Putting Business Coaching to the Test

Homewatch International's pilot program shows early promise

In these tight economic times, many multi-unit franchisees and area developers are focusing less on continuing the remarkable unit growth they've enjoyed for the past five years, and more on improving performance at their existing units. As consumer spending drops, savvy franchisees see increased royalty streams as a more attractive prospect than spending long hours with struggling franchisees, or worse, shuttering failing ones as the U.S. economy continues to sputter.

Business coaching, a results-oriented process with a sharp focus on the bottom line, aims to teach and improve skill sets in leadership, management, and business basics--and is coming on as an increasingly attractive option for both franchisors and franchisees.

While skepticism still exists as to its efficacy in terms of ROI, business coaching directly addresses a problem common to many small businesses: they begin with a vision and passion, but once open become bogged down working in the business, instead of on it (the basic premise of the E-Myth, popularized by Michael Gerber; see sidebar).

"All of us get caught up in the day-to-day operations and issues, look down at cracks in the sidewalk and forget to look up at the sky," says Roger Rhodes, a franchisee of Homewatch CareGivers in Englewood, Colo. Rhodes has co-owned the franchise with his wife, NAME, since mid-2006; he describes her as a "recovering attorney" and himself as a "recovering CEO."

Rhodes, who's been a divisional manager at a Fortune 500 corporation and CEO of a smaller company, was in week 7 of a 12-week business coaching pilot program when we tracked him down in New York City. "Even though I've run large corporations, you get caught up--you don't have the staff," he says.

The pilot program, which began in July at the initiative of the franchisor, Homewatch International, has two of its multi-territory franchisees participating. "We're interested in learning how we can help the business move forward," says what's best for the business overall."FranchisEsource Brands International,Rhodes says the coach, Dave McFadyen--a former small-business owner himself--has already helped him and his wife rise above the details and look ahead to next year and five years out. "Intellectually you know about this," says Rhodes, "but you still get caught up in running the business." AdviCoach, he says, has provided "tremendous software tools to track everything. The employee acquisition program saves us hours a week--we spend so much time on that."

McFadyen, an AdviCoach franchisee for just over a year, owns the metro Denver territory. He left his job as a business consultant because he sees the coaching process as a more effective vehicle for helping his clients achieve their goals now and over the longer term.

What the two franchisees in the pilot program don't need, he says, is any more help doing a better job at what they do. "They're already terrific at providing in-home healthcare. What they don't know how to do, for the most part, is step away from working in their operation and start working on it. It's right out of the E-Myth: most of these multi-unit owners are going to be great technicians, but the entrepreneurial and managerial part is not being utilized correctly."

His role as coach, says McFadyen, is to provide the franchisees with the tools and perspective they need to run their business better. "As an outside set of eyes, my job is to get them to recognize that, indeed, they are spending too much time on details, buried in minutiae--and that what they should be doing is systematizing out that minutiae and doing what they should be doing, which is growing the company."

McFadyen has identified two problem areas his Homewatch clients have in common. "In both of these cases, family dynamics, and the lack of a clear, written distribution of duties ends up causing gridlock," he says. "As you begin to grow, you just can't get anything done." McFadyen says he and the franchisees have worked hard on removing the personal, family component at work and on implementing a plan that will reduce any conflict and establish a clear separation of duties.

The second area McFadyen has identified involves franchisees learning how to 1) measure the results of what they do, and 2) turn their long hours into an improved ROI. "I'm spending a lot of time convincing them through a tool we call the Profit Equation that neglecting the big picture of where they want their business to grow gets reflected very quickly on the bottom line. That seems to be the most effective way to get people out of the minutiae: show it to them in numbers they can't disagree with."

The other franchisee in the program, Lora Kelly, owns multiple territories with partner Dana Wimberly. Prior to becoming a Homewatch franchisee three years ago, Kelly spent four and a half years at Homewatch corporate. She's already reaping benefits from using the AdviCoach worksheets, programs, and system McFadyen provides.

One early example is their advertising spending. "We were tracking things before, but we didn't have the equations to see if they had the potential for growth," she says. "We've found one source that's not beneficial and four or five we were thinking about that have made us switch gears to attract growth."

