Patrick Maloney, Director of Operations at DS+B, was recently part of a panel discussion sponsored by Club Entrepreneur and covered by Upsize Minnesota. The topic was business best practices – or rather, what mistakes business owners can avoid. The panel was made of professionals services providers with related expertise in business management, IT, finance, strategy and accounting. Here are the selected questions and responses from the panel discussion. You can also read the full article in context, here, or watch the video, here.
Rick Brimacomb, Club E and Brimacomb + Associates, moderator: I’ve spent my career in venture capital, and venture capital is about creating something out of nothing. There are often many of the same issues that affect all growing companies. We’re here with a panel of experts to help you learn from them and help you avoid some of the same mistakes others have made before you. [Patrick, please talk about the] lens through which you view this issue of business ownership success?
Patrick Maloney, DS+B CPAs + Advisors: I started my career as a franchisee in a business services company, and I built it and sold it, and then DS+B asked me to come on board as director of operations.
My lens starts with why: Why are you in business, what’s the business for? The financial lens is critical. Also there’s talent and leadership development. My approach is to look at a business from a number of different perspectives, and sort out what needs to happen to take it to the next level.
Rick Brimacomb: Please give us a handful of minutes on “avoiding the avoidable.” In other words, what are a few mistakes that derail successful companies?
Patrick Maloney: When I look at mistakes that derail successful companies, the first one that comes to mind is success itself. Specifically, companies achieve a goal and they fail to create a new goal. The other reason success can be a de-railer is not understanding what made you successful. The owner’s charm may not be the reason; it might be your competitive price, for example.
The other part is being a good Boy Scout: being prepared for the worst. What if you lost that client or that key employee, or you had fraud? Thinking through those things, not to be scared, but what could you do prevention-wise.
Rick Brimacomb: Patrick, how does your background as a business owner inform your views?
Patrick Maloney: The idea of working on your business is a very important one, and to realize the long-term value is from what you put into it. Developing people is a part of that, that can free you up to work on your business. Having your vendors help you, that can free you up to work on your business. As well as planning with your CPA, and before you hand out the bonuses, think about what the government is going to need from you.
Rick Brimacomb: A gentleman in the audience was thinking of going into a new geographic market. What thoughts do you have on that issue?
Patrick Maloney: It goes back to knowing why you’re successful, will that work in another market? Is there a way to pilot it, to test that you’ll be successful before going all in?
Rick Brimacomb: Take it up a level to a leadership perspective: what can leaders do with this topic in mind?
Patrick Maloney: What are the key drivers to your business? And then you repeat, repeat, reinforce, involve. So to me it starts with knowing what’s the most important three or four things. Here are my picks:
- The first thing for growing a successful business: cash. The first thing I’ll look at is cash flow. If you’re trying to cut costs and you don’t have enough cash to fulfill on your business, you won’t be operating.
- Gross margin: You cannot make it up on volume.
- Talent development, especially if you’re looking at transitioning your business, that can be very important. Talent development is an investment, it’s a matter of years and decades, not weeks or months.
- Vendor relationships are important: it’s an untapped resource, you can learn so much from your vendors. Do you ask advice from your vendors?
- Discipline of running a business: integrity, do what you say you’re going to do.
Rick Brimacomb: Give us your action items for people to focus on first.
Patrick Maloney: The starting point is to have good, solid financial information. If your gross margin isn’t where you want it to be, if the cash flow is weak, those are the first things to address in your business.