Moodling and Other Creative Ideation Techniques

Wondering why idea generation is so hard? There are creative ideation techniques you can implement to help boost your brainstorming.

We’ve all hit a creative slump before. Whether you call it writers’ block, a brain freeze, or a roadblock, when it happens, you’re stuck fast.

But in the business world, idea generation is vital to continue growing and innovating within your company. Problem-solving is also the only way to cope when day-to-day challenges crop up. When you reach a stuck point it’s time to employ your most creative ideation techniques.

What is creative ideation in the first place? What is moodling? How will teamwork help you overcome your slump (and as CEO, what if you can’t rely on teamwork to solve the bigger problems)? And what are other creative ideation techniques to help you come up with fresh new ideas?

To answer these questions, we have to start by understanding creativity.

Why is Creativity Often So Hard?

Creativity is often hard, even when creative ideation techniques like group brainstorms are used
By Mathew Henry

If you’ve struggled to come up with new approaches to a business problem, chances are you’ve asked yourself the question more than once: why is it so hard to be creative?

The noted economist John Maynard Keynes stated, “The difficulty lies not so much in developing new ideas as in escaping from old ones.” We often use creative ideation techniques to start the process of escaping from our old ideas because frankly, innovative thinking is hard.

In the 1920’s Jean Piaget, a well-known psychologist theorized on how we use schemas to sort and categorize our world, easing the burden of absorbing the stimuli around us. We quickly draw conclusions within our schema (in other words, how we see the world working).

Schemas help us in many ways. We can quickly walk into a situation and draw fast conclusions about the environment. Our brains tap into our prior experience to assess the situation and decode what’s going on, they lead us to recognize aspects of the scenario we’ve encountered before. They also cause us to overlook or ignore aspects that fall outside of our recognition.

Whether you call it a schema or your operating paradigm, it’s a viewpoint that comes at a cost. These fast conclusions and judgments are hard to change. They lead us to stereotypes. Because we rely on our viewpoints so readily, we often miss information and new opportunities as we fight to hold our world within a comfortable schema. Hence, this myopic view results in the difficulty we experience when it comes to generating innovative ideas. We can’t think outside the box if we’re only aware of what’s inside.

Can we adjust our schema? Of course, but it takes work and deliberate conscientious effort because our schemas are often very deeply ingrained in our thinking. Through learning, exploring, and seeking new experience, we will eventually adjust our schemas. This is often why collaborating and other creative ideation techniques are so valuable when we’re troubleshooting a problem. Working with others helps us broaden our viewpoint.

Team Participation for New Ideas

Encourage your team to engage in creative ideation techniques
By Mathew Henry

If you want to generate new ideas and spur creative thinking, involving multiple collaborators and team members is often a good approach. If your office culture fosters an atmosphere of sharing and working together, this may already be part of your process. If not, you may find you need to open the floor to new ideas.

The classic ideation process is usually approached as a group activity. Active participation is encouraged by operating under the rule of no criticism. Every idea is considered “good” until the evaluation or selection phase.

To shake people loose from their schema, the creative ideation techniques include engaging different senses such as:

  • – Verbal/auditory (brainstorming)
  • – Physical participation (role play, kinesthetics)
  • – Visual (storyboarding, mind mapping)
  • – Writing (brainwriting, free writing)
  • – …Or actively challenging the status quo with pure brain games.

These brain games challenge participants to think differently by making new associations, questioning assumptions, or using data points to generate a new perspective.

Group ideation techniques are effective in a wide range of organizations. Nearly any industry can implement creative ideation techniques to enhance problem-solving and encourage innovation. The group ideation techniques result in many benefits such as:

  • – Active and free-flowing stimulation and association.
  • – Encouraging individuals to build on the ideas of others.
  • – Camaraderie and team building.
  • – Participation of multiple disciplines to broaden perspectives.
  • – A high volume of generated ideas to draw from in the next phase.

Of course, like any business practice, there are drawbacks to group creative ideation techniques. It’s important to be aware of these challenges as a leader, and it’s particularly important to keep these pitfalls in mind as you form groups and plan your approach:

  • – Leaders and more extroverted participants directly or indirectly (and oftentimes unintentionally) influence the flow of ideas.
  • – Groupthink might happen despite or because of the group ideation technique.
  • – The strength of the facilitator might influence the process and the outcome.
  • – The stimuli in the technique does not suit all individuals. (For example, I find it hard to stimulate my ideas with a mind mapping technique.)

Consider offering the opportunity for team members to participate using a self-selected technique individually as well as in the group. In some situations, depending on group dynamics, this customized participation may bring additional ideas to light.

Although there are hundreds of variations of creative ideation techniques, I found “18 Killer Idea Generation Techniques” to be a helpful resource. The post features an overview and explanation of each of the creative ideation techniques.

Generating Creative Ideation at the CEO Level

Oftentimes, it isn’t wise for the CEO to participate in the group ideation, as his or her participation influences outcomes. Additionally, many of the problems you need to solve as the company leader don’t fit the “public” forum of ideation. Those problems are often more challenging to resolve and require time and dedication. As the head of the company, the question becomes when do you even have TIME to think about creative problem-solving?

As CEO, you’re not only in charge of the day-to-day operations of the business. You’re constantly working on the business, as well as in the business. You’re addressing any number of mandates that you, your stakeholders, and the business book of the month espouses. Often expounding on this, busyness is viewed as a badge of honor. Whether this drive is rooted in a Protestant work ethic or has sprouted more recently, we often compete on the state of busyness.

Busyness is rampant in leadership and I personally admit I operated in that mode during much of my career. I would jealously read an article by Richard Branson or see a picture of him enjoying sailing and think that’s NOT my life. I was always busy and didn’t have time to …. (you fill in the blank). It took me quite a while to internalize the concept that busy doesn’t necessarily mean productive or effective. In fact, this constant state of frenzy probably meant I had other failings in delegation, managing my time, and over-committing. Constant busyness limits our time for creative ideation techniques or innovative approaches to problem-solving.

It’s far more beneficial if we approach our business not with an action plan but with moodling. Now admittedly, when I first came across the term, I thought it was a misspelling of “noodling” — but both words capture “go to” methodologies for creative ideation and problem-solving at the executive level. Escaping your old ideas and generating new methodologies are easier if you apply both moodling AND noodling.

What is Moodling and How Does It Boost Creativity?

Moodling is a unique and effective ideation technique that works well in executive settings
By Sarah Pflug

The term moodling was coined in 1938 by author Brenda Ueland to encourage the use of idleness to spark creativity, particularly in writing, but we can apply it to business as well. In fact, moodling is an excellent creative ideation technique, particularly when employed at the executive level.

Moodling involves idly engaging in a pleasurable activity such as sitting on the porch or taking a hike and letting your mind wander. It is typically a solitary creative activity, so you’re unlikely to find a moodling group on MeetUp. Moodling requires you to put aside distractions, be in the moment, unfocused and open for daydreaming. Moodling has no mission or clear cut objective and may not produce any flashes of brilliance.

David Robinson in his article “The Art of Moodling” states, “Moodling (is) constructive idleness. This quiet looking and thinking opens the imagination; we encourage ideas to come to us by being available and receptive. What a wonderful realization! Not only is moodling enjoyable in itself, but it gives us a return in increased creativity—better ideas, whether we translate them into writing, … inventions, or business decisions.”

For some of us, the concept of moodling may prove more challenging and come less naturally. It may, in fact even take deliberate work for us to put down our phone, turn off the podcast, set aside the stack of reading and paperwork, and mute our inbox. Moodling is the counterfoil to the state of busyness many of us embrace so readily.

Sitting idly and allowing myself to daydream hasn’t been in my skillset since childhood… Ah, the memories of messing up my Grandpa’s hayfield, the smell of the hay and the warm sunshine… oh, where was I?

With meaning and value in idleness, maybe now I can stop being jealous of Richard Branson and start following his example as an excellent moodler.

What is Noodling and How Does it Differ from Moodling?

Noodling, on the other hand, is more in my think-style. Chances are, you’re familiar with the term or have heard someone say they’re “noodling something over.”

The term noodling is derived from the slang use of noodle to describe a head or brain. The creative ideation technique of noodling is slightly different from its counterpart, moodling. Noodling is a more active ideation and problem solving technique. It’s a more focused and deliberate approach.

Noodling may mean pondering your problem in an idle or speculative manner or examining the issue from a different perspective. In moodling, you let your mind wander aimlessly and you may or may not stumble on something amazing. In noodling, you loosely focus on a specific idea, concept, or conundrum. I often noodle by putting the problem into my subconscious letting it percolate under the surface, sleeping on it, or giving it a tickle over a couple of days until an answer presents itself.

As you noodle on a problem, keep in mind framing the problem is a significant part of solving it. For example, if you frame a sales growth problem as needing to add another product, you may miss an opportunity for a joint venture offering expansion in another market.

Other Creative Ideation Techniques for Executives

Creative ideation techniques are effective and efficient ways to generate creativity in the workplace
By Mathew Henry

If you have an issue you’re trying to resolve at the executive level, it may not be appropriate fodder for your team brainstorming session. This is often why the job of CEO or President is so isolating and challenging.

Look to your network for assistance when you need to think outside the box. After moodling or noodling on a problem, it’s time to bounce it off a colleague, advisor, or coach. There’s a tendency for CEOs to feel that since the “buck stops here,” you can’t ask for help or discuss challenges with others comfortably. But the insights and perspective from someone outside the situation can prove invaluable. Look for executive roundtables, entrepreneurial affinity groups, or business leadership networks where you tap into outside resources and creative feedback.

It may also be helpful to draw on your previous experience. Look at the way you’ve creatively approached problems in the past. Could any of the methodologies work on your current issue? The problem and solution may differ, but the best approach could be similar.

Ideation and problem solving simply means coming up with ideas and throwing them at the wall to see what sticks. Think of the wildest solution and as many different approaches as possible to start. Amass a collection of ideas and then, in the next phase of problem solving, you will narrow it down and decide what’s a plausible, practical, and even innovative answer to your issue.


Featured image and all post images licensed via Burst.

The Best Advice for Entrepreneurs

Looking for the best advice for entrepreneurs who want to succeed? There’s a lot of “noise” telling you what to do. Here’s how to build your business foundation and apply best practices.

Entrepreneurs, we’ve all heard it, haven’t we? When you talk about a stressful situation at work and someone says, “Gee I really wish I could run my own business,” or “I wish I was my own boss.”

Entrepreneurs know it’s not always fun and games. In fact, little does your pal know the 24/7 work and dedication it takes to make your business succeed. If you’re like me, you probably think, “Be careful what you wish for, buddy.”

