To know what to expect from a turnaround specialist, it is useful to understand what a turnaround is, and what a turnaround specialist does.

A turnaround is everyday management, but it involves managing the process of rescuing a company in serious decline which will fail in the foreseeable future with no corrective action.

Turnaround specialists are neither CFOs nor accountants. They are not lawyers, salespersons, or marketing experts. They are not hatchet men only interested in cutting costs and staff.  They may, however, have qualifications and expertise in some of these areas.

My definition of a turnaround specialist is a polymathic crisis manager. Polymaths are individuals with knowledge spanning a significant number of subjects, known to draw on complex bodies of knowledge to solve specific problems. Crisis managers plan and implement the response to a major threat to a business.

Turnaround specialists come to the organisation with complete objectivity, and with the ability to quickly analyse the situation, determine solutions and actions that those in or close to the business may not see and also make the critical and timely decisions that need to be made without emotional bias from shareholders, directors and management.

Turnaround specialists also have a range of unique behavioural skills and management style. They like intense situations and being shoulder deep in the operations. They have to work with often inaccurate and incomplete data and use their intuition to make decisions. They build credibility by delivering on what they say will do and building trust.

Years ago, as a senior currency trader, I said I can teach someone to trade currency in a day, but I could not teach them to be a currency trader. Similarly, just because you were a CFO or a corporate banker, it does not translate into being a turnaround specialist. It is the other skills and knowledge and the ability to apply them that really makes a turnaround specialist.

Turnaround specialists usually follow a similar process in four phases.

1. Analysis phase

This is where a diagnostic review is performed and the turnaround options are evaluated. One option gets chosen, and the immediate crisis actions are then undertaken. The turnaround team is established and they develop a plan.

2. Emergency phase

This is executing and managing the actions required within the plan. There is usually a heavy focus on liquidity management, operational factors, cost control and stabilising sales.

3. Strategic change phase

This phase looks at areas that will strengthen the business going forward.  This might involve revisiting standard operating procedures or looking at IT systems and processes. This phase may also consider products and markets and decide what changes are required for ongoing and long-term viability.

4. Growth and renewal phase

Once the business balance sheet has improved, the business can begin to grow again, either organically, or via merger or acquisition, or both.

Underlying and throughout these four phases, the turnaround specialist also undertakes stakeholder management and project management.

There are also some things you should not expect from a turnaround specialist.  They are not miracle workers, but they will do their best with what they have. Their success at implementing a turnaround is reliant on the support of the Board and management team, who must own the turnaround and commit to the actions required. Turnaround specialists do not work alone but require a team both internally and externally working on the turnaround for it to be successful.

For someone that works with businesses in financial distress, determining whether a company is insolvent is almost intuitive. However, there are several signs and predictors of insolvency that different stakeholders can recognise.

But first, what is insolvency?  Insolvency is a state of being insolvent, whereby a company cannot pay all of its debts, as and when they fall due.

‘Z-score’ empirical sign

Edward Altman developed an empirical evidence technique that uses five financial ratios and a statistical analysis technique known as linear discriminant analysis to predict if a company was solvent or insolvent. The ‘Z-score’ has been found to be 95% accurate one year prior to insolvency and 72% accurate two years prior to insolvency.

Observers

Depending on your view of a company, there are some typical signs and symptoms of financial decline. I have sometimes interviewed some of these observers to get a broader picture of the business situation of my clients. For each observer below, I have outlined some (not all) of the typical signs:

1. ‘Man in the street’

  • · Subject to takeover bid
  • · Obsolete or hopeless products
  • · A major disaster
  • · Loss of key personnel abruptly or embarrassingly
  • · Public refinancing deals
  • · Poor financial results
  • · Serious profit warnings

At the time of writing, and using Virgin Australia as a case, you will note a few of these signs are clear from the position of the ‘man in the street’.

2. Informed person

  • · Declining share price, profits, market share, liquidity, dividends, sales volume
  • · Delays in publishing and qualification of accounts
  • · New equity or debt raising to fund losses
  • · Turnover of key staff
  • · Public disagreements between director and/or senior management

 

3. Analyst

  • · Low morale
  • · Loss of key customers
  • · White elephant projects
  • · Concealed Board conflict
  • · Loss of key personnel
  • · Lack of strategy or ability to implement it
  • · Breach of banking covenants
  • · Discussion of financial restructuring plans
  • · Share performance worse than sector average

 

4. Suppliers and customers

  • · Negotiations by suppliers with company bankers to support a restructuring plan
  • · Factoring customer invoices
  • · Late payment of supplier invoices
  • · Increased supplier disputes
  • · Lengthening debtor and creditor days
  • · Problems with new IT systems

 

