Case Studies

Michael’s story

This is a demonstration of how the system works in practice (in a particular business), in the following chapters we’ll flesh out what these things mean.

Framing meeting

My notes show that we started working together in August 2011 when we had our Framing meeting. We began our formal coaching relationship a week or two later. At the Framing meeting, I learned that Michael had a young family who were disappointed at the amount of his time that his business occupied and that he had no real vision for the future other than ‘this is the way things are’.

What Michael wanted

With some pointed questioning, I discovered that he wanted to generate a six-figure income stream to support his lifestyle, to provide for his children’s education and to allow him to invest in residential property. He also wanted to take school holidays off with his family and to make more use of a holiday home owned by his wife’s parents. Further questions showed that he had an opportunity to travel internationally extensively with his hobby, if he had time.

We fleshed his ideas out a little and then, using some ‘back of the envelope’ calculations, we worked out that he needed about $250k after tax per annum to allow him his dream lifestyle. We determined at this meeting that we were looking at a nine-year timeframe because in nine years his youngest child (then 3 years old) would be completing primary school.

Using this as base, we started investigating the details

Michael employed 1.5 effective full-time staff, plus himself in the office, and 4 full-time drivers. He worked ‘at least 80 hours a week’ by his own estimation, and had not had a break longer than one week in over five years. He was under pressure to vacate his current premises as the landlord wanted to tear down and rebuild and he was also under considerable price pressure from a very aggressive competitor.

Additionally, Michael’s business had seen a couple of difficult years where he had turned over just short of $1.3m with a net profit of $30k or 2.3% in 2009/2010 and a similar turnover in 2010/2011, resulting in a loss of $80k or -6.2%.

He needed to get back into profit immediately, to add working capital to the business so that he could move into his own premises, to replace one of his part-time staff, and to take a break. He also needed to work out what his competitor was up to and how they could compete so effectively, plus he needed to understand how the business had incurred such a loss and to begin a building project that would include the acquisition of land and buildings suitable for his operation.

I think you’ll agree that this kind of transformation required a very aggressive plan and possibly a complete change in the business model. We had to consider changing the type of products and/or adding services. At this point Michael was really in a tight spot and had no idea how to avoid another substantial loss. (Please excuse me not explaining further because I am very careful with the confidentiality of my clients and believe that it is important that they and only they can have the right to explain their own situation in a way that makes them identifiable.)

Triage

At Triage, we used his historical financial records to create a budget for the following twelve months.

This included $1.6m in sales and a net profit of just under $200k, or 12.4% because that would allow Michael to take sufficient money from the business to support his current lifestyle and to add money to the capital account.

At this point, we had no idea how we were going to reach those targets but we set them anyway, based on what Michael needed from the business to improve his lifestyle. As I mentioned earlier, I often find business owners are working from where they are to where they ‘think’ the business could get to, rather than where they need it to be, they are planning bottom up, not top down.

We had already agreed that there would be no ‘sacred cows’ in the process. Anything that didn’t fit had to go, from Michael’s own thought patterns to the business model itself, and everything in between.

For instance, we started out thinking that the business we were in was ‘transport’ but we realised that the business was really about ‘peace of mind’ because the cargo was not only valuable but had an emotional element as well.

With this approach, the actual movement of the cargo becomes secondary to the peace of mind of the customers, and that’s a very different business model.

With the ground rules and the desired outcome in place, we started mapping out the ‘who does what by when’ part of the Triage, with a one-page business plan for the first three months.

There were many elements to the plan but I’ve summarised them here:

1. Vision, Mission and Culture

Vision – Where does the business need to be in nine years’ time (you will remember that nine years was Michael’s chosen time-frame, it could have been set much earlier) and what will it look like?

Mission – What are the indicators that will show we have arrived, how will the story sound at that time?

Culture – What are the general rules that we will follow, most importantly what is it that we won’t do?

2. Finance

Detailed financial analysis of costs (both COGS and Expense) using a zero-based method

Revision and agreement of the budget and its associated tracking and reporting systems

3. Staffing

Organisation chart of the business in nine years’ time and comparison with current chart

Creation of Work Outcome Statements for every role (starting with Michael’s)

Introduction of performance review system

Consider introducing incentive or ‘at risk’-based salary packages

4. Systems

Create and introduce a systems manual

Find all existing systems and formalise them

5. Time usage

Detailed time analysis for every staff memberm

Introduce Default Diary system

6. Education

Reading/listening/watching list of required learning for Michael and his staff
You can probably tell that at the time, Michael was very much the technician in his business, making bookings, managing the team, scheduling pick-ups and deliveries, and so forth – so even this level of ‘hands-off’ type work was a stretch for him.

As the weeks wore on, he became more comfortable and managed to get the work done, but he didn’t get it all done and he was OK with that.