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  • Writer's pictureLars Christensen

Your Business is a Leaky Bucket by Howard M. Shore


I finished this book in March 2024. I recommend this book 7/10.


Why you should read this book:

I would recommend this book if you are a business owner who is wondering if business books can add value. The book highlights the top issues that cost companies money and will help you locate your weakness and the solution to fix it. Additionally, the author has a strong financial background and provides guidance on how to think of expenses vs. investments and how to understand your financial statements.


Get your copy here.


🚀 The book in three sentences

  1. It is a great book for someone who has been in business for a while and wonders if business books can add value.

  2. Good information about how to look at cost and balance sheets.

  3. The information in the book covers many topics.


✍️ My favorite quotes

  • "Someone is sitting in the shade today because someone planted a tree a long time ago"- Warren Buffet.

  • "However beautiful the strategy, you should occasionally look at the results"-Unknown.


📝 My notes and thoughts

  • P12. Throughout the last hundred years and into the next hundred, you will find all of your challenges are the consequence of how effective you are in three areas:

  • People

  • Strategy

  • Execution

  • P27. The next question you must ponder is, "How balanced is my strategic decision-making?" Why do you need to ask these questions? Because I have seen organizations drive their strategy through three lenses:

  • Growth Orientation

  • Product/Service Orientation

  • Waste Orientation

  • P40. People Profit leaks

  • Poor Leadership

  • "B" and "C" Players

  • Financial Transparency

  • Vacant Positions

  • Excessive Turnover

  • P41. Strategy Leaks:

  • Action Without Purpose

  • Failing to Differentiate Properly

  • Focusing on Tactics Instead of Strategy

  • Chasing Revenue Everywhere and Anywhere

  • P43. Execution Leaks

  • Ineffectively Communicating Your Goals and Expectations.

  • Emphasizing the Wrong Priorities and Not Aligning the Team

  • Being Allergic to Saying "No"

  • Monitoring the Wrong Numbers

  • Holding Ineffective Meetings or Lack of Meetings

  • Failing to Create a Culture of Accountability

  • P45. A strong leadership operating system includes the following aspects:

  • You have a process set aside for regular strategic discussions throughout the year.

  • Your core values and purpose are alive throughout your organization.

  • There is a healthy, aligned leadership team that understands each other's differences and priorities.

  • The entire organization is aligned around three to five priorities, with quarterly initiatives to address those priorities.

  • There is a communication rhythm established, and information moves through your organization accurately and quickly.

  • Every function, position, and financial statement like item has clear accountability, ensuring goals are met.

  • A system for collecting and using employee input generates regular input and is causing meaningful changes to your business.

  • A system for collecting and using client feedback and data to improve existing operations and for developing new products and services is functioning well.

  • You have an innovation process that ensures you will keep growing long into the future.

  • P47. "Someone is sitting in the shade today because someone planted a tree a long time ago"- Warren Buffet.

  • P65. Kip Tindell, founder of The Container Store, shares his formula for making a great organization. He built his company from a small start-up to one of the most respected businesses around. By enforcing an "A" player mantra, his company is still growing at 20 percent a year, and has done so since inception. His formula has five crucial keys to success:

  • Pay

  • Recruiting and retention

  • Training and Onboarding

  • Real transparency and communication

  • Culture, culture is everything

  • P67. Six Steps to A-Player Status:

  • For each position in your company, identify two to three key performance indicators that the person in the position has direct control over and would prove they are performing well in their job. Establish a high but realistic standard for each indicator.

  • Communicate these indicators and the standards to the person in the position and then measure actual performance versus the rule you've set.

  • Establish a process for continually reinforcing your core values with all of your employees.

  • Every quarter, review how consistently each member of your team lives your core values and meets the performance expectations of their role.

  • Put employees who are not living your core values or meeting performance expectations on definite performance plans designed to direct them toward the desired performance.

  • Take immediate action to help employees who are not meeting their requirements.

  • Those who cannot meet your standards should be replaced.

  • P74. People make financial statements overly complicated. By applying a little focus, though, you can improve it every month. Every business has the same six to eight levers. Always ask yourself the same eight questions (remember the power of 1 above):

  • 1. Price: Are we bundling and offering our products and services in a way that allows us to maximize price? In other words, can you increase the price?

  • 2. Sales volume: What can you do to increase volume?

  • 3. Reduce Direct Cost of Goods/Services Sold as a % of Revenue: How can third parties, technology, process, different material, and logistic help you lower the variable cost requried to offer your products and service?

  • 4. Reduce Overhead as a % of Revenue: How can you lower your cost of acquiring clients, reduce administrative overhead burden, and other indirect costs to providing products and services?

