 

  1. We knew we had to differentiate the question was how? The service itself is pretty commoditized and guarantees only go so far.  Knowing the clients were typically men in remote work areas for weeks at a time we hired hot girls to drive the low end trucks and branded them

 

  1. We applied a visitation rhythm of regular visits and calls (PR trips) where the girls would for example bring donuts by the target customer locations and hand out information

 

  1. By hiring the girls to drive company owned trucks we were able to reduce the cost on those loads from 80% to 65% of gross resulting in a massive boost in margins

 

Even gaining one large customer within the target categories had the potential to significantly boost sales.  Hiring the girls created industry virality where companies we hadn’t even heard of were calling.  The regular rhythm helped encourage repeat business and keep the company top of mind for when services were needed.  Finally, the boost in margins as you can imagine was significant from a profit standpoint.

 

Lessons You Can Learn

Focusing on the right target market is EVERYTHING.  It is by far the largest marketing mistake I see people make and the biggest opportunity for improvement.

All customers have a buying window and go through buying cycles.  If you don’t hit the window at the right time you won’t get the sale because they simply aren’t in the market.  There are things you can do to improve your timing and consequently your efficiency but baring this applying a regular rhythm of follow up is the best thing you can do.

Differentiation is one of the most powerful ways to increase conversions but you need to be able to do it in a compelling way.  If your customers aren’t emotional about how you’re different then you need to look to a different strategy.  This is also where knowing your target customer is very helpful and in this case allowed us to set ourselves apart when others hadn’t previously.  Also note the fundamental service remained the same the differentiator was in the form of the packaging, which is something else you should consider if you can’t improve or differentiate the core offer.

Finally, when it comes to cutting costs not all efficiencies are necessarily better and some carry risks (for example owning too many trucks would have created risks that having owner operators didn’t create) so you need to be sure to measure the net effect of supposed improvements to make sure there will be cost savings and these aren’t counter balanced by increased risk.

If you’re looking for assistance growing your business, please contact us.

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What Should You Do When You’ve Got a Cash Crunch? A Proven Method to Deconstruct and Solve Your Cashflow Issues

One of the most common challenges I hear from business owners is having cashflow issues.  The good news is often this comes from growing rapidly where you’ve got to put out money for inventory or services and are waiting to be paid but because of how fast you’re growing there’s a shortfall.  So long as you’re really profitable that’s a short term problem though it can still sink you.

Worse is when you’re struggling from a temporary downturn in your finances.

In either case it can be incredibly stressful, sometimes scary and overwhelming and in either case you need to take action.

The question becomes what do you do when you’ve tapped all the accounts and the well has run dry?

As with most problems in business and in life it becomes a lot easier not to mention less overwhelming if you can deconstruct it into small actionable pieces so here’s the formula I’ve used successfully again and again in my own life, with my own businesses and with clients and friends.

 

Step #1 – Separate Incoming and Outgoing

You have two parts of this equation what’s going out or supposed to go out and what’s coming in or what you can bring in.  In other words

  1. What can be done to lower your obligations?
  2. What can be done to bring in funds?

These are really two separate issues either one of which could solve your problem but most likely you’ll solve it through a combination of the two.

Your goal here is going to be to brainstorm and then apply solutions in each area and breaking it down helps you to brainstorm more options.

With that in mind you’ve separated out the outgoing from incoming but it helps to break it down further to determine possible solutions for each area.

Richucation Tip – Start by making a detailed list of all your obligations how much they are and when they are payable

 

Step #2 – Deconstruct Possible Solutions to Your Obligations

Though it might not seem immediately obvious…or maybe it is there’s a few different options in terms of how you can deal with your obligations in these circumstances.  You can deconstruct these into essentially two things that can be done:

  1. Reduce Expenses – in other words find ways so you don’t have as much you’ll have to pay out
  2. Push Back Expenses – in other words find ways so you can pay expenses that you can’t eliminate later than they are normally due in order to buy yourself breathing room and time to bring in more cash to cover those obligations

This is fairly obvious right?  You can address some of your cash shortfall by not having to put so much out at all.  Or you can push back those obligations until you’ve had time to bring in more money.  This later only works assuming you’re profitable in the long run, that you’ll be bringing in more money than you’re spending on a regular basis though sometimes it buys you the time to make more money.

 

We’re off to a good start but we can deconstruct the problem and brainstorm solutions even further.

