Shark Tank Jump Start Your Business: How to Launch and Grow a Business from Concept to Cash (22 page)
Authors: Michael Parrish DuDell
Affiliative:
The affiliative leader believes more than anything else that people come first. Often prioritizing emotions over
performance, everything this type of leader does is designed to provide comfort and harmony for the team. Therefore, most of his time and energy is spent focusing on connection and collaboration. While this type of leader can offer value to an organization, a natural aversion to conflict often stands in her way. IDEAL FOR: an organization looking to improve culture and strengthen morale.
| “I don’t like to micromanage. I believe in the people I hire, and so I respect the decisions they make.” |
Identifying what type(s) of leadership you wish to adopt can have an extraordinary impact on your business. For one, it will greatly determine whom you choose to work with (and who chooses to work with you). But it will also provide you with a basic outline and game plan for how to effectively lead your team. Take a moment to consider which type of leadership speaks to you.
No matter which leadership style you choose to adopt, one thing is certain: you
must
learn how to delegate responsibility. For many entrepreneurs, this can feel like an impossible task. After they’ve spent so much time building, creating, and growing an organization, it’s difficult to hand over even the smallest amount of control. But knowing when and how to delegate is a crucial part of becoming a great leader.
To do this successfully, first, you have to get over the common misconception that a leader must always maintain complete control. From revenue to staffing, many believe that leadership means you have to be in charge… of everything. But of course you know that isn’t true. While a good leader must be responsible for laying out the vision, he needn’t execute every part of the process.
Earlier in the book you were asked to identify your strengths and weaknesses. No matter how talented or exceptional you are, it’s likely your list of weaknesses will rival your list of strengths. That’s a good thing. By being aware of your deficits, you can begin to delegate appropriate tasks and focus only on the things you do well.
Delegation is challenging for everyone—even for someone as successful as the Sharks. “I have learned to delegate,” writes Mark Cuban on his blog. “That’s not easy for an entrepreneur to do. In my past, I would have taken on everything and anything I thought could add value to. I had to be in the middle of everything. No longer. I’ve learned to hire people that I can build trust in and let them take the ball and run with it.”
Delegation isn’t just good for you; it’s good for the company as a whole. When you delegate a task, you’re essentially giving someone your vote. You’re saying, “I believe you can do this well.” This proof of confidence boosts morale and encourages a culture of initiation and trust—something that every organization can appreciate.
If you have difficulty delegating, begin by taking baby steps. Don’t turn over all your financials to someone just yet. Start small. Assign a task that won’t make or break the organization, and give the subordinate a chance to figure it out on her own. As you begin to see your team excel at new tasks, it’s likely you’ll grow more comfortable with the idea of handing
off some of the larger ones. After a while, you’ll see just how much time you free up—time you can use to grow the company and focus on the larger vision.
| “Delegation can be very difficult for the entrepreneur. It’s hard to let go. Personally, I try to hire smart people whom I like, trust, and admire. And then I spend a lot of time communicating the big picture of my company’s mission. Most entrepreneurs don’t start out being great at delegation; they have to learn as they go.” |
There’s a famous Buddhist expression that says, “Thousands of candles can be lighted from a single candle, and the life of the candle will not be shortened.” The same is true for delegation. You never lose power by empowering others. Quite the opposite in fact. The very best leaders know when to lead and when to stand back and let others take the reins.
Not every entrepreneur is a good manager and not every manager is a good entrepreneur. As a leader, it’s up to you to decide whether or not you’re the best person to handle the day-to-day operations of your company.
Many entrepreneurs are attracted to the building process—taking an organization from idea to reality. But when it comes to actually running the company, they’re bored out of their minds. If you’re this type of person, it may be helpful to bring on an outside manager to help run the business.
When hiring a manager, it’s common for entrepreneurs to look for someone like themselves: daring, bold, and perhaps a little untraditional. But bringing on a carbon copy of yourself may not be the best thing for your business. As you learned in the previous chapter, you want to hire someone who rounds out your skill set. When looking for a good manager, it’s best to step back and think about what your organization really needs to advance to the next level. Are you terrible at organization? Then bringing on a manager who is a hyper-organizer is a smart idea. Are you a notoriously big-picture thinker? That will serve your organization well, but only when fused with a more logistical and operational mind.
The greatest challenge most entrepreneurs face when hiring a manager is that the process requires a healthy dose of self-assessment. Some business owners, especially those who are self-made, can be judgmental of those who have taken a more traditional route. To them, such a path seems unthinkable. But this is a bias you simply can’t afford to have. Formalized experience can be a great thing, especially when combined with the gutsy bravado that a homegrown entrepreneur brings to the table. Although you may find a few philosophical differences in your respective approaches, it’s likely your combined experience will make for an all-around better organization.
When you’re hiring a manager to help lead your business, it’s
okay to bring on someone with more work experience than yourself—even if it slightly bruises your pride. Having someone on board with real-world experience in a similar industry can help your company avoid common pitfalls and ultimately save you time and money. Think of it like having a corporate tour guide on staff.
