Formula for Getting Results

(O x O x I x S x E x A) = Results
Opportunity which is constant
Observation of opportunity
Ideas on how to take advantage of opportunities
Strategic action plan for ideas
Execution of the strategic plan
Accountability

5 Steps in Turning Around a Business in Crisis:

5 Steps in Turning Around a Business in Crisis:

1. Develop a recovery plan and monitor your progress
2. Charge the right team with the job
3. Think “money-in” not “money-out”
4. Ask the right customers the right questions
5. Listen to those who do the job

It is important to note that the task at hand can’t be achieved without the buy-in and enthusiastic support of everyone involved, especially the owners/stakeholders.

In the time of crisis, you need to be prepared for a short supply of both time and resources and an abundance of stress and fear.  As a leader you must:

1. Find the most leveraged plan of action
2. Communicate the plan of action to everyone who will be involved in the turnaround
3. Stick to the plan
4. Monitor the company’s performance against the plan continually

Note that often team members and managers are powerless to help implement a business strategy because they are clueless as to what the strategy is, or the strategy is changed often and there is no clear action plan for them to follow.

Key points:

1. Ensure that the strategy developed can be implemented in the time frame available, and that it is clearly communicated and understood by ALL involved.
2. Do not veer from the strategy unless it becomes apparent (through measurement) that it is not working.
3. Discover the key business metrics and measure them with regularity.

Remember – People need leaders not managers in a time of crisis.  Often time the same managers that lead a company into a nosedive are rarely able to get it back into the black.  Often emotional involvement in the ways of the past can be a barrier as well as a challenge of ego, which can prevent normally rational people from acknowledging or accepting responsibility for the poor decisions they made in the past.  Sometimes acknowledging this is not possible when the people managing the business own the business, so a fresh approach to change is what is needed in this instance.  In other words, look back only to learn, don’t look back to blame or to repeat the past.

With every turnaround, cost reductions will be involved, the dangerous trap to avoid is developing a single-minded focus on cost cutting.  Cutting cost does not have the same impact as increasing sales.  Be careful that a focus on cutting cost will not negatively impact the quality of service, which if happens will lower the revenue even further.  If this were to happen the impact creates a negative spiral that will be difficult to recover.

Again, focus on the top line (revenue increasing) rather than cutting the bottom numbers (the expenses).

Marketing teaches us that we must listen to our best, most lucrative customer to find out thing such as:

• What they think of our products and service
• What we could do better to improve the products and service
• What they have going on in their future
• Do they know anyone that should be a customer of your business
• Are their needs being met by our business

If employees are not having fun, and the workplace is oppressive, your turnaround will not be successful.  You must strive for the trust and confidence of your team members.  You must value their opinion and they must know that you value their opinion.  You must communicate, communicate, and communicate.  Involve the team, listen to the team, learn from the team and share with the team.

Your biggest factor in your favor of a successful turnaround will be momentum.  You must make your changes fast, right away and all at once.

Things you must know:

• Breakeven point
• Current cash flow and projected cash flow

 

Understand there are only 4 ways to grow any business:

1. Increase the number of customers of the type you want
2. Increase the number of times customers come back
3. Increase the average value of each sale
4. Increase the effectiveness of each process in the business

 

Maximizing Value before Selling the Business

If the owners decided to sell the business, this often takes a year or more to get through the due diligence, therefore it is important that the value of the company be maximized before the sale takes place.

There are a number of methods of increasing value, and the increase payoff can be enormous relative to the company’s current value. 

Listed are a few of the methods:

• Sales price of a privately held company is often based on a multiple of earnings before interest and taxes (EBIT).   Therefore, one additional dollar of profit today may be worth two to five dollars to the owners.  Buyers tend to base their purchase offers on the most recent 3 year’s earnings.  A trend of increasing revenues and profits is the key to obtaining the best price. 
• Strategic acquirers are not entirely bound by a valuation formula based on earnings.  These buyers are seeking certain business attributes that a company possesses or could obtain, and which enhance the value of the company because they tend to drive profitability.  They include things like reputation, proprietary products, defensible marked position/share and above all, growth.  Most buyers expect to have access to financial statements.  The process must provide an accurate picture of the company’s financial performance.  It is also important for management to demonstrate that the company’s reporting systems are simple, accurate and timely.  Management needs to prove they continually measure the overall performance through the use of financial benchmarks.
• In most cases it is critical for a potential new owner to be able to depend on the company’s management team after the sale.  Too many deals have gone sour due to lack of effective management.  The best management situation is a well-disciplined, committed, multi-functional team that will demonstrate its desire to work for the new owners.  Prospective buyers will recognize this willingness and pay for it.