5. Investigating accountant

  • · Poor working capital management
  • · No sense of urgency
  • · Creative accounting practices declining performance in the management accounts
  • · Pending litigation matters
  • · Lack of leadership

 

6. Employees

  • · Major management issues only the staff can notice
    •      · Emergency board meetings
    •      · Management paralysis
    •      · Finger pointing and bickering
    •      · Acting in functional isolation
    •      · Fear

So, as you can see, there are many signs of insolvency or impending insolvency.  A caveat: just because some of these signs are evident, it does not imply that a company is or will be insolvent.  The first task on a new engagement of a turnaround or restructure is the analysis stage, which involves undertaking a diagnostic review with the following objectives

  • · establish the true position of the company from a strategic, operational and financial perspective
  • · assess options available and determine whether it can be turned around
  • · determine whether the business can survive in the short-term
  • · establish the stakeholders’ position and their level of support for the various options
  • · make a preliminary assessment of the management team

When a company is quickly running out of cash and becoming insolvent, this process needs to be ‘quick and dirty’ and the signs of insolvency are quick indicators of areas that need to be addressed.

Writing a business plan when a business is in severe difficulties may seem like a luxury and an unaffordable waste of time, but it is an absolutely critical part of business restructuring.

Plans help you stay organised and help you coordinate your efforts.  Developing plans is difficult. For most small business owners, their preference is to look at the detail and not the big picture.

I think the main reason they don’t develop and follow a plan is because they are afraid of failure. “What would happen if I have a big, hairy, audacious goal and didn’t reach it? What would people think?”

When I work with business owners, I first assure them the goals of their business are their goals, and no one else cares if they achieve their goals or not. I’ve never had a client ask me what my goals are, and I don’t expect I ever will – they just don’t care about my goals.

Second, I tell them that not setting a goal or plan is like turning up at the airport without a ticket and not knowing their destination. I ask them, ‘What will you do?’ and ‘How will you do it?’ and ‘With whom’ and ‘What do you want out of the trip?’

Third, I assure them they are more likely to get close to their goal if they first set one. Remember when you were saving up for a car or a house deposit? I bet you had regular savings goals and stuck to a budget. By knowing how much you needed to put away each week or each month, you were more likely to achieve your goal than if you had no goal or plan at all.

What is in a business plan?

1. An executive summary

A summary and overview of the important aspects of the plan covering the purpose of the plan, a brief description of the company, the history and marketplace, highlights of the financial projections and the proposed restructuring, funding requirements, and strategies.

2. Operational analysis and action plans

A SWOT analysis of each core business process and each major support function, then a detailed series of initiatives that address the weaknesses and opportunities – operationalising the restructuring strategies into a series of actionable, measurable and quantifiable steps.

3. Financial projections

These include the basis of any refinancing, financial restructuring, or negotiations for ongoing support from stakeholders. Financial projections set out the financial implications of the restructuring strategies and detailed operational actions, which in narrative form provide the core of the plan.

4. Implementation process

There should be a description of the whole implementation process including milestones, key performance indicators, reporting timetable and an internal communication program to roll the plan throughout the business.

5. Risk assessment

An assessment of risk is critical for all stakeholders when deciding whether to support the restructuring plan.

6. Review process

Plans must be reviewed regularly. They are a living, working document. A restructuring plan should outline when and how the restructuring plan will be reviewed, and by whom. The reviews should involve a restructuring advisor, especially if you are relying on safe harbour provisions.

I regularly get asked to write restructuring plans at the start of an engagement, but this is something I push back on a bit.  Under safe harbour provisions, the Board and senior management should write the plan.  Their involvement generates ownership of and commitment to achieving the plan throughout the organisation. Without this buy-in, the plan will ultimately fail. While advisors can play a useful support role and bring specialist advice, it is vital that the plan is ‘owned’ by the Board and management.

It would be an understatement to say the world has changed due to the COVID-19 pandemic. But as often is the case, it is through adversity we see a person’s real character shine, and the same holds true for business owners. So as a business owner, how can you reshape your business and emerge from the pandemic ready for the next few inevitably difficult years?

Make firm decisions

We have all heard the saying ‘You’re like a rabbit in the headlights.’ In these circumstances, you can’t be! Make swift, hard decisions now.  Do not wait until your sales drop, and then a little longer before looking at overheads and how to reduce them.  Do not wait to look at diversification.  Do not wait to look for different sales channels. Act now. Choose your path, stick to it, and do not look back.

Be agile

The pandemic is providing a crash course in exponential change. The nature of complex interdependent systems means that planning uncertainty quickly multiplies. For this reason, companies urgently need to improve their agility — their ability to learn quickly and to change course quickly.  And they need to realise that disruption can come in waves; we should be wary of just focusing on the next wave of any disruption (such as a pandemic) when a subsequent wave could be even larger.

