Tag: Business Plans

The ASP-LA Strategy Session #3:The Invisible Box

Rick_E_Norris_An_Accountancy_Corporation_The_ASP-LA_Strategy_Session_#3_The_Invisible_BoxIt wasn’t until we were swimming in our strategy session’s second hour that the picture materialized in my mind.  Professor Daniel Degravel, our French strategist from Cal State Northridge had become the Marcel Marseu of Strategic Planning.

Yes, in our first strategy session (July) we were able to to identify: Our clients, four key clients’ needs, our current activities, similiar organizations, stakeholders, and future products to deliver.  This session laid the ground work for the next level for which we determined our vision, mission, and goals in the September retreat.

But in this last session, Daniel helped us to pull these pieces together.  Just like Marcel Marseu, who had drew  boxes in the air with his fingers and descended down imaginary staircases, Daniel opened our minds to see the vision and mission that we had created and to build the relationships to our goals, products, and clients.

We ultimately created a matrix of the four key client needs of the organization:

  1. Education about strategy:The ASP-LA, like our national organization thrives to deliver knowledge to an assortment of “clients” like consultants, students, small and large businesses, etc.
  2. Implementation of strategy: It is said that 80 percent of strategic plans fail due to implementation.  This need therefore is paramount to those who are in the discipline.
  3. Legitimization: The ASP strategic planning certificates should bring a level of validation to those  who hold them.
  4. Hub-nexion: This is a word that Daniel created meaning the need to network, or look at the ASP as a hub for strategy among the different clients.

In addition to these needs were the external goals that ASP seeks to achieve:

  1. Increased awareness to organizations of the nature and benefits of strategic management
  2. Strengthening ASP brand
  3. Growth and retention of membership

Likewise, ASP must address its internal goals in its strategy:

  1. Financial sustainability
  2. Alignment of local ASP goals to the national organization
  3. Improved access to resources

The matrix and tactics will be far more complex than this in ASP’s strategy.  The main point is to implement our strategic plan in light of the ASP-LA mission which is “to serve as a resource to southern California organizations in order to foster their success in strategic management.”

Stay tuned to our next session as Daniel applies the white makeup to his face.

Just Like Poor Singing, Failed Strategy May Be in the Execution

Rick_E_Norris_An_Accountancy_Corporation_Just_Like_Poor_Singing_Failed_Strategy_May_Be_In_The_ExecutionMy family have enjoyed making music for a few generations:  My dad (Bobby Norris) sang under the Capitol Records label in the 1950s, I’ve been playing and writing music a little most of my life (not professionally, though I’ve written and produced an EP on Itunes), my middle son is a jazz pianist, two other sons are vocalists, and my youngest (daughter) is a clarinet player.

All of us (like many of you) can instantly  determine if a person is singing sharp or flat.  Though many would say that this person is “tone deaf,” the real culprit is execution.  More and more studies are saying that tested “tone deaf” people really have good tone recognition.  The problem is their muscle control to reproduce it. An APA article states, ” The pattern of results across experiments demonstrates multiple possible causes of poor singing, and attributes most of the problem to poor motor control and timbral-translation errors, rather than a purely perceptual deficit…”

This sounds a lot like strategy.  Failure of strategic plans usually are not the result of the plan, but the execution.  If you are considering executing a strategic plan, here are some tips:

  1. Put the Right People on the Bus: Jim Collins (Good to Great) professes “You can’t start off by asking which direction you’re headed in … First you figure out if you’ve got all the right people on the bus, then you figure out where to drive.”   This is really essential.  Small and large companies have “culture” problems.  In other words, companies have people within them that do not want to change what the company is doing, and how it is doing it.  Those people are the biggest threat to the strategy  implementation before it gets off the ground.  You must really take a look at your team and make the hard decisions.
  2. Develope an operating plan: Develop a plan that is consistent with both long-term and short-term goals.  In other words, you should look at your vision, your 20 year horizon and work backwards using milestones to gauge your progress.
  3. Cascade your operating plan: Make sure you design your plan to be implemented on different levels: organizational, department, region, division, unit, and employee levels.
  4. Communicate your plan to all levels: This is self explanatory.
  5. Assign the right people to the right roles: Don’t force someone to perform in an area that they are not gifted in.
  6. Measure your results: As many have said, if you can’t measure it, you can’t manage it.
  7. Evaluate and adjust: Your tactics and operational plan should always be flexible and adjustable.

