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6 Roadblocks to Growing Your Business

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Companies often encounter barriers as they mature. Here are six big ones and how to break through them.

1. Not knowing your ideal customer

Customers aren’t all equally valuable; some can even be unprofitable. So CEO Scot Lowry of digital marketing firm Fathom, in Valley View, Ohio, had his CFO draft a profit and loss statement for each. That helped him phase out the costly customers — and identify the ideal ones, such as health care and financial services firms that need very customized service. “Our strategy is based on deep customer intimacy,” he explains. “We have to focus on select clients to deliver on this.”

2. Failing to scale systems

Many companies don’t want to invest in brand-new software for accounting, customer-relations management, and other operating systems as they grow because they’re pricey. But procrastinating will lead to chaos and mistakes when you need to tackle tasks that should be easy to do instantly, like updating customers’ addresses in all your records at once. If your company has hit 50 to 150 employees without upgrading its systems, don’t delay any more. It’s an emergency.

3. Using an old org chart

It’s tempting just to stuff this important document in a drawer and forget it. Don’t. With his now nearly 150-person team squabbling over priorities and resources, Lowry shredded his org chart and reorganized everyone into teams dedicated to specific accounts. He is listed at the bottom, with the role of helping employees serve clients at the firm, which expects $20 million in sales this year. “I stopped talking about my ‘direct reports’ and switched to calling them my ‘direct supports,’” he says.

4. Trusting your gut

In the startup phase, you’ve got to rely on your instincts because there’s no historical data to guide you. But intuition often deceives CEOs as their businesses become more complex, says Sunny Vanderbeck, managing partner at Satori Capital, a Dallas-based firm that invests in growing, profitable companies. If you’re not letting data drive decisions, such as what products to develop or which customers are worth pitching, he says, “you’re missing out.”

5. Letting your skills flatline

Companies often outgrow the founders’ ability to lead them because the CEOs don’t sharpen their management skills. “If your company is growing 30% a year, you have to be 30% better by this time next year,” says Vanderbeck. Learn from other CEOs by joining a peer group like Entrepreneurs’ Organization or Young Presidents’ Organization. “If you aren’t a learner, you are the reason the company isn’t as big as it could be,” Vanderbeck says.

6. Not investing in team training.  

Out-learning the competition is a powerful and sustainable growth strategy. To get everyone playing the same music, CEOs must focus training where the company needs it most. Studies have proven over and over again that training has the highest ROI compared to any other investment a firm can make. Jeff Frushtick, CEO of industrial equipment maker Leonard Automatics, found this to be true: Training employees on Lean production resulted in a five-fold increase in profits in a single year at the 35-employee, Denver, N.C., firm. Look into training that can boost your firm’s profits similarly.

 

Verne Harnish is the CEO of Gazelles Inc., an executive education firm. Robert Fish is founder and CEO of Insight CXO.

This blog is adapted from a story in the May 19, 2014 issue of Fortune.

Image: Nicholas Canup / Flickr

5 Steps To Beat Spring Slowdowns

Q2 is the quarter that can make or break your year. Every business year has a natural momentum: Q1 always starts strong – everyone is excited about the shiny, new annual plan that’s just put into place. Q3 presents another mental fresh start with the launch of a new school year, and in Q4 everyone moves into high gear, working with greater urgency to make a strong finish.

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But Q2 can be deadly. It’s the time companies are most likely to lose their momentum. The annual plan was made on predictions and assumptions, and by Q2 you know how well these are playing out. The big, lofty goals in the annual plan that motivated everyone back in January now seem impossible, so the team (including the CEO) puts the plan back on the shelf.

Or revenue spikes and it’s “all hands on deck” for client delivery, and important operational efficiency or team health work gets postponed to achieve short-term goals. Or maybe the annual plan wasn’t balanced – too much was stuffed into Q1, with no major priorities or initiatives for the rest of the year, so everyone just goes into cruise control mode and growth stagnates. Summer months are approaching, kids are nearly out of school, everyone’s starting to plan their vacations and things start slowing down. Yet the business still needs to drive forward.