  • 5. Receivables: How can you collect money from clients faster?

  • 6. Payables: How can you slow payments to your vendors and employees without damaging your relationships?

  • 7. Inventory: How can you reduce the amount of inventory required to support your business and speed up the number of turns?

  • 8. Capital Costs: How do you lower your costs of debt and equity?

  • P76. Your technology function can be viewed in three categories: 1) mandatory: hardware, maintenance, servers, break-fix, and security to support decisions already made; 2) operational efficiency and scalability; and 3) industry disruption/research and development. In all cases, you have a responsibility to invest wisely. It is all about value. Buyer beware, as you get what you pay for. Your job is to achieve the desired outcome with the minimum investment. This is where I see most leaders go wrong. They look at the expenditures and not the outcomes. In the technology example, companies commonly fail to achieve true scalability and are disrupted by competition because they underinvest in areas two and three above, respectfully. In the first category, how much revenue and profit does it cost you if your systems are down for any period or if your employee cannot be productive because their computers do not work? What does it cost you if they are spending time fixing their computers and finding and installing software for themselves rather than focusing on their primary roles? My biggest concern in the second category is technology. Leaders regularly invest in technology, claiming it will make them more efficient and scalable. In other words, they intend to increase speed, add efficiency, and reduce labor intensity so that their cost structure can change. More often than many want to admit, no such benefits occur. Poor clarity on key performance indicators is a mistake. While not every investment will achieve the intended benefits, you must know your success rate! The third category is often confused with the second category. Many times, we are tinkering with very technological ventures, calling them strategic and not recognizing them as tactical efficiency ideas. When these ventures don't work, we justify them as research and development. However, they do not belong in this category. Unless the benefits you are going after will transform your industry and business model, your investment does not belong in this category.

  • P89. Eight steps to addressing position vacancy:

  • What is your strategy for finding the ideal candidate?

  • How many candidates applied this week for the open position?

  • If you are not getting enough quality candidates each week, how will you adjust your strategy?

  • Does the strategy match the reality of where candidates will be found?

  • Is your offer going to be attractive to your ideal candidate?

  • Have you created a position that requires a unicorn?

  • How competitive will you be in the marketplace?

  • Will using a quality recruiter increase the number of qualified candidates, improve the quality of candidates, and speed up your process? Bearing in mind that time costs money, will using a quality recruiter cost you less than continuing on your own?

  • P90. Many organizations underperform because of failure to properly clarify accountability, responsibility, and authority in their organization. Too often, we use these words interchangeably, but they are different concepts. In most organizations, there is not enough clarity around these three concepts. In his book Scaling Up, Verne Harnish did a great job of clarifying these points:

  • Accountability: There must be one person in the organization who tracks progress for a function, team, division, process, client, or project. When issues arise, this person is responsible for reporting those issues to the management team so that obstacles can be addressed. While this person may not have any authority and may not be a leader, they "account" for what is going on. If you designate more than one person to be accountable, then some things will fall through the cracks. You open the opportunity for confusion and finger-pointing.

  • Responsibility: This falls to anyone with the "Ability to respond." These are people you want to act in some way. Ideally, the people tasked with responding need to have the proper training, knowledge, experience, and time to do so well.

  • Authority: This belongs to the person or team with the ability to make a decision.

  • P92. Using the Role Accountability Chart from our proprietary Business Acceleration Tools, I challenge you to answer the following questions to close your leaks in these areas:

  • What are all the roles in your company?

  • Who is in charge of each role?

  • What leading and lagging measures tell you that each role is functioning well? Do you measure them?

  • What are the top five to nine processes in your company?

  • Who is in charge of each process?

  • What leading and lagging measures tell you that each process is functioning well? Do you measure them?

  • For each position in your company, have you identified each person's top five accountabilities?

  • What key performance indicators do you use to measure reasonably high performance for each position/role/function?

  • is any one person accountable for too many critical roles in the organization?

  • Is there any vital role that has no one person accountable?

  • Is there any role that is not functioning well?

  • Are proper boundaries set for your employees and yourself between work and home?

  • Is every person challenged to finish the highest-value activities first, or are they filling their days with the more manageable lower-value tasks?

  • Is there a clear set of priorities to help people say "no", or is your mantra that everything is important?

  • P100. Nine keys to finding your ideal hire:

  • 1. Position Mission: One sentence summarizing why the job exists.

  • 2. Job Description: Clarifies the task and responsibilities.

  • 3. Key Accountabilities: For what and to whom does this person have primary accountability?

  • 4. Responsibilities: Unit of work or set activities needed to produce some results (e.g. answering phones, writing a memo, sorting the mail, etc.)

