Best Practices = Managed Faster Growth

The Best Practices of High Performance Entrepreneurs - 2008-09 Edition is a detailed list and explanation of 300 best practices that are common to high performance businesses. The Best Practices book is designed to help with specific issues of growth businesses and to make real progress in a short period of time, and is a companion to the online HPE system. The book is available at Amazon.com

"Best Practices of High Performance Entrepreneurs is the best blueprint, best road map, and best advice for entrepreneurs that I've read. "

Jay Conrad Levinson
The Father of Guerrilla Marketing
Author, "Guerrilla Marketing
Over 15 million sold; now in 43 languages

The book is a companion to the Hot 100 program and is available at the BCC North Campus Bookstore.
Call 425.564.5711, $34.50 (US) + tax and shipping

TABLE OF CONTENTS

Introduction to the Best Practices

Chapter 1 - Ownership: Mine, Mine and Mine

Chapter 2 - Management: The Bosses and Their Bosses

Chapter 3 - Marketing: Make Customers, Not Sales

Chapter 4 - Productivity: Synergy Exposed

Chapter 5 - Accounting: Bean Counters Count!

Chapter 6 - Risk Management: Keeping What's Mine, Mine and Mine

Chapter 7 - The Next Phase

Appendix - 300 Best Practices Scoresheet

For Best Results

            The best practices are based on years of client work and professional standards. Our best advice is to review all recommendations with your own legal, accounting, and financial professionals. Local, state and federal laws and regulations change frequently and some best practices may not apply to your business or location.

            If you do not have a good attorney, CPA, financial advisor, and banker, you should get them soon. Good professional services are just as important to the building of a high-performance business as the operations side of your business. They never make the decisions for you but they should help identify and take advantage of good opportunities, while also avoiding costly errors.   Learn from others professional experiences and you and your high-performance business will benefit greatly.

Introduction to Best Practices (excerpts)

            If someone said your business revenues should increase $1 million to $50 million as soon as possible, would you be skeptical or interested, or both? This book contains a tested system of best practices that help business owners accelerate revenue growth, increase profitability, drive equity, and make it all a lot more fun.

            We challenge our clients to become high-performance entrepreneurs. One exceptional client took that challenge and in six years went from startup capital of $40,000 to revenues of over $50 million and growing. The best practices outlined here have helped many clients build sustainable and profitable revenue increases of 50 percent or more, year after year. Some clients have won prestigious regional and national awards such as the Entrepreneur Magazine “Hot 100” Fastest Growing New Businesses, Inc Magazine “Inc 500 Fastest Growing Private Businesses”, the SBA District and Regional Small Business of the Year, and numerous Entrepreneur of the Year finalists. More important, they build businesses that are rapid growth, highly profitable and much easier to manage. In many cases, equity rises at an even faster rate than revenues.

            The best practices are a result of 12 years of research with owner-operated businesses and over 75 combined years of consulting. We began by considering why so few entrepreneurs achieve the success they originally anticipated. It became clear there is a core set of best practices that successful entrepreneurs and their advisors develop, often through years of trial and error. It became even clearer that high-performance entrepreneurs adopt these best practices before crises and growth happen. Over time, we also saw the best practices change and evolve. When done consistently, the result is sustainable growth and profitability that far exceed the norm and can crush competition.

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            Merging the high performance best practices of the Power Tools and the high performance financial goals had a dramatic effect on our clients and the results they got. Multimillion dollar increases from otherwise ordinary business became common. Client compensation began to go up at a rate as fast as revenues. More clients began building homes they always wanted but could never before afford. And other advisors and their clients started to get similar results because they had a system to accelerate the results they wanted to achieve.

            The main lesson from our high-performance entrepreneur clients is that you are in a race with your competition and you have two alternatives. The first is to do take about 20 years and four major setbacks to develop your own best practices, if ever. The second is to put in place high performance best practices now and get where you want to be up to 90% faster.   Either way, your race has already started.

Sample Action Items - Ownership Section

6. Owners monitor management performance based on quantifiable measures of goals and values.

            Management history is full of differing terms for much the same thing. Regardless of the current terminology, you have to set and clearly communicate goals and objectives, then monitor performance. Owners must define what success is and make it clear to everyone. They should then make management accountable for the achievement of those goals.

            The majority of management problems are directly linked to undefined or un-quantified objectives. The phrase “We strive to be the best in our industry” is admirable but insufficient. How do you measure success? Who measures it? Are there rewards or consequences for partial success or failure?

            In the earliest phases of a business, entrepreneurs are usually working so hard to get new business and keep up that they forget what the real goal is. Survival is not a good definition of success. Detailed and specific goals are needed, even for the solo business operator. Don’t let yourself off the hook just because it is hard to do. Over time your goals will get more precise and accurate, but you have to start now and consistently track your progress.