As an entrepreneur, there’s no simple formula for success, no clear-cut path, or secret. The best advice for entrepreneurs is to learn how to tune out the noise and focus on the day-to-day progress that moves your business forward.

Does the Best Advice for Entrepreneurs Come from Books?

The best advice from entrepreneurs comes from many places; books, mistakes, and more
Image via Burst

Like many self-made business owners, you’ve probably read all the books you can find on leadership and running a business. They make it seem easy, don’t they? “Here are the 7 (or 10, or 13) steps to success,” or “get the right people on the bus in the right seats, going the right direction.” “Simplify your systems, hold people accountable and your business will thrive!” Right?

There’s a lot of books out there that claim to have the best advice for entrepreneurs—the secret formula to success. Many of these books have helpful advice and good takeaways, but it’s often nebulous or incongruent with your reality. How do these great books relate to the day-to-day of the small business? You may browse the business section at the library and wonder, have any of these authors really run a small business? How would Jack Welch or any of the others really know what it’s really like to be a bootstrap entrepreneur? 

The reality is, being an entrepreneur (especially a female entrepreneur) is tough! It requires you to think on your feet, adapt, and roll with the punches. Entrepreneurship isn’t for the faint of heart.

In my small business, I oversaw a staff of 10. This, of course, meant when one person was out, 10% of my workforce was absent. Because each person had multiple roles, as is common in a small business, one absence meant that several “departments” were missing as well. I found myself often wondering, when does a large corporation like GE have that problem? (Answer—never!)

While business experts like Jack Welch, Napoleon Hill. and Stephen Covey espouse the best advice for entrepreneurs and great management concepts, they’re often hard to sync up with the real-world challenges faced by small business owners. After all, it’s hard to imagine implementing everyone’s appropriately colored parachute, when your biggest customer now sources from overseas, one of your machines started a fire, and your controller just quit. At that point, ANY parachute will do (or perhaps a life raft). Okay, so maybe you won’t face all those challenges at once, but even one event can make you wonder how the concepts in these books apply.

As my dad would often say, “When you are up to your behind in alligators, it’s hard to remember that the original mission was to drain the swamp.”

Small Businesses Run Lean but Some Advice Still Applies

Setting smart, attainable goals is some of the best advice for new entrepreneurs
Image via Burst

Looking around your business, you may see you have an almost non-existent management team. You may fit the mold of the “E-myth;” you started a company because you were good at a certain task. Now you have to wear so many other hats and be good at so many other tasks to keep the business afloat… Or, do you? All the books, articles, and TED talks with the best advice for entrepreneurs say don’t try to shoulder it all alone. But that advice is easier said than done, especially when you ARE your business. So, why read the books and seek principles to do better? Is it even possible to do better?

Personally, I think it is. There are important principles that can still be gleaned from these books, even if it doesn’t seem perfectly congruent to your business model. I‘ve read more success books than I can count. Everything from Stephen Covey’s 7 Habits of Highly Effective People to the 13 principles in Napoleon Hill’s Think and Grow Rich, to my current reading of John Maxwell’s The 15 Invaluable Laws of Growth.

Reading and understanding the concepts within those books may not help find a new right-hand person or file and insurance claim, but the concepts withstand the test of time. They really do contain the tried and true best advice for entrepreneurs, business owners, and leaders. In fact, I’ve found that many of these books repackage the same concepts, because they’re so mandatory for success. Napoleon Hill started writing about best practices 100 years ago and many of his principles are used in more modern works. The essential truths don’t change.

Running a small business is HARD. But there are many lessons along the way. Think of the advice you’d give your teenager: learn from your mistakes. You can do the same and learn from others who have gleaned their own experiential wisdom.

Having read too many books to count, (spoiler alert), the majority contain universal truths. Across the board, they all encourage you to:

  • Identify your core values and those of your business. Are you honest, loyal, trustworthy? What do you want to represent? What do you want your company to represent?
  • Define your role and purpose in the market. Do you want to be business that’s the fastest, cheapest, or highest quality? Do you want to serve your customer base better than any competitor does?  
  • Set aside time to identify and plan for:
    • Your long-term vision (3 to 5 years). Do you want to be the market leader or low cost producer? Do you want to change your level of customer dependence, so that no single customer comprises more than 10% of your sales? Do you want to reduce your company’s supplier dependence? Is there anyone that you think would add value to your team that you want to start a dialogue with? Where is your industry going and are you prepared to lead or follow?
    • And, short-term goals (<1 year). How much does your business want/need to sell? Will your staffing support the level of sales and do you have the cash flow to pay the staff, and cover operations, inventory, etc.? What are your contingency plans, should an emergency arise? What are your areas of risk? 
  • Use a defined process to set targets and goals, define specific actions toward their achievement, and hold people accountable within the process.
  • Select a form of project management that fits your team.
  • Recognize that any business plan you develop needs to add competitive differentiation.
  • Motivate and encourage your team. Team members must be aligned to achieve the goals.
  • Realize that your leadership defines the success or failure of your business.

Often, authors offer an abundance of advice on what you should or shouldn’t be doing, and not as much advice on the logistics of “how” to get achieve it. There are two books I’ve found that incorporate the “how” very well and offer some of the best advice for entrepreneurs. The current go to book is Traction: Get a Grip on Your Business by Gino Wickman, explaining the EOS© system. While many reviews talk about the usefulness of this book in the context of start-ups, I believe this a great tool for any small business. Another older resource is Mastering the Rockefeller Habits by Verne Harnish. Harnish does a good job of explaining how to simplify processes and accomplish each business objective based on the practices and teachings of John D. Rockefeller.

How Do You Apply the Advice to Your Own Business?

Fortunately, there are many excellent books out there and we can all find value from various resources that apply to our business.

While the two I mentioned above have some great core advice and offer a “how-to” approach, the real secret is to pick and apply what works best for your business specifically. The basic principles outlined in most best-selling business books hold up over time. A key element in transitioning from the entrepreneur with too many hats to a competent leader is applying the skills preached in the books.

Many entrepreneurs have a plan for this business in their head, but it's getting it into a comprehensive attainable plan that's a struggle
Image via Burst

Many business owners believe they have a plan for success, but when it’s in their head, it’s hard to develop a competent management team with a cohesive mission and strategy to take the plan to fruition. If you want to achieve your plan for success, simply choose a method that’s clear, uncomplicated, and inspires you to lead your team to complete action items, taking you closer to your goals. And, as Nike says, “just do it”.

It is your responsibility to work ON your business, work with your team to establish clear, achievable (SMART) goals, set timeframes, and hold team members accountable.

So, if you’re ready to go, start now. TODAY, get your calendar out and schedule time for yourself (1- 2 days) offsite to really think about your business. This will help you get your vision sketched out and in order. Once you’re clear on your vision, share it with your team. Enlist their help on the process and path to success.

Work out the logistics of “how” by scheduling an offsite strategic planning session where you:

  • Set (in the initial) goal and then review your company’s 3-5 year goals.
  • Decide 1-3 annual company objectives (1-3 is a guideline for small organizations).
  • Establish 5-7 steps to achieve the objectives.
  • Determine the cross-functional teams.
  • Set timelines and a process for reporting.

As you work ON your business, apply the advice and best practices you’ve discovered to identify and address roadblocks as well. Does your company culture allow for all team members to speak honestly and openly about their concerns? Don’t forget that part of the strategic planning process includes identifying areas of concern so that over time you can mitigate risks and bolster strengths. Long-term planning lets you anticipate future hiring needs. When you work with vision, you can look ahead and set strategic actions, like networking and “getting to know” a targeted hire.

Again, like books with the best advice for entrepreneurs, the concepts often sound simple:

  • Priorities defined to allow focus, progress, and management.
  • Data available to manage the Company (firsthand and immediate).
  • Rhythm to maintain alignment and drive accountability.
  • Systems and structures in place to handle complexity.

The challenge is often not finding great advice or the best business practices, but in reining yourself in.

If you are like most entrepreneurs, you will bite off more than you can chew. I would like to encourage you to be conservative (ok, maybe a bit of a stretch) in this first round of strategic planning. This ensures you can achieve your goals and celebrate the success along the way. As you apply the advice, slowly and deliberately, you will see positive change. You’ll be leading and managing not by the seat of your pants, but with intention and inspiration.

Finding success as an entrepreneur means being open to learning more every day. It’s not about finding and applying the very best methodology, goals, and team. Simply pick something and get started. Keep your plan and objectives on the top of your mind. Schedule regular reporting as part of the process to ensure follow-through. Your life will get easier and you’ll find a better balance as you set expectations and manage the business against a set of goals and with accountable team members.

The best advice for entrepreneurs is to keep learning. Whether it’s from the words of wisdom written by business leaders or from your own mistakes. Growth-mindedness will keep you moving forward on the path to success.


Featured image via Burst. All images licensed via Burst licensing.

The Art & Science of Selecting a New System

Considering selecting a new system for your business? Whether it’s a new accounting system, CRM or ERP, here’s how to ensure your upgrade is a move in the right direction.

In the business world, we’re all about systems. Software and programs help us manage all aspects of our office life. But, of course, as time marches on, systems become outdated. If you’re considering an upgrade or update, there’s an art and a science to selecting a new system.

No matter which business system you are trying to replace, your process should always start with exploration. Before you consider selecting a new system, there are some basic questions you need to answer. I may sound like a broken Simon Sinek record, but nearly every business decision you make from acquisition negotiations to systems selection should start with why. Before starting the search for a system, analyze all the reasons why you are seeking to upgrade, replace, or add a new system for your company.

Often, the process of selecting a new system starts with researching on the internet to “find the best investment,” rather than an evaluation of what you are trying to accomplish with the new system. Research-first, ask why later is not a good strategy. You’re setting your company up for extra work, if not a failure.

Without identifying your needs and then evaluating how the new system will potentially meet those needs, you’re susceptible to the sales pitch and biases of the individuals involved in the selection process. Selecting a new system requires self-awareness and analysis—know what’s working and what areas of the business need attention. Be aware that a new system will not solve organizational dysfunction. It can, however, be used as a catalyst for change and improved efficiency you desire. This is why you must start with the big questions before selecting a new system.

Why are you going to invest in the new system?

Selecting a new system for your business operations is a big choice that take a lot of consideration
Image via Pxhere

The question of why is the most important one to ask at the beginning of any new business process. The most common reason for the selection of a new system is to improve the efficiency and the effectiveness of the business in some aspect. That’s a very broad umbrella and unless you define what that looks like in much more detail, the system selection or implementation goals will fall short.

