The 3 problems of small businesses

In a recent discussion with a small business banker, he identified three problems faced by most small businesses. They were:

• Cash flow
• Planning
• Staffing

In my Blog entry last week, I mentioned the problems from Quote to Cash, where many small businesses don't generate invoices on a timely basis.  If your only costs are time, and you have enough money coming in, then late invoicing may not be a big problem, and will not have a big impact on cash.  But if you have materials to buy, cash flow becomes a big problem.  You can at least reduce that problem, by issuing invoices on a timely basis.
Next week, I will describe a common problem that I have encountered with some small businesses who see having time to generate invoices as a problem.
Planning is the second area identified by the banker.  Often planning is what people do when they are not busy reacting to the challenges of reacting to day to day business issues.  Planning should outline what you want to achieve, so that you can focus your time on the important issues.  If you don't plan, you tend to react to business issues as they come up.  You focus on what's urgent versus what's important.  The key is to identify what is important to you, and spend your time on activities that help you get there.  That is what planning is all about.
Staffing is the third area mentioned.  As small business owners, we have a challenge finding staff, who have the skills necessary to do the job.  We can't afford the very skilled, because they are too expensive.  We hesitate to use specialists, because they are too expensive.  So we hire junior people and tell them what we want.  We then have to tell them over and over and they don't seem to get it.  What's wrong with this picture?  When we get into business, we start with a specialty and learn that we have to do many other things.  Most of these things are difficult to delegate to junior staff and we end up doing it ourselves.   Who is the busiest person in the office?  The owner.

All three of these problems are process issues.  I will provide some insight into solutions in my next few posts.

For anyone who reads this, if you have other problems as a small business owner, please let me know.

From Quote to Cash

Many small businesses suffer from the quote to cash cycle.  With many small business owners that I talk to, who work IN the business, delivering products and services, there is always a challenge to balance workload.

You work hard to get a sale, then work hard to deliver.  In many cases, these jobs are back to back, with a need to start working on the second, the minute the first is completed.

With a build to suit approach, which is where many small businesses start, a lot of time and effort is spent doing a quote or estimate.  Once the sale is made, all focus goes into delivery.  When the job is finished, you start to work on the next one.  Many times, you are too busy to create the invoice.

Most people might say "generating the invoice is the most important part!".  I always felt that, and was surprised at how many businesses don't do it immediately.  I found, surprisingly that many people are focused on delivering the next job.  They react to business critical items, such as paying their suppliers and their staff (or they can't do new jobs), but are very slow to pay themselves.  They often defer creating the invoice until they "have time".

In analyzing the situation with clients, I found the challenge.  Most of these owners hate paperwork and love doing the work.  They don't work at simplifying the paperwork, because it doesn't come easy to them.  They often create complex processes and tools that makes the job hard to do.  Yet they have done all of the real work, they just haven't made it easy to use.

A common example that I have seen is the generation of quotes or estimates in Excel or Word, the generation of the order form in a different product, purchase orders created manually, then invoicing again using a different tool.  Each of these often requires entry of customer information, product information, prices, etc.  Since there is no link between them, the data is entered multiple times.  In many cases, the same information in the quote is again used in the invoice.  Then the data is entered in the accounting program.  To save time, only the basic accounting entries are entered.

The result is that the business is able to do financial statements at the end of the year (often late), but has no understanding of the profitability of products or customers.

A simplified business process would capture the information once at the beginning, provide the ability to generate order confirmation, purchase orders and invoices simply, as well as save time, give you better information about your business, and get invoices to your customers faster.

Sounds like a winning proposition to me.  Why doesn't everybody do it?

The 5 Ws of Software Project Success

Computers are a necessary component of every business today, yet the success rate for software projects in business is not very high. Most companies get some value from implementing software, yet they get far less than they should, and far less than if they looked at software as an investment rather than as a cost of doing business.