There are basically three ways you can reduce your expenses:

  1. Finding unnecessary expenses and removing them – this should be a monthly practice in your business for you and all your managers to help keep expense from becoming bloated
  2. Negotiating to make expenses go away – this might look like calling up a creditor and saying “look I’m not going to be able to pay and going to have to default at which point you’ll get nothing, I can offer you 50% if you’ll take that instead”. Alternatively, you can call active suppliers and say “hey we’re shopping for better pricing if you want to keep our business I need you to come down on these numbers.  Often this can get you a 5%-10% discount if you’re a good long term customer who’s valuable to them and assuming you haven’t done this in the past.  Again, this is a practice you should be doing regularly in your business.
  3. Finding another place to meet the need without the cost – this is essentially a case of moving an expense from you to someone else. For example, maybe rather than providing employees with cell phones and computers they use their own along with their home internet connection and perhaps you reimburse them for any extra costs or help subsidize their cost so it’s a win – win.  Often, there’s someone else who already has the resource you need and you can use it without any real excess expense to them or split it with them for a win-win.  This can be particularly useful for women who are suffering from personal cash crunches as often guys will take them for dinner, give them rides, etc.

For a very personal example of this when I was at my brokest all my credit cards were maxed and had been frozen except one and I remember buying just over $19 of groceries and shaking as I scanned my last credit card not sure if it would go through.  During that time, I had to resort to eating my roommate’s Kraft dinner because I couldn’t afford my own thinking “I’ll buy him some when I’ve got money”.  I got packets to ketchup from McDonald’s and toilet paper from public washrooms, rides from friends to save on gas, etc.  Chances are you aren’t in that desperate a situation and hopefully never will be but it’s an example of how sometimes people have resources that you can get from them to temporarily decrease what you need to put out.

Richucation Tip – Refer to Richucation resources on the “3 Dimensions of Value”, “The Cost Halo”, “The 6 Resources”, and “The 5 Ways to Get Great Deals”.

We can also put you in touch with financial experts to analyze your expenses and help you cut costs.

 

In terms of pushing back expenses a lot of bills are due but you can get away without paying them on time if you’re desperate.  In my case because I couldn’t pay most of them when I was at my worst I’d figure out which ones I couldn’t avoid paying because they were going to cut off the services and I’d pay those while leaving the others.

One thing to note is often if you’re a good customer and call whoever you owe the money to they are happy to extend you terms so you can avoid paying for 90 or 120 days.  Not always possible but it’s often an option again to help buy some breathing room.  Costco literally builds part of their business model off of these terms because they’ll buy inventory on payment terms, sell it then invest the money to get a return before they have to repay.

This is very common when you take over a struggling or failing business.  For example, when I purchased a spa I met with the landlord and said “hey, the spa isn’t doing well, they’ll default on the rent unless I do something about it and you’ll lose out.  I need you to work with me here.”  It’s much better than the alternative for them so they’ll usually work with you.

Obviously, not all expenses can be eliminated or even pushed back but usually across all your expenses it can provide extra breathing room.

 

Step 3 – Breakdown Possible Options For Bringing In Funds

When you’ve exhausted all your options to cut expenses and push back expenses you’re left with bringing money in.  Once again there are lots of ways to bring money in and most people having dug deep enough into all the available options so breaking those down will help you become more resourceful.

 

Option #1 – Make Money

The first place to start when you need to bring in extra money is to ask yourself is there any quick cash I can generate?  In other words, can I make some quick sales and get paid right away?

When I was at my lowest for example I made a deal with a friend to sell some of his services and sold to someone I knew (close network so easy sale) then got the client to write a check to me.  I’d negotiated a 50% commission but needed to keep every penny because I needed it all and it was only after a few months that I’d regained enough to my friend his 50% share.  It wasn’t ideal but it helped me.

The important thing being “is there someone who needs something where I can provide a referral and get compensated for it for some quick money” (some kind of affiliate arrangement).  Can you do some sort of discount or promotion to generate rapid sales?  Or do you have a list of existing customers who you could offer something additional to?  I’ve done this with raising money for investments on a few occasions, as well as numerous other things.  I don’t believe it makes a good long term business model but for short term cash it’s useful.

This can actually help generate another revenue stream for your business if done well.

 

Option #2 – Sell Assets

I hate to do this one because whereas #1 is adding to your wealth to cover expenses after selling assets you’re impoverished.  That being said it’s a method of getting some quick cash in some circumstances.  For example, maybe you’ve got excess inventory or equipment you can sell off, maybe you’ve got investments that can be liquidated.  Maybe it’s possible to sell some things you own and rent instead (for example selling vehicles to generate cash and then leasing to replace them).

This is the least favourable and in fact the main danger of short term cashflow issues is that you need to sell assets at a loss in order to cover obligations, which is the reason for bank reserve requirements.  On the other hand, it beats being forced into bankruptcy, taken to court for obligations, etc.

In business perhaps the most common asset to sell is part of the business in trade for an equity investment.  This is sometimes a great way to go but also be careful it’s a long term obligation to a short term problem.  You want to ensure you’re getting long term value out of the investment.

