You Only have Two Hands…or not.

To paraphrase an old New Yorker cartoon  “I love being self employed. You can set your own hours, as long as you don’t mind working 24 each day.” Many owners find themselves “too busy” running a company to concentrate on the longer term improvements that come with planning, employee development and creating new initiatives.

An extra pair of hands would be “handy.”  From the Hindu deity Kali to Star Wars’ cyborg General Grievous, and from Edgar Rice Burroughs’ Barsoomians to Spiderman’s foe Doctor Octopus, multi-armed characters have always been a metaphor for strength. For an owner, adding extra hands to your working capacity is a powerful force for improving your company.

Yet, many owners I work with refuse to hire an assistant. They spend hours each week playing telephone tag with customers, writing memos, and following up with employees. When asked why they don’t have someone perform those tasks on their behalf, they say “Because I can do them perfectly well myself.”

They are missing the point. An assistant’s purpose is to free your time to do the more important things that no one else can handle. Your principle responsibility to your business is leveraging resources to produce profit.

Here’s a Rule of Thumb I use in my consulting work. In order to pay expenses and make a profit, I need to produce at least $400 for each hour of a 40-hour week. A good assistant, with fully loaded salary and overhead, costs about $40 per hour. So every hour that assistant frees me for revenue producing activities is leveraged ten to one.

admin assistantWith that kind of return on investment, I don’t worry much about filling every minute of her time. I see too many owners who are focused on keeping people “busy.” If my assistant is bogged down with routine tasks, she won’t have the capacity to juggle the dozens of unplanned responsibilities I toss her way regularly. Each time one of those winds up in my lap, I am spending ten times what it should cost me to get it done.

Keeping the leverage ratio in mind makes it much easier to ask “Do I need to do this myself?” about most activities. It’s not at all unusual for me to call in between appointments with “I just told Bob we’d send him information on the management training program. Charlie left a voice mail, he needs to move our next meeting. I emailed you a draft of a memo, please edit it,  clean it up, and send it to my phone for approval. Oh, and I need to see that analysis we did last month on ABC company; they are asking about the next step.”

I just saved two hours, or a net of $720 in available productivity. That’s enough to pay an assistant’s salary for almost a week. No brainer.

This Wednesday is Administrative Professionals Day. Like most owners, I smile at the marketing prowess of the gift and greeting card industry. None the less, they deserve the recognition, and I appreciate being reminded of it.

Hunting in a Farmer’s World: Celebrating the Mind of an  Entrepreneur, now has its own Facebook Page. Tell us your stories and read reviews from business owners who are putting the lessons of 7,000 years to work in their businesses.

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One Response to You Only have Two Hands…or not.

  1. Brent Lane says:

    John,
    Great post!
    I love the simple math of the leverage you are illustrating. It should get the attention of owners who look at expenses not revenue (and usually liabilities not assets!).
    I would suggest a post on how many forms of leverage you can generate as an owner. If your assistant frees you up for a 1-hour lunch that generates $16,000 in revenue, wouldn’t that be a 400X multiplier? (16000/400 (you)x400/40)(her). The $40 you spent for him/her resulted in a $16,000 yield. Or, the time leverage multiple that allowed you to write a book that produces residual income for years?

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The Meritocracy of Ownership

A few weeks ago, we hosted the 17th annual awards dinner for our members in The Alternative Board of San Antonio. It’s fun to recognize people for their achievements. Each of our 14 Boards votes for the most valuable and the most interesting member from the previous year. The most valuable member is high praise indeed, considering that it comes from qualified peers. The most interesting member is usually met with laughter. :-)

We also recognize business owners for lifetime achievement, community service, comebacks from adversity, and those who implemented the greatest improvements in their companies. It is a fun and positive evening.

The people who seem to enjoy it the most are the spouses of the members. It’s an unusual night for them compared to typical business functions.

