Journey of a Serial Entrepreneur

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How to get from where you are to where you want to be

5 Reasons why Teams Fail

“You will find men who want to be carried on the shoulders of others, who think that the world owes them a living. They don’t seem to see that we must all lift together and pull together.” Henry Ford

I started this series with a question posed by a reader  asking  why some teams succeed and others don’t. When I began structuring my thoughts and getting advice from more experienced entrepreneurs, the same issues kept coming up in one form or other. The core message behind all of them was the same, to get the team to work right, certain factors need to be in place along with hardwork and persistence. We have all been in teams where team cohesion is problematic, it is always an extremely frustrating experience. Hence first off, selection of team members/partners is an extremely important aspect, one that needs to be given a great deal of attention. Call it co-incidence, my post on 8 characteristics of an ideal business partner is the most visited post on this blog. However, even after you have reviewed your prospect partners using the 8 step process, there is still a likelihood of things not working out. Listed below are 5 things to look out for to measure the health of your team:

1. Mismanagement of Competing Interests: When a team comprises of many ‘star’ performers they are bound to have multiple offers on the table. When these offers begin to interfere with their performance and their  commitment to the project at hand, problems begin to arise. If these are left unmanaged they will slowly set seeds of mistrust and suspicion in other team members, this has a destabilizing impact on the entire team. It is important that these competing interests are brought to the table and are not used to leverage a team member’s position or interfere with their commitment. To read more about managing competing interests please click here.

2. Lack of Candor: The ability to communicate effectively is one of the core reasons why some teams succeed and others do not. When a team is unable to communicate their thoughts, suggestions or feedback openly, tensions arise. Being candid is every team members responsibility to themselves and to the rest of the team. This is not always the easiest path to take and many a time one will need to step out of their comfort zone to say it as it is. However when all is said and done, it is the things which are left unsaid that destroy a team from within. Set up systems where everyone is given the opportunity to speak freely and easily. To learn more about the importance of candor please click here.

3. Lack of Trust: In any relationship trust is a must, without it there is no team. In my opinion there are degrees of trust which need to be developed within a team. Expecting your team members to have 100% trust in you and your abilities from the get go is wishful thinking. Trust needs to be earned. The ability to trust someone depends on their shared core values, self confidence and risk tolerance. Mismatches in these components will result in a slow build up of trust. Low trust teams are very fragile and the slightest of hiccups can have severe ramifications. To learn more on how to build trust please click here.

4. Lack of Accountability: When team members talk more than they actually do, problems are bound to arise. Without clear objectives on what each team member is responsible for a culture for execution cannot be formed. Without such a culture certain team members may ride on the coat tails of others just to get by. Every team member must be held accountable for what he/she has been given responsibility. Inability to meet commitments, needs to be reviewed and appropriate action taken. To learn more on the importance of accountability and how to create it please click here.

5. Consistent Poor Results: If a team is consistently unable to reach targets and goals, the team and entire business model needs to be looked into. Many teams linger on even when results are clearly not being produced. This puts an enormous strain on the team and eventually leads to unpleasant defections and confrontations. This issue must be dealt with as soon as possible and strategies and tactics revised. If the team is unable to produce the results it needs, it is best to figure out how and where the team should  go from there. To learn more about how to deal with consistent poor results please click here.

The points listed above are I believe leading factors why some teams fail. One of the factors that I have not included in this series is a lack of good leadership. This is an issue that I think needs to be tackled in a separate series. Also, unlike the problems listed above this issue does not have any easy answer which says follow steps 1, 2 and 3 to help overcome the issue. Good leadership is a rare commodity. It all goes back to team selection and who is chosen to be the leader. If there is a problem at the initial selection stage then the team has a lot more to be worried about. The issues highlighted in this post are in the context where even though the team and team leader were correctly selected, the team still fails. I hope to get your comments and feedback on this series.

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8 Characteristics of Ideal Business Partners

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Consistent Poor Results

“Waiting is a trap. There will always be reasons to wait. The truth is, there are only two things in life, reasons and results, and reasons simply don’t count.” Dr. Robert Anthony

During the course of the week I have spoken about some key factors which lead to high performance teams failing. As a culmination of all the factors mentioned in my prior posts, the inability to reach targeted bottom line results, is a leading cause why such teams fail. I was advising a young startup team a few years ago, it was full of stars. They had a fantastic business plan and worked really well together. However the business was not gaining the traction they had projected. This was causing much tension within the team. This is a time when internal conflicts begin to surface. Initially no one really talked about it, rather they hoped that things would change. Unfortunately the market they were targeting was not ready for the product they had and soon the defections started to take place. This is a story one has seen many a time in small startups, as well as large companies.