 

Option #3 – Borrow Money

I’d rather not do this but sometimes it’s the only option and it’s worth exploring the options here.

The question of course is “from who and on what basis will they make the loan?”  Goodwill or unsecured credit only go so far where loans are concerned.

I’ve lent enough people money over the years to know that if it’s being lent based on goodwill unsecured I’m often at risk of not recouping my investment so if they are personal loans I’ll generally consider it a gift to help a friend and simply be grateful if I do get paid back or else make sure I’ve got some sort of security.

Richucation Tip – Contact us on advice for loan structuring to make sure you get paid back

This being said most people aren’t sufficiently creative here.  We’ve worked with clients who have cashflow issues and have credit that’s been destroyed or other outstanding issues that mean they can’t get money from a bank but we’ve been able to facilitate loans internally through the Richucation network.

The key here becomes “what can you offer as collateral?”

Very often people have latent assets they can borrow against in one form or another that protect the lender while allowing you to get the money you need.

Remember we were talking earlier about assets and not wanting to sell them?  Often, if you’ve got short term cashflow needs you can borrow against them instead.  Or you can sell them to someone at a discount with a lease to buy option in place so you’re both protected.  You get your cash short term; they get a rate of return but also an asset they can sell if you default and recoup their money.

Another example is the pre-sale of services.  A Richucation client early in his career approached a client and convinced them to lend him money for a venture based on providing services for the coming year.  I’ll do this in some cases where I’m extending private loans and concerned about repayment specifying that I can take repayment either as cash or services at my option.  I’m somewhat protected and the person gets the money they need, win-win.

You can also factor accounts receivables if you’ve got some steady or committed income.

Most of the time people who are looking for money don’t think enough from the perspective of the lender and the lender’s desire to protect their investment and earn a return.  They’ll make promises that aren’t necessarily realistic while at the same time failing to offer protection.  If you can offer protection to the lender that more than covers them, you can usually get someone to extend the loan.

Richucation Tip – Contact us if you need assistance determining how to borrow money

You’ll want to identify who might lend to you and what you can offer to help make the loan a no brainer for them.

 

Option 4 – Receive Gifts

This really applies primarily to personal cashflow issues as opposed to corporate ones but is still worth mentioning.  Although it’s usually not an option sometimes you’ve got people who are willing to help you out and ask nothing in return.

If you’re in a personal cashflow crunch brainstorm who all might fit in this category for you to help you get over the hump.  Sometimes it’s a bunch of people each making a small contribution, the movie “Cinderella Man” is a great example of this.

 

Step 4 – Use All These Strategies Together

Generally, if cashflow issues are serious no one strategy will work on its own so brainstorm solutions in all of them and then start implementing if nothing else you’ve got backup plans if one or two options fail.

As a basic rule prioritize making money and reducing expenses first, then pushing back obligations, then borrowing and only as a last resort selling assets.

Contact us for personalized assistance.

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5 Essential Steps to Automating Your Business.

Can you make money while you sleep?

Why did you get into business in the first place?

There’s one answer I hear more than any other…freedom

And yet a lot of entrepreneurs end up working more than if they had a regular job.  Working longer hours, it destroys marriages, limits vacations and time with friends.

We tell ourselves these are temporary sacrifices for long term gain but when does it end?  When does this long term gain start?

I look around me and see people who have been in business for 20 or 30 years and still the end doesn’t seem anywhere in sight.

But it doesn’t have to be that hard, it doesn’t have to take that long once you know the formula.

Here are the 5 essentials that were laid down for me by a friend who did it and that I’ve used since then:

accountable

Profitable Systems that WORK

Lots of people talk systems but the key is having profitable systems that work.  If you systemize a bad process you’re just repeating inefficiency within the company so the idea is to refine the process first then systemize it.

Systemizing means three things:

  1. Lay Out the Workflow – all work proceeds in a series of sequential steps so you want to lay out what things happen in what order in order to get the result

 

  1. Build Templates – you want to eliminate as much repeat work as possible and make as much “fill in the blank” as possible so it’s done the same way. This will include checklists

 

  1. Document the Process – here is where you record (written, audio, video, or images, whatever works best) how to actually apply the process. It should be laid out so a 10 year old could follow it but be careful if it’s too cumbersome people won’t follow it so aim to make it simple

My initial mistake was systemizing too early, my second mistake was systemizing in too much detail (long manuals that were supposed to be helpful but just overwhelmed people and they wouldn’t follow them).  When I chopped out the unnecessary and made it paint by numbers I got the best results.

