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Sadly, modern-day businesses get started, operate and all-too-often die, for all the wrong reasons. We have observed businesses that have floundered and in some cases died, when they could have (and in some cases should have) been spectacular success stories. We have also seen competent business owners and operators who have been forced to sell their businesses for little or no reward, for all the years of hard work they dedicated to the cause. We have also seen highly qualified owners with business degrees, who bought and subsequently killed good businesses, and in nearly all of the above cases the principals always had somebody or something to blame.

If, right now, you are standing in an airport bookshop, casually thumbing through this book to get one gem, or “secret” to keep your business growing and ultimately reward you with a passive income until you decide to accept a favourable offer from a keen buyer, then I will give you the first of many - up front. Businesses fail because people fail. Circumstances around us are constantly changing and it is up to us as the drivers of dynamic businesses, to adapt our business operations to the changing landscape. If we don’t change our business model to match the new buyer demand, we can face extinction and if we are not mindful, it can happen quite rapidly.

But why do university graduates also fail? There may be many reasons for this, but for me (as a post-graduate with a partial doctorate in process) I put it down to the difference between knowledge and know-how. Most commerce and economics texts are filled with superb examples of knowledge but in most cases, academics can’t teach you know-how. I know that most consulting academics will argue that they have business experience running their own (usually one-man) practices and/or their departments, but how many of them have faced the real hardship of a market paradigm shift (if you want to understand this, talk to the owner of a video rental store) or a legislative barrier? Think of those people who started or purchased an LPG changeover business for vehicles in Australia, before the government started to talk about abolishing tariff subsidies on LPG, or the installation subsidy on fitting gas to a vehicle.

This book focuses on business know-how, for a practical learning process that can be understood and used by anybody who has or wants to own a business. Most importantly, the knowledge can easily be implemented by the reader without too much effort. I urge you, the reader, to absorb one chapter at a time and implement the knowledge as you go. It requires care to ensure the business you have does not experience too much turbulence at once, as staff and customers can both become disillusioned and seek to distance themselves from the business.

Let me firstly present my key reasons for why academically qualified business owners may not be able to perform better than any other owner. It is my firm opinion that the value of a tertiary education does not lie in the content. You don’t go to university for knowledge. You go to develop the tools of learning. Yes, you have to learn how to analyse knowledge and also how to store it in sufficient quantities to regurgitate it in exams but most of the knowledge you gather is dated from the day you graduate. If you fail to recognise the value that lies in your tools of learning, you will stop learning when you finish your studies and you will immediately start to lose the competitive advantage you have as a graduate.

I have been very passionate about having graduates I work with understand that these tools of learning are not unique to universities. Many business owners develop their own tools of learning and if they continue their learning journey by exercising these tools, they will overtake any graduate who believes his or her parchment is the proof that they know it all now.

If you are still reading this, you are perhaps not a closed-minded graduate and accept the merit in a constant-learning model of continual education. If so, let this book become your first set of practical lessons, with easy-to-implement action steps that we use in our Formula 1 business coaching program in order to double business net earnings in 10 months (and 56 steps) if the program is understood, implemented, measured and embedded.

Preparing for Race Day

Could any of the Formula 1 drivers of today, have started their careers in F1 vehicles? Certainly not! They would need to develop advanced skills and competencies to even make it to the racetrack and then some serious wins in smaller (less complicated) classes would eventually identify the most skilled and elite drivers for selection into the big-time.

So it is with business. We don’t jump into a major corporation at our first attempt. We need to learn the business rules as they apply to the industry and the markets that we seek and we then need to turn some of our knowledge into know-how. Most of us do this as employees, working our way to management within someone else’s company, making mistakes and learning along the way.

Ultimately, when we have our experience and we are ready to fulfil the dream of owning our own business and being the boss, we have to learn a whole new set of rules. It may be that you have never had to balance your cash daily or calculate the turnover and/or projections for the lenders before.

