In this episode, Warren Maris from Magnus Business Advisers and Accountants share with us how we can recession-proof our business. We talk about having a unique selling proposition, employing ‘good’ people, putting the right people in roles that are right for them, being open to change and involving people in changes, keeping only ‘good’ clients, documenting everything (from client agreements to procedures), getting off the tools, having a thirst for knowledge, and working on the important elements of business in the correct order.
How to Recession-Proof Your Business
- Have a unique selling proposition
- Employ good people
- Put the right people in the right roles
- Involve people in changes
- Get good clients and keep them
- Get your relationships right
- Document procedures
- Gain knowledge and apply it
- Get off tools
- Focus on the important elements of the business
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He’s going to be talking today about one of the fun ways you can recession-proof your business instead of looking at some of the telltales like how long it’s been since we’ve had a recession and the effects that they had, and I guess for me, it’s kinda like the lotto. Your numbers will get drawn out, but there will be a car crash right where you are right now, but when it could be a day or it could be a hundred years in the future, normally likely.
Warren: That’s right. In the economic cycles of the late 20th century, which I dare say many of your listeners may not be terribly familiar with. They were fairly predictable. Seven to nine years was the sort of length of the economic cycle and bust followed boom! Sure, as God made little green apples, it’s much, much different in the 21st century. We seem to have a more steady thing. The government and its finance people I think are a lot more subtle and nuanced about what’s happening in the economy.
They’ve got a lot more leading-edge indicators that enabled them to massage the leavers rather than yanked them as they used to do. So be that as it may. One thing that you can take out of the 20th century, and it’s still applicable, is that somewhere, there’s an event that triggers the earthquake cause that’s just what a recession is. It’s an earthquake. Those tectonic plates have been bumping up against one another. They’re building and building and building and then bang! They release, so something big goes wrong.
You know, I’m hearing an awful lot of stuff in that coronavirus right now where they’re talking about a worldwide recession. Because it is just starting to shut down international trade, and the world thrives on international trade. Are we affected? We’re probably way behind because, you know, we’re mostly an exporter of primary production, mining, farming products, what have you. So they tend to lag and the contracts tend to be in place for a long time.
So we, as a country, are probably a little inch harder, but gee whiz, does that speak to your business today? Probably not. I think you need to have a sector and what the drivers are in your particular sector. So the mere fact that the economy is not having a rotation doesn’t mean that your sector or your business isn’t having one.
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Absolutely. I guess you were saying about the coronavirus and you brought up the analogy of an earthquake in Australia. I guess we’ve had a few different things that could really shift things quite drastically with a huge amount of bushfires that we’ve had and the businesses that have been affected by that, along with the coronavirus being released in Queensland with cases being found.
Warren: Yeah, it hasn’t been a great start to the year has it?
Yeah, there is definitely a 2020 effort. Everyone is going to have a 2020 vision. It seems like it’s getting very clad with soot and masks.
Warren: First, we struggled to breathe because of the smoke, then the virus. But what are the effects? One of the things about the natural disasters in this country is that the Federal government has almost always been there to pour resources in when there’s been a cyclone or these big bushfires or floods.
It’s an interesting thing. I have a client that is a medium-sized transport company. It might seem a little bit obscene perhaps but disasters are great for him. Because he’s in transport, everyone needs transport. Everyone needs building materials, and they’ve got to get there somehow. So we got back to the floods of 2011, absolutely run off his feet for four months and he couldn’t keep up.
Yes, We had a client that had a manufacturing and heavy earth-moving equipment business, and the moment he heard about the floods, he put in huge shipments of orders for new equipment. He took a $2 or $3 million loan, he wanted to make sure that he had the ability to hire out as much of the equipment for the floods as possible when it came together to do the cleanup.
Warren: There is a case of somebody spotting disaster, understanding the relationship of his sector and whose business to what happened. So right, the best thing we can do is get as much gear as we can because there’s going to be a lot of work to be done. Make hay when the sun shines.
Some of the sectors that I can see just from our own IT business have been heavily retail. And any of the secondary and tertiary industries supporting those, whether they be shopfitters or designers and things like that at Westfield, helping the retail is by extending their lease terms, and at least their renewal periods has helped the shops. Are there any other industries or people that you’ve seen that are kind of just limping along?
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Warren: I think the same ones that you see year after year, decade after decade. There are a notable four. Construction, it’s always number one. And The others are transport, retail, hospitality. They’re the four where there are just consistent issues with solvency and they’re a revolving door. And if you have a look at those industries, generally speaking, they’re low barriers to entry. You don’t necessarily have to be good at business. And probably the most telling factor is that that low barrier to entry then means that you’re competing against people who’ve got no idea what they’re doing. It’s bad enough that you struggle, but it’s very difficult to argue with a clever man and it’s possible to with a stupid one. And you know, the last thing you want is to have competitors that haven’t got a clue that acts on price and price of line. So one of the things I think you need to say is, ‘well, I feel I’m in an industry that’s got a lot of barriers to entry.’ Say cleaning, okay, I have to have my unique selling proposition. They’ve had my point of difference because otherwise what have I got to compete on? Price.