Make sure systems include where to put things and where to find them so everyone is on the same page.

profitable system

Technology that Accelerates

People misuse technology all the time trying to pursue the technology then build around it instead of the other way around, building a great process and then using technology to accelerate and streamline.  This is critical because the right technology will increase what your team can do several times over, make it easy to gather good data, and frankly just eliminate a lot of work.

Note, technology fits into your systems so those systems should include how you use the technology.

Each industry has its own technology but some really useful things pretty much everyone should take advantage of are:

  1. Cloud storage software – typically this means Google Drive or Microsoft Onedrive because they allow for real time collaboration, make sure everything is always sync’d so no information gets lost not doing so in this day and age is inexcusable

 

  1. Task or project management software – two free tools I often recommend to people and use a lot myself are asana.com or www.trello.com they don’t fit every business but they are highly flexible and allow you to keep track of things that need to get done, comment, get updates, share internally with the team as well as externally to clients, etc. Bottom line you need some way of knowing what needs to be done, by when, etc.

 

  1. Cloud accounting software – in this day and age you should be able to access real time financial data from anywhere and have it shared between yourself, your book keeper, and your accountant as well as anyone else who needs it. Modern software also reduces data entry a lot by pulling your bank and credit card statements directly into the software.  There are several that you can use but some of the better options are: waveaccounting.com ; www.freshbooks.com ; www.xero.com ; www.quickbooks.com

 

  1. Contact management software – this comes in a lot of different forms at the least you’ll want contacts sync’d to your phone and the cloud but typically you want an organizational contact list, which is in a lot of software it might be marketing automation software or a CRM or your point of sale software but having the availability of contacts and contact details is critical. Also consider auto-responder software in here.

 

  1. Scheduling software – you need some way of creating reminders, scheduling time for clients with location details, sharing those details, syncing them, etc. and this should all be available on the cloud

 

  1. Messaging software – you’re going to have to communicate with people so how will you do it? It might be email but today it’s more common to have other methods such as slack, Whatsapp, Google Hangouts, Skype, or maybe something internal.  Whatever it is you need a way to easily communicate with the team and keep everyone on the same page.  For email I recommend Google Apps for Business or Microsoft Exchange (I use the later in all my businesses)

 

There are a million ways you can use technology and it’s ideal if you can find technology solutions to problems rather than people solutions because the technology will scale.

metrics

Meaningful Metrics

In order for you not to be there you need metrics that will tell you what’s going on while you’re away and the sooner the better.  You want to measure two things here: activity and results.

There’s a risk that people will lie about these metrics so you want some controls in place to prevent this or at least some checks in place to make sure even if they are that performance doesn’t slip without you knowing fairly quickly.  For example, in my recruiting company there were signed agreements from clients.  This isn’t something they can easily fake so if they claim to be making sales but the signed agreements aren’t coming in then I know there’s a problem.

This is where technology can be very helpful for example you can see the date modified of documents within the cloud storage to see if there’s activity taking place, you can see emails sent and received, etc.

The bottom line is of course always the bottom line “what are you paying them for and what are they getting done?”  Each member of the team needs to be contributing profitably and that’s what you’re measuring.  You need to know you’re getting a return on your investment.

I recommend avoiding too many metrics but have ways of digging into the details.  What these metrics are might vary with the role some cases you might be paying piece work or commission (there’s a tendency of entrepreneurs to think commission is better, generally I prefer to avoid commission where the task is critical when you pay for someone’s time they need to do what you tell them whereas on commission this relationship is distorted).

Try to choose 1-2 activity metrics and 1 result metric you can look at for each employee and make it easy to record the metrics.

people

Accountable People

Ultimately nothing gets done unless someone does it and if you’re not going to do it someone else needs to.  If we have to boil the type of person we want down to just one criteria (frequently there are many) it’s accountable.  Someone who won’t place blame, who will take ownership for what they are doing and follow through.  To have freedom you don’t want to be chasing people.

The key here is delegate jobs not tasks.

If you’re constantly assigning tasks then you’ll have to keep delegating over and over which will take you time.  Instead delegate a fixed repeatable task with a result assigned to it.  For example, enter all the expenses into the computer and send out all the invoices.  This means if a new expense shows up they enter it if a customer needs to be billed they send the invoice.

By breaking complex tasks into smaller pieces you can hire lower skilled people for less and get better results.

The key here is training, which requires patience.  Training should happen as follows:

  1. Give them the procedure to read and have them read it

 

  1. Do it showing them how

 

  1. Have them do it and correct when they get it wrong…repeat this process over and over until it’s perfect, don’t fix it for them redirect them back to the procedure

Expect to spend a couple weeks training and getting zero results it’s a mistake to throw people into the deep end to see if they can swim.  Not only will you lose a lot more people but it will actually taken them longer to get up to speed.

trust

Trust but Verify

Everything is now in place to step away so you need to trust others will do it and not be too concerned about the quality of their results they might be slightly worse than yours or might be slightly better but trust them.

