I work with a lot of CEO’s and a common trait is the desire to grow their company. Instead of reviewing how to grow, I thought I’d highlight some approaches that DON’T WORK!
Hire more sales people!
I was leading a CEO peer group when I heard a CEO say the solution was easy, “Just hire more sales people”.
If it was ONLY that easy.
Increasing revenue must come from an expanding market, new product or service, new form of lead generation, etc. Simply adding to your sales force will not ensure increased revenue.
Build it and they will come
This is not a baseball field.
Careful thought and planning should go into the product features, market demand, market research, buyer profiles, competitor analysis, etc.
Don’t build something new and hope.
Just work harder
I’ve heard owners say “we’ve got to grow and you’ve got to work harder”….as the CEO departed for happy hour.
How you grow is the responsibility of the owner/CEO and leadership team. Be very careful when you ask team members to work harder. That’s rarely the right answer.
Focus on increasing demand, not working harder.
Buy more social media ads
There are LOTS of gimmicks out there. People will promise leads through Google, Facebook, LinkedIn, etc. by hiring them. Don’t fall for it. If it sounds too good to be true, it usually is.
Can you generate leads via social media? Absolutely. It should be part of your growth strategy, depending on the industry you’re in.
If you’re unsure how, hire a reputable advisor to help you better understand how it works and to make recommendations.
Don’t chase the pretty penny
Most small business owners are entrepreneurs that get excited by trying new things. Unfortunately, many put their best and brightest on the new “project” while impacting the ongoing, bill-paying operations.
Consider developing a market research team of 2-3 people. Let them do the research and come back to you with a plan.
This doesn’t mean you don’t pivot when the market changes. A smart CEO always looks forward. Just don’t chase an idea without applying a process and logic to the approach.
We could probably come up with another 100 items a small business CEO shouldn’t do to grow their company. If you have additional ideas, send me a note at firstname.lastname@example.org.
As the Russia/Ukraine war escalates, oil and gas are really back in the spotlight. The rise in our gasoline prices largely driven by national policy to reduce the use of fossil fuels is now being exacerbated by the ramifications of this Russia/Ukraine conflict on worldwide oil prices. I had mentioned this in my recent blog …
Most non-profit organizations’ fundraising struggled in 2020 and 2021 as the Covid 19 economic shutdown forced in-person donor and financial supporter functions to be greatly limited in size and scope or even canceled. Some organizations moved to computer-generated fund-raising events but these events were not as successful in raising money as the more face-to-face get-togethers had been. In addition, many businesses struggled financially just to get their employees paid and their doors open, thus having monies for support to charitable organizations and causes was and is simply just not there.
Further, in Houston, Texas the oil bust of 2020 caused many large companies that operate in the energy sector to limit or completely do away with charitable contributions.
Even prior to these 2020 events there had been a “Trust Crisis” developing regarding non-profit organizations. Ben Gose, a contributor to the Chronicle of Philanthropy, addressed this topic in an article he wrote that was published in the Chronicle’s January 7, 2020 newsletter. This article is very enlightening and worth reading.
With all this being said, there were also several very emotional political causes being promoted in this time frame, and many corporations began making contributions to certain groups and causes to show their stakeholders and customers that they are good corporate citizens and are providing support to these groups and causes.
On the Foundation giving side of fundraising, the story was somewhat different in that the stock market provided many Foundations that support non-profit and charitable organizations, increases in their corpora, thus enabling them to have the funds available to make contributions; however, these Foundations are getting more requests than ever before.
Further, Foundations have refined their requirements and giving criteria such that the request process has gotten more detailed and lengthier with committees and/or staff having to evaluate requests more thoroughly and provide the Board with very specific recommendations. Most Foundations today require at a minimum that organizations seeking funding have audited financial statements, which is an added cost burden on these charitable and non-profit organizations. Most Foundations will also check with Guide Star/Candid(1) to see if the organization has filed all the necessary organizational documents, like financial statements and 990 Tax Returns with Guide Star/Candid.
NON-PROFIT ORGANIZATION RECOMMENDATIONS
Richard Hendee/Horizon Associates, Inc. has been working with and assisting non-profit organizations for years. Further, Mr. Hendee has started several non-profits and has sat on numerous non-profit organization boards. He never agrees to serve on any non-profit board if that organization doesn’t have Director and Officers (D & O) Insurance coverage. In today’s litigious environment legal action of some kind is, unfortunately, a given. Even if the organization did everything right and by the book, if a suit is brought against the organization, typically the Directors and Officers are included in the suit, and the expense of hiring an attorney to defend being right can get really costly, an expense most individuals do not want to risk their personal assets for. Having D & O insurance coverage is a must for any non-profit.