Pivoting is the business buzzword of 2020. Take 13 CABS as an example – they quickly foresaw that closed borders and businesses would impact their patronage and duly pivoted to establish a parcel delivery service.

Adopt digital technologies, remote working and e-commerce

My wife is a General Practitioner, and her clinic could not continue operating as normal.  Patients now get screened at the door, COVID-19 testing procedures have been set up, and barriers have been put up to protect the administration staff and other patients. The managing partner was even making hand sanitiser at home for the clinic to use.

Now the clinic is split into two shifts, with doctors working from home half the week using phone and video technologies to conduct patient appointments, and the administration staff using ecommerce to access HiCaps, process payments and process online bookings and reminders.

Plan now

A generality is that before COVID-19, businesses were poor planners – particularly the small- and medium-sized ones.  A plan was often only put in place because ‘the bank needs it’.  The pandemic has starkly illustrated the weakness in business planning in all its forms be it supply chain management, cash flow and liquidity management, financial and capital planning, or planning for growth.

I would advise that you must plan post-pandemic immediately. In fact, you should be well underway by now because waiting until after COVID-19 will see many businesses fail. Remember buying your first car or house? You had to have a plan in place and if you didn’t, you probably wouldn’t have got either. Plan for after COVID-19 right now. While you may not be able to work in your business, this is a perfect time to work on your business.

Keep a steady cashflow

By far the most important forecast you could do for your business is a cashflow forecast.  Without a positive cashflow, a business will die.  Do a cash flow forecast now for the next six months and you will quickly determine actions you must take today.  This might include stabilising sales through diversification, reducing overheads now (not after the sales reduce further), extending supplier payment terms, or decreasing debtor days. It may also mean you need to explore different financing options now.

Unfortunately, medium-sized businesses are the ones most likely to come out of the pandemic worse off.  They do not have the ability of large businesses to raise funding and increase pressure on working capital.  They are not as agile as small businesses. While sole traders can stop paying themselves so they can pay and retain staff, medium-sized businesses are less able to do the same. That’s why managing cashflow will probably be the most important task in your business now.

Be kinder

The Australian government has a recommended code of conduct for commercial rental agreements.  It is not enacted into legislation, but a set of principles recommended by the government.  Underlying these recommendations is the idea that ‘we’re all in this together’ and that we ‘all have a part to play and a burden to bear’. A landlord can still not reduce rent for a struggling tenant or defer their rent. I hear their objections too – “we are a business, and we require the rental payments to pay our debts.”

However, I look at the bigger picture on a range of levels.  First, in this environment it will be hard replacing a tenant at full “normal” market rates immediately, so it would be better having some rent coming in rather than none.  Second, showing empathy and helping your tenant will probably develop greater loyalty and they are likely to stay longer beyond COVID-19.  Third – and most importantly for me – it reflects your character, your reputation and your brand. I learned many years ago that everyone has a story. In this time of immense tragedy, where many people are hurting, why create more hurt when you don’t need to? Be a little kinder. You will feel better today and your kindness will reward your business in future.

It has been interesting being a New Zealander living in Australia during the COVID-19 pandemic. There have been comments, cartoons and discussions that Australia should become the West Island of New Zealand, or that Australians wish that Jacinda Ardern could become the Australian Prime Minister (how quickly they forgot the 2018 dual citizen debacle!). There have even been comments that all Australia is doing is following the actions of the New Zealand government a few days later.

However, one thing that New Zealand has ‘followed’ Australia with, in response to the pandemic, is the introduction of safe harbour protections for directors – though like other countries, it has its own ‘flavour’.

Note: the proposed changes to the Companies Act discussed below are based on drafts of the legislation. The legislation will not go to Parliament until 28th April 2020. However, if it is passed, it will be backdated to 3rd April 2020.

The safe harbour rules provide directors with certainty that they would not be in breach of their duties in an environment where significant uncertainty exists, which avoids companies being placed into liquidation prematurely.

New Zealand does however have a commitment with Australia under the ‘Closer Economic Relations’ arrangement (CER). The CER requires New Zealand to cooperate with Australia on its policies, laws and regulatory regime to ensure consistency across the two markets. Therefore, in drafting the safe harbour provisions, New Zealand looked at the Australian regime for inspiration.

The proposed changes are temporary and will include:

  • Giving directors of companies facing significant liquidity problems because of COVID-19 a ‘safe harbour’ from insolvency duties under the Companies Act.
  • Businesses affected by COVID-19 will be able to put a hold on existing debts until they can return to normal trade. It is likely this will only be accessible if 50% of the body of creditors agree to debts being ‘hibernated’.

