This is an example of my principles in action – a story of how to grow a business from scratch.
The founder was good at his former job and had many years of experience – but all that experience was as an employee, an individual doing work managed and directed by others. Being good at what one does – such as making clothes, solving IT problems or driving trucks – does not necessarily lead to being good at running (directing) a business. Directing a business is a separate skill entirely – and the disciplines of finance and sales & marketing may be entirely alien.
In starting a business the founder was liberated from the directives of his employer and was now “his own boss”. As a one-man band he now needed to single-handedly work the three pillars of enterprise: selling his services, doing the work and producing the necessary paperwork. Importantly, in this example, he was consciously directing, managing and operating everything and was able to do so because, before starting the business, he and I had set out a plan which defined structure, capacity and process.
Becoming one’s “own boss” actually means surrendering a single job in favour of these ten. Registering a company and filling in a form can promote an individual to Managing Director …but the other nine bases also need to be covered. Consider the number of hours in a working week …divide by ten …and that would be an average of half a day per role.
Of course, the flat average is not how it works in reality: to begin with the primary focus is liaising with customers and doing work (Flogging It (Operative) and Making It (Operative) …in a managed way, as directed by the Business Plan. Without the plan, a founder is either swamped by events or neglects important aspects of running a company.
The dominance of the two roles in the bottom-left corner of The Ten Bases diagram is inevitable and efficient – but this must not cause neglect of the other eight bases. A founder with ambition to create a business is only temporarily serving the operative roles: one day that work will be done by other(s). The founder must direct and manage themselves as a prototype for directing and managing others.
It is worth pausing for thought on this point because it is very significant. Failing to understand the differences between directing, managing and doing leads many founders to attempt to hire clones of themselves to “share their workload”. A true clone would be another business founder! It is unrealistic to expect an employee to do “half of all the work”. The correct course is to decide which of the ten bases is/are to be delegated. When the roles are clear, they are much easier to recruit for.
In a proper business plan the roles and the triggers for hiring are all clearly defined and, in so doing, the founder is plotting their course toward a singular job in the enterprise: Managing Director.
Back to my example: A fundamental component of my business planning technique is to use the ten base structure as the starting blueprint to assess the capacity of each role at any level of work done. All ten bases are determined from the outset. The founder is then conscious of the time they spend in each role.
In basic terms the Managing Director sets targets for the Marketing Director to attract work; the Operations Director to get that work done and the Finance Director to ensure there is sufficient capital. There may not be demand for four full-time Board members – but there is absolutely a demand for all four Board responsibilities to be met.
In my example the first port of call was to have a virtual board meeting with an agenda of setting the business targets and metaphorical changing of hats. First hat: Marketing Director to set a sales target. Second hat: Operations Director to determine the capacity required to deliver the sales target. (Some types of business work the other way round – how much can be produced drives the marketing requirement.) Whichever way around, the third hat is Finance Director: how much capital is required, and from where will the capital be found? (The Virtual Chairman is useful for guiding these meetings!)
The first, part-time, employee was a bookkeeper using cloud-based Virtual Chairman accounts. The directing and management of the bookkeeper was determined by the plan and we hired wisely. The second recruit, once demand required them, was an operative who was sought for their potential future management skills. They started ‘at the coal face’ and would be supported into the Operations Manager role in the near future. The next operatives were brought on soon after and operative #1 became their manager – all as set out in the business plan.
Within a matter of months, the MD had delegated the entire ‘Making It’ pillar (Operations) to a small team led by a manager. ‘Bean Counting’ followed clear directives so the MD was liberated to focus more time on ‘Flogging It’ (Business Development).
With more of his time available to pursue new business and look after existing customers the operations team continued to grow to meet demand. The next significant hire was an operative with the potential to become the Sales Manager. By working amongst the other operatives where they would learn how the business worked and meet the customers. This would be valuable experience to understand what they would be selling and how to meet their sales target.
After 18 months, the business had management in place, properly directed by the MD and his business plan.
Today, the company has an enviable Balance Sheet, a healthy culture and vigorous growth – and it’s all beautifully controlled. Remarkably, for a relatively young business, the MD has already been approached to sell his business. He has become a great MD and, rightly, declined the offer because he is diligently building a mighty ‘money tree’.
This business was started with the right amount of capital and a clear plan. Often we hear the domesday statistic “80% of startups fail”, but the vast majority of those failures emanate from a lack of capital and/or a lack of a proper plan.
Whether starting from scratch, as above, or starting from wherever you are now, I can help you get on ‘the perfect path’ to directing a great business.