If you look at it as a cost, you look at whether you can afford it. If you look at it as an investment, you look at whether you will get a 20, 50 or 100% return. Very few businesses ever achieve returns that measure 20% let alone more than that.

We have all heard the questions that every reporter must answer in any article. They are: Why, what, where, who and when. It turns out that these questions are the same ones that generate results for software projects. The reason that software projects fail to achieve big returns is that there is not a clear answer to these questions.

Let's look at each of these in turn.

Why buy or install the software?
While this seems like a simple question, there are many potential answers to the question. This is often described as the goal or objective of the “project”. The software can be used to satisfy many different goals, and often the people involved interpret different goals from the original.
Take Customer Relationship Management (CRM) software, for example. The assumed goal for some may be to increase sales, but CRM software can do many things:

• It has a contact manager.
• It has the capability to track every interaction with your customers.
• It has the ability to track the status of activity with a customer.

Saying that you want to implement CRM software encounters this type of conflict.

A recent client's objective was to understand the status of activity with customers. The reason was that he was having high turnover with salesmen, and when they left, he had no idea whether there was any sales in the works. By tracking the status, he could quickly assign someone to work on these customers to finish the sale. Most people that I talk to would not have assumed that this was his objective.

You must clearly define why you want to install the software to everybody involved.

What must happen to get the software to deliver the results needed?

Most software projects focus on software implementation, but this need has nothing to do with the software or training on the software. This has to do with how people do their jobs. If we use the example above, every salesperson needs to track all of their activity with clients if you are to be successful. This can be a lot of work.

What is the incentive for the salesperson? If there is no incentive, why would they do it? If they do it, how do you know whether the information that they capture is of value for your objective? Many projects attempt to capture all of the data, assuming that it will be of value later. This results in too much data that is of little value.

Define how you will track whether it is doing what you want it to do. Do it on a small scale to ensure that you can use the data that is being captured. Work with the data that provides the most value first.

Who, Where and When will the information be captured?
These are the questions that deliver the results. If people are in the office and working on their computers, it is easy to capture the information that you are looking for. Rather than write it down, people can type it. However, if they are in the field and don't have access to a computer, and don't have any other need to capture the information, it will be much more difficult. This is where most software projects go wrong. They try to capture too much information, but force people to do it on their own time and don't offer any benefit to the person doing it.

This is a case of less can be more. If you ask for too much, you will get garbage or not get it at all. If you ask for less, the most critical information, you are more likely to get it. If you also show the value that you get early, it is likely to be better information.

This completes the circle:

• Everybody knows why you are doing it.
• Everybody knows what must happen in order to meet the goal.
• The people who must do it, know where they have to do it and when.

Small Business can be Beautiful when it comes to IT.

I see many small businesses that are struggling with the use of computers. They often spend the money thinking they are going to get improvements and end up with far less than what they expect. What is the problem here?

Large businesses have many different problems. In a large business, many people have to work together to get the job done. Many of these people hardly even see each other. They make assumptions about what other people are doing and try to do their best, in their own little silo. In many cases, they are operating to different objectives, objectives set by department and end up working at cross purposes. When new software is implemented, the project is often assigned to dedicated people, people who don't do the job on a day to day basis. They develop the new processes, identify what needs to be done and turn it over to the people that have to make it happen. There are huge communication problems and even when the needs are identified, it is difficult to solve.

In small businesses, people work much closer together. They can see each other and should know what everybody is doing. They don't have departments with different objectives. They shouldn't have silos and communication problems........... But they do. I have seen organizations as small as 5 people operating in silos and not knowing what each other is doing and what impact they are having on each other.

So the problem is not unique to large business. It also exists in small.

The good news is, it's easy to solve in small businesses:

• It's easy to set a single obective.
• It's easy to get people in a room and talk about what needs to be done.
• You can undertake major changes in software, business process, organization and do it in a few months.

So what's the problem?

The problem is that when organizations decide to implement new software, they think of it as a technical project to be run by technicians. It isn't.