Trust doesn’t mean ignore though keep your finger on the pulse of what is going on and check in with them regularly.  Even though you might only be looking at it 15 minutes a day they should feel like you’re present.  Be sure to give encouragement regularly and reprimand where things are slipping.

 

That’s literally it if you can do those things you can step away.  What this assumes though is that you’ve got a solid foundation of something that actually works in your business.  It should take a few hours per week to manage.  You can get away without managing at all for a few weeks or even months but every small business will gradually decline if not given some attention.  There’s a strategy to remove yourself entirely but that’s for another day.

Need help with specifics of how to apply this?  Contact us or join one of our communities.

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Grinders and Growers

When deciding to go into a business or launch a new product, service, or business area there’s essentially 4 things to ask:

 

  1. Is there demand and if so how much?
  2. Can I buy it for substantially below the market value and how much?
  3. How much and easily does it scale?
  4. How much durability does it have?
It’s usually easy to find things for which there is a market demand and you can buy for below market price.  Virtually any reasonable business has a marketing budget that is sufficient to earn a profitable income.  However, for the most part these are difficult to get big with because there’s a lot of competition and effort unless you catch a short term wave.  These businesses are what we call “grinders” meaning to grow them you’ve got to grind it out day after day.

 

The grind is required in any business but a business that’s a grinder won’t have rapid organic growth.  The #1 thing that’s required to make a grinder business successful, the differentiator is marketing.  You can 100% grow these businesses large and successful but it’s usually a fairly long path.  In the right industries you can sometimes accelerate this path through aggressive acquisitions but then you get into playing a different game, which is applying the above criteria to buying companies rather than just products.

 

The reverse type of business are growers.  Growers are defined by compelling differentiation.  Because they are differentiated they have low competition and if they are compelling can benefit from rapid organic growth as word spreads about them and inbound customers are very substantial as compared with grinders that tend to benefit most from a lot more outbound marketing relative to growers.

 

This is in the DNA of the company if you’ve got a grinder your fate is to grind, these can be great companies but you need to be aware of the importance of the constant push.  If you’ve got a grower you’ll still have to grind, you’ll face other challenges but the push for the market will be less intense making it easier to scale faster provided all other variables hold true.  Essentially, Silicon Valley is largely an environment where entrepreneurs are constantly starting new companies in search for growers and VC firms are investing little bits looking for one that will take off and they can run with it to make all the other work worthwhile. This in contrast to the general business formation environment where most people create grinders to provide them with a living and a lifestyle but without the intention of scaling rapidly into something huge.

 

If you’d like assistance in evaluating an opportunity please contact us.  Click “ask a question” in the lower right corner of the screen and we’ll be happy to assist however we can.
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When The Cat Is Away The Mice Will Go Play

There is a holy grail of business pursued by many who don’t love what they do and that is the idea of a business that runs without you.

Arguably, a good business, a strong business, should run without the owner to a certain extent.

It’s possible to achieve this feat in even small businesses if you have well trained staff, strong systems and can easily keep an eye on details.

This is almost never truly hands off in the absolute abdication sense but can certainly become low maintenance requiring no more than  one to four hours per week to maintain.

Ironically, there’s a bit of a sweet spot it seems in most businesses where this can be achieved beyond which more energy is required and below which more energy is required.  However, what you’ll learn is it is never so straight forward on a sustainable basis.

Energy input is required for growth, you can either put it in yourself or you can have someone else put it in, but one way or another it is required and if it’s to be to your benefit you’d better provide at least enough energy to direct it.

This brings up a very important principle, not so much a rule because it isn’t always true, but it’s a generally wise assumption.

People will tend to act in their self-interest.  People also tend to fall into routine.  What does this mean for you?

If you ignore your business one of two things will tend to occur, perhaps not immediately, perhaps not universally, but in general it will take place.  Either people will get lazy doing what they can get by doing as opposed to pushing the boundaries to do better, or they will take advantage of what is given to them to benefit themselves.  Three real examples from businesses I’ve owned:

  1. Staff were given a list of duties to complete daily and standards to live up to, certain amounts of work they were expected to get done by the end of each shift, however, in the absence of an on-site manager staying on top of what was done and what wasn’t done they started to slip, they’d leave something for the next shift, they would fail to get it all done, they’d let the standards of how well they were doing one thing or another slip, all of which cost us money

 

  1. Staff would clock themselves in for additional hours, not that they were lying about being present but the company really didn’t need them if everyone was doing their job efficiently,the business had no policy to pay them for those hours, they weren’t authorized to come in during those hours and it would cost the company money for them to be there for extra non-revenue generating hours

