Sailboats, Yachts, and Tall-masted Ships
By Chuck Violand
But there’s more to the relationship between boats and businesses than just image. In his book,NoMan’s Land, author and business consultant Doug Tatum talks about the need for businesses to change their model as they grow because the model that worked when they were smaller breaks down as they become larger.To sustain profitability as it grows, a businessmust constantly analyze its performance in light of its changingmodel.That’s where the relationship between sailing a boat and growing a business comes into play.
Businesses rarely grow in a smooth,methodical fashion.More often than not, they experience jumps as they grow that can be painful to the owner and threatening to the business.No well-defined line of a sales benchmark or specific number of employees, determines when wemove fromone size boat to another. But at some point the very survival of our companies dictates making the leap to a larger boat.With each leap one’s decisions become weightier, and if we don’t have the proper strategies in place beforehand, we’re at serious risk of capsizing.
The Winds that Move Your Boat — Cash
Think about money and sales as the two primary forces that move one’s business forward—just like the wind moves a sailboat forward. Each of these forces will have a direct impact on how fast the boat moves, or whether it moves at all.The more wind in the sail, the faster one goes.The more cash a company has, the faster it can grow. Less cash typically means slower growth.
Almost all businesses experience cash-flow struggles as they grow.When that happens, it’s not uncommon for owners to reminisce about the good old days when having $10,000 in the checking account meant you were rich. If payroll was covered for the week (sometimes even for the month), one could take the family out to dinner, and possibly even have a little money left over. Even when small businesses were struggling, a little money went a long way. But as a business gets larger, one quickly learns that $10,000 doesn’t stretch as far.
In the early stages,most businesses are able to make money in spite of themselves. They’re based on what Doug Tatum refers to as the “high performance, cheap labor”model.The owner is the cheap labor, going to the ends of the earth to do any job, no matter the size, to make customers happy.This is similar to the weekend sailor out on his sailboat. It doesn’t take a lot of wind (cash) to keep the boat moving around the lake. If the wind stops blowing for a spell, no problem.One can just float around until it picks up again. Besides, there’s always a paddle in the form of a few charge cards to keep one going.
But the game changes when sailing a racing yacht or tall-masted ship.One can no longer rely on the cheap (or free) labor of the owner or offsetting lower margin services. In the world of business, cash is driven by profits, and profits are driven by the prices charged. In order to earn the profits needed to generate the cash required to grow, one typically needs to change the pricing structure to move from one boat to another.Too often people underestimate just how much cash will be needed to move from sailboat to yacht to tall ship.What’s more, they underestimate how much cash is needed to keep the business moving forward. Captains of these vessels learn very quickly that when the wind stops blowing, the boat stops sailing. It’s dead in the water.When a company is out of cash, it is out of business.The business has grown beyond the ability to rely on charge cards for cash shortfalls.
To successfully make the leap from boat to boat, business owners must also adjust their mindset about acceptable levels of cash in the business and must become competent at handling larger amounts of cash.Where owners of small businesses might have been competent working with numbers that had one comma in them, they now have to become comfortable with larger numbers. Owners have to become disciplined at having large balances in bank accounts and uncomfortable with large balances in accounts receivables. If the captain can’tmake this adjustment, the ship may be in for rough sailing and in extreme cases, shipwreck.
The Winds that Moves the Boat — Sales
The second source of wind that moves a boat is sales. Sales are influenced by three different factors: selling, good fortune and competitors. Because of these last two factors, it is critical that one manages financial resources carefully.
Selling: A client beautifully illustrated the impact of selling on a business when he commented, “When you’re sailing around in a small boat, you can often grow your business just by showing up and doing good work. But when your business gets larger, that’s not enough.”He’s right.
Referrals might allow the business to grow at a safe, comfortable pace while it’s small, but to compete successfully when sailing a yacht or tall-masted ship, it needs an aggressive and sustained sales program. It is only this program that provides any kind of predictability over future sales.
Good Fortune: One doesn’t have to be in business very long to recognize the role serendipity plays in any company’s success. Even Sergy Brin and Larry Page, the founders of Google, recognize the role it played in their success.
But, too much good fortune can create real problems for a small business. For example, take situations where an overwhelming amount of work comes to the company unexpectedly. It can be in the form of a single large contract, or a weather surge.These situations are similar to having strong winds catch the sails and threaten to capsize or swamp one’s boat.One can be caught without enough cash to finance the work, or without enough equipment or trained people to handle the jobs.
Unexpected sales like this can also blow the boat into unfamiliar waters. Suddenly a small sailboat can find itself in heavy seas where it is competing with larger opponents…which leads to the next sales factor.