The second quarter is the critical inflection point for the year, and the only way to prevent stagnation is through careful planning. Creating a strong Q2 plan sets the stage to carry momentum through the summer – to keep the team engaged and accountable for delivering results. In Q2, you may look at your annual plan and see it’s not quite working as you’d expected. You see it may need some adjustments, which is hard to do, but if the end result is an engaged and excited team, it’s worth making the changes.

Make every quarter count

Insight CXO’s 13-Week-Race© planning tool (PDF) was created to ensure that every quarter is as strong as the last and the next. It looks at the quarterly “Rocks” (your major goals), breaks them down into their component tasks and load-balances them throughout the quarter.

5 ways to make Q2 stronger

  1. Break down the quarterly Rocks into 13 weeks, with each Rock further broken down into its component parts throughout the quarter. The more detail the better.
  1. Be very intentional about letting the team know that Q2 is the pivotal quarter of the year. A strong Q2 makes for an easy Q3 and great end of the year.
  1. Look at the 13-Week Race weekly with the team. Don’t let tasks and action items go more than two weeks without updates or adjustments.
  1. Have your team verbally commit in front of each other that they believe 100% in the Q2 plan and will do what it takes to make it happen.
  1. Create a fun reward for having a great Q2. Engage the team in the reward development so they own it and make it their own.

Don’t let your annual plan hit the shelf in Q2. Treat Q2 as the No. 1 quarter to have a great year, and you’ll reap the results with a happy and engaged team.

Image credit: Lion Towers / Flickr
BreakAway

Crush the Competition with a Breakaway Move Strategy

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You may know that when I’m not helping clients as head of Insight CXO, I’m fueling my passion for competition and training as a professional mountain bike racer. I envision business much like a race – initially, all of the competitors are in a tight pack, looking to gain any advantage that will put one ahead of the others.

Eventually, a few of the competitors begin to pull away from the pack to form a break – they’ve found something that differentiates them from the majority – but those racers still stick together in the lead break. However, at some point, one of those competitors makes a Breakaway Move™ – a strategy that enables him or her to separate from the competition and win the race.

In business, the Breakaway Move is something that has the potential to double revenue in the next 3 to 5 years. In order to drive top-line revenue growth, your company needs to have two or three Breakaway Moves it’s always working on.

New York Times bestselling author and leadership coach Marshall Goldsmith famously wrote What Got You Here Will Not Get You There. To find out if that’s true for you, ask your leadership team:

Will your existing products, services and capabilities be enough to drive serious top-line growth well into the future?

To help answer that question, project out over the next five years how much revenue each of your products or services will generate. There is probably a gap between that number and your desired revenue in five years.

One way to define a Breakaway Move is to explain what it’s not. Simply doing more of the same is not a Breakaway Move. Changing operations to increase profit is not a Breakaway Move.

Rather, Breakaway Moves drive top-line revenue. Working on Breakaway Moves may generate ideas and initiatives to increase profit, but it’s good to be clear on what Breakaway Moves are so you don’t stop short of creating revenue-generating ideas.

Where do Breakaway Moves come from? First, they come from consistent Breakaway planning sessions that leave room for flexibility (since things rarely happen exactly as they’re planned). Second, they come from looking deep into the world of your Core Customers:

  • What are their pain points?
  • What are their unmet needs?
  • What are their jobs to be done?
  • What keeps them up at night?
  • What will help them reach their goals faster?
  • What solutions can you provide to solve their problems?

Breakaway Moves must have a place in your annual planning process, both to make them a priority for scaling your business and because they can help you build a healthier, cross-functional team. Working together on ways to double the business is exciting and can make the team feel like they can win.