The reason that you start is that you want to upgrade your business by using technology more effectively. To make it work you need to:

• Have a common business goal that is understood by everybody.
• Understand how you will achieve that goal, by changing your business process, using the tools provided by the software, training your people to work differently, perhaps changing roles and responsibilities.
• Installing the software and converting your data.

Only the last one is technical. The first two are not. Success should not be measured by whether the software was installed, but by what business goals were achieved.

Large businesses can afford to put extra resources towards a large project. Small businesses can't. They also need to demand business results quickly.

Four steps to success of software projects - Step 3

Once you have your goals and vision and have identified your team, you need to look at your business process.

Your business process is the list of activities that you do to deliver the results that you are looking for. Since you are trying to improve the results that you get, obviously you need to change the activities. The software that you buy will require a change to the activities that you do. Even if the method of recording is the only difference, something will change. In addition to just automating activities, software comes with built in assumptions about how you will go about using it.

The is the big mistake that many organizations make! They assume that all they are doing is using a new tool. The approach to doing these activities will change! You are trying to deliver a different set of results.

Albert Einstein once said: "Insanity is doing the same thing over and over and expecting a different result". The opposite is also true. You can't expect to improve the results that you receive by continuing to do the same activities.

You start by describing the activities that you now do. This is extremely important! Everybody will make assumptions about what is going on, and they will be wrong. The devil is in the details. Once you know what is happenning today, you can look at what you need to do to get the improvements that you are looking for. This lays the foundation for the new flow of activities.

This new set of activities and the flow between activities and people will provide you with a new set of business outcomes and benefits. The process will show you what you must do to deliver the business outcomes. It will also provide you with a specific set of requirements for the software that you will purchase. You have a direct relatiosnhip between the software requirements and the business outcomes.

These four elements: activities, flow, business outcomes and benefits, will provide you with the basis for success.

Four steps to success of software projects - Step 1

When you consider buying, installing or upgrading business software, the starting point is asking the question - why?
It may be that you want to increase sales, increase productivity, decrease costs, improve cash flow, etc. The reason doesn't matter. Most often and organization will jump from this broad goal right to looking for software products, or talking to friends or colleagues about what they used. This is a big mistake! The goal is too loosely defined. Everybody in the organization and your suppliers will have a different view of how to achieve this goal. How you achieve this goal will depend on what you mean by it. And this is different from person to person, company to company.

You need to be able to visualize what this goal means. For example, if you are considering Customer Relationship Management (CRM) software, is it your intent to become more intimate with your customers, understand their needs and wants even when you can't satisfy them, understand every interaction? Or do you just want a contact manager and the ability to track sales in process?
This step is the most important!

Once you have visualized the solution, you need to identify how you will maintain the energy to deliver the results. Most software projects are more of a marathon than a sprint. As much of the activity is technical and of no interest to the business, most business people get tired and ignore the project waiting for something that they can get involved in, in spurts. They are busy running the company and can't focus on the project the way that technical staff do.

During this step, you need to identify deliverables that are to be performed by the business to move it forward. You must identify activities that can be done in spurts that help to move the project along and maintain focus.

As leaders, you must also maintain this focus by looking for results, improvements in te short term and not be satisfied with waiting to the end.

These four elements: Goal, vision, focus and leadership will be critical to the ongoing success.

Describing IT project success

IT organizations have a problem when they talk about project success. That success is almost always described in terms of the project itself, yet the reason why the project was undertaken was a business reason. The business wanted to improve the outcomes that they received from one of their processes.

Project success is normally measured by:

• The project was completed on time.


• The project was completed within 10% of budget.

The real issue is: "did the business receive the value that they expected?" If the answer is no, then the project was a failure. If the business can't answer the question, then the project was a failure. Significant time and efort has been spent in the last 30 years to improve project success. All of it has been placed on success as measured by the project team, not by the business.

In this example, the project team considered the project a success. The business considered it an outright failure, because:

• The solution increased workload.
• The solution did not cater for exceptions.
• The job roles were changed. The staff were trained on the software, but not their changed roles.