Competition: Most small businesses compete with companies that are similar in size to themselves. For the most part, they are unaffected by the competitors who are significantly larger or smaller. A smaller company doesn’t always take big competitors seriously, thinking they really don’t compete with them, and that’s probably true. A small company may be no more than a blip on a larger one’s radar screen.
When moving to a larger boat, the competitors change as well. Suddenly one might find themselves competing with the seasoned crew of a racing yacht, or staring down the gun barrels of a tall masted ship.While the previous companies may have been happy sharing the water, now the larger competitors are very serious about shooting the boat out of the water. Be prepared mentally for these new, larger competitors. After all, they’re more experienced and know how to navigate these waters using their customer relationships and financial muscle to undercut a competitor’s reputation, or get them kicked off jobs. Although some might view the captain as ruthless for callously wanting to destroy a competitor’s boat, he views it as just doing his job.
The Crew that Sails the Boat — Hiring
Perhaps the most difficult decisions business owners face as their companies grow from one boat to a larger one has to do with deciding on the crew that staffs the boat. Start with this premise: the crew one has helping to sail the current boat— including the loyal guys who have been there from the start— won’t necessarily be able to help when making the leap to a larger boat.This happens for various reasons. Some are happy where they are right now and don’t want to move to a larger boat, while others may want to move to a larger boat, but simply don’t have the skills to make the leap.
In the early days of a business, the boat one’s sailing is small, and the people working there are those who need a job to cover the daily physical needs of their families—paying the rent, buying groceries, or making the car payment. Some may be able to make more money working someplace else, but are intoxicated by the fast pace and unstructured environment of a start-up company and by the owner’s free-wheeling, swashbuckling leadership style. Still others might just feel sorry for the owner and believe he needs them in order to succeed.
As the business grows, the talent level of the people needed will change.Their involvement changes too.On a sailboat, the key people are “doers.”They’re frontline people who perform the tasks necessary to get their jobs done.On a yacht, the key people should be “thinkers.”Typically these are managers who help to think through how to deliver better service, produce a better product, or shrink expenses.On a tall ship, one needs them to be “advisors.”The advisors in the business are the senior managers or members of the executive team.These are the people who advise owners on the course the business is sailing.
“Thinkers” and “advisors” are looking for opportunities, not just tasks.How appealing are the opportunities on your boat? Are they enough to attract and keep the caliber of talent needed to compete at this level?How open are you, as the captain of the boat, to receiving input from the crew?Highly talented crew members who don’t get a chance to stretch their talents and voice their opinions abandon ship before too long.
Of course, “thinkers” and “advisors” usually come with a higher price tag than “doers.” Being able to afford these higher priced employees is another critical reason why pricing structures need to change as a business grows, and why the cheap-labor model mentioned earlier doesn’t work at this level.When combining the higher salaries of these employees with the added costs of even a modest benefits package, one can see the profit structure needs to be deep enough to attract people of this caliber, and to continue paying them once they are on board. Every good sea captain knows two things: his ability to compete and win races or to be victorious in battles at sea is directly dependent on the caliber of the people on his crew, and his crew is a direct reflection of his own values and beliefs.
The Crew that Sails the Boat — Managing
In his book, Leaders at All Levels, author and management expert Ram Charan states that leadership “is a leading indicator of a company’s [future] prospects, unlike financial results, which tell you only where the company has already been. Strong leadership makes a good company better just as surely as weak leadership lowers its prospects and over time ruins it.”
Getting the right crew on the boat (or as author Jim Collins likes to say, “getting the right people on the bus”) is only the first step. Some make a big mistake thinking that just because they’ve gotten competent people on board they don’t need any further development or management.
Developing the people. One of the most important jobs of every business manager—and possibly the one that defines true business leadership—is developing the people who report to him.Whether it’s a solo operator grooming someone to replace another in the field, a business owner developing managers in the company, or a division manager growing his direct reports, your job is to develop your successors.
Now, consider how the job of training and developing your people progresses as one moves from working with “doers” to “thinkers” to “advisors.” It’s the rare entrepreneur who doesn’t quickly exceed his own areas of expertise working with higher level people.This fact becomes even more evident when he’s working with people in business functions one may be completely unfamiliar with—functions like finance,marketing or human resources.Now one must rely on outside sources to provide training in these areas.
Managing the people. As businesses grow, and increasingly talented people are hired and developed, it becomes more important to hold people accountable for producing the results they have been hired to deliver.
When companies are small and an employee isn’t performing up to snuff, an owner can always jump in and pick up the slack himself.Too often, that’s exactly what happens.When done repeatedly, an owner runs the risk of establishing a pattern of poor performance tolerance that in time becomes part of the company’s culture. But poor performance tolerance doesn’t work in a larger company.Not only can one individual no longer jump in and pick up somebody’s slack, but now there are lots of other people on the crew watching this behavior and gauging their own performance against it.The good ones are trying to determine just how serious the skipper is about winning the race, and whether this is the same company they hired into.
