Sunday, December 6, 2009
New Blog Location
My blog has moved to the "Going Out of Business By Design" Facebook page of the same name. Catch it there "on the Wall. Thanks! Tom
Sunday, August 23, 2009
Go Buildingless?
Among your highest operating expenses is building occupancy cost--rent, utilities, insurance, maintenance, landscaping, furniture, taxes, property taxes--phew! Just imagine if you did not have that! How? Don't have a building. With today's tech you can stay connected visually and otherwise with coworkers. Maybe just a warehouse for some shipping and receiving will do. If you have customers in ocassionally for product presentations you can always rent on demand a show space in a nice part of town. Imagine the impact. Bigger bottom line, employees do not have to buy gas, clothes, makeup for work, and greener footprint. You wake up and you are at work!
Of course, this will not do if you have a retail business. Another downside is that people do not always like working where they live. But today's tech has eliminated distance. You could take advantage. Paperless and wireless are already business goals so lets add buildingless to that. In all three cases you will probably not achieve a zero sum but certainly a lesser one.
Of course, this will not do if you have a retail business. Another downside is that people do not always like working where they live. But today's tech has eliminated distance. You could take advantage. Paperless and wireless are already business goals so lets add buildingless to that. In all three cases you will probably not achieve a zero sum but certainly a lesser one.
Wednesday, July 22, 2009
Monday, July 13, 2009
Business DWI
In my opinion a big destroyer of businesses and business careers is ego. When too much ego is present in a decision or plan it is going to come apart at at some point. When owners have too much ego in their decision making I call this Deciding While Intoxicated. DWI. You are too juiced with yourself. Sometimes you cannot see this but others do. You are putting your self image above the well being of the business and do not see clearly. This results in decisons made by 'feelings' rather than facts. My wife the counselor frequently reminds me that 'feelings are not facts'. If you are a business owner you need the facts. If you go by those you will definitely feel better in the morning. Egosim, ego maniacs, ego centrics and all the rest usually come to ruin. A smart CEO keeps various voices around, other than "yes men", to stay grounded and out of the ego zone.
When I began doing well with my IBM sales career I became a bit cocky. I was taken by my fancy suits, custom shirts and expensive cars. As I extolled my accomplishments to my mother she always had the same unexpected response, which I hear to this day: "Tommy, pride goeth before a fall." Mom did not know a lick about business but she knew what got people into trouble. Heck, I really wasn't trying to be that prideful. Guys just want to impress their moms! Dads just tell you what you're doing wrong.
Do we doubt for one minute that the Wall Street collapse was brought on by serial DWI-ing executives ensconced in Taj Mahal offices being paid millions whether they did the job or not. You can bet that their main concern was to look better than their competitors. All involved just built a House of Ego that nearly brought down the nation.
I have found it a much better path to take a more humble approach. If you have been a business owner long enough you know that the Businessauress Rex Change Monster is always waiting outside your office to spew flames on your business. Things can change in a hurry and that should keep you humble. People like a strong confident leader but not a phoney one. If you are worried you should tell your people you are. If business is bad you should share the numbers. Employees have a lot of stake too and they try harder if you level with them. Sometimes owners just do not want to state bad news. Silly. It is the equivalent of pulling the score off the board if the home team is behind.
Anyway, if you are going around like a rooster just ask yourself what your mother would have to say about that and then you will know what to do. Some days you are the statue and some days you are the pidgeon. You will have plenty of both. On days you are the pidgeon let that remind you that you can actually leap, like superman, tall buildings in a single flight. On days that you are the statue, let that remind you that things can get messy at a moments notice.
When I began doing well with my IBM sales career I became a bit cocky. I was taken by my fancy suits, custom shirts and expensive cars. As I extolled my accomplishments to my mother she always had the same unexpected response, which I hear to this day: "Tommy, pride goeth before a fall." Mom did not know a lick about business but she knew what got people into trouble. Heck, I really wasn't trying to be that prideful. Guys just want to impress their moms! Dads just tell you what you're doing wrong.
