Archive | February 2012

Don’t Put All Your Eggs in One Basket

Yesterday, Jeff Haden posted an article for Inc.com called “Can You Afford to Fire Your Superstar?” In the article, a reader asks whether or not to fire a salesperson that brings in almost half of the company’s revenue but was caught in an ethics violation.

The article brings up a key issue faced by many small business owners: over-reliance on key team members.

The most common way this issue rears its head is a lack of succession planning and an owner that is intimately involved in every detail of the business. If the owner is responsible for too much, #1) he/she will never be able to sell the business because no business exists outside of the owner and #2) if something were to happen to the owner, the business would fall apart (and likely so would the owner’s personal finances).

The same thing can be true if a business owner relies too heavily on any individual member of the team. A business’ success should not be based entirely on one person, and most certainly not on one employee who doesn’t have a vested interest in staying with the company for the long haul. If your company would fall apart if you lost one of your team members, you need to make some changes to strengthen the foundation of your company so that you can withstand any unexpected issues (your star gets a new job, is somehow rendered unwilling or unable to continue performing his/her job, or you are forced to fire them for some reason).

Running a company is an investment. Just like in investing, you should not put all of your eggs in one basket. In the spirit of strengthening your business’ resilience against unforeseen issues, here are some tips for limiting risk from a lack of diversification:

  1. If an activity is absolutely vital to the operation of your business, there MUST be more than one person that knows how to do it. If you have only one employee capable of performing a task that has the power to stop and start the business, you’re setting yourself up for disaster. Make sure to cross-train employees on vital duties so that, in an emergency, there is someone who can step in and pick up the slack temporarily while you find a replacement for the key team member.
  2. Keep track of your reliance on individual team members, just as you would your reliance on any individual client. Most  business owners know that if too much of their revenue comes from a single client, they are in a dangerous position because they could lose the account, and then lose the entire business. The same holds true of employees, so you need to pay attention to this metric as well. If you spot a troubling trend – like the company in the article who has one employee generating half of the revenue – you need to take steps to correct it. Immediately. As the author states, if one sales person is so drastically out-performing all of the others you should take a look at your hiring and training processes and any other policies at your organization that could be affecting performance to quickly identify the issues and make the changes necessary to create a better productivity distribution so you are not reliant on just one team member for success.
  3. Know how long it would take you to replace key team members. You should know roughly how long it would take you to find a suitable replacement for any key member of your team so that you can have a backup plan in place that will cover you for at least that amount of time. Typically, the more skilled and/or experienced a person is, the tougher they are to replace. You also need to be cognizant of how competitive your salary and benefits are in your area, how large the pool of qualified applicants is in your area, what your company’s reputation is, etc. in order to gauge how long it will take you to fill the spot. Additionally, at small companies even more than large ones, cultural fit is key. You’ll likely need to add in some extra time to make sure you find someone who is qualified and a good fit for the team dynamic. Of course it’s not pleasant to think about what would happen if your best employees left, but you need to have a crisis plan in place so that you’re able to survive if one of them does.

Clearly, the best scenario is you hiring well and keeping your employees happy so that you never have to fire or receive a resignation letter from your top performers. However, the reality in business is that, eventually, you will lose some team members. The tips above will help you be prepared so that you can make a smooth transition.

If you have any additional tips, please share them in the comments section below.

Staples Small Business Advertising Contest

Staples is running a contest and will award the winning small business with a free TV commercial!

Check out Staples’ Facebook page to learn more and to enter.

But before you do, make sure to evaluate your business’ readiness for the added activity that would come with winning….or even just entering and having your video available for public viewing. Do you have the capacity to handle a drastic jump in customers and orders? You’ll need to make sure staff, supplies, inventory, etc. are prepared to handle the increased traffic that a major uptick in advertising like this will generate.

You certainly don’t want things to fall apart at your business just as all eyes are on you. Making a bad impression on a bunch of new customers would do more harm to your business than not having engaged with those customers at all, so be honest with yourself about what your business can handle.

If you’re ready for the added activity and attention, then head over to Staples’ Facebook page and enter your video! Good luck!!

Weekly Roundup: Feb. 19th – Feb. 25th, 2012

Here’s your list of the things I tweeted this week. It was a slow week since I was on vacation.

Developing Effective Strategic Partnerships: 3 Tips for Success and 4 Issues to Avoid by Cate Costa for New Venture Mentor

Infographic: 10 Ways to Increase Sales in 2012 by Truaxis for Under30CEO

Tips for Using Twitter to Market Your Small Business by Cate Costa for New Venture Mentor

Latest Small Biz Bill Addresses Contract Bundling by Jill R. Aitoro for the Washington Business Journal

Do I Need a Lawyer with Small Business Experience? by James Omond for Startup Smart

Startup America Policy Challenge by Cate Costa for New Venture Mentor

Six Strategies for Partnering with Big Brands by Jane Porter for Entrepreneur Magazine

Startup America Policy Challenge

I’ve posted before about how to use the government’s Challenge.gov site for your business. Today, I wanted to highlight one of the challenges that I would greatly encourage entrepreneurs to get involved in: the Startup America Policy Challenge:

Click here to visit the site and provide your thoughts so that you can be heard.

If you need more information about what Challenge.gov is and how to use it, here’s my tutorial video:

Developing Effective Strategic Partnerships: 3 Tips for Success and 4 Issues to Avoid

Small companies can benefit greatly from creating effective strategic partnerships. If executed correctly, strategic partnerships can be a key component of your business’ growth. However, if not executed well, strategic partners can suck up time and money and potentially harm your brand and/or your business.

Step 1 to a successful strategic partnership is choosing your partners correctly. If you’ve decided to begin pursuing strategic partnerships, make sure that you take the time at the outset to do your research and be sure that any potential partners are the right fit for your organization.

  1. Strategic partners should offer complementary products or services. You’re clearly not going to partner with your direct competitors but you also can’t partner with businesses that are completely unrelated to your own. You need to think about what products or services make sense to add to your own. Think about complementary products, or products that make sense to be purchased together, and be creative with it. For example, let’s say you’re a hair stylist with expertise in special occasion hair. You probably won’t add much value by partnering with a pizza parlor, but there are definitely opportunities for partnerships with nail technicians, spray tan technicians, makeup artists, limousine companies, or anyone providing another service associated with special occasions.
  2. Strategic partners should have a good reputation. Remember, once you decide to partner with someone their actions reflect on you, so make sure that you do your research on potential strategic partners to be sure they consistently provide a quality customer experience that is up to standards you would be proud of. Otherwise, their bad behavior could cost you business.

Step 2 to a successful strategic partnership is to be clear about your goals and your partner’s goals. You and your partner will never be able to effectively work together to help each other exceed goals if you don’t know what those goals are first. Before you approach a potential strategic partner be sure that you’ve clearly defined what you hope to get out of the arrangement, what you think your partner will get out of the arrangement, and how you think these goals will be accomplished. Then make sure you discuss and agree upon the goals and the strategies for achieving those goals so that the partnership will be a success.

Step 3 is to regularly check in with your partner, assess your progress and success, and adjust goals where necessary. A partnership isn’t a static agreement that never gets updated. Just as every business is constantly changing, so should the expectations of any partnership so that it continues to be successful by adapting to the changing needs of the businesses.

Following these three straight-forward steps should help you develop successful strategic partnerships that will help your business, and that of your partner, grow. For a few more tips, check out Janine Popick’s article “4 Reasons Business Partnerships Fail” for Inc.com.

What are your best practices for creating and maintaining strategic partnerships? Please share your tips in the comments below.