Questions McFadyen now has them asking include where their leads come from, and are they actually generating sales? "He provides different worksheets for the advertising: Is this really a plan? Did we put in all the costs? What's the conversion rate on closing?"

But in the coaching model and process, Kelly must do the work herself, not receive an outside consultant's report telling her what to do (see sidebar). "We have to do our own calculations to determine if it was a worthwhile advertising medium or not," she says. "And he's coaching Dana and me to open our minds and find the different trends, needs, niches in our marketplace to expand the business even farther."

In the big picture department, "We haven't had a chance to apply much, but we're in the process of creating strategic plans, tracking mechanisms, and working on our management styles," says Kelly. "The plan is for it to help us determine what avenues have the best potential for growth for our business, and making sure our foundation for the business is strong enough to further that growth."

Seven weeks into the process, says the coach, "There has been a big improvement" in both the areas he's identified.

And how will the franchisees and franchisor measure the efficacy of the 12-week pilot? "The proof's in the pudding," says Rhodes, who is well acquainted with KPIs, , metrics, and accountability. "We're setting up milestones and building a foundation now. If in six months or a year from now our revenues aren't up, I'd be shocked."

Considering business coaching? "Put your ego on the back burner," says Rhodes. "You owe it to the company, yourself, your clients, and your family to make it better." Says Kelly, "I would highly recommend business coaching to anybody."

Has Business Coaching "Arrived"?

They may be competitors in the marketplace, but executives at the two largest business coaching franchises agree on one thing: their industry is hot and will continue to grow for years to come.

Compared with five years ago, says Dan Murphy, founder of The Growth Coach (#2, with 140 markets in North America), "Business coaching has very much arrived. It's a very credible service."

"The whole attitude toward business coaching has changed dramatically over the years," and for the better, says Brian Miller, president of The Entrepreneur's Source. Miller also is part of the executive team at FranchisEsource Brands International (#1 with 252 North American units), which owns three business coaching brands--AdviCoach, The Entrepreneur's Source, and Business Partner Marketing--and recently teamed up with E-Myth Worldwide to integrate the E-Myth model into its coaching program (see sidebar).

Is there still resistance to the value, even the idea, of business coaching? "Absolutely," says Miller. When he approaches a potential franchise client, Miller typically hears something like: "I already have a field ops team in place to do that." His job is convince them that business coaching not only offers something different, but something more--and that it will translate into higher royalties, happier franchisees, and faster system growth.

Murphy says The Growth Coach's clients are small businesses with annual revenues of $5 million or less--95 percent of all businesses in North America. And most of that 95 percent are only beginning to wake up to the benefits of business coaching. For Murphy, that dawning awareness is resulting in a booming business. Business at the company he founded in 2002 continues to soar. System-wide revenues are up 53 percent in the past 12 months, year-to-date revenues 41 percent, and number of clients 59 percent. "Coaching is needed in good times and bad," he says.

For any franchisees interested in getting in on the action, Murphy notes that business coaching, an approximately $1.5 billion industry in North America, has plenty of room for growth. "Eventually, I think business coaching will be common in all franchise systems," he says. "The only question is will it be internal or outsourced."

E-Myth, E-Source Join Forces

This summer, E-Myth Worldwide teamed up with The Entrepreneur's Source (TES) to integrate their 30 years of E-Myth expertise with TES's 24 years as franchise consultant and coach.

"We collaborated to develop a modified E-Myth system designed specifically for the franchise world," says Walter Good, chief business development and strategy officer for E-Myth Worldwide. "I think it will fill a critical void in the franchising marketplace." The program, Franchise Accelerated Success Training (FAST) was scheduled for roll-out in late September.

The "E-Myth" is well-known to many in franchising. Its basic premise is that to succeed in business, an owner must wear--and balance--three hats: entrepreneur (the "E" in E-Myth), manager, and technician. Most businesses fail, according to this theory, because while owners usually are excellent at what they do (technician), they fail to develop themselves as managers and entrepreneurs.

Complicating matters, these three roles are in natural opposition: the technician wants to be left alone to do what they love (run a restaurant, work with animals, be a handyman); the manager wants structure and deadlines and is focused on ROI; and the entrepreneur is the visionary, always looking to expand (or even change!) the business. When all three roles are aligned, the business is firing on all cylinders. When they're not, things get a little crazy.

