The 4 Foundation ideas are the ones you need to run your business day-to-day. Plan, Plan, Plan, Watch your Dashboard Weekly, Measure by the Quarters, and Prioritize Ruthlessly are the keys to getting momentum in your business and starting to achieve some basic goals. Master these and you can be quite successful without anything else. To the extent that you are weak in one of more of these, your business will suffer and you will stunt your growth potential as well as not have as much fun in your business since you will constantly be dealing with these issues.

The 3 Differentiation ideas are the ones which will set your business apart from the crowd and really give you an edge. In my years in executive management, these are the ideas that would make or break the company. To the extent they were performed well, the company expanded quickly and profitably. To the extent the management team struggled with these, the company struggled as well. Seek out the Experts, Immerse yourself in your Audience, and Embrace Technology are the things that will catapult you ahead of your competition. Even just mastering one will allow you to take giant steps forward.

The final idea of the 8 GR8 Ideas is the one I came to after many long years of pondering why large companies re-organize constantly. Ever notice that companies will organize along functional lines—sales, marketing, operations, and then a few years later will organize along geographic lines—all sales/marketing/operations for the southeast in one unit, and then years later will re-organize again along product lines perhaps. Why?

While you are thinking about that, here is another puzzler. Why do some small businesses seem to hit a limit or ceiling? “I cannot get above 10 people no matter what I do” is something I hear frequently. Or “I cannot break $100,000 in sales it seems” is a variation on the same theme. Why? Are these 2 scenarios related?

Yes. I say they are. They are examples of companies going through the cycles of Invent…Scale…Invent…Scale. Inventing new goods and services and expanding their revenue, their reach and their top lines. Or scaling those new inventions to improve efficiency and increase their bottom line. In the first example, the larger company was merely going through these cycles and found one form of organization more helpful in each cycle. In the latter example, the smaller company needed to scale but didn’t know how.

Stay tuned for more blog posts on these topics and how to apply them to your company. Just a taste of what’s to come!

This blog does not constitute business advice. It is solely for the purpose of education. You should always carefully weigh any business decision and consult with professionals where appropriate before you make any major decision.

The dashboard is a quick, concise set of numbers that are important to your business. Perhaps web site hits are most important, or proposals written/month is key, or cost of raw materials/job is something you need to watch. Every business is somewhat different as your industry, your company age, and your company size drive many of these indicators. The dashboard is the twin sister to the planning (So What’s All This Planning Fuss About?) The companies who grow quickly and profitably are those who plan and measure their results. Dashboards are part of the measuring process.

So why do you watch the dashboard? Just like watching the dashboard in your car, you know when you can speed up or when you must slow down by occasionally glancing at the speedometer. You know when to add more fuel by looking at the fuel gauge. You have lights that come on periodically to tell you it’s time to change the oil. A dashboard helps you keep your car running smoothly. It can do the same for your business. Once you figure out which ‘dials’ and ‘gauges’ (also known as metrics) you need for your business, then you track the numbers against those dials and gauges and see how you are doing.

For example, let’s say you are trying to hit a new sales record. You know that number of phone calls and number of proposals are key indicators to whether you are going to get more business. So track them. Keep an eye on your number of phone calls weekly. If it isn’t tracking to what you need to get that extra business, you know sooner rather than later that you need to take some action. Keep an eye weekly on how many proposals you are writing. If you goal for the month was 20 and 2 weeks in, you have written zero, then you know you better change something. The dashboard is a way to get early indicators of where things are in your business. Early indicators let you take action to make changes so that you can stay on track to hit your sales and other goals.

So, you are thinking, it all sounds good but where do I get these numbers, these indicators, these dials and gauges? How do I figure out which ones to use and how do I keep them up to date? The key is to figure out enough numbers to keep you going and not so many that it’s a chore. You can always add numbers, so even starting with just one(!) number is better than none. Also, the numbers must be meaningful to really be useful. Knowing that your revenue goal for this year is $210,000 isn’t as useful as knowing that you must close 42 jobs with an average price of $5000/job.

Easiest way to do this is to think of your business in four different areas: Marketing, Sales, Operations, and Finance. Marketing activities lead to Sales which lead to Operations (manufacturing, delivering goods and services, performing services) which lead to Financial Activities like collecting cash and paying bills. Ideally you will have at least one key metric for each of these areas.