Well, in the cleaning business, have you seen that that person made a differentiator in the industry with the way that they’re cleaning? Well more recently? Topless cleaners don’t know if that’s gonna work for me in IT. I can imagine I rock up here without my shirt on. I don’t know if that’s going to be my point of difference.
Warren: If it’s a problem for Josh, folks let’s just be grateful that this is an audio podcast.
You’re exactly right there. It’s about finding that point of difference, making sure that you have that value-added or that thing that makes you resonate with someone else. Making sure that if you are cleaning, you’re doing that for a certain sector or something like that so that you’re less likely to have that as a downfall or a certain part of a sector.
Warren: Yes, it’s interesting. One of the things I’ve noticed was that when people look at their own industry sectors, they get the difference between the good operators and the not-so-good operators, but those same people who can nuance them and understand those differentials in their sector that look out and see every other sector be exactly the same.
They look at accountants and they think they are all the same. There’s one on every block. Why would I drive to one? So to get to a dollar and you think about it, it’s a really, really common thing. And if you can’t stand up and say, this is why I’m different from the next three guys, well, you’re in a world of hurt.
So if you want to recession-proof your business, have a look at your opposition. See what they are doing, and how can you differentiate yourself. And one of the ways I’d recommend is to go and have a look at some .co.Uk websites and .com websites in America where things happen over there that happened once upon a time we used to have trade make and tell you what was happening.
Well, then you’ve got the Internet. It’s right there at your fingertips. Um, if you are, plain and simple again, go and have a look at the cleaning cap news in Utah or Arkansas. See what they’re doing so that you can differentiate yourself from your competition.
Definitely good advice. And if there is something I guess that you need to try and steer clear of a lot of industries, like just naturally everything, most things are becoming commoditised.
Warren: Yeah. And look, we’re told that by the profits of doing in our industry, you know, where we’re going to have artificial intelligence, and it’s going to figure out everything. I’ll be interested to say that I don’t think it will happen in my lifetime because artificial intelligence is never ever going to get over natural stupidity.
No, I was going to say you’d be old enough to have seen the Jetsons in its infancy. And some of the cool stuff they had on there that we still don’t have now. That was sort of told, as you said, the prophet said, this is going to be a cool thing. This would be a cool motor transport, flying cars. Can you imagine what the world would be like if we had flying cars? We have trouble having people not have accidents on the road and flying into buildings.
Warren: I couldn’t agree with you more. I can’t see it being a good thing. Unless we can come up with some way to control the notion of adding another dimension.
Yeah. Well, the biggest risk in any business is the chairs. It’s the people in the business.
Warren: You’re getting onto one of my favourite subjects Josh.
We can dive into it, but they’re the biggest risk and the biggest liability, and they can be the biggest reward as well.
Warren: To me, it’s very simple. If you don’t have good people, you do not have a viable business. End of story. You can forget the rest now. What do good people mean? Is there a certain percentage of the population that are good, some that are average and some that are bad? Well, yeah, I suppose there’s certainly an element of that, but what opportunity do you give them to be good? There’s no point. Your employees look to you for leadership. We try to supply our people with the very best infrastructure we had. Josh, you just had a look at it. Have you ever seen that in an accounting firm before?
I have not seen that in many, many businesses, especially accounting firms, which could be utilised significantly more than other businesses.
Warren: And I thought we’d gone far enough with four 27-inch screens. Joshua has convinced the staff I thought I’m off on another IT, technology leap.
Absolutely. And what you said before, like it is good, bad people every obviously and mediocre people. I believe it was Albert Einstein that said that if you measure the intelligence of a fish by its ability to climb a tree or think forever, the fish is stupid.
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Obviously, it comes down to you putting the wrong people in the wrong roles and you might have someone who’s fantastic at doing the trench work or doing the number dialling, the number-crunching or whatever it is, and you think, ‘Oh, they’re doing really, really well. Let’s increase them to a supervisor.’ But they…
Warren: The Peter Principle! Where each individual will be promoted to the level of their incompetence. So someone who’s good at sales, let’s promote her to a sales manager, well, you know what, they’re two different skill sets.
Absolutely. The EQ and IQ are completely different from the ability to manage a team of people and the direction that they’re going to be looking at for you for leadership is going to be Nurture and farming
Warren: If you’ve got a hunter, you can’t put him in an office. The guy’s gonna go nuts. It was an interesting exercise when I was an account manager for an advertising company, we lost the state sales manager and I was plonked into the role. Which was funny because I didn’t consider myself a great salesman. So I sat down and I thought, well, you did numbers. Well, let’s do this by numbers. So I sat down and looked at the cycle and what was involved in the sales process and identified various points, and I’ll just get my reporting around that. And I found out that I had some really good presenters who couldn’t close to saving their lives. I had other guys that could close people on nothing at all. So what we did was we had, by sitting down and getting this reporting, we were identifying the guys who were good at their instincts, and sometimes I’d even tag-team a client, we’re not sending this brilliant presenter, but he’d go in with the closer and they just hand over and oh boy, did that work a trick?
