Shark Proof Your Business

It’s that exciting time of the summer, the days are longer giving business owners more time to get everything done. Of course, you’ve taken our advice and have taken that vacation from your business, so you should be feeling fresh and ready to take these dog days of summer head on! Another great thing happens this time of year, Shark Week!

Shark Week is back attacking television sets for its 28th year, capturing the imagination of viewers around the world. The shark frenzy that happens every year on the Discovery Channel and is the cable channel’s highest ratings week of the entire year. Both viewers and advertisers are fascinated by the educational and entertaining shark programs, bringing millions of eyeballs and dollars to the cable channel.

Shark Week shows have taught us that these animals aren’t mindless eating machines; they are calculating and use a wide range of senses to stalk and capture just the right type of prey. If you want your business to bite into a larger portion of your market, then using the same skills as these top predators would be wise.

In honor of Shark Week, let’s jump into the water and find out what these amazing animals can teach us about our business. Here are shark traits that your business can use to move up the food chain and shark proof your business.

The business world is full of sharks.
Given a choice, would you swim in shark infested waters with or without some form of protection?
If you own a small business or an entrepreneur then you must be prepared to encounter business
sharks. No matter how hard you try you cannot avoid them in the business world. So, armed with
this knowledge and a desire to make your business successful, what do you do? Essentially there are
two simple steps.

First learn to recognize the sharks. They come in all shapes and sizes, and are very skilled at hiding
their true character. However, there are telltale signs which you must learn to recognize so you
don’t get caught in the shark’s trap.
 
Second, you need to have strategies in place in your business for making sure that the sharks do not
eat your profits or, worse still, destroy your business. In the sea world, your protection from sharks
could range from a harpoon gun to a state of the art shark cage. In business, there are things you
can do to protect yourselves from the business sharks and we’ll tell you how to build a robust
shark cage for your business. So in short, shark-proofing your business is about these two things:
recognizing the sharks in business, putting in place strategies for protecting your business from them
and, if necessary, fighting them off.

This blog will look at the concept of shark-proofing in a lot more detail. Specifically:
1. What is shark-proofing and why is it so important?
2. How to spot the sharks in business; and
3. Three strategies to shark-proof your business.

Why many businesses fail
Many first time business owners go into business naive as to the sharks in the business ocean. That
is not to say that they don’t know they are there, but they perceive that they will never bump into
one. That is a false and very dangerous perception, but one which sharks prey on all the time.
They are trained through experience to recognize the naive business owner.
The first tactic which the shark will employ is to use your naivety to gain your trust. By building up
trust, the shark will aim to bypass the various shark-proofing strategies which you have
implemented into your business. Then once the shark has bypassed your defenses it will wreak
havoc on your business. For example, the business partner who tries to highjack the business once
it is making money and leaves you out in the cold; or the employee who decides to steal your
clients; or the competitor that steals your ideas and gains a competitive advantage in the
marketplace. These sharks are out there which is why it is so important to make sure your sharkproofing
strategies are robust.

Rule 1: Never wrestle with a shark
Once you have realized that you have been attacked by a shark it is easy to think you will be able to
fight your way out of the problem. However, that is easier said than done. Sharks are very cunning
when it comes to fighting because they have done it before. If you have ever seen a shark hunt its
prey you will notice that the shark employs a very clear tactic; before it goes in for the kill it tries
to wear the opposition out. You will see a shark poke and prod, and then role its prey along the
seabed before finally breaking into its meal. The shark knows through experience that if it can tire
out its prey first, then the prey will have little energy to fight back. In the business context, to
battle with a shark will usually entail some kind of legal action. However, it is an unfortunate
consequence of litigation that it costs a lot of money, not only in terms of lawyer fees but also in
terms of the time you will spend away from your business sitting in court or in your lawyer’s offices
strategizing how to fight the shark.
Sharks know how to play the litigation game. They will manipulate the process to make sure it costs
you money. All this time, your attention has been focused on the litigation and not your
business. So rather than focusing your efforts on making money, your energy goes into fighting the
shark (which of course entails you spending your profit on lawyers fees). So revenue goes down and
expenses go up: a double whammy hitting your bottom line profit. The shark knows this and in a
perverse way enjoys the fight. It knows that you will suffer more.
There will be situations where you will have no option but to embark on litigation to deal with a
shark. However, the key to business survival is not to put yourself in the position where you find
yourself up against a shark in a litigation environment. That is the first reason why putting in place
robust shark-proofing strategies is so important. If you don’t, your profit is severely exposed to
attack.

