Notes from the Road
I ride a motorcycle, a Harley Davidson, Sportster 883 Custom, a “baby” Harley. Riding a motorcycle generates unwarranted attention and conversation from well-intended, sometimes fearful strangers and acquaintances. “I love your boots”, says a total stranger as I am waiting for dinner at New Seasons on a warm day last autumn. When she realizes that I am wearing boots and a leather jacket because I am actually “riding”, she goes off on a little rant, explaining that physicians call us–motorcycle riders–“organ donors”. Then she asked me if my parents are worried. The next day, as I am changing from my professional to riding clothes ready to hit the road, I run into a gentleman who warns that I should not incite another colleague to ride. He implies that riding a motorcycle is dangerous and that my colleague shouldn’t ride as she has children. I also get the “you are irresponsible look”. Later that same week, I am talking with an executive client about business, cars and motorcycles since I rode in that day and he loves cars. As he is walking me out the door, he explains that he is afraid to ride, but then as we get to my bike, he observes, “oh, you have a ‘baby Harley’, with a bit of a smile. I think to myself, well, at least, I ride.
Calculated Risk and Freedom:
Riding, like running a business, is freedom. With freedom comes risk, responsibility and reward. Risk is the potential for ups and downs. There is potentially higher risk in riding a motorcycle than riding a car: a framed vehicle has more protection, is bigger and more visible. There is also freedom, a great upside: the feeling of accelerating, feeling the air, being in control while being at the mercy of the elements, smelling everything that is around, good and bad, which makes you more aware and able to act. All of this is more rewarding to me than sitting in a car. Similarly, business owners forfeit the comfort of a fixed salary to pursue a dream, a vision the potential for higher income and the opportunity to build something. Freedom and control are the upsides that come with more stress, longer work hours and the potential loss of capital.
Plan and Communicate:
As with any trip, regardless of the vehicle, but even more crucial on a motorcycle, I need to know where I am going, what the road conditions are going to be, what the weather will be like, that my bike is ready to ride (tire pressure, signals, oil, etc.) and that I have enough fuel (I have a three gallon tank with no gas gauge.). I also need to clearly communicate my actions to other drivers and anticipate their behavior because I am less visible and more vulnerable. Similarly, business owners confess as to how much they have learned in their first few years of operations. The rate of learning is quick, and if you do not pay attention, you might not be around very long. Businesses need fuel and a strong engine, new cash, working capital and good employees with the right systems in place to keep going. Leadership and communication are crucial for keeping a business going and growing into a high performance engine, in the right direction.
Momentum: Look Ahead and Keep Moving:
A motorcycle is more stable when moving, particularly in turns. It will go where your eyes look because your body leans where your eyes look. If you look down, you will fall. If you look at the turn instead of through the turn, you will not turn. You are continuously looking ahead and acting based on where you are going, not where you have been. Yet previous experience inform your riding. Similarly, successful businesses use real time financial and other leading indicators to know where they are heading and communicate a cross sales, operations and back again. They monitor the environment and their performance, forecast and adapt, growing people and systems wisely with the business.
Leverage the Power Wisely and Go Further:
If there is not enough cash or qualified employees, or miscommunication between sales and operations, the business will stall. Grow too big too fast, and the business can drown with sales while not covering committed costs. Operating leverage is created by hiring and purchasing, like the drive train of a motorcycle, and gives the business the ability to grow dollars earned per sale, at a higher pace than sales. Operating leverage, is also riskier. To increase leverage wisely, businesses can mitigate this risk through outsourcing, leasing and other more nimble options. Similarly, businesses should use financial leverage. Financial leverage increases the ability to earn returns on equity higher than returns on assets. It is a powerful tool, but carries more risk than no financing. Business owners can use financial leverage to grow the business and wealth strategically and leverage the earning power of their assets more effectively. They should do so wisely though, because too much debt and the business could drown, much like you can drown the engine of a motorcycle.
Call To Action
- Are you afraid or moving too fast, without information?
- Are you flowing towards goals, making strategic investments or aimlessly moving, looking to the ground for safety?
- Are you getting good, making informed decisions, growing the top line and the bottom line?
Notes from the Voyage
Successful, growing firms I have worked with in the past effectively leverage their data and people to grow strategically. For example, one fast growing company invested in their divisional staff to improve clarity into their cash cycle through better monitoring of working capital and cash flows. Another company changed mindset after we shifted focus to real costs and margins, which resulted in improved sales, operations and margins with more pricing options and more profitable make or buy decisions.