Ying and yang.
Warren: You couldn’t do that with everybody, but you know, we were looking at a large Queensland brewery. You can figure out who that is for yourself.
Do they sell mangoes?
Warren: Mango-flavoured beer, I think. It was a substantial opportunity. Let’s put it that way. It worked very, very well. But what we also did was we got the guys who were good at one part of the cycle to train and work with the guys who were better at other parts of the cycle. So there’s a bit of cross-fertilisation there, and that was all about working the people. You know the funny thing was we had an incredible turnout in sales there. The turnover dropped by 85%.
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Wow. The churn from what was it?
Warren: That was a byproduct.
That’s incredible. And that’s, I guess, something that you say, people feel more comfortable in their job and more satisfied with the results.
Warren: They are becoming better at what they did. They were learning things, and as I said, it was nothing other than studying some numbers and saying, ‘Well, let’s give this a go.’ And all of a sudden that was, ‘Gee, the boss does give a damn whether I live or die.’
If you hadn’t been put in that position, where would the team have been like if they didn’t have someone with the background of a number that obviously you’re passionate about for them to have them take that part, it’s kind of serendipitous the way that it all came together?
Warren: Yeah, it was, it was. And honestly, I don’t think they could have done it. Me falling back on what was comfortable and a little bit of analysis and a little bit of work, and lo and behold, it worked really well. So I think it’s a case of, you know, people are your biggest asset. Can they be liabilities? Yeah, sure. I’ll tell you something, Joshua. I’ve worked as a consultant for over 30 years, and I have yet to see an organisation that doesn’t reflect the boss. That simple. So to all you people out there that own your business and or are a manager or run a sector or somebody else’s business, if you don’t like what you see, there’s a big chance it’s that person that you got to shave or put makeup on this morning that is contributing to the issue. Oh, I have a good half. Look at yourself. It ain’t much fun, but I’ll tell you what, I reckon you’re getting results.
Yes, The whole ecosystem and ethos of the business stem from your belief systems and your attitude. And if your attitude’s portal or just staff there, they’re going to be pulled towards your clients. And that’s going to just carry through.
Warren: Well, you just hit on another one of our favourite topics. And one of the practices that we follow here is we seek to employ good people, not necessarily people that are highly skilled. Unless you’re not terribly smart. I can teach you just about anything. You can learn just about anything. I can’t teach you to be a good human being, somebody who takes responsibility for their actions, is prepared to be accountable for what they do, is prepared to say, ‘Well, you know what? Maybe I do need to pull myself up by the bootstraps.’ You get people like that. One of the great things is you get to a certain point, and there’s the momentum that will sort the bad eggs out for you because they just won’t fit in, because your good people are going to go, well, this person isn’t fitting in because of this, that and the other. It’s getting on the road.
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Yes, for me, I started out in business as a single-man operator. And when I looked in the mirror, I knew it was me. That was a problem at that stage. As the years have progressed on and we’ve put better systems in place and I’ve bought better staff, and I’m happy enough to say that I’ve got a team of unicorns that work with us. And I say, ask you not to work with me because the business wouldn’t be the business without us.
If everyone left, I’d be pretty screwed. And it’s not that it would be unrecoverable, but it would be a very, very, a big question mark as to why they’d leave. And that would only come down to their not being happy with the work environment. That’s what we need to make sure you have your finger on the pulse checking whether are they happy with what’s going on. What would they change in it? And we have any of our policy documents and procedures all pass by and pass through and created by all the staff. So it’s not just one person saying, ‘This is the road that you’re going to be walking. This is Hitler’s way.’ Everyone makes the decision and we work together to make sure it’s the right decision or we work together and realize later on it was the wrong decision. And then we work together to make the right decision.
Warren: Yeah. Forcing change upon people is a complete waste of time. They will resent it. They will interfere with it. You’re going to have all sorts of problems. But if you involve people in that change, and it’s their change, not yours, you’re going to get a different outcome.
If you’re able to use the knowledge from the movie Inception to have the people come about the change and solution themselves, they’ll own that change, own that solution, and then it’ll become their baby and they’ll want to see that move forward.
Warren: So my advice would be, and again, I think this goes to the recession-proofing your business because realistically what recession-proofing is doing is building a firm foundation. Those values, those things that you believe in, my advice is to write them down, publish them, share them, and live them. And it’s not as theoretical as it sounds. These are very, very practical things. It just doesn’t happen with love-ins and motherhood comments.
You really need to have, as part of your business, the engagement of your staff and have them involved in what’s going on. My staff are involved in every appointment to do with the business. If there is a major client issue, we will seek their guidance as to how they think there is an appropriate way to deal with it.
It’s because I value the opinions and understand that these people have experiences that you haven’t, and they may see an aspect of it, they’ll see a solution that’s not clear to you, but the only way that that is going to occur is for you to get them involved. So it gets your people on board.
They’re part of your foundation if you’re looking at them like they’re not my ideal thing. You’ve got a couple of options. You can bring them on board and get them involved, or you can replace them. Think hard because you’re going to lose an awful lot of accumulated skill by sacking and replacing staff.