 

  1. Some staff would steal clients for their own private work outside the company taking them for on the side services competitive with what the business was offering saying “the prices will be lower”

These are startling examples from just one company of the kinds of things that occur when you’ve got absentee management, when there isn’t someone actively in place watching the numbers, the staff, the performance constantly.  It’s sometimes under appreciated by small business owners just how much difference being on top of the details constantly can make in a business.  In the case of extra staff hours I audited the time sheets and discovered inefficiencies due in part to staff spending extra time beyond what they should be and partially due to inefficient scheduling was adding an additional 20% to payroll costs, all of which would be pure profit with the right management.  In the case of staff who slacked off the estimate was somewhere around an additional 5-10% boost in revenue if the staff were only diligent.  These are small examples but they are also short term examples, factors such as these erode and grow building momentum until they eat a company, a $10 000 monthly profit can quickly turn into a loss if not carefully monitored.

There’s an expression that “people respect what you inspect”.  It doesn’t necessarily have to be you doing the inspection but there is an enormous cost to not remaining on top of the numbers and the people, not constantly optimizing and tweaking.  When you are absent people behave differently, they think and feel differently, they start talking in ways you probably won’t like.

Bottom line, for any business to succeed at a high level it needs effective management, whether you or someone else make sure there’s a manager in place who takes ownership, has the will and the skill to make the organization thrive.

If you’ve got business management or growth or any other questions we’d love to hear from you.  Contact us with your questions.

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What is Credit?

Credit is used every day often without us even knowing it.  If you’ve got a tab at the bar they have essentially provided you with credit even though it’s very short term credit.  There’s an illusion that only banks can create credit and some conspiracy theorists who decry the unfairness of this system.  Nothing could be further from the truth.

Credit is incredibly important and in other articles we’ll examine how it works to create cycles within the economy.  The question is what is it?

To be clear, we’re not referring to credit scores here.  What we’re referring to is a means of payment.  You pay with either cash or credit, again not referring to credit cards in this case.  So what is it?

In any transaction there is an exchange a good or service for cash or credit.  Let’s consider what happens in a cash transaction (not referring to physical bills here but where there is no debt created).  In a case such as this I pay you money and you give me a good or service.  Look at our balance sheets.  At the start I’ve got an asset and you’ve got cash.  Then when the transaction goes through we swap.

Before the Transaction

 

Me You
Cash Goods

After the Transaction

Me You
Goods Cash

Now let’s see what happens if we change this process and instead of paying with cash.

Before the Transaction

Me You
Assets Liabilities Assets Liabilities
None None Goods None

After the Transaction

Me You
Assets Liabilities Assets Liabilities
Goods Debt (payable) Debt (receivable) None

 

Notice what happened here.  Instead of paying cash debt was created.  What is debt?  Debt is an asset for the person who is going to collect the debt and a liability for the person who has to pay the debt.

In other words, credit is when we create out of thin air an asset on one person’s balance sheet with a corresponding exactly equal liability on the other person’s balance sheet.  When the debt is paid off you’ll go back to the way it was in the cash transaction with just cash on the balance sheet of the person who was paid and no liability on the balance sheet of the person who paid.  What’s important about this?  A lot of people confuse credit for money because it can be used as such but credit, which can be issued to an unlimited extent within the confines of physical resources is not really the same as creating money.  It is treated as money in many cases to exchange goods and services but the difference is there is no net growth in wealth because credit cancels itself out.  What it does is it allows transactions to take place sooner, which can help to increase productivity and activate resources in the economy that would normally just be sitting.

Hopefully that gives you a basic understanding of what credit is and how it works.  There’s a lot more to it of course but we’ll cover those nuances in future posts.

If you’re interested in a deeper understanding of credit or any other business or wealth building issue please contact us and we’d be happy to assist you.

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How Do You Get Banks to Lend You Money?

Banks have fairly straight forward lending criteria; it can be as simple as a formula you learn (and you should learn it if you are looking for bank financing whether a mortgage, line of credit, or other financing).  On the other hand it’s amazing that someone who doesn’t know what they are doing can walk into a bank and ask for a loan and get turned down, then someone else can walk in representing the exact same business with identical needs and get the loan.  What’s the difference?

Your first assumption might be the individual in question has a relationship with the banker, might have better credit, more personal assets, etc.  Those things might all be present and yes in certain circumstances those can make a difference, but those are not the differences we’re talking about.  In this case (and this is an actual example I have personal experience with and have seen happen many times) none of those details were different from the original bank visitor, in fact the second individual was merely acting as a representative of the first.

When I or many others like me did this what did we know and how did we act differently than the first person who couldn’t get the loan?

