Isn’t it surprising, with all of the concerns over fewer and fewer people reading, that electronic gadgets like the Kindle, Nook, and iPad are selling like hotcakes. Has it suddenly become cool to read again or are we doing it because we’re so enamored with gizmos? (And remember… these “Gremlins” shouldn’t get wet, either.)
While I’d like to believe that reading interests are being re-Kindled, I think that, within a few months, a lot of these gadgets will be attracting more dust than interested eyes.
It’s kind of like business planning. A new fad, conference, or article can suddenly prompt an executive or owner to rally the troops for a hype-filled strategic or tactical planning session. However, within a few months, weeks, or even days, the fire has died and there’s no sign of any change as a result of the efforts. Why?
We love the event more than the product. We like buying the latest technology so much that we convince ourselves that it’s going to get us to read more. But then we find that it takes time to sit down and read, that there are distractions like family, TV, commitments, etc. that get in our way.
Likewise, the planning session is fun and everyone feels great about the process. We’re convinced that this time will be different. But, Monday morning comes and the phones ring, orders need to get out, production needs to ramp up, fires need to be put out. There’s no time for doing the things that we committed to do in the meeting that made us feel so good.
Our good intentions are not executed. Nothing changes.
Before you schedule your next planning session, think about how you’re going to implement the strategies that come out of it. As Stephen Covey said, “Begin with the end in mind.” Based on our experience in leading many companies through these sessions, here are some suggestions to consider up front.
Get consensus and commitment – Be sure that everyone is fully committed to taking the steps necessary to implement change. Change must be directed from the top. Time, resources, and personal agendas must be set aside for the good of the company. Remember, when it comes to a breakfast of ham and eggs, the chicken is supportive, but the pig is committed. Without commitment, your efforts will probably fall flat.
Organize initiative teams – Establish teams of individuals to drive the initiatives that support the plans. By delegating the responsibility to a small team of excited team members, you’ll get much better results more quickly than if you try to micro-manage the process. Their enthusiasm, commitment, and attention to details will produce a much better outcome, too.
Establish deadlines and milestones – Commit to establishing clear targets, deadlines for completion, and periodic milestones to measure your progress. People need clarity in the execution and are much more likely to follow through if they know what is expected of them.
Follow up on progress – Establish a regular schedule of meetings or report dates in order to measure and monitor your progress. We’re all motivated by deadlines, especially if we’re held accountable for meeting them. Make it clear what is expected and when.
So grab your iPad and schedule the time in advance. Map out your planning session and your plan for implementation. With all the improvements you make, you may actually find time to read that Kindle that’s sitting on your bedstand.
I have to be honest. I didn’t start out today looking for a ukulele-version of Queen’s Bohemian Rhapsody. As a matter of fact, when I saw the post on TED (www.ted.com), I was attracted to it more for its novelty than for my expectation of great music. After all, who hasn’t endured an Idol wanna-be’s screeching attempt to resurrect Freddie Mercury?
“Why not?”, I thought. So I clicked on the link to hear Jake Shimabukuro play the rock classic on his ukulele.
I was transfixed by the beautiful sound coming from what is so often considered to be a toy or a token Hawaiian souvenir. The tone of the instrument was beautiful, full and rich, with masterful fingering played by the artist who held it. The simple ukulele had become magnificent.
You see, I had put the ukulele in a box labelled “For Luau Only”. That’s where it belonged, didn’t it? In a Don Ho music special from my youth. Or, more recently, as a pleasing , but simple sound produced by the late Izzy. It’s not that the music wasn’t good, but that it wasn’t meant for Queen.
And I could relate to the ukulele. Many times, we have fought to get out of the “CPA” box that others are quick to put us in. Everyone knows what a CPA does, right? Business owners hire us, bankers rely on our services, attorneys bring us in for assistance, based on their own notion of what a CPA does. Their perception may even be quite flattering, but it’s incomplete.
What Bohemian Rhapsody is to the ukulele, our Business Profitability Service is to a CPA firm. The service is often unexpected, but the reaction is nearly always extremely positive. We show the owner (or the banker) the business’ financial history, just like they expect to see. (“OK, Don Ho, I’ve heard this before.”)
But, then, we show them insights they haven’t seen before. Possibilities open up to new areas of improvements through pricing strategies, growth opportunities, cost controls, working capital management. We involve their team so they have buy-in and enthusiasm. Everyone knows what to do and how to get it done.