Are you ready to create your own Breakaway Move? Insight CXO has created a free toolkit, “8 Steps To Your Breakaway Move,” a step-by-step guide to get your team invigorated and thinking in innovative ways about how to push ahead of the competition and win the race.

Winning Culture With Core Values

Well-defined and leveraged Core Values are one of the most powerful mechanisms to grow a company, especially as it passes 50 employees and gains complexity.

Core Values define the character of your firm and create the foundation and frame upon which the organization is built. A company’s Core Values can exist by default or be developed and supported by design. “By default” is a dangerous way to run a business because employees won’t have a clear should/shouldn’t framework in which to make decisions. Well-designed Core Values are a simple set of rules that define the kinds of behaviors you want to see inside the business. They also eliminate the need for countless, more complicated rules and operating procedures that can destroy a company’s culture anshopping-list-707760_1920d chase off the A-players on your team.

The number one mistake I see with Core Values is they are rarely mentioned, and most employees don’t know what they are, let alone the key behaviors tied to each Core Value. Yet, getting Core Values right – and integrating them into every aspect of the business – generates huge leverage and saves a tremendous amount of time and trouble.

How To Leverage Core Values

1. Use Core Values as a baseline and a test for developing strategy. Does a growth strategy idea work within the Core Values? Or does it violate any of them? This is an effective method to screen out ideas that could pull the organization in the wrong direction.

2. Use Core Values to evaluate talent as part of the recruiting process. Drill deep into the behaviors that define each Core Value for your business. For example, the word “teamwork” may have different meanings to different companies and different people. You must have clarity on the specific behaviors that reflect each Core Value. You can teach Core Values to employees, but you’re better off hiring people who already share your organization’s Core Values. Most companies hire for skill and fire for fit. Getting clear on the Core Values and integrating them into the recruiting process can reduce the chance of poor hires due to wrong fit.

3. Use Core Values as an easy method to manage employees. Clearly defining Core Values and the behaviors that support them makes it easier and more productive to have difficult conversations. Employee problems are almost always due to a fit issue or some type of behavior that is getting in the way of production. Often, problem employees have the right skills, but the people dynamics get in the way of things. Well-defined Core Values are an easy way to help managers address problems early, get someone back on track or even make a more difficult decision clearer, faster. And the employee receiving the feedback is less likely to be personally offended or upset if you tie the behavior back to the Core Values.

4. Use Core Values in dealing with clients. Try to attract clients who share your view of the world and how you do things. And when a client becomes difficult or antagonistic with employees, use your Core Values as a framework to have a difficult conversation. Using a Core Value as a talking point takes the sting out of the dysfunction and makes the conflict less personal.

5. Try to use Core Values for marketing leverage. Look at Whole Foods. Shoppers are willing to pay a premium based on what Whole Foods believes… who they are… their Core Values. They will not buy certain species of fish to resell because of overfishing in certain parts of the world. They are willing to risk an economic hit to retain a Core Value. And look at how well the market responds to decisions like that.

6. Tie public praise for great work or deeds back to a company Core Value. If this can be done weekly, it can really imprint the Core Values into the mind and behaviors of everyone in the organization.

You can’t over-communicate Core Values. All employees should be able to name them, describe the key behaviors for each and tell a story about someone in the company living a Core Value in the past 90 days.

During facilitated planning sessions, we always open the meeting by asking about Core Value activity in the past 90 days. It’s a great warm-up exercise and a way to reinforce the concepts. One of the best early warning radars for anticipating trouble in a company is when no employee can tell a Core Value story from the past 90 days. Core Values are one of the best lead indicators of organization health. And healthy teams are winning teams.

 

The Winning Team

For a sports team to win the big game and stand atop the podium with the big trophy, it not only needs the best players at each position, but also all of the individual athletes working well together toward their ultimate goal: winning. To be the champ, an athletic team can’t just have the best players on the field, coaches on the sidelines or front-office staff to manage the day-to-day business. It also needs everyone who influences its success – vendors, sponsors, ticket buyers, consultants and the league office – to buy into what it’s selling.

