If you are not a people farmer, then you are not a manager. If you are a manager you are in the people farming profession.
As a manager you might check Excel spreadsheets, monitor process and put systems in place, but that’s not the subject of your management. People is the stuff your management is made of. If you are a potato farmer, you should know potatoes. If you are pig farmer you should know pigs. A dairy farmer should understand cows. And if you are a manager, you better know people. If you don’t, poor harvests and bankruptcy lead to the final unhappy end. So, how well do you understand what makes human beings tick?
Learning to put people first
Very few entrepreneurs and SME owners I know began their ventures one bright morning, drawing the curtains aside with: “Oh, I want to work with people, what business can I start so that I can fulfil my lifelong ambition to work with people?” No, we usually begin because we have no other option than working for ourselves – or because we have a bright idea that we believe will change the world.
In the first case, we usually fall back on a skill we have and for a very long time we must keep on practicing that skill in our SME, while doing a host of other things, invoicing, chasing debtors, marketing, managing the people we acquire along the way to help us with the work load… Managing is a struggle to create some order from the day to day chaos. Thinking about people, what they are, what makes them tick, comes as an after thought, if at all. To get people to do what we want, we mostly fall back on anecdotes, fragments of our own experience, how people treated us, what we want and don’t want. If you wanted do potato farming with such little anecdotal knowledge you would have been doomed to subsistence farming at best.
Those entrepreneurs that begin with an idea are no different from those that had to jump the ship and begin their own business. They too are not primarily interested in people and what makes them tick. It’s the idea that drives them, not the love of people. “People” is an after thought. Those business owners/managers with a formal education in business will have a smattering of “Maslow,” often the only bit of knowledge I find among them.
Of course, our book shops are awash with books on the status term for management, “leadership,” mostly purely motivational and with no real substance. It’s about as good as if you want to do potato farming believing that talking to the plants will help them grow better!
So, now what do you really think about the people and about the human race as such?
Let me give you four options and then you choose (these were originally prepared by Matthew Stewart in an article in Strategy + Business).
- Do you believe human beings are self-cantered, not innovative and lazy; left to their own devices they will do the minimum and be prone to theft?
- Do you believe that human beings are like machines, they don’t know what they want, and you must lead them to achieve goals through a scientifically designed system of rewards and punishments?
- Do you believe that all people are creative by nature, love to work and will perform to the best of their abilities – if only management would get out of the way?
- Human beings thrive on freedom, however, they are also power hungry and they need a system of checks and balances to prevent rogue individuals from seizing absolute power?
Let’s do a quick check.
If you chose option A: People by nature stupid? Have you given thought to the ingenuity of prisoners? Want to know about innovation, go to prisons and get wise! Now these guys are not known for their high educational achievements, but hey, if it is in their self-interest they are on a par with top class engineers. The operative word is of course self-interest. If it is in our own interest, we are all hugely innovative. The question is how to harness self-interest in the workplace to bring innovation to the business.
If you chose option B: If this were true about humanity, it is inconceivable how the species could have survived for close on 200,000 years. And if you wanted to see this fail big way, just think Stalin and Mao. That was what communists really believed. But, oh, I think you forgot about freedom. Human beings want freedom, and if you imprison them, they will use their ingenuity to sabotage you – exactly what happened in communists countries! Same holds true for business.
If you chose option C: You have read far too many syrupy books by New Age management gurus. Probably you have a whole library of Tom Peters books. Sorry I can’t help you. We are freedom loving, ingenious when it serves our self-interest, but if management were so bad, why don’t you try and win the next soccer or rugby world cup without a management team. After all, we call an outfit without management amateurs!
If you chose option D: Pity you couldn’t travel back in time. You would have made great friends with the authors of the American Constitution, Thomas Jefferson and his friends. Now, we are close to the truth, freedom is important, so we are optimistic about human nature, but we are also pessimists enough to understand that you can’t win the World Cup in whatever sport without a management team to nudge self-interest and group interest to converge.
Farming with people needs both pruning and fertilising!
In my next article I will look in more detail at what we can really know about human nature, the stuff our management is made of.
4 Common Myths About Leadership That Can Hold You Back
Alignment with your values and belief systems is the foundation of becoming an effective leader.
To be a great leader in today’s world, being a brilliant knowledge expert or technician is no longer enough. Even harder is trying to learn the golden rules of the wrong and right ways to be a great leader. The amount of content spouted in countless books and resources is overwhelming let alone confusing.
To be unstoppable leaders for our businesses and our people, tuning out from the noise and distractions potentially misguiding us is pertinent now more than ever. Pay attention to any presence of these four myths and make guiding your people a more soul-enriching journey that they and you will want to continue well past your leadership term’s end.
