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The Flywheel Effect – Good to Great: A DLB Consulting Book Study

Great companies realize that there is no one single event that catapults the company into greatness. Rather, it’s a series of cumulative actions that add up to sustained and amazing results. In Good to Great, Jim Collins refers to this as the flywheel.Flywheel Effect

The flywheel is huge, heavy and creaky. It takes a lot of effort to move it an inch, but you keep pushing. Eventually, the flywheel begins to move until you get the first revolution. After continuous effort, the flywheel begins to pick up speed making rotation after rotation until at some point it’s using it’s own weight to continue the progress. That’s the break through.

The Flywheel Effect

Getting the flywheel to move in the right direction takes more than just an initial company meeting and a party to announce your plans. Arguably, hoopla and motivation are less likely to get the wheel turning. Instead consider using your vision and hedgehog concept to get started. Here are a few steps to implement as you build the flywheel effect:

  1. Take steps forward that are consistent with your vision and hedgehog
  2. Accumulate visible results
  3. Make sure there are roles to be filled because employees will want to be involved
  4. Encourage participation as the flywheel builds momentum

Everything that we’ve talked about so far in our book study on Good to Great is a piece of the buildup-to-breakthrough flywheel effect. The key is to be consistent and continue to build upon the stuff that works so that the positive effects are magnified.

Building a great company takes a long time. According to the study, the average time for a Good to Great Company to achieve greatness was seven years. There are no overnight success stories. Most overnight success stories are about twenty years in the making. Are you willing to take the next step to become great? I’d love to help you get started.

The Hedgehog Concept: Good to Great: A DLB Consulting Book Study

The Hedgehog Concept is the understanding that your company can’t be the best at everything. Rather, it’s knowing what you can be the best at, gaining clarity, and devising a focused strategy that ultimately leads to business success.Hedgehog Concept

The Hedgehog Concept

The Hedgehog Concept is drawn from the essay written by Isaiah Berlin, titled “The Hedgehog and the Fox” in which a cunning fox tries and continually fails to capture the hedgehog. The Fox waits for the perfect time to pounce on the Hedgehog, but is outwitted by the prickly creature when he rolls into a ball at just the right moment.

Jim Collins explains that companies who are more like the hedgehog — that is, focusing on one thing and doing it well — need not be concerned with cunning competitors because they would not be a threat to success. The three circles that make up the Hedgehog Concept are passion, economic engine, and understanding what you can be the best at.

What You Are Deeply Passionate About

The good-to-great companies focused on those activities that ignited their passion. The idea here is not to stimulate passion but to discover what makes you passionate. You can’t manufacture passion or motivate people to be passionate about a product or service. You can only discover what ignites your fire.

What Drives Your Economic Engine

If you could pick one and only one ratio – profit per x, to systematically increase over time, what x would have the greatest and most sustainable impact on your economic engine? For example if you’re focused on profit per store, you might consider changing your ratio to profit per customer visit, profit per employee, or profit per local population.
Your economic engine is not driven by a complicated macroeconomic equation. Instead, this simple single denominator helps force a deeper understanding and focus on the key drivers of your business.

What You Can Be the Best At

In order to truly know what you can be the best at you have to look beyond what you’re good at. It’s not a goal, strategy, intention, or plan to be the best. It’s an understanding of what you can be the best at.
What you can be the best at might even be something that you’re not currently engaged in. Just because you can make money and generate growth, doesn’t mean you can become the best at it. You must focus on what you can do better than any other company. Then gather the competencies and capacity to do so.

An Iterative Process

Developing your Hedgehog Concept is an iterative process. Each of the three circles can take some time to complete. In fact, it took four years on average for the good-to-great companies to get a Hedgehog Concept. It may take you less time, but the effort will be worth it.
What is your Hedgehog Concept?

