Determine Your Company’s Strategic Purpose & Growth

At the 1997 Apple World Wide Developer Conference, Steve Jobs answered a question about one of the numerous engineering projects that the company had become infamous for spawning by saying, “focusing is about saying no.” Jobs went on to apologize for what he described as “lousy engineering management” that had fostered a way of doing business at Apple that caused the “total [to be] less than the sum of the parts.”   During that time, Apple leadership had succumbed to the siren of continual ideation that undermined the progress and profitability of the entire company. In short, Apple had lost its focus. Paradoxically, it is often the entrepreneur’s advanced juggling and multi-tasking abilities that were the greatest asset in surviving the start-up phase that become the greatest liability in successfully navigating the growth phase. 

Take Rick for example. Rick was the newly minted CEO of a specialty manufacturing company that had just been acquired by a private equity firm. Rick had been given a daunting task by the company’s new owners: turn what had been somewhat of a post-acquisition money pit into a Cinderella story. But Rick suffered from what I call “bright shiny object syndrome.” Over the next year, this company of fewer than 50 employees (most of whom were well-meaning rank and file workers who had spent the last 18 years on auto-pilot) dabbled in four different markets, considered a fundamental change in its business model, and tried to roll out three new products. At the same time, the new owners continued to pump in more money to keep the company afloat.

Am I saying that there is no place for innovation or breaking into new markets? Absolutely not! In fact, without innovation or breaking into new markets, your company won’t grow. But if you want to generate the kind of innovation and new market entrances that lead to profitable growth, a better lifestyle for you, and eventually a large financial payoff when you decide to sell your company, then you are going to have to focus all your time, talent and treasure on one path at a time. You are going to have to become relentless about taking one idea and developing it to its full revenue generating, cash flow contributing, bottom line boosting potential while saying no to all others. You’re going to have to pick a path. 

One of the most simplistic and yet thorough frameworks that I’ve seen for guiding business owners in picking a path was put forth by Anthony Tjan, CEO and founder of the venture capital firm Cue Ball, in a blog posting that he wrote for the Harvard Business Review. In the post, Tjan describes the process that he uses when “outlining a path for strategic purpose and growth” of a portfolio company. The process boils down to answering four very basic questions. I’ve included the questions in bold below along with some color commentary to help you get started. So grab a pencil and a paper (you only need one sheet) and let’s get started:

1.   Why does your company exist (this is your company's mission)? This is where you write down the purpose that your company is trying to achieve. You don’t need a paragraph, just one sentence.  This statement should be simple and designed to stand the test of time. In other words, your mission should be something that anyone can remember and should still be the same 10 years from now.

2.   What is your value proposition? This question is all about your customers. This is not about what you or your executive management team decides to sell in the marketplace. It's about developing a true understanding of important (from the customer's perspective) unmet or underserved needs and delivering a solution that gives you a competitive advantage. Answering this question may require some research, but it’s well worth the time and energy to get this one right.

3.   Who are you trying to serve? This is really an outgrowth of question 2. Once you've identified the marketplace gaps, you then move on to deciding what customer group(s) you should be pursuing. This is what is commonly known as "outside-in" thinking. Your company has a set of core competencies--things that you are really good at doing (or that you could become really good at doing without significant costs and effort). What is the intersection between the marketplace gaps from question 2 and your core competencies? This intersection is your ideal playing field.

4.   How do you know when you are winning? I like to think of this as your vision for successfully delighting (not just serving) the market that you identified in questions 2 & 3. Perhaps it's as simple as being the #1 choice in the marketplace. If your company has been losing customers for a number of years, perhaps winning equals a net growth in your customer base. The key is to keep your vision short and simple and state it in terms of winning with your customer.     

Once you’ve answered all four questions you’ll have the foundation for a growth plan for your company. 