When it comes down to staff, as you said, they’re pretty much the pinnacle, the number one aspect of your business, whether it’s going to make or break. One of the things that we put in place was the Friyay meetings we call them. So the Friday meetings of vendors, they’re normally quite casually said, sometimes with a cold beverage in our hand.
A local author, Ryan McDonald-Smith, wrote a book called Flawsome, which is about embracing your flaws. And we introduced some of the concepts within it around what we’re calling a section within the meeting, hard conversations. Did someone piss you off this week? Let’s talk about it. It’s a hard conversation.
Warren: Sure. That’s a really, really good thing. Probably a little bit difficult to talk about in a public forum, but one of the things that I will not call right is if my clients are rude or disrespectful to my staff because the simple fact is there is not any client that always worked for one of my people. Yeah, they are that good to me and I’ve never had an instance in this particular business. It’s possibly because we identify when things are going wrong. We will sit down with the client, and just say, look, your expectations and their expectations are not making, we don’t think that there is a future together, but we are very, very happy to discuss that and come to some sort of conclusion where I change or you change and we all change. Generally speaking, as long as it’s done in a respectful manner, you can have that conversation. And what that means is that my staff have less pain because I’ve got a client who was completely disorganised and he is forever mucking them around. And they get that joy from it because they’re not achieving the things that they want to achieve. There’s an old saying in residential property investment: better an empty house than a bad tenant.
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Warren: If your clients are giving your staff grief, I think you need to change the way you’re doing things or you need to change your clients. But whatever you do, look after your staff. You know, in a practice I worked at many years ago, there’s a single largest client. It was a big slice of the turnover in the business. It was a, you know, fairly important client, and he was quite abusive to our receptionist. And I walked downstairs and she was in tears and she was unprepared to tell me what it was that had happened. And anyway, I’ve just got somebody else to sit in reception and we sat down and had a talk and it turned out this guy has called up and for no fault of hers, something has gone wrong and he’s given her an earful and it was completely unwarranted, far from anything else.
So I went and saw the boss and I said, ‘Look, this is how I want to deal with it.’ He said, ‘Yeah, do it.’
And I rang him up. And I just said, ‘Look, I want to have a very frank discussion with you. The way you spoke so and so this morning is not acceptable for this firm ever under any circumstances. If you want to yell at somebody call me. I’ll cop it. I get paid for it and I can deal with it, but please leave our staff alone. They don’t deserve to have that sort of thing.’ And he apologised and he said, ‘Alright, what do I have to do to make it right?’ And I said, ‘Send some flowers and call her tomorrow morning.’ And he did it. He was a decent guy.
Is that enough?
Warren: Yeah, absolutely. Happens all the time, doesn’t it? And he sent us some flowers the next morning. He called her to apologize. He actually called the office and apologised in person.
That would have been much harder to do.
Warren: It was a lot harder to do. I respected him for doing it.
That’s what Flawsome is about. Embracing your flaws. His flaw, he stuffed up. He shouldn’t have done what he did, but he fixed up the problem that he stuffed up with.
He could’ve just gone to someone else.
Warren: Absolutely, and that’s a fairly standard reaction. ‘I can’t possibly be the problem. It must be them.’
Exactly. There’s a demotivational poster that I remember seeing many years ago, and it’s a picture of a chain. And there’s one link breaking in the middle. And it said, the only thing consistent in all your inconsistency is you. And it’s like, okay, you can imagine bad things happening everywhere, running every black cat. No, it’s just you. You need to just think about the position you’re in and why it’s suddenly only happening to you.
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Warren: I was once doing an interview with a prospective client and, it came out of the conversation. They had had five accountants in four years. Oh yeah, that’s a lot. I said, do you expect me to be the sixth? It’s a bit of a revolving door. Can we have a look at what’s going on behind the scenes? Because after five, you’ve got to have a bit, there is only one consistent there.
A few years ago, I was single and I was scared off my ass, ‘Oh, what’s this going to be like talking to women?’ It’s exactly the same as business. You look at the ones that have had to revolve through too many times like that. Something’s wrong here. It’s the same time point that you put your eggs in that basket or anything else. It’s the same thing. It’s just reading and analysing the situation. You don’t want everyone to be a client and a client like that in a recession time would be someone that’s going to come and leave and drop you as fast as they picked you up.
Warren: This should be the next tip for recession-proofing your business. Get good clients, and keep them. Bad clients are just gonna bring you down.
There are enough good people out there, as you said, and your clients might be fish and you might need a monkey to climb the tree. If they’re fish and they liked swimming, they might not be the right client for you.
Warren: Absolutely. And just because it doesn’t work between you, it doesn’t mean you’re a problem or there is a problem. It just means the chemistry isn’t right. Go and find somebody else with the chemistry that works. It’s not that hard to do now.