Here are some other key recommendations:
Run the organization just like any for-profit business would be run. Eventhough the organization has been given non-profit status by the IRS for federal income tax purposes, it is still a business.
Develop a well-thought-out (not wordy) Mission and Vision Statement that clearly states the organization’s purpose and future direction.
Create an organizational chart that includes position titles and functional areas of responsibility.
Identify areas that need specific levels of expertise, like legal, accounting and human resources, and contract with outside service providers to assure all the details are done correctly from the start, like the Bylaws.
Set-up the organization with the Secretary of State in the State the organization is located in and make sure updates are filed periodically.
Prepare a thorough detailed Business Plan which includes what the organization does, for whom is does it, how it will do it, who are the management team and board members and what are their levels of experience, who are the competitors, how the organization will be marketing what it does, what the organization’s strategic plan is, and the key: how the organization will be funded and what happens if there are shortfalls in the funding.
Develop criterial governance policies like code of ethics, conflict of interest statement, whistleblower policy, directors’ roles and responsibilities, gift giving policy, investment policy, internal controls, and record retention policy.
Schedule monthly and annual Board Meeting dates and times and hold these meetings using a formal Roberts Rules of Order(2) process. Agendas need to be created prior to the meetings and sent out ahead of time with any related agenda item documents in order that directors may have an opportunity to review documents prior to the meeting. Further, meeting minutes should be taken at these meetings and approved at the next Board Meeting.
Create working Committees like Fundraising/Development, Audit, Finance, Nominating, Executive (if needed). Make sure these Committees meet regularly, take minutes, have specific assignments, and periodically report to the Board.
Create a Community Advisory Board made up of key visible community leaders, key business executives, and community group leaders who all can be called upon for fundraising assistance, opening doors that may need to be opened and/or providing invaluable information and support about the communities the organization may be servicing. Try to stay away from putting political officials on Advisory Boards.
Assure that the organization is properly protected by carrying General Liability Insurance, Hazard Insurance if the organization has a lot of fixed assets, Workers Comp. if the organization has employees, and event riders to these policies for fundraising events like Galas, Hunting Trips, Golf Outings, Trade Show Events, etc.
Create budgets and fundraising goals and regularly review and measure actual results.
If the organization has real estate, apply with all taxing authorities for a reduced property tax schedule.
Hold annual board retreats to develop annual plans and a five-year strategic plan. These plans should be evaluated and adjustments made periodically especially if a major event occurs.
Develop a robust communication plan to keep your sponsors, supporters, stakeholders, community groups, and volunteers updated on the organization, events, and developments.
Establish a volunteer group that can be available to help with projects, events, manpower shortage, and the like. These volunteers need to be informed and made to feel they are a part of the organization and a valuable resource.
Participate in local Better Business Bureau (BBB) non-profit evaluations. Often individual gift-givers check with the BBB to see if the organization has any complaints filed with the BBB.
Prepare collateral materials (3) that communicate your messages and what you want others to know about your organization. You want to make sure that your message is in your words to avoid any miscommunication or key details being left out in any communication chain.
Develop an annual giving campaign that is geared around some important date related to your organization, like the founding date. You could always use the end of the year date, as some contributors do tax-saving contributions at that time of the year.
Horizon Associates, Inc., founder by Silver Fox Advisor, Dick Hendee, has developed this non-profit organization position paper to provide non-profit organizations some guidance and assistance as individuals set up a non-profit organization and to provide existing non-profits some directional changes or planning ideas if needed Horizon Associates, Inc. does not guarantee using any of this material will result in your organization being able to achieve any specific results.
(1) GuideStar/Candid is an information service specializing in reporting on U.S. nonprofit companies. In 2016, its database provided information on 2.5 million organizations. In February 2019, GuideStar merged with Foundation Center to become Candid.
(2) Robert’s Rules of Order is the basic handbook of operation for most clubs, organizations and other groups. So, it’s important that everyone know these basic rules! Organizations using parliamentary procedure usually follow a fixed order of business.
(3) Collateral material is any media material used to promote a company’s products or services. This includes everything from print materials like posters and flyers to digital content like catalogs and e-magazines. Anything you can use to communicate your company’s brand message is considered marketing collateral.
Small business has a significant role in the economy. Owners and entrepreneurs create jobs, provide goods and services, and serve special niches that help round out our economic vitality. The health and well-being of small businesses is a critical element of our culture.