The answer lies in understanding the language of the banks, what they are looking for, and being committed to getting the result.  When you walk into the bank you need to be focused on what they want in order to be able to give them what they want in order to get what you want.  Banks aren’t out to deny you loans; they’d rather give you the loan provided it meets their criteria.

What banks care about is security, they are generally asset lenders and their most important concern is the assurance not from you but from what’s backing you that they’ll get repaid.  In other words if things go badly how are they protected?  If you can make it next to 100% that they’ll be protected if things go wrong you’ll be very likely to get the loan.

Think about it what are the three easiest loans to get?  First, mortgages, why?  Because the value of the house is typically greater than the amount of the loan so worst case scenario they can sell the house and recover most of their money.  Second, collateralizing life insurance policies.  Again this comes down to the same thing they know there is a fixed value to the life insurance policy so when in doubt they can recover their money from the asset.  Third, loans backed by cash or GIC deposits.  In other words if you walk into a bank and put down cash or a GIC as security the bank will essentially always give you a loan based on that security because they are protected, it’s like they are lending you your money back to you and who wouldn’t make that loan?

First lesson put yourself in the shoes of the lender.  The lender makes money by making the loan so they want to do so.  The lender is generally in a better position when you repay since it’s a hassle to go through the collection process if you default.  The first most important thing to the lender is that you repay.

Second lesson banks determine whether you’ll be likely to repay primarily through three factors.

  • Assets as security such as: real property vehicles, equipment, land, cash, bonds, securities, etc.
  • Cashflow on the personal side this is measured by before tax income, in the case of a business it’s profitability. Keep in mind when it comes to cashflow you need to show track record again think as the lender they want to know it’s steady income and not one time income, in other words do you have the income to make the debt payments?  With this in mind there’s one more factor to consider when it comes to cashflow and this is the relative amount of debt.  In other words it’s all well and good that you’ve got a certain income but if you’ve already borrowed so much money it consumes your whole cashflow then it’s not safe for the bank to lend you more.  This is called the debt service ratio.
  • Credit is essentially a measurement of how likely you are to repay.

Some banks will work and get resourceful to help you and find ways but generally that’s not the case.  Generally, they won’t know what resources you have available at your disposal in terms of different profit centers, different assets, etc. to call on to provide them with what they need so it’s up to you.  You’ll need to understand what types of loans are available to you and how to qualify for them.  For example, typically, lines of credit are more difficult to qualify for than loans for vehicle or property purchases simply because of the security.  Sometimes you can restructure debt to improve your debt service ratio, other times you can provide cross company guarantees to provide more cashflow to support a loan, the list goes.  The bottom line is when you walk into a bank if you do so with the understanding of what they are looking for and what you have available as resources you can present them with plans A, B, and C about how they are going to get paid back, in essence remove the risk from the deal for them and then they’ll be able to do all kinds of great things for you.

There are lots of little things to know that vary from bank to bank, but the above points form the essence of it.  The moment I learned what banks were after and was then able to engage in conversations with them about what resources I had available that I could manipulate to give them what they needed it become comparatively easy to get approved for loans.  You won’t always be able to borrow money from any institution this way, there are times when you won’t qualify, but it gives you a massive advantage.

For further detailed training and resources on this matter please check out our Richucation training programs.

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Are Business Coaches a Good Idea?

Today we’re going to discuss an interesting topic, are business coaches a good idea?  The discussion is prompted by a comment a business owner recently gave to someone advocating business coaching in response to “what was he doing to keep more money every month to build wealth?”  His response was “I now keep $4000 each month rather than giving it to a business coach”.  It’s an interesting point is a business coach just another expense or does he/she provide real meaningful value?

Generally, the people talking about this stuff are the coaches, authors, speakers, consultants, etc. those who have an invested interest in you paying for their services and that of their colleagues.  On the other hand it can’t be denied that top athletes all have coaches is that just a sports phenomenon?  Or have the sports coaches pulled the wool over the eyes of the athletic community?  It’s also noteworthy that major business leaders (former Google CEO Eric Schmidt is one of the most prominent examples of someone who publically advocated it as one of the best pieces of advice for a business leader).  Then again maybe that applies for high level business leaders and athletes and not those starting out?

It’s certainly undeniable that coaching can be a significant expense for a small business owner where $1000-$10 000 per month can make a huge difference.  By contrast for a company like Google affording a coach is really a non-issue it’s more a question of the leader’s time and focus than the actual monetary cost and the gain can be phenomenal because it’s leveraged over a much larger organization.  But is this an argument against coaching in low level business?