This list is not meant to be complete, but a sketch of stages that you should consider before you implement ( or maybe even design) your strategic plan.  Upfront planning may save your plan if done prudently, and keep your company humming a tune of prosperity.

Bad Strategies are Like Undercooked Pasta…Nothing Sticks

I worked in my family’s Italian restaurant as a pizza cook during my teen years and even today I still have to taste  pasta to know for sure that it is done.  Another way is to throw it against the wall and see if it sticks.  That’s too messy.

So it is with a bad strategy.  No matter how hard you try in implementing it, it will remain a bad strategy.  Charles Roxburgh tackled this problem in his article, Hidden Flaws in Strategy, and why executives back them.  His article addresses the problem from the point of veiw of the  human brain function.  I refer to that article from time to time, but will point out other practical aspects:

  1. Overconfidence:  Roxburgh’s article discusses the overconfidence of companies like start-ups.  In other words, “rose-colored glasses.”  We prepare business plans in addition to strategic plans.  I always try to interject a business strategy for those companies that hire us to prepare business plans.  I have found that entrepenuers that are trying to impress their investors usually fall into this category.  So, as a CPA, I have to gently bring them down to earth.  One of my approaches is to lay out all assumptions so potential investors in order to inform potential investors.  Another approach is to have the client embrace their weaknesses.  Most clients ignore that, but want to dwell on their strengths.  In several instances we were able to turn their weaknesses into strenghts.  In any event, as CPA’s we have a special point a view because we see both the big picture and the minutia.
  2. The Sunk-cost effect: I like this concept from Roxburgh because I have seen so many small companies continue on a bad strategy until they implode.  I have found it very hard to change the course of an executive whose company is plummeting downward.  The gambling instinct comes out and they refuse to address the problem.  I refer to it as the “ostrich stage,” because they will stick their heads in the sand and not make the hard decisions that usually require a different strategy.  I have found the solution to this is to closely monitor your startegy with metrics, and if the metric(s) start pointing south, do not hesitate to explain it.  This is why it is imperitive to have a current set of accurate accounting records, a condition we don’t find very often with new clients.
  3. The herding instinct: Roxburgh cautions about following the herd off a cliff. The situation that comes to my mind are bankers in the United Kingdom who backed the Southern Confederacy’s “Cotton Bonds” in 1863.  Due to the taking of New Oleans and the Union’s victory of Vicksburg, the price of cotton skyrocketed because of the Union blockade.  Some UK investors of that time herded together to buy the Confederate Bonds presumably backed by cotton) which supported the war.  Unfortunately, they usualy couldn’t get their hands on the cotton collateral, the South lost, and so did the investors. This is a simplistic view of the events, but Illustrates how the herd can lead others into financial ruin.

Another example of the “herd” factor was when my brother-in-law tried to get my wife and I to buy into a ponzie scheme where people were doubling their money in a week.  We laughed, but didn’t like hearing of family and friends who “bought” into the hype and lost their $1,500 investment within thirty days.

The main takeaway from this article is to measure.  Like many say, “If you can’t measure it, you can’t manage it.”  These points can help you to measure your strategy and to make the necessary adjustments.

CPA Advice on How to Grow a Business of Any Kind

Rick_E_Norris_An_Accountancy_Corporation_CPA_Advice_on_How_to_Grow_A_Business_of_Any_kindI grew up in a family of entrepreneurs.  Most of my uncles were some form of contractor: General, electrical, and plumbing.  Prior to becoming a CPA, I learned a little about these trades from them which helped me when I built my own house.  They were (and are) masters at their trades and deserve the greatest of respect.