Under the safe harbour provision, directors’ decisions to keep on trading, and decisions to take on new obligations over the next six months will not result in a breach of duties if:

  • in the good faith opinion of the directors, the company is facing or is likely to face significant liquidity problems in the next six months because of the impact of the COVID-19 pandemic on them or their creditors.
  • the company could pay its debts as they fell due on 31 December 2019; and
  • the directors consider in good faith that it is more likely than not that the company will be able to pay its debts as they fall due within 18 months (e.g. they can resume trading or they can negotiate with banks and creditors and put in place payment arrangements).

Like the Australian safe harbour provisions, directors will still need to comply with other legislated director duties e.g. to act in good faith and in the best interests of the company, and also NZX continuous disclosures requirements.

Under the debt hibernation provisions

  • Directors will have to meet a threshold before being able to access the Business Debt Hibernation regime and putting a proposal to their creditors.
  • Creditors will have a month from the date of notification of the proposal to vote on it, with the proposal going ahead if there is a 50% agreement (by number and value).
  • There will be a one-month moratorium on the enforcement of debts from the date the proposal is notified, and a further six-month moratorium if the proposal is passed.
  • Creditors who continue to trade with the company will be protected from having payments for those new supplies overturned if the company is subsequently placed into liquidation, unless those transactions occurred in bad faith.
  • The debt hibernation provisions will also be available to trusts and partnerships.

Grant Robertson, the New Zealand Finance Minister, said “While they will help increase certainty and provide practical assistance to business owners and directors, the changes must not be seen as a workaround for obligations to creditors and the responsibility of directors to act in good faith.”

“The changes would help keep jobs and support the New Zealand economy to recover as quickly as possible,” said Consumer Affairs Minister Kris Faafoi.

“We know that, whether real or perceived, the threat of a director being held personally liable for a company’s solvency problems will likely make them inclined to advise closing a business.”

He added that a ‘safe harbour’ will help them keep trading rather than prematurely closing up to minimise disruption to the economy as much as possible.

As we have seen in the last few weeks, the world is changing at light-speed. Before the world was struck by COVID-19, a large percentage (over 60%) of businesses failed and went into insolvency in the first three years.  I expect the same percentage will fail or go into insolvency in the next three months .  So, what are some actions businesses must do now to avoid insolvency?

Make business decisions now

We’ve all heard the saying ‘You’re like a rabbit in the headlights’. Don’t be! Make business decisions swiftly and hard. Don’t wait until your sales drop and then a little longer before looking at overheads and how to reduce them.  Don’t wait to look at diversification. Don’t wait to look for different sales channels. Act now.

Maintain a positive cashflow

Fred Adler, a pioneer of venture capital markets in the USA, had various epigrams that some called Adler’s Laws. His most famous one focused on the things that made a business successful, such as

  • being able to generate more cash than was spent; and
  • having the cash where and when you need it.

He regarded both as vital to a business’s survival and I do too. Some tips to take to heart are:

  • Forecast cashflow regularly and often
  • Follow correct invoicing procedures so you can utilise legal avenues if you need to (e.g. the Security of Payments Act) or utilise debtors’ insurance
  • Invoice more regularly and make payments less frequently
  • Implement tight controls on spending authorities
  • Eliminate discretionary spending
  • Embrace technology

Build relationships with your bank or financiers

What I mean by relationship is a real personal relationship with the decision makers at the bank.  They need to know you when you are in the same room.  They must be able to trust you as a person.  Get to know them – have a regular coffee catch up.  Take an interest in them as a person.  Know and ask about their families or their interests.  You will get more support from your bank if they know you personally.  The same goes with insurance. I encourage my clients to use an insurance broker because you’ll have only one point of contact if there is a claim, and they’ll know you and your business well.

Ask for help

I hate seeing businesses fail because either they seek help too late, or their pride stops them from asking for help, or they think the help is too expensive.

There are only three reasons a business fails.

  • A lack of business skills in the business
  • A lack of attention to applying business skills within the business
  • Mostly working in the business rather than on the business.

“Surely not!” I hear your cries and jeers. Don’t misunderstand what I am saying though. And don’t just take my word for it.

Michael E. Gerber, esteemed author of the bestselling book E-Myth Revisited, nailed it when he said:

‘The assumption is that they understand the business because they understand – and maybe are experts at – the technical work of the business. They think they know the work; they are qualified to run the business.’

What he means is you may be a technical expert or genius practitioner, but you also need to know how to run a business. I haven’t seen many electricians or hairdressers go out of business because they are bad practitioners – but I have unfortunately seen plenty go out of business because they do not have the skills to run their business well.  The good news is skills can be learned. All you need is devotion, time, and help from a trusted advisor.