Let’s discuss this in more detail. This blog is a little “academic” to drive home the importance of entrepreneurs and small businesses to our economic progress.
Without the renewal that entrepreneurs and small businesses provide, economic stagnation will eventually result.
Capitalism provides the incentives for entrepreneurs and small businesses to bring about this renewal process.
Capitalism provides opportunity to pursue self interest
Back in the 1700s, the industrial revolution fueled the rise of capitalism and the eventual demise of European feudal systems. The key driver was machine technology that transformed the way society functioned from transportation, to agricultural production, to consumable and hard goods production, etc.
Fortuitously, Adam Smith recognized that underpinning the freedom to pursue one’s self-interest in a capitalistic system overall delivers the best possible social outcomes through his concept of “an invisible hand.”
A main ingredient for a productive society is also having rules of law that facilitate interactions within the economic and societal eco-system. These rules need to fit the evolution of economic entities.
When entities like Standard Oil grew so enormous to have monopoly power on petroleum markets then anti-trust rules were enacted. Boundaries were put on this economic freedom.
Facts of Life
Now living systems including economic entities follow S shape curves where there is a slower early learning period followed by steep growth which eventually slows and ultimately takes a downturn and dies.
What happens in economic entities causing them to die or be absorbed into another entity?
One reason is the natural competitive process that occurs in a capitalistic system. Another reason results from the also natural bureaucratic growth where over time entities shift their focus to internal structures becoming more rigid in their ideas rather than learning the evolving dynamics in the external market landscape.
Capitalism creates renewal through entrepreneurship
We often hear of Adam Smith’s invisible hand, but the other characteristic that makes capitalism such a strong economic system was described by Joseph Schumpeter “Theory of Economic Development.”
In short, he believed that entrepreneurs introduce new products and services revitalizing markets and enabling continuing growth, in Schumpeter vernacular “creative destruction.”
Thus, entrepreneurs disrupt through innovation the “circular flow” of entrenched bureaucratic entities following their routines. Schumpeter was a product of the great depression and the massive economic downturn.
He felt that ultimately capitalism would self-destruct as the political strata become dominated by those undermining the capitalistic framework of renewal. His view was that socialism would be the ultimate successor.
Pace of change is accelerating
My view is that Schumpeter did not recognize that the pace of change would continue to increase. The information revolution is just another form of the industrial revolution where technology revolutionizes information to being both global and individual at the same time.
This has also enabled a discontinuity in the delivery of goods through the Amazon’s of this world. The nanotech or bio-tech revolution through advances in technology is making the change much more chaotic. We find the very foundations of our beliefs in how the world works being reworked.
Dominant entities are moving up the S curve much more rapidly as change accelerates the dominance shifts with the emergence of new concepts and technologies. In the information revolution, IBM was the early dominant player. Their foray was more in the industrial form with its emphasis on hardware. They were dethroned by the software side through Microsoft. who has now lost its preeminence to Google and its follow-ons that have shifted the focus of information power and flow directly to the consumer.
The accelerating and chaotic pace of change will only enhance the renewal process under capitalism. On occasion, there will need to be interventions with tools such as anti-trust should the dominance of some entities become too great in their marketplace.
This dominance can occur quite quickly and political systems which are more bureaucratic will have difficulty in adjusting. Nevertheless, the ongoing technological developments will transform the dynamics over time.
Socialism stifles renewal
With socialism, the means of production, distribution, and exchange are owned or highly regulated by the community (i.e. government) not by private individuals. This spreads the economic wealth through political intervention and further enhances the bureaucratic nature of the political and economic systems stifling the renewal process.
Back to S shape curves, the capitalistic system relies on building new S shape curves to be overlaid on top of the current S extending the economic and societal growth. Socialism largely relies on the condition of the current S curve when implemented which leads to much faster stagnation.
Helping entrepreneurs succeed
This is a backdrop to the importance of the entrepreneur within a capitalistic system that drives our economic growth. Here in the United States, small business added almost 2 million new jobs in 2018.
At that time there were about 30 million small businesses accounting for not quite half the private employment of the United States. Small businesses truly are the economic engine of our economy of this the largest economy in the world.
Thus, a fundamental question is how can we help small businesses accelerate their growth and avoid a premature death on their S curve? In this world of accelerating change, understanding the growth stages of a small business is exceedingly helpful for the entrepreneur hoping to become a successful enterprise.
If I have your interest, come back to future blogs that describe my four-stage growth model. It should add greatly to your understanding of the key elements in the different stages of growth for small businesses.