People are at the heart of any business, from suppliers to customers and staff. Your ability to read and work with people – and to get what you need out of them to move the business forward is critical to your business growth.
In this Podcast of The Money Show Pavlo Phitidis outlines his approach to getting the most out of people to achieve your vision of the business.
There are three people or kinds of people you have to understand to harness their ability to build your business.
The starting point is understanding yourself
Next, understand your customer
To get this right you have to listen to your customer – you cannot sell to them on the assumption or hope that they are interested in what you are telling them.
Understanding your customer will help you to be more clear and focused in what you do for them. It is always important to know precisely who you serve, what you serve them and how you serve them. You cannot be everything to everyone.
Then understand your employees
“When it comes to employing additional staff, you must have a strong understanding of your business and a real vision of what sort of personality suits it. It is critical to understand your own values as well as the values of the company you’re building. To the extent that you can get birds of a feather to flock together, you can coordinate, simplify, and scale”.
Inflation is creeping in and the cost of living is rising through fuel and food prices. Consistent political volatility is not making the situation any easier. All this noise creates uncertainty from an individual and a business perspective and can erode your confidence as an entrepreneur and your future endeavors.
As a business owner, you need to steer your ship in the right direction, which means being the captain who stays on the bridge with a clear view ahead.
Business owners need to adopt one strategy! And there can only be one strategy behind your business, and that is to build it into what we refer to as an Asset of Value™
In this podcast of The Money Show, Pavlo Phitidis shares insight on a strategy that all business owners should be working on.
An Asset of Value™ has 3 elements to it:
A business built as an Asset of Value™ will enable you to sell it and reap the capital gain as a reward for all the risk you have taken over the five, ten, fifteen, or twenty years of getting it there.
To build your business into an Asset of Value™, you need to be able to move through the storms because even as a captain of a ship, there are storms that come to pass and how you steer through them will determine the end goal of your business.
Despite the difficulties in the market, your team must be able to find confidence in you to lead them through it all.
With that note, an exercise that will lead you in the right direction would be to take a note pad and, from Monday to Friday, in different colours, write down all your tasks and separate them to see where you are spending most of your time in the business. Is it working with the team? Or micro-managing them to make sure that the business is on track?
This exercise will help you determine whether you are working on the business or for the business.
Having a vision is essential. And sticking to your strategy is essential, because if you don’t have a vision or strategy, then what are you doing? Your business should be built into a business that can one day be sold and not be part of the 94.6% of businesses that are started that never, ever get sold.
To build your business, there are many things to consider. One being that no investor wants to invest in any company where it is just you. You need to have a team. Because if you were to have the misfortune of a sudden death, many investors would be interested in that company if they knew who would carry on the value. Business owners see this as an exciting opportunity and yet the toughest one to get right.
In this podcast with Pavlo Phitidis from The Money Show, he looks at the key elements in building the team you need for a business that can scale and grow.
Some key takeaways from this:
When building a business, the goal is to scale and grow and ultimately sell your business. Thus an accurate business valuation is essential.
In some cases, businesses are sold outright with everything they are built on, but in other cases, businesses are stripped and torn down simply because the buyer is only interested in one part of the business that he sees as valuable, which is not a desirable outcome for the owner because he does not receive the actual value of his business.
Listen to this podcast from The Money Show where Pavlo Phitidis discusses valuation and successfully selling your business.
A business that Aurik is currently working with was about to be acquired. However, in the acquisition, the offer they received for the company was way under what their assets were worth and their understanding of the value of the business.
There are 2 key takeaway points which could be seen as red flags in this business:
For a successful business sale or exit, start at the end and imagine yourself as the buyer; this may help you with business valuation. Grasp the mechanics of business valuation and simply construct a business to demonstrate those mechanics. A few key elements to consider are:
Build a coherent business where the sum of its parts far greater than the whole.
Succession in business ownership means the transfer of a business from one generation to the next.
We tend to think of succession in terms of family businesses, where it can become very tricky and may fail unless it is done right. However, the same applies to the services industry, where businesses like architectural firms, engineering firms, accountants, lawyers and advertising agencies almost always grow through succeeding generations of leaders in their company. These businesses also face the hardships of succession if it is not done right.
In this podcast from The Money Show, Pavlo Phitidis discusses businesses that are affected by succession in the services industry.
In private companies, succession not done right erodes or stalls the retirement wellbeing of the exiting generation and robs the next generation of their future wealth creation path.
With around 75% of these efforts failing, understanding what goes wrong and how to prevent it is critical. Here are four key points to look at for a successful hand over:
1. Aligned future visions.
The misalignment in terms of what that business needs to look like, and be shaped into going forward tends to delay succession or creates a lot of bad blood. This is often because, for example, the exiting founder plans and promises to let go and hand the business over in a year or two. This turns into 15 years during which nothing changes because either he or she has not got the courage to align with the new vision, or their vision is misaligned with the new business owners.