It is only natural that when things are not going well that team members begin to explore other alternatives open to them. They are justifiably looking out for themselves and being realistic about the situation. However, if the business had created a culture of accountability and candor, I believe things may have gone very differently. Firstly, when things were obviously not working, how to tweak the business model would have been brought up and discussed candidly. Secondly, with greater transparency in the team, those individuals who were not contributing or whose skills were not required, could have started exploring other opportunities without suddenly leaving the team. Lastly, if the team did work well together there could have been other opportunities which they could have pursued.

Consistent poor results are definitely a major reason why teams and businesses fail. The key word is ‘consistent’. Losses are bound to occur at some point or other in a business. However, it is when they continue to appear without any direct action being taken, that it gets serious. As a team leader one needs to continuously keep a keen eye on key metrics and regularly update members about results and problems being faced. Transparency helps leave doors open for candid discussions and gives  team members the opportunity to make graceful exits. Warren Buffet has some wise words on this matter “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”

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Lack of Accountability

Accountability breeds response-ability.” Stephen R. Covey

Starting a new business is a lot of fun. The first couple of months everyone is really enthusiastic. People are making sales calls, improving the website content, developing new marketing concepts and generally being highly productive. After the initial couple of months or even a year, there is a dip. The spark of starting this new revolutionary business begins to wear thin (unless you started something like Google). All of a sudden those sales calls are not being made and there is just not enough attention being given to the key first customers which you closed. I have experienced this in the first couple of ventures I was a part of. Whenever a routine set in, the enthusiasm levels began to drop. This then brings us to the next factor that results in the falling out of teams…a lack of accountability.

From the very onset of a business venture, clear objectives and targets need to be set for every team member. They need to be accountable for a specific component of the business. The progress on this must be reviewed periodically. I believe it is usually a lack of clear objectives that brings about a lack of accountability within teams. This is the leader’s or senior management’s fault. It is a reflection of poor leadership skills and is often taken advantage of by individuals riding on the coat tails of the effort of others. I have been  part of many teams whether it be at school or in a business, when someone or other on the team takes advantage of the free rider problem and ends up taking undue credit for the success of the team.

The components  talked about in my recent posts, such as lack of candor and trust, usually lead to this lack of accountability. When there are no clear objectives communicated to team members, and this is compounded by a lack of trust between team members, there is very little motivation to work  hard. Neglecting this aspect of a business will result in inadequate traction and eventually lead to a poor bottom line results. I will talk about that in the final post of this series. In conclusion, make sure that everyone in the team is held accountable to certain SMART goals and targets. This is essential to meet positive bottom line results and eventually succeed as a team.

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Lack of Trust

“Wise men put their trust in ideas and not in circumstances” Ralph Waldo Emerson

Trust is an essential component of any type of partnership,  be it business or personal. Without it, a relationship’s growth is impeded, it will in all probability remain stagnant and eventually break off. It takes a lot of hard work to build trust in a relationship, but very little effort to destroy years of accumulated trust. Looking back at the ventures I have been part of, I see that trust was definitely something created over time. However, there are a couple of factors that create the basis for this initial leap of faith and trust between individuals or a group of individuals. They are:

1. Shared Values: Before making any type of commitment, the underlying premise must be built on a set of shared core values. Core values are a set of values embedded into each individual’s system. They are the result of life experiences, culture, environment and our spiritual belief system. Hence ,when team members with different sets of core values come together the process of building trust is much slower.

2. Risk Tolerance: Everyone has different areas for the level of risk they are willing to take on, at any given point in time. Those with higher tolerance levels push forward and hope for the best, whereas others hold back and wait for the right time. When individuals with different levels of risk tolerance come together as a team, it takes a lot longer for trust to develop.

3. Self Confidence: I believe that individuals with higher levels of self confidence, have higher levels of risk tolerance too as they are positive about things working out. Whereas individuals with low levels of self confidence constantly doubt their own abilities and their plans to get it right. Individuals with differing levels of self confidence take longer to build trust.

Differences in these areas will result in trust being built slowly. Teams who have mis-managed competing interests,  not created a culture of candor in their business, will have severe problems in developing the level of trust needed to push the business forward. I believe that when there is a lack of trust in the team, team members are not able to perform at their optimal. If this problem is not handled in its early stages, the probability of members defecting and moving to greener pastures increases greatly.The key to incorporate candor into your business is to ensure that messages sent are consistent with what the business stands for. When these factors are in place one should be able to see higher levels of trust, this will eventually lead to better performance and results.

