Transforming Small Businesses Into Highly Profitable, Great Places to Work
This week I was honored to interview Dr. Sabrina Starling, The Business Psychologist™ and author of the How to Hire the Best series. She is also the founder of Tap the Potential, a business that specializes in transforming small businesses into highly profitable, Great Places to Work, then sending business owners on a 4 Week Vacation to celebrate that accomplishment.
How to Hire the Best
Dr. Sabrina has been coaching small business owners for over 15 years. She transitioned from her psychology practice because she wanted to work in a field with clear results. Small business coaching gave her that!
With her company, Tap Your Potential, she gets to work with top-tier small businesses and entrepreneurs. The business owners she works with are intent on building highly profitable places to work that do NOT depend on their constant present and oversight. This enables business owners to have more freedom and actually enjoy living their lives. When the business can run profitability on it’s own, it’s much more likely to be well-positioned for an eventual sale when the time comes.
Dr. Sabrina’s interest in authoring the How to Hire the Best series came about as a result of her desire to solve the toughest hiring challenges. She realized that these hiring challenges were constantly interfering with her clients’ growth and profitability.
Eventually, her work catapulted her into becoming the world’s leading expert in attracting top talent in small businesses. Regardless of what hiring challenges those businesses were facing, How to Hire the Best philosophies were able to make a difference and transform their businesses. This work also established Tap the Potential’s reputation as the go-to resource for entrepreneurs committed to creating Great Places to Work with thriving coaching cultures. Businesses who hire the best benefit from highly engaged team members working from their strengths.
The philosophy of Tap the Potential boils down to this: work should support life, not the other way around. This connects to my own belief that every business should be a lifestyle business. A healthy, profitable business should be supporting your life, not taking it over.
Creating a Sustainable Business
Dr. Sabrina’s upcoming book is all about how work supports life, not the other way around. She is on a mission to end the hustle and grind mentality and disrupt the dominant discourse about what it means to be a business owner and entrepreneur. She believes there is too much focus placed on growing top-line revenue, and not enough on margins. At the end of the day, she points out that it’s not how much you make, it’s how much you keep!
The focus should be on how much of our revenue consists of profit, and how much life our business gives back to us and our team members. After all, if we are building businesses that are not sustainable, we are setting ourselves up for failure.
Work sustainability is a huge concept to dig into. You can start by asking yourself:
- Is it sustainable to work 90 hours a week?
- How sustainable is it to sit at your desk behind a screen for hours and hours on end?
- Is it sustainable to be the only person who can keep the business running?
At the end of the day, no!
Laying awake at night worrying about cash flow and payroll while chasing bigger deals just to keep it all afloat is NOT sustainable. The real focus should be on increasing profits and margin, not just pulling in high dollar deals.
Creating a sustainable business is also key to creating enterprise value for an eventual exit deal and being freed up to have the time, focus and creativity for deal-driven growth.
Transforming Small Businesses: Optimize Success and Focus Your Time
Dr. Sabrina has run her business on 20–25 hours a week for the last 15 years. Every single year she’s grown her business by 30% or more (other than the two years she took a step back). She had to be highly focused and productive in order to maximize those working hours.
She understands there are limits on her time, and she has to be highly selective about where she put her focus and energy. By letting go of the day-to-day distractions and focusing on the most valuable uses of her time, she has seen massive success in her life and business.
The flexibility to be highly focused and work-oriented while also raising her children and parenting, was key in Dr. Sabrina’s success. I realized during our conversation that some of my own most effective hires have come from giving employees the flexibility to work at the times that make sense for them.
One way to create flexibility? Focus on employee results, rather than hours behind a desk.
Dr. Sabrina shares that all of her team members are virtual, part-time workers. Everyone works flexibly, and she understands that work can get done alongside the other priorities that people have in their lives. She also creates clear work/life boundaries for her team. If she sends emails or Slack messages after 5pm or on weekends, her team knows that she’s doing so because those things were top of mind for her, not because she expects them to drop everything and respond.
So many entrepreneurs are currently running remote businesses, either by choice or due to the Coronavirus. A common question she keeps hearing?
How do we know our employees are getting things done?
Hours vs. Results
She recommends shifting the conversation to results. Know what results you need from each team member, and communicate them. If they are getting those results, then they are doing what needs to be done. The details of when and where they are working aren’t relevant if results are happening.
Hire great people. Trust them as professionals. Hold them accountable for results.
When that is your method, you don’t need to micromanage or hover over anyone’s shoulder.