Selecting a new system need not be a big project because, as you know, entrepreneurs tend to be action driven. In an entrepreneurial business, slowing down the action for some deeper thinking makes the entire process easier.

What are the considerations and outcomes expected in changing systems?

Depending on the size of your business, the amount of your day-to-day participation in the actual system change will vary. Depending on your delegation skills and preferences, you may be very involved or fairly hands-off. As CEO, you need to make sure your team has answers to their questions, especially the questions of why and what when selecting a new system and during the implementation process.

Before You Start Researching a New System

Before you start “Googling,” it’s important that you define the need. Are you looking for an accounting system, an HR system, a timekeeping system, or a fully integrated ERP system? Know what solutions you’re seeking and which systems you need to improve before you start your search. If your identified needs change during the process (you started looking for an accounting system, but see the benefits of the ERP), go through the full exercise of exploring why the change once again. You started with an initial rationale and now it’s different — why? Should you still go forward with the change?

Once you’ve explored the why, there are other questions you should explore as you assess your need for a new system:

    • What are our current processes and workflows? How will the new system revise the workflow, and do we have an evaluation and documentation process in place? Do we know the internal costs of our current processes? If not, how can we measure and assess any improvements?
    • Is there discipline and order in the existing processes? Does the right information get in the right place in a timely manner? If not, how will the new system improve discipline? Or, more importantly, how will we need to change our management and expectations to encourage this discipline and ensure success?
    • Are we only trying to eliminate manual processes or are we trying to improve the processes as well? If we “computerize” manual processes, have we missed out on an opportunity for improvement? Should we be following the current processes, altering them for efficiency or even eliminating them all together?
    • How will the selection and implementation impact existing business operations and how will we accommodate the disruption? Can we afford to pay our staff overtime during the new system implementation? What incentives might we consider for staff who puts in extra effort on the system?
    • How will the new system change impact our customers? Will they receive information faster? Will it be more secure? Will there be a lower likelihood of errors? Will our customers even notice the change?
    • If the new system is creating efficiencies, whether in processing or IT, how will we position those efficiencies within the current staff? Will they lose their jobs due to automation, or will they simply move to a different role and take on new tasks? What motivation will current staff have to help with the new system implementation if they could potentially lose their job?

Getting Ready for Selecting a New System

After exploring some of the challenging background questions about your company and the need for the new system, it’s time to start the process of selecting a new system. Once again, taking a deep dive on self and company-assessment on the front end will prevent many issues from cropping up down the road.

Here are some important areas to explore as you get ready for selecting a new system:

    • Have we defined what we need from the new system? What are the needs/wants/nice-to-haves that we will need to evaluate the new system against? Are there software comparisons and assessments online that we can use as an assessment starting point?
    • Do we have the right people defining the system needs of the company, to create a comprehensive view of the new system’s impact? Each department carries biases whether financial, manufacturing, marketing, HR, or another area, and these biases can affect their perception of the need for the new system.
    • As we’re selecting a new system, what is the budget range to meet our objectives? Should we determine a hard budget before beginning our search and selecting our new system, or should we seek information first to decide on a relevant budget range? What do we need to consider if we can’t find a new system within our target budget range? How will we determine Plan B?
    • Do we have the right on-staff talent internally to create a decision matrix and facilitate the review process for selecting a new system? Do we need to look externally for an objective resource?
    • If our company is buying a large system, can we request and schedule an onsite demo? In my experience, most demos now take place online. Not unlike those onsite in the past, every system manufacturer claims that “the system can do it all,” so buyers beware. Demand a demo when possible, especially for a large investment in a new system.

Smoothing the System Selection Process

Once you’ve decided on your internal factors like budget, staff, and workflow, it’s time to start selecting a new system. This process includes shopping around and narrowing down your choices.

Here are the steps for selecting a new system (especially) if you have several options to choose from:

    • Which systems are our industry peers and competitors using? Compare the systems not only of your direct peers but of businesses that are the size you aspire to grow into.
    • Do we need to select a new system that’s industry-specific? Do we need to integrate features for manufacturing operations or timekeeping? Will extra features and integration capacity add value to our new system or just complexity?
    • Are we seeking a fully integrated system or integration of multiple “best in class” options? What is the downline cost of each alternative – more conformance to the system, more manual reporting, or systems integration costs? Do the various best-in-class system options integrate and how complex is the process? If we decide on the best-in-class option when selecting a new system, do we have an IT team that can support the 24×7 nature of the new systems? Is our organization moving toward cloud-based systems or SaaS models? Do you prefer to host information as sensitive as finance and HR data? Do you have the system security protocol in place to protect customer data?
    • What are the reporting tools available in each of the new system options, and how do we expect to use the tools?
    • Can we quickly narrow down the new system selections to 2 or 3 choices and only delve deeply into the finalists?
    • Can we contact current users of the new software options and preferably visit them onsite to see how they actually use it? If not, why not?
    • Is the new system we’re considering the right size (cost and complexity) for our current company? Is it scalable to our growth, and will it support where we plan to be in the next 5 years? Can we use the new system in either its most simple or complex form? Are we buying a more robust system than we need or would ever use?
    • How will we evaluate the total cost involved in selecting a new system and the implementation process? Do we have benchmarks? (For example, multiply the system cost by 2 to estimate the additional cost of consulting.) Be sure to include hardware and software costs. Don’t forget the depreciation expense of the new system in your costing models. Areas that are often missed in the cost assessment are the testing regions needed before implementation of the new system and all the development to integrate the new platform. Whatever you estimate for hours, assume 2x. After selecting a new system, your business will likely change during the changeover and implementation process. Incremental changes will need to be accommodated that were not anticipated at the beginning.
    • What are the ongoing costs of the new system? Are there monthly per-seat costs, annual upgrades, etc., and what options do those costs include? In my experience, if you are comparing two or more systems on cost alone, you should consider a 3 to 5-year horizon. For example, if you have a first-year maintenance plan included on one and not the other, or if you need hardware upgrades or additional reporting tools to accommodate one of the systems, be sure to include those costs when selecting a new system.

Planning for the Implementation of the New System

Once you’ve decided on the best new system for your business, the next step is planning for the implementation. There are several assessment questions to explore that will help you create a smooth implementation.

Here are the questions to ask:

    • How will we switch to the new system–running a concurrent system for a timeframe or a cold cutover? Who will decide and what will the decision be based on? If it is a concurrent switch, there is an additional workload to consider? What kinds of testing and preparation are needed for the system change?
    • Do we need to convert customer and company data from the current system to the new system? Data conversion can be costly and time-consuming. It’s rare that data will convert seamlessly from one system to another.
    • Does your data need to be replicated to a database for reporting? Don’t forget to estimate staff time and efforts required for reporting.
    • Who will decide the staff training plan required on the new system and develop the documentation? How and when will process changes be incorporated into the system documentation and training?
    • What should our customers and vendors know about our change? Will the system change be transparent? Will customer or vendor interaction change? If there are differences, how will customers and clients learn how to use the system? Do we need to plan on training? What is the communication plan?
    • Which processes are we willing to change and adapt based on the best practices built into the selected system? Do we need to adjust a “we’ve always done it that way” mentality?
    • Can we move the data into the new system at the time it is created? Can we eliminate extra touches on the data entry process by authorizing appropriate access to the new system for any individual involved with the process?

Selecting a new system is truly an art and a science. System feature implementation varies by the personality and culture of your company. Some companies prefer to seek out ALL possible features available in the new system and attempt to implement the features into the company processes. Other companies may find the skeleton to be enough for their business at first.

Selecting a new system is a science, so make sure you're addressing every component
Image via Pxhere

Since most systems are designed around the common denominators, it will not meet all the needs/wants/nice-to-haves of everyone in the company. Remember there will be trade-offs when selecting a new system. Reporting and integrations with other software systems are often critical to the performance you want to achieve.

It’s important for leadership to be cognizant of the fact that new systems create change and change creates uncertainty. Uncertainty fuels the rumor mill. To counteract concerns and allay fears, as soon as possible, start the communication cycle on the new system. Start setting expectations and giving notice to those who might be involved in selecting a new system and in the implementation process. Explain the why and the what. Continue with regular status updates, both formal and informal.

As with any other new process, setting expectations is key. New systems do not solve business problems. A new system implemented with poor discipline and incorrect data simply means you get bad information faster. Cash flow problems don’t go away with a new system either. However, new systems, when implemented with due diligence on the front end will improve effectiveness and efficiency in the organization. Use the system change to your advantage; a new system is often the catalyst for changes you want to achieve.


Featured image via Pxhere. All images licensed for use via Pxhere licensing.

How to Create a Post-Acquisition Game Plan

Your business made an acquisition…now what? Navigating through post-acquisition territory can be a challenge. Here’s how to plan for this critical time.
Your company made an acquisition. Now what?
Now comes the easy part – NOT!!  Successful post-acquisition integration is more of an art than a science, but a solid implementation plan is critical.

Large companies typically have experienced integration teams that are trained to handle post-acquisition planning and still a significant number of acquisitions fail to perform as expected. Even with the right planning, running your company post-acquisition is a challenge.

How disruptive will the acquisition be to your day-to-day operations? The interruption often depends on the type of acquisition. If the acquisition is stand-alone, there may be little impact on the day-to-day function of your existing operations, whereas integration of a product line or acquisitions for economies of scale may be quite disruptive.

No matter what, as the CEO, you have a significant role to play.

Understanding the Impact Post-Acquisition

Any acquisition is culturally, economically, politically, and to some extent, personally disruptive to every team member of both companies. No matter how solid your team culture, expect some waves. An acquisition also creates uncertainty that often drives employees to exhibit self-preservation behavior.

 

Post-acquisition is the best time to sit down with your team and get on the same page for moving foward
Image via Pixabay

To counteract fear of change, it’s incumbent on leadership to communicate with the team. Clearly define the why and what of the acquisition plan. Work to create a shared vision and an environment of trust in the negotiation process. These actions will set up the basics for transparency and form a base of communication. Post-acquisition, this need for transparency still stands. Remember, once the acquisition is complete – communicate, communicate, communicate!

 

Timeliness of the communication during and post-acquisition is also critical. Immediately after the close, share the company vision with the entire team; explain the expected benefits for all members of the combined organization. Ensure consistent messaging throughout the entire organization.

Don’t make the mistake of assuming people will believe you. I was told that I would survive a merger at one point and, as you might imagine, I took a “we’ll see” attitude and covered my bases anyway. It’s instinctive for employees to protect their own interests.

Communication needs to be consistent, frequent, and ongoing. Err on the side of under-promising and over-delivering. To the extent possible, make any drastic changes within the first 30 days. Whether those changes include replacing management, eliminating duplicate positions, or selling off a product line, get the change over with! If there is unexpected bad news, be transparent explaining potential impact and your planned response.

