Dallon Christensen

Increase Your Chances for a Bank Loan

What businesses can learn from the Minnesota Twins

I love a good underdog story, and the Minnesota Twins are a great baseball version of the underdog succeeding.  I have to put some of my bitterness away about the Twins defeating my beloved St. Louis Cardinals in the 1987 World Series (yes, after 23 years, there's still some disappointment there!), but I have a great deal of respect for the Twins organization.

The Twins are supposed to be at the bottom of the American League.  When I think of baseball, one of my first thoughts is how teams like the New York Yankees, Boston Red Sox, and Los Angeles Dodgers spend almost unlimited money to assemble the best pool of individual players.  Salaries continue to skyrocket, and many teams in smaller towns like Kansas City and Pittsburgh are not even competitive.  Just ten years ago, the previous Twins owner tentatively agreed to dissolve the team.  So how do the Twins continue to contend every year when they face many of the same issues? 

A great feature article in the August 2010 issue of Entrepreneur magazine highlights what current Twins owner Jim Pohlad has done to revitalize the Twins organization.  Pohlad recognized that his club was the small business compared to the huge corporations like the Red Sox and Yankees, and he recognized where his team had unique strengths.  Here are some of my thoughts on the turnaround in Minnesota.

• Have a clear plan for your people - Even though the Twins now have the 11th-highest payroll in baseball, their payroll still remains far below the big-spending clubs.  The Twins simply do not have the revenue from television that drives much of the payroll in major league baseball.  Los Angeles, New York, and Boston are simply much larger cities than Minneapolis-St. Paul.  The Twins adjust by investing in their player development system.  While bigger spending teams can buy teams of individual talent, the Twins select players in the draft and ensure they have the best facilities and coaching to turn into major league players.
• They invest wisely - I have attended baseball games in the Twins' old stadium, the Metrodome.  It was a dump for baseball.  The Twins needed a more pleasing stadium to attract fans.  Along with help from the state and city, the team invested in a new stadium that is a highlight for the team.  The team also faced a tough situation keeping their best player, 2009 American League MVP Joe Mauer.  Mauer is from St. Paul and a fan favorite.  The team knew it would have to pay a lot of money to keep Mauer with the team, and they were willing to make that investment.
• They promote from within - Sports businesses often have very high turnover.  I have many friends in the business, and they talk about the odd hours and constant demands of running a team.  The Twins have treated all of their employees very well, and they have a stable front office.  This helps build trust among the employees and allows the organization to face problems instead of working through issues because people do not know each other.

Why small business can win despite the government

(Photo from dullshick via Flickr - this is definitely an environment that does not look fun!)

I normally do not like to comment directly on political matters.  Quite honestly, I consider the government like I do a piece of popcorn stuck between my teeth.  It's there and I have to deal with it, but there are many other things I'd rather be doing.  However, a statistic from David Port's Entrepreneur magazine article ("But Where is the Money?, August 2010) is causing me to go against my normal content guidelines.

Mr. Port showed that when it comes to government spending, small business is getting the very short end of a very large stick.  $2.8 trillion (yes, trillion with a "t") has been spent on a variety of activities to keep big business afloat.  Meanwhile, small businesses only received $258 billion in the same time period.  In other words, for every $7.82 spent to bail out businesses like General Motors and Bank of America for their transgressions, only $1 of government money is spent on the real growth engine of American business.

This is frustrating to me on so many levels.  I grew up in a household funded by a classic American small business success story.  My dad has worked for a Western Illinois seed corn company for nearly 30 years.  I have seen the creativity and hard work that goes into a small business to make it successful, and I've also seen how government supports big corporations (and their political donations) with special favors.  I also see the real lack of support from a government only looking to secure votes from those not working and from those writing big campaign checks from big corporations.  The positive thing about small businesses is that we thrive on change and stand ready to win in spite of government's best efforts to halt our efforts.