‘Get comfortable with being uncomfortable. When you start your own company, you have to get used to learning how to do things that you don’t know how to do.’ – Heidi Zak, Founder of Thirdlove

Get help to learn the skills to run your business better by engaging a hands-on business advisor . Be a sponge and learn from them. The cost to do so is not an expense, it’s an investment – and you will get a positive return on it

As a turnaround advisor , when I first meet a potential client, I feel like they think I have a big magic wand, and I’ll be able to come in, wave my wand, create an instantaneous miracle that will cost them a small fortune and then disappear, leaving them with a lot of turmoil. However, this couldn’t be further from the reality of how the turnaround process works.

While every business is different, every business owner is different, and every industry is different, the key to the recovery of a sick company is the same – it relies on a robust plan.

Characteristics of a turnaround plan

A successful turnaround plan must have these characteristics:

  • Address the fundamental problems
  • Tackle the underlying causes and not the symptoms
  • Be broad and deep enough in scope to address and resolve all the key issues

Plans must consider the big picture and not the individual problems in isolation.  It is also important the plan does not get bogged down in too much detail.  It is far better to act quickly rather than spending days working on a plan in detail.

Turnaround plan key ingredients

There are seven key ingredients to a successful turnaround plan:

  1. 1 Crisis stabilisation
  2. 2 Leadership
  3. 3 Stakeholder support
  4. 4 Strategic focus
  5. 5 Organisational change
  6. 6 Critical process improvement
  7. 7 Financial restructuring

With each of these ingredients, there are various strategies needed to make them work. Under crisis stabilisation, for example, there are strategies such as taking control of the business, cash management, asset reduction, short-term financing and first-step cost reduction.

In a business I worked with recently, I started the turnaround plan by taking control of the direction of the company, reviewed and put in place more accurate cash forecasting models, changed how and when they paid suppliers, and put a focus on customer cash collections.  Simultaneously, I started addressing their short-term financing requirement by seeking more appropriate financing for the company, reviewing their operations and overheads, and determining what were core assets.

This may sound chaotic, it is actually very structured in my mind as the turnaround advisor and closely follows the plan and ingredients for a successful turnaround.

Timing in the turnaround process

To add to the structure, I have four overlapping phases in the timing in the turnaround process:

  1. 1 The analysis phase
  2. 2 The emergency phase
  3. 3 The strategic change phase
  4. 4 The growth and renewal phase

Each phase will incorporate multiple different ‘ingredients’ and turnaround strategies.  For example, the analysis phase is not just a diagnostic review, but also brings in the crisis management and stakeholder support ingredients.  It is the starting point for the development of the turnaround plan and may encompass turnaround strategies such as cash management, C-suite leadership review and financial control.

What makes a turnaround process successful?

A lot of business advisors have a specialty, and excel at that specialty be it marketing, accounting, organisational change, IT, etc.  With turnarounds, the process to be successful needs to be:

  • ● Comprehensive – it needs to be both tactical and strategic
  • ● Non-linear – per the timing of the turnaround process, a successful turnaround requires simultaneous rather than linear sequencing
  • ● Wide-ranging – they are broad in scope.  For example, they may tackle both cost-reduction and revenue growth, soft and hard issues, and short- and long-term priorities.

At Byronvale Advisors we have perfected a polymathic consulting method, which means our teams of experts specialise in multiple disciplines and industries – instead of just a single area. We draw on their diverse, specialised knowledge and experience to create specific, thorough solutions for your business or organisation.

Our polymathic consulting approach accelerates the time to minimum viable knowledge on your organisation’s industry and business processes.  We access and use specialist knowledge by effectively combining specialist capabilities with your business’ needs – meaning we assist you quicker and better.

Using this model, our turnaround process is comprehensive , non-linear, and wide-ranging with a focus on delivering a successful turnaround.

For most small business owners their business is a large part of their life. They may have given up a 40-hour-week job to work 80 hours a week on their business. As such, either the business owner wants to talk to family and friends about their business, and/or friends and family want to talk to them about their business. It’s only natural – after all, friends and family are your support structure and care about you – and they are going to have an opinion whether you ask for it or not. Now, that may be a good thing as advice can be a way of expediting your learning process and avoiding obvious mistakes. There is, however, good advice and bad advice and you can’t always pick what is going to come from whom or even which advice is correct.

Family and friends want you to succeed but can end up being the bearers of well-intentioned, terrible advice. You also might not be able to see a carefully hidden agenda no matter how careful you are. Your best friend since childhood may not tell you your business that you’ve dreamed of running since primary school is a money pit and you should cut your losses. Conversely your parents may advise you not to pursue a great idea you have in a new technology or disruptive market because they don’t really understand it and don’t want to see you fail.

