The Operator Weekly: Detecting Problems

Probability, Severity, and Discoverability

Recently, I have been diving into training at Hadrian. It has been an interesting journey of helping map out our factory tech experience for the first 2 months to actually getting in the weeds of the bandsaw alongside someone else. Part of our mission is training up people from outside the industry like myself. With that, obvious things to someone who has been in it for a decade becomes something likely not to be noticed.

As a small business owner, it's important to pay attention to the probability, severity, and discoverability of potential problems during training. This can help you to identify and address potential issues before they become major threats to your business. Anything major, focus on it and reiterate several times before buy off. Make sure the employee both understands where things can go wrong and can demonstrate the task without reminders.

If a certain process has a high probability of failure, it's important to identify and address the issue before it causes problems for your business.

The severity of a problem is another important factor. This refers to the potential consequences of the issue if it were to occur. For example, if a problem could result in significant financial losses or damage to your business's reputation, it's important to prioritize addressing it. If a person could get hurt, spend more time covering safety than anything else.

Finally, the discoverability of a problem is also important to consider. This refers to the likelihood that a failure will be discovered by someone, whether it's an employee, customer, or machine. If a problem is easily discoverable, then you can put a process in place for it. When discoverability is low, then you have to really trust those working on the project.

By paying attention to the probability, severity, and discoverability of potential problems during training, small business owners can identify and address potential issues before they become major threats. Remember to train and vet heavily when discoverability is low and severity and probability are both high.

Thanks to Everest Brady for his help, writing, and research in assembling this week’s newsletter.

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SMB Job Postings

You'll notice a recurring theme in this week's job postings, Chief of Staff. In case you are not active on Twitter, Michael Girdley posted about how he would go after a Chief of Staff role if he was a recent grad.

Thomas Ince at LP First Capital probably has one of the most extensive applications we've ever seen, but there is no better initial screen than who will put an effort in to apply. With 32 businesses as of this week, 260M in revenue, and 7 holding platforms for theses you will learn a ton in this role alongside Thomas.

Kelcey Lehrich at 365 Holdings literally shifted gears on a hiring initiative and is searching for a Chief of Staff as well. A person in this role with learn a lot about e-commerce and running a Holdco with Kelcey and Justin, the COO. 

Even Levi Benkert at Harbor Capital is looking for a CoS!

Beyond Chief of Staff roles, recent podcast guest Jamie Shah is hiring a Quality Assurance Specialist and a Controller at her family's business Chem-Impex in Chicago. Be sure to Check out our recent episode with Jamie to also learn about the family business course she teaches at Chicago Booth.

This Week on Think Like an Owner

Our guest on this episode is Judd Lorson. Judd acquired Alliance CAS, a specialty collection agency, in 2018 as CEO and in 2021 resigned from the role after a much more difficult road and path than he’d anticipated. Judd’s story was recently profiled in a Yale paper by A.J. Wasserstein titled “The Judd Lorson Story” which we will link to in the show notes and highly recommend reading for background on Judd’s time as CEO.

For this conversation, we are focusing on new daily habits and foundations he has created influenced by his experience, what he values today, how those values have changed over time and the power of having a growth mindset.

This episode Q&A featured Hood & Strong, Jerry Zhou answers the question, "How is a quality of earnings different from an audit?" Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners, Jerry Zhou, at [email protected].

This Week in SMB Twitter

Think Like an Owner is sponsored by:

Live Oak Bank – Live Oak Bank is a seasoned SMB lender providing SBA and conventional financing for search funds, independent sponsors, private equity firms, and individuals looking to acquire lower middle market companies. If you are in the process of acquiring a company or thinking about starting a search, contact Lisa Forrest or Heather Endresen directly to start a conversation or go to www.liveoakbank.com/think.

Hood & Strong, LLP – Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners Jerry Zhou at [email protected]

Oberle Risk Strategies– Oberle is the leading specialty insurance brokerage catering to search funds and the broader ETA community, providing complimentary due diligence assessments of the target company’s commercial insurance and Employee benefits programs. If you are under LOI, please reach out to learn more about how Oberle can help with insurance due diligence at oberle-risk.com. Or reach out to the CEO, August Felker, directly at [email protected].

Oakbourne Advisors – Oakbourne is an independent retirement plan consulting firm that helps small companies design and implement great retirement plans for their teams.  Whether you already have a 401(k) in place or are looking to start one for your team, please reach out to learn more about how Oakbourne can set your people up for success in retirement at oakbourne.com/think.

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