BSA Management Articles

How Can I Save This Sinking Ship?

Sinking ship with crew member bailing it out. Business metaphor.What causes a ship to sink? A leak in one of the systems? Too much weight? Hit by an unexpected object?

You’re on the high seas on the way to deliver a valuable cargo. Suddenly you get word from below that the ship has developed a leak that unless stopped could, over time, cause the ship to sink. What’s the most effective first reaction? Plug the leak? Find the source or cause? Protect your valuable cargo?

Or perhaps in your exuberance to maximize your profits you’ve taken on more weight than the ship can manage. It’s riding so low in the water that eventually it will be pulled down below the surface.

Of course, it could also be an undetected iceberg.

As captain of your business (your ship) you may be faced with similar situations.

A System Leak?

A business leak might be an employee skimming from revenue. I once had a client whose bookkeeper loved to gamble and would “borrow” money from the incoming cash, and of course, never pay it back. These kinds of leaks are insidious in that it’s often hard to even know there is a leak until things become bad. The business owner needs to have systems in place that match products and/or services provided to expected income. Yet, many small businesses do not.

Too Much Weight?

An overweight business has more expenses than income. It’s easy to forget that often the money doesn’t come in until well after the expense must be paid. If not corrected early, the business will find itself sinking deeper and deeper each month. At some point it’s too late. This business ship can be saved by preparing a monthly budget, observing expenses and income on at least a monthly basis. Considering the long term effect, it’s imperative that expenses must be brought down until the income can match them. Additional capital funding sources may be a short term answer, but eventually it has to be paid back.

An Unexpected Hit?

Then there’s the big lucrative client who had been buying from you for years. Suddenly, there’s a better mouse trap somewhere else and they are gone. Of course, you can try to get them back, but meanwhile the expenses go on. Having a strategy for dealing with the unexpected will help you get to the issue immediately.

These situations deal with systems, budgeting and crisis management. Every business at some point will likely experience similar situations. The answer to all of them is the same:  having a solid business management system. That means having time-specific measurable goals, a clear plan of action, consistent monitoring and decision-making based on results.

Now, don’t panic. This stuff is not hard to do. It’s just a matter of learning the techniques and tactics to run your business proactively rather than reactively. I’ve packaged a new six-month semester course called Captains School, which covers the gamut of what it means to function as captain. It provides the training, tools and support to give you the confidence to consistently make sound business decisions.

Aren’t you tired of bailing water?

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Don’t wait until it’s too late. If you’re getting that “sinking” feeling, send me a note and I’ll be in touch to schedule a phone call.

Common Business Challenges: You’re Not Alone

If you’re in business, you’ve got challenges. Some are priority; some can be deferred. Some will take time; others can be handled quickly and easily. Some will require a financial investment; some will not. They are all business challenges because they are holding you back in some way.

Rather than see a challenge as a negative, I find it’s helpful to think of it as an opportunity. It usually means choices must be made, and that’s where it can get sticky. Sometimes we feel stuck because we’re unsure about the right course of action. When the problem continues, we feel the stress and so does the business.

Some of the types of challenges I frequently hear about from small business owners are:
– sales – how to get more
– time/organization – not enough time, chaos mode, overwhelm
– cash flow – unpredictable and uneven income and expense
– staffing – conflicts, poor delegation and job matches
– technology – not adequately supporting operations

Anything sound familiar?

Even though the specifics are unique to your business, thousands of others experience the same kinds of challenges. The great thing is you don’t have to deal with these all alone. You can learn from those who’ve been there.

There are also experts in each of these areas who may be able to help you better see the issues and create a smart strategy. Even getting their perspective can sometimes trigger a new idea or technique that will let you move forward.

As entrepreneurs, the buck stops with us, so we need all the help we can get. I’m happy to share with you my perspective, suggestions and case studies. Let this be a point of reference for your next steps.

Sales

If you’re struggling to make sales, something needs to change. Sales happen when the perceived value is equal to or greater than the cost. Of course, it’s a matter of timing also. A customer may not need computer repair today, but sooner or later they probably will. The key is to be there, at top of mind, when they do.

