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No 42 December 2004 Balancing our Work and Lives!Following a newsletter a couple back where we talked about the growth of a business, I was challenged about where that should be put in the life/work balance ethos. Work is essential as the activity that delivers the things necessary for our survival as humans. Beyond survival, work is the lever of our intellectual curiosity and the blessing that has produced civilization. To this point I have not defined the term "work". If you're an employee, one day you expect to stop working and retire. In fact, many businesses still have a mandatory retirement age in their employment policies. But if you're a small business owner, it's likely that the concept of retirement takes on a much different perspective because, theoretically, you can work as long as you want. Many of us love our businesses so much that we actually don't think about what we do as work. We're often so defined by our businesses that it may scarcely occur to us that we would ever stop working. Alas, when facing that indictment, I would be guilty as charged. B.C. Forbes (1880-1954), founder of Forbes magazine, said, "I have known not a few men who, after reaching the summit of business success, found themselves miserable upon attaining retirement age." Mr. Forbes is warning us about the dangers of a life without balance. If you love your work, congratulations. But simultaneous with that love, make sure you also love golf, or tennis, or - and this is a big one - your child's ball game, or whatever can become your work's counter-weight to balance the scales of your life. Research has shown that balancing our beloved work with other interests enhances physical and mental well-being, and actually increases productivity. And for those around us, it makes us much more interesting and desirable to know. Balancing work and life is easier for employees than it is for an owner, because they typically have to be concerned only with their assignments. But when the proverbial "buck" stops on the owner's desk, it's loaded up with all of the challenges and opportunities facing every aspect of the business. And even if you've acquired the ability to take all of this in stride, "all of this" quite simply just takes a lot of time. Consequently, balance requires more than awareness and conscious intention. Finding the right combination of work and balance in the life of a small business owner requires the execution of at least three of the things that we use to achieve success in our businesses: planning, scheduling, and discipline. The virtues of having a financial plan for retirement are self-evident. But we should be just as disciplined about balancing our work with other interests. Otherwise, as Mr. Forbes observed, we may find ourselves, "miserable upon attaining retirement age." The recipe for happiness includes love and experiences that create memories. Let's make sure our love and memories have balance. LeadersSomeone once told me that you can't be an effective leader without first knowing how to follow. I think successful leaders not only learn how to be followers first, but they also never forget that perspective. In his book, Moses: CEO, Robert Dilenschneider says, "Leading and following are opposite sides of the same coin." That's an interesting paradoxical metaphor: Opposites indeed, but one can't exist without the other. Being a leader takes more than just wanting to lead. In the marketplace, you can only be a leader if you can get others to follow you. No matter the size of a small business, there will always be more things to do than people to do them; everyone must wear several different hats. You can't drive people to wear extra hats, but you can lead them to do it. Does this mean that leadership is an especially essential characteristic for a small business owner to have? I think so. Napoleon once said, "A soldier will fight long and hard for a piece of coloured ribbon." But only a leader who understands the heart of a follower can convince the soldier that the ribbon is worth fighting for. If you want to be a successful small business owner, make sure you know and understand both sides of the "coin". Then line up your troops, put your ribbon out in front, and lead them into battle. Is Your BIZ up to Expectations?Matthew Bellingham of Hayes KnightResearch shows that up to 90 per cent of small and medium sized business failures are caused by making the same financial mistakes. These mistakes do not always lead to failure, but often lead to a significant under-performance of the business. Below are ten of the most common mistakes that we see on a regular basis. The cost of failing to correct these mistakes range from lost profits right through to receivership or liquidation in some cases. 1. Cash Flow Management SMEs often get into trouble because they run out of cash. They don't differentiate between profits and cash flow and they don't understand the cycles that occur in their business cash flows. Cash flow management requires strong discipline and control over debtors and stock. Always take the time to prepare cash flow projections, always monitor them against your actual figures and update them regularly - weekly if required. 2. Know your key drivers and manage them Keep a careful eye on areas that affect cash flow: accounts receivable collections and inventory turnover. How are you doing compared to past performance and your peers? Watch key areas that affect profits, net and gross margins, labour and fixed asset utilisation. 3. Insufficient capital Most SMEs are undercapitalised. They don't have a buffer for quieter times or unexpected expenses. This problem is compounded when they don't have arrangements in place with their banks. It's critical to know how much capital you need. 4. No business plan The old saying "failing to plan is planning to fail" may have been said many times over the years, but it is all too true. As the majority of SMEs don't have a business plan, they tend to lose focus and are too easily distracted from the right strategic course for the business. It also means they don't have a yardstick to measure their business performance by. 5. Tend to work in the business not on the business Many SMEs fall into the fatal trap of believing that because they are good at what the business does they will be good at running that type of business. Their time is caught up so much in what they're doing they never have time to manage the business. Usually as a consequence the business runs the owner rather than the owners being in control. 6. Lack of good financial data Too often the paper work is left to last or forgotten. Not only can this can get you into trouble with the Inland Revenue Department, but it is critical to have good quality records - what you can measure you can manage. Accurate, timely financial statements are critical in good times and in bad. Don't accept excuses. Your banker will love you for it. 7. Don't know their break even point This is one of the most critical pieces of information for any business. It is only when you know this that you can make effective pricing and costing decisions. If you don't know, you won't know how much more you need in sales when costs rise or prices fall. At the same time you'll know how much to cut when sales fall and analyse the need for expansion or capital decision. 8. Failure to borrow properly Are you financing long-term growth (or assets) with short-term funding such as a credit line? If so, see your banker about getting it changed. With the current environment of low interest rates, everyone should look at refinancing now. 9. Inadequate systems Too many SMEs are run out of the owners head. As they don't have operating systems in place they are too dependent on the owners and don't gain sufficient leverage. A lack of systems can cause differential standards and an inability to provide consistency within the business. 10. Failure to plan for taxation Business has to manage, fund and plan for a wide range of tax responsibilities. With Income Tax, GST, FBT, PAYE and others, the average business has a lot of compliance it is responsible for and failing to manage these can put you out of business. The Inland Revenue Department do not take lightly to those that do not file their returns on time, or keep up to date with tax payments. Businesses that make the same mistakes again and again, particularly if they make more than one of these mistakes, run a very real risk of significant under performance and possibly even ultimate failure. |
© 2003 The Nework Centre | email neworknz@yahoo.co.nz |
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