Do we doubt for one minute that the Wall Street collapse was brought on by serial DWI-ing executives ensconced in Taj Mahal offices being paid millions whether they did the job or not. You can bet that their main concern was to look better than their competitors. All involved just built a House of Ego that nearly brought down the nation.
I have found it a much better path to take a more humble approach. If you have been a business owner long enough you know that the Businessauress Rex Change Monster is always waiting outside your office to spew flames on your business. Things can change in a hurry and that should keep you humble. People like a strong confident leader but not a phoney one. If you are worried you should tell your people you are. If business is bad you should share the numbers. Employees have a lot of stake too and they try harder if you level with them. Sometimes owners just do not want to state bad news. Silly. It is the equivalent of pulling the score off the board if the home team is behind.
Anyway, if you are going around like a rooster just ask yourself what your mother would have to say about that and then you will know what to do. Some days you are the statue and some days you are the pidgeon. You will have plenty of both. On days you are the pidgeon let that remind you that you can actually leap, like superman, tall buildings in a single flight. On days that you are the statue, let that remind you that things can get messy at a moments notice.
Saturday, July 11, 2009
Treat Everyone Differently
If there is one tenent that I feel has made a lot of difference in my business success it is my concept that you should treat all employees differently. This would seem to fly in the face of time honored dictums that say you should treat everyone the same. Treating everyone the same really does not work that well first of all. It assumes everyone is the same. Not true. Each person is distinctly different from the other. God made us all originals. We surely know you would treat a grandmother differently than a teenager, a man different that a woman, a child differently than a parent and so on. So in business.
I think the 'treat everyone the same' concept originates from lazy business leaders. It is a lot more work to treat everyone individually. But you can do that effectively in a small business of say under 50 employees. It would not work well in a large business and probably turn it into some kind of chaos. Treating everyone differently can be a unique strength of a small business owner' s management style and you should adopt it.
I like to think of a small business as an organization that has unique abilitities to solve employees' problems, or at least mitigate them, for their well being and thus the better well being of the business itself. For example, when we were a younger, child bearing company I allowed mothers to leave work at the drop of a hat if their child was sick at school, or they had to take them to the doctor or simply had to be at a school play. This time was given gratis becuase children are such a valuable part of a parent's life you are a complete fool to stand in the doorway of anything important in this area. By supporting it, you have gained a much more motivated employee and new respect. Would you not rather have that than be seen as some rule enforcer?
Detractors will say this is not fair to non-mothers but it is just a matter of time before they have sutff come up that needs wiggle room. They may have a grueling commute and if it was me, I would give them a later starting time so they could miss that nightmare. This, in turn, would not have much meaning to someone who only lived a mile from the office but then one day they need something and so it goes....Become a sort of Employee Godfather and everyone benefits in my opionion. If you treat everyone differently then, in a sense, you are treating them the same! Everyone gets exceptional treatment.
I think the 'treat everyone the same' concept originates from lazy business leaders. It is a lot more work to treat everyone individually. But you can do that effectively in a small business of say under 50 employees. It would not work well in a large business and probably turn it into some kind of chaos. Treating everyone differently can be a unique strength of a small business owner' s management style and you should adopt it.
I like to think of a small business as an organization that has unique abilitities to solve employees' problems, or at least mitigate them, for their well being and thus the better well being of the business itself. For example, when we were a younger, child bearing company I allowed mothers to leave work at the drop of a hat if their child was sick at school, or they had to take them to the doctor or simply had to be at a school play. This time was given gratis becuase children are such a valuable part of a parent's life you are a complete fool to stand in the doorway of anything important in this area. By supporting it, you have gained a much more motivated employee and new respect. Would you not rather have that than be seen as some rule enforcer?
Detractors will say this is not fair to non-mothers but it is just a matter of time before they have sutff come up that needs wiggle room. They may have a grueling commute and if it was me, I would give them a later starting time so they could miss that nightmare. This, in turn, would not have much meaning to someone who only lived a mile from the office but then one day they need something and so it goes....Become a sort of Employee Godfather and everyone benefits in my opionion. If you treat everyone differently then, in a sense, you are treating them the same! Everyone gets exceptional treatment.