So before taking advice from friends and family consider the following.

Do they run a successful business?

Is their business truly profitable? Has it got some history? Are all their obligations up to date? Or, if they don’t own a business, then have they got other financial credentials? For example, have they paid off their mortgage or set themselves up to retire comfortably, or do they have a mojo account? If the answer is no, or if they have tried previously and been unsuccessful, then it may be best to take their advice with a grain of salt. You wouldn’t ask me for medical advice or a graphic designer to do advanced financial modelling. So why would you listen to tax advice from your brother that has a mate that ‘gamed’ the tax office? Foolhardy at best, downright dangerous at worst.
You’re not Ellen

Even if your friend or family member, let’s call them Ellen, ticks the experience and skills boxes, you’re not Ellen. They may have run a successful business, but they made the right decisions for their circumstances and at that time. They might have had a great business network and you might not, they may have had equity in their business, and you might only have debt. The world might have been quite a different place for them – think of the technological developments in the last 20 years.
They project their experiences

My mother-in-law was telling me about how she hates that some shops have self-service machines, and how it is terrible that all the jobs in shops are disappearing. “My kids all worked at the checkouts at the supermarket when they were at school and university,” she said. You can imagine then her recommendation to a retail business owner to make sure they have plenty of people in a shop, or that online selling is terrible. The ‘guidance’ would have more to do with her, than the person receiving it. People are different – your family or friends may hate whatever choice you’re making – but that doesn’t mean you will.
They are biased towards ‘safe’

I was teaching my daughter to ride a bike several years ago in the days before balance bikes, so I had training wheels on her bike. She started riding around quite well and I went to take the training wheels off, to much protest from my daughter. I remember (and she does too) telling her that if there is one thing she can count on is that I will always try to protect her from harm. It is instinctive for family and friends to protect the people they love, but while this is beneficial to small children, you are not a small child. You are putting yourself out there and have to be willing to face rejection or failure, make mistakes, and learn along the way. If you asked most parents, they would rather their child find a well-paying job, in a stable ethical company than their child investing everything they have – money, time, and energy – to pursue a dream of running a business. Why? It’s perceived as safer.

In addition to solicited advice, you might also receive unsolicited advice from friends and family. You’re having a nice dinner out with friends and the conversation then turns to your business. Within a few seconds, you begin doubting your latest offering and second guessing your prices. So how do you deal with unsolicited advice?
Managing your mindset

I ran an exercise at a graduate program once where I set up an indoor putting hole and a bucket of balls. I selected one person to practice putting from a metre a way for ten minutes while I went on taking the graduate program with the others. After the ten minutes I asked the person putting what their success rate was. “100%,” they said. I then got everyone to hover around, making noise, and stuck a microphone in their face, and asked them to putt again. They missed. The point of the exercise was to demonstrate that mindset is key to success. Negative comments from people you care about is the quickest way to derail positive energy. Find a way to interrupt negative comments. It might be something silly like putting an elastic band on your wrist and pinging it when someone makes a negative comment or doing something that clears your head like going to the gym, or as I do, go ‘Zen’ fishing.
Are you inviting comments?

Check in with yourself and see if you’re actually inviting unwanted feedback. Are you oversharing your business? I have found there are two types of people – those that at the end of the day need to shut the door to their business and focus on something else (that’s me), and those that come home and need to articulate their day back to someone (like my wife). Don’t tell your family and friends everything about your business unless you’re prepared to hear potentially unwanted advice.

Once you’ve ensured you’re not making it easy for your friends and family to be unsupportive, look at some strategies to counter their negative comments. Try these:

Focus on the positive. If you are asked how your business is going, smile and say, “It’s going great, thanks”. Tell them about a win but remember they don’t need to hear everything – warts and all.
Turn the question around. Try a reply like “Business is awesome, thanks, and how’s everything in your job/life/business?”
Completely change the subject. This is useful when you know someone is likely to trigger you. Practice saying something like “Everything is going well, thanks. Have your kids started back at school yet?”

One thing though that all business owners should remember is that it is important to have a safe place to share successes and get feedback on challenges. Consider joining a group of like-minded entrepreneurs. One such group is Business in Heels aimed to provide such a place for support for female entrepreneurs. Consider a business coach to help you navigate the ups-and-downs. Otherwise, remember your business is not other people’s business – trust your experience and your wisdom. You’re living and breathing your business every day, so you know what’s best for you.

And a final thought – I reckon it was probably 10 years after I qualified as a chartered accountant that my parents actually considered me as an accountant. It was only after I wrote my book Run Your Business Better that my family and friends actually had any real understanding of my business. (It probably just meant they could tell their friends I was an author rather than some business person that talks on the phone a lot). So, make sure your friends and family are oil to water for your business.