It’s your job as a leader to build the best business you can, and occasionally that may mean turning over some of the leadership responsibilities to someone else. Don’t be afraid to ask yourself the tough question, “Am I the right person to run this company?” You may be surprised to see just how transformational the answer can be.
THE SMART WAY TO GROW
Whenever the words “growth” and “business” are combined, people start to get excited—especially if the business in question is their own. But growth is a complicated thing, with many positive and negative implications. While growth usually means more profit, it can also mean a complete revision of the company, which can be a time-consuming and expensive task.
Before you can properly craft a growth strategy, you must first identify what ideal growth looks like for
your
company. Not all small businesses will grow or should grow the same way, and bigger doesn’t necessarily mean better. Everyone has an opinion on how and when to expand, but one thing is universally true: you must have some sort of growth plan.
“Too many small business don’t have a plan for growth,” says Robert Herjavec. “Even when my company was small and just starting out, we always had a target for what we were going to do each year. People are afraid to put a plan together because they feel it makes them accountable, and it does.”
As you begin to think about your growth strategy, you’ll
want to be sure you have all the right pieces in place. Otherwise, you could end up growing too fast or too soon (yes, there’s such a thing as both!). Before taking any major steps toward expansion, be sure to answer the following questions:
It
takes
money to
make
money, and this is particularly true during any period of significant growth. Even if you have enough capital to start a business, any sort of significant growth will most likely require an infusion of additional money. According to leaders at the Small Business Administration,
“The biggest challenge facing small businesses right now is that too many good, creditworthy borrowers still can’t find the capital they need to grow and create jobs.”
In other words, if you don’t have access to capital, you may find yourself stuck in one place.
Let’s say, for example, that you own a toy company, and you’ve just received a massive purchase order from a big-box retailer. That can be a tremendous opportunity for your business, but only if you can deliver. An order that triples your output means you’ll need triple the funds to produce the goods, which can be a cumbersome expense.
In Chapter Seven you learned the importance of managing your cash flow and staying on top of your financials. This is absolutely crucial when you’re attempting to grow. The very worst-case scenario is that you lose out on an incredible deal because you didn’t have the capital in place to see it through.
Imagine that you own a small artisanal chocolate company. You’ve spent years slowly building the business and creating
a high-quality, handmade product that your customers absolutely love. You are the very best chocolate company in town and have a devoted base of loyal fans. Then one day, quite by accident, the editor of a high-volume magazine receives a box of your chocolates. She loves them so much that she decides to do a big story about your company in her publication. The story does well, and you get twenty times the amount of orders you’ve ever received. Sounds like what dreams are made of, right? Maybe, but also maybe not.
All of a sudden your quaint little artisanal chocolate shop is faced with a major challenge. How do you keep up with volume while still maintaining the integrity of the product? In order to do so, you must have the proper infrastructure and materials in place to handle such growth. It’s likely you’ll need more machines, a bigger kitchen, and perhaps even a new fulfillment center. But it doesn’t stop there. As a chocolate maker, you rely on your vendors. What does growth look like across the supply chain? Will you have access to the same quality cacao and sugar? If not, how will that affect your product?
Growing a business can be thrilling or terrifying, and often it’s a little bit of both. If you want to ensure that your growth is sustainable, you must consider both your infrastructure and materials before trying to expand.
In the previous two chapters you learned how to build a great team and get comfortable with the delegation process. Those skills will serve you especially well when trying to grow.
Going back to the chocolate company example, not only would you need to have the necessary infrastructure in place, but you would also need the workers to keep up with the influx of orders. If you have to hire fast, chances are you aren’t
going to find the best people for the jobs, so it’s important to be prepared from the outset.
There may be some situations where growth happens organically or by sheer accident. In those cases, you’ll just have to think on your feet. But more often than not, growth isn’t accidental; it’s a calculated and strategic move. Many of the entrepreneurs who appear on
Shark Tank
, for instance, know that they’ll experience a surge of growth once their episode airs on television. Therefore it would be in their best interest to secure the necessary employees in advance.
Depending on the type of expected growth, you may wish to bring on freelancers, hourly workers, or full-time employees. That’s up to you. But no matter which type of employee you hire, be sure that you have some sort of plan in place. There are only twenty-four hours in any given day, and you have to sleep for at least… two or three of those.
Many believe that money can change a person. Well, if it can change a person, it can definitely change a business. One of the most common hurdles an entrepreneur encounters when experiencing growth is maintaining the mission and vision of the organization.
As more opportunities begin to arise, naturally things start to get more complicated. The chocolate company, for example, built their business on a handmade, artisanal product. If they experience rapid growth and don’t have access to the same quality of materials, all of a sudden the very core principles of their business are in danger. Now they must make a difficult choice: do they refine the mission to accommodate growth or do they stay true to the original vision and ignore opportunity? That’s a tough one. While there’s nothing wrong with
altering the fundamentals of a business, you must be aware of the effect it can have on the organization as a whole.