Add to this the fact that in larger businesses, just as with yachts and tall ships, things happen much faster.While poor performance or poor decision making might not have been fatal in a small business, they can very quickly sink larger ones. As one business owner once commented, “Every business is just three bad decisions away from failure.”
The Skipper Who Pilots the Boat
As one might imagine, the most important changes that have to take place when choosing whether or not to move from one boat to another goes beyond issues of dealing with the wind in the sails or the crew on the boat. Instead, these decisions have to do with what’s going on inside the head of the captain.Here are three areas to pay particular attention to:
1.Take risks andmakemistakes. Most people grew up in an environment that discouraged themfrommakingmistakes. They were encouraged to get A’s in school, which were only achieved by not making mistakes. In a large company,most people are not promoted for suggesting some brilliant-but-risky ideas. Understandably, we bring this play-it-safe strategy to running businesses.The problem is that a business can’t grow by playing it safe and not making mistakes.
Over the long-term, trying to run a business by not making mistakes might be the biggest mistake of all. So, rather than fearing mistakes, embrace them. Rather than trying to avoid them, learn from them and move on. Sure it’s scary. But nobody ever sailed to new worlds by playing it safe and never leaving the security of dry land.
2.Develop the needed skills. Think for a moment about the different skill sets needed to be the skipper of a sailboat, the captain of a racing yacht, or the commodore of a tall-masted ship.These skills have very little to do with raising and lowering the sails. Instead, they have to do with making sound decisions, having the courage to navigate uncharted seas, acting with discipline, communicating with the crew and managing conflict.Usually these skills are acquired over a lifetime of combining real-life experiences (the school of hard knocks) with formal training.The same holds true as one grows a business.
The ability to lead an increasingly larger company has more to do with one’s ability to make good business decisions and to lead and manage people than it does with how well one performs technically.Dr.Daniel Goleman drives home this point in his book, Primal Leadership, when he writes that leadership skills contribute “80 to 90 percent of the competencies that distinguish outstanding from average [business] leaders.”
3. Ask the right questions. As businesses grow andmove fromone boat to a larger one, the fundamental questions to ask change.Now, rather than simply asking, “How can we sail faster?” it is important to ask, “Where are we sailing to?” It’s the skipper’s job to chart the course for the boat. It’s the crew’s job to sail it there.Without a well-defined sense of where to go, companies are just drifting without purpose…like a ship without a rudder. Even the fastest boat in the water will eventually stall or sail in circles if the captain piloting it isn’t up to the job. Part of the job as captain is to make sure to be ready for the ever-changing challenges.
At the end of the day, the decision to move from one sailing vessel to another or to stay on the current boat is up to the owner. The prizes that are won or lost as one moves from boat to boat are as individual as the captains who sail them.
Here are three important lessons to take away from this article.
1. Sail the boat with passion.One won’t see a captain sailing his yacht from a lounge chair, but with one cheek in the chair—always fully engaged, always anticipating the next move. Do the same thing with business. Running a business is not a lounge-chair sport. One will never make the leap from boat to boat without passion (and no one gets the most out of the boat they’re on if they’re not passionate about sailing it). Even while
preparing to make the leap to a larger boat, take the time to enjoy the current ride.
2. Learn to anticipate the needs of the growing company. Don’t underestimating the needs on the next boat, or try to expand the current one instead ofmaking the leap to a larger one. Itmight be tempting to just add a few planks here and there to enlarge the boat, or to get a tallermast to handle a larger sail, or to addmore crewmembers to handle the expanded boat. In business, these things are equivalent to trying to expand businesses with inadequate cash or profitmargins, or outdated technical or information technology. All of these strategies place one at serious risk of capsizing. At some point, the very survival of the company dictates making the leap to a larger boat. Anticipating the needs tomake that leap will improve the chances of success.
3. Execute! It’s one thing to understand on an intellectual level what’s needed to make the leap. But it’s another thing altogether to actually do the hard work and make the tough calls necessary to prepare, leap and then follow through with a safe landing.The time for analysis and procrastination is over. Nobody ever made the leap from one model to another by endlessly analyzing more spreadsheets, or rubbing the hide off a buffalo nickel, or waiting until the perfect employee comes along. It’s time to pull the trigger…or decide to stay home. Either way is fine. But hesitating halfway will cause one to land in the water, and that, “plop” is not a happy sound.
Growing a business, just like sailing a boat, is a thrilling adventure. It can provide tremendous emotional and financial rewards for an owner and his crew.The waters will not always be calm, and the winds will not always be blowing favorably. Count on that. But one can also count on winning more regattas or battles at sea when he understands how the game is played and thoroughly prepares.