My daughter is a huge Harry Potter fan, and she has been smitten by the frenzy of the release of Harry Potter & The Cursed Child. So last week I found myself watching Harry Potter 7 Part 2 with her. And in it, Hermione was recommending that she, Ron & Harry be more careful and plan out their return to Hogwarts, since that journey was likely to lead to a conflict with the forces of You-Know-Who.
Ron, feeling some urgency, dismissed Hermione’s request, saying:
“Hermione, when did any of our plans work? We plan, we get there, and then all hell breaks loose.”
Fortunately Harry, who is an intuitive strategist like most of the Second Stage owners I know, comes up with a short-term plan….”We’ll figure it out when we get there and we see what we’re working with.”
Let’s highlight some of the lessons about strategic planning that are contained in that little scene:
– Planning doesn’t work on its own, because things won’t happen the way you expected them to
– A good plan starts with an assessment of the current situation – assets, needs, opportunities
– There are times when good execution is more important than good planning – specifically, when a lot is uncertain, or you don’t have a lot of resources that you can put toward a plan (this is why planning is less important in start-ups bootstrap start-ups)
There are also some undercurrents to Ron’s statement – the stuff we can read “between the lines”:
– Planning helps get you ready for the battle, even if the plan doesn’t work
– People who fight the battle can use that experience to develop better plans – and do them faster
– When you’ve gone into enough similar experiences, you can rely on your intuition more than needing a plan – it’s likely that the situation will mostly look like something you’ve dealt with in the past, and the stuff that is new will be minor enough that it won’t overwhelm you
You Second Stage muggles have your own version of wands and spells – the experience you have that enables you to solve problems as if you were waving a wand, the insight and service you give your customers that can (truly) be like a spell, all the assets and resources you have built up to solve some of the world’s problems in a way that (if you step back from it) can seem magical to someone new to it. And all of those things will be made better, and more powerful, with the right amount of planning.
I’m going to be talking about sales process on my webinar this month, and I want to focus in on the most interesting part of the sales process for this article – creating a “mash-up” of assertiveness and empathy to engage a prospect about the needs they have.
But before I do that, I first have to talk about an important part of the sales process. If you want to get paid the value you deserve for the expertise you have, you have to make sure that your discussions with prospects start with a collaborative dialogue about their needs. If they’ve already defined their needs, and they’re just talking to you about a solution, then you will not get the value you deserve.
The problem is, though, that most prospects think that they’ve already defined their need.
So, how do your salespeople provoke prospects enough to change their thinking – to throw them off the path they’re already on for a solution, and get them to think more about their needs? To do that, your salespeople need to be assertive – they need to prove that they know as much about the prospect’s situation as the prospect does, and it will pay off for the prospect to listen to the salesperson. But your salespeople need to do that carefully – if they’re too assertive, then they’ll probably be dismissed. So they also need to be empathetic.
And that’s the hardest challenge your salespeople have today – how do you be assertive enough to get people to talk with you, and empathetic enough that they want to talk with you? That’s the sales process mash-up that every growth business needs to figure out.
We find the answer to this challenge in the playbook of a Trusted Advisor. Trusted Advisors have independent perspective that the person values (that’s the Advisor part) and the connection and understanding that reassures the person (that’s the Trusted part).
I’ve worked with several clients recently to create “Trusted Advisor Tools” for their people to use in sales discussions to build trust and provoke prospects to question how they’re thinking. I think every business needs these tools.
The salespeople usually see immediately how valuable these tools are and are enthusiastic to start using them. And many are actually relieved because they haven’t known how to push back against prospects in a supportive way.
We’ll develop some sample Trusted Advisor Tools on my webinar – please join us if you want to see these in action.
Not all strategic decisions need the same amount of analysis. This is something that many founders understand intuitively. But it’s also something that becomes more complicated as a company grows.
Why? Because the decisions get bigger and more complicated, what worked for a Big Decision in the past often doesn’t work for the Big Decisions of a bigger company. In addition, the “decision environment” gets more complicated, with more potential participants and more dynamics among them. Who do you include? When? How? Who provides input and who participates in the decision? How is the decision actually made?
What qualifies as a Big Decision? Something where the payoffs are extraordinary – say, it could have an impact of 20% or more of a company’s revenue, or it could impact more than a third of the employees – and/or where the risks are extraordinary – say, it could take 20% or more of a company’s discretionary resources to implement.
