Owners, Manage Thyself
by Andy Birol

You have a good business and yet just when you have a great month, the next one turns sour. Even worse, it takes another two months just to get back on track. The cause may vary, perhaps this time a key employee quit, production screwed up or the competition stole another client. While it is never the same reason, you find you spend most of your time managing through another crisis. Your business life begins to feel like Bill Murray's in the movie "Ground Hog Day." If it were not so serious, you would laugh at yourself. In the immortal words of Rosanne Rosannadanna, "It's always something."

As the leader, owner and in most cases the actual service or product your firm sells, you are your business. So let's face some cold hard truth. If it is always something, it is you. Some part of your leadership, vision, management style or ability to implement tactics is holding your company back. Your friends, advisors, and peers may tell you this is naturally part of being an entrepreneur but given your results, you know it is not acceptable. Worse, yet, your other options for fixing the problem are few. Hiring a professional manager or working harder are not options. And the ultimate decision, selling out or giving someone else control, will destroy your dream and your ego.

So, what can you do to manage yourself to greater success? Here are the first two of five key steps.

1. Recognize your three roles:

  • As the owner, you are the ultimate protector of the firm's reputation, wealth and purpose.

  • In your leadership or presidential role, you are responsible for setting direction, achieving results and managing everyone and everything.

  • As employee #1, you are also the icon for providing the company's key product or service. To your clients, you are what they are buying. You must sell yourself, deliver yourself and get paid for who you are. As you are the definition of what you sell, you must continually improve and raise your personal standards.

2. Compensate yourself in three ways:

  • As an owner, reward yourself for building wealth. Pay yourself an owner's salary or distribution, increase your insurance and investment planning and gradually extract equity from the business as your reward for making your company richer. Tie your reward directly to how much wealth your business has gained. Obviously company cars and other perks can be a tax effective approach to doing this well. Your accountants and financial advisors will help you here.

  • As the president or leader, your goal is to increase sales and profitability. If you have the discipline, you can hold yourself completely accountable for results. To do so, consider yourself an employee in terms of compensation. Shop your market place and pay yourself according to what a non-owner president would receive. Clearly you would earn a base salary, significant incentive compensation and some deferred income. A leader who hits goals is well paid and one who doesn't is fired.

  • As the product or service provider, your key success measurements are customer satisfaction, market penetration, new product introduction, up-selling/cross-selling. Compensating yourself here is most tricky. What would you pay a key employee who invented a process, was adored by customers or was invaluable in delivering your service yet is not an owner? Ask outsiders to help you determine both your success and what it is worth.

When you have determined what you should be paid for each of your three roles, add them up to arrive at your total compensation. For example: If you run a $5,000,000 service provider:

  • As the owner who increased net worth by $500,000 pay yourself $100,000

  • As the leader/president who increased sales by 10% and profits by 8%, pay yourself $200,000

  • As the service provider who reinvented a new process, created three products and gave five speeches, pay yourself another $100,000.

So, if you were successful in all three roles, you would have proudly earned $400,000. If you were not as effective in one or more of your jobs, cut your compensation for that part. By linking your pay to each of your roles, you can stay connected to all that you must do.

Contrary to what you may feel or hear, you are never completely successful or a total zero. Just like everyone else in your organization, you have your good points and bad. The only difference is that as an entrepreneur you have no boss. Therefore, to make a difference, you must manage yourself. And doing so through your compensation is a great way to stay honest.

Now that I have talked to you about the three roles you must play as a business owner and how to tie what you accomplish to what you earn, I will now show how to best spend your time to make the greatest impact. As owner, leader, and product number one, what can you do to make progress towards your goals everyday?

Consider this. Regardless of whether you are running a service, manufacturing, retail or distribution business, you can distill all your day-to-day efforts into three areas: Selling, Delivering and Developing your business.

Defining the Big Three:

  1. Selling is the activity that starts and keeps your company rolling. Even if you know exactly what you want the customer to buy, the sales activity moves your product off the shelf or gets your people hired. Therefore, the most important short-term activity to focus your efforts on is learning to sell what your company makes. By learning to uncover customer pain and prospect opportunity, you drive your company's business forward. You know you are doing this effectively when you propose to three of every ten prospects you meet with and close one of the three prospects you meet with. So, as you lead your business forward and are probably also serving as your company's top sales person, perfect your selling process and build your sales funnel. Become excellent at identifying which of your qualified prospects to propose to and which ones are likely to close and when.

  2. Deliver what you like making and have succeeded at producing to others' satisfaction. Link this to exactly what you sell. To do this, determine your best and highest use and assure it meets your client's needs. Hone it, codify it and make it distinctive. As you make your product ever better, raise your company's description and your client's perception of its differentiation while lowering your cost of delivery.

  3. The third part is to develop your company's long-term ability to perform at higher levels. Understand what it takes to develop prospects and build the top half of your sales funnel. Meanwhile brand what you sell while continuing to distill and expand you and your company's best and highest use. As you do this, narrow your target market and pursue greater opportunities to resolve customer pain and lead them to greater opportunities to grow your customer's business.

Why are the Big Three all important and always at the same time?

By focusing on selling, delivering and developing your company at the same time, you will be successfully spending every moment of your business life focusing on the right company goals. Here's how:

  • Selling solves your short-term revenue needs

  • Delivering ensures you exchange value for money

  • Development means you continually build and fortify your growing brand

Why are all three important and any two won't work?

  • Sell and deliver and your business will always live no greater than hand to mouth.

  • Sell and develop and your poor value will drive your customers away.

  • Develop and deliver and you will go out of business because no customers will ever get sold.

While you are undoubtedly thinking about all the things you must get done every day, think first about the Big Three. If you are making equal and balanced progress in each area, you are helping your business to thrive both in the short term as well as in the long term. And in doing so, your daily activities can always stay on track and give you confidence your goals will be achieved.

Andy Birol is a Cleveland-based business growth consultant, owner of Birol Growth Consulting and author of "Focus. Accomplish. Grow… The Business Owner's Guide to Growth." He holds an MBA from the Kellogg School of Management at Northwestern University and has been published in The Wall Street Journal, New York Times, Entrepreneur Magazine, Fortune Small Business and many more. In 2002, his firm won the Weatherhead 100 Award as Northeast Ohio's fastest growing single-employee business. A guest expert on CNN's Dollar Signs, NPR, and NBC, Andy comments on national and local issues facing business owners who want to grow their businesses. Andy can be reached by visiting his website at www.andybirol.com or at abirol@andybirol.com .

Many more articles in Creative Leadership in The CEO Refresher Archives


Copyright 2003 by Andy Birol. All rights reserved.

Current Issue - Archives - CEO Links - News - Conferences - Recommended Reading