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Lack of Candor

“You can’t shake hands with a clenched fist.” Indira Gandhi

I have written about the importance of candor in earlier posts. When teams are unable to communicate effectively, problems start manifesting themselves from all angles. Most start up teams comprise of 3-5 individuals who usually work in very close proximity. When these individuals are unable to speak their mind or voice their opinions, tension begins to build up. I have noticed that this phenomenon occurs more where teams are comprised of individuals from the east rather than the west. I do believe this has much to do with culture. In Malcom Gladwell’s new book ‘Outliers’ his research validates this claim, delineating how Asian cultures affect the way an individual is supposed to communicate with another. It is about not ruffling feathers and ensuring that a status quo be maintained.

As a direct result of this mindset, conflicts are avoided at all costs. This further intensifies any frustrations plaguing the team. Lets face it, no one wants to be the one to bring bad news to the table. This is more the case when the team comprises of friends or associates you have been working with for an extended period of time. The feeling that there is a lot more at stake compels us to push these frustrations deeper. As a result of this almost unnatural behavior, the competing interests I spoke about yesterday begin to surface. Alternative routes available to team members start to become more attractive and this leads to greater diffractions in the team.

Lack of candor is a serious issue, one I have personally witnessed many a time. Writing about it is one thing,  putting yourself out there and talking about this uncomfortable situation is a completely different matter. To a large extent, the development of a culture of candor is dependent on the founders or individuals leading the group. It is only when all team members are comfortable talking about these matters and are assured that their comments and feedback help the team progress, will one see greater buy in from everyone. Undoubtedly this will require stepping out of your comfort zone. The benefits far outweigh the downside in this matter. More importantly, the future of your team may depend on it.

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Mismanagemnt of Competing Interests

“Wearing the same shirts doesn’t make you a team.” Buchholz and Roth

Reflecting through the past couple of the ventures I have been part of,  this was one of the things which struck me as a vital cause for a team’s eventual downfall. The issue of managing competing interests is prevalent in most teams and organizations. However in teams which include many ‘stars’, this issue gets amplified. The reason being that stars are always on the look out for new opportunities, they are approached by many individuals who want them to be a part of their ventures and they are also approached by headhunters who are scouting for senior positions. In short these individuals have many options available to them from the onset and pinning them down to work on one business is very difficult. Multiply this issue by the number of stars in the team and there is substantial work to be done by the leader.

Looking at the bigger picture, a misalignment of interests is something that start-up companies have to deal with very often. From the very beginning, founders want different things from the venture. When investors come in, they have a different set of objectives and the employees of the venture will have another set of objectives. The entrepreneur needs to manage all of these competing interests by making sure that channels of communication are kept open and as candid as possible. It is when these competing interests are kept under wraps that they tend to blow out of proportion when brought to the surface.

Therefore in conclusion we have to accept the fact, that every team will have to deal with it’s share of competing interests. In dealing with them it is important not to allow any member of the team to use those interests to undermine the positions of others or to leverage themselves unfairly. Also, mismanagement of competing interests will lead to a drastic reduction of the focus of the team member. This further amplifies the problem, and soon the team finds itself moving away from each other. With transparency the team will be able to get a better idea of how it should proceed and who should stay on the team and who should leave. This can only be possible when a culture of candor has been embedded into the team. This leads me to the next factor which is the lack of the candor.

 

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5 Tips for Better Cash Flows

“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” Warren Buffet

Mismanagement of cash flows is a leading cause of failure among businesses. Business owners do not realize how critical it is to budget and plan cash flows from the beginning of the venture and most times a liquidity crisis catches them completely off guard. This often leads to irrational last minute maneuvering which amplifies the problems at hand. To ensure smooth cash flow cycles we have to ensure that we are extremely vigilant of the financial health of our business from the onset. This may appear to be over simplistic advice, however the truth of the matter is, not enough emphasis is given to this function. The excitement lies in closing those million dollar deals and creating fancy marketing campaigns. Reality of the matter is that if we do not have the financial structure in place to support these deals and campaigns we will soon find ourselves in a lot of trouble. Listed below are a couple of tips which have helped me manage cash flows better.

1. Inflows & Outflows: From the onset identify your inflows and outflows. If you have adequate historic data, map out how long on average it takes to receive cash after providing your product/service. Next carefully map out all your expenses, and dates when they need to be paid. Next we have to minimize the time between the two flows. Usually inflows are much slower than expected and this needs to be compensated by negotiating favorable agreements with suppliers, stocking less and invoicing your customers at regular intervals. To learn more about the importance of mapping out inflows and outflows please click here.