Decisions fall on a continuum – as the stakes rise, so does the need to treat the decision more seriously.
And how do you do that? As the decision gets bigger, you should add more information, more structure and process, and more focus and energy on the decision before its made. If you don’t, you can be pretty sure you’ll be spending more time than you’d like or expect after the decision.
Did you ever see the Reese’s Peanut Butter Cup ads that showed one person with a chocolate bar, and another with a tub of peanut butter. They run into each other, and discover that chocolate and peanut butter are “Two great tastes that taste great together.”
Click here to see one of the ads.
Those ads remind me of budgeting and strategy – two great processes that go great together!
Now, if you’re an early Stage 2 company, you may not be doing either. If that’s the case, you have a chance to leapfrog over many later-stage companies, because many do either budgeting or strategy, but not both.
Strategy is a qualitative process in which you assess your situation and draw conclusions about what parts of your business have the best opportunities to develop or worst problems to fix. Budgeting is a quantitative process of allocating resources based on the conclusions you draw in your strategy process.
If you have strategy without budgeting, then you haven’t really determined how you will handle all the commitments you want to make. Later, when it comes time to spend money, there will be other things that also need money. If you haven’t decided during your budgeting process what gets money and what doesn’t, then you will make a tactical decision. If you’re lucky, it will still be a good investment. If you’re not lucky, you’ll find you’ve spent your money on the wrong thing.
If you have budgeting without planning, then you will just get more of what you’ve always had, which is usually 10-20% better…until one year you realize that it’s not 10-20% better, and you’re not sure why, and you’re not sure what to do about it. If you haven’t decided in your strategy process what deserves investment, you’ll find yourself realizing too late that “more of the same” only works for a limited time. If you’re lucky, you’ll find a new path without too much investment. If you’re not lucky, the weak area of your business will become a quagmire that costs you a lot of money.
Just as the Peanut Butter Cup combines chocolate and peanut butter in one convenient package, the Business Case combines strategy and budgeting. They’re not hard, but they’re not easy either – there are a few tricks to making business cases work for a Stage 2 company.
So, you’re thinking about what life will be like at your company when you’re gone. Congratulations. Really. It’s a sign of maturity when a leader has the courage to imagine being out of the picture, and the foresight to care before it’s forced to happen.
Having worked with dozens of Stage 2 leaders, what recommendations do I have for you about succession? A few thoughts come to mind immediately when thinking about my clients.
First, those of you who are strong leaders… we love you, and it’s amazing what you have accomplished and do accomplish… but this may be the biggest challenge of your career. The strength that you have in your role means that your shoes are going to be hard to fill. And, strong personalities have a hard time handing things off, so it’s never going to feel like the right time, and your successor is probably going to seem far from ready when you start the transition.
Second, having a healthy company is important to managing a succession. You want a healthy company to retain or attract the best talent. And, successions take resources, because transitions always put a burden on an organization. (Think about how many coaches have a “transition year” when they start even if they’re good and have good players.)
Third, start as early as you can. Succession is best managed not as one big event (“OK, here’s the company…don’t screw it up”), but as a series of small hand-offs. Most of my work on succession is on choreographing the series of small hand-offs based on the departing CEO’s capabilities, the incoming CEO’s capabilities, the needs of the business, and the needs of the transition process itself.
Fourth, don’t look for another you. He or she is going to be too hard to find. Use this as a chance to build up your company’s strength in a new area. (You’ll need to do some strategic planning to think about what area that should be.) I had one client hire an experienced sales and marketing exec because they realized they were weak there. I had another hire someone strong in operations because they were going to need to tighten up that area if they were going to be able to grow. Was the new exec everything that they needed in a CEO? No. But neither are you! You have a whole eco-system around you that complements and supplements your strengths. You may have forgotten about it because it’s designed around you, but no CEO can be everything – and the search for another you is based on flawed thinking that one person can lead your company.
The good news is that, if you plan out and use a succession process, all of these issues are manageable.
As your company grows in Stage 2, you should use your sales process to drive more value – yes, for your company…but also for your customers. The only sustainable growth comes from win-win sales, so your sales process will benefit you and your customers.
One of the most important ways that your sales process can increase the value you bring to and get from your customers is by uncovering what the real need is. Oftentimes, customers don’t know what they don’t know, and by managing the sales process well, you can help them realize what they really need. In doing that, you also make sure that you’re paid for any premium value that you give them.