If the acquisition is a stand-alone, you bought it (at least partially) for the management team; stay out of micromanaging operations and team communication. This does not mean abdicate. You should focus your role of bringing together the resources to gain the expected benefits such as purchasing power improvements or consolidated finance and accounting functions.

If the acquisition is fully integrated, the planning and process pre and post-acquisition are much more complex, broadly affecting the entire organization. Provide resources and tools to enable your team to implement the integration plan, optimize performance, and measure the benefits.

The Role of CEO Post-Acquisition

As the CEO, the team looks to you during a time of transition
Image via Pixabay

Chances are the acquisition was your brilliant idea, so now what?  In your role as CEO, you will guide the overall success of the acquisition. According to McKinsey, handle the integration well and you can expect 6 to 12% higher returns than those who don’t. Sounds hard, right? That’s why careful strategic planning is critical to your success.

Create DAY 1

As you negotiated the contract, certain performance will be required DAY 1. Creating DAY 1 means making sure that everyone hears the same message. DAY 1 is THE opportunity for a first impression.

  • Celebrate!!!! Whether individual events at multiple locations, a company sponsored lunch, a small gift or remembrance, or a giant teleconference, let everyone know DAY 1 is an important and exciting day. Acknowledge uncertainty, share pertinent details and set expectations. Explain the why and the what. Outline how the acquisition answers those questions.
  • Identify and introduce the integration team. Set the 3 top goals on the agenda for the transition.
  • Communicate directly with customers, vendors, and other stakeholders (using the stakeholder blog), prior to public announcements.
  • Issue the press release and let the world know of your new adventure. Use your social media platforms and website to share the message.
  • Perform formal onboarding for new team members.
  • If possible, meet individually with new team members and provide them with an overview of the vision, mission and their role in the combined company. Remember people often fear change. Explore their concerns and be prepared to address them as soon as possible. Be prepared for skepticism.

Pick Your Top 3 Post-Acquisition Goals

With your new management team, select the top 3 priorities for the post-acquisition integration. These should reflect the why that the acquisition answered. Once selected, engage SMEs (subject matter experts) in the areas of integration to build the timeline. This may mean directing Purchasing to renegotiate purchase contracts with your vendors, consolidating buying power, or conversion to a new ERP system.

Getting everyone to share the same vision and move in the same direction should occur within a 90-day window. The longer the timeframe it takes to implement, the more resistance the company may face internally. Don’t miss the opportunity to revamp and optimize systems. Limited resources mean selecting the best strategy to get the most done in the shortest time.

Pick the Right Team

Picking the right team for your post-acquisition goals is a key step in making an acquisition a success
Image via Pixabay

In my small company, my controller and I were the acquisition team. If possible, select people from both organizations as team leaders and make sure they understand the vision. Getting unbiased input is important, but you don’t need skeptics in leadership roles who are undermining the process.

Encourage the adoption of best practices from both organizations as the post-acquisition project plan is developed. As with any project plan, there should be SMEs involved from any area or subject affected by the acquisition. A detailed implementation plan is critical to successful integration. While a significant amount of the post-acquisition implementation can be boilerplate, it needs to reflect the negotiated items from the contract.

Lead!

Your team looks to you, the CEO, as the rudder of the ship. The team wants to know the captain has the situation under control. Set expectations, measure results, keep the end in mind as the company navigates through the integration. Celebrate milestones and share progress reports (good and bad). Communicate.

Engage heavily with the new management team members to develop their trust. Engage new team members with existing team members both formally and informally to foster relationships and collaboration. Encourage broad communication of the messages up and down the organization. Participate.

Throughout the post-acquisition integration, encourage discourse on best practices, issues, changing roles, expectations, and concerns. Listen.

An acquisition could be a smart move for your company, provided it’s approached with deliberate planning and an understanding of the struggles that will arise. As the CEO, once you’ve started considering an acquisition, your work as a leader has just begun. Clear, consistent communication and planning are key. With the right approach, your company can emerge stronger and even better post-acquisition.


Featured image via Pixabay. All images licensed for use via Pixabay licensing.

Acquisition Strategy: How To Prepare Acquisition Negotiations

To acquire or not acquire, that is the question. Before you set your acquisition strategy, you need to explore the reasons and benefits.

Companies seek acquisitions for many reasons, some of the most common reasons for acquisition are:

  • Geographic expansion in the same line of business
  • Consolidation of competition in the industry
  • Acquire R&D or other intellectual capital
  • Streamline operating costs by plant, people, and/or technology consolidations
  • Gain economies of scale in purchasing power, distribution channels, and/or market
  • Improve competitive advantage against larger players
  • Obtain a niche synergistic or complementary product
  • Customer acquisition

For smaller companies, facing a decline in organic growth often opens the conversation of an acquisition. Even if an acquisition opportunity drops in your lap, setting a solid acquisition strategy is important. Start the process by exploring questions on the “why” and the “what” of the acquisition. Lastly, exploring the “how” the acquisition will result in a better outcome for your company and employees, no matter how good the acquisition deal looks on the surface.

Exploring the Why and What of Company Acquisitions

Acquisitions are costly and often fail to meet expectations. They aren’t always the best answer for the company, so it is a good idea to thoroughly explore any alternatives available before you take the plunge. Examine the driver behind your desire for the acquisition. Have you considered lower-risk, alternative paths to achieving your goal without acquiring a company?

Some reasons for acquiring a company and questions to explore before choosing acquisition:

  • Slowing organic growth – Can you extend your own product line into new markets, new geography, or open to new customers? Can you buy a complimentary product line or open a new distribution channel? Can you cross-sell your other products in your existing markets?
  • Industry consolidation is making competition more difficult – Can you acquire, or can your company be acquired at a favorable price? Can you narrow your niche? Could you amend your product to address an additional niche?
  • Government regulations are creating higher cost burdens – Can compliance be outsourced to keep individual costs down?

Asking strategic questions will help you gain a new perspective. Analyzing why you want to acquire versus the alternatives will force a clearer picture of what you are really trying to accomplish. This exploration will help you to set parameters and define an ideal candidate for acquisition. This exercise will also help you avoid excess costs by eliminating those candidates that weren’t really a good fit to start.

In clarifying the “why” behind the acquisition, the definition of the “what” becomes clearer. The process of defining the “why” and “what” is often assisted by a business broker, lawyer, or other M&A professional. These professionals know the market, pricing, available deals, and businesses to approach and they can greatly assist in defining potential targets.

As you outline your acquisition strategy, it’s important to define what metrics will determine if the acquisition is a success. ROI is one measure, but not the only factor to examine. Consider other metrics that relate to the reason why. Did we succeed in accomplishing the why? Did it result in sales increases, overhead reduction, monetizing intellectual property, or was product line extension successful?

Setting Up Your Acquisition Strategy: Understanding the How of Acquisition

Search

After hiring a team of advisors, including an experienced attorney and business broker or M&A Specialist (usually dependent on the size of the deal), the process of identifying candidates that fit your criteria begins. These may or may not be companies that are for sale. The formal search might include competitors, existing or potential partners, and those companies presented by brokers. The advisors help define candidates that meet your criteria and assist in pricing evaluation.

Letter of Intent (LOI)

A businessman signs a letter of intent, which is an important part of an acquisition strategy
Image via Pxhere

After identifying a candidate and assessing their interest in a transaction, the LOI defines the basics of the transaction, stating the legal names of both parties and the intent or purpose of the transaction. It will include the stated intent (purchase the business), a purchase price, closing date, and specifics of price adjustments. It should also outline any special circumstances of the deal as negotiated. This is a legal document and should be drafted by an experienced transaction attorney.

Once the LOI is signed, both sides should be biased toward closing, not looking for ways out of the deal. There will be emotions and plenty of surprises during due diligence – not all of which should cause the buyer and/or the seller to walk. If you’re looking for the perfect deal, it doesn’t exist.

Due Diligence

Due diligence is designed to verify the investment thesis for the acquisition and in so doing, to drive the integration checklist. Depending on the size of the deal, due diligence may be carried out by outside advisor’s team or by the internal team, if they are qualified.

Acquisition Negotiations

Before starting the process, keep in mind that there are many concerns that may arise as your company prepares to make an acquisition. The negotiating process is the time to hash out these concerns. It’s important to keep in mind that negotiations are often broader than simply agreeing on the financial aspects of acquisition. Concerns that arise during the acquisition strategy and discussion may include:

  • Due diligence – extent, timing, data room availability, and control. Access to customers and vendors, employee involvement needed.
  • Personnel-related – position eliminations, benefits (insurance, PTO, sabbaticals, leaves of absence, etc.), golden parachutes, termination payouts, rewards for completing the transition.
  • Physical-related – closing or consolidating locations, inventory changes (obsolete, excess).
  • Assignments of contracts – leases, purchase orders, sales orders, software licenses.
  • Timing and type of notifications – press releases and their approval, employee, customer, and vendor notices, cash commitments, and delivery.

As I often say, an acquisition isn’t a DIY project. Having professional support drafting letters of intent, arranging due diligence, and negotiating deal points will ease the initial burden of acquisition.

Good representation and advice in the negotiation is critical to your overall acquisition strategy. Your advisors bring experience to the table. They’ve seen many deals and thereby understand the parameters. They’ll use their experience to help prevent mistakes and improve your negotiating position. A well-negotiated deal and professionally drafted documents assure that both parties are on the same page and agree on the specifics of the acquisition.

Having fair and knowledgeable representation during acquisition negotiations is an important part of a solid acquisition strategy
Image via Pxhere

In my personal experience, I worked on an acquisition with my boss, another owner, and their CFO in a small conference room. During the negotiations, the CFO and I both heard the same “yes” to a high-level point, but it was our responsibility to work with the lawyers to get the deal into the legal documents (as the bosses went to dinner). When we began to discuss the point, we realized we each heard a different “yes” based on the myriad of conversations with our respective bosses. In this case, “yes” didn’t mean the same thing, and we both had different interpretations of what each owner meant.

The lesson from this acquisition negotiation aided me greatly in future negotiations. It’s important to remember that agreements between the two parties need to be extremely clear. Outline the points, ask questions, reiterate for clarification. Do the detail work and get down to the nitty-gritty, rather than relying on generalizations. Extra diligence in the acquisition strategy and negotiation phase will help you avoid expensive renegotiation and redrafting down the road.

Your advisors will also have input on the types of clauses that are standard in acquisition and transactions. They will share where they saw pitfalls in the past, evaluation of pricing, as well as assistance in structuring debt and/or seller financing (if you don’t have as much cash sitting around as Apple). You just don’t know what you don’t know! Therefore, trusted advisors are vital to acquisition strategy.