• We know how to lead and manage in any economic environment - We have found ways to creatively grow our businesses.  We bootstrap our resources, trade needed services with our partners, and develop realistic plans for dealing with anticipated future events.  While companies like Chrysler go begging for more money, we know how to operate on a very tight spending plan.
• We can focus on a niche - Big companies have to spend too much time being all things to all people.  Small businesses can focus their time and effort on serving a very small, well-defined niche.  It's the difference between serving everyone in a town and serving only those in a given neighborhood with the right product for their neighborhood.  You can grow a business profitably using that model.
• We can build real relationships - Customers to huge banks like Bank of America and Chase are literally numbers on a computer screen.  There is no soul, no relationship, and no face-to-face contact with a huge company.  Meanwhile, small businesses work directly with their customers.  We understand the deepest needs of their businesses and their pain points.  We can ask questions and learn how to deliver more than what they demand.

Why execution matters in your business

Why concentration starts your small business

(Photo from jfvo via Flickr)

I am in the middle of Michael Gerber's book "The E-Myth Enterprise".  I have heard about Mr. Gerber for many years, but I really became interested after my friend James Dibben from "Blue Collar Coaching" recommended the full version of "The E-Myth Revisited" right before I attended the May Free Agent Academy Intensive Event. 

I like the E-Myth message because it stresses the process of business as much as the people or the ideas that launch businesses.  As I've written over the past several weeks, consistent processes help businesses focus more on innovation and creativity because the day-to-day work is done the same way, every time.  The E-Myth message also stresses the importance of entrepreneurs working ON their businesses and not so much IN them.  Many business owners, myself included, spend too much time on being a technician.  If you run an interior design business, you spend too much time on designing great rooms.  If you are a finance coach, you concentrate too much on coaching your clients.  While the technician side of your business is extremely important, you must also make sure you are running the actual business - building a customer base, keeping the financial records accurate, securing funding, and the other things that keep your business alive and growing.

The core of Mr. Gerber's message is stronger in "The E-Myth Revisited" than in "The E-Myth Enterprise", but I did like the introduction of five key entrepreneurial traits.  I will provide more of my own thoughts on these traits in future blog posts, but the first of Gerber's key traits is concentration.  Let's face it - many entrepreneurs do not concentrate as well as we should.  We have so many things to juggle in our businesses and our lives, that we have difficulty focusing on a single thing for very long.  In "The E-Myth Enterprise", Gerber highlights concentration as the most important key trait, because all other traits rely on a sense of concentration.  Since I live the concentration battle every day, I agree with him.  I know the days where I am concentrating well.  I am more productive, have more creative ideas, and deliver more value in my business.  The days where I struggle to concentrate are the days where I cannot seem to get much done.

My advice for you starting this week is to pick one thing to concentrate on very well.  For me, it will be creating a number of blog posts and newsletter items.  These are the things that tend to slip when I am not concentrating well, and I know I will be able to do good work if I concentrate on those items.  I will focus on very little else except my content for this week.  Once I am confident I'm delivering good content on a consistent basis, I will pick something else.  As I get better, I'll concentrate on more things, but I know I need to start small and gain confidence.

How cloud computing helps your business manage risk

Can the title really be correct?  For years, we have lived in a world where the computer was the center of your information technology life.  We purchased CDs or downloaded software onto our hard drives.  If we didn't have our own computers with us, we were unable to use our technology.  It seemed so safe.  If we had our data on our computers, then we were reducing our risk of losing data or seeing a hacker breach computer security.
(Photo from aranarth via Flickr)

We are seeing a big change in the mindset of businesses toward IT, and I think it's very encouraging.  A recent survey from Pew Internet indicates the next 10 years of IT will see us migrate toward the ever-growing "cloud" of Internet-based computing.  Tablet computers like Apple's iPad are just the beginning of hardware that will be designed to work almost exclusively in the cloud.  Conventional wisdom says moving to cloud-based computing is riskier than the traditional, PC-based model.  Where is my data?  What if I don't have it on my own computer?  Can I really control what I can access?  While I acknowledge the concerns about cloud computing, I support cloud computing as a way to actually REDUCE your company's risk.  Here are just a few reasons why I feel the way I do.