            One of Corey’s clients met with their banker, who told them to limit their revenues to $1.25 million for the coming year. They had been working with Corey only nine months and revenues were already up from $200,000 to $850,000. The banker made a safe recommendation from a financing and cash-flow viewpoint but missed the real issue. “Controlled growth” doesn’t mean “stifled revenue,” it means to plan and prepare for growth. Given the growth objective, management could hire and train temporary help, renegotiate the line of credit, re-finance or find a new lender.

            Once the client passed the million-dollar-a-year mark ($84K/month), their next goal was to prepare for $500,000 a month. The client hit $100,000 a month quickly and only three months later hit $273,000 a month. How soon they hit $500,000 is not determined but if they don’t prepare for it, it will cause bigger problems later. Help your advisors, your staff, and everyone else by making clear what your goals and values are. It always pays off and sometimes very quickly.

13. The business has contracts that protect it from the divorce, death or disability of the owners and key employees.

            As much as we might like to ignore it, death eventually affects every successful business owner, and divorce affects many unexpectedly. Preparing for the certainty of death and the possibility of divorce does not mean that they will occur more quickly. It just means that when they do occur, the business will not die also.

             Don’t gamble that you will be one of the lucky ones who beat the odds. One of our clients won $2 million in the lottery but almost lost his business in a messy divorce. Regardless of your beliefs about marriage, both male and female business owners should have prenuptial or other agreements that protect the business from divorce. These agreements should state how the value of the business will be determined in the event of a divorce and that the business will not be dissolved or divided.

             Divorce and death drain cash away from the business, so a viable contingency plan must ensure that there will be sufficient cash flow to keep the operations going without interruption. One of the first things we help clients do is to get the level of coverage they need to sufficiently protect the client’s family and their business interests.

            The owners must discuss these problems and create a plan of action to deal with each scenario. As tempting as it is to put this off, it is a critical issue that even new business owners have to address.

            Both the owners and employees depend on the success and continuation of the business, but dead people have very limited communication skills. The plan to deal with death, disability or divorce must be written and available to the management, owners and owners’ families. Knowing that the business will survive regardless of changes in ownership gives everyone a sense of security and continuity.

20. An independent business valuation has been completed and is updated annually.

           What is your business worth? If you pay the owners a market price for their contribution and you are still making a profit, then it is worth more than the cost or market value of your business assets. Though there are several acceptable approaches to valuing a business, they all come down to the present value of future revenue. Given an active and sustainable market, the number of years of projected revenue is enhanced by a history of profitability. The present value depends on a discount rate or the cost of capital.

           Here’s an example: an aging tent and awning fabricator wanted to sell his business. The business had provided nicely for his family for thirty years. Recently however, the owner hadn’t paid much attention to profitability. He was only earning an annual profit of $23,000. Because profits had declined in recent years, the business valuator could only project three years of declining revenue. He valued the business at the present value of $21,000 the first year, plus $19,000 the second year and $15,000 the third year, at a 15 percent discount rate or $7,489. That is all the expected revenue is worth if it costs 15 percent to borrow money. The business was sold for scrap value.

          Knowing the value of your business helps in many business decisions. The valuation is used when a partner dies and you need to distribute ownership among other partners or settle the estate. The valuation can be used to determine lost income insurance. If someone approaches with a purchase offer, you’ll recognize a good deal. Use the valuation to make financing decisions. If you know you can make a 15 percent return on investment and you can borrow money at 10 percent, then borrow the money. A business valuation can be costly, but it can be invaluable in the right circumstance. Update it regularly.

30. A tax minimization review is conducted semi-annually with a tax expert.

           We deliberately saved this best practice for last in the Owner’s section. Not because it’s unimportant, but because a business owner should concentrate first on making money, then on keeping more of it. Roger has a goal of paying a million dollars in income taxes, because taxes are a percentage of income; think of the income! Corey prefers to think of how much of it could be tax deferred or tax advantaged.

          Tax minimization is an important secondary concern that needs specialized expertise. The review should be scheduled within a month after your fiscal year reporting to determine what you should do that year. Then a follow-up should occur six months later to see how you’re doing. Business and personal taxes should never be an unexpected surprise

          These meetings with your CPA and financial advisor should make you more money every time. If not, get better experts. After a 10-minute meeting with his new accountant, one of our clients walked out with an extra $35,000 in tax savings. His previous accountant of 17 years did a good job of doing the tax return and was a great golf buddy, but he didn’t offer anything to help build his client into a High-Performance Entrepreneur. One of Corey’s clients went to a financial advisor to help reduce the taxes on $400,000 of profit. The financial advisor recommended a qualified retirement plan and stated they would save about $9,000 in taxes. Corey helped them find another advisor who showed them how to reduce their taxes by $91,000, with no additional risk. Don’t settle for standard advice. Building a real business means getting a team that can help you get there.

The most satisfying role in any business should be that of owner. Done well, the High-performance Entrepreneur’s business will provide a level of challenge, satisfaction, reward and accomplishment that is unparalleled. The business is only a vehicle to get you to your destination, in style and in a reasonable amount of time.