The result? Negative productivity impact on the business.

Technology value through Focus and Will

Years ago, I went on a course that presented three steps for achieving results:

• Focus
• Will
• Capability

I read about cultures that achieved great things. They lacked the skills or capabilities to move forward, but had the focus and will. They eventually developed the capabilities.

The same is true of technology. I see many small business owners that are frustrated wth technology. They don't have the interest and abdicate their responsibilities to others who are comfortable with it.

I understand the frustration that these business owners have. Most technology based solutions are presented as technology solutions in their own right and not as business solutions.

When a business decides to buy software, they start with a business problem. As solutions providers, we jump right in and assume that the software is THE solution. The business peopl lose interest, because they don't care about the technology. They care about their business problem. This is the way it should be.

The three words listed above offer the solution to the problem.

Focus: on the business problem, not on the software. What problem are you trying to solve. If it is important to your business, keep this focus. Don't get distrated. When the software supplier tries to teach you everything about the software (fire hose training), resist and get them to focus on the features and functions that will help solve your problem.

Will: This will be painful. The technical support people will try to get you away from your focus, to get their approach and become technical. Resist. Maintain your focus. Learn what you need to know to succeed at solving your problem.

Capability: If you can maintain your focus, you will learn what you need to know. You don't have to be a technician. You need to understand how to manage technology so that it helps your business.

Getting to the Business Goal

Many technology related projects get stuck in the technology world. They start with a business goal, but by the time they get to doing something, the goal is totally wrapped as a technology related project. The end result is that although the technology related project is delivered, the business goal is missed, or the effort to deliver it exceeds the value.

A recent project provides an example of how the business goal can easily be missed.

I was called in to help a small construction company. They were growing rapidly and went from small jobs to much larger ones. These larger projects required more sophistocated tools. As a result, they purchased new software. After a year of trying unsuccesfully to implement, they called me for help.

In analyzing the situation, I found that the software was probably the right one for the job. However, the approach was wrong. The focus had been to implement the complex functions first, ignoring was was their bread and butter operation. The complexity of the new function required significant effort, meanwhile, they had problems with day-to-day operations.

In digging into the issue further, I found that they were unable to invoice their customers ina timely manner. Since everything was being done manually, they had no records until after a job was invoiced, no ability to follow up on what was billed or not billed. Invoicing was 3-6 months late.

The delayed invoices meant that customers were not being billed and therefore not paying their bills until months later. This created a cash flow problem. lack of cash flow meant that the business could not take on the bigger, more profitable jobs. Lack of bigger jobs meant that the growth of the company was stopped.

So the real business goal was to grow the company. In order to grow, the company needed cash. In order to get cash, the company needed to invoice more quickly on the small jobs. In order to bill more quickly, they needed to start tracking jobs when they were started, when a quote was given.

We were able to capture all existing jobs and and create a follow up process for planning and executing the jobs as well as invoicing most jobs within days of completion in less than 3 months. This meant that the company could focus on growing the business quickly. The new functions to handle to large jobs could be done during quieter times.

If the original goal of fully implementing the software had been maintained as the priority, it would have taken a lot longer and cost a lot more. During that delay, the company might not have survived its cash flow problem.

Do everything computer support

I've recently read a number of ads and articles from ccomputer support companies that claim that they can provide all of your computer support from hardware and software purchases to strategic planning to website development.

In this day and age, technology is changing and growing rapidly. In order to stay up to date, you must specialize. When you try to sell your services to a customer, what is he impressed with?

• The fact that you can do anything, but not particularly well?
• The fact that you are a specialist and you can solve his or her problem the fastest?

No single person or company can be the best at everything. With the frustrations that most of us face with computers, it is tempting to "abdicate" our responsibilities as business owners to the kid down the street who is comfortable with computers.

Don't do it! He will be managing your business for you!

