Barry is President & CEO of Deluxe, a Trusted Payments & Business Technology™company that helps businesses pay, get paid, & grow. NYSE:DLX
The military and intelligence communities have a concept called “red teaming,” which involves running war game scenarios. As an example, the U.S. military created red teams made up of specialists and experts in enemy tactics. The red team’s mission is to think, dress and act like the opposition military, while also using their equipment, to defeat the American forces.
This concept has found its way into business lexicon. When “red teaming” your plans, you look for vulnerabilities. You ask: What are we assuming? What could go wrong? Where are we most at risk? In business, as in military tactics, there is a positive aspect to recognizing the negatives—the vulnerabilities—so you can plan around them.
Take small-business planning. Perhaps a relative loaned the business money with a certain understanding of how and when it will be repaid. Or, perhaps an employee has engrained themselves into your own special way of doing business and then leaves for a competitor. Does one person in your business have all the bank and computer login codes that could cause your business to shut down if they were unavailable?
These may all be painful scenarios to contemplate. They may be an insult to the goodwill you’ve worked so hard to develop. But, if you’re running a business, you don’t have the luxury of only doing the planning that makes you feel warm and cozy. As a business owner, you must do the planning that sends a chill up your spine. It’s the best way to anticipate and avoid much more worrisome outcomes.
Your Physical Locations
During the seven years that Deluxe filmed our online reality TV show Small Business Revolution, we saw that businesses ran the gamut in terms of their physical circumstances. Some have cavernous spaces that can be assets or liabilities. If the business is paying for a lot of space that is not generating sales, that’s a problem. Then again, a lot of space allows for future expansion. The sweet spot is to have enough space to grow but not so much that it inhibits profitability.
In my book, Small Business Revolution: How Owners and Entrepreneurs Can Succeed, I discuss how a simple spreadsheet can save lots of time in doing what-if analysis of different scenarios. Maybe this is my inner nerd talking, but I’m here to say that getting the hang of doing simple spreadsheet analysis will allow you to sleep better at night. The spreadsheet can handle all kinds of questions to guide your growth and plan against the downside. You can ask things like:
• What is the most we can pay for the additional space if we don’t hire additional staff?
• If we buy the building instead of renting it, how many years will it be until we pay it off, using our average historical revenue and expense numbers?
• What are different mixes of products and services that could happen in order to pay for that space?
• Could we take advantage of it with current staff?
Another benefit of doing spreadsheet analysis is you can leverage it as a tool when you want to get financing for your future plans. You can only help your case when pitching to a bank or partner if you have spreadsheets that show what will happen under best-case, worst-case and average scenarios.
You may not need a spreadsheet to identify some significant business risks, but you do need to write them down. Always write down your risks or concerns. This will make you look at them more closely. Although it seems easy to psychologically look away when it is in your head, if it’s on paper, you can walk away and come back to it with clearer eyes. Writing down issues is a great discipline.
Some people may not like this sort of planning, thinking it is too negative. Don’t think of it in negative or positive terms. What is important is being realistic about your business, to challenge yourself when it comes to what the risks are in front of you. Challenging your assumptions improves the odds of your success. There is an old saying, “If you fail to plan, you plan to fail.”
Similarly, understanding the competition is another hurdle for business owners. I’ve heard many say things like: “Look, I’m focused on making my business as good as it can be. That means I’m not preoccupied with what my competitors are doing. Instead, I want them sweating about what I’m doing!”
It’s true, looking at what your competitors say and do is not a comfortable activity. Sometimes they look better than you. But ignoring your competitors is dangerous. Dismissing your competitors is defeating. If someone has a successful business, there is a reason it’s successful. You should know why.
If you’re going to grow your business, you need to be able to walk and chew gum at the same time. That means focusing on your own products and services, plus on your customers, plus on your competition. Additionally, competitors can often help each other, whether by cross-selling or providing financial support. If you’re doing a good job and helping customers, then you’ll see the fruits of your labors.
The areas we’ve just covered may be difficult to address but deserve attention. They could be the weak links in the chain that is your business and the stumbling blocks to your overall success.