People don’t buy what you do, they buy why you do it. Simon Sinek, author of “Start With Why”, powerfully argues that people are compelled to look for relationships with someone who shares their purpose. (The video is available at the bottom of this post.)
Consider Apple Computers. They have developed a cult-like following who will buy almost anything they produce (e.g., computers, phones, mp3 players), not necessarily because their products are the best, but because Apple has successfully marketed the “Why?” behind the brand. According to its website, Apple is “out to change the world”. They do that by engineering beauty and functionality into the products they develop. It just so happens that they build computers.
Compare that to other computer companies who market only their features and benefits. “Here’s what we do and here’s how we do it. Please buy one.”
Sinek’s point is that most companies start with “What” and then move to “How”. Rather, they should start with “Why”, explain “How”, and then describe “What”.
This got me to thinking about the “Why?” behind Grimbleby Coleman. Why do we do what we do? Yes, we provide high-quality services and excellent client service, but why? Here’s a brief example of what our firm description looks like, using the “Why, How, What” approach:
We believe that small business drives the economic engine of the greater Modesto area, provides community resources to improve our quality of life, and gives people the opportunity to care for their families.
We support them by investing in the best people and resources available in order to improve business profits and cash flow, maximize the assets that the business owners can control, and provide meaningful financial information to owners, their bankers, and investors.
As a result, we provide quality insight and analysis with the financial statements we deliver, tax planning that considers all opportunities, and business planning that includes strategy development, analysis, and successful implementation of changes to processes and structure.
We invite you to share your purpose with us. Develop the “Why?” around your business and share it with others. Let me know how it changes the responses you get from others. We’ll post your responses below.
Golf is a funny game. The premise is simple. Beginning at the tee, hit the ball into the cup at the other end of the fairway in as few shots as possible. Unlike baseball, the ball doesn’t move while you swing at it. Unlike basketball, people aren’t yelling and waving their arms while you concentrate. And, unlike football, no one is ready to do you bodily harm during your backswing. Yet, it is a very difficult game to play consistently well. (See the graphic at the end of this post.)
After decades of playing decent golf, I decided to entertain folly and contacted a local golf instructor to help me with my swing. At an epiphany moment during my lesson, this story came to mind:
Scenario:
A local business is experiencing cash flow problems. Profits are down, but the company is still in the black. According to the owner, they’ve never been busier, but the line of credit has nearly reached its limit. The owner calls on us for help.
Solution #1:
After reviewing the income statements, we determine that sales are indeed up by 10% over the previous year. Our analysis of the income statement shows that the company’s cost of materials has increased as a percentage of sales, causing the gross margin to slip by 3%. However, upon analyzing the company’s balance sheet, we find that accounts receivable are taking an average of 10 days longer to collect and that inventory has grown from 60 days of sales on hand to a current 90 days. The result is less profit, more cash tied up in assets, a higher debt load, and more interest expense.
Solution #2:
Discussions with the owner reveal that prices were cut by 5% to gain a bigger share of the marketplace. So, while sales are up by 10%, the volume of activity is actually up by 15%. The result is smaller margins on increased sales. As the company became more aggressive with its pricing, it also extended credit to customers with higher credit risks, leading to a longer collection period. Salesmen insisted on having inventory in stock for all sales. Slowly, but surely, inventory had grown by 50% over the previous year.
Now, what on earth could have brought this to mind while hacking 8-irons on the driving range?
As I hit ball after ball, the instructor would watch a few swings and stop me to make corrections to my posture, my alignment, my pivot, my hand position, the position of the ball. (My gosh! I thought I was a fairly decent player, but I felt like a basket case.) One thing, though, that he harped on for several minutes was that I was leaning forward during my backswing. He gave me several tips on how to keep my weight back, my posture straighter, etc., all in an attempt to keep me from leaning forward.
After standing there watching, he finally had an “Ah-Ha!” moment. He noticed that it was nearly impossible for me to keep my weight back because my left knee was bending forward instead of towards my right knee. That simple move caused my weight to fall forward. We made the correction and my swing began to improve.
This was the epiphany. Only by observing, asking questions, analyzing, and tweaking can we get to the root of the issue. Many situations present themselves with symptoms that need to be corrected, but we often treat the symptoms instead of looking for the root cause.
In my case, it was an incorrectly bent left knee. In the situation above, it was an aggressive sales strategy without proper guidelines and controls.
