How to build your team for business

Entrepreneurship is all about an action-oriented person willing to take risk....someone willing to put financial security on the line in the pursuit of business success. The level of risk you incur as you grow will be related to the thought given to the undertaking. The more thought, the less the risk. American financier Bernard Baruch put it this way: "Whatever failures I have known, whatever errors I have committed, whatever follies I have witnessed in private and public life have been the consequence of action without thought."

As you grow, you can reduce the risk by spending more time thinking about your business as well as recruiting other bright people (hopefully even brighter than yourself!) to also spend time thinking about your business.

If you are operating without a business plan, our free Starting a Business course has a full session on this important tool. It is completely free including providing business plan templates which can be filled in and downloaded. Please visit The Business Plan session in this course for more information or click on The MOBI Business Plan from the right-side menu of our home page for the free MOBI template.

So before embarking on growth, or proceeding on already planned growth, it would be a good idea to initiate an objective review to either confirm and justify your plan, amend it or even abandon it. Components of the review could include:

• Bring your key managers and advisory board together for candid brainstorming sessions. Be willing to objectively and mathematically evaluate plans already in place which are considered to be exempt from criticism or questioning.
• Require that approved growth programs be financially justified based on either return on investment, intrinsic value, or other measurable benefits.
• Have key department heads participate in updating your five year business plan.
• Reassess your five year cash flow projection to determine if debt service is conservatively provided for.
• Investigate the directions and methods of your best competitors.
• Conduct critical appraisals of different business scenarios that could be more favorable than the direction you are going.
• Redirect and refocus your energies on the results of the evaluation.

If your study concludes that your growth entails serious risks or has systematic deficiencies consider following the advice of Warren Buffett of Berkshire Hathaway:

It's possible that when you started your business, you never wrote a proper business plan. It doesn't hurt to write one now!

In some cases operating entrepreneurs find it difficult to delegate responsibilities because they have never practiced it. But delegation of authority is important for growing business owners because of the importance of committing your time to planning and executing growth programs. Delegation frees you from the time and responsibility it would otherwise take to run your business. The manager you appoint will need not only the authority to run it but also the responsibility for the outcome.

So authority and responsibility will go hand-in-hand. Successful delegation will include giving the manager whatever authority will be required to carry out the assignment and at the same time create a firewall placing limits on the manager's authority. Let's assume that you wish to delegate the operation of a store. Some examples of both the authority you might authorize and limits you might place could include:

APPROVED AUTHORITY

• Hire and training of staff (but be provided with hiring controls)
• Cash and credit card management
• Ordering of merchandise and supplies
• Advertising budget and selection of media
• Discretion in appropriate operating issues

LIMITS TO AUTHORITY

• Making capital purchases
• Signing checks
• Stay within choice or range of SKUs (Stock Keeping Units)
• Conform to cash and internal controls

RESPONSIBILITIES

• Conform to operating procedures manual
• Weekly reporting per format
• Conform to governing manual provisions
• Provide information for store's monthly profit (P&L) accounting
• Spell out short and long range goals

In the Achieving Lowest Expenses session, you learn the importance of achieving a frugal mindset in order to achieve the lowest operating costs to sales in your industry. In order to secure this important objective, your management incentive plans should be tied into earnings rather than to sales or other objectives. To a manager on a profit based incentive, a penny saved is worth achieving because it will come back to him/her in his/her bonus check. On the contrary, a penny misspent or lost will take away from the incentive payout.

If you are operating a chain of retail stores, each store should operate on its own frequently drawn profit and loss statement (P&L). Timing of incentive compensation is important. It is better to calculate the P&L pay monthly, or in some cases weekly, and disburse incentive payment frequently rather than over long stretches of time.

There is another reason for installing an accounting system which reports financial statements on individual profit centers: you will be furnished early warning signals in case of a troublesome operation. A common mistake made by expanding entrepreneurs is that losing businesses are supported too long. If early P&L's of a new operation shows unacceptable losses, corrective measures should be undertaken early and massively and if still not successful, the unit shut down or sold.