For many aspiring to be a company director, time on a not-for-profit board is seen as a prerequisite. It’s almost as though time on a not-for-profit board is a form of apprenticeship for the company board role. Go on a not-for-profit board, learn how it operates, get some practical experience then apply for a company board role.

But in my experience of being on both and as a board advisor, many people struggle with being on a not-for-profit board and often find being on a company board easier. Is being on a not-for-profit board really harder?

Perhaps, but they are different types of organisations and, as such, not fully understanding the differences can make time on a not-for-profit board for aspiring company directors difficult.

The differences can be distilled into three areas – mission, finance and executive.

With mission, a not-for-profit places great weight on the underlying purpose, service to that purpose, long-term focus and non-financial performance metrics. Financial metrics, internally generated funding and short-term goals have greater weight in a for-profit company.

A not-for-profit board is often quite large and has many committees. The chair is usually a volunteer director and the CEO is skilled in delivery of the underlying purpose. Whereas a for-profit board is small, paid and may only have a couple of committees. The chair is an experienced company director and the CEO is skilled in running a business.

While these differences are reasonable it can make it very difficult for a company director to adapt to the not-for-profit board and it can make it difficult for the not-for-profit to adapt to the company director.

Directors from a business background joining a not-for-profit board may struggle with the inefficiencies of a large board and with the greater operational focus than they would expect on a company Board.

There may also be members who have been there since the organisation’s inception and find the corporatisation and higher professionalism from a board with directors from a business background as culturally challenging.
Effectiveness

Well-regarded people from the business world can be ineffective as not-for-profit board members if they do not show the level of commitment that they would to a company board. This may be in part due the voluntary nature of the not-for-profit board.

People value what they pay for and, often due to the voluntary nature, board members do not attend every meeting, almost as attendance is optional. They also seem to leave their analytical and business skills, and their ‘toughness’, at the door. These are some of the exact attributes that the board requires and why a board member from a business background was appointed.

Not-for-profit boards often weight two attributes higher than business skills. One is the board member’s contact list. Relationship capital is worth a lot to a not-for-profit organisation and peer-to-peer influence can improve fundraising, recruitment and even board capability. A company board recruitment advisor made a comment that has stuck: “Boards don’t appoint nobodies – become a somebody.”

Joining a not-for-profit board without a large and influential contact list can be frustrating as the ability to leverage and be an ambassador is limited. Equally, organisations should be helping board members and themselves effectively use the contacts and networks.

Organisations should get board members to promote the organisation through social media or get the board members to host or speak at an event. Make it easy for board members to be ambassadors at all times.

Recently a not-for-profit client was recruiting for new appointed board members. Ads went out on various job boards and the response was woeful. I was told it was extremely difficult to find a board candidate with the appropriate skills.

However, not one of the current board members promoted either the board opportunity or the organisation on any of their social media platforms – something that would have taken five minutes of their time. Neither did the organisation promote it on their social media platforms.

This organisation has more than 200,000 members – that is first connections – and let’s say each of them has 20 mutually exclusive connections –a potential 4 million people could have been informed of the opportunity and the organisation as a whole. I think out of that pool of 4 million people they could have found a few more potential board members if the directors and the organisation had leveraged their contacts.

The other highly weighted attribute is passion for the cause or purpose. If someone has passion for a cause they will be able to engage more easily with the various stakeholders. They will also have a greater understanding of the issues and willingly devote more time to the organisation.

I attended a not-for-profit client’s board meeting and several of the board were there by virtual of their day job. Their boss had nominated them to sit on the board and attend the meetings. The meeting went for two days and these particular board members were checking their emails the whole time, on calls back to the office in the breaks and had early flights home to ensure they were back in business hours.

While they had some interest in the not-for-profit organisation, they clearly had no underlying passion and drive. Being on a board where you do not have that passion will make your time on the board feel like watching paint dry and you are wasting the time and resources of the organisation.

So, if you are thinking about joining a not-for-profit board make sure you are doing so for the right reasons. Understand the differences between for-profit and not-for-profit organisations. Don’t use a not-for profit board as a stepping stone to company boards.

Not treating a not-for-profit board with the same level of commitment as a company board, not having a passion for the purpose or cause, treating it as having less value because it is voluntary, leaving your analytical skills, business skills and ‘toughness’ at the door, and not opening up your contacts and being an ambassador for the organisation will make your time on the board extremely difficult.

It will be a lot harder than being on a for-profit board and will be unrewarding for you and ineffective for the organisation.