Stopping with the steps in Solution #1 may have led us to advise the owner to reduce inventory, find alternative suppliers, and send customers to collections. However, in short order things would have been right back where they started.
By asking more questions, watching how things were done, and analyzing financials with our SCOPE-It software tool, we were able to get to the root cause of the problem and make corrections that would have a lasting impact. With various team members from sales, operations, and finance assembled togethere, we were able to show the cash impact of the changes that had occurred. We then strategized with them how best to meet the customers’ needs, but to also minimize the cash requirements of carrying accounts receivable and inventory. Pricing strategies were examined and we were able to quantify the relationship between price decreases and customers gained. With everyone more aware of the financial impact and the effect on other departments, the group was able to form a working plan with specific implementation steps. They owned it.
I, too, have specific things I’m working on to develop a consistent swing. Now, if I could just get my putts to go in.
The Lakeside Lemonade stand at Pinecrest Lake has employed many business practices that are universal. What is it about selling lemonade that brings you back to the fundamentals? Even Donald Trump used the lemonade stand in 2004 as the very first test on the premier of The Apprentice.
As a business, it’s pretty easy to get started. There’s plenty of time during summer vacation, Mom provides the equipment and the inventory, and the location is generally in your front yard. A piece of paper quickly makes a sign and, voilà, you’re in business.
So, what makes Lakeside Lemonade stand out from the crowd? Here are 10 things I observed first-hand during my five-minute rest.
1) Be passionate – As I previously discussed, the owners showed passion about their business. With energy and enthusiasm, they took pride in what they had done and the opportunities that were ahead.
2) Location, location, location – The business was in a beautiful lakeside setting, in the heart of one of the most heavily-travelled parts of the trail. Another stand we had passed was set up in a more remote setting, up the hill from the lake. Needless to say, sales were not brisk.
3) Invest in your facilities – The business looked successful. Signs clearly displayed prices, ice was close at hand, a new cash box made handling money much more efficient, and the “Recycling” and “Compost” waste bins were clearly marked to show the customer how to keep things “green”.
4) Engage your customer – They were eager to engage people in conversation and lead customers into making more of a purchase than they probably intended.
5) Educate your customers – Nutritional information was clearly displayed for those who may have had concerns about what was in their Country Time Lemonade or Chips Ahoy cookies.
6) Listen to your customers – As a result of listening to their customers, Lakeside Lemonade had added cookies to their previous single offering of lemonade.
7) Provide an experience – Chairs and benches, complete with seat cushions, were available for hikers to take a brief rest while enjoying their refreshments. The enthusiastic banter from the owners welcomed each new customer and helped create buzz among people passing by. One customer even commented, “This time I brought my wallet with me.”
8) Give people options – Lemonade was available in two sizes, with or without ice. Cookies were priced at 25 cents each, but you got one free with the purchase of four.
9) Provide employee incentives – One of the business operators commented that he had just arrived 10 minutes ago from back east. To my comment that he had already been put to work, one of the owners responded, “Hey! I’m giving him part of the profits.”
10) Look for expansion opportunities – Just as these entrepreneurs had used customer feedback to add cookies to their product line, they were also enthusiastic enough to think there were more opportunities available (new products, new locations, etc.)
I’m sure there are other bits of business insight that you could take away from a visit to Lakeside Lemonade. I encourage you to stop by on your next visit to Pinecrest. But hurry, school starts in a few weeks and these business owners will be in recess.
It was a perfect day to get out of the sweltering valley heat. On a somewhat “typical for July” 102-degree day at home and the Sierras only an hour-and-a-half away, my wife and I decided to drive up to Pinecrest Lake for the day. At about 11:00, we decided to take the 4-mile hike around the lake. The weather was perfect, the lake was filled to the brim, and the river was rushing into the inlet. There were also several hundred other people who had the same idea as we did, so the trail was crowded with weekend warriors.
Note the consumer information and the "free water for your dog".
At about the 3-mile mark for us, we came across an oasis… Lakeside Lemonade. Oh, we had hiked past a lemonade stand earlier on our hike, but we weren’t compelled to stop. This stand was different, though, as three energetic entrepreneurs (Cal, Beth, and Carter) had set up, not just a lemonade stand, but a business. We pulled up a seat in the cushioned chairs they provided and soaked in the things that made this stand different.