If your company is anything but a startup, you may find that because of the way you’ve done things for the last 10 or 15 years, you have a gap between your ideal growth path and where you are today. Does this mean that you are doomed to stagnation until you get everything perfectly aligned or that your newly created path is totally irrelevant? No. It just means that you’ll need to chip, hammer and blast away at business-as-usual while using your growth path as your guide for what should stay the same and what needs to change.  

Selling Your Business To A Key Employee

Owners wishing to sell their businesses often look to key employees as a way to transition the business to someone who knows and understands the business and often has a similar vision for the business.

But selling a business to a key employee is not as simple as handing over the business and cashing a check. Here are some steps you must still take:

Read more . . .

Spotting and Preventing Fraud in Small Businesses: Tips for Small Business Owners

Many of us know stories of small businesses succumbing to fraud committed by employees and third parties whether that is employees embezzling funds or third parties scamming business owners out of the company’s cash flow. In either event, individuals can be quite clever in disguising fraud or passing off a scam as legitimate. Business owners should be prepared to spot signs of fraud and have tools in place to prevent fraud in the business. Below are signs of fraud common in small businesses and tips to prevent such fraud from occurring.

Issue: A long-term employee who handles all aspects of writing checks and collecting funds has been embezzling funds for years. Many business owners have experienced some form of this where an employee or bookkeeper who handles all aspects of accounts receivable and accounts payable has improperly kept money for him or herself. Surprisingly, it is often a trusted loyal employee who is found to have been perpetuating the fraud over some period of time and that employee has little to no oversight from the business owner. To prevent such a situation, you should

• incorporate an oversight process,

• establish segregation of duties, and

• require dual controls for any person to move funds in and out of a bank account.

For example, you may consider having one employee writing checks, but to withdraw or make payments over a certain amount, two employee signatures are needed. Similarly, the person collecting the accounts receivable may report to another individual who actually deposits the accounts receivable. Finally, employees should not share passwords related to a company’s funds or bank accounts and each employee should have a separate user name and log in. This makes it easier to track who is doing what with regards to your company’s funds and allows you to minimize the number of employees accessing this sensitive information.

Issue: Employees writing unauthorized checks out of the company bank account. One of the most common examples of small business fraud is employees writing checks to themselves from the company bank account. Specifically, a trusted bookkeeper or individual who handles the checks will write unauthorized checks out of the company’s bank account. Many business owners are effective in delegating duties; however, if an employee with the authority to write checks has little to no oversight, the possibility for fraud exists. To prevent such a situation, most banks offer a service called Positive Pay. Positive Pay is an automated fraud detection tool offered by most banks. Specifically, business owners send the bank a list of checks written and the bank matches the account number, check number and dollar amount of each check to the list provided by the business owner. If the checks do not match up, the bank notifies the business owner who then has the authority to approve or deny the check.

Issue: Employees intentionally or inadvertently wire funds for fraudulent purposes. For example, an employee may set up an ongoing wire to his or her personal account or an employee may inadvertently wire funds to a vendor without prior authorization to do so. Additionally, if such wire transfer was fraudulent or inadvertent, business owners only have 24 hours to notify the bank of such issues otherwise the bank may not be liable for executing such transfer. To prevent such situations, business owners can establish ACH filters or ACH blocks with their banks. ACH filters allow you to protect your company’s cash flow by setting up parameters of when your approval is needed before ACH debits are transferred out of your account. Additionally, you can receive email and text alerts of wire transfers over a certain dollar amount, so you are aware of funds going in and coming out of your company account to better understand your company’s cash flow. Similarly, another tool is to use an ACH block which protects your bank account from unauthorized electronic charges. Similar to an ACH filter, the ACH block will only process ACH payments authorized by you and block all other requests.

Bringing it all together: Business owners should consider implementing some of the prevention tips listed above. Putting dual controls in place and using tools offered by your bank will help prevent fraud in your company. In addition, by letting your employees know that these systems are in place, you are communicating to them that their actions are being monitored, which may prevent them from attempting fraudulent acts.