To most people worldwide, 2020 has been a really strange year. Even if you have not had any health issues this year, your life has changed. Our day-to-day work and social habits have been challenged like never before in our generation.
In this text, we will talk about small businesses, start-ups, and freelancers who work independently. The ‘’death’’ rate of these businesses is very high. Some statistics show that 90% of start-ups fail. How they can go on in Covid time? Is it possible to survive doing business during an unprecedented global pandemic and the strongest global recession since the Great depression (i.e. the crisis which brought Hitler to power in Germany)?
The time of crisis is also the time of opportunity. Adversity makes us regroup and rethink our approach in both work and personal life. My personal advice about going through this crisis: if you have any free time, read anything from Nassim Taleb, bestselling author on probability and risk-taking. I’ll sum his approach to coping with crisis in one sentence:
‘’ Tomorrow morning when you wake up say – I’m going to make lemonade out of this lemon.’’
Starting your business in times of crisis can be a blessing in disguise. What does not kill you, makes you stronger. Your business becomes more resilient for years to come. Many famous companies were founded during crises. During the last great crisis (2007 – 2009), both Uber and Airbnb were born.
In the following paragraphs, we will cover two main subjects about start-ups:
- What makes them fail? And what to do about it?
- How time tracking can help them survive during Covid time?
In this text, we are going to show that these subjects are interrelated, i.e. that time tracking software can be crucial in start-up survival.
Why most start-ups die?
There are two types of start-ups that die.
The first type is those Startups that did not manage to scale. Something about them was not well at the very beginning and the business was not profitable. Examples are:
- The product was too expensive
- Distribution channels were not chosen wisely
- Wrong promotion strategy
- Product quality was not consistent
- Owners did not manage to generate enough funds for financing business
The second type of start-ups is those that have success at first. They start to scale and then they crumble. What happens? The business is booming, sales go up in the air, the company employs more and more people, and then, suddenly, symptoms start to occur:
- The owner is overwhelmed with operational work, does not have time for business development. Frankly, the owner does not have time for anything
- The number of clients/projects is booming. People work overtime, but clients are not satisfied with the results. They do not get the results they expect. Or they do not get the results when they expect. Or both.
- There is not an exact division of work. There is no defined organization, there are no sectors, working positions, procedures, etc.
- Work relations deteriorate in the company. The owner blames everyone that they are irresponsible. He/she thinks that there is no one in a company that can be relied on. On the other hand, employees are under constant pressure, working overtime
If these symptoms are not cured in time, businesses will start burning cash. It will be in constant demand for cash for funding a business. At the same time, the company will not be disciplined enough in collecting receivables and paying loans and payables. Before you realize it, the business will be halfway through bankruptcy.
We will now analyze the second type of start-ups in more detail.
The story of Sun King
To explain why start-ups fail after they get some size, we shall use two analogies: one from history, one from sports.
Have you watched The Man in the Iron Mask? Do you remember the king played by Leonardo DiCaprio? He played King Louis XIV, Sun King. Not just in the movie, but in reality, King Louis XIV was a flamboyant king. France was the strongest European nation at the time. He built The Palace of Versailles, on the outskirts of Paris, where he organized many parties. Everything he did was to show off his larger-than-life persona: many mistresses and illegitimate children, fancy clothes, an entourage of smooth-tongued courtiers and servants.
How did he manage France on a day-to-day basis? A man with such ego cannot sustain to sit and watch. He believed his rule is above every law. Not a single key decision in France could be made without his order. His management style could be explained in his own words:
‘’The state is me!’’
Why are we talking about this king? Well, when the company founder starts the venture, he/she identifies himself/herself with the company. Founder’s mindset at the very beginning is:
‘’The company is me!’’
And that is true at the beginning. Founder spends his whole day establishing business believing his/her vision will become alive. In many cases, the founder works alone.
And then, all of sudden, business starts booming. Founder’s business idea proves right, founder gets rich. The company gets fancy business premises with many employees. The founder is at the height of the power, becoming Sun King of the company.
Avoid being Sun King!
So founder is now at his/her prime, loved by the clients, adored by the employees. Why is that bad? The problem is that organization becomes centralized. One person makes all the decisions and solves all the problems. However, as the company becomes larger, the number of decisions and problems rises exponentially. On the other hand, the founder’s abilities to solve issues do not increase exponentially. Even on the contrary, he/she may get health or other personal issues and the company can easily get into problems.
Let’s go back to Sun King. What happened to him? He was lucky. He died in time. His descendant, King Louis XVI was not so fortunate trying to rule in the same manner. He was executed and France became a republic. The rule was not any more centralized in one person, but it was divided just in like modern democracies with government, parliament, independent courts, etc.
France is a large European nation, a much more complex system than your company. Things can change much faster in your company and in a matter of years, even months, from Sun King you can easily become his less fortunate descendant.
Therefore, you need to divide your rule. Just like modern state demands institutions, your company now needs sectors, work positions, and procedures.
The problem with the dividing rule is that founder has trust issues. The company is his/her life. How can you possibly let your life in other people’s hands? We will need to use another analogy. The one from NBA.
Create your Scottie Pippen
During spring lockdown this year, have you watched The Last dance, a documentary on Michael Jordan and the Chicago Bulls? At the beginning of his NBA career, he struggled with Bad Boys, i.e. Detroit Pistons. Year to year, he tried to win alone. The result was always the same: he would get physically beaten up by one of the harshest teams in NBA history.
How did MJ beat them? He started to pass the ball. Michael Jordan was tired of being MVP, he wanted to become the champion. Players do not win championships, teams do. Most of his balls were passed to Scottie Pippen. Scottie became his No. 2, the man he could have always relied on right until the end of their career in Bulls.
