Management is the oil that keeps the company engine running smooth.
This chapter will focus on the idea and concept of effectively managing and growing your company. It will provide you with a basic understanding of how to go about it. The best way that I can teach you how to manage and grow your business is by providing you with my own personal example, which I have included in each section and at the end of the chapter.
I have written this chapter to give you a general understanding of what it takes to manage and grow your business. For a complete understanding of exactly how to manage and grow a business, I highly recommend reading my book: “Engineer to Entrepreneur: Success Strategies to Manage Your Career and Start Your Own Firm” (e2E), chapters 9 and 10, where I detail everything you need to know about managing and growing a business from marketing and communications (Chapter 9) to management (Chapter 10). In this chapter, wherever I feel that you can derive benefit by referencing e2E, in that topic, I will include the note: “See e2E chapter x, page y”. “Excerpts from Engineer to Entrepreneur © 2016 American Society of Civil Engineers used with permission of the publisher. All rights reserved.”
Effective management encompasses many aspects within a company, all of which are essential to success. Like a chain, the strength of a company may be limited by the strength of any given link at any given time. To have a strong and successful company, your chain must be strong. Every link must support and transfer its own load to the next link to move or support an object. In the case of a company, the object you are trying to move, or support, is success. To effectively manage your business, you must understand the eight key areas of company management:
1 |
Office |
2 |
Cash flow |
3 |
Client |
4 |
Project |
5 |
Employee |
6 |
Payroll |
7 |
Contract worker |
8 |
Profit |
1. Office: Running the office efficiently and establishing clear office policies are critical for the success of the company. It involves properly handling the office business accounts, vendor accounts and contracts, professional association membership, professional and occupational licenses, online accounts and passwords, inventory of office equipment and warranties, copies of insurance policies, employee files, company records and accounting reports, Internal Revenue Service (IRS) quarterly reports, profit and loss reports, balance sheet reports, payroll reports, and aging reports. In my case, I selected, trained, and delegated authority to three key individuals: my vice president, an office manager, and a project manager. I trained them to utilize the tools that I have created to provide excellent service to our clients. Information that includes all aspects of running a successful office. I defer to my office manager. I get involved only if an issue arises, and I judge success based on employee and vendor satisfaction. I do not get involved in the day-to-day office management. I delegate and trust, but verify. See e2E, Chapter 10, page 138.
2. Cash flow: Learning to manage cash flow is the most important financial aspect of a successful company. It includes invoicing, aging reports, payment incentives, and collections. Keeping a steady cash flow is the only way to meet your business liabilities and expenses. In my case, I track and manage the cash flow by constantly reviewing the available financial reports such as the aging reports through the QuickBooks accounting software and the jobs under contract spreadsheet, which I created myself to track all the status of all committed revenue. This information allows me to make informed decisions to make sure the cash flow runs smoothly. See e2E Chapter 10, page 142.
3. Client: Understanding all the different client personalities and knowing who your most valuable clients are is critical to job growth and client relations. You must ask yourself the following questions: Is the client a repeat or loyal client? Does the client pay in a timely manner? Is the client demanding and constantly pushing deadlines? Does the client ask for services not in the original scope of work? Does the client refer work to you? Is the client high profile? In my case, I have learned to identify all the different client types and I act accordingly. See e2E, Chapter 10, page 144.
4. Project: Properly identifying the exact type and scope of work and proper handling of your workload can save you potential misunderstandings with your clients. At job origination you should: identify and explain potential hurdles, detail the exact scope of work, identify services that are considered additional services not included in fee, identify exclusions from the scope of work, exact proposal terms and conditions, fee and payment terms, and estimated project completion date. In my case I defer to my project manager. I get involved only if an issue arises, and I judge success based on client satisfaction and cash flow. I have developed spreadsheets to keep track of all project-related information to gage success, including review of individual project profitability. See e2E, Chapter 10, page 145.
5. Employee: Hiring, evaluating, managing, and firing employees is key to maintaining company chemistry to ensure a good working environment for all and to establish quality control. Important items to consider and track include: the initial interview, date of hire, initial pay rate, yearly evaluations, confirmation as to understanding of office policies, explanation of company benefits, date of promotions or increases, and date of termination or resignation. In my case, I make it a point to make sure the employees I hire have good chemistry and are versatile. I empower my vice president with input. See e2E, Chapter 10, page 148.