You may benefit from an outside perspective on how to better reach your target market, pre-qualify or follow-up. Don’t continue to sink resources into something that isn’t working. Find out how others have addressed this type of challenge. Talk with a sales consultant, trainer or specialist to help you see things from a different perspective. At least you’ll know you have options.

Sylvia was a publicity and public relations consultant who increased her sales dramatically when she changed her marketing strategy from shotgun to rifle focus. She decided who were her best clients and focused her efforts on finding what they wanted.

Time/Organization

Who has enough time? It’s a challenge for every small business owner.

Analysis, organization and systematizing operations are the key to making the most of your time and that of all your staff. With organization and systems to support the operation of your business, time will be on your side.

Most businesses have “predictable” activities, many of which can be automated to some degree. In the process of putting this in place you are forced to review the actions of your business. You’ll also become aware of areas that can benefit from streamlining.

Yes, bringing time under your control will likely require some more invested time, but the payoff can be huge.

For Gus, owner of a bakery products distribution company, creating a system to track movement of his inventory saved him many hours of searching for information when he needed it. There was a financial investment for purchase of computer hardware and software, but he was able to break even in less than a year and has knocked 4-5 hours/week off his own job.

Cash Flow

Both new and well-established businesses often find themselves in a difficult cash situation and don’t know what to do about it. The answer, of course, is cash planning. In order to do that, you will need accurate and timely financial information and know how to interpret what you see.

Good cash planning requires review of historical financial information, including a look at business cycle and sales cycle. Credit policies and practices, marketing plans, periodic expenses, debt and cash access need to be considered as well. The concept is to control what can be controlled and to manage what can’t.

Erica, owner of a wellness center, was able to move into a bigger space because she knew her cash flow would support it. Using her past 2 years cash history, the results of a recent marketing campaign and a change in patient planning strategy, she was able to project more than adequate cash inflow to cover the expected increase in expenses.

Staffing

You may have difficulty finding or retaining qualified help. Your staff may not be onboard with your goals. There may be interpersonal conflicts. The real problem with unresolved staffing issues is it will hold back the growth of your business. Until you can get your people, as well as your systems, to support your operations, any potential growth is in jeopardy.

It may not be difficult to identify where the problems are. Reaching the right resolution, however, may prove to be more difficult. Certainly, until you are totally clear about where you’re going and have a plan to get there, your staff won’t be able to provide consistent support.

Adam was an engineer who owned and managed an 8 person company. He had an assistant who just wasn’t performing at the level he needed and expected. In a focused interview he learned she had no idea what her job was supposed to be.

His steps were to wrote a job description discuss it with her, get her agreement, include some of her suggestions, show her the critical nature of her role and help her set personal goals.

Some follow-up and reinforcement was necessary, but in less than 3 months he was able to delegate management of the administrative portion of his jobs. This, of course, freed him to spend more time seeking new business.

Technology

Every business must first define and streamline its business practices and processes, then seek the technology to carry out and support operations. Correctly applied, technology makes information more available and useful, helping small firms better manage their finances, sales, prospect development, customer relationships, inventory, etc. A good marriage of business and technology saves time and money. expedites workflow and provides accurate and timely information.

When Jonathan transitioned from being head of a division in a mid-size company to opening his own business, he knew this was the time to introduce technology that could streamline his operations.

After being in business only six months he researched and chose a paperless system that allowed him to scan and archive the numerous forms and documents that are required to be maintained as part of his operation.

He estimates the business saves 1-1/2 to 2 hrs. (20-25%) daily in time previously spent on filing and retrieving paper. And the cost of storage is practically non-existent.

These are certainly only some of the more commonly reported challenges. Consider which of these areas need your attention. If something else is more urgent, by all means, address it first.

And don’t forget, you’re not alone. Ask for help when needed and find out what others have done in similar circumstances. Use this information to help you gain the confidence you need to make a commitment to a strategic course of action.