In one of my acquisitions, the seller, a large local company, issued a press release stating we were closing the location. This statement was false, and I spent the first day post-acquisition on damage control. It is very important all key players are part of the acquisition strategy and negotiation. Again, your advisors offer transaction experience to avoid missing important transition items. Advisors will also typically suggest that you include a catchall clause in the contract to allow cleanup for insignificant items.

Building Trust and a Shared Vision

The details of the aforementioned acquisition strategy and negotiations will go much smoother if the seller and buyer can agree on a shared vision. The vision varies, whether it is a portfolio company, stand-alone add-on, or a fully integrated strategic combination. This sets the stage for a cooperative rather than adversarial relationship.

Combining two organizations is a complex process with many moving parts. In many ways, it’s not unlike a second marriage where the family grows well beyond the couple themselves (blood relatives, exes, steps, in-laws, etc.). If both parties focus on the success and benefit of the new organization, expected outcomes drive negotiations. Honesty and transparency lead to trust, which bodes well for the consummation of the deal.

Pitfalls to Avoid During Acquisition Strategy and Negotiations

There are many pitfalls, both legal and logistical, to avoid as you work through your acquisition strategy. Possibly the biggest pitfall isn’t due to a failure to plan out the moving pieces. One of the major stumbling blocks of an acquisition comes from a failure to consider the human and emotional side of the negotiation process.

People feel passionate about their livelihoods, especially when facing change. There’s often a great deal at stake for both parties. Beware of buyers and sellers falling into emotionally driven acquisition negotiations; these can happen in a few ways, but two of the most common are when:

  • The buyer often “falls in love” with the acquisition, thereby creating many blind spots in the evaluation of the potential acquisition risks. In this case, it’s the advisors’ role to keep the desired outcomes as defined in the why and what in the forefront of the conversation. It’s your role as CEO to listen to your advisors.
  • The seller, especially if an entrepreneur or founder, created the business from nothing, developed, and grew the business with years of blood, sweat, and tears. The sale of their business feels like they are selling a piece of themselves–their child. Deals fall apart if the seller did not thoroughly examine the “why” and “what” before they get to the negotiating table. Again, an advisor will help you navigate through these waters.

There are other pitfalls as well. Beware of poorly represented sellers who hire their “every day” advisors to work on a transaction that requires specific deal experience. Without knowing the standard and customary clauses and expectations, attorneys can derail a deal with unrealistic expectations. Even experienced attorneys can fall into the trap of forcing the abdication of a business deal point rather than protecting the point legally.

Beware of “fast-tracking.” If someone is in too much of hurry to close a deal, this should be a red flag. Consider a higher level of due diligence before the negotiations start. A party that is moving too slow is also a warning sign.

Setting up a strong acquisition strategy will lead to a successful deal for all parties. It’s important to the long-term health and well-being of your company that you maintain your reputation for fairness, honesty, and transparency throughout the acquisition.

Bring on trusted advisors to help steer you in the right direction with their insight and experience as you navigate the acquisition strategy and negotiation process. As a CEO, it’s your job to listen to your advisors and carry out a strong plan for the future of your business.


Featured image via Pxhere. All images licensed for use via Pxhere.

The Benefits of An Advisory Board

Wondering if an advisory board is a good move for your company? Implementing an advisory board is a great way to boost your company’s value.
What constitutes an advisory board? Who should participate on an advisory board? Is an advisory board the right fit for my business? While most private companies aren’t required to have a formal board of directors unless investors or their banks insist, advisory boards bring value to the business. Even if you are the sole owner of your company, there are many reasons why you should consider setting up an advisory board.

Definitions.net identifies the differences between a formal Board of Directors and an advisory board: “An advisory board is a body that advises the management of a corporation, organization, or foundation. Unlike the Board of Directors, the advisory board does not have authority to vote on corporate matters, nor a legal fiduciary responsibility.”

Why Engage an Advisory Board?

A well-selected advisory board adds significant value to your business. As a rule, any business can benefit from a group of wise and experienced outsiders who mentor, share successes and problems with the entrepreneur, and act as a sounding board. As an entrepreneur, you wear many hats and some hats fit better than others. An advisory board fills the gaps and provide guidance in areas where you have less knowledge and expertise.  Alternatively, you can form an advisory board for in-depth expertise in a particular area, such as forming a Medical Advisory Board if you are developing a new drug or medical device.

Considering an Advisory Board? Start Here.

A trustworthy board of advisors will help you put together the pieces of your business to help you achieve the visions you want for your business
Image via Pxhere

Who you are? Where you are in your business? What exactly do you need in terms of advisory services? Ask these types of questions to refine your thought process on an advisory board. Keep in mind, if you are not going to listen to the input of your board, don’t bother. An advisory board only works if you’re open to their suggestions.

Some questions to ask yourself as you consider implementing an advisory board:

  • Is your business growing? Do you feel you need input in areas outside your expertise such as sales and marketing or more technical fields such as engineering and accounting?
  • Are you considering a geographic expansion of your business? Are you looking for specific expertise in the expansion process itself or knowledge in the new geography?
  • Do you need help on the execution side of your vision?
  • Is industry upheaval requiring more specific industry insights?
  • Are you preparing for an acquisition, product launch, or other significant business change and seeking to avoid missteps?
  • Is your business in a rut? Are you out of new ideas?
  • Has a new competitor moved into your market and you need help responding to the new competitive landscape?
  • Is business running smoothly and are you just looking for suggestions to incrementally improve or monitor progress?
  • Are you willing to be open and honest about your company with outside advisors or will you hold back?
  • Can you deal with honest feedback – no matter what?
  • Can you accept change for the business, even if it goes against your likes and wants?
  • Are you organized enough to follow through on planning and preparing for the advisory board meetings to make productive use of board members time?
  • Are you primarily looking for mentors, a sounding board, accountability, help in dealing with issues, or a specific issue?
  • Are you willing to broaden your thinking based on the insights of the advisory board?

I repeat, if you aren’t going to listen (even though the final decision to implement the advice rests with you) then don’t bother!

Understanding The Who and What of the Advisory Board

Who should sit on the advisory board?

After defining the purpose of the advisory board, the first characteristic to consider is expertise and experience for the role; members who can bring an outside perspective and judgment. Defining what is outside may require thinking broadly. Board diversity brings value, as a Credit Suisse Research Institute study of 2,360 companies showed. Those with at least one woman on the board performed 26% better than comparable companies did. Seeking out divergent opinions is important. Depending on the reason for the advisory board, types of diversity might include differences in geography, social status, technical skills, risk-taking temperament, industry, gender, national origin, etc.

Like your company culture, diversity on your advisory board brings value, whether better understanding your customer, your business, or just improving financial performance. In a diverse board of advisors, not everyone has to be an extrovert – just willing to state their opinion. Often introverts bring additional insights. Using a tool like DiSC or Myers Briggs to assist in communication across diverse members might also be helpful.

While each member of the advisory board should be committed to your success, if you seek only those who agree with you and offer a similar perspective, there’s not much point in forming a board of advisors.

What does an advisory board look like?

Selecting members for your board of advisors might be a challenging process, but having diversity in opinions is a benefit
Image via Pxhere

A highly effective advisory board needs chemistry and operates within a culture of trust. Effective boards function with dissension and candid conversation. This isn’t easy. Susan Scott’s book “Fierce Conversations” provides tips for getting there.

Advisory boards are not ad hoc events. To be respectful of members’ time and gain insights, highly effective boards of advisors have:

  • A focused objective.
  • A definition of quality participation and contribution expected.
  • A defined term of service (2 or 3-year terms).
  • 3 to 8 members.
  • A deep respect for the knowledge brought by each member.
  • Meetings regularly (quarterly) for a specific duration with a formal agenda and a 12 to 18-month schedule.
  • Agendas and needed prep work distributed with adequate time for review.
  • A standard format for materials provided that is of an appropriate quantity and quality to serve its purpose (unbiased summaries and quick visuals).
  • A trained facilitator or chairman keeping focus and timetables.
  • Periodic communication on “hot topics” and regular business updates.
  • Opportunities to develop personal relationships (dinners, events, outings).
  • A compensation plan (ranging from paying for travel and lodgings to actual money).
  • Members that aren’t employees; outside professionals minimize any self-interest.
  • A plan to disband after completing objectives and retire members who are no longer contributing.

Creating the Advisory Board

After the self-analysis and formalizing the process, you are ready to draft the charter that will clearly communicate the expectations for the board of advisors. Be thorough in your thought process so expectations are clear to those you will approach to join the advisory board.

The charter might look like this:

My company seeks to improve profitability and growth through a six-person board of advisors. Individuals who can contribute will bring technical and industry expertise and have a record of accomplishment. The responsibilities of the advisors:

  • Contribute expertise and ideas to support growth and profitability, as well as the ability to address other issues as they arise.
  • Attend four meetings per year, at least one in person.
  • Review monthly reporting package and be available for questions.
  • Prepare for the quarterly meetings in advance.

The term of service is at least one year, and compensation includes travel and lodging expenses and a stipend of $1500 per year.

The charter may be expanded if there are specific additional considerations (for example, reviewing and commenting on FDA paperwork in the case of a new drug).

To recruit for the advisory board, use your network and those of colleagues. Seek out potential members while keeping in mind the criteria previously identified. A high-functioning advisory board can move your business forward quicker and more successfully than you alone are likely to do. Giving serious consideration to creating an advisory board is the right move for many companies.


Featured image via Pxhere. All images licensed for use via Pxhere Licensing.

How to Successfully Take on A Business Partner

Are wondering how to take on a business partner smoothly and successfully? There are a few steps to help make the partnership process easier on the company.
The horror stories of business partnerships gone awry, often sound like bad divorces. Most of these stories serve as cautionary tales as to why we should never take on a business partner.  Of course, it’s possible to start and grow a business without partners, but there’s also nothing wrong with a good partnership. So should you take on partners and if you do, how do you create a good partnership?

The decision to take on partners is your choice alone. Look at the future of the business, your capacity to take on another executive, and carefully weigh the pros and cons. Once you decide to take on a business partner, follow the steps below to ensure the onboarding process is a smooth one.

Note: Partnership here refers to two or more people who are starting/heading a business not the legal form that could refer to several structures from a Corporation to LLC to traditional Partnership.