6. Payroll: Making sure you understand all tax implications and can meet your payroll liabilities is one of the more complex parts of owning your own firm. It includes taxes (federal and state employer corporate income, federal and state employee income, federal employer and employee Social Security and Medicare, employer federal and state unemployment), bonuses, paid time-off, overtime pay, retirement benefits, and insurance benefits. In my case, I always review the payroll and sign the checks as well as track the invoicing, collections, and cash flow to ensure the company meets its payroll liabilities. See e2E, Chapter 10, page 150.
7. Contract worker: Properly utilizing 1099 contractors can help reduce company overhead if done in accordance with the guidelines of the IRS. The typical guidelines of whether an individual qualifies to be paid as a contract worker include the answers to the following questions: Can they set their own hours? Can they work from home? Can they hire people to assist them in their tasks? Can they set their own fee? Do they provide your company with invoices for services rendered? It is important to request the contract workers social security numbers, for issuance of a 1099 statement, and save their invoices. In my case I, try and hire 1099 contract workers for specific tasks to lighten the burden on payroll taxes and benefits. See e2E, Chapter 10, page 154.
8. Profit: Learning to properly determine actual profit is important to understand if the company goals are being attained. This is done by tracking: overhead, using a multiplier analysis to set rates and fees, determining your fee structure, understanding when to charge a flat fee, learning to utilize additional services, and learning to manage profit to take advantage of available tax shelters. In my case, I have a unique approach to taking profit. I prefer to use the profit that the company makes and reinvest it at the end of the year back into my company. I do this in the form of employee bonuses, purchases of new equipment, paying down of liabilities and expenses, and so on. What this accomplishes is to strengthen my company while lessening my tax burden. I can do this because I am the sole shareholder and the only owner of the company. If not, I would have a fiduciary responsibility to the other shareholders to realize that profit. See e2E, Chapter 10, page 156.
Once you learn how to effectively manage your company, you need to learn to grow it. This is done by thorough marketing and communications as well as networking and originating. This is where I get heavily involved. I rarely delegate these tasks. As I am the brand of my company, I make the sales pitches. Once the client is secured, I hand them off to my project managers.
Marketing and communications: Marketing and communications are key to growing your company. Marketing is more externally focused, whereas communications is both externally and internally focused. In order to grow your company, you must be able to find clients and convince them that you are the best option they have and why they should select your product or service over that of your competitors. To grow your company, you must be able to communicate effectively internally to improve your services and externally to relay the right message.
Marketing: Marketing is defined as “activities undertaken by a company to promote the buying or selling of a product or service.” This is best done by:
1. Creating credentials and self-promotion: Credentials set you apart and, by definition, provide credibility. As an entrepreneur, you are the brand and identity of your company, you must actively promote yourself as an expert in your field. See e2E, Chapter 9, page 116.
2. Company and name recognition: Opportunities for recognition for your company and for yourself will not always present themselves. You must actively seek them out. Putting your company name and your own out there to be recognized for what you do is the first step to success. See e2E, Chapter 9, page 117.
3. Establishing a marketing strategy: You cannot just advertise your company, your product, and your services, to just anyone. If you want to achieve success, you must develop a detailed and comprehensive plan based on research and understanding of the market. You must understand what people want and what people need, and the difference between the two. What people want (a desire) is quite often a luxury, for them, and may be subject to, and limited by, their means, priorities, trends, and the economy. What people need (a necessity) is fundamental to them and may not be limited by their means and will be prioritized highly and less dependent of trends or the economy. People will, quite often, exceed their means for, or prioritize highly, something they need. It is okay to target both, but you must understand the limitations and differences between the two. Your company should have a good balance, of services and/or products, targeted between wants and needs and not rely only, or too heavily, on addressing wants, if you want to be insulated from changing trends or a bad economy. You should try to prioritize identifying needs and focus on a market, with those needs, with a means (product or service) to address those needs. See e2E, Chapter 9, page 119.
4. Joining professional associations: The best way to get your name out there is to associate and surround yourself with people in your profession. See e2E, Chapter 9, page 121.
5. Building an effective website: While there are many forms of marketing available today because of social media, having a good website is still considered a sign of credibility. See e2E, Chapter 9, page 125.
6. Utilizing proper marketing materials: Aside from social media, the traditional form of advertising your services, such as creating effective flyers and brochures, is still productive, especially for face-to-face meetings. See e2E, Chapter 9, page 127.
7. Word-of-mouth advertising: The best form of marketing and advertising is having performed well for a previous client and getting their endorsement. See e2E, Chapter 9, page 127.
Communications: Communications is defined as “the imparting or exchanging of information or news.” This is best done by:
1. Internal communications:
(a) Staff meetings: Before you can communicate effectively with your clients, you must be able to communicate effectively with your staff. See e2E, Chapter 9, page 129.