In businesses where compartmentalization of profit centers is not practical, effort should be made to base incentives on key performance indicators (KPI's) which will differ according to the business. A successful KPI should be measurable, measured frequently and support the overall goals of the company. Here are some examples:

• A payroll service provider might base the incentive on how many new payroll sign-ups were achieved in a certain period of time.
• A collection department could measure its success in collecting overdue payables.
• A manufacturing firm's KPI could measure the number of parts rejected by the quality control department.
• Most towing services are 24-hour businesses. An owner might begin delegation by hiring a manager to operate the store during the night shift. Perhaps on a weekly basis the manager could be paid a bonus based on a portion of total receipts above a specified amount. Later on when the towing service owner begins opening branch stations, individual profit and loss statements for each station can be used for managers' incentive plan.

If you have not already developed operating and training tools, the time to do so is before growth programs are implemented. As you grow, your employees will then have clearly stated procedures and well-defined job responsibilities. These manuals will become building blocks to create solid understandings of goals, management structure, procedures, training, safety, and employment issues. 

Governing Manual
The governing manual provides documentation for management to set out overall company goals including business plan updates (at least annually or more frequently if appropriate), cash flow projections, company mission statement, and corporate bylaws governing board meetings.

Procedures Manual
A procedures manual provides the instructional guide for employee training. Day-to-day functions of office, sales or manufacturing should be spelled out in detailed but concise form.

Building your business will require that the standards you have established for quality and uniformity will be maintained as the business grows. A procedure manual can provide instructions for how all important business procedures and operations are conducted. Your procedure manual will also serve as a training tool to cover these issues.

Training Manual
Your training manual for each individual job responsibility will be a helpful tool in not only establishing standards but to help train job back-ups. You should have at least two or more employees qualified to perform each of the important functions of running the business. The practice will ensure smooth running operations even when employees are on vacation or off the job.

Employee Handbook
The employment handbook is the set of rules governing employees, records, vacation policy, job benefits and rules of conduct.

Your handbook should become the written summation of what your employees need to know regarding your company objectives, policies and current labor rules. Your employee handbook should include procedures for each job function and how problems will be resolved. It could include sections for the following materials:

• A document explaining company history and objectives
• Employment policies
• Pertinent labor laws and rules
• Job descriptions and qualifications
• Benefits package
• Safety rules
• Organizational chart and operating procedures

Sixty-five percent of all accidents on the job are related to drug or alcohol. Substance abusers utilize 16 times as many health care benefits and are six times more likely to file workers compensations claims. Learn more about drug screening.

Safety Manual
In working environments where safety rules are important, clear rules should explain the do's and don'ts of the working environment. Your Workers Compensation representative can help you set up the manual and in safety training.

Building your business will require you to stay in face-to-face contact with important customers anywhere in the world. The Internet offers a number of ways to communicate, from sending instant messages to phone calls, to video conferences. 

A common mistake made by entrepreneurs is they fail to solicit advice from proven leaders in their business. Mentors won't come to you.... you will need to find them and cultivate them. If you don't have one or more mentors now, begin nurturing friendships with experts in your business who can be called upon for advice. Start building your advisory board now. When an important decision comes up, call a formal "board of advisors" meeting. You will be surprised how people are flattered to be asked and receptive in sharing their wisdom and experience.

But keep in mind when seeking out advice that you need to be watchful of getting bad advice. For example, it would be a good idea to establish a rule that you will never accept advice that could risk losing your entire fortune or business. In other words, you should keep in mind that you only need to get rich once. And once you are rich, it would be foolish to consider any expansion decision, with or without advisors, that could risk your business.

Growing your business will require making some important decisions. These are the times to bring an advisory board to the table to gain the benefits of their specialized know-how. The team could include:

• Your lawyer (If necessary a specialized lawyer)
• CPA
• Banker
• Key managers
• Mentors
• Family members
• Consultants