Change Your Vocabulary and Mindset About the Business

When you take on a new business partner, it's necessary to change your view of business ownership.
Image via Burst

Notice I said “THE” business. If you take on a business partner and you continue to refer to it as “your” business, you set the stage for failure. When you take a partner, the company is no longer just “your” business; it becomes either “the” business or “our” business. The words “our business” conjure a different perception. It may seem like a minor adjustment, but this small change in vocabulary helps shift your mindset toward keeping decisions broader and less personal.

Engage Professional Help as You Take on a Business Partner

Unless you hold a law degree and ample experience in business law, taking on a business partner isn’t a do-it-yourself project. The professionals will help hammer out the details and a trained legal eye can identify key clauses needed in the partnership documents to serve as a starting point for negotiations. The final partnership agreement will encompass legal and tax requirements as well as buyout and other options for exiting the partnership. Protect the company and yourself by putting all partnership documents in front of an attorney.

Iron Out the Details Up Front

It’s often much easier to define all aspects of the partnership before there is real money involved. If the partnership is for an existing business, the steps are the same. At any point in the partnership process, you may decide the union isn’t working. Perfect!

The process outlined here does entail a great deal of work up front, but setting clear expectations will pay off. Most of us would agree that the costs of comprehensive analysis are much less than the legal battle of a failed partnership. Before you begin, you may also want to retain a facilitator for the process. Using a facilitator as you take on a business partner ensures the discussion is thorough and all decisions are documented.

Steps to Successfully Take on a Business Partner

1. Agree on the vision.

It’s crucial to define the business in legal documents but running the business day-to-day requires a shared vision. Partners should also be on the same page regarding the mission of the business as well as the balance of their personal lives. Consider the vision for both the long-term and short-term. If you are the type of person who lives to work, and your partner works to live, identify how that affects roles, responsibilities, equity, and so on, as you form the details of the partnership.

2. Define the exit strategy.

The discussion around an exit strategy is likely to expose differences in the expectations of partners for the business as well as identify differing long-term intentions of the partners. As you discuss the other aspects of the agreement, you may circle back to this conversation multiple times. Expect the perspective to change as you go through the process. Revelations that arise as you define the exit strategy may kill your deal.

3. Agree on the business plan.

When taking on a new partner, it's important that both partners agree on a business plan going forward. Does your new partner share your vision?
Image via Burst

Define the steps required to make the business a success. What is the business plan? Do you and your potential partner agree on market segments, distribution channels, forecasted revenues, expenses to support those revenues, funding sources, and cash flow projections? Other business decisions to include in the business plan are: first hires, the team needed, and the plan for ramp up. These topics should generate vibrant discussions to identify differences of opinion that should be resolved. Exuberant support of varying positions will add helpful perspective, and the resolution of any conflicts is an important part of the partnership process.

4. Identify the roles of each partner.

Once you know (or think you know) what the business needs, define the roles required to make it happen without identifying who will take on the role. Common roles are sales, executive, administration, accounting, IT, engineering, manufacturing, and customer support. What roles did you define as needed in the business plan? If you are taking on an add-in partner for an existing business with a team in place, this discussion is the same – defining the roles of each partner.

What does the role of partner mean? What are the responsibilities under the partnerships and what is the level of authority? What is the reporting hierarchy?

For example, a simplified engineering role may include:

  • Maintain knowledge of all relevant product safety rules.
  • Meet regularly with manufacturing to improve product quality and ease of production.
  • Provide drawings and bills of materials for all products.
  • Propose changes to the product to meet safety rules or to enhance production.
  • Report to Engineering Manager.

In a small business, a partner might take on the roles of both the engineer and engineering manager. The engineering manager has a role and reporting structure as well. When an existing company takes on a business partner, much of this legwork is already complete. The definition of roles should clearly designate the ultimate authority of each role.

Assigning the roles to partners involves matching skill sets. It’s important when you take on a business partner, you balance the workload (to the extent possible) and clearly define how the authority is distributed; budgeting, spending, hiring and firing, are just a few examples.

In defining roles and dealing with the perceptions of the work involved in a role, recognize the different requirements as well. For example, accounting may require more hours than sales, but both teams contribute to the success of the company.

5. Agree on the components of equity.

After all of the roles are defined, the partners have a clear understanding of what they are looking for, and the commitments they’re willing to make, it’s time to talk “equity.”

  • Ownership Structure – Ownership structure should follow contribution to the business. In a 2-person partnership, often ownership is assumed as 50/50, and rightfully so. However, a 50/50 partnership may lead to a predicament even with an arbitration clause. Consider instead an equal partnership at 49/49 with an outside 2% holder as a swing vote in case of an impasse. Use caution and diligence to choose the 2% holder carefully.
  • Work Equity – In theory, after all the legwork above and a periodic review, you and your partner will agree what equity looks like and avoid the argument of who is doing more work.
  • Compensation – This is a corollary of work equity. Having defined roles and responsibilities, benchmarking compensation will help avoid future difficulties. Entrepreneurs should budget and pay compensation to all active partners (including themselves).

The Benefits of Taking on a Business Partner

The benefits of taking on a new business partner are sharing ideas, achievements, and setting now goals while growing your business
Image via Pixabay

Is it worth all the work to take on a business partner? Only you can decide what’s best for your business, of course, but in most cases, the right partner compliments you and brings additional value to the business by:

  • Providing a sounding board for new ideas. Whether taking on a devil’s advocate role or simply by bringing a perspective from a different background, your partner has a stake in helping you make better decisions.
  • Offering additional capital if you can only bring your idea to fruition with more money than you have, and loans aren’t an option.
  • Bringing needed talents and skills. Entrepreneurs often wear too many hats and rounding out your expertise grows your business faster and better. If you are visionary and details bore you, a detail-oriented partner will increase the probability of success (possibly while driving you crazy, but remember it’s all about balance).
  • Challenging and energizing the business. Entrepreneurship is difficult, facing obstacles with a shared vision and mission enables you to have challenging conversations while still remaining enthused about the business.
  • Sharing responsibility. While employees also lighten the load, a partner makes developing the business a shared experience.

Taking on a partner is a huge step. Katie Felten of Strategy House expressed it this way: “Yes, having a partner has been transformative for me… (we) created a rock-solid operating agreement, and talked through the what-ifs of things not working out early on. We are aligned in our business growth goals and have very complementary skill sets. We each do what we love and what we are good at every day and appreciate that the other takes on aspects of the company we wouldn’t want to spend time focusing on.“

Of course, when considering if it’s the right step to take on a business partner, many of us focus on the risk of loss when we should objectively evaluate what we can gain. Would you rather own 100% of a $1 million business or 50% of a $3 million business?

Evaluate what you think a partner brings to the table and force your thinking toward focusing on the gain, not the loss. The process is designed to ensure you are on the same page and the partnership will last, creating a successful future for your company.


Featured image via Pixabay. Post images licensed for use via Burst and Pixabay usage rights.

Let’s Talk KPI Basics (Key Performance Indicators)

Trying to understand the basics of key performance indicators? KPIs are a powerful tool to help your company set goals, track and monitor performance, resulting in stronger outcomes.
There is much discussion of key performance indicators: what are KPIs? How to set KPIs? How to organize your dashboard? Let’s clear up some of the confusion as to what KPI means as well as discuss how to choose YOUR key performance indicators for YOUR dashboard.

Key Performance Indicators, or KPIs, are a powerful tool to motivate and measure success. Typically, KPIs are used in business as benchmarks. But the concept of KPIs can be confusing and vague. Today we’ll clear up the confusion and discuss what separates the good KPIs from the bad and the ugly.

KPIs are indicators of performance across your company and are helpful when displayed as reports and graphs to determine if your goals are being met
Image via Pixabay

Let’s start with a definition of Key Performance Indicators: KPIs measure performance success against a goal. Success is typically defined as the achievement of a specific long-term goal, or simply the repetition of a period’s achievement of an operational goal.

So, choosing the KPI that best represents the desired objective requires a deep knowledge of the business and the objectives. A quick report of the status of KPIs is called a dashboard.

Often, dashboards use short-cut visuals to hone in on performance. For example, in a typical dashboard, red might represent a KPI behind by at least 10%; yellow, one falling behind, and green meaning KPI is on/above the target. In sales, individual goal achievement might be visually represented by racehorses (or another icon) staggered, based on the percentage of goal achieved or sales dollars produced.

What Are Good KPI Examples?

Common attributes of a good KPI include:

  • Well-defined, measurable information that is readily available or can be cost-effectively obtained,
  • The KPI measures a factor that has a direct impact on a specific goal or long-term performance,
  • The KPI is effectively communicated throughout the company, cascaded to responsible departments, and
  • You can act on the indicator, holding team members accountable, when performance digresses from the goal

Measure KPIs in context and by that, I mean: define “compared to what?” If the KPI supports a strategic objective or specific goal, how does the KPI compare to that goal? For example, an internal goal of maintaining all accounts receivable under 90 days would then compare the receivables over 90 aging to the goal. Or, if the goal is to increase sales by 10%, then the monthly goals of calls, quotes, and orders expected as compared actual performance would be reflected on the dashboard.

Defining Good Key Performance Indicators

A recent visit I had with the commercial lenders at a local bank underscored the same dilemma I faced when I was running a business. What is a good KPI? With limited resources, how do I identify and track the best KPIs?

In my opinion, every company should track basic metrics:

  • Margin (preferably by product line or in construction, by job) is sales less related costs of goods sold. Measure margin against an industry standard, historical performance or other similar benchmarks. Trends or performance against the industry metrics may indicate pricing or performance issues which need to be addressed.
  • Pipeline means the sales you expect to close. Typically, measure the pipeline against history using the sales funnel (the percentage of quotes that convert to orders). Trends in the pipeline foreshadow future sales.
  • Backlog indicates how many incomplete orders you have now compared to your normal level of outstanding orders. This trend may show future customer discontent or a slowing/improving of your sales.
  • Lead Time is defined as how long it takes to get the customer the product from the time of the order. Compare to historical levels, industry standards, and competitor information.
  • Financial Performance & Ratios Include a series of pertinent financial data and ratios as part of the financial review process. Simply adding a couple of formulas to the monthly financials provides the information. These indicators fall into categories of liquidity, activity, leverage, operating and asset productivity. Measured against industry and historical standards, trends are often the harbingers of what’s to come.

As you establish the Key Performance Indicators, keep in mind when measuring departmental or any other performance, the company must still function as a whole.

Mapping out KPIs with your team can help manage and track team performance and determine how and why goals are or are not being achieved
Image via Pixabay

Incentives and performance integrate across the entire company. If the warehouse manager’s KPI to increase inventory turns results in production shut downs due to lack of materials, you created what’s called a perverse incentive. This could also indicate your warehouse manager is very bad at the job or the tools aren’t in place to manage the inventory properly. In all cases, the KPI gives you an area to address – the incentive; the inventory management; the tools available to measure and manage; and possibly a production issue.