I’m sure you’ve gone down a similar path. We’ve had times where I’ve had a client that was great, brilliant, grabbed business, they grew their business. They were in a very different direction with the way their business is working, and we went to them and said, ‘Look, you’re not really working within the model’s confines of the way that we were putting everyone in a box.’ Their model of business and the way they’re looking to be pushing it wasn’t a direction that we’re hoping and looking to look after them in. And because we’re not just the ‘you call us up when there’s a problem.’ We’re here to help you out long-term. If I didn’t believe in the model and what they’re doing within their business, I didn’t want to be the person they just called up when something went wrong. Cause I feel like I’ve become, you shouldn’t, but you’ve become emotionally invested, invested in your client’s problems and the situation you’re helping them out with and you feel amazing when something comes to fruition, from an idea or something that you’ve worked on together.
Warren: There was nothing wrong with that. The relationship at the end of the day, whether it’s a business and employee-employer, a marital relationship, whatever, you know, one day you’re on the side page is nothing but blue sky, and at the end, the world is your oyster. Everything is great. I think I’m going to tell you something that everybody really knows and that is that people grow in different directions at different speeds. And if you are not allowing for that to happen, it’s going to come up die when you’re just not even in the same book, let alone the same page. And one thing that I say is that relationships are as good as I give them to start. If they’re not good then, they don’t push you up, it is just not going to work. So there you go. There’s another tip, folks. Get your relationships right.
It feels good. Do it.
Warren: Yes and you know, relationships in a commercial sense, ultimately down to the terms and conditions that you operate on, right? So you would have a letter of engagement with your people that worked for you that has standards set out in it. If I don’t comply with that, they’d probably not be in the right place. You have terms and conditions, presumably with your customers, as do we. And if they’re not working out well, it’s not a question of who’s right or who’s wrong. The relationship isn’t working. And the other thing is, have you got those things documented? I know an awful lot of people out there don’t have partnerships or shareholder agreements. Right. He’s obese. He’s too old. He affects it there that haven’t got one. It’s gonna fail. Yeah, absolutely. I can’t tell you when, but it’s gonna fail. I can guarantee you. I’ve had to mediate in a number of partner shareholder disputes over the years. And every single one of them had a common element: a lack of an agreement. If there was an agreement, typically that agreement is going to have the resolution for your problem.
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Warren: Absolutely. So we meant to do is got back to that insight. Well, this said, you had to do this and you’re entitled to that, and I had to do this and I wasn’t told of that. And that’s not happening anymore. Therefore, what do we do about it? Do we recalibrate and get back to what we said in the agreement? Do we revise the agreement or do we just go to the exit provisions and work through them and see who wants to go when? One buys, one out. You sell the business and split the proceeds, whatever it might be.
So agreements with your stakeholders, folks, write client’s terms and conditions, employer, employees, and contractors. Please don’t have any contractors. That’s not a good thing. I’m not sure that you’ve got a letter of engagement that stipulates what you want to know and so on. So all of your stakeholders should have documentation around that.
We’ve spoken a lot about people and how people are an important part of your business and can make or break your business. And without the right people, you’re destined to fail in times when it becomes tough, such as recessions obviously. It’s the failure that seems imminent. The emotions become heightened. We’ve got businesses that we’ve been working with that had 40 to 50 employees have dropped down to 3 and 4 employees because they’ve just said, ‘Let’s keep us alive.’ We can’t have that many people. For us in business, our number one goal for any of the businesses we work with is automation. Get as many of the processes that are repetitious, mundane, and anything that can be automated through software as be automated. Anything that can’t make sure to do that through any standard operating procedures, if there’s a reference document and have their KPIs attached to the documents. So that way you’ve got, in a sense, the workforce knowledgeable of the direction or automated in a sense that you know how it should be working. And then for any of the other aspects that are software-based, all those automated for a business, that is looking to try and go one direction or the other, if they have the opportunity, if they have to spend money on automation or spend money on staff, where would you say, obviously I’ve got a biased opinion towards automation.
Warren: Well, let’s have a look. Firstly, Australia has a fabulous standard of living. Which basically makes it less expensive to employ. I doubt very much. that employees aren’t well protected. I might even go to the extent of saying heavily protected as they are in Australia. We’re expensive and we are to get rid of his employees.
All right, so obviously automation has to be something that is considered. Automation is often really difficult for small businesses purely simply because they just don’t have the capital to attack it. But there is something that everybody can afford, and that is to write down procedures.
I dare say you’ve come across it, Joshua, in your time. I’ve heard these words in different formats from dozens, possibly hundreds, of people over the years. It doesn’t matter to him much more onward. Nothing more comes out. So what’s happened is they’ve hit the glass ceiling. It doesn’t matter what they do. I just can’t rise above it.
They’re trading time for money most of the time, and they’re hitting their ceiling because they don’t have any more time. And they’re probably getting more and more grey hair and less and less of that in lightning in the sky.
Warren: I’ll tell you one of the things that come out of it. Every time, there’s a simple question that I ask, and that is if I said to you on a scale of 1 to 10, it’s just faster if I do it myself, where are you, and when I say anything above seven, that’s where the problem is. They would much rather do it than get somebody to do it for them.
I’ll just be right when I do it.