Effective Followup to Customers without being Annoying

Effective follow-up may keep your customer’s attention on your business which makes them more likely to become a repeat customer who will bring you a steady stream of revenue.  Steady streams of repeat customer revenue are the lifeblood of every small business.

A small business must balance the need to maintain a connection to their customers without crossing the line into the type of annoyance that drives them away from your business.

Some suggestions:

Avoid making every interaction you have with the customer about selling them a service or product.  When a customer calls you or stops by to ask you a question, don’t view it as an opportunity to make a sale.  View it as an opportunity to help a customer with a need.

Answer their question by telling them how to solve their problem, if you can.  You should strive to give them advice that works – not advice that is just to sell a product or service.

Each of us is extremely loyal to a particular business for a number of businesses.  Stopping to wonder why you are loyal reveals that perhaps it is we are confident they’ll give us the best service or product they can whether or not they sell us a product or service each and every time.   In turn we keep going back to that business.  Repeat business is of value to every business.

Drop a note in the mail to the person you want to speak with.  Let them know that you were happy they chose to do business with your company and include a coupon or something of value. This is a simple way to attract your customer’s attention to your product or service without annoying them.

Get involved in a community event.  Community events are often great places to touch base with lots of people, if you run a business in the community attend a community event perhaps join the group who organized the community event and volunteer your time.  Look for customers and engage with them without a sales pitch – a name tag or your shirt with a company logo visible so people are reminded of who you are.  Learn your customers and potential customers name; everyone likes to feel they are important enough to be remembered.

Carry business cards with you at all time.  Be prepared to make it easy for customer and potential customers to contact you.  Keep company data or coupons with you as you are out and about and use them.  Set a goal for yourself on how to gracefully distribute your cards to potential customers each time you are interacting with people.  You never know, they could be your next customer.

Repeat customers most often are the lifeblood of a small business.  There’s money and value in helping them keep their focus on your business.  Learn to promote your business without annoying the customer; making your contacts produce value to the customer will result in a win-win situation.

Chicken or Egg?

NEW YORK (CNNMoney.com) — The nation’s biggest banks cut their collective small business lending balance by another $1 billion in November, according to a Treasury report released late Friday. The drop marked the seventh straight month of declines. The 22 banks that got the most help from the Treasury’s bailout programs have cut their small business loan balances $12.5 billion since April, when the Treasury began requiring them to file monthly reports on the tally. The banks’ total lending has fallen 4.6% in that seven-month period, to $256.8 billion. Facebook Digg Twitter Buzz Up! Email Print Comment on this story As Wall Street megabanks return to health — and celebrate with lavish bonuses — President Obama and his administration have been pushing financiers to help spur a Main Street recovery. Small business owners are still reporting difficulty finding banks willing to extend the credit they need to launch, run and grow their ventures. In December, the President met with a dozen CEOs of the nation’s biggest banks to pressure them to reverse their small business lending declines. Hitting bottom: There are some signs the credit drop may be at or near its nadir. Five of the 22 banks reported higher small business loan balances in November than they did in April. At others — such as Wells Fargo (WFC, Fortune 500), by far the biggest small business lender — the totals have fluctuated month to month. But 10 of the 22 banks have cut their small business balances every single month since April. That list includes firms such as JPMorgan (JPM, Fortune 500) that are now posting monster profits. In the past seven months, JPMorgan’s small business loan balance has dropped by almost $962 million, or 3.7%. On Friday, JPMorgan Chase reported earnings of $3.3 billion in the last three months of 2009. JP Morgan said its compensation expenses rose 18% during the year to $26.9 billion, much of which will be distributed as bonuses. JPMorgan was the first major bank up to bat to report financial results. Later this week, Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500), Wells Fargo, Goldman Sachs (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500) are all slated to release their fourth-quarter and full-year numbers. Bonus backlash: American taxpayers are sour on the idea that the bankers they bailed out are pocketing super-sized end-of-year bonus checks. The day before JPMorgan reported its earnings, President Obama called on Congress to tax the largest banks in a so-called “financial crisis responsibility fee.” As the backlash gained steam, one representative in Congress proposed a bill that would siphon money from Wall Street bonuses directly to into small business coffers. Rep. Peter Welch, D-Vt., introduced a bill on Thursday calling for a 50% tax on bonus compensation in excess of $50,000 at banks that received government assistance. All revenue raised from the tax would go directly to the Small Business Administration to fund a new direct lending program. Twenty-three members of the House of Representatives co-signed the bill. “With double-digit unemployment in a recession they helped cause, there’s no justification for seven- or eight-digit banker bonuses,” said Rep. Lloyd Doggett, D-Texas, one of the bill’s co-sponsors. SBA-backed lending has begun to rebound from last year’s wipeout. The agency’s flagship program funded 37% more loans last quarter than it did a year earlier, totaling $3.8 billion. Chicken or egg? Banks say they are lending less for two key reasons: Small businesses are risky borrowers, and fewer entrepreneurs are looking to borrow and take on more debt in the face of slower sales. But small business owners tell a different story. They say that tighter lending standards leave too many viable businesses unable to access the credit they need to grow or finance routine operations like buying materials to fulfill customer orders. Lending standards have been growing steadily more restrictive for nearly three years, according to the Federal Reserve’s most recent Senior Loan Officer Study, released in October. Edward Yingling, CEO of the American Bankers Association, says that finding the right balance between caution and investment is critical to spurring economic recovery. “Bank regulators need to be prudent without being so punitive that they choke off lending in communities across the country,” Yingling said last month. “Just as too much risk is undesirable, over-correction will impede economic recovery if banks are prevented from making good loans to creditworthy borrowers.”