How to Select KPIs for Your Business

KPIs come in all sizes and types and there are hundreds, perhaps thousands of them. How to choose?

Guide your decision by keeping in mind: the availability of data, team member workload, internal dependencies and costs to help focus on the most important tasks at hand. Depending on what fits best with your business, there are several approaches:

  • Simply start with the Company KPI measurements described above to get your feet wet on data collection, reporting, accountability, and response.
  • Select what you believe is your biggest performance issue and look at what drives it. For example, if you decide revenues are too low or falling, contributing factors could be the volume of sales, pricing of sales, ticket size, lack of upselling/cross-selling, customer selection, number of SKUs, the conversion rate of quotes, number of sales calls…and the list goes on. Since you know your business intimately, you can probably select the top one or two items that might move your revenue number, such as, revenue generated by day per construction worker as a benchmark. Decide on and set the realistic goal (historical company information is useful, if available) – another not-so-easy task. Once the goal is set, assign responsibility and start measuring the driver against the goal.
  • Get your CFO or Controller to analyze existing data over time. This data may include trends in margins, revenue per person, or other readily available financial measures to help identify any negative trends. Then select what you believe is the most impactful – similar to above– and address it.
  • If you have an annual plan and/or budget, break down the objectives in the plan into daily, weekly, or monthly goals cascading into the departments that contribute to the success of hitting the target objectives.

Establishing a KPI Dashboard

establish a KPI dashboard to keep clear track of your KPIs and track your progress towards new and better goals
Image via Pixabay

After selecting your KPIs, consolidate them into a dashboard. A dashboard sounds complicated, but it’s simply the place where you put the KPI objectives along with the actual performance. This may be tracked in a physical location or tracked as part of a shared software program used by everyone in the company.

Each level of the organization that has accountability will have a different dashboard with the highest consolidation at the Company level. For example, the sales department will have a dashboard possibly detailing performance by the individual, whereas management will have sales at a summary level that evaluates all of sales performance against the total objectives.

At any time, your dashboard should give you a full picture of where the company stands and where each department is performing based on their goals. The dashboard changes in real time, with regular updates to track performance. It’s important to delegate and assign the responsibility to department heads or other parties to ensure KPIs are regularly monitored, tracked, and reported on the dashboard.

Establishing the RIGHT KPIs is no easy task. It’s important to adjust as you go and select indicators relevant to your company. If you’d like to learn more about KPIs, you can even become KPI certified.

While implementing a KPI system may seem intimidating, it’s best to simply pick an indicator or data point and start. Starting is daunting, but as you get used to the process and your data collection becomes more meaningful, you can refine your business measures. When done correctly KPIs are a powerful tool in your management arsenal and can help you succeed in setting greater goals for your company.


Featured image and all post images licensed for use via Pixabay.

Employee Onboarding & Orientation: How To Prepare Your New Hire for Success

Employee onboarding is an important aspect of running a business. Here's how to have a successful employee onboarding process.
In today’s tight labor market, employee onboarding has never been more important. It’s often challenging to find and hire the right people for your company.  When you finally hire, it’s essential to have processes in place to help him or her succeed. 

So, you’ve hired the perfect (or near-perfect) employee and they’re ready to start their new and exciting position with your company. Now what happens? Effective employee onboarding is critical to seamlessly integrating new hires into everyday operations and company culture.

If you’re wondering just how important employee onboarding is, put yourself in the mindset of a new employee:

Don't leave your new employee feeling like everyone forgot it was their first day. Make sure to have an employee onboarding process in place for new hires.
Image via Burst

On a typical first day, you show up and show up are greeted by a busy receptionist who says, “Oh, you’re here. I’ll take you down to HR.”

After a deluge of paperwork, HR escorts you to a supervisor who says, “I’ll see where your desk is,” only to end up plopping you into an empty cubicle, noting that your computer should arrive in a day or so. For now, well…. “Here, just sit tight, and I’ll check back with HR.”

As the new employee, you’re probably thinking “What did I get myself into? Did they forget I was starting today? And where is all the excitement they expressed about bringing me in as part of the team?!”

Always remember, for new employees the first day on a new job is exactly like any other first impression – and first impressions matter the most.

When I began a new job in 1982 at Aqua-Chem, I was greeted warmly and welcomed into a fully stocked office with my very own business cards, printed and ready to go. Introductions to my team members were a success and I had a pleasant conversation in the Controller’s office where my expectations were set. To this day I still remember how truly welcomed I felt. My amazing experience is how I knew I had made a great decision and was working for the right company.

Guidelines for Great Employee Onboarding

With varying opinions out there about what qualifies as a positive hiring experience, it seems tough to find clear employee onboarding guidelines.

In the book “You’re Not the Person I Hired! A CEO’s Survival Guide to Hiring Top Talent,” authors Barry Deutsch, Brad Remillard, and Janet Boydell provide useful guidelines for helping new team members feel welcome. This book is an excellent resource. I’ve personally used this book as a guide to establish my own company’s orientation manual and I’ve seen the amazing results throughout my career. The authors recommend a standard orientation process and a straightforward manual as the two key parts to success in the employee onboarding process.

Develop (and Adhere to) a Standard Orientation Process

Orientation is an important piece of successful new employee onboarding. The orientation process should be well documented and available to everyone in the organization. A smart place to store this information is in the company handbook. This establishes the importance of the process and makes the information accessible to anyone in the company. Although the handbook and process outline should be available for all employees, who is involved in the orientation process itself will depend on the size of your company. For a small company it may involve everyone but, for a larger business, it may only include one specific department.

Develop an Orientation Procedure and Manual

This is a one-time investment that will pay big dividends. Effective employee onboarding relies largely on a well put together orientation procedure and manual. After the candidate accepts the job offer, recognize the internal questions they will likely ask themselves: Will this really be right for me? Is leaving my current job a good thing? etc. This is the perfect time to confirm they’ve made a great choice to work for you.

I would encourage your company to create a standard orientation process as well as a personalized manual and procedures right away. Each part should include important steps as well as clear and easy-to-follow guidelines. This should be done before your new team member begins.

How to Prepare BEFORE Your New Team Member Starts

1. Send a Gift

Shortly after the acceptance of your job offer, send a gift to the new employee’s family and/or spouse re-confirming how excited you are to bring them on board. (Define this process for your company and assign responsibility within the procedure.)

2. Craft a Memo for Current Employees

Draft a memo to introduce the team member to existing staff. The employee onboarding process is sometimes tricky and navigating the best ways to ensure both the new and existing employees are happy is no easy task. Consider the expectations of current team members and proceed with caution not to oversell.

An employee onboarding memo might include:

  • Special qualities of the new team member and why they were chosen to fulfill the role.
  • Some interesting outstanding qualities and characteristics of the new team member.
  • The “stats” and how they will contribute to the team.
  • Reasons management likes him/her.

3. Prepare their Workspace with Necessities

Workspace essentials like a tablet, notebook, pen, paper clips, and a cup of coffee.
Image via Burst

Prepare their workstation with all the needed supplies, keys, security cards, and business supplies they may need. Don’t forget to add a touch of CELEBRATION to the space as well! Whether it’s a balloon, a banner, or a small gift, good employee onboarding should help the new hire feel special. A list of team members in the department, as well as those they might work with in other parts of the company, along with a brief description of their roles/responsibilities and types of questions they might answer, should also be included.

4. Schedule Time for Paperwork

Arrange a separate time and place for the overview of benefits and completion of new hire forms (the more general paperwork should be completed online prior to start). Typically, employees will need to provide copies of their identification and bank information (for direct deposit). It’s always helpful to request this ahead of time, so they can be processed with HR before their first day. You may want to offer them access to the copier, so they can copy and scan the materials they need for employment.

5. Define Clear Responsibilities

Remember to delegate tasks and define responsibility (generally the direct supervisor) for preparing for the very important discussion with the new team member by:

  • Reviewing and updating the job requirements and work rules.
  • Developing a draft of the training plan based on the job requirements, previous experience, and any strengths or weaknesses revealed in testing, if applicable.
  • Preparing for a specific discussion for work standards, responsibilities, authority, reporting, and expectations.
  • Other information that the new team member may need such as product, customer, role etc.

6. Define Expectations for Existing Hires

Define the expectations for the current members of your team like determining any expected interactions the new hire may experience with certain employees as well as preparing existing staff members to understand their role in the employee onboarding process/how they ‘re expected to help.

Remember: You should do all of this is BEFORE the new team member arrives!

How to Give Your New Team Member a Great First Day!

Once your team member arrives, it’s important to welcome them and set them up for success. This portion of the employee onboarding process sets out the general objectives of the orientation program and establishes the timeline for accomplishing them. Depending on the scope of influence of the new team member and the size of the company, this may take anywhere from 1 to 3 days.

Set specific objectives for each day as well as a detailed agenda to follow the flow of the day and topics each person will cover. (Check out this sample orientation guide attached here.) A few of my recommendations for the team member welcome phase are:

1. Implement Employee Onboarding Immediately.

Okay, this one may sound obvious but it’s important to remember the process you need to complete to successfully accomplish your goal of bringing on a new employee. The actual start of work is exciting for everyone but can also be disrupting for the team.

Keep in mind, you’re not only making a good impression on the person starting, but you’re also reinforcing your cultural mores, confirming expectations and revisiting what it means to be part of the team for existing employees. Keeping the excitement and interest up for everyone is key. Following the orientation guide will assist with keeping things on the correct employee onboarding track.

2. Start on a Wednesday

Maybe it’s been some time since you started a new job, but trust me when I tell you, it’s hard work! The first week is extremely overwhelming and starting on a Wednesday allows recovery time for the employee. They’re given the weekend to take in all the new information they’ve recently learned. Time to settle in is one of the key concepts of employee onboarding and new job training.

3. Begin the Day with a Tour

Whether it’s the Supervisor or CEO, the person responsible for giving the tour must convey the history and culture of the company. The tour should involve brief introductions as well as cover the physical locations of important areas like the lunchroom and other facilities.

4. Encourage Team Building

New employees meeting their team for the first time is an important step in a new hire feeling welcomed into the workplace.
Image via Burst

New job, new people, new everything. Helping the new team member to feel welcome while engaging the current team to help in doing so is important. Fun yet focused introductions will make the new team member feel included as well as encourage participation by everyone.

My choice was to bring in lunch for everyone and give each person a chance to introduce themselves (new person last) while also sharing something personal (i.e. they have four dogs, or they go to Mexico every February). I wasn’t the leader who organized a cool scavenger hunt, BUT I understood the importance of engaging the new team member to meet and get to know their peers across the company.

