Random Thoughts – Randosity!

How not to run a business (Part 1) — Don’ts

Posted in best practices, business by commorancy on April 4, 2012

While there are tons of articles out there describing exactly what you need to do to start and operate a business, here are tips on what not to do when operating your business.  I come from a background of years working in IT and, thus, this article is born from that perspective. Please view the index page to view all parts in this series.

Don’t treat your customers as burdens

So many businesses see only dollar signs next to a customer’s account.  They’re more than dollars, they are your livelihood.  Without them, you don’t have a business.  Always treat your customers with respect and never as a burden.  With that said, some people are difficult to manage in their mannerisms, manners, speech or phone etiquette. These types of people can be difficult.  If you know that you cannot work with a given customer or client based on their behaviors, you may have to let them go as a customer.  There is nothing that says you have to continue to do business with everyone that comes to you for services.  If the client cannot show your business and your staff the same level of courtesy, respect and professionalism that you show them, then they don’t deserve to use your products or services.

On the other hand, your staff should always remain professional, courteous and friendly at all times.  Word gets around quickly when your people are rude, improper or treat customers disrespectfully.  Don’t do it and make sure your employees don’t, also.

Don’t burn your employees out

It’s very easy to lose sight of what your employees are doing day to day.  If all you are seeing is the work being done, but you aren’t understanding how that work is getting done or by whom, you need to stop and smell the roses.  In other words, find out what they are doing.  Don’t assume that you have enough employees simply because the work is getting done.  What you may not see is that your employees could be working after hours and on weekends to get the work done that couldn’t be done on shift.  This is both unfair to your employees and causes burnout.  Eventually, the employee will leave and you’ll be forced to hire and train someone new.

Treating your employees fairly and understanding their workload is how you get better productivity.  Cracking the whip and expecting immediate results only pushes other work aside for your fire drill.  As more and more fire drills result, the less and less other work gets done.  This then means the employee is backlogged with some work that will never get done.  If getting all work done is important, make sure that you understand the ramifications of a fire drill before you start it.

Additionally, you may have spent a fair amount of time recruiting the talent to your business.  If you’ve got talented employees doing a bang-up job, but they are way over worked, they’re eventually going to leave.  You don’t want to have to replace that brain trust.  It’s expensive, time consuming and can leave your business vulnerable until you find someone and get them trained.  It’s cheaper to keep your existing talent by treating them right the first time out. Keeping track of and managing your employees’ burn level goes a long way towards employee retention.

Do not categorize every customer issue as a fire drill

This goes back to the point above. Every customer issue isn’t a fire drill.  Be professional, be courteous, but most of all, be realistic with your customers. Don’t promise immediate results when it’s not possible. Doing so throws employees into fire drill mode and other work gets pushed aside.  Fire drills result in much lost productivity. Learn to triage and manage these customer situations appropriately.

Don’t expect professional results from fire drill mode

When employees go into ‘fire drill’ mode all productivity stops.  That is, all productivity stops for each employee consumed by the fire drill.  The only thing that employee is focused on is in fixing what caused the fire drill whether or not they have the tools to do so.  Worse, as employees jump into fire drill mode, they also enter the get-it-done-as-fast-as-possible mode.  This mode is problematic on many levels.  It can leave the issue only partially resolved or temporarily resolved.  This means that someone will have to go back later and fix the problem properly and permanently. Moving too fast can cause mistakes or even bigger problems later.  Moving too fast can bypass rational and critical thinking.  Moving too fast can halt logic thought processes and prevent people from seeing the bigger picture.  These are all important aspects to realize.  For example, is the problem just for this customer or is it impacting all customers? Is the problem something that the product or service caused, is it caused by the customer interaction or is it something introduced by a third party vendor? Getting thrown into fire drill mode keeps some of these thought processes from materializing and, instead, employees tend to put blinders on instead of rationally thinking through the entire issue from top to bottom before starting.

Fire drills burn people out rapidly.  Eventually, employees get fed up with the fire drill mode and they leave the company. Don’t expect to keep employees for longer than a year or two if your entire business runs on fire drills daily.  Note, successful businesses do not operate in fire drill mode all of the time.  Yes, fire drills happen, but not all of the time.  Treating every issue as a fire drill leads employees to feel unproductive and eventually they burn out and leave.

Don’t expect perfection from employees

We are all human and we are all fallible.  Running a business, you have to expect occasional mishaps.  That’s not to say that you can’t strive for your employees to reduce mistakes.  But, it does mean that you need to set your expectations accordingly to avoid thinking that perfection is the way the company should run.