Says Good, "There has been a very strong focus on delivering technical knowledge on running a franchise and how to comply with the system, but a very big piece was missing: how to look at the business as an entrepreneur and a manager, and how to align the business with your vision."

Teaming up with TES Founder Terry Powell and President Brian Miller, says Good, helped E-Myth refine its content to be better focused around the needs and challenges of the franchise model, and provided immediate access to the franchising world.

"The E-Myth system has been focused on developing managers who have a vision of becoming multi-unit operators, but lack the fluency, skill, and knowledge to build a multi-unit system," says Good. "The existing franchise world is not developing multi-unit operators; they're happening, but they're not being developed in a meaningful way." After studying successful multi-unit owners, he says, three unique behaviors stood out:

1. Building systems to run and manage their enterprise. "Most people don't understand the power of systems and how to build them," he says.
2. Working on their business, not in their business. "They must be both a manager and entrepreneur or they will fail. They have to change their leadership behavior. This is absolutely crucial."
3. Building human assets. "This is part of being a leader. Their people become more and more important as their business scales. They need strategies around employee and organizational development to take it to the next level."

Achieving these goals depends on... the owner, of course. Says Good, "The change in achieving business success comes with a behavioral change. The owner has to change how they look at the business and change their role in it. Without that fundamental shift, fundamental success cannot take place."

Business Coaching 101

Tim Shepelak was the original franchisee of The Growth Coach six years ago and today owns four territories in Cincinnati and Northern Kentucky. As a franchisee coaching franchisees, he brings "more of an understanding. I can relate to them at another level."

His goal is to help franchise owners can learn to run a business, be better leaders and managers, and think and behave more strategically--and make more money working fewer hours. That's what business coaching aims to help franchisees do... for themselves. Shepelak coached us on what business coaching is--and what it's not. Here are some of his observations.

What it's not

• Consulting-- You pay someone to come in to tell you what to do and how to do it. Coaching is a self-discovery and development process. "I look at coaching as helping individuals to change their mindsets and behavior patterns to achieve better results."
• Seminars-- These usually are one-shot, quick-fix events with no follow-up. You get smart for a day, return to work all fired up for change, and in three days it's back to normal. "We help a person change from the inside out over a period of time, so the changes build, not recede."
• Training and support-- Franchisors (good ones) provide excellent training and field support to both new and existing franchisees. But the owners still have to run their business. Business coaching supplements franchisor training and support by developing leadership and management skills.

What it is

• Ongoing-- The Growth Coach program consists of eight quarterly modules. "It's not instant pudding. It's gradual, messy, not linear, and people fall off the wagon. That's why we have a two-year program."
• Behavioral-based-- "We help owners become more strategic behaviorally. As we go through these processes, they are fundamentally changing. It causes them to focus on the things they need to, and to look at things differently."
• Self-discovery-- "It's all of their own volition. Most hard-charging, high-performing people with healthy egos don't like to be told what to do. If they discover it themselves, it's the best idea in the world."
• Strategic-- Franchise owners are hard-working and have a lot of energy, he says, "but they focus it in the wrong places: down the organization, rather than up; internally not externally. "
• Confidential-- What happens in a coaching session stays there (even if the franchisor is footing the bill). "We're confidential, like an attorney. I tell them that up front. There's a lot of value in that: they can tell me what they can't tell their wife, partners, or franchisor." Trust is key.
• Measurable and accountable-- The eight modules each have a theme and build on one another over time. Goals are set, tracked, measured, and the coach checks in regularly by phone in to see if those goals are being met--and if not, holds the franchisees accountable.

Business coaching is hard, inner work focused on creating leaders and growing the business. Its results are measured in the bottom line.

The Personal Touch

After a successful career in franchise sales at Sylvan Learning Center, where she helped the system grow from 300 to more than 750 units, Flo Schell left her job as vice president of franchise sales to train as a personal and business coach. Today she's come full circle.

"I work with area developers to create an overall marketing strategy to develop their region and to find qualified franchisees. For a multi-unit franchisee, all the people they bring in have to perform," says Schell. In most cases, the challenge is "to create a sales process that will sell their product or service, and sell themselves."