Yet, as a CPA, I have learned that a great tradesman does not necessarily translate into a successful entrepreneur.  In fact, they can be completely opposite.  A tradesman may focus on detail and create a great product, where an entrepreneur would focus on the vision and produce products to fulfill it.  I always joke that a small business person usually wants to know two things: 1) What are my sales? and 2) Do I have enough cash to make payroll?

CPAs run into this issue, too.  Many of us tend to focus on the minutia of getting a job done and not on the big picture of running the business towards its long-term vision.

If this sounds familiar to you, here are some pointers and sources:

  1. Be a hedgehog. The hedgehog is not as cunning as the fox, but does something that makes it the world’s best defender against the fox.  It rolls up into a little ball and sticks out its spikes.  According to Jim Collins in Good to Great, you can be a hedgehog if you do three things: 1) Be deeply passionate about what you are doing, 2) Do something that makes money, and 3) Be the world’s best at what you do.  The intersection of these three requirements will brand you into a specialized business in which others will struggle to compete.
  2. Focus on your customer needs, not the industry.   The Blue Ocean Strategy by Kim and Maugorgne shows you how to extrapolate unnecessary services that the industry provides, but the customer doesn’t need. The strategy book also describes companies that have transformed their businesses to a level to make competition irrelevant.
  3. Manage the business, don’t let the business manage you.  Michael Gerber’s E Myth describes entrepreneurs that let their businesses run them into the ground, and destroy their quality of life.  This is the most common problem with trades people.
  4. Know where in the cycle your business is at all times.Les McKeown’s Predictable Success discusses the cycles as: Early struggle, fun, whitewater, predictable success(balance), treadmill, the big rut, and death rattle.  Predictable success stage has the right amount of systems and processes to tame a company.

Though we are CPAs, we look at out client’s businesses through the lenses of strategy and planning.  Small business entrepreneurs must be measuring their businesses in light of their visions and short-term objectives in order to accomplish their goals and desires.

The First Two Strategy Sessions of the Association for Strategic Planning (Los Angeles Chapter)

Rick_E_Norris_An_Accountancy_Corporation_The First_Two_Strategy_Sessions_Of_the_Association_for_Strategic_Planning_Los_Angeles_ChapterI was adrift in a sea of strategists.  Recently I conducted two strategy morning  sessions for the Association for Strategic Planning, Los Angeles Chapter.  Of the fourteen strategists in the room, we  produced fifteen opinions.  What a blast to be in a room with so many bright and creative people.  We were able to hammer out a vision and mission with components of who were the customers (members) and what benefits we could offer them.

It wasn’t until tonight that I realized that we operated our session EXACTLY the way Barry MacKechnie suggested in Achieving Strategic Alignment. Barry wrote that there were six critical elements of a successful strategic planning session:

  1. Define your expected outcome: Our academic compass Daniel Degravel from Cal State Northridge specialized in strategy and established a map that we were to follow.
  2. Pre-planning session meeting with your executive team:  There was a four person executive team: Daniel, Erik Bleitz, Rodney Stone, and myself that discussed the course we were to take during the broader strategy session.  The phone calls were a logical step to the map laid out by Daniel.
  3. Create an agenda: The agenda was created, but the timetable was left open.  As the facilitator, I had to keep the process going or risk it running aground.  The attendees made this easy for me since so many were focused.  We knew we could not get this done in one three hour session.  It looks like it may last three-three hour sessions.
  4. Mandate participation:This step was also easy for me because nobody was required to attend.  The attendees were both members and non-members who wanted to be a part of the Los Angeles Chapter’s future.  As Barry stated in his book, “A great strategy planning session requires an atmosphere of open dialogue with a free exchange of ideas within an environment of creativity and common goal setting.”
  5. Set expectations for clearly defined results: As stated, we knew where we were going but were not unrealistic on how long it will take us to get there.  I estimate two more sessions should result not only in the plan, but the goals, assignments, and desired outcome.  Barry set the timeline in his book at two full days.  We may beat that estimate a little, but aim to implement the strategy with confidence.