None of their employees are present. No one is trying to make friends with them in hopes of a nice comment to the boss. No one complains about being overworked. I still remember a nightmarish company party where I spent most of the evening trying to extricate from an inebriated wife haranguing me about how her husband (whom I was about to fire) was unrecognized for his massive contributions to the company.

It isn’t a customer or networking event. The spouses don’t have to worry about who is important, who spends a lot, or who should be spending a lot more.

Most of all, it is a place where there are only two kinds of people; hardworking entrepreneurs, and people who are in a relationship with hardworking entrepreneurs. They share a bond of sacrifice for a business dream. There is no spouse of a small  business owner who hasn’t been asked to sacrifice for the sake of the business.

A few years ago a member’s wife (although many of these spouses are husbands of entrepreneurs), attended her first function. She waded into a conversation among three or four other female spouses with enthusiasm. At the first opportunity, she spoke up.

female group listening“I don’t know about the rest of you, but I have to play second fiddle to my husband’s business all the time. We plan our vacations around the business, and he often doesn’t come home until after dinner. I’m sure no one has to deal with the demands of the business interfering with your personal life like I do.”

I’ll never forget the looks of incredulity from the other wives. One mumbled something about “pretty typical.” The others simply walked away. In another minute, she was standing alone. She never came again.

If you have a spouse or significant other working in your business, you share a bond in building the company. Even if he or she isn’t directly involved, however, you share in the challenges of ownership. Make sure you say “Thanks” on a regular basis.

Hunting in a Farmer’s World: Celebrating the Mind of an  Entrepreneur, is an ownership book, not a management book. “John Dini’s writing is crisp, peppered with good data and concise, pointed stories, revealing how deeply he knows the head, heart and guts of entrepreneurs.” (Read more reviews)

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You are Never too Busy to Make Money

Last week I was having lunch with a client who owns a substantial construction firm. His phone pinged during our conversation. He apologized for looking at it, but he was waiting to hear on a couple of large bids.

“Dammit!” he exclaimed when he looked at the screen. I assumed a big one had gotten away. He went on to explain. “This job is going to be a bear. The schedule is tough, and the type of work is filled with hidden traps. I estimated high on the work, higher on the labor, very high on the overhead, and then tacked on some more just to make sure I’d be out of the running. The competitors who bid the job loaded even more onto it than I did! Now I’ll have to do it.”

Before you feel too sorry for him <grin>, he lost another large contract that day to a competitor who’s estimate came in 30% lower than any other bidder’s. Clearly, not everyone feels they can be aggressive in their pricing yet.

new profitsSouth Texas may be growing faster than the nation as a whole, but we are seeing acceleration in many sectors across the nation, and especially in financing and acquisition activity. For some small business owners, the relief of being busy is enough. They think that they can worry about increasing margins later. They are happy just to have the phone ringing. It seems premature to risk the uncertainty of pushing returning customers for a price increase.

Small business owners thrive by reacting instantly to changes in their markets. Those who survived the last five years of moribund growth and high unemployment did so by getting lean and mean quickly. Most saw their reserves dwindle and their margins tighten.

If the warm winds of increasing activity are reaching your company, it is time to develop a plan to increase your profitability. Talk to vendors to find out what your competition is doing.  Determine whether new or resurrected customers are calling because they are busier, or merely because you are becoming their low-cost supplier.

The race goes to the swift in both rising and falling economic cycles.

Hunting in a Farmer’s World: Celebrating the Mind of an  Entrepreneur, is an ownership book, not a management book. “John Dini’s writing is crisp, peppered with good data and concise, pointed stories, revealing how deeply he knows the head, heart and guts of entrepreneurs.
(Read more reviews)

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The Migration from Service to Knowledge

As I have pointed out frequently in this space, the Baby Boomers’ entry into entrepreneurial business moved the core of the American economy from products to services. (see www.theboomerbust.com)

Multiple dynamics created the shift. Boomers were degreed at four times the rate of their parents, and not inclined to utilize their college educations doing physical labor. The rapidly expanding economy, ubiquitous automobiles, two income households and increasingly long work weeks provided both the disposable income and time compression that drove people to purchase services that their parents had once done for themselves. Service businesses had a low cost of entry and a short learning curve.