In most cases, the new layers of learning are harder to grasp than the operational functions and we struggle to bring it all together. If, for any reason, we choose to focus on getting the operations running smoothly, we are not maximizing our resources. As the business owner, you need to start with the end in mind and the end game is to have more competent operators operating the business, while you manage it. This means you need to allocate some of your valuable time to the practice of management, to get you away from the operations as quickly as possible. To best achieve this we recommend an eight-stage model, which is detailed in this book, as a practice model for most small businesses. These steps are:

Segment the operational functions. Even if your business has a part-time workforce of one, you still need to plan it out as if the fully-operational full-scale business is inevitable. You need to prepare the organisational chart for the firm and then start to create the divisions or departments. Typically, these would be around (1) Management and Administration, (2) Finance and Accounting, (3) Production/Service and R & D, (4) Human Resources and (5) Marketing and Sales. Although these may be broken down further in major corporations, they are still structured around these five key functions.

Identify the positions. Typically, the organisation chart may have a manager in each of these positions, with your name under each, from the commencement. The art of true growth is to get the names of other quality employees on these functions, as quickly as possible.

Set the operational function for each position. After the organisation chart has been set and you can fully document the functions within each position, you then need to draft up the job description. Although you will be performing most of the tasks in the short-term, you will need this experience as part of the knowledge-base you hand on to the incumbent in the induction process.

Work out the accountability for each position. Each role will need a job description and position on the organisation chart, clearly identifying the role, to whom they report and also who reports to them. This structure ensures full accountability from the end of induction.

Set about hiring someone for each position, against the job description you set. As you expand your business (based upon your hard work and strategic planning brilliance) you follow the basic recruitment process for selection, appointment and induction, with you sharing your experience in that position, with the incumbent. The recruitment process for all positions identified may take several months or even years, but with the right paperwork in place and the procedures for everyone to follow, you will not have to go back and repeat the process when people leave.

Work with each person until they are comfortable and competent. Some small businesses consider the induction process to be a half-day exercise and will view it as lost productivity for the position leader. There is considerable research available that bears out the theory that the more comprehensive the induction process, the more likely the candidate will engage and become part of your team. The temptation for most small business owners is to focus on business and see induction as a cost (lost business) but the long-term strategic business manager knows the value of hiring once. Don’t be tempted to drop employees in deep water but be ready for their inevitable mistakes during the learning process.

Measure the individual and collective operational performance. As your first employee becomes part of a growing team, the KPI measures you put in place will enable you to remotely monitor and measure your business and not have you work in an operational role to grow the business. It is essential to give regular feedback to teams and individuals, so that corrective action can help all employees adjust to their roles and functions.

Focus on the outside. Once you have the business in a strong and steady growth trajectory, you can now begin to look outside the company. Your focus now switches from growth through operational efficiencies, to growth from other areas. These areas may include new customers, offer more products or services, new regulations, opportunities, compliances, suppliers and contractors, as well as protecting your intellectual property and know-how.

Once you are out of the business (with no operational functions) your very presence and your access to accountabilities (KPIs, etc) will ensure the business will continue. With encouragement and with regular adjustment against the KPI trends, your business should prosper, if the outside environment remains the same.

Your final role is to look for your next business. Could this be a business you buy from or supply to? Could it be a competitor? Could it be a new branch in another area, as your first attempt to prove your business model as a franchise?

Why Change Anything?

In consulting, one of the first sessions we have with business owners (before accepting them into a change program) is to have the business owners set their outcomes. To effect this managed change, we provide 100 points for them to allocate on their goal priorities. We offer them the chance to invest in any proportion, in the following outcomes:

 Increasing the net earnings

 Reducing the hours worked by the business owner, and

 Increasing the sale value of the business, as a going concern.

The most immediate response from business owners is to affirm their desire to double their net earnings. Forcing business owners to decide how much of this as a priority they would be willing to trade-off, in order to effect gains in one or both of the other areas, can be confronting for any of them. This may be the first time they have been encouraged to think about these other options, as part of their overall vision for the business future. The intent becomes even more pronounced when they discuss the trade-off with a business partner and/or spouse.