The Strategy of Living a Balanced (Business) Life

Rick_E_Norris_An_Accountancy_Corporation_The_Strategy_of_Living_a_balanced_Business_LifeOne of my kids, (honorable number one son), is a poet; a comedic poet. He is in graduate school at UC Davis in the creative writing department. He is the first to say that he is disorganized.

Even though he is an artist, that skill does not give him a license to be disorganized.  As an entertainment CPA business manager, I have heard that excuse many times from  clients.  Sadly, what I have found are those who are disorganized in business tend to live an unbalanced life full of stress and “emergencies.”

Whether it is your business life or your personal life, in order to fulfill your potential, you need an organization strategy.  May I suggest the following:

  1. Vision: If you have read my previous articles , you will find that I always ask persons to start with a “vision.”  This is as true in your business life as it is in your personal life.  A vision goes out ten to twenty years.   A good start may be Jim Collin’s hedgehog concept in his book Good to Great.  Read up on his three concentric circles on how a business (and arguably an individual) can become great.
  2. S.W.O.T: Understand your Strengths, Weaknesses, Opportunities, and Threats are to accomplishing your business or personal vision.  Make the difficult decisions to eliminate the weaknesses and threats.
  3. Craft a Strategy to your Vison: This strategy should be a result of working backwards to long-term objectives, or milestones.
  4. Create a System: Every  business and life needs to be organized if they are to accomplish its vision.  In other words, a system.  It may be as simple as doing specific tasks each day or a task on the same day of the week.
  5. Evaluate with metrics: You must know where you are in relation to your vision with some type of measures.  Businesses can have a whole host of measures.  A personal life have on like spending time with your kids all day Saturday or Sunday.  Or maybe, coach a Little League team.

As far as business, there are a couple of books that can help, The E-Myth by Michael Gerber and Predictable Success by Les McKeown.  You may find in going through these steps that you need to adjust your business or personal vision.  That’s OK.  The sooner the better.  If you let your business or your life “run itself,” you are setting yourself up for a disappointment(or maybe midlife crises).

If you visions are limited, e.g., spending a lot of time playing fantasy football, then you don’t have a vision; you have a pass-time.  It “passes time.”  Time is your biggest enemy and ally in a strategy depending how the strategy is implemented.  A balanced business leads to a balanced life.  A balanced life leads to a quality life.

Rock Band Business Mentality: Band Together, or Risk Rocking the Boat

Rick_E_Norris_An_Accountancy_Corporation_Rock_Band_Business_Mentality_Band_Together_or_risk_Rocking_the_BoatJame’s Obrien’s article, What your small business can learn from a rock bank caught my attention for a short while.  I thought he would report more then some basic business legal advice.  So, playing in rock bands my whole life, and practicing as a CPA business consultant, I will take a shot at it.

  1. Your business partnership and rock bands are marriages: Like in any marriage, don’t focus on what the other person can’t (or won’t) do for you.  Instead, focus on the things that compliment you.  It is not important that one person is successful, only the sum of the parties.
  2. Don’t be afraid to use the standard SWOT analysis for each partner: Strengths, Weaknesses, Opportunities, and Threats of each partner can bolster a strategy when confronted up front.  Each person realizing their limitations will help other partners to fill in the gaps.
  3. Find the business ‘s rhythm: My jazz piano son and I agree, people who clap their hands on the 1st and 3rd beats of a song are annoying.  Clapping on the 2nd and 4th count drives the song.  Likewise, every business has its rhythm, and every partner has to stay in sync.
  4. Everyone should agree when the song will end: I remember watching an opening act for Boston in the 1980s.  It took me two songs to figure out that the musicians did not know when the song was end until the lead singer-guitarist jumped up in the air coming down on the last beat of the song.  In partnerships, there should always be a documented plan of what will happen to the business if certain events happen–like a partner dying.
  5. A new instrument will not necessarily make you play better, if you haven’t mastered the old one: Too many businesses capitalize with unnecessary assets.  Look critically at everything from office space to equipment, to insurance.