When your business starts growing, you need to slow down on scoring on projects for clients. Pay attention to your employees. You need to recognize their talents, to help them grow and achieve their own personal and career goals. As a leader, you need to develop new leaders who will be able to manage company’s operational activities, while you spend more time thinking about the long-term direction of your business.
Time tracking as a management tool
Dear reader, you are probably now asking yourself:
‘’What does time tracking have to do with the growth of my business?’’
Maybe you are still working alone or you have several employees, still working to get to the scaling phase. Your current problems are more of operational nature:
- How to communicate with my employees when we cannot meet in person?
- Since we need to work remotely, how do I track the status of projects?
- How to distribute work among employees?
These issues can be easily solved with time and expense tracking software. We have started using our own TimeAnalytics software at the beginning of the year, just before the Covid-19 epidemic struck. Our financial and tax advisory business got bigger and we needed an automated solution to track our projects. We started working remotely in March. Not only we did not have problems with efficiency, but we were also more efficient than before!
We used time tracking software as a means of communication. At the beginning of the day, each employee would fill in his/her expected hours for the day. On the basis of these data, managers would get a perspective on how are projects going on and whether someone is working overtime or does not have work.
Let’s say that you tried our timesheet tracking software and you solved operational issues. You can now track the work of your people wherever they do their job. How does this help you with future growth?
Well, using time tracking software, you will micromanage less. Because pandemic has put that challenge before than expected, you manage to solve these issues long before your business starts scaling and becomes too big to handle. You have established infrastructure for future growth. Now, you can use your time you would spend controlling operations to think about business and organization development.
Why not Excel?
You may ask:
‘’I understand the importance of time tracking. But, why should I pay for the software license, why not use Excel instead?’’
Before we developed our own solution, we had used timesheets prepared in Excel. However, this process was not automated enough for us. Each employee would fill in the timesheet for one month, then send it to the supervisor, who would then merge the data into one sheet. Except automation, other reasons for using automated solution were:
- Better data presentation – not only for one period/project, you can compare different periods and projects more easily
- Exporting timesheets in Excel format (for example for invoicing purposes)
- Unlimited number of data entries, unlike Excel
How to choose time tracking software?
If you decide to use time tracking software, the next question is:
‘’Which time tracking software is the best for my business?’’
The main factors in choosing time tracking software may be:
- Type of business
- Number of employees
- Data managers want for making decisions
As written before, we come from a financial consulting background. We are a small company which developed time tracking software in order to solve our own problems in business development and growth. Then we decided to act as business doctors: to prescribe the very medicine we take ourselves. Therefore, we believe our solution is the best software for smaller professional service companies who aspire to grow in future.
What do you track with timesheet software?
Your company uses time tracking software for a month. By clicking on the review of made entries, what can you learn about your business? We divided these data into two categories:
- Analytics – data that is presented automatically in our software
- KPIs – quantitative business measures that you can calculate easily by using our software
Analytics
In Time Analytics timesheet calculator, analytics is divided in the following categories:
- Employees
- Clients
- Tasks
- Projects
For each of these categories you can get the following data for a selected period of time:
- Total hours spent
- Amount of billable hours spent (i.e. hours spent working on a commercial project for a client, not doing internal activities or pro bono work, which are non-billable)
- Non-billable hours spent
- Productivity rate (share of billable hours in total hours)
- Total costs
- Cost per hour
How do you calculate costs for each category? Well, when you set up your TimeAnalytics account, you enter in data on costs per hour for each employee. You may put their costs of salaries only or you may add some additional overhead expenses. This data is the basis for calculating costs. If an employee’s cost per hour is 100$ and then he/she spends 5 hours on a certain project, the cost of that project is 500$.
KPIs
KPIs (Key performance indicators) are quantitative indicators that help you realize the current state of affairs and future development of your company.
KPIs can be tracked by employees, clients, tasks and projects.
Some of the KPIs you may easily calculate while using TimeAnalytics software are:
- Productivity rate: % of billable hours in total hours. This KPI can help you see if you bill all your work to the client
- Revenue per hour: your real hourly rate
- Profit per employee, client, task, and project
- Total number of clients: you should track the number from month to month or year to year
- Average number of service lines per client: think about cross-selling opportunities with current clients
Analytics and KPIs may come in handy in making day-to-day business decisions:
- Negotiation with current clients on price for services: on the basis of spent hours working with the client, you may see if current terms are acceptable for you
- Making proposals to new clients: how do you come with the price for the new client? You may look at timesheets, see how much time you have spent on similar projects and apply a desired hourly rate
- Deciding on forming new working positions: look at the structure of activities of your employees. For example, if they spend too much time doing administrative work, you may look for a person who will work administration work only
- Performance appraisal: data from TimeAnalytics can be the quantitative basis for a review of employee’s job performance
Panta rei
To repeat my thoughts from the beginning of the text, the crisis is the time of opportunity. I have not lived on this planet for much longer so far, but in my experience, each period of personal or professional crisis was also a period of learning and starting again with a different approach. Period of crisis should be used as a platform for future growth. There is an Ancient Greek quote Panta rei, which I personally like.
It means everything flows. Everything changes. No man ever steps in the same river twice.
Maybe you can survive this year without time tracking software. But, I would suggest you to think if this software will introduce improvements in your business, which will save you a lot of headaches down the road. As Covid-19 lectured us, things can change very quickly.
Dear reader, I hope that reading this text relaxed you after a long day at work. I also hope you and your loved ones will all stay alive and well in this pandemic and that you will remember this period as a period of setting up conditions for both personal and business growth. Thank you for reading.