One of the nice things about working for yourself is the flexibility it gives you with regard to the hours you work. This reason alone is why lots of people head off and start their own business – me included. “I’ll be able to take the kids to basketball practice,” or “I can have the whole summer holidays off and we’ll head off camping.” Sound familiar?

As the business grows, you start working harder – before the family wakes and after they have gone to bed. You take work calls while you’re driving in the car on the way to basketball practice. Your family are supportive as they hope you are living your dream.

Father’s Day breakfast comes along, and you go to school with your children (you can do this because you run your own business, right?). After the breakfast, you are invited to see the kids’ work in their classroom. Your eldest daughter has written a poem about Dad and one verse goes: ‘Daddy – talk, talk, talk on the phone all day’.

Ah well. Criticism noted!

Next you go off to your youngest daughter’s class and she has to answer a quiz on Dad. One question is: ‘What does Dad do for a job?’ Your youngest daughter writes down, ‘Talks on the phone.’

You’ve got the message. And wasn’t this the complete opposite of what you sought by starting your own business? You have been isolating yourself from your family and not engaging with them. Before you know it, you’re not running a business, the business is running you.

Business can destroy your family life and your family. If you have your own business and you have a family, then it’s their business too. You might be happy to work 24/7, but they won’t be.

Every business is a family business – but it is only a business and not only your entire life. A business can have a profoundly negative impact on your life if you let it. It can also serve you and your family well as long as you start working more on the strategy and less on the tactical aspects of the business.

While I was reading the Sunday newspaper, I saw an article where Carrie Bickmore from The Project was being interviewed by her co-host Waleed Aly. There was a section where Carrie was talking about the juggle of being the best at her job at work and also the best at her ‘job’ at home. Waleed commented that his wife, Susan Carland, says to him that when he says ‘yes’ to someone he is saying ‘no’ to his family, and he pondered why it is easier to say ‘no’ to his family. Why is it easier to say ‘no’ to your family than to a client, customer or someone else?
Time keeps on ticking

A father comes home from work and his daughter is about to go to bed. She gives him a cuddle and asks, “Dad, how much do you earn an hour?”

Stunned, he asks why she needs to know that.

“I just do,” she replied.

“Around $100,” he said. She then asked if she could have $50.

Her father was tired and said, “Just go to bed – there are enough toys to last a lifetime on the floor!”

The daughter raced off to bed.

After a few minutes, when he had cooled down, he went back to his daughter to tuck her into bed.

“Sorry – I’m tired and have had a hard day. Here is the $50 you asked for,” he said.

“Thanks Dad,” she replied and reached under her pillow and pulled out a pile of crumpled notes.

“Why did you need $50 if you already had all this money?” he asked.

“Because I didn’t have enough, Dad. I’ve now got exactly $100. Can I buy one hour of your time? Come home early tomorrow please, you haven’t had dinner with us for so long,” she said.

There is only a finite amount of time in a day, in a life, and you are using up that time – second by second. Time is life; when time ends, life ends. Time is the most valuable asset you have. You can use that time any way you want, but are you using it rewardingly, intelligently and as intentionally as possible? If not, you’re squandering it and failing to appreciate it and living your life oblivious to time passing you by.
Value your time

It’s your failure to manage your time that leads to your business spilling over into family time. So, what is the value of your time? Are you using time effectively and efficiently? What is the opportunity cost of your time?

Failure to recognise and value your time can actually lead not only to the business failing, but you can also lose the other things where your time is valuable – time with your family, friends or doing the things you enjoy.

Years ago, I hired a cleaner at home. It wasn’t because I didn’t know how to clean, or that I was incapable of cleaning my house. In fact, a bunch of my friends and I were employed as cleaners at our high school when we were students there. I hired a cleaner because I worked long hours during the week and often that extended into the weekend.

I was single and living by myself, so on the weekend I had to do the cooking, cleaning, gardening, grocery shopping and ironing. So, I decided to outsource one of those chores and chose the one I least liked. Cleaning was it.

The opportunity cost of a couple of hours of my time was greater than the actual cost of the cleaner. Have a think about your business – what is the opportunity cost of the time you spend doing a particular task? Can that time be better used?

I like playing with websites. I can and have built websites from scratch. But it isn’t something that I can do very quickly and I don’t necessarily build them as efficiently, or make them as effective, as a website designer could.

A paradox I see all the time in small business, in particular, is that the owners do not spend money. I often hear, “We’re a start-up, we don’t have the money to spend on a website designer, a bookkeeper, a marketing expert, an IT person.” But they expect people to spend money at their business – the website designer might need a plumber, the bookkeeper might need a marketing expert, and so on.

Do yourself a favour. Work out how best to use your time, what that opportunity cost is and then employ people to do the tasks that cost less than your opportunity cost. And get some family time back!