  • 5. Competencies: Abilities (skills) and capacity required to perform the job successfully.

  • 6. Critical Success Factors: Provide focus on the influences that impact the performance of the job.

  • 7. Key Process Ownership: Identify the critical processes owned by the position.

  • 8. Key Performance Indicators: Provide visibility to performance through the use of metrics and established performance targets, thereby giving context to vague concepts.

  • Career History: A candidate's experiences required to have gained the level of knowledge and competency required for the position. A complete career and personal history form clarifies the outcomes they have produced in the past that would provide confidence that they will be successful in your position.

  • P111. "However beautiful the strategy, you should occasionally look at the results"-Unknown

  • P115. Establishing your purpose allows you to address the following essential questions:

  • What is the primary difference you want your organization to make for your community and clients?

  • How is the community being served, and what would be lost without your organization?

  • What will your client relationship and experience need to resemble? What boundaries and rules must you learn to break?

  • Why will the best employees want to work for you rather than for your competition?

  • P117. Understanding how to discover purpose is an integral piece of an organization. To aid you in that discovery, I offer you five categories of purposeful movement for your business. Purposeful companies usually try to do more than one of these. Great companies must accomplish, at a minimum, one:

  • Disrupting your industry: Airbnb changed the lodging industry forever. They created a very cost-effective and easy way for anyone to list their space and book unique accommodations anywhere in the world.

  • Uncommon services: Provide service at a level that goes beyond your competition in a way that is essential to your target client. The traditional companies that comes to mind are Ritz-Carlton and Nordstrom. However, you could also add Amazon to the list with their 24 hour delivery system.

  • Change the world: Purposeful organizations change the world.

  • Excellence: You can always find ways to change the features of products by increasing their speed, beauty, functionality, and many other qualities.

  • Information and communication: Technology has caused this category of purpose to explide over the last ten years. These tools allow people to share information, find people and things, exchange knowledge, discover, and communicate.

  • P120. So what actions can you and your business take to hone on your highest purpose? Start with these:

  • Define your purpose.

  • Include your "story" as part of your orientation process. If possible, have the CEO or another senior leader tell the story to new hires.

  • Regularly reinforce your purpose in everything you do.

  • Get out of your office to start talking to existing and potential clients, and make sure you know what is essential to them.

  • Develop measures to make sure that everyone in your company knows what it will take to move close to your purpose continually.

  • At your annual planning session, ask questions like, "How can we better serve our purpose?"

  • P129. Depending on your core client and the options available to them, you need to consider how the following elements add value to your unique offering:

  • Price. What is your potential client's total cost today? Do they know what their total cost is? What would additional features, benefits, and services be worth to your prospect in terms of time and value? How does your offering increase their value to their clients? What other needs does it serve?

  • Cost/Risk Reduction. How can you modify your offering in a way that can substantially reduce clients costs? How can the design of your product or service minimize the risk for you clients?

  • Trends. What trends are occurring technologically, economically, and environmentally industry-wide that call for a new advancement in how your product or service is sold, delivered, distributed, or marketed?

  • Performance. What performance enhancement to your product or service the most valuable to your client? Would you client pay more for this enhancement, and would you lose clients to a competitor that made the enhancements?

  • Customization. To what extent does customization to a product or service significantly enhance value? Many of my clients offer different bundles of their products or services.

  • Design. To what extent does the design make a difference in the usability of your product or service? Can design make your product more appealing or usable? Technology and people's intensity are the two key levers here.

  • Brand/Status. To what extent does brand or status influence the buyer? The internet has allowed some companies to rise to the top of industries. These companies have achieved national and international recognition in a short time frame.

  • Accessible. How can you make your offering more accessible to your target client? What channels do you use to access clients? Netflix stole significant market share from BlockBuster and even cable companies when they determined that clients preferred streaming video over DVD.

  • P132. Seven ways to be a true differentiator:

  • Communicate. Get out of your office and start talking.

  • Focus on change. Once those difference-makers have been identified, you must focus on improving the internal processes to become the best in the industry at delivering those differences.

  • Be accountable. Leaders fail to measure whether they are delivering a unique experience. You must have metrics to measure and demonstrate you are gaining traction and separating yourself from the competition.

  • Shine bright. Capture and market your key distinguishing factors effectively. How often do you go to someone's website or review other marketing materials and have trouble seeing why they are different in a way that resonates with you? Don't make the same mistake!

  • Prove it. Provide the evidence to your sales force, clients, and prospects to show what makes you unique in a measurable way. If you can't measure it, neither can your clients.

  • Validate. An effective validation process allows you to gather gaps between your perceptions and that of your clients. Just asking if clients are happy is not enough. You need to monitor changes in the market continuously.