(b) Staff evaluations: To provide the best possible service to your clients, you must first assemble a good staff. See e2E, Chapter 9, page 130.
(c) Staff motivation: Once you find a good staff, you need to make sure you address their needs to ensure continuity. See e2E, Chapter 9, page 130.
(d) Office policies: Having clear office policies and making your staff aware of them is essential to avoiding misunderstandings. See e2E, Chapter 9, page 131.
2. External communications:
(a) Online media: Sharing company information with the public on social media can help bring awareness to your company in ways you never would otherwise assume. See e2E, Chapter 9, page 132.
(b) Newsletters: Keeping your clients informed of the latest trends promotes loyalty. See e2E, Chapter 9, page 133.
(c) Sales pitch: The best way to originate work is to have a good sales pitch and learn to deliver it with confidence. See e2E, Chapter 9, page 133.
(d) Presentations: The best ways to close a deal is with a good, concise, and well-thought-out presentation. See e2E, Chapter 9, page 134.
(e) E-mails: The best form of communication, aside from making a phone call, is via an e-mail. E-mails allow you to have conversations on the record and avoid disputes or misunderstanding. Important conversations should be followed up with a concise e-mail detailing what was agreed. See e2E, Chapter 9, page 134.
Networking: Networking is defined as “the action or process of interacting with others to exchange information and develop professional or social contacts.” Networking is not standing around with a drink in your hand with your friends or co-workers as you scan the crowd, as I have quite often noticed. Real networking consists of:
1. Identifying the right targets for face-to-face encounters: Knowing where to network and with whom to network is the first step in successful networking. Target venues that will include people who directly, or indirectly, provide or refer business to you. That is an important point. You never know where work can originate from and who is listening to your pitch. When it comes to who to target, the best source are the people you have been working with for most of your life. These people, provided you have dealt honestly and dependably with them, are your best source of potential start-up clients. Build a rapport, and do not lose touch with them throughout their careers. Also, do not only look to target those individuals who can directly use your services, but rather target, as well, individuals who are in position to recommend those people to use your services. Good venue areas and types to target for good networking opportunities include professional association meetings or events (seek work or collaboration among your peers), alumni association group events (utilize common bonds to generate leads), professional annual conferences (target specialized individuals that can refer work to you), and local lunch and learn or continuing education sessions (attend a session that closely resembles your specialty and develop relationships). Do not discount networking at social functions that are frequented by potential clients.
2. Utilizing online tools and social media: The best online platform for professional networking is LinkedIn. But, like any other media, you need to invest in it to derive a benefit. Investing is not opening it up and reading the articles and posts and then reaching out for connections that you then aggressively target for work. I am put off by connections that I accept only to receive within minutes a solicitation for work. Like with face-to-face networking, it is all about building a relationship. Finding common ground and common interests first. The first step is to make sure your profile is complete and includes all pertinent, and updated, information on your experiences, qualifications, projects, accomplishments, and recognitions. The next step is to understand the proper way to invest in LinkedIn to derive a benefit from it. That is to actively participate. Write an article and post it. Use the hashtag options with keywords to help attract your target audience. Do not just like, but also comment on other people’s posts. You would be surprised to know what a simple good job comment on a post can derive (a visit to your page, a personal response) versus just a like. Join a like-minded group and participate in their discussions. Create a group and invite like-minded individuals. Many people look down on social media sites such as Facebook and neglect it all together. That would be a mistake. Why discount free advertising? You never know who is watching your feed or page. It could be a friend of a friend who might need your services. However, unlike LinkedIn, where the venue is strictly professional, this venue is primarily social. Therefore, if you are going to befriend potential clients and professional contacts, be very mindful of what you post. A way to keep your personal life separate is to create a Facebook business page.
3. Building relationships: Effective networking is about building relationships. I have found that in your face, hard sales pitch’s turns people off. Some people just sense a sales pitch coming and close up. You must get to know your target at a personal level first. Talk to them about themselves and their projects first. Successful people love to talk about themselves. When they feel comfortable with you and see that you are interested in them and not just their business, they will relax and open up. Find something in common (sports team, school, family experiences, projects) and start building a bond. You may not even make your pitch until sometime in the future, but you are planting a seed and building a rapport. Cultivate and nurture the relationship. Then you introduce a mutually beneficial proposal.
4. Providing collaborative and mutually beneficial associations: Once you identify the right target, have built a rapport, and are getting ready to make your sales pitch, take time to consider how you can make the professional relationship mutually beneficial. Some of the ways to do that include offering them a savings from their current expenses in your scope of work, providing better-quality services that can increase their productivity, providing faster response times to make their office more efficient, or referring business to them. The most successful, and longest lasting, relationships are those in which both sides are benefactors and beneficiaries.