Confront the Brutal Facts: Good to Great: A DLB Consulting Book Study

In our last post we emphasized the importance of getting the right people on the bus. The right people are internally motivated and your job is to make sure they don’t get de-motivated. In this post we’ll discuss the importance of building a culture that confronts the brutal facts and where open and real communication exist. Confront the Brutal Facts

There’s a difference between having the opportunity to be heard and having your say. Great companies know the difference. To create a culture where truth is heard and problems are solved, consider the four basic practices that good-to-great companies employ.

Lead with Questions

As a leader you must be humble enough to admit that you don’t have all the answers. You weren’t anointed with a crystal ball the moment you got promoted or started your own business. You should ask questions and actively listen to responses. This will help you gain a better understanding of the message and lead to better insight.

Engage in Dialogue and Debate

Become a great moderator. Create an atmosphere where issues can be debated with facts and point-of-views based on information that’s presented. Ensure that all sides engage in the debate and do so respectfully. Then, make a decision and implement the solution.

 Conduct Autopsies

John Maxwell, author of Sometimes You Win—Sometimes You Learn, points out that experience isn’t the best teacher. Instead evaluated experience is. Leaders learn from past mistakes. They take responsibility for the mistake and take the time to truly understand the root cause. In other words, they learn.

 Build Red Flag Mechanisms

The information age brought with it the ability to share and receive data. You have access to this data just like your competitors. However, having data doesn’t do you any good unless you recognize it and then take action. Create a mechanism that allows your employees to raise a red flag when they discover a risk area to evaluate and mitigate.  You can use a physical red flag if you want to or you can simply create a process that enables it.

Confront the Brutal Facts

Good-to-great companies that employ these techniques face adversity with strength instead of fear. They focus on confronting the brutal facts with open and real communication. In the end, they cultivate a culture that drives the success of the company and those who are in it.

Which of the four basic practices discussed today will you employ to drive the success of your company?

What is Level 5 Leader? Good to Great: A DLB Consulting Book Study

Are You a Level 5 Leader? Level 5 leaders focus on the interest of the company before themselves. They check their egos at the door. They are modest, humble and fearless. In part one of our DLB Consulting Book Study series, we’re exploring level 5 leadership. If you don’t have your book, you can order it through my affiliate link at Amazon.com. Level 5 Leader

Level 5 Hierarchy

Level 5 leadership is the first of two concepts in the Disciplined People stage of the Good to Great framework. It refers to the highest level of executive capabilities, which are:

  • Level 5: The executive who builds enduring greatness through humility and professional will.
  • Level 4: The highly committed effective leader who passionately pursues a clear vision with high performance standards.
  • Level 3: The competent manager who effectively and efficiently organizes people and resources towards the goal.
  • Level 2: The contributing team member who effectively works with others through individual contributions towards the goal.
  • Level 1: The highly capable individual who contributes talent, knowledge, and skills towards the goal.

 Level 5 Leader Attributes

Level 5 leaders exists all around us. They are the leaders who achieve greatness and never attribute the success to themselves. They are the lynchpins in the company that go above an beyond their job role, work with diligence, have intense focus, and declare others as the heroes. To identify them look for the following attributes:

  • Ambition for the Company: Level 5 leaders hire strong successors and set them up for success.
  • Compelling Modesty: Level 5 leaders produce extraordinarily results and are often described as humble, modest, reserved, shy, gracious, mild-mannered, self-effacing, understated, or simple.
  • Unwavering Resolve: Level 5 leaders have intense determination to do what must be done, often times going against the grain. They work more like a plow horse than a show horse.
  • Window and the Mirror Mentality: Level 5 leaders credit others for the success of the project, while blaming themselves for failures. They often attribute their success to outside factors, such as the industry, life events, blessings and good luck.

How to Attain to Level 5 Leadership

There are no magical steps to attain to the level 5 leader and you don’t have to go through each of the executive levels to get there. The secret to level 5 leadership is to encompass all four attributes described in this post. If you don’t currently have them, you can work to integrate them into your leadership style one trait at a time.

Do you know a level 5 leader? If you’d like to recognize them, leave a comment below. I’d love to recognize them too.