Rule 2: Build your defenses and don’t leave yourself exposed
Very few people would buy a house without getting it checked out first and doing a bit of
homework. You may get a structural survey, check for any covenants on the land, check the zoning
and make sure is was certified. You certainly wouldn’t take the word of the vendor.
In business, it is exactly the same. Nobody should ever invest money into a business without
carrying out due diligence first. Generally, due diligence is carried out by a lawyer or an
accountant who would check every aspect of the business and identify whether there may be any
exposure for the purchaser. Essentially, what the lawyer or accountant is doing is assessing how
much the business is shark-proof. If the due diligence process reveals too many red flags then the
advice will be not to buy the business or, at the very least, negotiate a reduction in the purchase
price. Of course, that is not good news for the business owner who is trying to sell his/her business
and too many red flags will make the business completely unsaleable.
That’s why you should shark-proof from day one
By starting the shark-proofing process from day one of your business you put yourself on the right track to create a saleable asset when you are ready to implement your exit strategy.

Rule 3: Have a strategy for growth and exit
A significant number of first time business owners go into business to create a new revenue stream
to replace a salary from a previous employer. Whilst that is obviously important, it is very shortsighted.
Business, like houses, are assets. When you are building a business don’t just think about
the revenue it generates for you in the short term but always have an eye on resale. If you don’t
shark-proof your business from day one your asset becomes worthless.
To become an asset your business must have potential for growth
So what makes a business a valuable asset? Those which attract the high dollar sales figures are
those which have the potential for growth. That way the purchaser is not only able to acquire
existing revenue streams but also has the opportunity for developing those revenue streams or
adding new ones.
The problem with many businesses is that they fail to grow and therefore are unable to demonstrate
the potential for growth to a prospective purchaser. The main reason for failing to grow is that the
business hits the ceiling of complexity.
All businesses start small with the business owner or owners at the helm. The business owners wear
many hats from CEO to CFO, COO, Marketing Director, Sales Director etc. As more customers come
on board and sales go up, more people need to be employed to cater for the upturn in work or
sales. The more customers you get and the more people you employ, the more complex the business
becomes. No longer can the business owner oversee every aspect of sales, marketing, finance, etc.
The business owner must delegate responsibility whilst at the same time ensuring the business is
moving in the right direction.
Effective delegation and control means that the business owner must first get out of the way of the
business. In the same way that a parent must cut the parental strings with their children when they
reach a certain age, the business owner must let go of their business and allow the business to run
itself. That is not to say that the parents stop being a parent, or the business owner stops being the
business owner, they just must let their offspring take their own course, confident that the offspring
have been nurtured or brought up in the right way. For the business owner this means ensuring that
proper systems and procedures have been put in place to ensure that the business runs the way
he/she wants it to be run. Any parent would agree that the key to successful parenting is setting
boundaries early on with their children to ensure they behave and turn into responsible adults.
Shark-proofing in the business context is also about putting those systems and procedures in place
so that your business is robust enough to sustain growth.

You can’t grow without shark-proofing first
Imagine putting a turbo engine into a peddle car. The chassis of the car could not withstand the force of the engine. Before long the car would get the speed wobbles and then the wheels would fall off entirely.
If your business is not structured for growth and you try to grow it regardless, the wheels will fall
off your business and you could ruin it completely. Have you got sufficient reporting structures in your business so that you can manage its growth and identify clearly if your business is starting to come off the rails? When a business starts to wobble customers get fed up and employees become dissatisfied. Shark-proof from day one and you avoid this problem entirely.

Why it is important to shark-proof from day one

So, there are three very good reasons to shark-proof your business from the start:
1. to increase your profit
2. to create a valuable asset
3. to enable growth.
However, many first time business owners don’t engage in shark-proofing strategies for two
reasons.
The first is naivety. As a first time business owner you don’t know what lies ahead once you jump
off the pier into the big wide business ocean. However, this blog will give you a heads up on that
front. The second reason is cost. Let’s face it, shark-proofing costs money, usually in professional
fees (lawyers, accountants etc). That is a cost which you may not be able to afford in the early
days of your business. Therefore, you will be forced to make difficult decisions about where to
invest your start up capital and what can wait for later. By reading this book you will be able to
prioritize what needs doing immediately and what can wait until you have generated more cash.
For example, what is more important to your business: a flashy website or a shareholders agreement
with your business partner? One may look cool and provide a good front door to your business, but
the other may prevent you having your business taken away from you later down the line.
Armed with knowledge of what is important and strategies for keeping things affordable, you can set a realistic plan and budget for building your business whilst at the same time protecting you from shark attacks. But first, let’s look at what sharks are out there.