Even companies that get into this and try to do everything can't be good at it. Even if they have enough staff to keep up-to-date on everything, every company needs a focus. They need to be known to be REALLY GOOD at one thing. They may be able to do other things for you, but they work best for you if they help you to find other specialists.

On top of that, there are three different types of consultant or support that can be valuable for you. They are:

• Computer and technology support
• Business planning support for effective use of technology.
• Websites

These three types are very different, and someone who is really good at one, is unlikely to be really good at another, because they are very different skillsets.

• Websites are not about technology, they are about marketing. Any technician can build a website, but if it doesn't produce a return on investment, it is not worth the price that you paid for it.
• Business planning for technology is not about technology, it is about business results. If you buy software and it doesn't produce a return on investment, it is a waste.
• Computer and technology support is not about fixing computers, it is about keeping your systems up and running, so that the other investments that you make can produce the return on investment that you expect.

The next time somebody tells you that they can do it all, run for the nearest exit! Find somebody that has your interests at heart and get help you to meet your goals, not try to be everything at the lowest price. You can afford the cost.

• some support companies tell you they do everything.

Too much specialization, can't do anything well.

Justifying IT projects

In many cases, IT projects get initiated with a wish list. There is a legitimate business need behind the project. The business defines that business need, but can't necessarily articulate it to the technical staff and/or suppliers. The business generally know what they are trying to achieve, but because there is no detailed definition, it is simply a wish.

These wishes need to be turned into plans. If you want to get more sales, many software suppliers will tell you to install Customer Relationship Management software (CRM). While CRM can help to improve sales, it is not a magic bullet. Just because you want it, doesn't make it happen. So far it's just a wish.

How do you change that wish into a reality? Sticking with CRM, the way it helps to increase sales, is that it helps you to improve your relationship with your customers. It provides the capability to track every interaction with your customer, no matter who talks to them, using whatever vehicle: phone, email, letter, even web. The software doesn't do it by itself, it provides the tools to do it.

Implementing CRM may totally change the roles and responsibility of your sales and support staff, as well as change the way your software works. If you justify the project based on the software aspects, you will get many of the costs, but few of the benefits.

In order to create a plan, you have to start with understanding how you will increase sales. If your intent is not to increase sales with existing customers, then CRM will be of no value.

If you do intend to increase sales to existing customers, then CRM software may be a solution. What benefits can be gained? Do you see a 10%, 20% gain? What else will have to change in terms of roles and responsibilities, other software, etc., for you to make that gain.

Most technology staff and suppliers will help you to install the software, but few will address the issues of how the business will have to change and what you will have to do to measure whether it is working. You may also end up implementing a lot more than you have to, to achieve your goals. Most software products have far more features than most companies need.

Even if you successfully implement the software and successfully gain the benefits that you expect, you may end up installing far more than you need and paying a much higher cost.

The biggest issue is justification of the expenditure. Start with the business goal. Then lay out a plan that shows how you will achieve it. This will define the benefit you will receive AND what components or activities are necessary to achieve it and what will provide the biggest benefit Then figure out the cost, and see how the costs map to the benefits. Drop anything that doesn't have a high benefit to cost.

This will get you out of the issue of dealing with all of the extraneous technical issues, the options that provide no value.

Does Software make you feel like a victim?

When business owners look at software, they are looking for solutions to their business problems. The software supplier describes the benefits in specific detail and often will describe how others are getting great business value from the software. You're sold. You buy the software.

If the solution was as good as you were told, then why are so many people frustrated by the experience?

There are the techies of course/ They enjoy the challenge of digging into a software product and seeing how it works. The more difficult it is to find, the more they enjoy it. But the people who enjoy it are a very small part of the population. The rest of us live with the consequences.

I have a long background in software. I've done software development. I've done software support. I've managed technical staff in mainframe hardware and software, as well as PCs and servers. I've managed staff in voice and data communications.

In all of these jobs, I've often found challenges in getting the results that I was looking for. I enjoyed the challenge of developing the solution, but often been frustrated by the experience. The software is seldom written for the average person. It is written by techies for techies. That why the average person is frustrated and feels like a victim.

