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.
Once again the ground is shaking, dust is swirling, and lots of slow moving machinery is on the road. You don’t have to go far out of town to see corn being chopped into silage for dairies or almonds being shaken from the trees and swept into rows in the orchard. Harvest is a time of reckoning, when yields are counted and results are tallied.
When you think about it, harvest is a lot like running a business. The whole process is similar to the kind of annual scorekeeping that many businesses do at the end of their financial year. There are a number of object lessons that can be learned from the farm life cycle:
Yield – The yield is similar to the revenue reflected on your business income statement. But what about all of the activities that influence that yield? How does a business owner or farmer for that matter impact the results of his harvest?
Inputs – The successful grower spends time and effort to add soil amendments, fertilizers, and other nutrients that will help maximize the crop. What factors help determine the size and quality of your business “yield”? Depending on your business, it could be investments in better technology, or additional training for your employees. And just like the farmer, you’ll need to weigh the costs vs. the expected benefits.
Dormancy – the almonds being harvested all around us required a certain number of hours of cold weather during their winter dormancy season. Businesses also need downtime to regroup and plan for the year. How much time are you allowing to think and plan for your business? How effective are those planning sessions?
Water – every crop being harvested is the result of a sustaining flow of water during the growing season. Cash is the water of every business – are you managing your cash flow effectively? Are you strategically saving the excess cash in good times as a resource for “drought” in other seasons?
The list could go on, but suffice it to say that whether your business is farming or something else there is a lot that goes into completing a successful year. Thoughtful strategic planning, careful budgeting, and diligent financial oversight can all work together to grow better fiscal yields in any business. So the next time you drive through a cloud of harvest dust, take a moment to appreciate all the planning and processes that result in food on our tables. And to all of our farming clients and their families, best wishes for completing a safe and profitable harvest!
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.
We polled everyone on our team for some ideas that would help our current and future clients begin 2011 on the right track. Here are the resulting suggestions.
The number one suggestion, according to our unscientific, non-secret vote, was for businesses to update their 2011 Strategic Plan and decide where they want to be financially in 2011.We also suggest every individual prepare his or her personal financial budget. (If you don’t have a Strategic Plan or a personal financial budget, now would be the time to sit down and create one. Ask us for a $COPE grid that you can use to start the process.)
Here are some other resolutions you might want to add to your list.
Retirement and Estate Planning
Review your estate plan. Recent tax law changes and asset revaluations may have substantially impacted your planning.
Consider meeting with an estate attorney if you don’t have an estate plan.
Review your retirement portfolio. Is it time to change your investment allocation?
Review your retirement contributions. Is it time to increase the amount or frequency of your contributions?
Pension Plan Fiduciaries
Review pension plans to ensure that all fees are reasonable. (To comply with new rules that take effect in July 2011.)
Establish or review your business succession plan. Who is next in line? Are your processes documented?
Businesses
Planning and budgeting
Establish or update your 5 year plan.
Create both an Income Statement and a Cash Flow budget. (Ask us how our $COPE It! Software can help.)
Focus on building more business now.
Review and communicate your company’s break-even point.
Create a capital expenditures budget to capture any planned projects or expected investments in furniture, fixtures, buildings, equipment or other similar items.
Prepare a monthly budget to actual analysis (check your software for reports that provide this view.)
Accounts Payable
Start capturing 1099 vendor information early. Formalize the process each time you add a new vendor.
Contact your top vendors and suppliers to see if you can negotiate a better deal based on volume purchases.
Look for ways to improve your accounting system.
Banking/Collections
Review your lending relationships to see if you can lower your interest rates on debt.
Look for business expansion opportunities – is it time to add a new product or to acquire a new business?
Review your Accounts Receivable. Now is the time to take action on any amounts that are older than 60 days.
Expense Management
Review your advertising and marketing expenses. Investigate new marketing ideas and evaluate the success of your past efforts.
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’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?”
For the last month, we have been feasting on our backyard citrus crop. Harvesting the abundant bounty got me to thinking about the ordeal I went through in early fall. I had the burdensome task of pruning five citrus trees, all in various states of disrepair. All of them had been pruned a year earlier, but in that short amount of time they had put on anywhere from three to five feet of new growth. The trees certainly appeared much larger than when they had last been pruned, but their shapes had lost that nice rounded “pure Florida orange juice” logo on the carton look. They more closely resembled a silhouette of Mort from the original Bazooka Joe comics.
What I was impressed with, though, other than the size and number of thorns on citrus trees, was the fact that, on all that new growth, there was no fruit to be found at all. Oh, there was plenty of fruit on the trees, but it was all on the old growth. Not only that, but the uncontrolled new growth made it much more difficult to get to the fruit. While the new growth was what everyone saw when looking at the trees, most of the fruit was concealed behind the façade of productive branches.
That got me thinking about businesses I have seen. Lots of growth, plenty of show, but no profit or cash to show for it.
Has unproductive growth gotten out of hand in your business?
Have you added new products, employees, and sales revenues only to see flat or declining profits?
Are you busier than ever, but without an increase in cash flow to show for it?
Is the productive core of your business being choked out by the new and greatest thing?
Perhaps it’s time to put on the gloves, the long-sleeved shirt, hat, and other protective gear, and get to pruning out the non-productive fluff. You’ll have a better-looking business, more production, and profits that are much easier to reach. Check out the “Seeing is Believing” blog to see how we can help.
I grew up in the country, where roads are “maintained” rather than “improved”, and where storm drainage can often be a challenge. So we were used to big rain storms (like last week) resulting in large puddles of water on either side of the road. We knew it was a big storm when the puddles met in the middle and stretched across the entire road (and as kids, it meant that some excellent “mud biking” was in store). A day or two after the rain had stopped, someone would notice the puddles and put up a warning sign like the picture above.
This always struck me as humorous. Everyone who lived on our road, or used it on a daily basis, had already been navigating the puddles for several days by the time these signs started showing up. We already knew, or had learned the hard way, that caution was needed. So what was the point of the sign?
When is a warning sign most effective – before something dangerous or unwanted happens, or after it occurs?
What about your business – are you getting timely warnings before adjustments are needed, or just historical indicators telling you that something has occurred? What are the key performance indicators that drive your business? How do you get accurate and timely feedback about these key measurements, so that you can react when adjustments are necessary?
Think about your potential warning signs and put them up early. Let people know what they mean and how to avoid the problems that could arise. Prepare a plan to follow to get you around the potential pitfalls.
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