Start with sales. What sales or revenue target are you trying to hit for the month? If you don’t have a number you are trying to hit, see the Planning blog post (So What’s All This Planning Fuss About?). If you have a target you are trying to hit for the year and don’t have it broken down by month, then divide it by 12 at least. That will get you going. Let’s say your goal for the year was $120,000. Dividing that by 12 gives you $10,000/month. Keep going. Divide that by 4 weeks/month and now you have $2500/week. That is starting to be more real. If your average sale is $1000, then you have to close 2 ½ sales a week. Even more meaningful. So with a revenue goal of $120,000, perhaps the most useful dashboard metric would be # sales closed/week. Think about it. If you closed 3 sales by Thursday, you know you are ahead of the game. If you closed 1 sale by Wednesday, you already know you are behind for this week and possibly even behind for the month. Instant feedback! Easy number to quantify and easy number to measure.

Unless you have a computer system (like a cash register that gives you # sales/day) or some other system, pick a sales metric or metrics that is easy to measure. Things like # sales/week, sales $/week, appointments/jobs booked/week, proposals written/week if you don’t close sales each week, contacts for new clients/contacts for existing clients might work better for those with longer sales cycles. Then just keep track of that metric and compare it against the goal you set. Adjust your activities up or down, like you would with your vehicle speed, to keep the sales pipeline flowing. o Similarly for marketing, operations and finance, pick numbers that are easy to measure and watch them weekly. Then change your actions and behavior to achieve your goals. More to come in future posts on how to pick metrics for areas other than sales. Hope this first part was useful.

So here is annual planning in 3 easy steps. This is not a business plan, the document you write to get people to give you money. This is an operating plan for the coming year. It’s something YOU will actually use. Instantly, it should seem more useful and relevant in that context.

• Step 1. Set realistic revenue goals.
• Step 2. Match expenses.
• Step 3. Balance revenues and expenses to get the right bottom line.

So let’s pretend you only have 8 seconds to think about this since you are so busy. (Yes, I DO like the number 8). You can still get value as the critical part is the thinking. Here is what you do:

• Step 1: Set realistic revenue goals. Think about the last 3 year’s growth history to see trends and even out boom and bust economies. Think about new products and services you are planning to offer or planning to retire. Set next year’s revenue goals in line with the past years’ trends factored up (or down) for changes in products or services.
• Step 2: Match expenses. More sales usually require more raw materials and people expense. New products mean more marketing. Start by thinking about last year’s total expenses, bump them up for inflation, then add increased expenses for making all those extra sales.
• Step 3: Balance revenues and expenses. If your revenues less expenses don’t give you the right bottom line, then tweak revenues up and expenses down until they do.  Don’t rule out extra financing if you cannot make it work. Remember that this is the most important part of the exercise as it forces you to think about how your revenues and expenses fit together.

Yes, 8 seconds is really a bit short but it got your attention I bet. You can gain some insight with the 8 second exercise but 8 minutes is really better as you can start to write some things down now and get some actual numbers. This is likely to be more accurate. Here is what you do:

• Step 1: Set realistic revenue goals. Look at your final income statements for the past 3-5 years. Haul out your calculator and actually calculate the growth in revenue year over year. You will probably be surprised as memory doesn’t always match reality. You want to use 5 years if you can as that will balance out this dreadful economy. We are looking for trends. Take the average of the 5 percents and apply that to 2009 and that is your best starting point for 2010. Adjust it up or down based on new products and services, new locations, etc.
• Step 2: Match expenses. Take your final expense number for 2009 (get a projection for the year from your accountant or take January-September and divide by 9 then multiply by 12) and bump it up for inflation. It appears that most people are predicting flat pricing for 2010. Remember that the government didn’t adjust COLA up this past year. Now figure out how much additional expense you will see because of your increased sales activity. More gas to visit more prospects? More networking club fees to get out there more? More marketing and advertisting expense? More training to offer that new service? Add these on top of your total expenses.
• Step 3: Balance revenues and expenses. Subtract your new expenses from your new revenues. Is it negative? For most people it is. Now comes the fun. Think about what you can tweak to get the balance right. Hopefully your expenses are not increasing faster than your revenues. That is not the way to profitability! Can you raise prices on some premium items? Can you offer more higher-priced items? Can you stretch your sales goals more? Can you partner with someone to sell more? Are there natural ways to package your product or service so people will buy more? Will you be able to get better raw materials pricing since you are buying more? Can you use college students to do some work for your as part of a class project? Can you train someone internally to take over part of what you do to free you up? The key is to understand the tradeoffs between more revenue and more expense. This is what will set you up properly to achieve your goals in 2010.