Do you worry about cash flow?

There are no simple answers on how to make cash flow better. But there are things you can do, in addition to increasing revenue: 

Following are suggestion that should improve your cash position: 

1.     Bartering  

Barter some of the things you need for your business.  Bartering has become very popular, lots of business owners are doing it. 

Bartering will allow you to keep your cash for the things you need.  (Remember you still have to report the bartered transactions for tax purposes). 

2.    Ask your employees what they think; step back and evaluate your process - It is important to take a step back and look at what your expected outcome is.   Examine your business processes often and see where there are possibilities to increase efficiencies.  Look at every touch point and decide if there is perhaps a better way; decide if that particular step is needed.  Ask yourself, “ is the steps benefit worth the cost of the step?” 

3.     Think about partnering with another business  

Do what you can to compliment another business service or product.  Example:  if your paint supply store is next door to a flooring store, work together – promote each other. Think about join advertising, and sharing information to broadening your customer base. 

4.     Practice effective inventory stocking and safeguarding 

Know how often your inventory turns, don’t over nor under buy.  Inadequate inventory practices create a cash drain.  You need inventory to sell, but excess inventory stands a chance of becoming obsolete, damaged or stolen and it takes up costly storage space. 

5.     Outsourcing needs to be considered 

 There are lots of sources out there that will help you with your business process.  Look to outsource the services that don’t make you money but you belive you need to offer. Outsourcing can be done for your internal bookkeeping services and your payroll services as well.  Often times outsourcing saves a company lots of CASH. 

6.  Non-Billable hours or write-offs 

If you are a service business that bills for time – watch the nonbillable hours and the writeoffs – make sure every knows what time is to be charged and find a way to hold everyone accountable. 

8 IRS Tips to Help Choose a Tax Preparer

 The IRS urges people to use care and caution when choosing a tax preparer. Remember, you are legally responsible for what’s on your tax return even if it was prepared by an another individual or firm. Most tax return preparers are professional, honest and provide excellent service to their clients. However, unscrupulous tax return preparers do exist and can cause considerable financial and legal problems for their clients. Therefore, it’s important to find a qualified tax professional. The following tips will help you choose a preparer who will offer the best service for your tax preparation needs.

• 1. Check the person’s qualifications Ask if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.
• 2. Check on the preparer’s history Check to see if the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs or the state’s bar association for attorneys.
• 3. Find out about their service fees Avoid preparers that base their fee on a percentage of the amount of your refund or those who claim they can obtain larger refunds than other preparers.
• 4. Make sure the tax preparer is accessible Make sure you will be able to contact the tax preparer after the return has been filed, even after April 15, in case questions arise.
• 5. Provide all records and receipts needed to prepare your return Most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items.
• 6. Never sign a blank return Avoid tax preparers that ask you to sign a blank tax form.
• 7. Review the entire return before signing it Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.
• 8. Make sure the preparer signs the form A paid preparer must sign the return as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return.