 

How to Create a Strategy: A Case Study

Clients often tell me they’re not really clear about the concept of Strategy. It’s a lot easier than you might think. Strategy is one of the steps in the planning process and cycle. The sequence in the business planning process is Vision, Mission, Goals, Strategy.

Vision is where you start and is the most abstract. Once clarified it become the guiding light toward which all your activities will be directed. Your Mission is what you do in your business to carry out your Vision. Goals are specific measurables that define what will exist when you’ve realized your Vision. The Strategy step is the thinking through of how you will achieve those Goals.

Start by considering the resources you have and the direction you want to go. Evaluate various scenarios and steps and predict how they will turn out. An analogy that makes it easier to understand is the game of chess. Various moves are considered with predicted outcomes BEFORE the actions are taken.

Some examples of Strategy might be:

– identify and develop an untapped market (based on observed trends);
– provide staff training and coaching (to strengthen customer service)
– redefine our brand (to fit our updated target market)

Developing a clear Strategy is critical because you’re going to base your Plan on your Strategy. As you know, it’s the activities you carry out in your day-to-day operations that produce the results you see at the end of the month. It is likely that you will have more than one Strategy because you’ll probably have several Goals.

There may be more than one Strategy for each Goal. An example might be to “create a contact database” and “hire a part-time assistant to manage your database”. You’re not actually at the Plan level until you determine the steps you’re going to take to hire that assistant (seek employee referrals, network word of mouth).

Bill Sipes, CPA, is founder and CEO of a community-based Accounting Business, which provides Tax Management, Write-up, Financial Services, Financial Support Systems and Business Valuation. He sees opportunities to add even more services and products and has decided to take on the persona of a Financial Advisor. I’d like to share the story of how he recently developed his Strategy for this business because it clearly exemplifies the process.

When there was an economic downturn in his local community, Bill realized he needed a new Strategy that would “turn his clients into cheerleaders” and turn around his bottom line. He decided to find out where his business had been coming from in the recent past.

He found out he got most business from 3 sources: mailing to professionals, new business/product mailing, and new sales to existing clients.

He called together his staff to discuss his findings and to ask for their help in determining a new Strategy. Following the meeting he sent out a summary of “what he heard” and asked for their continued thoughts. The staff were acknowledged and given a role in the process.

Here’s Bill’s memo to staff.

“Thanks to all. I think this is the most important meeting we have ever had. This is what I heard.

1. We need to separate ourselves from the other CPA firms.

2. Several ways to do this were mentioned. Speed of service was one. Another was building relationships.

3. We are going to develop a system of building relationships with our clients. Jane is going to write a rough script to follow whenever we get with a client…..The Moment of Truth.

4. I am going to ask Annette to print a few banners that say…..The Moment of Truth.

5. Jeff is going to check with the software people about Telemagic and Act.

6. We are going to spend more time “showing our face” in the community and to our clients.

7. When with a client always ask……How are we doing?

Thanks again for a great meeting……which I am sure will lead to a great system that will turn our clients into cheerleaders.”

Here’s Bill’s Strategy.

– Develop a plan to cross-sell existing clients.
– Continue to use Marketing Assistant to carry out marketing campaign to targeted list.
– Make Customer Service visits with our commissioned software salesman to cement relationships and try to cross-sell.
– Hire a commissioned insurance sales rep with a benefits background to sell Long Term Care Insurance as a new service (to cross-sell).
– Redefine our “brand”. Develop our new image to support our updated profile.

He’s building his redefined brand on “trusted relationships”. The staff is very enthusiastic and willing to support each other’s efforts. He also plans to have “Moment of Truth” banners made up to keep the staff focused on what’s important.

Bill is utilizing a Strategy that’s based on research into information about his own business and he has buy-in from his staff. He not only knows where he’s going, he has a Strategy to get there.

Business Fitness: Prerequisite to Growth

Everyone knows the value of physical fitness. It may be a struggle in the short term, but the medium and long term benefits are worth it. The same is true in business. If you want your business to grow make sure it is “fit” first. A fit business is sleek, strong, stable, flexible and attractive.

