Posts Tagged Small Business
Hearing What You Need To Achieve What You Want: The CEO’s Third Opinion
Posted by vianova in Business Operations, Corporate, Entrepreneurism, Leadership, Small Business on February 22, 2011
An interview with Lauren Tanny, executive coach, Vistage Chair, and experienced “third opinion” to multiple CEOs. Lauren is President and CEO of TannyWood, whose corporate services include corporate visions and missions, strategic planning and implementation. She is a powerful facilitator, experienced brainstorming leader, and natural coach and mentor. Most importantly, Lauren cares deeply about people and is passionately committed to their greater professional and personal success.
FS: First, let me say how happy I am to be interviewing you for JustGoodBusiness. You have been an invaluable mentor, coach, and “third opinion” to me for the past three years. For those who are not familiar with the term “third opinion”, can you explain what this means?
LT: Yes, thank you. As business owners and CEOs, we are often surrounded by lots of people, many of whom are all too eager to give their opinions. That’s great, yet, generally speaking each of those people have a vested interest in the outcome or are biased in some way. To whom do you go when you really need an truly impartial sounding board? My strong recommendation is to find a seasoned, impartial business professional to serve as an advisor. This is what I call your “third opinion.”
FS: What can this person do for a CEO that, for example, their direct reports are not able to do?
LT: First and foremost, question your answers, challenge your assumptions, and play devil’s advocate. A good advisor or advisors will often come up with additional ideas and suggestions that might not otherwise survive your inner circle’s vetting process. As an impartial sounding board, they may suggest you go back to the drawing board. They can also help you think through the long-term ramifications of your decisions. This is especially important in today’s often short-term focused business environment. They can provide insight about best practices from other industries which can prove very useful in yours. And they can often illuminate blind spots that can negatively impact the business.
FS: Can you give us some examples of when you, as a third opinion, were able to illuminate blind spots for CEOs?
LT: A CEO told me he was concerned that the performance of his most senior accounting person had deteriorated, and he was thinking of replacing her. After asking whether her accounting skills were previously good (they were), I suggested that such a deterioration may be due to either substance abuse or guilt over embezzlement. Short version: This comment led to uncovering a $250,000 embezzlement.
Due to loyalty and tradition, certain employees may get “cemented” to a certain spot in a company. When one CEO was complaining about resistance to change at his company, I brought up these “sacred cows”. After several months of discussions, the CEO ended up hiring a COO to spearhead the changes needed, since his long-term relationships with certain employees made him reluctant to act.
One CEO complained often about cash flow. When they felt they had solved one cash-flow-related problem, another issue would come up and they’d be tight on cash again. By helping the company step back further from the problem, we changed the customer payment schedule (more up front, more progress payments), and totally revamped the sales projection methodology (which continually over-estimated the likelihood of closing deals, and the timing and size of payments). I also suggested a new bank and a larger line of credit, both of which they implemented.
FS: Those are great examples. If someone is interested in finding an independent advisor to provide that third opinion, where do you suggest they find one?
LT: There are a variety of organizations and independent professionals that do this work. One most businesses are familiar with is SCORE. SCORE counselors are unpaid volunteers with significant business experience. This free counseling is particularly useful for start-ups and small companies. Another organization is Vistage International. ”Vistage Chairs” are experienced business professionals who lead executive peer roundtables and who coach executives one-to-one. There are fees for the groups and coaching, which vary by company size. There are also Entrepreneur-In-Residence Programs. These organizations have entrepreneurs associated with them who are available to counsel CEOs and companies. Financial arrangements vary. One such organization is CONNECT in San Diego, CA.
You can also seek our referrals from other CEOs. They may have recommendations for you for people they have utilized. This is a good way to find independents who do this professionally. Another source may be speakers you hear at conferences or other events that may offer advisory services, also for a fee. Of course there are a variety of executive coaches. While I am also one of these, I would caution you to be careful here. Most coaches help you achieve specific goals. If you want them to serve as an independent sounding board, make sure you contract for that up front, and that their business background is sufficient to do so.
For more on this topic, I recommend The Third Opinion: How Successful Leaders Use Outside Insight to Create Superior Results, by Saj-nicole Joni.