I've developed a solution that has worked for me, in overcoming the frustration, the technobabble and working effectively with technical staff.

The are 5 simple steps to achieving business outcomes from business software. But first, you have to make a decision. Do you want to remain a victim?

Small Business Dreams for Information Technology

I speak to many business people who are frustrated with technology. They see what others are getting, and would like to get it for themselves, but they don't like technology or are not comfortable with technology, therefore they get frustrated.

The technicians that are hired to do a job, take away the need for business owners to become technical, but they also take away the focus from the business.

What's the business owner to do? He/she is not comfortable with technology. The technicians speak a different language and always talk about how complex it is, and how the business person doesn't understand.

All of that is BULL! The reason that the business owner doesn't understand is that the technician is not knowledgeable enough to explain it. I have worked with technology for many years, and there is one thing that I have learned. When somebody is not very skilled, they cannot explain what they are doing. The really experienced people, understand how to explain things in meaningful terms.

As a non-technical business owner, what do you need to do?

Let's start with a dream. If you had the perfect world (for the non-technical business owner), what would you have? You would ask a business question and get an answer that you would understand. There would be no complex jargon, no "you don't understand", just simple answers to simple questions. If there was a need for learning, your supplier (internal or external), would help you learn what you need to know so that you could make the necessary decisions.

So, as a business owner, why don't you assume that this is the world that you live in? If you can't get an answer that you understand, is the technician willing to provide you with the learning, on your terms, so that you can make the proper decisions? If not, find another one. I don't mean that you have to become technical. If you have no interest in that, you shouldn't have to. The technician should be able to provide you with what you need without being a techie.

The key to all of this is focus and determination. Determination to not let technicians befuddle you with technical mumbo-jumbo.

Thry it! You might like! It works. I know it..
what would they like to see? How do they get it?

Future state with a software project

When a business owner decides to take on a software project, they want to create an improvement in their business. With a owner managed business, this is more important that with a public business, because the money is coming out of the owner's pocket.

If this is so important, then why do many business owners get frustrated with the results achieved.

Many projects taken on to improve a business start off with a dream of improved results, but they are often just a dream. You look at what others have achieved, and HOPE to do the same. You don't know how they did it, but they used this software and got results.

The reasons are very simple, but not necessary very easy. As Albert Einstein said: "Life is simple, but not easy". The same is true of software projects. In order to get the results that you need, you need to understand HOW you will get those results. Your business is working a certain way today. How will the software change the way you get results? How will that benefit yoyr business? How will you know that you are succeeding?

If you can't answer these questions, you will be disappointed.

You understand your business. You don't need to understand the software. But you do need to understand how the software will help you. And you do have to play a major role in the decisions that are made during implementation of the software, because these can be critical.

Dream about what you want the future to be like. That's great. Then take a detailed look at what you have to do to make it that way.



http://www.valuedeliverymanagement.com/blog/index.php/2009/01/20/critical-insights-1/

Is your IT service delivering what the business needs?

A CIO Magazine article "What it takes to succeedNow as a CIO" described the difference between results described by the CIO (Chief Information Officer) and the CEO of organizations. Much of this relates to the definition of expectations. Many CIOs are still buried in managing Information Technology and still not focused enough on business outcomes.

Some statistics in this study:

• 70% of 506 CIOs rated IT as "considered an integral business partner by the rest of the company", while 46% of the business respondents rated IT as fair or poor.
• When asked about the impact of IT, "only 15 percent of you chose managing customer relationships and 11 percent said acquiring and retaining customers", yet these were critical to the business.

The real story is in this quote "There's an outcome that we need. How do we get it? Not, 'We need a new system. Please put it in." If your business discussion is not being held this way, then your business will lose. Whether you have a CIO or an IT Manager, or no IT department at all, this is the type of discussion that needs to take place.

You can see the full article here.