My thesis has always been that it’s important to reach a state of business fitness as the foundation for future growth. You want to be able to answer “yes” to the following questions. If you can, your business is in a state of fitness and you are ready for growth.

Sleek
• Are you concentrating on the critical elements that determine the condition of your business – such as Gross and Net Revenues, Accounts Receivable, Inventory, Fixed and Variable Expenses, Unexpected Expenses, Cost per Unit Sold, Cash Flow, Net Profit/Loss, Cash Reserve or Debt?
• Have you clearly defined your market and targeted your marketing efforts to the most likely groups?
• Have you identified and eliminated all unnecessary expense?
• Is your inventory and/or accounts receivable as tight as possible? [Read more…]

7 Questions to Ask Before Launching a New Product or Service

The economy has been good to many small businesses this past year. Many are ramping up for expansion through the launch of a new product or service. This can be an ideal way to grow your business if you do it strategically.

To help increase your odds of success with a new product launch, I suggest you analyze your business and market history. Here are seven questions that will assist you in analyzing your information and creating a growth plan.

1 – Is my business already on a solid foundation?
If your systems, processes and personnel are not ready, efforts to expand will overload your capabilities and set you up for failure. Before launching a new product or service, make sure you are ready to handle the orders, deliver the product or service and collect your money in a systematic and timely fashion.

Also, make sure you have one or more strong indications that there is a market for what you plan to offer. Strong past sales of something similar or a part of what you are expanding are usually a positive sign. Be careful you don’t fall in love with an idea and disregard the warning signs that the market won’t support it.

2 – What is the size of the market?
Do a competitive analysis. How is your new product or service filling a market need? What will be your position within this market? Who is your target market and how will you reach them? You want to reach the conclusion that your efforts have the potential to pay off. If you are offering the same product to a new or broader market the same principles apply.

3 – How should I price it?
Pricing is an important consideration. When you do your competitive analysis you’ll learn how similar products or services are priced. You want your price to be attractive enough to sway people to buy; unless you’re pricing a luxury product and the higher the price, the higher the perceived value. The option for prospects to keep their money and not buy from anyone is always one of your competitors.

I find it’s better to start on the low side to make sure the perceived value is greater than the cost. You can raise the price once demand has been established.

4 -How much revenue can I expect to generate within a specified time period (usually one year)
This is an important question and is dependent upon the actions you take to generate sales. You’ll need to think through your Marketing Plan in order to come up with a realistic projection of how many widgets you can sell at $XX within a specified time period. Analyze your sales history to help you know what has worked in the past. If you have a long lead time for sales, that should be taken into consideration. This may mean hefty upfront expenses with corresponding delayed revenue income. To be conservative make your revenue projections and then knock off 30%.

5 – What will it take to realize this additional revenue and profit?
What additional resources will you need when launching a new product or service? Do you need to hire more people, buy more supplies or inventory, etc.? That additional cost must be taken into the equation. These may be in the form of fixed or variable costs.

Consider what the competition is doing and what market insights and trends you can utilize that will generate sales. Select one or two actions for your initial campaign and test on a small scale before committing major dollars.

At best, making a financial revenue and expense projection is always a guesstimate. Gathering and analyzing pertinent information is the key to accuracy.

6 – Where is the break even point and what is the potential profit?
The formula to determine how many you have to sell to start making a profit is Fixed Costs divided by (Revenue per unit minus Variable costs per unit). A quick and simple explanation of this can be viewed in the article, “Breakeven Analysis” . For some products or services the upfront investment is such that the breakeven doesn’t happen for more than a year. If that is your situation, you’ll definitely want to know how you’re going to capitalize such a project.

7 – Is this new direction in line with my overall Business Vision and Long Term Goals?
This is a good time to determine if your new offering will take you closer to (or further from) where you want your business to be going. One of the real values of having a clear Vision and Goals is to help you make this type of decision for every opportunity that presents itself. Think long and hard before starting something new that does not have an obvious fit.

Answer these questions and you’ll be a lot more confident about your plans and in a much better position to succeed when bringing a new product or service to market. Good luck with your new project!