The same things are true in business, and, just like in sports, a poorly functioning team will prevent you from achieving your version of the Ultimate Podium Finish™, the goals you’ve set that will determine whether you’ve beaten the competition and won the game of business in your field.

Just like in sports, your team isn’t just the people who work at your organization, but also your entire universe of customers, vendors, contractors, advisors, coaches, consultants, etc. You want to attract and retain A-players – the people who are onboard with your Core Values and achieving (or beating) performance goals – and weed out the players who drag your business down.

Build A Team Of A-Players

We’ve all heard stories about locker-room issues that prevent a sports team from winning games. This also happens in business. To build a team full of A-players you must address the things that repel A-players from your business. Often, this is management not taking any action to fix problems with B or C players, bad processes or customers who are more trouble than they’re worth to the bottom line.

A-players maintain your Core Values – the rules and behaviors that define your culture and personality – and are repelled by co-workers whose bad or inappropriate behaviors cause workplace tension or reflect poorly on your business.

First, make sure that everyone on your current team knows your Core Values and has a fair chance to show whether they can live by them.

Next, you need to identify your A-players and deal with the B- and C-players. Place everyone on an ABC matrix.

  • B-players: weak job performers, but their behavior reflects your Core Values
  • B/C-players: strong performers, but they have behavior problems
  • C-players: poor performance and poor behavior

Now you need to deal with what you’ve learned. Let’s tackle this in reverse order:

  • C-players: eliminate them, either by terminating them or finding a new role that will give them an opportunity to become A-players.
  • B/C-players: clarify behavioral expectations and give them an opportunity to change the attitudes or actions that are keeping them out of the A quadrant.
  • B-players: offer job training to help improve their job performance. (Consider Laurie Bassi’s exhaustive research, which showed that training and development produced a 672% ROI, more than any other investment a business owner could make.)
  • A-players: take actions to keep the A-players happy and engaged. (Dealing with the B- and C- players should help.)

Get Your A-Players Working Together

Building a team of A-players isn’t enough for small and midmarket companies to achieve the Ultimate Podium Finish™. Those A-players must work together, driving as a team toward your goals. The technique to breaking down those silos is creating cross-functional responsibilities. During your quarterly planning, identify quarterly Rocks, and the Tasks needed to achieve them, that involve multiple departments. Although one person is accountable for each Rock, he or she must work with people across the business to achieve it.

This strategy encourages leaders to work together, and it also exposes any interpersonal issues or other below-the-surface things that are preventing your people from being a team. As those issues surface, they must be quickly addressed with team-building exercises or other interventions to get healthy.

Why It’s Important

Just like in sports, your team can make or break your ability to achieve your Ultimate Podium Finish™. Take steps now to ensure that your team is full of A-players – high-performers who reflect your company’s Core Values and are committed to the business’ success.

Scaling Up with Rock Solid Annual Planning Methodologies

Scaling Up with Rock Solid Annual Planning Methodologies

By Robert Fish

business-1137366_1280Does your company have a proven and repeatable Annual Planning process that is used and referenced throughout the year? Does the full company BELIEVE in the plan and know how they individually contribute to make it a reality? Does your Annual Plan create simple but powerful strategies and direction? Even if you said ‘yes’ to the above, does your leadership team run out of steam half way through the year?

As a serial Entrepreneur, Gazelles Certified Coach and Professional level mountain bike racer, I have learned one very powerful thing. Often, the best way to have a strong finish is to start at the beginning. If I want to have a strong finish at mountain bike Pro Nationals, my ‘start at the beginning’ means lots of long easy and slow miles on the bike in the off season. This is my base. I can only layer in intensity to my training in direct relation to the size of my base I create… think the base of a pyramid.