No one has any time these days but I would ask: if you cannot spend 8 hours out of the entire year to think about 2010, then I have to wonder how serious you are about your business! There are 2,080 business or working hours in a year. 8 hours is only 0.4%! You probably spent more time than this on what kind of coffee to have in your office! Big companies spend months doing this but you don’t have to. Here is how to make the best use of your 8 hours:

• Step 1: Set realistic revenue goals. Start by thinking about what worked well in 2009 and what didn’t work so well. Make some ‘new year’s resolutions’ for your business. “Will continue to increase higher-priced offerings”, “Will not waste time on sales opportunities that don’t fit my product line”, etc. Next, make a list of initiatives you have for 2010. Things you have been thinking about for the past year. “Make a standard entry-level offering”, “expand south into Newtown”. Now take your resolutions and list of initiatives and pick 3, only 3, goals to focus on for the 2010. Sure you want to do more, and maybe you will, but if you narrow it down now, you are much more likely to succeed. NOW do the exercise to figure out the trends for the past few years from the 8-minute version. You will have much more insight into how to adjust your revenue numbers up or down. The key here is that sales just don’t materialize out of thin air. You have to do something DIFFERENT for your sales to increase. Figure out now what it will be.
• Step 2: Match expenses. Since you have more time, you can dig into your expenses line item by line item. Do the same exercise as in the 8-minute version, but now look at each line item. Some are easy–your office lease is likely to stay the same. But look carefully at marketing, training, networking, supplies, T&E and see if they truly reflect what you plan to do next year.  All those new activities you must do to make your top line go up, will likely have a cost.
• Step 3: Balance revenues and expenses. Now you can really dig in. This is where the magic and the insight happens. As you try to squeeze more profit out, take a look at the suggestions in the 8-minute exercise. Those are some of the tricks to use. But now that you have more detail in front of you since you are looking at all the expenses, really take a look at what you are spending and why. Really dig into what exactly it will take to increase those revenues even if just a little here and there. Finally, the best thing to do is to break those revenue and expense numbers down by quarter. Projecting $160,000 in revenues for 2010 is abstract. Projecting $20,000 in Q1, $60,000 in Q2, $55,000 in Q3 and $25,000 in Q4 is much more concrete. If you have a busy season, you should reflect it.

So here are 3 ways to get your planning in for 2010. I hope you do at least 1 of them. I guarantee you will have a more successful year if you do.

1. Plan, plan, plan
2. Watch your dashboard weekly
3. Measure by the quarters
4. Prioritize ruthlessly
5. Consult the experts
6. Immerse yourself in your market
7. Embrace technology
8. Invent…scale…invent…scale

Sound intriguing? Hope so. Want to know more? or at least what they all mean? Stay tuned. I will take them one by one over the next few weeks.

I did a bit of work in high tech but then some friends and family asked me to help them with their business. ‘You know small business’, they said. Did I? I knew companies that started small and grew large. I had an MBA for what it was worth. I knew how to get things done. But small business was so different.  No executive row. No smart, young guys right out of school working 24×7 to meet impossible deadlines.

But I wanted to help so I sat with my friends and family and listened to their issues. One by one, I helped them see the other sides of the issues, suggested alternative courses of action and even helped them to make the final decisions. They thanked me, took many of my suggestions and improved their businesses. Wow! I felt great! I could really help.

And that made me think. The experience of helping these people, so passionate, so close to their businesses was very gratifying. It was their families, their livelihood. The businesses were real and tangible. So different from high tech startups with their ‘dominate the world’ strategies.

Fast forward to 5 years later. I founded Next Step Business, became a business coach to solo and micro-entreprenuers (at least part time) and started writing the book to take all of the ideas I have distilled down from the things I have learned working with the best and brightest in high tech. I came up with 8. I know odd numbers are better but 8 is a lucky number, according to the Chinese at least, and I stuck with 8.

So this blog is about those 8 GR8 Ideas, how I came up with them, how they can be used, and how they can impact a business. I am still writing the book and as I finish the chapters, I will post them here for all to read…and hopefully comment on.