Price is a function of value, and the surprising fact that you need to know is that value is established when the need is defined, not when the solution is defined. If a customer comes to you and tells you what they need, then they have already set the price in their mind. On the other hand, if a customer comes to you and asks you to help define what they need, then you create the value together.
If you’re like most Second Stage companies, it’s hit or miss whether you’re talking to customers about the answer or the problem. It takes a clearly-defined market strategy, and a disciplined sales process, to ensure your conversations consistently focus on the need. That takes some work, but it’s also the best way to grow your small business in Stage 2.
As a small business emerges from the start-up phase, and becomes a Second Stage company, the sales process can and should be formalized.
It can be formalized because you now have enough experience with sales to know some standard steps that you usually follow.
It should be formalized because you need to start building consistent expectations with your customers, you need more consistent information for your team, and you need to start to build up systems around your sales that will need some standardization.
I’m not suggesting you go overboard on this – just some general guidelines or steps that you’ve learned help you.
How do you create a (somewhat) standard sales process?
As a first step, think about the customers or orders that your team handles smoothly. What usually happens when those orders come in?
Then, think about the customers or orders that are a hassle. What usually happens with those orders – and what do you notice doesn’t happen with those.
When I asked these questions of a 20-person manufacturer last year, they realized that most of their sales followed 4 basic steps – but also that complex, unclear orders (which happened to be their highest-value work) needed a different process. They outlined the two different processes, and when I met with them 3 months later, they said, “We’re handling all of our orders much, much better. And the customers are a lot happier.”
If your small business has grown into a Second Stage company, your team and your customers will appreciate you starting to understand and standardize your sales process.
Once you have segmented your customer base, the question is, “What can I do for my best customers that will drive value for them and us?”
The answer to that question should be captured in an Account Plan, which outlines the relationship and opportunities you have with a key customer.
Here’s what I recommend you include in the Account Plans you write for your Second Stage company:
– History and highlights of the relationship
– Background on relevant people you know at the company
– Description of why they work with your company and why they think you’re valuable
– Immediate and next-year opportunities that you’ve identified, as well as the 3-5 year potential for the relationship
– Likely relationship and engagement for the coming year
– Plan for additional activities to expand or enhance the relationship and engagement in the coming year
You’ll be surprised at how much you learn about your customer and yourself when you write an account plan.
I’m working with a $2MM firm right now to build in a performance-based aspect to their compensation program.
Usually, I would follow a process of compensation strategy (guiding principles for how we make comp decisions) > compensation framework (the components that go into comp decisions) > performance framework (the specific definitions of performance). (If you want a full description of the process, you can get it from my book, The Stage 2 Owner’s Manual.)
But with a small firm, we’ll be able to skip the comp framework step. That’s the step where “What does it take for you to stay in the game?” changes to “What is the right amount to pay you?” It looks at things like market pay rates, and what the role of the person is.
If you’re a small Second Stage Company, the most important things to address when you upgrade your compensation program is why you pay people what you do – the overarching principles that are at play, and the specific performance drivers you look at. When you get bigger, or when compensation starts causing you problems, you can fine-tune your pay program based on some more sophisticated thinking about what makes up employee compensation. But that’s a short-cut that, in most cases, is fine to take when you’re smaller.
Stage 2 management focuses on getting approximate answers, not precise ones – and then using judgment to realize when an answer can be more approximate, and when it needs to be more precise.
Have you ever thought about the impact of over-paying, or under-paying, the staff in your Second Stage company?
If you are over-paying, then you are taking resources away from other parts of the business that would give you a higher ROI. Over time, you’ll under-invest in the areas of the business that make your company stronger, and the result is a company that is paying its employees relatively well while weakening the business.
If you are under-paying, the opposite is true. You are “mining” your employees for the value they create, and if they don’t feel rewarded, you will be faced with a triple-whammy – you’ll lose someone who was providing more value to the company than you realized, you’ll have turn-over costs, and you’ll have to spend more than you expected to replace that person.
Compensation is about aligning the rewards that employees get with the value that they create for the business. As your business gets more complex in Stage 2, that alignment gets harder, and more important.
You’ll never pay someone exactly the right amount, but making sure you’re close is important for you, your business, and your employees.