- by Morris Bocian

In 2009, before any semblance of an economic recovery, a potential client viewed this period of uncertainty as a once in a lifetime opportunity. He asked me to help increase its business’ capacity. At the time, the entrepreneur’s business had gross revenues of $1.5 to $2 million. He understood fortunes are made (and lost) in periods of great uncertainty and wanted to participate when an economic recovery occurs. The entrepreneur was uncertain as to how to approach the dilemma, especially since he also was risk adverse. Based on his initial comments I drilled down; I wanted to understand the entrepreneur’s vision of his industry and how he wants his company to perform relative to his industry. Do you want your company’s growth be in sync with the industry or do you want growth to exceed the industry trends?

He came to the realization that we needed to develop a plan as to how the company is going from its current situation to its targeted goals within the timeline he specified. Further, it needs to be accomplished with the entrepreneur being comfortable with the underlying assumptions and risks being taken.

During the process of developing the strategic plan, I asked the entrepreneur some very difficult questions; and many times he couldn’t answer many of the questions with any degree of certainty. It became apparent to the entrepreneur that flexibility was key towards building the business, while conserving assets, so that he would be in position to exploit market changes when industry trends and the economy become more predictable.

We assessed the resource he had available to him as well as what he might need in order to achieve his goals. We went through a series of scenarios and several outcomes made the entrepreneur feel very uncomfortable. He understood how important flexibility was to his outcomes, and how lack of flexibility hurt his competition.

Human Capital

It became apparent that the entrepreneur’s company lacked the human capital to build the company that he now envisions. In some cases human capital was an impediment to growth. Further, the way the company was compensating its salespeople reinforced a behavior that was inconsistent with growth. To compound matters, he behaved like many entrepreneurs, “working in his business, not on his business.” The entrepreneur needed to let go and allow his employees to make decisions, initially smaller decisions, then increasingly more difficult.

He eventually came to the realization that if he did not have confidence in certain people he would have to let them go. When it was broached initially, he immediately (and loudly) rejected that suggestion.

I smiled and asked him, do you feel you are to blame? Have you given your employees the opportunities to prove themselves, or to grow? Begrudgingly he admitted he never gave his employees the tools to grow professionally. He recognized that he needed to be trained on how to let go. He also realized his employees needed to be trained on a wide array of subjects. Many of his people were mentored and re-educated to enable the company to grow. Compensation was adjusted and people were rewarded based on outcomes, not for “showing up to work.”

The Physical Plant

The entrepreneur was able to recognize the downside of owning additional capacity versus outsourcing. The analysis showed if he owned the capacity and overestimated sales by 10 percent it would strain the business’ financial position; he could no longer draw his usual compensation. By maintaining flexibility and expanding the products being sold (sourced from several new vendors) the entrepreneur’s business continues to grow. Sales have increased significantly, profitability has increased, the company is accomplishing more with better trained employees and the company continues to build its balance sheet. And best of all, the entrepreneur feels much more comfortable with the risk

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