People understand that with the scarcity of resources, they could not achieve increases in all three areas of their business operations within a ten month period, unless they employed several full-time consultants. They would also need to be willing to entertain an extended period of turbulence, as the business is dissected and re-built from different directions.

From the very beginning of the change journey, the business owner should feel confronted by their own personal goals and making these congruent with their business goals. The goal-setting process (for personal or business applications) will almost always start with the vision and include a mission and a stated set of values. These personal VMVs are then measured against the business VMVs to ensure congruence. If there is a difference (and there usually is) this is the first change requirement that we would work on, in their business model.

The underlying messages and themes that we are going to share with you in this book are packaged and presented in understandable and implementable nuggets. The intent is to deliver each of these practical and proven business concepts in “bite-sized pieces” for you to recognise, understand, implement and measure, before returning for another. Some of the core concepts we need to embed within our business practice, include:

 We need to measure everything we do, so that we can improve it

 We need to focus on one area at a time and not change too much at once

 We need to make incremental changes not massive changes

 We need to implement strategies that will ensure we are not working in the business

 We need to structure the operations which will make our business most attractive to buyers and will deliver us the highest value at sale

 We need to Increase our margins by adjusting our profit drivers (so the value increase is less about pricing), and

 We focus on fixed and variable costs, supplies, channels and potential partnerships, to enhance and extend our outcome-activity ratio.

What Can Go Wrong?

In most cases, business owners have had some exposure to business consulting or coaching, with little or mixed results. In a lot of cases, this may have less to do with the programs and more to do with the turbulence or confusion it can create in an uncontrolled change interval.

The temptation (particularly when you have just acquired a business) is to make a list of changes you would like to implement and then rush into changing them all at once. The result for most businesses is turbulence. Employees do not perform at their peak if everything around them is being changed, including the rules they work by and the accountabilities with which they are measured.

The three key principals for managing organisational or operational change in any organisation is (1) To keep change to minor, incremental changes over time, changing one area at a time if possible, (2) To have a change interval, followed by a period of consolidation (to embed the changes), before looking to implement another change interval, and (3) Communicate the intent to all team members and explain what outcomes you are trying to achieve. These three simple rules will help your changes to be received positively and to become standard operational procedures within a much shorter time.

Once you have set up your structure and prepared your growth and change program, you are ready to build your racing business vehicle to be competitive in the races you enter and ultimately, to be dominant in your industry.

What Happens When your Business Accelerates?

This book is presented as an easy-to-read operators guide for small high-growth businesses, but as you continue to understand the process, you will begin to see this as far more. Once you have completed a diagnostic review of your current business, ensured the processes are documented, the kinks ironed out, the tweaks implemented and the improvements measured and proven, you will find that your own role will transition from operator, to driver, to owner and later to the entrepreneur. At present, you might be working hard in your business and looking for a way to reduce your working hours without reducing your income.

One of the most common first reactions that business owners have to the suggestion that they need to be out of their business, is “My business can’t do without me.” This is all too common thinking, for managers as well as the thinking some business owners have for key personnel. In most cases, there is no foundation to this thinking.

In August of 2011, Apple announced that their charismatic leader and chief innovator was stepping down for health reasons. Analysts predicted a share price plunge, from its then present position of $368. As we know, Steve Jobs died a month or two later but some 12 months after his death, the shares were trading at $624. If such a pivotal key person can make such a small difference in his exit, in one of the largest companies in the world, what impact do you really think your exit would have?

The longer-term objective for us as authors and management consultants is to have you hone the skills of assessing, buying, building and either selling businesses or building a portfolio of cashflow businesses that can provide you with far greater returns than property or equities in publically listed mature companies.

Somewhere along this continuum you are going to choose to stop your journey and this could become your “comfort-zone” for months, years or even decades. We are hoping you revisit this book when you become restless and continue your journey to entrepreneur and develop your E-factor to the point where you collect cashflow companies like properties in a game of monopoly.