Josh Patrick
All business owners and their businesses have developmental stages. We have limited amount of energy we can expend on activities to make our business better. Most of our activity is and should be focused on those things that bring money into our company.
Arlene Aardvark had just inherited her families business. The company had done well. Her company’s annual sales were $4,000,000 with profits after all expenses of $200,000 per year. She majored in business in college and was taught she needed to focus on the strategic part of her business to be successful. Arlene was frustrated. She only had time to put fires out. She felt her company could be better but she didn’t have the time or energy to do what she needed.
Arlene, like many private business owners was focused on keeping the business doing the things that would keep the door opened. She learned at school that CEO’s of successful businesses spent all of their time working on strategic excellence in their companies. She wondered what she was doing wrong where she was spending all of her time focusing on operations and never had any time for the twelve projects she felt were crucial if the company was to break out and earn more profits.
Arlene had several problems. Her first was she was focusing on too many activities at once. The second was that she was having a very difficult time managing her time. Arlene decided to see if she could find a consultant to help her get her time under control so she could tackle the things she knew she should do, but couldn’t ever find to tackle.
Arlene’s consultant worked with her to understand the difference between present business activities and future business activities. Present activities are those things that Arlene was doing that produced cash for the company. Future business activities are those things that will pay off in the future, but don’t produce any revenue today.
Arlene realized that all of her time was spent on present business activities. Every time she thought about taking a strategic activity on, she found she couldn’t afford the time. Her first priority was to make sure there was enough cash in the company. She never found time to work on a second priority. She seemed to always be running from crisis to crisis putting out fires. There just wasn’t enough time for her to focus on the important, but not urgent activities she know she should be handling.
Arlene’s consultant started working with her on two projects. The first was an understanding of what present business versus future business activities were. The second was making sure she was focusing on stage specific projects for her company. Her consultant showed her the following graphic:
Her consultant looked at Arlene’s list of things she wanted to accomplish. She noticed that all of the projects Arlene had chosen for herself were strategic things she had learned in business school. During their consultation, Arlene discovered that her business wasn’t tactically excellent. That was why she was always putting out fires.
The consultant explained to Arlene that her business was a Stage 1 business. This meant that she needed to concentrate on having a predictable cash flow. Her cash flow was inconsistent because cash flow planning was not done and her company spent too much time correcting mistakes.
The consultant explained that it was crucial that Arlene and her company to focus on stage appropriate activities. Since Arlene was focused on achieving consistent cash flow and had operational and financial control problems she needed to stay focused on Stage 1 activities.
“Stage 2 activities are those you move to after you have achieved consistent cash flow and tactical excellence” her consultant told her. She then went on to say “Stage 3 activities are those that you pursue when you are ready to have someone else take over the ownership and control of your company.” Arlene knew all about Stage 3 as her family had just passed ownership and control of the business to her.
Arlene’s consultant recommended that she focus on getting her company to become tactically excellent before tackling the items on her list. She recommended that Arlene choose the three most important areas of the company that needed improvement and start one program for each of these areas.
Arlene thought that was a great idea except that she never got around to even working on these projects. She was too focused on putting out fires.
Arlene’s consultant helped her understand that she couldn’t do present business and future business activities at the same time. Present business activities by their nature are urgent and important. That meant that she was constantly being interrupted and forced to deal with the crisis of the minute.
Arlene decided that her first step was to make an appointment with herself for two hours per week. During this two hour appointment she was going to lock her door, turn off her phone, e mail system and concentrate on the task at hand. She knew that she could afford two hours per week and understood that if she didn’t turn off all outside communication, she would never get the concentrated work on her future business she needed.
As the months went on, she was able to set up systems to implement her three activities. She first tried working on all three at the same time. She learned that she couldn’t work on three activities when she only had two hours to spend on them. She instead choose the most important activity and concentrated on that activity to completion. She then went on to her second activity and finally her third project. Arlene found that by spending two hours per week in a concentrated manner was enough time to make some of the changes her company needed.
Arlene learned that her business school education was designed for those who work in large organizations. Her new found experience told her the rules for running a large business are fundamentally different than those used in a privately held company of her size. She also learned that different strategies must be used for success in a company of her size.
Arlene now knows that understanding what stage her business is in was an important first step. She then learned about future business versus present business activities. Finally she learned that if she didn’t “cut herself off” from outside activities she would never get around to working on her future business.
Arlene saw that her business dramatically improved by only spending two hours per week on future business activities. Her profits improved from $200,000 per year to $300,000 per year. More importantly, her cash flow measurement systems allowed her to know what was going to happen to her cash. Operations improved to the point where she felt she could now spend four hours per week on future business activities.
A year later Arlene found that her company had become tactically excellent. She now was in a position to move her company towards Stage 2 activities and planning. She knew that when she tackled the strategic activities her company could handle the operational needs in an effective and efficient manner. She was confident that this next step of moving towards strategic excellence in her company would also help her profits improve by $200,000 to $300,000 per year.
Like Arlene, your company can also take a similar path. Concentrate on the activities that are stage appropriate your firm. Start making an appointment with yourself to work on future business activities. Your return on effort will be well worth it.
This case is hypothetical in nature and provided for educational purposes only. Actual results may vary depending on circumstances.