When your business makes a promise (e.g., handmade, artisanal chocolate), you sign an unofficial contract with the customer. When that promise is revised, so too is the contract, which could jeopardize your entire base.
Growth can be a magical and intoxicating thing. There’s nothing like watching something that was once just an idea transform into a beloved product or service. But too much growth at the wrong time can hurt, or worse, destroy a business. As you begin to experience growth, it’s a good idea to go back and review your original business plan. Update your market research, revisit your mission, and perform an in-depth analysis on your financials. Use this as an opportunity to refresh your goals and refocus your positioning.
| “The idea that growth equals profitability is a misconception. If you can’t afford the financial or qualitative side of growth, it can just as easily put you out of business. You must have the money to provide your customers with what they need, when they need it.” |
What’s the current state of your brand? Where are you succeeding and where are you failing? Which marketing efforts are working and which are a waste of time? How do your sales match up to your projections? As you begin to revisit these crucial questions you may discover areas of growth that you never considered or hurdles that you didn’t know were even there. You might learn that you need to pay better attention to how you measure success. Perhaps you’ll find a
new piece of technology that can greatly improve the efficiency of your operations. The more intel you can gather, the better off you’ll be.
Remember, growth is specific to your organization, and you must treat it as such. As an entrepreneur, it’s up to you not only to carve the path but also to lead the way. And that requires knowing where you came from and where you’re headed.
What’s the fastest way to grow a company and turn it into a household name? For some businesses, the answer may lie in franchising. In the first part of this book you learned the pros and cons of
purchasing
a franchise, but that’s only one side of the coin. From an ownership perspective, the franchise business looks entirely different.
As you might imagine, becoming a franchisor is a lengthy and often complicated process that requires an abundance of not only patience but also money. Between up-front and operational costs, the price of franchising a business can range from tens of thousands to hundreds of thousands of dollars. It all depends on how you choose to go about the process. Keep in mind, however, that most first-time franchisors will require the help of consultants and lawyers, which can considerably rack up the price, so it’s always best to budget a little more than you think. But even though the initial costs can be hefty, franchising a business can be incredibly lucrative.
The U.S. Census Bureau reported that in 2007, franchises made up 10.5 percent of businesses across 295 industries.
In total, those franchises accounted for $1.3 trillion in revenue and the creation of 7.9 million jobs.
Sound too good to be
true? The next time you drive down a highway, try to count the number of franchises you spot. From fast-food restaurants and gas stations to specialty stores and even law firms, franchises are more prevalent than you might imagine.
Still, don’t let that $1.3 trillion number blind you; not every great company makes a great franchise. Before saving up for your big franchise rollout, pause for a moment and carefully evaluate whether it’s the right decision for your particular business.
The primary issue to consider is the market size of your business. Most often, the franchises that work the best have a huge market and appeal to a broad spectrum of consumers. If, for instance, you own an antique yo-yo store that specializes in hand-engraved yo-yo accessories (if there even is such a thing), then franchising your business may not be the best growth strategy. The specialty engraved yo-yo accessories market just isn’t that large. On the other hand, if you own a quick-service salad restaurant with a strong brand identity and a unique twist, then franchising may be an option worth considering.
One of the best ways to identify whether your concept is fit for franchising is to put it through the “mall test.” Would your business succeed inside (or around) any mall in America? While this test won’t apply across the board, it’s often a quick way to determine whether your business has real franchise potential. After you’ve done the mall test on your business, try it out on other proven franchises, like for instance any of the top ten companies on
Entrepreneur
magazine’s 2013 Franchise 500 list:
1. Hampton Hotels
2. Subway
3. Jiffy Lube International, Inc.
4. 7-Eleven, Inc.
5. Supercuts
6. Anytime Fitness
7. Servpro
8. Denny’s, Inc.
9. McDonald’s
10. Pizza Hut, Inc.
More telling than the actual businesses, play close attention to the categories: restaurant, hotel, auto repair, salon, gym, convenience store, and cleanup service. Excluding Servpro, the cleanup and disaster repair company, each of these businesses would perform remarkably well inside or around just about any mall in America.
Of course you must also think about whether or not your business will fit within the more rigid confines of a franchise structure. Part of the reason people purchase a franchise is for the ease that comes with running a more plug-and-play style of business. From store design and pricing to training and marketing, the franchisee is buying more than just the business; he’s buying the model as well. This means that before you can even think about franchising, you must have a fully developed infrastructure. Do you have a reliable network of vendors? Have you come up with a proven marketing strategy? Do you have a training program in place? Do you have someone on your team who will be designated to handle franchisee relationships? Without the necessary elements, it may be difficult to sell your franchise.
According to the International Franchise Association, more than 40 of the 105 companies that began selling franchises in 2008 had yet to report their first sale by the end of 2009.
That’s almost half. This statistic shows just how difficult it can be to
sell a new franchise. And when you think about it, it makes perfect sense. Why would a franchisee buy your business when they could purchase one that’s already proven? Will you offer lower fees? A better supply chain? More rewards and benefits? As part of your preparation you must determine how your business will differentiate itself in the crowded franchise market.