My fitness pyramid will only be as high (peak performance) as my ‘base’ is wide. From a business perspective in relation to Annual Planning, the base of the pyramid is review, and re-commitment to Core Ideologies such as Core Values, Core Purpose and the BHAG (Big Hairy Audacious Goal).

Want your company to reach peak performance, engage your people, execute without drama, and turn revenue into real profit and cash? Start at the beginning!!! A common mistake during Annual Planning is trying to start in the middle with goals and priorities. A good plan on paper may be possible, but the team will not reach peak performance during the year.

Focusing on Core Ideologies at the beginning of Annual Planning gives your team CLARITY on why they are doing what they are doing and MEANING on why it’s important. Developing a simple set of rules and guidelines that people believe in creates the engine or batteries that will help carry the plan through the year. Developing a plan around revenue and profit alone just does not work in most cases. There is not enough emotional connection to carry through the rough patches. The team needs to physically connect with the Goals and Priorities for the year, and why it’s important to make them happen.

Think about the power of creating a Core Ideology driven Operating System for your team during Annual and Quarterly Planning. There are two major outcomes by creating this:

1) Strategy development (things that drive revenue) becomes simpler because it’s easier to decide WHAT NOT TO DO. Does the proposed strategy idea accelerate our BHAG or does it pull us away? Any strategy that violates any of the Core Ideologies is not a good and SUSTAINABLE strategy. They fail.

2) Scale Up faster by better alignment of resources. By aligning strategy with Core Ideologies, and eliminating projects that conflict, your team will not be fighting over resources during the year. One common mistake many companies make (and they never know this is the reason) is the annual priority stack which pulls resources in opposite directions. The CEO thinks the team is in alignment because of the agreement on the annual plan. But the plan itself (not the people) pulls the company apart and makes execution and profit very difficult. It’s important during annual planning that the priorities build on each other and do not compete for resources. There are other methods to aligning resources but always start with Core Ideologies first.

The fastest way to Scale Up your business and reach Peak Performance is to slow down at the beginning of Annual Planning and get the Core Ideologies dialed-in and re-engaged 100%. Everything through the execution phase of the plan will be easier and faster as a result.

When is the best time to start Annual Planning? Now!!! Especially if any of the Core Ideologies are in question, are missing, or your leadership team is not 100% on board with them. You’ll also give your team a running start into the new year and you’ll have a chance to address potential issues that might prevent success in advance.

SCALE Up with the Cash Conversion Cycle

cycle-150947_1280I facilitate planning retreats every week and I’m always fascinated by the concept of the CASH CONVERSION CYCLE and how it engages every person in the room. Typically, the concept of cash is left to the business owner and the Controller and/or CFO. Cash is like oxygen for the business.  Without it, the business simply dies. So the question is “how can we generate as much cash as possible to fuel growth and reduce the need for outside financing?” There are four parts of the CASH CONVERSION CYCLE and all four need to be analyzed and shortened as much as possible:

1) Sales Cycle

Shortening the sales cycle has an impact on cash! What are the ways the sales team can get to the market faster and less time between steps? How long does it take to bring a new product to the market? What is the R&D process like? How can we speed it up? The sales team is never asked to think about sales in the context of cash conversion. And you’ll be surprised what they come up with when asked. For them it’s really commission conversion cycle and they will become great advocates for the initiatives.

2) Make / Production Cycle

Shortening the make / production cycle has an impact on cash! What are the ways to speed up inventory turns and reduce inventory? How can the sales team get better orders so things get made right the first time? How can operations be organized to increase flow and capacity? How can LEAN techniques be used to eliminate waste of material and time?

3) Delivery Cycle

Shortening the delivery cycle has an impact on cash! We see so many easy to correct mistakes happen at this stage. And until delivery happens billing usually cannot be completed. How long does it take to complete the delivery of the product or service? Was the customer ready? Did they get exactly what they expected? Did the finished product have to be shipped back for re-work due to miscommunication or improper order taking? Did the product work like it was supposed to? Did Quality Control do their job right?