The simple answer is “it depends” on both the coach and the person being coached.  If you’re not coachable then having a coach is a waste of money.  There are also a lot of crap coaches out there and business tends to suffer a higher percentage of them than sports.  What’s the problem?  The process.  If you look at a professional athlete the way they are coached is the coach runs them through drills over and over, observes what they are doing and corrects.  In the case of business coaches most tend to operate by meeting with you every so often, sitting down to talk about the business generally with no hard data such as actual numbers and ask you questions to try to get you to do something different.  Not very surprising when the process is less effective than it is in athletics since sports coaches are generally training you the way you actually get better at things, business coaches are often like a friend discussing business issues with you, not that this can’t be effective but it tends to be less effective.

If you’ve got a great coach the coach can be worth their cost many times over.  Why?  Because it can drastically shortcut your learning, which is the most costly and difficult part of success for most people.

So how do you select a coach that’s going to be worthwhile?  Focus on someone who has already solved (either themselves or with someone else) the problems you are facing, someone who can tell you “hey this is what you need to do right now and here’s how to do it”.  That kind of insight is immeasurably valuable.  Want to rank on Google?  You better have someone who can look at your webpage and tell you specifically the exact fields that need to be changed, what they need to be changed to, and how.

Next, if you’re going to get a coach get someone who will delve right into the metrics of the company with you and provide those metrics.  Someone who expects to sit in a boardroom across the country somewhere spilling out advice without direct information about your business isn’t the right person.  If you’ve got a problem with staff you want someone who can spend time in the environment with the staff and make an assessment.  If they are going to coach you on how to manage and lead those staff members they need to be able to watch you do it not just hear about what you think happened but observe it directly.

Of course all of this means nothing if they aren’t going to hold you accountable and you’re not going to trust them and do what they say so make sure you’re coachable.  If you put all of those together a great coach can be one of the best investments you’ll ever make.

If you’d like to learn more about about how to select a good coach or how to make the most of a coach or have any other business or wealth building questions please contact us by clicking “Ask a business question” floating at the bottom right of your screen.

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The Wrong Reason to Hire Someone

Today I got to re-witness a story I saw play out many times in my father’s life and business.  It’s a hard won lesson that some of you are going to take hard and be resistant to.  In spite of this I promise you it’s the right advice…especially for those who resist it.  Hopefully you’re not someone who has fallen into that trap and for you this advice will be self-evident.

I’ve had the good fortune over the last little while to know someone who has been struggling to find work.  My naturally tendency is to be soft hearted, generous, kind, etc.  All good qualities and in this case qualities I have to resist.  See my desire is to hire them for something, to come become a chef for me for my home meals (something I don’t need right now) or an internet marketing assistant (something they have zero qualifications for and would require massive training which their not motivated to undertake) or who knows what else.  The problem is this would do two things:

  1. It would be charity on my part effectively representing not a fair exchange and definitely not beneficial to me in fact likely costing me far more than the money

 

  1. Not serve that person even though they think it would and would like me to do it it would be a short term service at long term expense

 

Some problems simply aren’t solved short term and some problems are solved in the macro not the one off cases and this is painful for people who want to fixate on the small scale.  Not helping someone by paying for their trip to Mexico to a family member’s wedding, it’s hard they have to stay back (don’t get me wrong, you can do these things but they are pure charity and they aren’t addressing a root cause so the problem creating the situation will perpetuate, the best charity creates productivity but that’s for another discussion).  There are lots of examples.

Growing up I saw my father do this again and again in his small business, take pity on someone, see how he could help them and give them a job for which they were ill suited and resulted in a loss for him.  On the surface this seems kind hearted, it is in a sense, but it’s a bad move for everyone for a number of reasons:

  1. It’s just plain a stupid financial decision, there’s a stage and time for philanthropy and a way to do it well and this is not it
  2. It denies someone more skilled, motivated, and capable from having the same job
  3. It hurts your company reputation and brings the whole organization down
  4. It doesn’t build up the person you’re hiring so it perpetuates behavior that needs to change
  5. It leaves you with less to give in areas that you can have a higher impact

Among other faults it’s much like the give a man a fish vs teach a man to fish analogy.

I’ve made this mistake on a few occasions both lending money and hiring people sometimes literally to the point where I took money I legitimately needed (possibly as much or more so than them) and gave it away never to be returned.

The best result for everyone comes from win-win interactions, from creating the best net effect so there’s more abundance to go around in the long run.  This is a microcosm approach that seems good up close but hurts overall.

Learn the lesson, hire the best people you can every time and if you’d like to do charity or philanthropy do that separate from business and do it in a way that maximizes the impact you can make with each hour and each dollar and you’ll have the biggest possible effect in changing the world.

If you’d like some assistance or mentorship on how to hire the best people or on other business issues contact us and we’ll be happy to help.