As as CPA business consultant, I have seen many partnerships fail in theory before they get started.  Like  a marriage or rock band, some of the best music is made years after the beginning.

Strategic Leading, A Task Not for the Timid

Rick_E_Norris_An_Accountancy_Corporation_Strategic_leading_A_Task_Not_for_the_timidRecently I led a strategy meeting for the Association for Strategic Planning, Los Angeles Chapter (ASP).  What made this exercise unusual is that even though was the Chapter President, I was not the only strategist in the room.  In fact, there were several proven strategists who had more experience in me in the area of strategic planning.  Moreover, I am a CPA, a profession that usually doesn’t embrace strategy and deals in the past of historical financial statements.  So, what is a Strategic Leader?

Cynthia Montgomery’s article How Strategists Lead in the McKinsey Quarterly addresses this question. She offers a few points on what makes a strategic leader:

  1. Meaning Maker: “It is the leader–the strategists as meaning maker–who must make the vital choices that determine a company’s very identity…” There is more to this than strategy charts.  The leader has to tap on the personal gifts of key people to implement the vision.
  2. Voice of Reason: “A leader must serve as a voice of reason when a bold strategy to reshape an industry’s forces reflects indifference to them.”  At the ASP meeting, we chose not to “check the box” strategy style.  We asked the hard questions to arrive at our vision.
  3. An Operator: “A great strategy, in short, is not a dream or a lofty idea, but rather the bridge between the economics of a market, the ideas at the core of a business, and action.” Inadequate implementation is the single biggest failure of strategic plans.  The blame would seem to fall on the leader, but leaders, too, sometimes have limited power in corporate culture.
  4. Consistency and Follow-thru: “…facing an overhaul can be wrenching, particularly if a company has a set of complex businesses that need to be taken apart or a purpose that has run its course.”  I recall so many “systems” of implementation that are just a regurgitation of the same cyclical analysis.  You think, plan, act, re-assess, think, plan, act, reassess, etc.

All of this is fine, but what really makes an effective leader?  Jim Collin’s book, Built to Last answers that in five steps:

  1. Level 1: Highly capable individual
  2. Level 2: Contributing team manager
  3. Level 3: Competent manager
  4. Level 4: Effective leader
  5. Level 5: Executive

It seems Ms. Montgomery’s article stops at Level 4 which Mr. Collins defines as a person who “catalyzes commitment to and vigorous pursuit of a clear and compelling vision, stimulating higher performance standards.”  Mr Collins goes a level higher which defines Executive as a person “who builds enduring greatness through a paradoxical blend of personal humility and professional will.”

Mr Collins seems to go beyond the function of an individual and focuses on his or her attitude.  A lot of his book dealt with those leaders who humbled themselves to lead by serving.  Any small business leader should keep this in mind.  As Mr. Collins puts it, ” Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company.”  In other words, their ambition is for the company, not for themselves.

 

Business and Rock and Roll History Repeats itself

Rick_E_Norris_An_Accountancy_Corporation_Business_and_Rock_and_Roll_History_Repeats_itselfWatch this great performance of Alex Chadwick play 100 Riffs (A Brief History of Rock N’ Roll).  Within about 12 minutes he peels through some of the greatest guitar riffs from the  1950s to the present.  I’ll have to watch it again and learn several of them.

As I watched Alex play these, I was thinking of how much the great guitarists of the last 50 years  evolved using variations of the blues scale.  They mastered the basics and improvised creating sounds that were original and innovative.