These kids had put together a customer experience for the weary mountain trekker, so much so that they had created their own marketing buzz. As one family walked up, the father blurted out, “We’ve heard about you!” What entrepreneur doesn’t cherish hearing those words?
I took note of the business principles that had been employed in this operation. Of course, they had a desirable product in a great location. But, they had also employed creative pricing practices, customer care services, and consumer information. They had even “gone green” with their “Recycling” and “Compost” waste baskets.
Yet, even with all of these practices in place, one thing stood out that made their business very difficult to copy.
PASSION!
These entrepreneurs had an engaging energy that was fueled by their desire to make this business work, as evidenced by the tremendous pride they took in what they had accomplished. They told us how they had added cookies to their product offering as a response to customers’ suggestions last year. Their faces beamed when they showed us the cash box they had invested in with part of their profits.
To all business owners…!!!
Remember the passion you had for your business when you first started it? The pride you felt in your product or services to your customers? The enthusiasm you had when you went to work each day, if you could even call it work?
Do you still have it? If not, take a hike… around Pinecrest Lake, and get reenergized. Your business will thank you.
To Cal, Beth, and Carter… With your parents’ permission, I would love to add your picture to this article. They can email me at mfox@gccpas.net and we’ll work it out. I wish you all the best and congratulate you on a successful venture. I look forward to seeing what you have in store next year. Who knows, maybe a franchise on the other side of the lake?
With but the thinnest layer of protection, opposition set on maiming you swarms in at a pace that gives you only the briefest moment to make a decision. Your window of opportunity closes quickly as you must hit a target no more than one square foot while on the run.
No, you’re not Jack Bauer… You’re an NFL quarterback.
Somewhere along the line, I read about the progression a quarterback must make in transitioning from high school to college and, finally, to the NFL. In order to succeed, the quarterback must deal with changes in these four factors.
The increased size of the players (and, it so happens, the level of injury threat),
The speed of the game (imagine a 300-lb lineman who can close faster than a used-car salesman),
The complexity of the offensive and defensive plans (who knew Stephen Hawking designed game plans), and finally
The shrinking size of the target the quarterback must hit to complete a pass (high school – 5 feet, college – 3 feet, pros – 1 foot).
In recent discussions with business owners, these same factors have come to mind when talking about how business has changed with our shifting economy.
The risk of being in business has definitely increased. Our local unemployment rate hovers near 20% and we are smack in the middle of the foreclosure capital of the country. Failed businesses line our main business districts.
The rate of change is faster than ever. Technology advances open new opportunities (for both the business and its competitors), new products and services are constantly introduced, and banks have tightened their qualifications for small business financing. Owners must pay more attention to what’s going on around them if they want to succeed.
The business and regulatory environment has become much more complex. Owners must wade through complex health insurance regulations, labor laws, safety and environmental standards, municipal codes and regulations.
The margin of error continues to shrink. Owners who succeeded “in spite of themselves” must now know exactly where to look for increases in efficiencies, new market opportunities, cash management strategies, etc. They must pay attention to the details.
Over the past several months, we have had many opportunities to work with local business owners who have successfully weathered the toughest times and are now seeing opportunities open in front of them. From our position, we have noticed that successful business owners…
stay informed.
use their advisors wisely.
pay attention to details.
know which things are critically important and closely monitor that information.
anticipate changes and plan for the future (both short-term and long-term).
stay fiscally fit so they are healthy enough to weather the tough times and take advantage of opportunities that arise.
As I’ve previously established, I’m a rabid baseball fan and have been for nearly half a century. (Oh, that hurt!) I love the pace of the game, the finesse skills of the athletes, and the strategy involved in pitch selection, positioning, player substitutions, etc. Don’t even get me started about the designated hitter rules.
I’ve always loved reading and analyzing baseball statistics. Each day when I open the newspaper (I’ve already established my age so, yes, I do read a newspaper), I’ll skim the front page to make sure that global annihilation is not imminent and then I’ll peruse the sports page, particularly, the box scores and stats leaders. Baseball is loaded with measurable statistics. At Bats, Runs, Hits, Runs Batted In, Home Runs, Strikeouts, Walks, Earned Runs, Innings Pitched. (In short hand, AB, R, H, RBI, HR, K, BB, ER, IP.) These measurements are then used to create other stats, such as Batting Average, On-Base Percentage, Slugging Percentage, Earned Run Average (ERA), Walks + Hits per Inning Pitched (WHIP), and on and on.