Originating: Originating is defined as to “create or initiate something.” In the case of entrepreneurs, the focus is on originating business by initiating relationships. Networking and originating go hand in hand. For the purposes of this chapter, we will consider networking as bringing the client to the table, whereas originating, we will consider closing the deal. Learning to originate business requires:
1. Identification of your target clients: For originating business, from the results of your networking efforts, you should focus, from the list of potential clients, on potential repeat clients or clients of value such as those who can bring exposure to your firm or include you in iconic projects. See also networking described earlier.
2. A great sales pitch: There is no substitute for face-to-face meetings to close a deal, even if it is via video conference due to the social distancing limitations that occurred due to the COVID-19 global pandemic. Being able to read your target’s facial expressions and mannerisms to your pitch and being able to adapt and improvise can be the difference in securing that contract. That involves emotional intelligence. Be advised, however, that no amount of emotional intelligence can save you from a bad presentation. You need to be prepared to pitch. Know the information and practice the meeting in your mind over and over, each time introducing the most unexpected reactions and questions from your target, and let it play out in your head of how you would react and respond. Mental simulations are extremely helpful and create a form of experience in your mind without having gone though it that can allow you to prepare for almost all contingencies. Like pilots training on flight simulations, it creates muscle and mental memory that can be useful when the actual encounter takes place.
3. A good strategy that provides value: You must back up the sales pitch with examples or information of how you have helped clients in similar situations in the past. Be prepared to provide those examples. You must also give a detailed step-by-step process and outline of how you will do the same for them. Make clear to them what the value to them will be.
4. Providing incentives. Offering a discount, or a sliding scale fee structure in exchange for bulk work, is one way to incentivize securing continued work from a client and potentially pushing them over the edge to close the deal.
I have a unique management style. I delegate, trust, but verify. I manage remotely, rarely visit the office, but review and supervise extensively. This experience came in handy when some offices were forced closed due to the COVID-19 global pandemic. However, prior to the pandemic, I trusted my office manager to run the office, my project manager to manage the projects, and my vice president to run the company. It allowed me freedom and flexibility to pursue other profitable ventures and enjoy leisure time. However, I must emphasize that this form of management style must be developed over time and planned and tweaked until you find the right mixture of leader and staff. It is a style that every entrepreneur should strive to achieve. It frees you up to pursue additional profitable ventures or investments, while still having a well-functioning one that is providing you resources that will enable you to do so. Start another company, set it up, train, delegate, and move on to the next venture and so forth.
In my case, the foundation for originating work and growing my business came from past relationships and the trust, honesty, and reliability I had fostered with people I worked with in my career. Those are the same people who followed me from my first job to my second job and eventually became clients of my firm. I took much care in developing my name recognition and brand and identity and creating credentials that it makes closing a deal much easier. I have set myself far apart from my competitors, many of which focus only on their business and the financial bottom line who are business owners, but not entrepreneurs. In summary, I grew my business through creating and cultivating my brand and developing and nurturing relationships. By understanding the differences between one-time clients and repeat clients and by providing value and experience while incentivizing potential new clients to trust me with their work in face-to-face meetings.
Just because you own a business, that alone does not make you an entrepreneur, and you do not have to own your own business to be an entrepreneur and utilize entrepreneurial skills to achieve success. As explained in Chapter 4 (Identify and Attain Your Goals), everyone’s definition of success is different, and if your definition does not include owning a business, that is fine. There is no wrong answer to your definition of success. However, you can still utilize and benefit from the entrepreneurial mindset, skills, and concepts to climb up the corporate ladder and make yourself more marketable to your firm. Thinking, acting, and practicing like an entrepreneur do not have to be limited to entrepreneurs. You can achieve this by:
1. Networking for relationships: Promote your company to potential clients or new recruits. Present or write an article in your field and ask your company to sponsor it. Raise awareness of your company on social media. Represent your company at job fairs.
2. Looking for innovations: Find ways to improve the products, services, or processes in your company, how to do things faster, better, or cheaper.
3. Adding to the company’s growth potential: Continue your personal growth and education. Attain credentials. Mentor younger associates. Take advantage of your company’s management training programs.
4. Originating business: Learn to pitch on behalf of your company. Set up origination meetings with potential clients with you superiors. Get to know your team and promote their services.
