Producing a sufficient contract from the start of any endeavor is
the key to all-round satisfaction and success.
This principal applies not only to the agreements signed with
clients but it is equally if not more important for the people you hope to
employ to perform a job for your company. A business hires a person or accepts
a new client as part of a strategy to grow their business. In this letter
building maintenance is used as an example to illustrate strategic business
development. Specifically the letter utilizes cleaning and cleaners to
illustrate the strategic development progression of great businesses.
Cleaning
businesses are almost exclusively and proudly reliant on customer loyalty and
being able to hold onto customers by providing consistently great service. A cycle for a cleaning company is one where the business
growth reaches a point at which owners have as many contracts as they can
comfortably oversee themselves. Owners would otherwise be required to employ
cleaning or management staff. The ‘Do it yourself’ mentality has capacity
challenges – growth eventually means employing people. The owner operators begin
or continue to replace themselves with employees - cleaners.
The typical case starts with a 'husband and wife' team,
partnerships or sole traders and there is a common reluctance to employ or manage
others initially. When the owner does all the work they can only take on additional
clients when other clients leave – taking on increasing employment helps to
alleviate one challenge by replacing it with another. Consultants, accountants,
lawyers, etc… are constantly faced with this constraint…
Managers document the possible ways to manage cleaners, and
cleaners maintain a quality level of work for the client on behalf of the
shareholders.
Hiring like mergers and acquisitions are different types of growth
strategies. Nearly all small owner operator businesses start by hiring people
to grow their business and forgo any consideration of common alternatives.
Since hiring represents the common local behavior, there should be
clear documentation that details the cost of service delivery and growth by
this method in order to facilitate fair market growth option comparisons.
Business growth occurs by first overcoming the reluctance to
employ staff but then the typical business becomes limited by a failure to plan
and implement great contract writing practices, or culture building practices.
When the owner operator cleaner replaces themselves with an
employee there is essentially a trade of a front end owner operator cleaning
job for an employment management and HR career.
Businesses are comprised of people who 'do it themselves' and they
too often believe that they could not find someone else to do what they do, as
well as they do it themselves. There is a certain truth behind this, and of
course it is only natural that the business owner has more incentive to look
after a cleaning contract. A cleaner who is just working part time creates a
different result. Doing the cleaning yourself is not maintainable in the long
run for a number of reasons and it will invariably mean that the owner becomes
a self-employed cleaner rather than the manager of an expanding cleaning
business – but then if successful at employing cleaners they become self-employed
managers. Trading one title for another is often not the growth outcome owners
were looking for when they started hiring cleaners as a growth strategy.
There are two main dangers when starting a contract by doing the
cleaning yourself and then hiring a cleaner to take over the work and ‘replace
you’. The first one is that the owner is used to getting a full income from the
contract clean, rather than a smaller percentage once the cleaners wage and
management portion has come out of it.
The second; when a client experiences ownership intervention in the work, the
intervention tends to create unrealistic expectations in the eyes of the
client. The danger of direct service from ownership is that the customer
becomes far too used to the owner coming in and ‘saving the day’. Perhaps over
the years, the owner has carried out ‘little extras’ that the client requested,
whether it be unblocking a toilet, cleaning the shop front windows for absent window
cleaners, shoveling snow from a walkway...
When the
newly employed cleaner shows up to replace the owner, they work only to the
schedule and training provided and they never work beyond the allotted hours.
It is no real wonder why a client will become annoyed and disgruntled by this
change. It is at this point in the business that it shows that the ‘little
extras’ were just ‘unpaid extras’. These never bothered the owner operator when
ownership did the work, as it didn't cost the owner anything extra but a little
time and energy. The client eventually is billed for this extra effort. The
owner after all is now out of pocket for the extra staff wages. This can cause
owners to raise prices. This will cause clients to start looking at their
monthly bills which may all of a sudden change.
The ‘Do
it yourself’ mentality has intellectual constraints, there is truth to the
proverb ‘the more you learn the less you know’. Unleashing knowledge within
your extended social network not only solidifies your dominance in an area of
specialization but it can create opportunities to profit from numerous other
areas that would have been previously been unimaginable for the small business
owner who is trapped working in the business rather than on the business.
The transition to employing management carries forward additional
expenses that need to be generated by the contract cleaners. The trade-off is a
larger business that can generate far more revenues and requires the ownership
to do far less work, in addition, the larger the business, the greater its capacity
to handle unexpected challenges and failures.
The transition from owner operator to mature enterprise requires
shareholders to develop trust in the management to deliver hours of labour that
satisfies the client and shareholder objectives.
A business can naturally lose clients by changing the service the
client receives. These changes require strategic consideration but are often
unavoidable if the owner wants to extricate themselves from doing all the work
themselves.
Business growth beyond owner operator is determined by the ability
of ownership to communicate and match expectations to the realistic outcomes
that can be consistently provided by trained and trusted staff. A business can
be equally constrained from growth by a failure to access specialized skills.
Ownership in the role of management is now responsible for providing
the tools for employee success. Employee failure, retention, satisfaction,
selection are all new risks that the owner assumes. Do owners fully understand
the full spectrum of new specialized skills that they are expected to deliver
for employee success? Specialized managers in sales might go out and look for
additional cleaning contracts and direct cleaners to help expand the
shareholders client base, while specialized purchasing or manufacturing
expertise may reduce your cleaning supply costs and provide the owners business
with new revenue streams. The evolution of the business takes the owner out of the
cleaning realm of operations and into a senior business management role.
The next step for a great business owner is to swap out the senior
management job and retire from day to day operations. Enabling a scenario where
participation in day to day operations is a luxury of ownership choice and not
a critical requirement of the enterprise. This is why owners engage in the management
development discussion.
After you develop the management systems, the business success no
longer depends on the active involvement of ownership. It is at this stage that
the business begins to resemble a company that can effectively be sold on the
open market as a valuable going concern. Otherwise, if you decide to sell an owner
operator business, you are selling a job to someone and common sense will tell
anyone that a job has less value than a business. Valuations are improved when
it can be clearly demonstrated to potential buyers, or financial institutions
that the business can operate and grow without ownership intervention. This
achievement greatly expands the number of potential buyers and greatly
increases the likelihood of maximizing any audited valuation.
This letter described a common general issue with the development
of small and medium sized businesses. Intellectual
constraints prevent small businesses from accessing greater degrees of human
specialization which is a key factor in deciding which business succeeds in
capturing market share in the long term. Commercial cleaning is an example of an
owner operator business evolution cycle that represents common growth challenges.
Similar growth challenges are experienced by all small business owners.
The goal of strategic planning is to negotiate and plan your way
to a specific growth outcome. This outcomes best serves the client,
shareholders and employee interests.
As a Growth Negotiator the strategy builds upon the working
document known as the ‘to do list’. Good documents serve to help the
development of clear plans, clear communication that can move a business towards
an ever increasing population of employees. Plan to enhance employee
specialization as tools for driving corporate growth and profitability. The
process that produces the ‘to do list’ and fits the strategy requires ownership
feedback and access to specialized skills, your core team. It is critical to
have a solid financial commitment from ownership to tackle the development of an
optimum long term working relationship with partners, senior employees and
clients. Ownership engages in this strategy to ensure long term success and
security for all the human beings that have chosen to shelter under your
corporate wing because you have vision, remuneration and a philosophy that aims
to create new opportunities for others in the future. You want to help build the
next generation.