FS: Thank you for these resources and for enlightening us on the value of a third opinion to business owners and CEOs. Do you have anything else you would like to leave us with?
LT: If you want your business to be the best it can be, you owe it to your company (and yourself) to get rid of as many blind spots as you can!
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Lauren Tannyis a Vistage Chair, executive coach, and experienced “third opinion”. She utilizes her vast executive experience in seven industries, broad functional expertise, inquiring mind and keen sense of humor to help executives see things in new and broader ways. She can be reached at lauren.tanny@tannywood.com.
Five Common Business Challenges
Posted by vianova in Business Operations, Corporate, Corporate Social Responsibility, Finance, Process Optimization, Small Business on February 5, 2010
In working with small and middle market companies, I have discovered several common financial related issues with which they struggle. When I first start working with these businesses, most if not all of these issues exist. All of them are critical to their success in managing and growing their businesses. The good news is that with time and focus they can be rectified. In no particular order, here are five that I see most:
1. Lack of Timely and Accurate Financial Statements
In today’s business environment, decisions are made at a fast pace. Information is readily available via the Internet, yet internal financial information to improve the decision-making process is sadly deficient. Most business decisions have financial implications, and without this basic financial information, it may be a shot in the dark. Many times the financial statements are put in a drawer and never reviewed because the information is too old (not timely), the business owner doesn’t believe the information is correct (not accurate) or the financial statements support the preparation of the income tax return, not running the business (not operational). They usually only become important when the business owner needs to meet with the bank.
2. No Cash Management
As we all know from operating a business, cash is king! It is the common denominator for all businesses NO CASH = NO BUSINESS. Other than the current cash balance (most of the time determined by looking at the bank’s balance) most small businesses don’t manage their cash. Cash management includes understanding your business’s “operating cycle” (i.e. cash to cash cycle). To improve your “operating cycle” it is imperative you understand what it means, how to calculate it, and what influences it before you can improve it. Many times I will ask “what do you expect your cash balance to be in 6 months?” Most of the time they are fighting cash flow problems today and can’t think about the future past this week. Managing cash flow will provide a real sense of control over the business.
3. Poor Pricing Management
Setting the price of our products or services will drive revenues and just as importantly the “gross margin” for the business. Unfortunately, not enough time and attention is provided to this aspect of business. In working with small business owners, I find many have not revised their “pricing formulas” for some time, while others don’t really know their underlying costs to derive a sales price that provides profit. Many products are market driven because of competition, so it is imperative to know not only the direct costs but all costs necessary to produce a profit. Gross margin analysis by product line, products or customer is critical for small businesses.
4. Lack of Systems & Processes
Processes, whether documented or not, exist in all businesses. It is the way we perform the work necessary to produce our products or services. In most small businesses, the underlying processes to accomplish the work are rarely documented or reviewed as a whole (i.e. system). Developing efficient and effective systems and processes generally reduce costs and/or improve productivity. In businesses where there is a high turnover of people, documented processes are critical for training to ensure employees achieve higher productivity quicker.
5. Minding and Grinding Not Finding
Jerry Mills, founder and CEO of B2B CFO®, developed a simplistic organizational model for small businesses. He identified the 3 roles in small business as Finders, Minders and Grinders. Grinders represent the employees whose focus is about today. They generally work in the production side of the business. Most Finders start as Grinders. The Minders live in the past; their work is in the administrative, accounting, customer service or warranty departments. Minders are just as critical as Grinders to the success of the company and must be led. All Finders live in the future. They are the visionaries, innovators, and relationship builders. They are the passion and the drive for the business to grow and succeed.
The entrepreneur is the Finder and must stay in the Finding role. Unfortunately, as businesses grow the Finder gets pulled into the company and works in Minding and Grinding activities. Without a change back to the Finding role, the entrepreneur/small business owner severely limits the business’s ability to grow. In working with small business clients, they almost always identify with this organizational model.
As I mentioned at the beginning of this piece, these challenges for the small business owner can be corrected. Most of them are fundamental changes. As with most challenges and the related changes, awareness is the first step.
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Vianova guest blogger Grant Brisacher, CPA, is a Partner a B2B CFO®. B2B CFO® has grown to be the nation’s largest Chief Financial Officer firm serving small and middle market companies.
