A primer on How to Grow a Lifestyle Business to a Professional Business

Sometimes, a business that has been run as a lifestyle business for the owner him/herself needs to be transformed into a professional business which can be managed by an “outsider”. It is not uncommon for a family owned business to be “family owned and operated” for the first one or two generations, but after that, it is usually “family owned” with a professional management team running the business on behalf of the family.

A lifestyle business has the following general characteristics:

  • The business is run by the owner and most decisions route through him/her
  • The core value of the business is highly dependent on the owner’s personal expertise or competency
  • The core value of the business isn’t easily transferred to other owners
  • The core value of the business can be readily replicated by others such that it’s cheaper to start a new business than purchase an existing one

In contrast, a professional business has the following general characteristics:

  • The business is run by a management team that is distinct from the ownership group
  • The core value of the business is a process or service which can be transferred to another ownership group
  • The core value of the business isn’t dependent on who the owner is.
  • There is a reasonable barrier of entry to those wishing to enter the market, making it easier to enter through acquisition than it is to start a new business

Obviously, there are gradations of intensity for each of these characteristics, so take these descriptors as a working model. And in some businesses, gradations of both sets of characteristics can be seen in the business. But the core aspect is moving the day-to-day decision-making from a single owner to a professional management team.

So, the question becomes this: If you need to grow a business from a lifestyle business to a professional business, how do you do this? I’ll offer a quick primer here for your consideration.

First, Start with Building a New Culture

I define culture as the combination of Core Values and Core Processes. In other words, how we treat each other and how we get our work done are the two parts of culture. If people treat each other well and get their work done on time, then we’ll have a good culture.

Nearly all lifestyle companies lack process documentation or training. The fuzziness of role definitions and the need for employees to unexpectedly take on disparate duties creates conflict in the workplace. Without good conflict resolution skills, relationships sour and people don’t treat each other well. So documenting good processes is directly applicable to building in good values in the workplace that people can buy into. I tend to hire for culture first, skills second. I can teach a task. I can’t necessarily craft a character in the workplace.

So, define your Core Values and Core Processes. Then – and this is important – enforce the values and processes consistently and without regard to who is violating them.
Core values and processes are only honored as long as everyone is held to the same standard.

Secondly, Define Your Management Model and Stick to It

You can select any number of management models – the point is to select one and stick to it. If you like Traction, then implement it fully. If you like a different model, then implement that model fully. I’m a simple man, so I like simple models. I use a five step management model that is easy for people to understand and grow into.

The model I use is easily replication and widely known. This helps if you’re in an interim situation where you need to implement a new management model but you know your successor will be coming within a year or two. There’s no rocket science to this model – it’s very simple to deduce.

Once you’ve set your strategy in place, you need to look at your company to make sure that it is organized in the right way to support the strategy. Then you make sure you have the right people in the right seats. You’ll need to reward your people, so have clear metrics and measurement by which reward thresholds can be known. All of this happens paying attention to your culture (core values and core processes). In any given day, during the transformation of the business, you might work in two or three different areas. That’s OK. In an existing business that is growing from lifestyle to professional, you can’t do this in a linear fashion. The daily decisions will force you to work in multiple domains, filling in holes as you go along, getting the entire model built over time.

Thirdly, Connect Daily Activities to the Metrics and Measurements

In this step, you’re asking employees to re-orient their daily tasks to support the core goals of the company and align their measurements with the company’s core goals. This won’t work if the company’s core goals are not clearly measurable.

I do this by using a simple matrix that each employee must fill out with their manager:

Goal #1 Goal #2 Goal #3
Learn
Do
Deliver
Budget
Authority

I call this the “LDD” or “Learn/Do/Deliver” tool. Each employee must support at least one company goal with 1-3 measurements (Deliverables) on a quarterly and annual basis. In order to achieve their deliverables, what do they need to learn and what do they need to do? What budget/spending do they need to be successful? What decision-making authority do they need?

Filling out this simple, one-page form will help them define their role, understand where their focus should be and give them opportunities for professional growth. In addition, it will help you see where you might have “holes” in task completion or how you might need to re-orient some employee’s jobs. Finally, it might surface jobs that need to be eliminated or outsourced. If an employee can’t directly “connect the dots” between their job and at least one company goal, then you have a problem on your hands that will need your input for resolution. Note that not all employee’s jobs will support every company goal.

Lastly, Build the Value Creation Process for Your Company

Believe it or not, most owners – let alone employees – can’t clearly articulate what the core customer benefit or core value is that their company offers to the market. I once owned a training company, so naturally, most people thought our core value in the marketplace was training. I never bought into that line of thinking. I always felt our core value (core customer benefit) was that we provide hope and confidence to the student that they could do more in their job and solve more problems by taking our training. In short, hope and confidence were the two core benefits we offered. I’m still uncertain – even today – how many of my staff really understood this.

The Value Creation Process is a reverse-engineered process in which you start with the end goal (profit) and work your way back to the beginning. Hence, you’ll ask the same question over and over: “In order to achieve X, what did we need to have done or what needed to happen?” For example:

  • In order to create profit, what do we need to do? Answer: Deposit a check in the bank.
  • Why did we deposit a check? Answer: Because we received a check from the customer.
  • Why did the customer send us a check? Answer: Because we invoiced them.
  • Why did we invoice the customer? Answer: Because the project was completed or the product was received without damage and so forth.
  • How did we know the project was completed? Answer: Because the customer signed-off on the project completion document.
  • Why did the customer sign-off on the project completion document? Answer: because we completed the project plan to the customer’s satisfaction.
  • Why did we have a project with the customer? Answer: Because the customer signed a project contract to have us complete the project.
  • Why did the customer sign a project contact? Answer: Because we presented it to the customer.
  • And so forth

It can be an iterative, pain-staking process to build out your Value Creation Process, but after it is completed, you’ll have done several important things for your company:

  1. People will see just how interconnected their jobs are. They will begin to understand that the output of their work directly effects the quality of work for others in your company
  2. People will see that it really does take a team to create value for the customer
  3. Believe it or not, most employees will be quick to spot areas where the company is wasting money and they will see why cuts are needed in a given area. By the same token, they’ll see where the company is weak in staffing or is not paying enough attention to a given part of the process and they’ll understand why additional resourcing is needed to shore up that part of the process
  4. In the end – they will be able to “connect the dots” between what they do and why the customer buys your product or service. That connection is invaluable to motivating your employees.

Summary

It will take you at least 12 months to fully implement what I’ve outlined here. And that’s if you’re working in a company with a relatively healthy staff and product/service line. It could take 24 months to fully implement these ideas if you’re coming into a difficult turn-around situation. In either case, it’s important for you to realize that you keep your staff well informed by using the metrics to build appropriate dashboards for all to see. As change occurs, they will naturally feel unease, have questions and will want to know “what’s next”. Be sure to have regular meetings in which you’re *only* goal is to surface all of the elephants in the room so that no quandary is left undiscussed.

If you want to discuss these ideas with me, just email me at bill.english @ theplatinumgrp.com.

Thanks.

Bill English
CEO, Service Ideas
Executive Consultant, The Platinum Group

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