Warren: Yeah, that’s right. By the time I teach you how to do this, I could have done it. Well, that’s fine. You’ve got somebody who works for you that is still untrained so you’re going to have to do it next time and the time after that and the time after that.
Removing repetition from the business.
Warren: Bingo. So I don’t care how small your business is. Whether you’re a one-man business that works out of the tools in your van or in the back of your ute, you can still write down procedures. There is nothing to stop you. And then you follow those procedures and it’s really simple. Look. Did it go wrong? Yes. Did I follow the procedure? Yes. Fix the procedure.
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Warren: Rinse and repeat. So there’s another tip for recession-proofing, folks. Procedures. Get them right. Take the time to write them down.
What we do here as tax agents and business advisors is damn complex. It really is complex. To do a company tax return or a trust tax return, I think there are something like 2,000 steps that we have to follow, and that’s only if everything works.
Would I even contemplate doing a tax return without those procedures? No, and I’ll tell you what all would cancel very firmly. Anybody you thought they came even a simple amount of setting up a company. I had set up hundreds, if not thousands, of companies over the years, and every now and then, just for the heck of it, I do one without the procedure and then go back and tick off the boxes later, and invariably I’ve got it wrong.
It can’t get any simpler than that. If you’ve got a mindset that is ‘I don’t need what somebody else has written down,’ oh boy, you’re in a world of hurt because you cannot run in a quality manner from that.
There’s no consistency. It doesn’t need to be good. It needs to be consistent. It is more important. McDonald’s, no one goes to McDonald’s because the burgers are absolutely amazing. In fact, the burgers are better at Hungry Jack I’m told. Yet at McDonald’s, because you know the burger is going to be there in a certain amount of time, it’s going to be consistently the same quality. As you better your processes and procedures. If that’s the direction you want to go, the quality will go up as well.
But having something consistent, at least, you know, if you stuff something up today, you’ve probably stuffed it up the last hundred times you’ve done it as well, and you can go back and fix that.
Warren: And have a look at McDonald’s. One of the most successful businesses in the world is run by spotty 15-year-olds.
Warren: And I’ll tell you how it’s done, folks. They’ve got procedures and they have to follow them. Yeah. When it comes to bigger McDonald’s franchisees, I don’t know if you’re familiar with this system, but you have to go to the academy. You will train in school, whatever it is. That was for four or five weeks, I think. Forgive me if I’ve got some of the details wrong. You stump up the money before you even set foot in there and they let you know at the end whether you’re a shot. Otherwise, it’s a case of ‘Well, thanks for coming, but, I’m afraid that five weeks and 20,000 bucks have been wasted because we don’t want you.’
Why would they get consistently the same outcomes? Because they select people who will stay within them, within their procedures, and make things happen in the same way.
As you say, it might be the best burger in the world, but you can be pretty sure it’s going to be the same as the one you got last week and that wasn’t that bad.
Exactly. It was good enough. And that’s another big point that you touched on lightly. There are people that buy into a McDonald’s franchise, they do make sure they vet them accordingly, both from a financial perspective to make sure they’ve got the ability and understanding of how to run a business before they go and throw them in the deep end and say, ‘Hey, run a business.’
But none of the people running a McDonald’s franchise is flipping the burgers. None of the people that are going, ‘Oh, burgers are wrong. I’ll just do it myself. I’ll just go out there and not just serve the windows, refill the soft serve machine.’ They’re not doing any of that. They’re looking at the numbers, the profit and loss. They’re looking at the high-level stuff. They’re not looking at any of this stuff that’s going in and working out the procedures because the procedures are written, done, and repeated tens of thousands of times across the globe.
Warren: There you go, folks. So here’s the next tool for recession-proofing your business. Get off the tools.
Absolutely. The 100% most profitable thing you can do in the world is get off the tools, becoming the least important cog in your business that owns all the cogs. Don’t become the cog that the business stops when you disappear.
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Warren: Yeah, absolutely. I can name probably hundreds of people over the years who said, ‘Oh, look, I’m just not a good people manager.’
Well, my response to that is, ‘So tell me about what you’ve done to make yourself a good people manager.’
‘Oh, well, nothing. I just haven’t had the experience.’
‘Well, of course, you’re not going to be good at it, but there’s nothing to stop you from learning.’
I’m a huge fan of YouTube. It is amazing how many people are going up prepared to sit down there and give you the benefit of their wisdom.
Yeah, they might not always be right, and sometimes they will be damn right wrong, but gee whiz, it’s interesting listening to them filtering that information. And seeing how you can apply it to make it work for you.
So probably one of my biggest tips is to have a thirst for knowledge. I don’t care what it is. Businesses, as you’ve heard from this discussion, have lots of aspects. There’s no silver bullet. I’ll do this and bingo, I’m going to be a champion. It doesn’t happen, right?
But if you are prepared to invest time into reading and listening and understanding and not say ‘I can’t do it,’ Which is really simple and it doesn’t take long. Unfortunately, it’s also extremely unproductive. But going there and finding that knowledge. Sometimes, it’s being a bit like diamond mining. You know, you have to get 2,000 tons of ore to find this little gem, and if you can pick that gem with you for the rest of your life, and use it every single day, what is it worth over a lifetime?