The obsession with statistics in baseball has led to an entire field known as sabermetrics, “the search for objective knowledge about baseball.” It is the quest for the holy grail when comparing players from different eras or different leagues (“Who was better, Willie Mays or Mickey Mantle?”) or to predict the future value of current players (“What is Pablo Sandoval’s future value based on his current production?”) Sabermetricians have even come up with new statistics, such as OPS (On-base + Slugging) and Runs Produced.
My interest in baseball stats comes from the same curiosity that drives me to look at business metrics. Every business has certain measurements or statistics that can be used to measure the performance of the company or individuals within the company. There are also measurements that can help predict the future profitability of the company. The key is to find the right metrics. Sabermetrics for business. It’s not quite the search for the holy grail, but it is critical to find the right mix of drivers.
You see, by identifying the business’ key performance indicators (KPIs), we can address several critical questions, similar to the Mays vs. Mantle question above. How does this period stack up against last period? What trends can we spot in revenue and expenses? How do we compare to the industry as a whole?
While these are interesting questions, KPIs can be even more useful as predictors of future outcomes. Just as baseball owners look at critical stats to see which areas need the most improvement, business owners need to know which KPIs to improve in order to give them a better chance of improving profits and cash flow.
We are fortunate to have several tools that allow us to analyze KPIs across multiple periods against industry averages and to use that analysis to predict and plan for future outcomes. Whether we’re looking to improve cash flow from operations, net profit before taxes, or debt-to-equity ratios, we can analyze a company’s performance to determine where to focus the business owner’s attention and to develop strategies to implement the necessary tactics.
My parents probably thought I was wasting my time reading the sports page so much. Little did they know I was building my professional tool chest.
“It’s designed to break your heart. The game begins in the spring, when everything is new again, and it blossoms in the summer, filling the afternoons and evenings, and then as soon as the chill rains comes, it stops, and leaves you to face the fall alone.”
A. Bartlett Giamatti, Former Commisioner of Major League Baseball
Ahhh, baseball. Every year about this time I have a brand new love affair with the game. They say, “Hope springs eternal,” and there couldn’t be a better case for that than the beginning of baseball season. Whether you’re a New York Yankees fan, jaded by the expectation of pennants year after year, or a long-time Chicago Cubs fan, still waiting to see your team in the Fall Classic, April brings the promise of hope that “This could be the year!”
As a San Francisco Giants fan for nearly 50 years, I have endured my share of heartaches over the decades.
The sixties, with a tremendous roster, but a string of 2nd place finishes. How could a team of Mays, McCovey, Cepeda, and Marichal not win one pennant?
The seventies… orange softball shirts and orange bills on the caps. ‘Nuf said.
The eighties… I’ll never get rid of the image of right-fielder Candy Maldonado sliding on his rump, successfully turning an out into a game winning triple for the Cardinals. Two years later, God personally stamped his seal on the Giants’ fate with a 6.9 earthquake in the middle of a four-game World Series sweep at the hands of the Oakland A’s.
In the nineties, things got interesting. They couldn’t win the pennant with 103 wins, they were swept in the playoffs by a wild-card team, and they lost a one-game playoff to the even-more-snake-bitten Chicago Cubs.
A new decade, a new millennium, even a new ballpark was needed. Alas, a 3-2 game lead in the World Series and a 5-0 lead in the 7th inning of Game 6 turned around quickly as the Giants lost to a stupid Rally Monkey! Two years after that, yet another playoff loss to the Marlins.
Yet, here we are in 2010 and again I say, “This could be the year!” Even though 52 years have gone by since the Giants moved to San Francisco and they still haven’t won a World Series crown, I am excited about the prospect. I am re-energized by the fresh start, by the young new prospect who lit up AA in some town I only know as a Giants farm team, by the veteran whose glory days are behind him, but who will undoubtedly resurrect his career this year.
So, what is the connection to business or accounting? Is it that we have an opportunity to put the dismal year of 2009 behind us, throw off the bad news of the recession, and start 2010 feeling inspired that we have a chance to make a fresh start, that “This could be the year?”
They give up pleasure, endure pain, practice at ungodly times of the day, all so they can be a little bit better than they were yesterday. There is no financial payoff, no medal, no crowd of followers. What is it, then, that keeps the non-elite Olympic athletes going, dedicating their lives to pursuing excellence in their particular sport, knowing they will never have a realistic chance to compete for a medal?
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