Wednesday, July 8, 2009
Winning Ugly
In very tough times like these it may come down to winning ugly. You may have to resort to some unpleasant strategies to recover your bottom line. Yes, they are 'ugly' in that you nor the one on the receiving end will like how it looks but this is about survival. Here are some things you can do to win ugly.
- Renegotiate leases and loans. Ask your landlord and lenders to refinance your balances to a lower and longer amortization. If they won't, do it for them and tell them this is what you can do. This is not a case of trying to get out of something you owe. You are just seeking to relieve tight cash flow from these tight times. It is likely that they will live with it but it will ruin your chances of getting anything else from them in the future.
- Deduct ten or twenty per cent from vendor invoices you have in hand. Again, if they continue to want your business they will probably go with it but they may not ship you any more stuff.
- Reduce employee pay by ten percent. This has almost become standard right now. Maybe force everyone to take two or three days of unpaid time off each month. Have a later start time and an earlier end to the day with reduced pay accordingly.
- Turn lights off, AC up, and remove every other bulb from light fixtures. Re issue company cell phones with ones that only have local service and thats it. Be cheap.
- Reduce insurance coverage to bare bones that guard against major catastrophe only.
- Take more of your pay out of the company in the form of a loan to you. This has to be paid back but it gets you out of paying payroll taxes on it. Pay it back slowly with an auto deduct from your regular paycheck over a couple of years. You can only do this a few times.
- Barter. Pay your bills with paid for, useful inventory. That is how all business was conducted way back when. The indians woluld trade a cowboy blankets for rifles. You may want to exchange free landscaping service in lieu of rent. Bartering conserves cash. There are even barter groups you can join such as Trade Bank.
You do what you have to do.
Dark Times Strategy (con't)
Buying or merging with another company is a possible solution to revenue and profit problems. When two companies get together they benefit from new economies of scale. That means that the new entity can shed expenses that were being duplicated at the other company such as rent, the phone system, utilities, insurance, probably some employees and the like. The two combined companies now create more profit than the two did standing separately. This is expressed in the Acquisition Formula of 1+1=3. Rather, one plus one must equal three for an acquisition to make sense and provide each company with more benefit than they had standing separately. Put another way, you wrap a ketchup and mustard soaked bun around a hot dog which , in turn, creates a much tastier product than the bun or dog alone. You get the idea.
The new cash flow coming from this can be split by the two companies or it can be used to finance the purchase of one company by the other. Usually some owner financing is involved, especially these days. Maybe there is a bank loan for half the purchase price and then the owner takes back a note for the rest over 5-10 years. Selling prices vary some but here is the formula that will be pretty close. Take the recasted company, that is, how it will look once it is absorbed, and multiply its new annual profitability, usually with all owner's take out of this too, by 3.5. It comes out close to about half of your annual revenue.
Two owners rarely get along so plans should be made for one to turn things over to the other after a six month transition period. The most likely companies to merge with would be one in your own field but an acquisition also is a means for one company to enter a new field that it previously did not have the expertise to do but now does with its new purchase. In an acqusition it is good to keep in mind the definition of a good deal. A good deal is one that is good for both parties.
The new cash flow coming from this can be split by the two companies or it can be used to finance the purchase of one company by the other. Usually some owner financing is involved, especially these days. Maybe there is a bank loan for half the purchase price and then the owner takes back a note for the rest over 5-10 years. Selling prices vary some but here is the formula that will be pretty close. Take the recasted company, that is, how it will look once it is absorbed, and multiply its new annual profitability, usually with all owner's take out of this too, by 3.5. It comes out close to about half of your annual revenue.
Two owners rarely get along so plans should be made for one to turn things over to the other after a six month transition period. The most likely companies to merge with would be one in your own field but an acquisition also is a means for one company to enter a new field that it previously did not have the expertise to do but now does with its new purchase. In an acqusition it is good to keep in mind the definition of a good deal. A good deal is one that is good for both parties.
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