  • P144. The very best leaders look at how hard everyone is working and then decide there must be a better way.

  • What would need to happen to make our sales volume change?

  • What would need to happen to inspire people to pay more for our products and services?

  • How can we do this with fewer resources?

  • How can we do this in less time?

  • Why does it have to be done the way we are doing it?

  • How can we do it faster, better, and cheaper?

  • P146. The leadership team needs to answer these questions regularly:

  • What are we trying to accomplish? Why?

  • What areas of the industry are ripe for disruption, and how can you be the organization that causes that disruption?

  • How are you breaking the rules in your industry?

  • What do your core clients need? Are you addressing their needs well enough?

  • What are your core clients getting from you that your competitor's core clients don't yet need?

  • In what areas of your organization could you partner with another organization to better deliver value, dramatically change your cost structure, or invent a new product or service?

  • What item can you eliminate to do what your core clients need?

  • P169. Key question you must answer for every employee. With your SMART WAY in hand, you can create much-needed clarity, focus, and attention. If you manage others, I recommend you grade yourself in the following areas:

  • Clarifying business objective

  • Establishing a clear set of expected outcomes

  • Creating policies and procedures to guide daily activities

  • Aligning resources

  • Holding others accountable

  • Removing obstacles to allow every team member to achieve peak performance

  • Providing proper training and development

  • P172. Key components of the Job/ Position Profile:

  • Job description

  • Job tasks

  • Job function

  • Role(s)

  • Competencies

  • Performance Management

  • Key Process Ownership

  • Career History

  • P173. Effectively communicate your goals and expectations. Communicating goals and expectations well and aligning them across your organization is hard and critical work. Failure to do so will create a huge leak in your bucket. Making an effort is well worth your time and will avoid unnecessary work and hardship in the long term. Here are actions I suggest you take:

  • Create a strategic plan. This forces you to look at your business beyond one year and up to three years out.

  • Create an annual business plan. A simple blueprint on how you will elevate your business by the end of the year.

  • Do not confuse your business plan with a budget. You cannot create a realistic budget without a specific plan for how you will improve your business.

  • Make plans clear to your team. Once you have created your plans and your goals, everyone in the organization needs to know what their contribution will be to achieve them.

  • In your meetings, continually discuss progress on your plans and goals.

  • For each position, have a position profile that addresses all of the factors discussed above.

  • Hold people accountable.

  • P178. To accomplish focus, prioritization, alignment, and accountability, your business plan must answer the following eight concerns:

  • Why do you exist (purpose)?

  • How are you different (unique offering)?

  • Who is the core client you will build your business around?

  • What are your goals?

  • Which "Critical Numbers" will you elevate this quarter?

  • What are your three to five essential annual priorities? Remember, these are the problematic changes that need to be made in terms of products and services, systems and processes, and people.

  • What are the three to five quarterly company priorities that will drive the annual priorities?

  • What are the three to five quarterly personal priorities for every leader that align with the company priorities and functional priorities?

  • P199. Selecting the Critical Number is one of the single most important decisions in the planning process. Whether you are planning the year, the quarter, or your priorities, it is necessary to pick the one or two Critical Numbers that must be achieved to drive all the other desired outcomes. If you are not sure which Critical Numbers to select, you'll find some clues by asking yourself questions like:

  • What is the critical weakness in your business model?

  • What is the biggest weakness in our operations?

  • What is causing us not to gain clients?

  • What is causing us to lose clients?

  • What is causing our cost structure to be out of line with our competitors?

  • P206. For example, let's say you need to hold a meeting to decide whether to acquire a company called Blue Dragon. You could name the meeting "Pros and Cons of Acquiring Blue Dragon." Everyone invited knows they will be involved in deciding whether to acquire Blue Dragon, and everyone will be expected to be prepared. Consistently using the approach of naming and setting a purpose for your meetings will help you determine if your meetings are productive, as well as how often your meetings fail to achieve their goal and why.

  • P213. Now that we have discussed exactly how to create healthy and well-considered meetings let's shift to some of the biggest mistakes people make during these meetings. I have isolated three of the most common pitfalls to help you identify whether they apply to your meetings:

  • Are you potentially seeing your role in the wrong way? Great leaders understand their role in meetings: Ask the right questions and access the ideas of their team. They realize there are many ways to do things. So they put big ideas on the table, ask difficult questions, and get the team to debate those ideas.

  • Do you have a tendency to jump into problem-solving mode too quickly?

  • Are everyone's contributions being heard? If you don't contribute, you have wasted your time and everyone else's. A good leader will make sure others have a chance to speak and limit the amount of time they give the over-contributor. Also, Identify what is not being said.

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