Good to Great – A DLB Consulting Book Study Series

When you envisioned your business your dreams reflected a great company, with great employees, and a great mission. Good to GreatSomehow the existence of your company would make this world a better place either through the products and services you offered or through employees you provided with a steady income. Where is your business now?  Perhaps your business is failing, mediocre, or performing well but not according to your dreams.   Are you ready to make it great?

Good to Great

If you’re ready to take steps towards greatness, then join us for our study of Jim Collins’ book Good to Great: Why Some Companies Make the Leap…And Others Don’t. This book contains in depth research performed by his team over the course of five years.  The process of taking a company from good to great relies not on executive compensation, celebrity heroes, or any one person. But rather on the ability to adopt a framework that provides the foundation for establishing a company that can rise to the top and outperform the competition year over year. This framework includes:

1) Level 5 Leadership: Leaders with a paradoxical blend of humility and professional will, like Lincoln and Socrates.

2) First Who…Then What: The principle of hiring the right people before setting the vision and strategy.

3) Confront the Brutal Facts: The belief that through the difficult times you will prevail in the end so long as you have the discipline to confront reality.

4) The Hedgehog Concept: The intersection of three circles comprising of what you can be the best in the world at, what you are deeply passionate about, and what makes enough money.

5) A Culture of Discipline: A culture that combines disciplined people, thought, and action with an ethic of entrepreneurship.

6) Technology Accelerators: The careful section and pioneering of technology to accelerate growth rather than to ignite a transformation.

7) The Flywheel and the Doom Loop: The process of pursuing success in one direction, turn upon turn, building momentum until a point of breakthrough, and beyond.

Order Your Book

If you’re ready to become a selfless leader who builds a great team and passionately pursues a simple goal, then follow along with us as we explore this timeless classic and begin to become great ourselves. We’ll discuss each of the principles in great detail over the next few months. You can order your book from your local bookstore or through my affiliate link at Amazon.com. Are you ready to become great?

Four Ways to Accumulate Cash in Your Small Business for Corporate Tax Filing

If you read my last article and prepared your financial statements it’s likely that you have a  solid picture of your 2013 taxable income.

Accumulate Cash in Your Small Business

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Hopefully, you made a profit this year and now you’re faced with making a good decision on how to invest it and grow your business. Having extra money at the end of the year could mean a new vehicle, better training for your employees, or an amped up marketing campaign. It can be very tempting to use the money that you know needs to go towards your tax liability to better your business and choose not to save for the payment due on March 15, 2014. This can be risky, but with proper planning you can invest in your business and still have the money that you need to pay the government. Here are Four Ways to Accumulate Cash in Your Small Business for Corporate Tax Filing on March 15th.

Customer Incentives

Consumers love to feel appreciated and needed by the businesses they patronize, and the holidays are the perfect time to show that appreciation. Offering a small customer incentive is a great way to increase your sales. As the busiest shopping season of the year ramps up, every person is looking for a great deal. Service industries could offer a discount with an annual renewal or new contract signed, a complementary service for a friend when another one is purchased, or a free downloadable e-book with tips and strategies relevant to the business. Consider what low cost gift could bring more clients this season and weigh the benefits of investing your capital in that gift. Alternatively, assess what products or services aren’t selling well and consider revamping them or giving them away in a contest or sweepstakes.

Marketing

Marketing is extremely important for small businesses at every time of the year, but especially as we approach tax season. Investing your income in a larger marketing campaign could not only help you earn the money to pay your taxes, but also increase your overall income. The key here is to employ relevant marketing techniques, targeting customers who are most likely to visit your store and spend their money. Consider reviewing your marketing campaigns to your Profit and Loss statement to determine which campaigns provide a solid ROI. If you’re using QuickBooks, you can use the customizable feature to track the advertising method that brought clients to your business.

Cut Expenses

Cutting unnecessary expenses is always a good thing, but if you are struggling to come up with enough money to pay your taxes, it is especially important. Take a few days to evaluate your business and take note of any areas of excess. This may uncover some difficult truths, if, for example, you have an employee who is slacking off and costing you sales while happily taking salary. It’s important to ensure that you have good hiring practices in place so you can reduce the necessity of firing a unproductive employee. It doesn’t have to be as extreme as firing someone. It can be as simple as going paperless or switching phone service providers.