On the flip side, do treat your employees with proper and necessary fringe benefits. For your business to be considered on Forbes top 100 best places to work, you need to offer a whole lot of perks to your employees.  Perks can be costly, but happy employees keep the productivity flowing.  Unhappy and dissatisfied employees do the minimum and go home.  Employees that are happy to work for your company will turn in a lot more carefully completed work than employees who are dissatisfied or are getting burned out.

Don’t play games with your website

If you intend to do business on the Internet (and who doesn’t at this point?), your web site is the new storefront. It shows off your business and how it works. It is the single most important portal for both your customers and prospects.  Without a solid well designed web site, don’t expect high quality traffic or even the right traffic.  This means, let professional design firms design your site tuned to the correct keywords.  Don’t build the web site yourself from scratch (unless you happen to also be a well known web designer).  Let professionals do this work and provide your site with a fresh look.  Additionally, trust your web designer.  Don’t think you know better than your web designers (unless you happen to have a degree in commercial art).  Yes, flaws in the way something works on the site, these need to be corrected.  For the look and feel, trust that they know what they are doing.  If you are uncertain of a certain image, flow or feature on your web site, do an A/B test (your idea vs the designers’s idea) to find out which one your visitors like better.  Visitors always speak loader than you.  Treat your visitors with the respect they deserve.  Don’t assume that because it’s how you want it that it’s the correct move.  Note that that goes for everything in your business, not just websites.

Additionally, once you establish a web site with reasonbly high ranking in Google, don’t up and change it just because ‘it’s old’.  Don’t do this unless you are absolutely certain you know what you are doing. If you roll the site out incorrectly, you can easily lose all page rankings you have in Google.  If your intent is to target new keywords, then maybe that’s what you want.  But, if you had a page 1 or page 2 ranking, by changing key words and content incorrectly, you can expect to drop down to the 20-50 page area (or lower).  This is immediately damaging to any business.  Note, page rankings move down far faster than move up.  So, you’ll pretty much lose your rankings overnight, but your new keywords might take a year or longer to get even close to page 4.  So, you’ve lost a lot of ground and you’ve lost a lot of visitors because your new site is now ranked very low.  You can always pay for AdWords to help your business, but pay-per-click  is very costly and may not help your page rankings in any substantial way.

Don’t use content management systems for your web site

I know, I know.  A lot of people are using WordPress for their home pages.  This is way overkill for a home site. Why? First, your content doesn’t change that often on your home site. It’s mostly static. WordPress and other content management systems are designed for adding new content often and rapidly (just like this very blog article you are reading).  Corporate web sites don’t change frequently enough to justify all that’s necessary to run a CMS (i.e., Linux, Apache, MySQL and PHP for starters).  On top of that, WordPress requires you to build the graphics inside of a specially designed theme which requires specialized coding knowledge.  Additionally, for Linux, Apache, MySQL and PHP, someone will also need to understand all of these technologies for when things break and when redundancy is required.  This means hiring someone knowledgeable to manage the CMS site, not to mention someone who’s knowledgable with WordPress management.

Second, there’s page delivery speed. For each additional technology layer you add, there’s a performance hit to deliver that page to the browser. The slower the page load, the lower the Google page ranking.  Statically designed web sites are the fastest to load. Why? No databases to pull data from, no PHP to interpret and process commands, no extra layers of networks to pull data through, etc. The pages and content are immediately there to download rapidly. Ultimately, a CMS is simply delivering an HTML page to the browser. So does a static web site. The less layers involved, the faster a page can deliver. The faster the delivery, the higher the page ranking. Of course, you can also throw super fast hardware and caching mechanisms in front of your CMS to help speed up delivery, but that can cause other issues for some types of content and, at the same time, cost you more money. The only downside to static web sites is management and deployment. However, tools like Dreamweaver can solve some of these deployment issues. It’s also far easier to hire someone knowledgeable about HTML and Apache alone than it is to find someone who additionally understands PHP and MySQL databases and permissions, let alone WordPress.

Don’t send mixed messages to your customers and prospects

The worst thing you can do is have a muddy browsing and sales experience.  Customers want to know what things cost and what they will get in return for that money they spend with you.  If you don’t have a clear and concise list of your products or services, then define them before ever allowing a salesperson on the phone.  Mixed messages are the quickest way to lose prospects before getting to stage one in the sales process.  Clearly define what you offer before getting any prospect on the phone.  Additionally, mixed messages can come from different sales people also.  For example, based on commission rates, one sales person might offer once price while another offers another.  Keep your sales people consistent on pricing.  If a prospect calls and is given pricing, make sure that pricing is documented in a quote somewhere.  If the prospect calls back, even a different representative who answers the phone can find the pricing they were given.