The preparer must also give you a copy of the return. You can report abusive tax preparers and suspected tax fraud to the IRS on Form 3949-A, Information Referral or by sending a letter to Internal Revenue Service, Fresno, CA 93888. Download Form 3949-A from IRS.gov or order by mail at 800-829-3676.

Focus – Keep your eye on your Business

If you don’t have clear goals and a direction for your business, then you may need to consider charity work.  Sometimes the owners of a company gets too comfortable with the way things are or the feeling that it will all work out, they lose focus.  There is a reason the pro repeats time and time again that the golfer must keep their eye on the ball.  Same as in business, the business manager must get a solid grip on all aspects of the business from the shipping department to the accounting department to the sales department and even to the marketing department.  Always follow through, focus on the end result but don’t forget the processes that will get you to the end result.  Focusing as you go and following through to see that all the processes are working is a must.  Focus on being successful.

Communicating in the Workplace

4 Generations -

• The Traditionals – born 1922-1944
• The Baby Boomers – born 1945-1961
• Generation X – born 1962-1979
• The millennial – born 1980-2000

Traditionals at work:

• No bull performers
• Reliable
• Needs security and stability
• Value obedience over individualism
• “We’ve never done it that way” school of thinking
• Management style is authoritative and expects decisions to be made at the top
• May find technology intimidating

Boomers at work:

• Over 50% of the work place made up by Boomers
• Good at teamwork – as long as they have opportunities to shine as an individual
• Job must be fulfilling
• Need to feel important, needed, valued, appreciated
• Motivated by opportunities for advancement
• Want to be treated as unique and important individuals
• Not always good at direct conflict
• Not all Boomers were hippies and yuppies but all hippies and yuppies are Boomers

Generation Xers at Work:

• Good at multi-tasking
• Works best when given a lot to do
• Let them set their own priorities and processes
• Not afraid to ask questions
• Believe in merit – not just years of experience
• Give them lots of freedom and flexibility
• Enjoys on the job training
• Do not micromanage them
• Allow them to have a life

Millennials at work:

• Extremely technologically savvy
• Resilient and not bothered by set-backs
• Good at team work and collective action
• Needs lots of training and mentoring
• Turning out not to be as materialistic as adults once feared
• Most want job satisfaction over money
• Need strong leadership and active management
• Need lots of supervision, praise and structure

4 Ways to Grow Your Business

Increase the number of customers you have.

Increase the frequency with which you deal with them.

Increase the average transaction size.

Increase the productivity of your business resources

New Year Financial Resolutions

We are not out of the woods yet as far as the ecomony goes so think about make  financial resolutions in addition to your personal resolutions, I suggest the following:

Evaluate your expenses by asking yourself, “is the expense necessary?”  Sometimes we get into the habit of “SALY” (same as last year) and perhaps thing need to change from last year.  Ask yourself if your employees are truly using the benefits that are expenses of the company.  Clean out the supply cabinet before you purchase more office supplies.  The little things very well may add up to bigger savings than you think.  Make sure your expenses are adding value to your business, if not, start cutting…….

Take control of accounts receivable, perhaps it is time to change the way you are paid for your products or services.  Perhaps it makes sense to ask for payment when you deliver the service or product.  Think about what is working now and identify what is not working for your company.  Get to know your customers/clients this always increases the likelihood of collections.

Remember the saying.. ”if you continue doing what you have always done, you will get what you have always gotten……….” make sure you can afford to continue doing what you have always done and definitely make sure you can afford to grow your business.  Some may think this is a silly remark, but evaluate whether you have the means to cashflow growth in your business.  Talk with your lending bank officer to secure the line of credit that may be necessary to continue doing business as you have always done and especially if you are considering a growth spurt.

Now is the time to revisit your business plan and if you don’t have a business plan it is sure time to write one.  As with all business plans be sure to run what we call “what if’s”  worse case and best case scenario; to decide if your cash reserve is adequated to handle the good and the bad.

Keeping your finger on the financial pulse of your business  is critical during these uncertain economic times.  By doing so, you are providing an added assurance that your business can survive and thrive.