Employee Training

Most small businesses rely on their employees as their greatest source of revenue. If you have great salesmen, you get more business. If you have even one who routinely offends or bothers your customers, you could have money walking out the door, even if you have the best prices and products in town. A simple training seminar could be just what your employees need to refresh their skills and remind them of the importance of every customer. With better sales techniques, your employees will be able to rev up their conversions and help you prepare to pay your tax liability.

Accumulate Cash in Your Small Business

It’s important to have a plan to accumulate the cash you need to pay your corporate tax bill. Penalties and interest payments are a waste of money and an indication of poor business practices. I can help you gain control of your cash flow by setting up an efficient system and training you or your personnel on it. If you already have a system, I can help oversea it, identify gaps, and recommend solutions that improve your bottom line. Let me help unload some of the burdens of your business. Contact me today.

Gain a Holistic View of Your Small Business 2013 Taxable Income

2013 taxable income

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December 31st is just around the corner. It’s time to gain a holistic view of your small business 2013 taxable income so that you can prepare yourself for filing your corporate tax returns.  As a small business, it can be difficult to know where to start. In fact,  you may be tempted to put it off until the only options are to hire a tax preparer or make a dangerous slap-dash attempt at the forms. Incorrectly filing your taxes could lead to  significant problems down the line, including audits, penalties and allegations of fraud—even if the fraud is unintentional.

The only way to avoid the possibility of these problems is to gain a complete picture of the 2013 taxable income for your small business by the end of the year. This will provide you with some time, before tax season actually rolls around, to ensure you have the necessary capital and all the correct paperwork to pay your taxes correctly and efficiently. Allocating a little time today to prepare will make filing on March 15th less stressful for you and those around you.

Your Small Business 2013 Taxable Income

Here are four easy steps that you can take to prepare your small business 2013 taxable income picture:

Step One: Gather your bank statements. Your bank statements should provide a clear and concise picture of every income and expenditure your business has accumulated over the past year. Review your statements for accuracy.  Understanding where your cash comes from, where it goes, and at what intervals can help provide the most complete picture of your total income and expenses for the year. Many business expenses, especially for small businesses, can be translated into tax deductions. It’s a great idea to make a list of these potential tax deductions while you have your bank statements handy.

Step Two: Establish a balance sheet. Your businesses balance sheet is the statement of  financial position. It provides a single snapshot of your assets, liabilities, and ownership equity. Whether you use a program such as Quickbooks or a simple spreadsheet, a balance sheet will help you not only see the entire financial picture, but also help you keep track of them in the future. Organization leads to better business practices and fewer costs in the long run.

Step Three: Create a profit and loss statement. This document, based on the information gleaned from your bank statements and balance sheet, will provide you with one solid number. This is your net income, and is the money that you will be taxed on. The most important part of filing taxes is to provide adequate documentation for all of your money, both as it comes in and leaves your business. These three steps can help you get organized and prepare your business for the 2013 tax season.

Step Four: Get ready for next year. Having just compiled all of the information necessary for this year’s taxes, learn from this experience to become better organized next year. If your money is spread across more than one bank account, consolidate it. If you had trouble remembering what money was spent where, create an organizational system that allows you to document your expenses as they happen. Taking small steps now is the key to making this process less time consuming in the future.

The key to long-lasting success is always knowing where your business stands financially. As your business grows, it’s critical to have the right team in place. I can help you find the right accountant, bookkeeper, or other financial personnel by working with you to identify the necessary skills, knowledge, an attributes of a successful financial role. How can I help you prepare for success this year and beyond? Contact me today and we’ll get started.

Retirement Dreams Require Personal Financial Responsibility

This past year has undoubtedly been the best for the economy since the recession.Personal Financial Responsibility With new tax incentives kicking in, companies are finally seeing profits, where they were just barely, (often not at all) covering their expenses. The economy is expanding again, which is great for everyone involved, but it also means that many businesses are growing complacent. With cash on hand, they are paying off their bills and neglecting to prepare budgets, manage cash flow, and make projections about further growth.