As a CPA consultant, I can see that the same type of innovation can be applied to small business while adhering to the basics. It doesn’t matter if you publish music or manufacture tile, the basic business concepts are the same:

  1. What is your small business mission and vision? We are not speaking of the next 5-10 years, but the next 20 years.
  2. Who are your customers? Have you focused on who they are and what are their needs, or are you just throwing out the same product/service as your competitors?
  3. Who are the people in your company that can help you achieve your vision? Are you restricted by family politics? Are you looking at each individual and developing their personal abilities, or are you trying to force a person into a position that they are not qualified to function efficiently?
  4. Do you have the resources to get off the ground and ultimately fulfill your vision? Small businesses fall short when they only focus on the vision and not the resources to creatively navigate there.
  5. Have you identified all of your stakeholders? A stakeholder can be anyone who has a stake in your business: You, your employees, your bank, your suppliers, and customers.
  6. Do you have meaningful metrics to manage your business? How will you know if you are moving in the right direction?  Do you look at the business metrics daily? weekly?  monthly?
  7. Do you have a plan to grow? Many companies get growing pain.  There is a balance to growth.
  8. How do you manage your cash? Have you prepare a budget?  Do you compare you budget to your actual performance?
  9. Are you making alliances? You should not exist as an island but be connected to a network of individuals and companies that enhance your vision.
  10. Do you have the right professional assistance? Small business has gotten more and more complex in the last 50 years.  Leverage those with certain expertise to keep up with the pace.

We see many businesses ignore these points because we sometimes operate as an outside accounting department for companies.  As a CPA firm, we try to help clients not lose focus on what is important to their small businesses.  Even the entertainment clients lose sight of their vision.  All to often they ignore our advice until they fall into a crises.  A crises usually stifles creativity due to the stress.

As a small business, you should constantly reinforce the basic principles.  If you don’t, you might find yourself playing the same three chords while your competitors are composing symphonies.

Surviving an Economic Downturn, or Sticking to an Idea from God

Rick_E_Norris_An_Accountancy_Corporation_Surviving_An_Economic_Downturn_or_Sticking_to_an_idea_from_godI’m sure most of your heard the story of  Art Fry who invented the “Post-it Note” in 1980.  He took an unsuccessful adhesive designed by 3M’s Dr Spencer Silver in 1968 and used it to post little notes in his hymn book.  He took an arguably failed concept and turned it into a household word.  You wonder if Mr. Fry got a message from God in using this product; Definitely an epiphany.

How a U.S. Factory Survived the Recession by Susan Kuchinshas report interviewed Essential Sealing Products.  Essential survived the great recession and foreign competition by innovating.  There are some points to consider when innovating:

  1. Focus on your customer’s needs: As a CPA, my industry must continue to evolve.  Long-gone are the days when tax and monthly financial statements absorbed most of our time.  Clients need more in running their businesses.
  2. Look at your own supply chain, not just the customer relationship: In the article, Essential eliminated vendors that could not keep up with their schedule or quality.  The customer demanded more, and so did Essential.  As in a CPA case, we push any professional alliances we have to provide quality service as we do.  If they can’t, our clients are not happy, and we can’t use them.
  3. Thin out your Customers:  I remember working for an entertainment business management firm in 1988.  They retained a client that required a lot of work but was past his prime earning capacity.  He could not pay for the level of service that he demanded from the firm.  The owner of the firm felt obligated to this client because he had referred other clients over 10 years prior.  I truly believe in loyalty, but even that has a limit in any company, especially a labor intensive CPA firm.
  4. Apply Strategic Planning Concepts to Your Company: There are many, many books that can help you design a strategic plan: Blue Ocean Strategy, Good to Great, Built to Last, The Innovator’s Dilemma, just to name a few.   Read and implement their concepts, or find someone who could.

As a CPA firm, we see many new start-ups.  When they present a concept to me asking for a business plan or strategic plan, I usually as  one question about their venture.  “So what?”  I ask them what makes them different from anyone else.  If all they can say is the price or service, I tell them to innovate more.  CPAs see lots of these vanilla types of companies but have a unique viewpoint as to how they work.  At, least CPAs who know strategic planning.

Don’t ask your CPA to compute an ROI or an IRR without knowing where you are going.  It is a waste of your money and time.  Maybe God will speak to you from a hymn book about not permanently sticking to the pages.