YOUR SHARK SPOTTING GUIDE
In the ocean there are 350 different species of shark. In business, sharks come in all shapes and
sizes and if you have been in the entrepreneur game for any length of time (like me) then you
will probably have seen as many different types of business sharks as there are sharks in the ocean.
For the first time business owner that creates a problem because distinguishing a shark from an
honest businessman can be tricky. Don’t forget the shark is not going to announce his/her arrival.
Quite to the contrary, he/she will come across as being very trustworthy in order to get you off your
guard.
But when you think of business sharks, don’t necessarily think just of those people whose sole
intention is to rip you off. There are others whose intentions at the outset may have been quite
honorable, but when they find themselves in a certain situation behave in a shark-like way. People
can change like this for many reasons. Sometimes it is to do with greed and other times it is
because of a perception that they have been wronged in some way and feel the need to exact
revenge.
If people can change like this, how can you ever recognize a shark? The answer is that you can’t.
The best you can do is understand the basic shark-like qualities so if any of those characteristics
emerge in your business dealings, you know to be on alert.
This section shows you how certain types of people can become sharks and illustrates some of the
damage they can cause. By knowing what to look for you are better equipped to spot the telltale
signs before it is too late. Implement the shark-proofing strategies in this book and you are well on
your way to being shark-free.
So, let’s start with probably the least obvious group of people who could turn into sharks – your
customers.
How your customers could turn into sharks
Your customers should be the life-blood of your business. They are the people who pay your wages
and allow you to put food and drink on the table every evening. So how could customers possibly
turn into sharks?
The problem with customers arises when they don’t pay. If a customer doesn’t pay, you still have
to pay your overheads. Those overheads can be anything from wages to the ordering of stock. If a
customer places a large order with you and then doesn’t pay, you still have to pay your suppliers.
The cost of that will seriously eat into your profits and will adversely affect your cash-flow. You can
have a great business but if the cash-flow is poor you are going to struggle. A lot of businesses rely
solely on cash-flow to keep them afloat. Even if a customer is late in paying, that can have an
effect on the viability of your business. Then, your customers start to earn interest on YOUR money.
Worse still you may have to borrow or get credit to run your business until they pay.
What if a customer doesn’t pay – what then?
When a customer doesn’t pay, you then need to make a decision as to what to do. Do you write off
the debt or do you try and collect it? There are costs consequences of both courses of action and
you need to be sure in your mind which avenue is best to pursue.
Believe it or not, the cost of writing a debt off can sometimes be cheaper than collecting it,
particularly when you factor in the lost time engaging in litigation (just remember never to deal
with that customer again!).
The strategies you need
To avoid all this happening, you need to have strategies in your business for ensuring that your
customers pay on time and for collecting any debts that fall over-due. If you can’t manage cashflow
in your business it will sink like the Titanic.
Don’t allow your employees to sink your ship
Most people will have heard of an employee disaster story. If you are less fortunate you will have
experienced first hand the hassles an employee can cause if not managed properly. Of course
employees are meant to be loyal, but that is not always the case.
When disloyalty turns to lost profits
Employees have been known to steal intellectual property, generally be dishonest, or simply irritate
everyone they work with. All this can have a serious financial effect on your business.
Even the well behaved employees can be a problem if they are not performing up to certain
performance standards. Having a non-performing employee in your business can be like a cancer
which spreads throughout your organization. Profits drop, and then you have the difficulty of
terminating the employee’s position.
Are you over staffed?
You may also have the best employees in town, but if you are over staffed then the extra wages are
going to eat into your profits. However, the law doesn’t give you free reign to do what you want.
Various states around the US have different processes of dismissing employees and it’s not as
straight forward as you may think. You can’t just fire someone on the spot even if you have a good
reason. You must also follow a fair process.
Often while that process is going on you could be losing money. So, is there an alternative?
The alternative to employing staff
The alternative may be to engage independent contractors, but even that has its difficulties since
you have less control over independent contractors. If you start to exercise more control then you
run the risk that they start to claim they are employees. The law has its own tests for deciding
which is which, irrespective of what you have agreed. So, is not employing anyone an option?
Every business must grow to make money
If you are going to grow your business (and any business serious about making money will), then you
will need to engage others to help. First, you will need to decide the right time to engage
someone, then whether to have employees or contractors. Once they are in place, you then need
strategies for managing them. If you don’t, even the most good-natured employee can turn into a
shark… 
Then there are the sharks circling your business
By this I mean people who you rely on to provide products and services for your business. These can
be your suppliers, but also can include people such as your landlord or people who lend you money
to finance your business.
We have all heard the expression “loan sharks” but did you know you can have supplier sharks and
landlord sharks? Well, there is no reason why your suppliers cannot sign you up to a supplier
agreement that could damage your business, or a landlord impose onerous rules making your
office lease a stone around the neck of your business.
These sharks can be sneaky
The easiest way to grow is to get financial investment into your business. But any loan costs money
to service and if you can’t service it then your business could be in trouble. Many first time business
owners may struggle initially to get finance. That means growth will need to be funded from cash
flow until such time as you can demonstrate a sound business model that a third party will be willing
to lend upon or invest in.
Whichever method you choose to finance your business, don’t make the mistake of stopping the
investment into your business. Once investment stops, the business stagnates and eventually dies.
If you want your business to become a big fish in the ocean then you need to keep feeding it. Then,
if you have capital at your disposal you can invest in further streamlining and shark-proofing. If a
shark does decide to attack you then you also have the funds available to fight, if that’s the routine
you choose. There is no truer adage, that the winner in litigation is often the party with the
deepest pockets