Warren: So finished with all those folks. That’s the next one on our list so far. Did you write these down, Joshua?
They would be written down. Don’t you worry? I got that automated.
Warren: You can put them in a dot point at the bottom of the blog.
I think we will. We will make sure that is available in one dot point. After that, we’ll actually put it at the top of the documents so you can reference each of the parts. A lot of people call themselves entrepreneurs and I think, well, what does that actually mean? It’s just a word that’s thrown around everywhere.
Warren: It’s a French word. It means the takers in between.
The takers in between.
Warren: That’s exactly what it means.
What does a con man, short for convincing then? And so there’s this person that the taker of, in between, which sounds like a reseller of services. And then there’s a con man, which now has a very negative connotation, is the convincer or the person that would otherwise convince someone of an argument, which is taking a bit of a turn. But I think most entrepreneurs and salespeople or people that are business just think, ‘Oh, I’m an entrepreneur ’cause I’m a business owner.’ It’s not about that at all. I think the way I would describe it is you’ve created a process that is different to someone else’s process and you’re able to talk and discuss and relay that in a way that is understanding to the other audience and relevant to the other audience.
Warren: You can ask a dozen people to give a definition of an entrepreneur and I guarantee you it doesn’t. Different answers.
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Warren: Am I an entrepreneur? Am I a businessman? I often find those labels not terribly helpful. I was going to put them in the same container as anyone who’s ever attended a master class. Everyone’s a business development type of person that’s helping you out and going to grow your business and add an extra zero and bring your business to the next level. I won’t speak negatively of any, particular individual, but that is a lot of guys in the sales game that go out there and talk to a thousand people at, you know, 200 bucks a ticket and they walk out of the jumping out of the skin. And I’ve seen the results of these countless times. Seven days later, everything’s still the same. There was an absolute blinder on Monday. Tuesday was pretty dang good. Wednesday was better than usual. Thursday was okay. Friday…It’s all gone and lost. The way to me that you achieve anything is by being methodical and careful. Yep. This notion that silver bullets are around, I don’t buy into it. Somebody comes to me and says, I want to improve my bottom line by 10%. My answer is, ‘Good. Let’s go and find 10 1% because they’re a hell of a lot easier than finding one 10%.’ And often, taking that approach has delivered very, very quick results. Try and stay away from the flash stuff, I said in an article I wrote recently. There aren’t very many of us that are like Nelson Mandela or Richard Branson. These are inspirational, highly motivated, motivating people, and they have a magical effect on those around them.
I am certain I’m not one of them, but over time, by investing in my people, I hope that I can become a leader. Am I ever going to be a Nelson Mandela? Absolutely not. But can I make that person’s life better? Yes, I can. And can they, in turn, make my business better? Yes. You can build that reciprocal arrangement. I think you’re going to go a long way, so stay away from the flashy stuff, guys.
I completely agree. Don’t go and sit down in a conference and then in six months’ time sit down at another conference, thinking that you’re going to absolutely change the world with this book or course that they want you to buy into, you’re buying into snake oil most of the time. If they’re giving you these diamonds and you’re not actioning them, you’re not doing anything with them, there’s no point.
Warren: No. And I think all too often, you know, um, with these snake oil salesman, you’ve called it right there, Joshua. It’s attended this by this and your world will change.
The only way your world will change is when you decide to make a change, and I know it all comes back to you. You are the centre of your universe. Don’t go expecting some other star to make it better. Only you can do it, and it’s not that hard, but it does take some effort.
You have the impacts that you make on your own life. You’re going to care more about it. They don’t care if they are already getting the money that they want. They don’t gotta be looking to have their lives impacted. Even if they were, your business is close to you, which is why getting off the tools and being the person they’re selling your business, selling your ideas, selling your services, and talking passionately about them. I use the term selling, which can sometimes have a negative connotation. Just talking about it. Everyone in business that’s a business owner is a salesperson. It doesn’t have to be that a bias to the knives and get another set of knives in the first 10 minutes, but it’s about making sure you’re building up those relationships.
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Warren: Yeah. We have a lot of sales. Come and see us. We do business with quite a few at the moment. And one of the things I show them is there are four elements to Walworth’s business. We’ll leave at the end of the day. The regulations and all this stuff make business probably more complicated. We have four elements: marketing, sales, service or product delivery, and administration. And they’re not in that order for fun. Marketing. It starts with marketing. If the phone isn’t ringing, people are walking through that door, you’re dead in the water. I don’t care what you do. It is irrelevant.
Yes, a Cure for cancer in the garage does nothing.
Warren: Oh, I’ll use that.
Go for it.
Warren: Consider it stolen.
Did you hear that, everyone?