Now Boomer entrepreneurs are seeking to sell their service businesses, and finding few buyers. At the same time, the nation is waking up to the next surge of entrepreneurs, the Millennials. Slightly more numerous than the Boomers, they will be half of the workforce by 2020. Squeezed by a stagnant job market, they are going into business for themselves just like the Boomers before them.

Like the Boomers, they have skills that the previous generation lacked. In their case, it is based on technology. Like the weavers and carpenters of generations past, Millennials are starting businesses where they sell a skill that others don’t possess. The only difference is that the skill involves the knowledge of how to use information instead of building a tangible product.

bakeryA service business is driven by the needs of the customers. Few people will pay to have their lawn mowed at 3:00 AM. Boomer service businesses, many with long hours and demands that eclipse family life, don’t appeal to the Millennials. They are gravitating to businesses that are low investment, don’t require brick and mortar, and can generate revenue when they choose, wherever they are. They assemble staff virtually; usually with other Millennials who provide a complimentary skill, but only for as long as it is needed.

Boomers are distressed at the disappearance of the Mom and Pop store. They decry the loss of high-touch service to Internet competitors and big boxes. The Millennials don’t care. It’s not who you know, it’s what you know.

 Hunting in a Farmer’s World: Celebrating the Mind of an  Entrepreneur, is an ownership book, not a management book. “John Dini’s writing is crisp, peppered with good data and concise, pointed stories, revealing how deeply he knows the head, heart and guts of entrepreneurs.” (Read more reviews)

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Personal Morals and Business Ethics

A few weeks ago, I posted a column on employee empowerment that used the example of a Girl Scout selling cookies outside a medical marijuana dispensary in San Francisco. It generated vehement response in some forums, many excoriating the parents of the girl for exposing her to immoral activities.

Why? Use of marijuana for physical and behavioral issues requires a prescription, and is an accepted therapy in California. In Colorado, where recreational use is permitted, Girl Scouts are forbidden to sell in front of pot shops, just as they are from selling in front of bars, night clubs, adult video stores, or any other business whose patrons must be 21 or older. That makes sense, and is consistent. No scouting council (as far as I know) forbids them from selling in front of physician offices or hospitals, both of which dispense powerful, and legal, drugs.

Morality differs from place to place, and shifts over time. Smokable intoxicants have been legal in Holland for decades, just as nude bathing is in Germany. I don’t hear claims that the Dutch or Germans are immoral as nations.

On the other hand, few of us would defend stoning or amputation, forced marriage of pre-teen girls or honor rape as moral acts, yet they are legal and considered righteous in parts of the world. Some business owners claim a moral right to refuse service to gays and lesbians, but I’m personally not clear on how that differs from the not-so-far-gone practice of denying service based on skin color, when some people claimed that allowing races to fraternize was immoral. We can agree to disagree.

Business ethics, on the other hand, are pretty close to universal (although perhaps not universally observed). I know of no jurisdictions where it is permissible to sell poisonous or dangerous products labeled as safe. Nowhere can you legally contract for goods and services with no intention of paying, or collect payment with no intention of delivering. Honesty and integrity are the underlying assumptions in every business transaction, from the smallest to the biggest.

The dictionary says that ethics are the application of moral principals. That is true, but in business, my moral compass doesn’t have to agree with yours as long as my ethics do.

 

 Hunting in a Farmer’s World: Celebrating the Mind of an  Entrepreneur, is an ownership book, not a management book. “John Dini’s writing is crisp, peppered with good data and concise, pointed stories, revealing how deeply he knows the head, heart and guts of entrepreneurs.” (Read more reviews)

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One Response to Personal Morals and Business Ethics

  1. Peter Hirst says:

    I agree, morals are personal and ethics a code of behaviour and both require defending.

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