Recently, a lot of managers have been forced to put aside their micromanaging ways. Will this last when employees return to the office?
Post-Coronavirus, Dr. Sabrina believes that there will be micromanaging leaders who simply return to their old ways. However, she suggests that thoughtful leaders who are paying attention will recognize the benefits of running virtually and releasing control. If they are wise, they will find ways to reevaluate what work has to happen in the office, how important it is (or is not) to clock in and out at rigid times, and how flexibility can enhance everyone’s performance. There is going to be a desire to maintain some elements of this new-found ability to accomplish at least some work from home!
In addition, we can consider trust, which really is the foundation of all of this.
When we can extend trust to our team members, we’ll get better results and behavior in return. If you’ve strategically hired the best, extending trust causes people to step up and work harder for you. When team members feel distrusted, they become fearful of making mistakes, and are unlikely to operate above bare-minimum baselines. Trust creates better interactions, more safety, and more support. And those are the conditions that are required for anyone to create their best work.
At the end of the day, your team members are your biggest investment. Treat them with the dignity and respect they deserve!
Profitability Vs. Revenue
About 5 years ago, I shared with Dr. Sabrina that I read the book Profit First. (I had no idea that Tap the Potential was a Profit First business!) This is a great resource because it has you break things down in a way that enables you to not only pay yourself, but also have profits within your business. Too often, we are operating under a self-created cycle of stress, debt, and uncertainty.
It doesn’t need to be this way! Every check that comes in needs to be segmented into taxes, operating expenses, owner’s pay and profits. This will lead to greater clarity about what your margins are, and allow you to operate with more breathing room. When you can stop accumulating debt in your business and finally gain clarity on your profit margins, you can focus on growth that truly matters.
Hiring in a Down Economy
As we’re experiencing a down market, hiring and profits are changing. Many organizations are scaling back in order to focus on the sweet spots in their businesses, and this may involve hiring decisions.
With a clearly defined sweet spot, businesses can let go of all the extraneous elements. Growing from this spot decreases overhead and “drag”. The resulting layoffs can mean the market is saturated with A-players who are looking for a new position.
Dr. Sabrina recommends that, as an entrepreneur, you have a “shopping list” handy. This list will help you consider your long term vision, and what you will need to fulfill that vision. From platforms, tools, and new hires, you shouldn’t be making decisions based on what you can get a great deal on. You need to consider your business’ long term impact and needs.
It’s also key at this time to position yourself as an employer of choice. You can interview amazing people all day, but if your organization isn’t set up to attract them, they won’t accept your offers. Work to build up a presence and communicate the sort of environment you provide for employees.
Another recommendation? Don’t use the “opportunities for advancement” line. It’s vague and meaningless. Set yourself apart from other organizations by creating a clear, results-based path towards growth. You can start an A-player around the 65th percentile of pay when you can show them the clear path to the 90th percentile.
Dr. Sabrina also recommends that, at the end of an interview, you give candidates you’d like to hire a sheet that breaks down their advancement path for the first 18 months. On the back of that map, include testimonials from current employees about why they love working for the organization.
In structuring acquisitions, an earn out offer is a common way of increasing purchase costs while also protecting the buyer if profits don’t manifest as expected. Dr. Sabrina’s hiring plan for A-players essentially creates an “earn out offer” for new hires.
Employees who rise to the challenge and perform well are rewarded, and if the results don’t come through, the pay rate remains stable and payable for the business owner. Back-end upsides help mitigate risks for both parties, which is key in establishing trust and bringing in top candidates.
If you attempt to take advantage of the current down markets by hiring an A-player at a low rate of pay, they may accept your offer…but they will jump ship as soon as possible when the market turns! They will know that you took advantage of them when you had the chance, and they won’t remain loyal to you when the field clears and they have more options.
Another option in this market is to bring new employees on as part-time, remote employees. They can start learning the business and going through the training process, which is a great way to get them started without committing to a full time hire.
No matter how you go about it, be sure to consider how you can add value to both your organization AND your new hire.
Transforming Small Businesses Without Entrepreneurial Burnout
So many entrepreneurs are operating under a high-risk of burn out. Dr. Sabrina urges you to put your own oxygen mask on first, and don’t forget to take care of yourself!
You can take a free assessment to determine your level of burn out here:www.tapthepotential.com/assessment/. This assessment also serves as a screening tool for what you need to work on next. After all, you want to impact both the quality of your business AND your own life.
Listen in to our full interview here!