Warren: The next one’s sales. What are sales all about? Yeah, I hear you. Some people got this negative connotation of sales, but at the end of the day, sales is providing a solution. This person has a problem. Does your product or service provide the solution? I’ll tell you, I’ve had people who were here with up that approach do far better in the long run than they, you know, sort of act sneaky used car salesman, politician, you know what they say. So marketing is number one. Sales, number two. Product or service delivery. If you’re no good at that, what are you doing in business anyway? But it’s not being good at product or service delivery that is important. It’s being good at a business that’s important. And you have to have all of those elements.
And as you said, in that order, and when you start replacing yourself as the person that’s on the tools, you should be employed in that order.
Warren: Absolutely. And the last one is administration. They don’t tell anybody else I said this, but nobody has ever administered a business to success. Never. They might’ve kicked it out of the old pot, but it’s never brought success to a business. It’s ancillary. In fact, for my money, the first thing they get out the door is administration.
Running your accounting system. Seriously, guys, you can’t be in a camp. Stop even thinking that you can put me in the best automotive workshop in the world. I can’t fix your car. All the tools that there, I have no idea how to use the. And I know we’ve had Xero and QuickBooks and God knows who else is telling us, ’Come and buy my stuff and your problems are over.’
Well, I’m here to tell you if I took that work that way and it never has and it never will. Yeah. That’s not just a plug for me or a plug for the accounting provision. That’s a fact. You don’t make money with administration. Get rid of it either and then put an employee on the handbook. Absolutely. But for God’s sake, stop doing it.
If you do shit as marketing, you might have someone who comes over and says, ‘That logo is copyrighted.’ If you do shit-out sales, you might have your business grow food. If you do shit in any of the administration stuff, you might have the government knocking on your door and suckering shutting down your business. I can send a report and Josh, I’ve never seen it. Of the four elements that we just talked about, marketing, sales and product or service delivery, they are crucial. Your business cannot function without them. It will get on for quite a while with a really bad following or even bad accounting. But it’s something you don’t need to do.
There are bookkeepers out there that work for 100 bucks an hour. If your time’s not more valuable than that, what the Dickens are you doing in business?
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There’s quite a spread actually across the bookkeeping and accounting industries. It’s very difficult to send across the IT industries. There’s a lot of Cowboys out there that sort of say, they know the voodoo they do and they don’t and frustratingly, for a business centre, you don’t know if they’re just always behind the curtain as far as you can see, like all they’re doing it, the tick box, there’s a tick in the box. I’ve got an accountant. We suggest everyone that engages with our services get a second opinion from another IT company as often as they want, every 6 months, every 3 months, every 12 months. Whatever you want to do, get an opinion from someone else. Have them come in and cross-check our work, and make sure you’re comfortable with what we’ve been doing. Have them tell you any problems that we’ve found and we don’t tell you to go, ‘Oh, go to this other company. We want it to be absolutely as pure as or as a result as possible. Cause they don’t need to see that we’re doing the right job. And we think the same thing for people in accounting.
Warren: That simply comes down to a commitment to excellence. I don’t mind it. It comes with, it has to look at by staff. If they found a problem, I’m actually happy cause I want it fixed anyway. That’s great. I’m a great fan of excellence and striving towards it. It also shows that you’re not afraid of their check quality. And I think that’s a tremendous thing for your business, Joshua. Good for you.
Thank you. With thirteen years in business, I have to be doing something right.
Warren: Well, absolutely. What is that old saying, I bet you that 50% of businesses fail in the first five years. Believe me. It’s fundamentally true. I don’t know exactly how accurate that is in terms of the quantity and the timeline, but it does happen. And invariably, why does it happen? Because people don’t play it.
Would you get in your car and just start driving? No, not at all. It’s like, I need to go from A to B and it’s going to take you about an hour and I’m going to do this, that, and the other along the way, and Josh has just shared this thing. He’s got…what’s that called again? That little note system Google Keep! Have a look at it. Go on, as you can create notes for your wives. It’s fabulous. All those female business people out there, through your husbands. We’re equal opportunity here. And you can just give them the shopping list, and off they go. A beautiful thing, I love it. A lot of that offered endorsed products and certainly not many of Google’s, but I think this one’s a winner.
You’ve got the tick box. Well, we’ve gone through a lot of information. I think the big takeaway here is to make sure you have the staff and the people set up properly in business. If you’ve got that happening, everything else will flow on. Is there anything else that you’d like to add before we wrap this one up?
Warren: Oh, look, I think we’ve covered a lot of ground. I think the thing to understand is that even the dot points at the top of this article aren’t going to cover everything. But I’ll tell you what, if you can tick every item on this list, I suspect you’re going a long, long way to recession-proofing in your business.
Cool. Cool, cool. And is there any way that people would get in contact with you?
Warren: Yeah, sure. Do a search on the Internet for Magnus Business Advisors. My contact details are on there. I’m always available to have a chat, whether it’d be as an engagement or sometimes it’s just people making some words of advice. Happy to do it. I’d love to hear from you.
Cool. Well, we’ve had Warren here on the podcast and I hope you’ve enjoyed this. If you have, jump across to our iTunes channel. Leave us a review. Give us some love, and any other tips and tricks you’d like to see us doing a podcast on and look forward to you guys listening in the future. Stay good.