2. Cost Management: Cost cuts do not necessarily require a business to layoff staff or drastically cut marketing expenditure. I take the approach of measuring cost effectiveness in terms of every product or service that the business is providing. The goal must be to provide the product or service at a lower cost than the competition. Identify all direct costs, incremental costs of increasing volume, fixed costs and overall cost structures in comparision to the competition. This does not necessarily have to be reflected in lower price points. As we widen the cost comparison between competitors, we are able to hold a much stronger position in the overall industry. To learn about each cost in greater detail please click here.

3. Marketing: Cutting marketing expenses to conserve cash is often not the most optimal solution for solving one’s cash flow problems. Assessing marketing strategies and tactics needs to be practiced on a regular basis. It is not wise to make marketing expenses cyclical with business cycles. With optimized marketing campaigns and strategies in place, a business has greater chances of avoiding these cash gluts as business is constantly being generated at a healthy level. To learn more about marketing strategies during a liquidity crunch please click here.

4. Technology: Gone are the days of keeping track of your business expenses on excel sheets. As a business owner today we should use one of the many accounting packages available to make sure we always have a financial snapshot of the health of our business. This will provide us with the ability to quickly identify trends and potential liquidity crunches before they take place. Please click here to read five questions you need to answer before selecting which accounting package is right for you.

5. Last Resort Measures: There will be times however when a liquidity crisis will hit . It is important that when it does we remain calm and evaluate the options we have instead of making rash decisions. The options I have used during these period of times are, discounting, credit cards, loans from friends and family, invoice factoring and secured credit lines. All of these options need to be used when all other alternatives have been exhausted. Attention needs to given to ensure that all documentation has been read carefully and that one is fully aware of the pro’s and con’s of each measure. To learn more about each measure please click here.

Those who have experienced liquidity crunches realize how stressful and frustrating these cycles are. They can result in partners leaving the business, unpleasantness at the office and even eventual closure of the business. Using some of the tips provided above we can avert a number of these situations. It comes down to better financial planning and catering for unforseen events. We have to be prepared when such situations arise and must deal with them face on. There is no need to dig ourselves deeper into a hole by using temporary fixes. If the business that you are running is repeatedly running into cash flow problems, do your best to re-engineer it from the ground up, or have the discipline to change boats.

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Getting out of a Cash Crunch

“When you’re in a pit, the first thing to do is to stop digging.” James Ellman

At some point of time or other most entrepreneurs go through a cash crunch period. These are stressful and frustrating times when the world seems to be falling apart around us and we have a limited set of options to get out of the mess. I have found that by following the tips provided earlier in this series we can reduce the probability of being stuck in a liquidity crisis substantially. However, there are times when even after having planned for every conceivable outcome there is a blind spot we missed out. The important thing to do at this point is not to panic. Cutting your marketing budget, laying off staff and hawking office equipment on ebay is not usually the answer. In a situation where we have exhausted options of negotiating extensions with suppliers and run out of excuses why we have not settled the rent, there are a couple of alternatives I have used. Listed below in order of my personal preference are:

1. Discounting: If we are in a quarter with a number of payments due I include a clause in outgoing invoices stating that if payment is made within x number of days there will be an x% discount. This creates monetary incentive for clients to pay up on time. If invoices have been pending for a while I give the same discount to the client stating they should pay the discounted bill or we would be forced into calling in collection agencies. Surprisingly I have had very good results using this method in speeding up payments causing strapped up cash.

2. Credit Cards: I personally do not advocate using this type of financing but when the situation calls for it, use it as an emergency backup. These can be either business applied credit cards or personal cards. Using the cash advance option, essential payments can be made. This will help tide through the business until payments are made by clients. Using this option for any other expenses other than these critical ones results in getting buried by ridiculously high interest payments. Instead of fueling growth for your business this stunts growth. Use it with caution

3. Loans from Friends & Family: If you are in desperate need of some bridging capital and need access to it quickly, going to friends and family is a valid option. I do not like mixing friends and family with business, but at times it is unavoidable. Make sure when you take the money there is an agreement with terms and conditions spelt out in black and white. Full disclosure must be made regarding the situation at hand as well as when you are expected to repay the loan. Conflicts tend to arise when inadequate information is given, this results in confusion and unrealistic expectations.

4. Invoice Factoring: For businesses with natural and steady flows of revenue, but prone to erratic payments, applying for these schemes through banks or specialist factoring companies is an option. These basically take into account your average business activity and streams of revenue, then provide you a credit line against it. This can free up much of your working capital and can boost growth. However read the fine print carefully. Sometimes these institutions limit who you can do business with, and can also force your clients to interact with them as far as payments are concerned. This reflects negatively on the business and does not convey a good image to your customers.