So, getting that alignment right is the first thing that starts the process of succession.
2. Communication across the team
Many business owners only realise they want to sell when it is already too late to sell. If you are looking to sell through succession, the communication with your team has to begin first and foremost with you looking in the mirror and saying, “There are only two outcomes for every business in the world: a sale or closure. Because the way that you build a business to generate income is very different from the way that you organize a business and lead a business towards a successful handover.
Communication with your team will help to shape and develop your team and the business differently for a sale and exit.
3. Relationship transfer
Most professional services businesses begin with deep relationships. A good example of this is two professional engineers working for a large engineering group who develop strong relationships with clients. They then decide to step away from the firm to start their own business by servicing that clients. Ten to twenty years down the line, they still hold onto those client relationships. And even when the leadership of the company finds a young talent in the ranks who they think can continue the legacy of the business, it is difficult to have this transfer because the business has been forged on relationships that were retained by the owners for all these years. The relationship that contributes to 40% of the revenue is tricky to hand over.
So how do you hand over those relationships? It takes time. There is a structure to it. There is a methodology to it, there is a practice to it.
4. Valuation and exit criteria
Once the business owner makes the decision to sell and has found his successor, this can still go wrong for the successor, especially if it’s a senior employee who the business is being handed over to. As an example, the owner will price the business at R20 million, which is an amount the employee will not have nor have had the time to accumulate in the time of employment. So where would you acquire that kind of money?
If you do not get the metrics of this right with the view to educating your successor on how valuation will occur and with the view to aligning yourself with that successor so that this successor can acquire the shares over a period, you’re shooting yourself in the foot.
Succession is not something that just happens. It typically has a five-year runway. So, if you want to exit your business in five years and your plan is to do so through succession, you should get on the horse right now and start planning a showcase.
Pavlo recently had a discussion with a young entrepreneur who wants to start a business. However, this individual has no capital to fund his idea, and sadly, in this country, there is no bank that funds start-ups no matter how good the business idea.
In the discussion with the entrepreneur, these were some of the takeaway points:
In this podcast of the Money Show, listen to Pavlo Phitidis share how you can build a business with zero funds.
The alternative is to just blame, blame, blame the challenges in the country for you not doing something. This view blocks the opportunities, which are out there.
Pavlo recently spoke to a 58 year-old businessman who had started his business 20 years ago and built it up to employ more than 50 people and earn average annual revenues of 86 million. Four years ago, his business was worth around 60 – 70 million – a healthy capital exit if he had chosen to sell then.
Fast-forward Four years later, and the business is not doing well. This business owner now has 11 staff members and is headed for retirement. He will continue the business, but no longer as something he was once passionate about, and more of a hobby to keep him busy in his retirement.
His is one of many businesses who were hit by a shockwave in the face of the COVID pandemic and the after-effects of it. In the unknown, expansion and growth were afterthoughts, not even mentioned, and many business owners withdrew to their core skills, to see if they could salvage their business by fixing their product or service.
Listen to this podcast from The Money Show where Pavlo Phitidis shares how dangerous it is to weather the storm from the engine room, where this business owner was.
Persistent uncertainty eroded the confidence of the captain and drew him back into the engine room from the bridge. Navigating the direction of a business in a storm down in the engine room gives a sense of purpose. It gives a sense of confidence that you are tackling this uncertainty, and it creates and erodes. It creates massive erosion in the business.
As uncertainty increases, resist the temptation to go into the engine room, where you can get stuck putting out fires instead of staying on the bridge and navigating your business through and around the changes that come with the storm. The storm could be the Ukraine war, the inevitable recession, or the after-effects of the COVID-19 pandemic.
Global inflation and the strong Rand create an environment that is ideal to position your business to expand into global markets. Now is the time to explore the opportunities for growing a business and make it happen!
Finding the opportunity in crisis
On the one hand, global inflation rates are beginning to rise,. On the other, the strong rand helps to supplement measures that are sometimes beyond our control. However, the two together are providing an excellent atmosphere for a company to grow into worldwide markets.
In South Africa , we’ve become accustomed to inflation and the Reserve Bank’s ability to manage it by adjusting interest rates. And for us, dealing with this in our business is almost almost a kind of muscle memory. In more developed markets, this is profoundly unfamiliar territory.
This is compounded by the ongoing COVID supply chain crisis. It’s not going to change anytime soon and businesses are realising they need to learn to live with it.. As a business owner, protect yourself, get yourself a jab, do what you need to. But business isn’t going to stop any longer because it can’t afford to.
Listen to Pavlo Phitidis in this podcast of The Money Show, share the possibilities of expanding into global markets.