4) Billing Cycle

Shortening the billing cycle has an impact on cash! Most companies think they are stuck in a billing format due to their industry norms. The reality is most clients are willing to pay faster or are willing to change when billing happens. The trick is you have to ask! For example, instead of billing everything at once after the service is completed, consider X% up front and progress billing. If you typically bill monthly, start billing bi-weekly.  If you bill bi-weekly, start billing weekly. If you are a service based business and usually bill for work after it was performed, start billing for work before it is performed.

Look for 100 hundred ways to shorten cycle times and never stop looking. Make it a point, each quarter, to find an area the company will focus on and improve. I guarantee when you look at your business through the lens of cash you’ll realize when you make cash improvements you are also making significant process improvements.

Living Legacy

People often joke that the best moments of boat ownership are the day they bought the boat and the day they sold it.finger-567279_1280

There are similar punctuation marks in our lives—the day we’re born and the day we pass away. As busy executives, if we’re not careful, our personal lives can end up as neglected as those vessels, forever docked in the harbor (or parked in storage!).

I’m a big believer in building a living legacy. Your life will be more meaningful if you treat every day as if it was your last and, instead of rushing from one obligation to another, you proactively establish personal priorities and align them with your professional goals.

As readers of this column know, there are four decisions you must make to build a thriving company: People, Strategy, Execution and Cash. In your personal life, there are parallel areas: Relationships, Achievements, Rituals and Wealth. Commit to writing your goals in these four areas, just as you weave the Four Decisions into your business plan. To guide you in creating a personal one-page plan, here’s a link to a “ME: Living Legacy” tool.

Relationships

At the end of the day, what matters most in life are relationships. The first step in using the Living Legacy tool is to list the key people in your life on whom you want to have a lasting impact.

In business, you have a tremendous opportunity to influence your employees or customers. In your personal life, the important people in your life will likely include your family, your friends, and those in the various communities to which you belong. Limit the list to 25 people, so you don’t get overwhelmed.

At the same time, there may be some people in your life who are destructive and/or distract you from your higher goals. There’s a space on the form where you can note relationships you want to end. Doing so is important, so you can free time for the people who matter most to you.

Achievements

Many CEOs find that even when they reach critical milestones for growing their company, they feel they haven’t made a real difference in the world. The achievements section of the Living Legacy tool can pave the way to a more meaningful life. Think about the major ways you’d like to make an impact through your work beyond reaching monetary goals—perhaps by mentoring others or setting up a nonprofit organization or pro bono initiative—and set objectives in these key areas.

In your personal life, you’ll want to think about how you can make a real difference to the key people in your life. For instance, you might aim to have a happy marriage, instead of just staying married, as many people do. Signing on to facilitate the 5-year strategic plan for our children’s school was something I enjoyed prioritizing this past six months.

Rituals

Establishing regular routines in your life will help you achieve your larger goals. Examples of rituals might include a weekly date night with your spouse and booking some “alone” time with each child once a week. For distant family members, you might build a regular routine, like taking a vacation together every two years.

You might also want to establish rituals with people whose presence in your life supports your bigger goals. Meeting regularly with a workout buddy, for instance, can help you maintain good health—something that’s important to achieving any goals you set.

Like destructive relationships, there might be some bad habits or behaviors you wish to stop – list those as well.

Wealth

Rather than financial wealth being an end in itself, see it as a resource for supporting the rest of your personal plan. Set goals for the amount of money you want to donate to causes that matter to you. Decide what you need to set aside to support activities with your family and friends, investing in experiences that create lasting memories. In the cash section of the Living Legacy document, you’ll want to make note of any financial goals you must meet to fuel your living legacy. And when you let money flow through you to help those around you, it seems to appear more effortlessly.

It’s not easy to do this type of planning, but just getting yourself to think about what matters most is 90% of the battle. You want to make sure that what you leave in the wake of your life as you sail along is a legacy worth living.