5. Secured Credit Lines: If one is expecting the next couple of quarters or year to be tight, taking out a secure credit line may be a good alternative to solve the liquidity crunch. The bank provides you with a line of credit which is usually secured against a particular asset. The asset is usually real estate which you or the business may own. The business is then able to borrow money against the asset conveniently. This is an option exercised by many entrepreneurs. However it takes time to setup, therefore one must plan for it well in advance and not when you are stuck in a liquidity crisis.

No one wants to be stuck in a liquidity crisis. We must do all we can to ensure the business does not slip into one. Keep your eyes on both the sale numbers and controlling expenses. When and if the situation becomes critical these last resort measures can provide significant relief in assisting you to get out of the mess. It is important to use these options wisely and to do thorough research on them before committing to any one of them.

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Technology and Cash Flow Management

“What amount of value creation can be assigned to the efforts of management for a particular time period? That is the essence of accounting. Otherwise, it’s simply an appraisal process.” Charles W Mulford

Gone are the days of keeping track of your business expenses on excel sheets. Earlier on in my entrepreneurial journey we relied solely on excel sheets to manage accounts. However we were then introduced to Quickbooks, and it completely changed the way we viewed our accounts. With this software we were actually able to extrapolate a lot of data and zoom into key metrics by which we could monitor the growth of our business. Many business owners wait until they have an ‘established’ business before investing in standard accounting software. This is like wearing a helmet after you have experienced a fall. Undoubtedly experience is a great teacher and one should continue to learn from mistakes. There are however some precautions which should be taken beforehand, and getting software to manage your accounts is one of them.

There are many great accounting solutions available in the market today. These key questions need to be answered when selecting an accounting package:

1. What is your budget allocation for purchasing this software? (If a budget has not been allocated there are many free accounting solutions which one can find online)

2. Do you want the software to run locally on your computer or would you want web access to your data?

3. How many users will be using the software?

4. What is the primary purpose of purchasing the software? (Do you require a simple application which helps to track all of your incomes and expenses, or do you require one through which you can manage inventory, payroll, invoices etc)

5. What level of reporting will be required? (If one requires simple profit/loss, cash flow and balance sheet statements there are a lot of great packages out there. For more complex reporting, software like Quickbooks premier can generate detailed reports on sales report per employee and profitability per product)

Once these key questions have been answered, you will have a better idea for the sort of solution required and your search would have been made easier. When you have selected a software, assign someone or a group of people to continually update it to ensure access to the latest activity. This acts as a safeguard and protects over exposing the business to unnecessary risk as well as maximizing the opportunities currently in hand. I plan on creating a widget which will compile the answers to the questions above, and help provide a list of appropriate software or services. If anyone would like to help me out in creating it please let me know at blog (at) usmansheikh.net

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Cutting your Marketing Budget?

“Marketing is not an event, but a process . . . It has a beginning, a middle, but never an end, for it is a process. You improve it, perfect it, change it, even pause it. But you never stop it completely.” Jay Conrad Levinson

The quote above encapsulates the essence of this blog post. I don’t think anyone could have said it better. I am a fan of all Mr. Levinson’s work especially his book “Guerrilla Marketing”. In the book there is constant emphasis on marketing being a process which we cannot cut whenever things get tight. As I mentioned in my last post, costs need to be contained tightly if we are to reach our goal of attaining a positive cash flow. What I have noticed is that whenever things get tight, cash flow wise, many entrepreneurs tend to pull the plug on marketing expenses in an effort to control costs. This however leads to a decrease in new business development, which ultimately results in decreased revenues.

Cutting marketing expenses to conserve cash is often not the most optimal solution to solving one’s cash flow problems. Assessing marketing strategies and tactics needs to be practiced on a regular basis. For example we could be advertising our new virtual assistant services on the front page of a popular web portal. We have continued to run the ad for the last quarter but have barely broken even on our investment.  We find however that ads running with much greater ROI on a couple of niche blogs and portals relating to the GTD methodology. As a business owner we should assess these trends on a regular basis and change out strategies likewise. If we take the approach of cutting all web advertising, it is more like amputation instead of laser point surgery.

These budgets and control measures need to be adopted from the onset of your business venture. It is not wise to make marketing expenses cyclical with business cycles. With optimized marketing campaigns and strategies in place, a business has greater chances of avoiding these cash gluts as business is constantly being generated at a healthy level. If you are currently experiencing cash flow difficulties in your business, assess your marketing budget and find ways to optimize the cash available to you in order to maximize your ROI.

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