Team building exercises and sharing fun facts are entertaining ways to help new employees get familiar with the faces of the building and get a first-hand look at the culture of the company through finding the answers to questions like which employee’s spouse is a stand-up comic? (No one in Wisconsin would use Who is a Green Bay Packer fan?)

5. Set Clear Expectations from the Beginning

Provide a tailored 90-day performance plan with weekly (at the beginning) and then monthly milestones allowing the supervisor to track progress and recognize training needs. The new team member should have clear objectives and, depending on the uniqueness of your business or product, there may be a bit of initial training as well.

6. Every Little Part Matters

Remember it’s all about how you make them feel and if a quantitative person like me buys into it, you know it must be true. Strong employee onboarding processes will help new hires feel welcome, appreciated and engaged from the beginning which sets the stage for job satisfaction.

Remember: Employee Onboarding is Only the Beginning

Getting the new team member started on the right foot is just the beginning. Orientation is only one part of achieving the employee onboarding process. Do research and take a look at other, more out of the box and creative ways to conduct employee onboarding and don’t forget, keeping an entire team engaged and motivated is even more work, so plan ahead and get ready!


Featured image and all post images licensed via Burst.

 

 

The Unique Challenges Faced by Women Entrepreneurs

A businesswoman looking confident and smiling, standing in front of a whiteboard in an office space.
All entrepreneurs face challenges, but women entrepreneurs have several additional obstacles to overcome. These four big hurdles can be addressed and tackled with a pragmatic approach.

Every entrepreneur faces challenges. As outlined in this great article Top 10 Challenges Today Faced by Entrepreneurs: Solved, many of the challenges are addressed with common sense solutions.  But there are unique challenges faced by women entrepreneurs that need to be further addressed.

These additional challenges faced by women entrepreneurs fall into 4 broad categories:

  • Acting outside social norms and stereotypes
  • Owning your competence
  • Lack of mentors and role models
  • Access to capital/investment

In general, our culture “hears” women differently than men. I’ve had a great deal of personal experience in this area (being a women entrepreneur myself) and I’ve observed this phenomenon innumerable times in senior management and board meetings. A woman offers a suggestion that “isn’t heard” and the same concept is then repeated moments later by a male colleague who is recognized for the excellent suggestion. (I will also add the caveat in a few of the cases I observed, a man did rightly point out his co-worker originated the suggestion, but this is unfortunately not always the case.)

Cultural expectations are deeply embedded and hard to overcome. As I explored this topic, the underlying cultural norms and expectations seemed to be at the source of each of the hurdles faced by women entrepreneurs. Nevertheless, there are simple, pragmatic solutions to overcome these challenges.

The Four Challenges Faced by Women Entrepreneurs

Acting Outside Social Norms and Stereotypes

As much as we may hate to believe it, culture often stereotypes characteristics by gender. Our brains seek patterns to make sense of situations and bring order. These patterns often lead to generalizations and a tendency toward stereotype-confirming thoughts. This phenomenon is also known as implicit bias. We may think we don’t fall prey to this common thinking pattern, but implicit bias often influences behavior so subconsciously, we don’t even recognize it happening.

In the recent Supreme Court case Pricewaterhouse v Hopkins, Ann Hopkins argued the firm denied her partnership because she didn’t fit the partners’ idea of what a female employee should look and act like. In this case, after hearing her argument, the Court agreed, Ms. Hopkins indeed didn’t fit the stereotype of demure, quiet, patient,well-coiffed woman who took a “course in charm school.” However, she was extremely well qualified to become a partner, frequently outperforming male counterparts.

A woman business owner standing in her shop, looking proud and accomplished.
Photo by Sarah Pflug

Implicit bias comes into play as our culture (spurred by the media) perceives a successful entrepreneur as a brash young man–usually a Harvard or Ivy League school dropout. Think of the typical Silicon Valley wunderkinds Larry Ellison and Steve Jobs, for example. This stereotype creates additional hurdles for the woman entrepreneur, whether she’s working in tech, finance, or any other field. While our culture is certainly shifting and changing, as women move into more executive roles, female entrepreneurs are still judged with a harsher eye than their male counterparts.

Women frequently encounter questions no one would consider asking a man in a similar situation. These inappropriate questions often revolve around how they plan to juggle and handle the other roles in their lives. Yet, when we imagine asking a man how he will handle his responsibilities as husband or father in an interview, the picture is almost laughable. The mere thought of these questions directed at a man creates cognitive dissonance. We should, however, remember those types of questions, legal or not, seep into women’s lives regularly. In one of my own interviews, the interviewer asked, “How does your husband like having a part-time wife?” And, even more unimaginable–I attempted to answer!

There is a fine line when it comes to bucking stereotypes. It’s important to accept that blazing trails is a hard, slow process. The best course of action is to simply be yourself, accept yourself and be aware of this obstacle, especially in your own interactions with women entrepreneurs.

Owning Your Competence

Numerous studies, as well as personal experience, show women don’t promote themselves enough. Humility, meekness, and acceptance are all feminine qualities most of us were taught to embody (whether by our parents or society). Women are often taught it’s wrong to brag, boast, or come off as too forceful. Many of us are filled with self-doubt and shades of imposter syndrome. Even when we find success, we may feel we don’t deserve it, or we arrived there by a fluke.

Hillary Genga (founder and CEO of Trunkettes) says, “You made it to where you are through hard work and perseverance, but most importantly, you are there.” Own it.

According to an Inc. magazine article, 30 Surprising Facts about Female Founders, as well as numerous other studies, businesses experience higher financial performance when women are on the Board of Directors or in Senior Management roles. Many theorize this fiscal success relates to women’s tendency toward fostering teamwork as a leader. I would also presume women’s high level of organization due to their additional roles outside of work is a factor in their success as well.

Recognize the value you bring and don’t be afraid to talk about that value. As Molly McDonald (founder and CEO of The Mobile Locker) says, “When I talk about the company… I always find myself saying ‘we’ instead of ‘I’…I am making an effort to own what I’ve accomplished.” You can own what you’ve accomplished as a women entrepreneur, too.

Lacking Mentors and Role Models

Two businesswomen working together on a project.
Photo by Matthew Henry

According to Inc. almost half of female founders say a lack of advisors and mentors limits their professional growth. Yet, successful companies now recognize the importance of women in leadership roles. Women offer unique approaches and tend to be thoughtful, emotionally intelligent leaders. Supporting women both at the top and on their way to the top is very important for their success and the success of the company. Unfortunately, there’s a lack of mentorship programs for women and because there are fewer female business leaders, as women move up the ladder they may find their selection of peers getting thinner and thinner.

According to speaker, author, and Women in Global Business Ambassador Margie Warrell, there are several ways to reverse this leaky pipeline of female mentorship. First, it is important for women to learn to speak up and aren’t afraid to ask for coaching and mentorship. With the media’s focus on the upwardly mobile, young male entrepreneur, women may look around and wonder if they’re alone in their position. The truth is, there are many opportunities out there for young female proteges, but it may mean reaching outside your office (and even your industry).

Fortunately, there are there are also many forums and networking groups specifically directed at women. Meetup groups, women’s networks, and professional groups are often city-based and a simple Google search will yield opportunities in your area.

The other solution is to connect with coaching and mentoring programs in your industry or designed for your particular position. President, entrepreneur, and leadership groups may not be gender-specific, but they offer a chance to mingle with different individuals who are facing similar challenges. Fortunately, we’re past the days where networking was a “boy’s only” club (but I remember as a young professional, standing outside a downtown club because I couldn’t enter as a woman—it wasn’t that long ago).

Having Access to Capital

The cultural mores and expectations discussed above lead to different questions in the interview process. Both men and women tend to fall into the same patterns when they’re interviewing potential candidates. The interviewer asks questions of men focused on how they “will win.” Women are asked instead how they will “avoid losing.” The difference is subtle but distinct. Men, therefore, respond by focusing on the opportunities, whereas women’s answers tend to be limitation and problem-based. Women can overcome this obstacle by responding with opportunities despite the frame of the question (and interviewers should ensure they aren’t injecting implicit bias in their interview by framing all questions the same).

At the root of the interview questions and many of these patterns is a question of accessing capital. Women entrepreneurs often start businesses providing services and/or products focused on issues faced by women. They consider the needs of both genders equally or veer more toward female needs. Their male counterparts, on the other hand, may approach opportunity differently. Men are focused on winning and women are worried about not losing—this mentality is a safe way to play but successful entrepreneurship is often about confidence (and acceptance of risk).

In a world where decisions are drawn not only from “hard data” but also the comfort level that the lender/investor draws from the entrepreneur, the ability to fully understand the product and achieve a comfort level is limited when the decision-makers are predominately men. It’s much more challenging for women to sell a women’s product or service to male investors, no matter how savvy the research or great the need. This phenomenon helps explain why men start businesses with 6 times the capital of women.

As a women entrepreneur, it’s important you network with investors of all stripes. Don’t limit yourself to male-only investors, but don’t rely on female-owned businesses as your sole support either. Make sure your network includes all decision-makers. Als,o consider all other investor options – family wealth funds and crowdfunding are alternative options when regular investment channels fail.

Overcome Women Entrepreneur Challenges by Building Your Support Network

Three women dressed in business professional clothes walking and smiling with each other
Photo by Sarah Pflug

As women entrepreneurs and business leaders, it’s a bit disheartening (and yes, even lonely) when you examine these challenges. It’s important to remember we’ve certainly come a long way and society continues to grow, shift, and realize the value of a diverse workforce. The opportunities for women have grown by leaps and bounds over the past fifty years and they continue to grow today.

You may have heard success breeds success and it’s not what you know but who you know. Find a group of like-minded people and role models to build a network that supports your success. This group needs to know you and your business. Pick the right people—those who you can work with, who you admire and respect. These members of your team will become powerful allies to help you overcome the fear of failure, encourage your growth, hold you accountable, and smooth out the rough spots as you face the challenges mentioned here.

Remember, being a woman also gives you strength. This is where you can shine. Women outperform men in innovation, calculating risk, and playing the long game. We’re organizers, planners, and we know how to juggle plenty of tasks at once. Women bring power, emotional intelligence, and insight to the table—which is why we see many statistics showing companies are more successful with a diverse leadership which includes women.

As a women entrepreneur, being aware of these specific hurdles (and I am sure several of these aren’t new to you) better sets expectations and avoids the “is this real or is it just me?” feeling. You aren’t alone, and don’t worry—you can do it!


Featured image by Matthew Henry. All photos licensed for use via Burst.