• Variable cost - Burn rate is the most important measure a new business must track.  Simply put, burn rate is how many months you have until you run out of cash.  Many cloud-based Internet applications charge on a per-month basis, which allows you to reduce your cash burn.  What is less risk for a new business - paying $300 up front for a desktop-based accounting system, or subscribing to an Internet-based system like FreshBooks or Clarity Accounting where you pay $10 or $20 per month?
  
• Off-site data storage - Disaster recovery is a big topic in business today.  One of the best ways to ensure your data is stored away from your office is to use a program like Google Docs that runs via the Internet.  I know that if my external hard drive crashes, like it did in March, I still have my data.
• Protecting against hackers - "Impossible, Dallon!"  I'm hearing some of you say.  "How can my data be safer when it's not on my hard drive?"  I'd ask you whether you can spend the money and have the talent of companies like Google or Intuit.  The answer is probably not.  I know these companies know that they are targets, so they are taking every precaution to support data integrity.  I trust them more than I trust my own firewall and passwords.

Can your business survive a 96% success rate?

(Photo from Flickr courtesy of Kahleel Haider)

The World Cup ended yesterday.  Along with the rest of my family regaining control of the television set for the next four years, I also like to look back on how the officials do.  Except for the United States and German soccer teams (I lived in Germany from 2001-2002 on a special work assignment), the team I follow most is the referee team.  Unfortunately, the "third team" did not have a great World Cup.  There seemed to be more publicity about what the referees did or did not see than about the game.

On Friday, the leaders of FIFA (the international organization in charge of soccer and the World Cup) stated they were pleased with the officiating and claimed that the officials got 96% of their calls right.  I officiated soccer as a part-time job for six years and did several major college games before deciding to stop in 2007.  While I appreciate just how difficult a soccer referee's job is, I am surprised to think that any organization would say that doing their jobs right 96% of the time is a major success.

I honestly do not blame the referees in this situation.  These officials are in great shape, have trained for years, and have thousands of games of experience.  I blame the refereeing system.  Imagine a National Football League game officiated with four people, and only one of them has the final say on a decision.  That's what you have in a soccer game.  There are only four officials, and only one on the field of play.  NFL games have seven referees, and they completely encircle the play.  The system of officiating cannot allow soccer officials to get more than 96% of the calls right.

What does this mean for your business?  You need to make sure your systems allow your talented people to make the right decisions almost 100% of the time.  No one is perfect, and no business can make a decision right every single time.  However, you must do things in a way where you are making the right decisions.  You must have a consistent way to hire good people, keep your books accurately, and convert those interested in your services into paying customers.  If you do not have a structure in place to do all of these in a consistent manner, your business will suffer.  You will not meet deadlines, hire the right people, or deliver value to convert your leads into paying clients.  Getting it 96% right still means you are getting 4% of your tasks incorrect.  Can your business afford that type of breakdown?

Your business as a windshield and not a rear-view mirror

I was talking with a client starting a virtual assistant business last night, and she described a new relationship with an aspiring medical professional.  My client discussed how her prospective client really needed to improve her accounting and bookkeeping system.  My client is an experienced administrative assistant and bookkeeper, and I know she will do an outstanding job for this new professional if they do start working together.

I am the first person to say that an accounting system must produce reliable and accurate information.  Investors, employees, and managers must know how the business has performed in the past.  Not having accurate accounting records is a sure-fire way to negatively impact a business.  However, a good business must do more than just keep accurate books.  I like using the analogy of the rear-view mirror when discussing accounting.  I use my rear-view mirror in my car.  I can see if anyone is coming behind me quickly, and I can make sure my two young sons are behaving themselves in the back seat.  However, I cannot drive my car by only looking through the rear-view mirror.  The windshield allows me to see everything in front of me.  I can prepare to change lanes, I can see if there is an upcoming storm, and I can scan the horizon for any deer or other threatening animals.  In short, the windshield allows me to plan and respond to what is coming in the future.