Don’t overhire

This is a huge problem in Startups.  Startup companies tend to overhire in places like sales and under hire in critical technical positions needed to support those sales properly.  So, you might have 50 sales people all closing deals, but you have one or two operations people to enable and train those 50 (or more) new customers each month.  This goes back to, don’t burn your employees out.  Lopsided hiring is a phenomena that upper management rarely sees or chooses to ignore, but continues to be a problem in nearly every startup I’ve seen.

Don’t pay out commissions before receiving customer payment

We all know that closing a deal is great.  However, the trap that many startups fall into is paying out commissions on the close of the deal rather than after the customer’s check has cleared.  This is a problem for so many reasons. First, it allows your sales staff to game your commission system by finding any deal to close and closing it even if it never has hope of actual payment.  This means they will always get their commission, but new the customer never actually makes any payment.  Second, you’ve paid out commission to the salesperson, but you’ve never collected a dime from the customer.  Don’t do this.  Always pay out commissions only after the customer’s check has cleared the bank and only based on the length of the term only after the payment is received.  If it’s a 12 month deal paid monthly, pay the employee commissions after receipt of payment by the customer and only pay the sales person on what the customer has paid.  If it’s a 10% commission, they will get their 10% of that monthly check after the check has arrived and cleared.  Never pay any commissions before the check clears.  Never pay out the full commission payment on the deal until all customer monies on that contract have been collected.

Paying commissions in this way does several things at once.  It forces the salesperson to make sure the payment is properly received, it forces the salesperson to accurately document the contract to get the correct payment amount from the customer, it prevents paying out commissions without receiving payment by the customer first (which means you aren’t dipping into cash reserves to make payroll), it reduces the amount of work necessary by your receivables person, it prevents claw backs through salary reduction of future pay checks from sales persons if deals fall through after-the-fact, and it just plain makes good business sense. Running your sales department’s commission program based solely on when deal closes is just ripe for major cash flow problems.

You know, you’d think this specific Don’t would be a no-brainer in the business world.  In fact, it isn’t and I don’t know why that is.  I’ve worked for multiple startups that have chosen this money-burning commission approach.  I know, some people have said, “Other startups do it this way”.  This is a non-argument and offers no justification for this stupid practice. This rationalization also doesn’t make it sane for your business or the bottom line.  It just means the insanity runs deep in other companies. Because another business chooses a high cash burn approach to their sales operations doesn’t mean you need to follow that same cash burn approach.  Instead, save that money and invest it places that bring money in rather than lose it.  Your sales people don’t need to become millionaires off of bad commission practices. Sure, you can use claw backs to get the money back, but only if the sales person is still working for you.  It doesn’t work if the employee has quit and left with money in hand.

Don’t let your sales people promise things that cannot be delivered

Your sales people are primarily working for their commissions.  That’s why they are sales people.  Once you acknowledge this fact, you can do the things to protect your business from dire sales mistakes. Basically, your sales people are looking for 10% of that million dollar deal.  They are not concerned whether your product or service actually is capable of doing what they have sold.  Overselling is one of the biggest problems that any organization faces, especially growing startups that have little experience.  It takes work, training and proper management to keep this problem in check.  Don’t turn a blind eye to this part of your business.  Yes, your sales people do bring in the business, but they need to bring in the business based on what is currently offered, not what can be built.  This goes back to fire drills.  If your sales people are constantly selling vapor products, your business will always be in fire drill mode trying to build something a sales person has promised.  Don’t get into this mode or you’ll never get out of it.

When a sales person sells something that doesn’t exist, their commissions should be eliminated for that sale.  This immediately deters sales persons from selling non-existent features (even if it’s part of a larger deal).  If even part of the product doesn’t exist, neither does their commission on that sale.  Commissions are like rewards.  Don’t reward your sales people for promising things that are not possible and then rushing to try and fulfill that promise by building something really fast ‘to cover the promise’.  This is a bad bad business practice to fall into.

Don’t play games with the books

With Sarbanes-Oxley in play, it’s rather difficult to do… especially in public companies.  However, in private companies, all bets are off.  If you (or any of your staff) play games with the books, you may never be able to recover from this if you intend to IPO.  The quickest way to tank your company is by playing games with the books. It’s pretty simple, hire an accountant, a CPA or someone who’s honest and is willing to do the right thing.  At the same time, keep close tabs on your books (payments in, out and general ledger).  If you are a C-level exec, don’t use the company coffers as your own personal bank account.  While this is extremely tempting, unless you intend for the company to close its doors at some point, don’t do this.

