Time and resource management
For businesses to be able to grow they need to have solid foundations. In my earlier article ‘The business of building and building a business’ , I likened the foundations of a business to the foundations of a building. If you build a house or apartment block, the size of the building will determine the depth of your foundations – and it’s the same in business; the bigger the business you want to build, the deeper and more solid the foundations you need.
In business terms, our ‘foundations’ are represented by four key underlying principles of how we structure and run our organisation:
1. How you use your resources’ time – ensuring that people are delivering the value for which you are paying them
2. The business model that you take to market
3. How you make decisions – your understanding of how to create ROI on investment
4. How you build or recruit capability
In this, the 11th article in my Growth Metrics series, we’ll take a look at the first two of these foundations – time and resource and business model. We’ll then explore the others in the next article.
Measuring Time and Value
Time management is an essential, but often overlooked component of a successful business. When I say ‘time management’ I mean your personal time and the time of your resources, and how that time is being used to deliver value.
Time management can be a challenge for many people, as they don’t have a framework for measuring time. “If you can’t measure it, you can’t manage it”, goes the adage, and it is true. Without a sound measurement system, it is very difficult to know what to change.
The traditional measurement of time has been based on the 9-5 working day. You employ someone, they come in and sit at a desk and they do things in a time-bound manner. You are measuring their input in hours, but not in the value that they generate in those hours.
Over the last 15 years, driven by the integration of technology, the 9-5 working day has become an outdated system for many businesses.
So in today’s world, just how do you now measure time and value for that time?
The system I use, and that I recommend for my clients, uses colour coding to help measure my time and the time of those that are working for me. This system is the subject of a podcast, which you can listen to here, or download as a transcript.
The second principle that forms our foundations is understanding that there are different business models for different types of business, and determining which is the right one for you. Developing the right business model from the start will maximise your time (and, therefore, your money) because different business models utilise your and your resources’ in different ways. Getting the right model is essential to structuring a business for growth.
When people don’t know about the different models and understand which model they are using they find themselves in uncomfortable and unprofitable territory.
As businesses grow, for example, as a rule of thumb they make money when they get to 4 people, lose money at 7, make good money at 12, take a profitability dip at 17, make great money at 24, get completely stressed out at 33 and breathe a sigh of relief at 48.
The key here is that in order to make it through each of the difficult points, you need to understand your business model.
The 7-person dip happens because a business moves from being very simple, with very little management, to being more complex, and requiring a degree of management overhead. It is this pivotal point, and the negativity in this period that stops 95% of all businesses globally getting past the 7-person size. But, with an effective structure and business model, businesses can jump this unprofitable zone.
One of the Growth Metrics packages is designed for small operators that have no desire to go past four people. I encourage them not to take on more people and to structure their business to be able to grow in other ways. I’ve described these strategies for growth in earlier articles in this series.
For businesses that do want to gain further leverage, jump the unprofitable 7-person zone and grow to 12, I encourage them to spend the time to it properly. I have calculated the ROI on growing effectively when moving a business from 4 to 12 people and found that the right planning and implementation can generate an additional $1.8m dollars profit and deliver the growth three times faster than unplanned growth. I’m not saying you won’t make it to 12 if you don’t plan, but I am saying that you won’t do it nearly as fast or as profitably. Planning can sound daunting, but under my methodology, it only takes 3 days.
Growing from 12 to 24 is the next big jump, and the same holds true - again with good planning, you can make it there faster and more profitably than by taking an ad hoc approach.
The move from 24 to 48 requires a bit more planning and a lot more careful implementation; this stage is where you are adding a layer of management and need to ensure you have the right people with the right capabilities. If you recruit the wrong people, you get stuck and very uncomfortable.
To illustrate the different business models, let’s go back to our property analogy and think about how you would accommodate different sized groups of people, for example on a group holiday.
If you’re a family of four, a house with several bedrooms and shared living, cooking and washing areas will be perfect – but if you tried to squeeze more people into the house, things would get pretty strained.
If you were accommodating 12 people, you’d use a different property structure – for example, you might have three townhouses, each with its own separate washing and cooking facilities, but maybe with some communal areas, such as a barbecue or pool, to mingle and share each other’s company.
Providing accommodation for 48 people would need a different structure again – here you’d be in a complex, with separate apartments, but again some shared areas and facilities.
Just like the right property for a group holiday, a business structure needs thought and planning be successful. My Growth Metrics Program provides the framework to effectively plan that growth.