It is this kind of attitude that is perpetuating a recessed economy. Small businesses must continue to plan for the future of their business and their retirement. Some of the recent economic growth can be attributed to the dispersion of bailout funds in the last four years. However, according to the August 2013 issue of The Kiplinger Letter, by 2016 that money will disappear. The economy will begin to shrink again and businesses will find themselves in deficit once again. By 2024, America is going to see interest payments on the national debt quadruple. That’s a serious cash flow issue, and why? Because saving has not been built into the budget. Don’t let this be the fate of your business and your retirement. Now is the time to plan for the success of not only your business, but for your retirement too.

Prepare a Budget with Future Deficits in Mind

Most companies already have a budget, at least a loose one. You know how much you have to pay in expenses such as, employee salaries, benefits, location rentals, lighting, insurance, etc. In general, you know how much money you have to spend every month in order to keep the lights on. In reality, you need to know exactly how much money leaves your account every month. Not only will this help you realize and eliminate waste from your spending, it will allow you to get a hold of your money and make it work for you.

Outside of the minor ups and downs that every business experiences, you need to be prepared for serious financial difficulties. Saving money isn’t just for individual households, as even the government has come to realize this year. Don’t spend every last dollar just because you have more dollars than bills this month. Next month or next year, the situation may be reversed. Think critically about where you can cut your budget and where you can save.

 Focus on Cash Flow

No matter what your business is, you probably have a good idea of where your money comes from and where it goes. You know your target market, and you know that those people are going to be the source of your income. Now, consider carefully how to tap that money source when you are seeing cash flow problems. In conjunction with formulating a living and budgeting, create a contingency plan that you can implement when sales are slow. Whether this is an aggressive marketing campaign or a new product or service, have a list of ideas and feasible enactment strategies that can help loosen your cash flow when money is tight.

Personal Financial Responsibility

If you want to retire you have to take personal financial responsibility for your business. We can help with cash flow management savings, preparing budgets, cash flow projections, and tying in your marketing plan with your business plan. When you create a good financial structure, your accountant will have less to give to the IRS and more to your bottom line.

Are you ready to live your retirement dreams? Preparation is key and we can help you get there. Call us today so that we can help you chart a better course for your business.

Articles of Incorporation: Your Commitment to Ethical Practices

The term Articles of Incorporation describes the primary rules that govern the management of corporations within the United States. They are your commitment to following the law and are typically filed with a state-based or other regulatory agency.

articles of incorporation

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Once you become incorporated, you are bound by the law to ethically comply with the rules, policy, and procedures. Just as you’d treat your marriage with respect, your business deserves equivalent respect.

About Articles of Incorporation

When individuals incorporate as an organization in Arizona they are required to complete Articles of Incorporation. The requirements to incorporate naturally vary from state to state. Therefore, it’s important to contact the state’s governmental office, typically their Secretary of State, to learn more about the incorporation process.

Many states including Arizona provide informational documents about how to incorporate. They even provide sample Articles of Incorporation to help individuals learn how to properly fill out the required forms. Generally, they request the following:

  • The name of the corporation
  • The names of individuals who have organized the corporation
  • The purpose of the corporation
  • The number and names of the corporation’s board of directors, in addition to the initial directors and registered agents; and
  • The location of the corporation’s registered offices and street address

Articles of Incorporation typically don’t describe the operations of the corporation in question. Those details are generally included within associated documents for the corporation’s bylaws.

The documents for Articles of Incorporation are important, as it’s the basis for registering a corporation within any state. In most cases, corporations that fail to file for Articles of Incorporation may be served with legal action if they proceed to act without securing their legalities.