Myth 1: Great leaders are highly ranked individuals
Richard Branson proves a classic example of how great leaders can get to the top without having ivy-league school connections and astounding qualifications. Having had enough of struggling at school, Branson dropped out of the highly reputed Stowe boarding school at the age of 16 to start a magazine called Student. The first publication sold $8000 worth of advertising. We all know the Virgin story from there on. Then there are the likes of Rachael Ray, food industry personality whose empire has amassed a $60M fortune without her having any culinary qualifications whatsoever.
There’s a common entrepreneurial DNA that runs through the veins of such leaders. An avant-garde vision, tenacity and patience seem to be common underlying themes for many. For others, it’s about making sacrifices and taking risks that could cost their life to serve a cause extending far beyond serving their own needs.
By publicly speaking out against the Pakistan Taliban’s extremist rulings, one of which of was to prevent females from accessing education, Malala Yousafzai became a target. At 15 years of age, a masked gunman boarded her school bus and shot her in the head. She survived and many months of rehabilitation spurred her determination to fight for every girl to have the opportunity to attend school. The work she achieved through establishing the Malala Fund with the undying support of her father, earned her the Nobel Peace Prize in December of 2014.
Whether from desperation or a happy place there is always the genesis of a passion driving a persistence to go against the grain and to continue the fight. Often there’s no formal training, qualification or certification in sight.
Myth 2: Following a certain checklist of behaviours will make you a great leader
The ‘fake it ‘til you make’ adage has become a common throw-away phrase consultants and coaches spout as a means to quickly build confidence. Following advice to merely emulate the behaviour of those you admire and respect can pose grave risks, especially when you become a leader by default as opposed to by your own audition. Smart teams can smell falsehood and copycats a mile away. Your integrity will often be scrutinised and your jury will constantly evaluate the values and principles you lead by. One foot wrong might end your leadership term just as quickly as it began and not necessarily by your team’s choosing.
Imagine being tasked with driving credit card sign-ups yet you yourself struggle to make repayments on your own overdraft. How long can you resist your inner conscience? You’ll feel the tug every time you invite a customer to sign up and at every request to your team to follow suit. At some point, you’ll be struggling to face yourself see in the mirror.
This article was originally posted here on Entrepreneur.com.
9 Ways To Get Employees To Buy Into Your Vision
Your business is your dream come true, now it’s time to include your employees in your vision to drive future success.
Your vision statement is the foundation of your business. It is the baseline against which all strategic planning is assessed and the benchmark against which all results are measured. However, as important as it is to have a vision when it comes to business success, it is equally important to get your employees to buy into this vision to ensure that success.
Here are nine ways to get your employees to buy into your vision by making it their dream, as much as it is yours…
- It must be believable – Your company vision needs to be within the realms of possibility otherwise people just won’t believe in it. It must be steady, achievable and relevant.
- It must be inclusive – Employees need to see how they can play a part in achieving this vision to make it relatable and inclusive. If they don’t understand what the business does, they won’t care how well the business does.
- It must be reinforced – Talk about your vision all the time. Don’t assume everybody has read it or is familiar with it as new people may not have seen it and older people may have forgotten. Constant communication is critical to ensure everyone is, literally, on the same page.
- It must be transparent – Make sure your communication around your vision is open and clear. Talk about it with clients, with all staff members, at all meetings and keep on talking until everyone understands it. When a vision is tangible and accessible it is far more achievable than when it is ethereal and vague.
- It must be practical – Don’t make flamboyant statements that are almost impossible to achieve like, ‘We will be number one in X!’. Be practical. It doesn’t matter if you’re not number one, it does matter that your vision is practical.
- It must be shared – Connect people’s careers to the vision by creating opportunities for them. Show them how the work they do is tied back to the vision and the business. If the business is only about profit and customer, then employees often don’t see how they fit in or why they are important. Create opportunities for them and they will be inspired to achieve your vision.
- It must be people-centric – People make up the core of your business. It is bigger than just one person or one idea. So, give them something to aspire to with a realistic, practical and human company vision.
- It must have purpose – Embed your vision and its values into the way you do business. The way you treat your employees and your customers and the choices you make should all reflect your vision. Take it beyond just ‘We want to make money’ and show how your vision positively affects your community and others.
- It must be visible – Put your vision on doors, in emails, on letterheads, in proposals. Show what you stand for at every opportunity. Employees need to feel that there is a cohesive plan for the future. This will not only drive engagement but it will keep them steadfast when times get tough – they believe in the ship too much for it to sink.