Your accounting system is your rear-view mirror.  You need good accounting, but you also need to develop a way to see what is coming in the future.  That's where your forecasting system comes into play.  By developing a forecast, you can measure how you actually did against what you were planning.  This allows you to respond to future events instead of reacting in surprise.

I support my clients by developing a rolling one-year forecast, broken into quarters instead of months.  I always want my clients looking out at least one year beyond where they are right now.  Too many businesses simply create a forecast for the existing fiscal year.  They reach November, and they have no idea what may happen in January or February.  When I help my clients create a rolling forecast to look ahead at least 12 months, this helps my clients do two things.

• First, they are required to adjust their planning and forecasting every three months.  Let's face it - forecasting can be uncomfortable.  We are dealing with the future, which is always uncertain.  Forecasting is not about "getting it right", but it is about thinking about what may occur in the future.  This allows a business to think about the different things they may do to ensure future success.
• Second, they always have a longer-term view of the future.  It is too easy to just live in the moment and do what you need to survive today.  However, successful businesses always consider the future and make decisions for long-term success.  A business that simply fights fires will not enjoy long-term success.

Encourage consistency with a business planning system

Let's be honest - planning is usually not high on the list of most entrepreneurs' fun things to do.  However, it is the most important part of running a successful small business.  I have talked a lot about how a system is merely a way to help you do a process or task more consistently.  Your planning system is the foundation of your entire business, and it is important that you get it right.

A good planning system will make your business easier to run and manage.  Unfortunately, too many business owners start their planning where their planning should really end - at the tactical level.  Most planning systems are like Dan Rydell's great quote about Napoleon in the long-forgotten (but still fantastic) sitcom "Sports Night":  "We'll show up, and we'll see what happens."  That type of planning is a recipe for disaster followed far too often.

I like to think of your planning system in three unique sections.  Each section is more specific and detailed than the one above it, which allows you to start with the "big picture" and then progress into the details of your business.  You MUST think of all three sections at the same time and be just as prepared to work up the ladder as you are to go down the ladder.

• Strategy - Your strategy starts with the vision of your company.  How will you be remarkable?  What will you do to serve your customers or clients distinctively?  You then need to learn about your competitors, customers, and other external factors like government regulation and determine how to best leverage your strengths and counter where you are not so strong. 
  
• Objectives - More commonly known as goals, your objectives are what you must achieve in order to consider your strategy a success.  Your objectives must be consistent with your strategy.  For example, you cannot have a strategy of being a high-value or premium provider and then set an objective of having the lowest price.  This would be like a baseball team setting a strategy of having a good defense and pitching staff, then spending all of their money on slow homerun hitters.  Your objectives must include
  
• Tactics - Once you create your objectives, THEN you can design your tactics.  Like I mentioned earlier, this is usually where most planning starts.  Your tactics are the specific steps you will take to meet your objectives.  Your tactics will include the specific marketing steps you will perform, setting your pricing, and designing your logo.

I will discuss more systems in the coming weeks, but everything starts with your planning system.

Business systems to survive the "bus crash"

As a small business owner, you should be asking a similar question:  "If I'm hit by a bus today, could my business continue working tomorrow?"

As I wrote in a blog post last week, a system is merely a consistent method of performing some task or process.  The common misconception people have is a system can only be an expensive computer program or a complicated set of tasks.  Systems are necessary in business, because they help you do something the same time, every time.  If you want a business to continue without you closely involved in every task, then you need some systems to ease your worries.

John Warrillow has written a new book called "Built to Sell" that is on my future reading list.  In several interviews, Warrillow advocates any business looking to create future value to create systems.  Only by creating system, Warrillow says, can a business prepare itself to sell when the owner is looking to move on.  In the unfortunate event of an owner suddenly being unable to run the business, having good systems in place will allow others to run the business with less disruption.

So what systems should your business have to run well?  I'll write about some of those in the coming weeks.