Filing for Articles of Incorporation in Arizona

Individuals who want to incorporate in Arizona are required to submit their Articles of Incorporation. In addition to submitting the aforementioned information about their corporation, they also have to submit information pertaining to:

  • The number of initial authorized stocks associated with the corporation
  • The street address and signature of the statutory and registered agent associated with the corporation
  • The names and associated contact information of the business owner or individual who files the articles of incorporation

The Arizona Corporation Commission website provides fillable PDF documents for business owners to complete, print and mail.  In addition, the business owner must pay a filing fee, which is noted on the application form.

The Arizona Corporation Commission generally approves Articles of Incorporation after receiving documents if they are complete and accurate. Then, businesses are required to publish a copy of the document in the newspaper belonging to the county of the corporation’s business location. It must run for three consecutive publications within 60 days of the approval.

Importance of Ethics

Once the application is approved, the business is legal and bound by the laws of Arizona. It’s critical to understand the importance of ethics or run the risk of alienating shareholders, stakeholders, partners, employees, and customers. Unethical practices reduce growth and limit revenue-generating ability.

Here are four reasons why businesses should practice good ethical behavior:

  • Litigation—Breaking the law generally comes with heavy fines and may lead to lawsuits and indictments.
  • Perception—Companies that tolerate unethical practices are subject to wildly unpopular social media outbreaks. Additionally, supplier and partner trust is diminished.
  • Performance—Employees follow their employer’s lead. Furthermore, companies that are unethical tend to have a hard time attracting and retaining talent.
  • Integrity—It’s just the right thing to do.

There are many ways you can encourage ethics in your business, but the best place to start is with you—the owner. Take care of your business so that it can take care of you. What examples of ethical and unethical practices have you encountered?
If you’d like a copy of my latest book, click here: Cash Flow Problems: Don’t Let Them Sink Your Ship.

The Art of Delegation – Trust is Key

Many small business owners attempt to do everything, leaving little to delegate until they become so over worked and exhausted that they have no where left to turn.delegation Often times they hire the first competent person (hopefully) that they can find and immediately hand over the keys. In the end, they find that the person that they hired, isn’t as competent as they thought or maybe isn’t quite ready to drive.

In the book Entreleadership, Dave Ramsey explains that effective delegation is analogous to lengthening the rope of trust. When you properly manage your culture, hire and keep the right people, build unity, provide recognition, and creatively compensate your employees you’ll find that delegation opens doors to success like you’ve never imagined.

Two Types of Delegation

According to Steven Covey, there are two types of delegation: gopher and stewardship.

Gopher Delegation-the gopher delegation method is similar to micromanaging. It involves providing the employee with step-by-step instructions on exactly how to do the task and then verifying that the work was complete to your specifications. The gopher position is generally good for entry level job functions that are repetitive and don’t require a lot of thought.

Stewardship-the stewardship delegation method is management-level delegation. It focuses on the outcome rather than detailed instructions on how to get it done. Stewardship delegation requires trust because you are granting that person authority to act on your behalf and then responsibility to carry out the major project or task. Trust must be earned.

Earning Trust

Before you delegate important tasks it’s important to know that you can trust your employees. The process of developing trust takes time, but it will save you a lot of heart ache and drama if you approach it with intention.

There are two attributes that trust worthy people have in common. They are integrity and competency. Wise business owners trust employees with important tasks to the extent that they’ve spent time with them, observed their behaviors, and believe that the employee has both integrity and competency.

Integrity

Integrity is the quality of being honest and having strong moral principles. You should spend absolutely no time trying to work with employees who have no integrity. If they steal from you, cheat on their spouse, or lack moral character, do you think they’ll do an outstanding job for you?  Probably not. Instead, hire someone who has talent, and then work with them letting out the rope bit by bit.

Competency

Competency is the ability to do something successfully or efficiently. You can’t assess competency without observation. Competency is more than the ability to complete the task. It involves the process of completing the task as well. Were the team members treated with respect? Did the project get completed within budget?  These are just a few of the questions you should ask to assess competency.

Once you begin to delegate with authority and responsibility, you’ll display your trust to your entire team. Ronald Regan once said, “Surround yourself with the best people you can find, delegate authority, and don’t interfere.” What type of delegation do you relate to?  Let me know in the comments below.