What’s Your Number? How To Unpack Company Valuations
Business is booming. Investors want in. But how do you put a price on the value of the company you have built with your own hands?
Company valuations is such a hazy part of the scale-up journey of a private company. Putting a price tag on a business is both art and science. At the end of the day, the number that makes the headlines (if ever disclosed) will be where willing buyer and willing seller meet.
But how do you , as business owner, go about setting your asking price? Before approaching investors, it’s a good exercise to determine your own valuation range for the business. Choosing the right valuation method is the first big question. The answer has many parts to it, but the most important driver is the stage of the business.
Let’s look at some of the most commonly accepted valuation methods in our market:
Applicable stage: Established, profitable companies
Listed companies, institutional players and private equity investors normally invest in a company for its cash flow profit that can contribute to their portfolio income. More often than not, companies will be valued based on their current earnings (bottom line profit after tax).
This method can only be used for companies that consistently make a profit. A multiplier will be chosen based on the company’s perceived risk. Younger, more risky businesses will likely have lower multipliers (as low as 3 and 4) and high growth, well established, lower risk companies will get higher multipliers (8-15).
Sometimes small adjustments are made to current year earnings (like non-standard, non-repeating income statement items) after which the valuation is set at Earnings times multiplier equals company valuation.
Discounted Cash Flow (DCF)
Applicable stage: Post-revenue start-ups, growth companies and established businesses
The most commonly used method in practice, the DCF method argues that a company’s value is determined by the future cash flows that it will yield to investors.
The starting point is creating a five to ten year cash flow forecast for the business. This is no small feat. In order to create a full financial model – income statement, balance sheet and cash flow statement – for the next decade requires a lot of work, both from a strategic and technical perspective.
Investors love this model because if forces the owners to put a clear strategy and expansion plan for their business into numbers. It will include dozens if not hundreds of assumptions – all of which can be scrutinised for reasonability. The result of financial model will be five to ten years’ worth of projected cash flows. These amounts are then discounted to present value at a discount rate that reflects the company’s risk and expected cost of capital.
The sum of the discounted future cash flows plus a terminal value (that represents the value after the five or ten year period of the model) then represents the valuation of the company after some final small adjustments for things like existing debt in the business.
A revenue multiple valuation approach is focused on the market for similar businesses and is underpinned by your company’s current turnover. It seeks out the sales price of other similar companies in the country or worldwide, adjusted for size, stage and market differences.
A company that sold for R100 million at a turnover of R50 million would have a two times revenue multiple (valuation/revenue). If the average revenue multiple for similar companies is in a certain range, this multiple is then slightly adjusted and applied to your business.
If the average sale in your industry has been two times revenue but you are growing much faster than the average with a better competitive advantage, you can argue that two and a half times revenue is a more applicable number for your business. Revenue multiples are often used as a reasonability check in the market for the current asking price.
Most established companies are valued using one or a combination of more than one of the above three methods. At start-up stage, there are a number of other methods like Cost to Replicate or the Scorecard Method that early stage investors look to. When a company is simply in too early stage to practically value it, seed stage investors would also consider SAFE Agreements (Simple Agreement for Future Equity) – an instrument that determines that the percentage of the company the investors are buying with their investment. This is only determined when the Series A round is raised at a future date and under certain conditions, generally at a discount to the price the series A investors are paying.
Company valuations are complex. Many of the above technical factors play a role. A lot of it also comes down to the salesmanship of the owners and the negotiating capabilities of the parties. In ‘How Yoco Successfully Secured Capital And The Importance Of A Pitch’, the Yoco team speak about the importance of the right approach in their recent R248 million fundraising
Don’t go into this process without seeking some kind of expert advice. The price of the wrong valuation is simply too high. Make your numbers and your arguments bulletproof and you will be on your way to defending a strong and exciting valuation for your next raise!
Self Development2 weeks ago
10 Secrets To Finding A Job You Love
Performance & Growth7 days ago
How Matt Brown Quadrupled His Business By Becoming A Niche Player
Entrepreneur Today6 days ago
Entrepreneurs Organisation Crowns the Winner of the Global Student Entrepreneur Awards
Branding2 weeks ago
How A Strong Brand Protects Your Business
Entrepreneur Today3 days ago
5 Businesses You Should Start in 2019
Marketing Tactics2 weeks ago
An ‘Outside-the-Box’ Approach to the e-Commerce Unboxing Experience
Hiring Employees2 weeks ago
Are You Hiring A Cultural Fit? Do You Actually Want To?
Business Landscape2 weeks ago
4 Tips To Create A Great Conference / Workshop / Event In 2019