Tuesday, 27 May 2014

Year Seven: Renewal

Risk: Medium
Satisfaction: Medium
Key Issue: Creating a new challenge for yourself
There is nothing more dangerous to a business than is a bored entrepreneur!

Year Seven is a tough year on which to comment.  For many business owners, this is a time to capitalize on the gains built in the first seven years and grow their enterprise to the next level.  For many entrepreneurs, starting a business is more enjoyable than growing or operating a business.  This is how many businesses go onto divergent paths growth and renewal or neglect and decline. 
The story of the bored entrepreneur is personal to me.  Before starting his own business, my father was a shareholder in an electrical contracting firm.  They brought in my father to acquire his engineering expertise, just as they brought on another individual for his expertise in the field of programmable control. The founder of the business still owned 51% of the business and thus had controlling interest.  The company had a line of credit, backed in part by the personal guarantees provided by each of the shareholders and their respective wives.
The founder of the company was a bit of a tinkerer and inventor.  He invented, and patented as ‘self-propelling’ boat.  It took the side-to-side rocking motion of the boat and turned it into forward propulsion.  As with many entrepreneurs he thought that just because he was good at one business, he would necessarily succeed at all his businesses.  He decided to begin manufacturing these self-propelled boats using the line of credit from his original company.
When the other shareholders found out about this they went to the bank, asking the bank to ‘call the loan' so the founder could not drain the company on this boat venture.  The bank agreed not to call the loan provided the company undertook not to forward money towards the boat company.  The bored entrepreneur continued to follow his dream, resulting in the bankruptcy of both companies.
I have seen too many entrepreneurs follow this pattern.  Sometimes, they are like Richard Branson…sort of entrepreneurial polymaths.  Most are not, and have both successes and failures.  Many are  one-trick-ponies, and confuse a single success with entrepreneurial genius. In planning sessions, I tell these ‘serial entrepreneurs’ that the start-up plan should include an exit strategy.
So what should Year Seven look like?  I believe strongly in the following:
·       Ask yourself “Is this really, what you want to be doing?”  If it is not, develop an exit strategy or a succession plan.  If so, think of it as signing a seven-year contract extension.
·       If you want to commit yourself, re-vision your business to align your personal goals with the goals of the many stakeholders around you.  These include investors, employees, customers and your community.
·       Take action.  Inaction means attrition and attrition means an uncontrolled end to your enterprise.  It is better to go out of business than to be forced out of business.
The reason I am so passionate about planning in Year Six is so you can execute strategies in Year Seven.   Exit strategies and succession plans are just as important as are growth plans.  Too many entrepreneurs do not even think about the end as they are so busy building a business they never know when it is done.
One client with whom I am working is in year seven.  I put the ‘contract extension’ concept to him.  He told me that he wanted to do the next seven years, but that after that, he would be done.  This will help us develop a planning framework with an end game in mind.  By having a well thought out exit strategy, he can ensure continuity for his employees and his customers, and at the same time, reap the rewards of what will have been fourteen years of hard work and commitment.
Year Seven is either a springboard to bigger and better things, or it is a black hole drawing the enterprise to perdition. Not since the founding of the business is the passion, desire and direction of the founder more important.  There are two key differences.  Firstly, you have an infrastructure of success.  You have customers, you have production / provision methods and you have a financial track record.  You are not in uncharted territory.  The second is that you have more to lose.  The stakes are higher now than they were at the beginning. You have more people relying on you.
As a part of a strategic planning exercise, I had the planning team calculate how many people were directly affected by the success of the enterprise.  Over 200 peoples', lives depended on this firm.  This helped put the importance of planning into a greater context than profit or loss, but into a context of families.
Seven years may seem like a long time, but ask any entrepreneur who has succeed for that long and he or she will tell you that it went by in the blink of an eye.  As Geoffrey Chaucer wrote, “time and tide wait for no man.”

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