A multi-unit franchisee is essentially "the CEO of their region," she says. "Not everyone will feel comfortable selling and will need assistance, usually beyond the training they receive." In addition to coaching, Shell has written a book, Stop Selling...Start Clicking, to help business owners with selling.

Schell, a "great believer" in the E-myth, says, "Franchisees do get involved in the technicalities of the business." She helps them find ways to rise above the everyday and focus on developing their units and territories.

One franchisor she worked with had eight area developers who were falling behind in their development schedule. "The issue for this company was that the ADs had purchased a larger region they promised to develop, and life was getting in the way. Every single day life will get in the way."

Growth "really is about relationships. In my days at Sylvan, I would talk more about communicating from the heart, talking to people as a human being, rather than just another prospect. When we do that, we're at our best," she says. "It's the very same process I used at Sylvan that doubled our franchise system. There's certainly nothing soft about this."

Business coaching also is a partnership, she says. "We both need to be doing our part in order for this to be successful for them," she says. "If there's field work involved that's intended to increase revenue and they're not doing it, that's a concern."

In addition to her 20-plus years in franchise operations and sales, Schell brings her 6 years of training and certification as a coach. Her coaching training has taught her to ask questions, present options, and allow the person on the other end of the phone to discover for themselves their goals and how to achieve them.

"Coaching is helpful because it goes deeper than the conversation you have with your franchisor, because you're protecting yourself there. With a coach, you're much more apt to dig deeper," she says. For her, coaching is a personal, one-on-one experience involving collaboration, interaction, co-creation, and trust. "The one-on-one aspect is ideal because you get to the heart of what's going on."

They'll Make an M-U-O Out of Y-O-U!

"We believe multi-unit owners are not found, they're developed," says Good. "The E-Myth system has been focused on developing managers who have a vision of becoming multi-unit owners, but who lack the fluency, skill, and knowledge to build a multi-unit system."
--Walter Good, E-Myth Worldwide

"We're trying to get the single-unit owner to have that multi-unit owner mindset. We ask them: If you owned five, how would you run that? They're boggled. They must learn to get beyond being a doer and think like a leader and owner."
--Dan Murphy, The Growth Coach

The Growth Coach

In the 1980s, working as a CPA working for Deloitte Touche, Dan Murphy worked closely with small businesses. "I saw nothing to help them manage," he says. He moved into business coaching, which he did for 16 years before founding The Growth Coach in 2002. With 140 markets, The Growth Coach is the second-largest business coaching franchise and is shooting for 400 in the next 5 years.

"Our fastest-growing segment is franchise owners," says Murphy. "Over the last five years, more and more franchise owners began to avail themselves of business coaching."

Murphy, who began to approach franchisors about three years ago, says business coaching is "probably the next wave in support for franchise owners." And for franchisees, "I think it's been the missing link in the support system they've been getting."

In speaking with franchisors, he says, he had to convince them that what he offers does not compete with training and field support, but instead works in tandem with it, augmenting what franchisors provide. "We are supplemental to franchise systems," he says. "We work on the mindset of the franchisee to become a strategic business owner. We focus on the growth and development of owners, not the industry specifics."

Says Murphy, "Multi-unit operators eat this coaching process up, and the franchisors have seen that. And for single-unit owners, he says, "It elevates their mindset to go to two or three. They get to discover what they need to do to run their business and their lives," he says. "For a business to grow, the owner must grow."

The battleground for achieving these goals is the mind. "We focus on the strategic things, taking any business owner and helping them adopt more effective mindsets and habits and learn how to function as a multi-unit operator," says Murphy. "We get into sales, marketing, leadership, employee management, business systems, delegation, and business planning. We help grow revenues, royalties, franchisee satisfaction, retention, and avoid burnout."

Another plus: "We're independent, objective, and have no real connection to the corporate office. We focus on what's best for the franchise owner," he says. "Because we're not corporate, they're very open with us."

Murphy says the results of coaching are positive and measurable. "Franchisors are tracking the performance metrics of those going through the program. Those in it clearly outperform those who are not." For the franchisees in the program, he says, revenues are 30 percent higher than for those not in it. "We encourage them to track metrics."

Despite these impressive results, Murphy is the first to admit business coaching is not for everybody. "Twenty percent of franchisees within any system we're not going to coach. They're struggling too much, have all the answers, and don't want to change."