Don’t hop around trying to find the next big idea

It’s great to explore new things, but don’t abandon your tried and true services thinking you have the next big thing. If you have something that’s selling well, keep it in play.  Don’t get rid of it simply because you think you have a new idea that is better.  Make sure you market test all new ideas before you dump services in replacement for that new idea.  You may have dumped your bread and butter for an idea that doesn’t work.  Your customers will tell you that really quick.

Don’t rely on self-service business models to sustain a large corporation

Self-service is an adjunct to your business and is not intended to be used to sustain the business itself.  If you plan to be in business and sell business-to-business services, don’t expect self-service pay-by-credit-card services to win over large corporations. First, most corporations don’t (and can’t) pay by credit cards and, instead, they prefer net 30, 45, 60 or 90 day terms. Credit cards are almost always intended for small transactions, usually under $1000.  Although, some consumer cards allow charges up to $3-4k.  Some business cards can go even higher. Yes, some cards like the government P-cards have high limits, but most cards don’t. For the most part, though, credit cards are intended primarily for small transactions.  If you are looking for $30k-$1mil contracts, cards are not really the place for this size of transaction.  You will need salespeople, you need to extend credit and set up payment terms and you need to hire a finance team to send invoices and collect and book payments.

Second, big corporations expect some level of spoon feeding with regards to the sales and support processes. Expect to assign salespeople to corporations as single points of contact.  Corporations expect to talk to the same salesperson each and every time they call.  If your sales people change constantly, be sure to do proper turnover and have your new sales people contact those corporations explaining the transition.  If you prefer not to assign salespeople to accounts, you may do more harm than good for your business, so don’t do this. Corporations want to feel like their accounts are being handled properly.  For the amount of money that a corporation is spending on their contract to your business, this is the least you can do to secure their peace of mind. This goes back to treating businesses and people with respect and courtesy.

Don’t think email invoices alone suffice as for notification of outstanding debt

Email invoices, while convenient, are not always admissible in court.  Always send a paper bill for second notices to pay.  Yes, this means printing and mailing paper invoices, but that’s just one cost of doing business.  Expect to incur this cost.

Don’t think your employees know how to act

Write an employee handbook.  Not only is this book a great reference for how to act, how to dress, how to conduct business and simple business etiquette information, it is also a good place to set expectations so when you do have to let someone go, you have a document that states unacceptable conduct.  You can also state things such as ‘at will’ terms so that employees know exactly where they stand with their employment with you.  Employee handbooks are good places to keep all kinds of information not otherwise easily documented.  Sure, you can use a Wiki or other digital media (PDF) for this information, but printing this document to paper and placing it on every employee’s desk with a page to ‘read and sign’ means that at least they cracked open the book enough to read and sign the signature page.  Digital documents are not always enough for this.  This is a way to protect your business from employee issues when you need to let someone go for inappropriate behavior or when performance issues are at work.

Don’t become fascist about the use of electronic devices

Employees carry iPhones, iPads and portable electronic devices.  They’re going to carry them whether you like it or not.  It’s a way of life today.  You’re not going to change that behavior by mandating a no-cellphone policy in the office.  People rely on cell phones for critical personal communications.  Don’t expect that you can take away cell phone privileges from them and they’ll be happy working for you.  This goes back to perks.  Let that be a perk for your employees.  You can mandate in the employee handbook (discussed just above) about over usage of devices. Basically, let employees exercise common sense on usage (for example, on breaks, at lunch time, etc).  But, if it consumes their day and they’re not productive, that’s a problem that needs to be discussed and addressed.

Some employees also like to listen to music while working, so allowing this is also a perk.  If an employee is more productive while listening to music, let them listen.  If it allows them to tune out other office noises such as other phone conversations, ringing phones, typing, printer noises and other distracting office sounds, all the better.  Of course, if the person happens to be the receptionist, use of headphones may not be an option.  Note that anything that calms an employee, let’s them remain happy at work and helps them to concentrate is never a bad thing.

Don’t expect people to give up their weekends for your business

This goes back to burning employees out.  If you have so much work that one person cannot get the job done or it requires weekend work to get things done, expect to offer extra salary or comp time.  Comp time costs you nothing additional.  It’s a straight trade.  One weekend day for one weekday off.  Don’t expect your employees to work 6-7 days on a 5 day a week salary.  Eventually, you may find yourself in a lawsuit for backpay.  Don’t do it.