Surviving during a tough economy or crisis: All good entrepreneurs should know, or should learn, how to anticipate and have a plan in place to account for unexpected financial hardships or an economic or market crisis that may affect their business. They must learn to adapt to changing or challenging times or risk losing everything. At no other time in our nation’s history was this scenario tested and more evident than during the 2020 COVID-19 global pandemic. The global pandemic resulted in the near-complete shutdown or lockdown of our nation’s economy where no business remained unaffected. Businesses that did not, or could not, adapt were forced to close or lay off employees. As a result, the global pandemic of 2020 forever changed the way companies do business. The pandemic and subsequent economic crisis exposed company weaknesses and tested contingency plans. In my case, I sensed that I needed to have a contingency plan in place before the lockdowns began. Our engineering firm was well prepared, we created a plan, we executed it, and managed to survive when many did not. We accomplished this by:
1. Instituting a plan and process, for the office, to ensure a clean and safe working environment for the staff in the early stages of the pandemic.
2. Advising our staff of the social distance rules and regulations recommended by the Centers for Disease Control and Prevention (CDC) if the need arose to travel offsite.
3. Backing up our server and local computer hard drives and uploading all project files to a cloud service.
4. Setting up a plan for the staff to effectively work from home by utilizing their office workstation computers and monitors.
5. Exploring and utilizing virtual meeting capabilities versus face-toface meetings for staff and clients.
6. Reviewing our revenue projections versus expenses, taking into consideration the effects from the forced closures and social distancing rules in effect.
7. Offering incentives or early payment discounts for outstanding invoices to drive up cash flow and reserve.
8. Considering the effects on our staff of decrease revenue and possible cut back of time for hourly employees.
9. Reaching out to our clients to let them know that we had a plan to effectively continue to work on their projects and how that plan may affect them.
10. Exploring and utilizing verified e-signature software to avoid having to print hardcopies of drawings and plans.
11. Setting up credit cards, wire transfer, or online payment methods to include payroll delivery.
12. Communicating with our vendors to understand their limitations and adapt as required.
13. Discussing the ramifications of the closures and potential work slowdown or shutdown with our staff and explaining our plan.
14. Consulting with our office landlord regarding their plan to handle the crisis.
15. Reducing and/or eliminating all nonessential expenses.
16. Exploring and applying for available Small Business Administration (SBA) hardship loans.
17. Terminating our month to month office lease and transitioning to 100 percent remote work. We calculated, after determining that our staff could effectively and efficiently work from home, that our company could realize a considerable financial savings. Savings for both the company and the staff that include savings of rent, utilities, parking, travel time, office attire, fuel, maintenance on vehicles, and so on.
Having an effective plan in place, with enough lead time, prior to the forced lockdown bought us the necessary time needed to effectuate a smooth transition without any interruption in service to our clients and our staff. The preceding plan can be a useful example and a good lesson on how to adapt to an economic crisis or tough economic times. The plan that we implemented worked out so well that we decided to shift our practice to a permanent work from home and shared workspace combination where we can reduce expenses without sacrificing productivity. As a business owner and entrepreneur, during unprecedented and challenging times, the health (financial and physical) and safety of your clients and staff should be paramount. As a leader, you owe it to them to be thoughtful and meticulous and put in place a good contingency plan to handle any eventuality that could affect your business. Some of the steps taken during the pandemic to mitigate the effects of the economic crisis can be applied to all general economic hardships, such as:
1. Setting up a plan for the staff to effectively work from home to save on rent and other expenses.
2. Reviewing revenue projections versus expenses and setting aside a cash or liquid asset reserve.
3. Offering incentives or early payment discounts for outstanding invoices to drive up cash flow.
4. Considering the effects on staff of decrease revenue and possible cut back of time for hourly employees.
5. Understanding the available business hardship resources.
6. Reducing or eliminating all nonessential expenses.
7. Utilizing entry-level, interns, or 1099 contractors to increase work profitability.
8. Offering discount prices to current and potential new clients in exchange for bulk work.
9. Offering uncomplicated basic services that can be handled by interns or trainees that can serve as a constant source of revenue.
10. Identifying ways to expand your scope of services within your area of expertise to compensate for lost sources of income elsewhere.
Chapter 11: Manage and Grow Your Business
Recommended Activities
1. Read chapters 9 and 10 of Engineer to Entrepreneur: Success Strategies to Manage Your Career and Start Your Own Firm.
2. Take a course on business management and accounting.
3. Practice your public speaking and sales pitch.
4. Identify organizations to network with.
5. Review the car analogy in Chapter 2 (What do Entrepreneurs Think About?) on the top five things entrepreneurs think about that affect their business.
6. Formulate a good contingency plan for how to survive and mitigate economic hardships and write it down.