Why is it that the time is right to grow your business in developed economies like the UK and US?
The US and UK markets are viciously competitive to levels that we as South African companies are not, so entering those markets is not a simple task.
So, growing a business by understanding the market environment, guiding, and managing changes to your product or service, and finding access to those markets requires you to find someone who will be able to conduct market research for you and look out for your interests. It’s not something that you can commission from a so-called research agency that might be well located in the US, somewhere in Europe, or in the UK, where it may be. And I say that because, very often, those services bill you and then leave you with a document that contains a lot of theory but no practical path to getting to revenue quickly.
What you need to do to make it happen
The fear mongering taking place across the UK, in the US and Europe about the very real inflation impact – something that those environments are not used to – is creating a lot of discussion, and a lot of consternation, right across business. And that consternation is leading to a slowdown on the take up of services, and of investments. In those environments, the rand albeit stronger than it has been in a while, acts favourably for us because outsourcing to countries like South Africa, to companies that can respond effectively to it is where we are seeing massive growth across the clients that we are working with in South Africa.
It is a prime, prime opportunity to get that toehold in, which is so hard to gain. Now is the time because when you do, you learn fast what you need to do to upgrade your service and product and capability. You might as well have thrown a grappling line onto what will be the fastest moving ship for your revenue two or three years from now. But you need to be growing your business into an Asset of Value to ensure you’re ready to scale and grow into markets beyond South Africa.
Meetings can be a huge drain on time. And as business moves from online meetings to some in-person engagements, the demand to deliver a return on time – not just for you but for the person you are selling to, is more important than event.
While in Chicago, Pavlo attended a conference on experts tactics to advance sales and business growth. In this podcast from The Money Show he shares a few of these to optimise your outcomes from any business meeting.
How you set up a meeting, how you manage it, how you follow through after
How do you set up a meeting?
First impressions count, and people buy from people, not companies.
Creating this impression is entirely in your control.
Why are you meeting? Who needs to be there, who will be there, and what does success from that meeting look like?
The meeting agenda is the most powerful tool to get this right. Set it, confirm it, and use it to build consensus and excitement ahead of the meeting itself.
How do you manage a meeting?
How you enter the room counts. If you are selling to a team or to a single person, getting there ahead of time, being appropriately dressed, and knowing who your audience is sets you apart.
Introducing yourself and your team correctly reduces time wasting and creates a connection immediately. Your audience needs to remember your name, know why you are with your company, and find reasons to connect with and trust you.
The job of your team is to connect and resonate with the audience relevant to them and create an alliance and champion out of them.
How do you take notes in a meeting?
People buy from people, so whilst taking detailed and comprehensive notes has value, avoid doing it in the meeting. Eye contact and connection are more important. Make a list of who will be in the room and what their roles will be ahead of time. When it comes to discussion, which you’ve allowed for by setting up the agenda, write down only the powerful words that you can remember afterward to create your notes around. After the meeting, in the car, record your notes before leaving the parking lot.
How do you follow up after a meeting?
Always send a follow-up email. Using your notes, confirm what you heard, ask if anything further needs to be added or corrected, and confirm the action items and follow through that you agreed on in the meeting. Saying thank you at the end of a meeting as opposed to next steps impacts your audience’s expectations and what they are committing to doing next.
To “Scale & Grow” you need to up your game in the most important game of business, selling, is how we can get a return on time and cost. New habits are needed since repeating yesterday won’t change anything tomorrow.
About 94.6% of businesses started fail to sell and close at great cost to the owners, their families, and employees as they did not have a saleable business asset.
This should worry any business owner.
Aurik is currently working with a client who led the market in automated SME lending a few short years back, with two rounds of funding backing their development and growth. Today, they find themselves increasingly irrelevant, superseded by lending platforms that have AI and ML baked into their performance. They created the market opportunity, and competitors followed with advanced technology to outcompete their more traditional services. To lead again, they must rebuild their platform at a high cost, requiring another round of funding, diluting all parties further!
The lessons are clear. A business never stops needing innovation, and therefore investment, to stay ahead. It means a business owner invests continuously in their company if they wish to remain relevant and ahead of their competitors. There are always fewer buyers than sellers. Your business will be priced based on that competitive environment, with buyers spoilt for choice in a crowded space.
There are two paths to success worth talking about.
Build a business into an asset.
Build it to be a strategic asset.
Selling to strategic buyers needs extensive forethought and deep knowledge of your sector and industry. It’s the 5th act of leadership in any business owner’s journey and one that few have the commitment and obsession to attain.
A well-built company that is a saleable business asset with $5m EBITDA can earn you a cool $35m. However, the same business sold to a strategic buyer can earn you $100 million in half the time. It’s worth getting right!