Don’t expect technology to solve every problem

Technology is made by humans.  It is, therefore, fallible.  It has bugs, it crashes, it doesn’t always work as expected.  It doesn’t matter if the software is from your developers or from Apple.  Nothing is perfect, expect that it will become a problem at some point.  This goes back to fire drills above.  Take failure in stride and work through it.  Don’t pressure your employees for 5 minute fixes when things go wrong.  Let the employees work through the issue properly.  The question is, do you want it done right or do you want it done fast?  Fast may get you a fix, but it may not be a fix that you’ll ultimately like several days later.  Giving enough breathing room to let the technical employees work through a proper fix is critical to ensure proper resolution to problems.  Expecting fast fixes only leads to more problems later.  This even goes for writing code.  Pressing to get software releases out the door ‘fast’, especially if you are a software company, is the only real way to tank your business.  If you’re a software business, your brand is built on quality, not quantity.  You want your software to work as expected.  Rushing to get software out the door, more often than not, leads to failure somewhere along the way for someone.  It means your developers have missed critical edge cases that can make the difference between being known for mediocre software and being known for high quality software.

If you think that there’s a way to write speedy software that’s high quality, you’ve deluded yourself.  Quality software comes only from producing code that covers 98-99% of every edge case out there and that simply takes time to produce.  Basically, this requires bulletproofing the software so that no matter how a user may use the software that it always does what’s expected.  Increasing speed of software delivery reduces the ability to test edge cases leaving dangling code that doesn’t always do the correct thing under error conditions.  This means the code could run wild, do the wrong thing or, worst case, corrupt data irrevocably.  This situation puts technical staff in fire drill mode.  Again, you cannot run your business in constant fire drill mode.  You hired your technical staff to write high quality code, let them.  Yes, by all means set delivery dates, but if a feature is too complex for a release, pull it and release it later.  Don’t rush them to get that feature into any specific release.

Don’t let the sales team drive your business

Your sales department is your front end the public.  It’s how you sell and do business.  But, it is not what drives your business ahead.  Your products and services drive your business.  The solutions that you create are what become the face of what your business is and does.  As an entrepreneur, you may have forgotten that the reason you went into business is to solve a problem.  You wrote a piece of software or designed a product to solve a business problem, perhaps even for yourself. Then, you realized you could sell that solution to many different people.  It’s the solution that drives the business, not your sales team. Basically, your technical team’s ability to deliver a functioning solution is what matters.  The sales team is irrelevant in this equation other than the fact that they answer the phone, make the sale and take payment.  Far too many businesses rely on the sales department to drive their business forward. This is the wrong approach and uses wrong thinking.  Sure, the sales team is the one reaching out to prospects and locating interested new parties.  That’s the sales team’s job.  But, when sales begins selling a square peg to fit a round hole that’s where problems begin.  This goes back to overselling.  The solution is what sells, not the sales team.  The sales team is the mouthpiece for the solution, not the other way around.  So, the sales team must be trained to sell what is there, not what isn’t.  It is not the sales team’s job to make up new features or imply that a feature a customer may be looking for exists.  It’s the sales team’s job to understand the solution offered and find prospects where that solution fits their problem.

In this goal, always have a technical person who knows the limits of the solution on every sales call.  They are the voice of clarity to keep the sales team from overselling.  The technical person can step in and say, “That’s not exactly correct, our product doesn’t do X yet”.  This sets customer expectations.  However, if X feature is important, it should be added to the list of new features to be added into a future release.

Your business and you

As the owner and/or CEO of your business, you are the champion of your business.  Only you can do the right thing for your business. Stop, think and use common sense. Rushing employees to get things done fast is not the answer. Slow down the pace. Let the employees catch up and catch their breath.  Let them finish critical projects. If you’re consistently compressing time lines, some tasks will never get done.  Compressed time lines are usually driven by customers and this, in turn, is usually driven by a salesperson over promising. These are all practices that must be tempered.  Setting the correct pace for your business is the only way your business will succeed.  Too fast a pace and your business will never be known for quality.  Too slow and the competition will outdo you. Critical, of course, to your business is having creative thinkers on your team.  You need a constant flow of new ideas to keep the business fresh and keep your products and services new and innovative.  Without critical thinkers producing new fresh ideas, your business will keep wrapping pretty new bows on old ideas. Keep your old ideas the way they are.  Don’t wrap pretty new bows into them.  Your customers will appreciate that you respect them. Wrapping pretty new bows on old ideas can be insulting to old customers if you’re trying to play it off as a new service. This is the quickest way to lose customers. Keep your existing customers happy and don’t insult them by playing off something old as something new.

Next Up: Part 2 | Chapter Index Page

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