If you are not growing your company, you are dying. The war in Ukraine, global supply chains, microchip scarcity, remote working, COVID, and inflation will kill your business… if you allow them to!
Inflation in a business is like cancer in a body. It’s often not detected until it’s either too late or requires a massive effort to eradicate and remedy. The best way to understand how it works is to think about R1,000 and what you do with it.
Say, inflation is running at 5%. If you place it in a current account, no interest is payable. At the end of the year, that R1K has the buying power of R950, and at the end of the following year, it’s worth around R900 and so on. Alternatively, you could place your R1k into a money market investment offering 4.5%. That way, before tax, you maintain the purchasing power of that money over the year. It’s worth R1,050 at the end of the year and so on. But the problem, of course, is tax and its impact on your purchasing power. That R50 interest earned can only be worth half of that, depending on your tax rate, but in any event, it still sees your money eroded. So here is the problem: many business owners don’t run calculations like this. They are too busy contending with the many challenges in the business environment. Their heads are also full of the deafening, seemingly relentless noise created by the information overflow generated by local, national, and global events.
But you leave it in your current account because you need to have it at hand.
In this podcast, Pavlo Phitidis discusses how your business may thrive in today’s economy, where the business environment, political environment, and global environment all play a role.
Why do you need to have it at hand and readily accessible?
Plan to plan, but no plan yet.
This is likely to develop a growing aversion to risk as well as a mindset that only ever sees risk. If you are here, either sell your business or get some help to get into the next option below!
The plan to sustain
Do what you’ve done until you have an idea of what you want your business to be. Whilst it’s better than not having a plan, it’s not good enough. The reason is simple. In your industry, you have competitors that are planning and acting on their plans to grow. Their growth erodes your business.
Make plans to expand.
Turn an idea into a plan, a plan into a document, the document into action. Or, even better, you can anchor your business into the future by defining what your company needs to be: an Asset of Value™. You engage your leadership team to set the 3-year plan and your operational team to develop the 1-year plan. Once all are aligned, you work with that team to break the year’s plan into quarterly milestones (measured outcomes over time). Once done, you create a budget. Once done, you delegate and assign the budget.
In this economy, business environment, political environment, and global environment, it’s tempting to feel overwhelmed, small, insignificant, unworthy, and incapable of growing your company and fulfilling your dreams and ambitions. Many people retain the shroud of an imposter, seemingly in control, up and at it and succeeding. The Jekyll and Hyde conflict exists in everyone – you are not an exception. It’s valuable to acknowledge and embrace. The frustration of this world must turn into anger. That anger must turn into positively inspired action. This is the turbine that propels action to make a difference and create a reality different from what we are told makes up the world. It’s a choice, and it’s in everyone’s power and self-interest to make it so.
Without a team, you have a job. Ask yourself – what happens when I’m not there? And if the answer is nothing, then that is a job. If you want to rather build a business, then you need to invest in and build a team. It’ll change your job into an asset. And that is a business that can be sold, monetizing your years of effort, risk, and care.
To build a team, you must learn to delegate. To get it right, many of us must slay several demons that reside in us.
Pavlo takes a look at a few of them in this podcast from The Money Show, and see which ones reside in you.
I don’t want to delegate because I get meaning from working hard and being very busy. I love it when people say how hard I work, because it makes me feel like I’m making things happen, big time.
Nobody can do things as fast as I can. It takes more time to teach someone something than just get it done. And I’m good at it too!
I don’t want to see anyone succeed beyond me or perform better than me. I’m going to set them up to fail – consciously or unconsciously. I’ll set targets too high or delegate something and then take it back repeatedly. I might even exclude some of the insights or activities that you’d need to succeed in the task I’ve delegated to you.
Well, nobody can do it as well as I can. Nobody is good enough. I’ve always said it: if you want something done properly, do it yourself!
My people are useless. and helpless. They show no initiative and don’t care about anything other than their paycheck, lunch, and public holidays.
Nowadays, you can’t trust anyone.
If I delegate that, what will I do? Where will my value come from if I don’t perform the tasks that I do if they are delegated to someone else?
Only I can do these tasks. I invested in the product. The service was my brainchild. You need special skills and insights, and this belief makes it impossible to delegate.
I delegate lots of things and expect people to get them done. I’m not sure how, what, why, and all that. They should just use their initiative and figure it out. Why can’t people just apply themselves and figure it out?
I delegate things, but I find you really must watch everything that people do when fulfilling the tasks. It’s the little things that make the big differences, and you constantly must be on your people to make sure they do them right.
Several other demons reside in us as business owners when it comes to building a team and working with our people and colleagues. Should you be growth-minded, each of the demons will show up, and your job is to ensure you slay them, one by one, to constantly build and lead your team better. It’s the answer to growth, innovation, and building your business into an Asset of Value™.