Category Archives: Operations

Operations management best practices. Keys to efficiency, executing, and cost controls

Succession Planning – the How, When, & Why

All businesses will use at least one form of “Succession Planning” strategy during its lifetime.  This phrase can mean many things to a business owner.  Succession Planning  is subject to scale and scope of a business,  and like any strategy, the most effective ones are developed over time and employ specially designed resources.  Transitions are part of a businesses DNA, and unfortunately some are forced on a business before they are planned for.

One key tool to ensure business continuity and continued success for your business is a well designed Succession Plan.

Succession Planning quite simply is planning for the future and continued success of the business.  It insures the continuity of services of the business entity itself and likely includes planning with in each of the 4 Pillars we commonly talk about in our blogs                                                     (Products, People, Operations, & Marketing) . 

If a business losses ability to generate revenue due to change in ownership, loss of key people or suppliers or lack of consistency in their products, clearly it is not as successful as it could be.  Proactive management considers multiple scenarios that may effect revenue generation.  Common risks a Succession Plan identifies & addresses may be a sudden loss of a key leader, preparation for sale or retirement, or even rapid business growth.

  • In this article we provide some very brief points on questions around the most common transitions Business owners may face.  Like many of our “Conversations Series” articles this is designed only as an overview and in bullet point fashion.  Future blogs will address these points more thoroughly or please contact me if you would like me to expand on specific points.                 LearnMore-Blue-Primary-16

 

Why undertake Succession Planning-

A good “Stress Test” for small business

Business growth has determined need to document processes and business knowledge

Improper hiring practices have created a gap in culture or brand execution

 

Succession Planning is..

  1.  A Leadership Development Strategy
  2.  A Risk Management Best Practice
  3.  A Sustainability Best Practice
  4.  Crucial for Knowledge Transfer

Types of Succession Planning

  •  Strategic Leader Development (Next Generation)
  •  Emergency or Interim Management (Sudden loss)
  •  Departure Defined (Sale, Retirement)

 

When is right to plan?

  • Business/Company is financially sustainable
  • Strategic Plan/Priorities are in place
  • Leadership and Management is involved and engaged
  • Performance appraisal plan is in place (pending scale)

When is the Wrong time to plan?

  • During a sudden loss (death/medical emergency, etc)
  • Ad-hoc leadership patterns are apparent
  • When economically challenged
  • Unstable labor base (high attrition, low engagement)

As mentioned the reasons why an organization may address this depends on there specific situation and needs.  We will outline the more common areas people have asked us for help.  The most proactive thinkers look for Leadership succession with in an organization.  Others are more Risk Management savvy and want to protect against a Leadership “Emergency”.  Organizations that find themselves in an Emergency situation often look for an  interim management (Outsourced) solution so here we point out keys to consider.  Lastly many are looking for a departure plan, “how to insure the ship will run when I retire”.  Here we give tips on what to considered and plan for.  If you are uncertain what your business needs are or where to even start, please reach out and C.S.Simons Consulting will be happy to provide some free direction to get you started.

Steps for Leadership succession
  1.  Identify future goals and challenges (strategic plan)
  2. Create model of needs, competencies, skills, experience
  3.  Identify potential successors and assess individual and organizational gaps to              determine developmental needs
  4.  Create individual and organizational development plans
  5.  Measure frequently and revisit models and plans as environment and priorities       shift
Emergency Succession Planning
  1. Identify critical executive functions and responsibilities
  2. Name and train a backup for each function
  3. Ensure that key relationships and contacts are documented
  4. Create and update a binder or digital file that includes key documents such as strategic /operational plans, annual and monthly calendars of organizational activities, etc.
  5. Create a board approved policy and procedure for Emergency Succession
Interim Management option considerations
  1.   Proprietary IP concerns/Legal concerns
  2.   Affordability
  3.  Knowledge transfer/Time to proficiency- Transition production curves
  4.  Minimum contracted time?  (3 months common)
  5.  Support structure with in business/company
Defined Departure issues
  1.   What are our vulnerabilities with departure of our Executive/Owner/Partner ?
  2.   Unique skills of this person … Can they be replaced?
  3.  The “Do-ability” of their job?/ Compensation needed for replacement?
  4.   Management Team strength?  Is an internal successor ready now?
  5.   Should we Consider a Merger/ Acquisition or Restructuring?

 

How to create a Succession Plan

  1.   Identify critical positions
  2.   Identify competencies
  3.   Identify Succession Management Strategies
  4.   Document and implement plan
  5.   Evaluate effectiveness

Some of these steps may seem overly simplistic (which is why they may be overlooked).   A Succession plan may be an insurance plan that is never needed (unplanned departure) or for a certain event like retirement that everyone works to achieve.  Planning to insure there is little interruption in the continuity of business functions, reputation and revenue will positively impact your current customer base, your employee population, and quite possibly your ability to sleep at night!

 

Carpe diem!

Choosing the right Strategy Consultant

From our “Ask an Expert” series-

John asks;

“In your speech you spoke of the importance of Strategic Planning for businesses of all sizes, what should I look for in a Consultant to help with our Strategic Planning?”

Thanks for the question John,

Businesses of all scale need business strategy that focuses on growth or improvements.  Many businesses realize that periodically bringing in a Consultant to help solve a nagging problem or achieve their next milestone is a cost effective way for improvement.  One problem is that a “Strategy Consultant” comes in many forms and choosing the one that “fits” best for your organization can be daunting. 

Some take complete leadership roles and others facilitate your team through the process.  Depending on your business structure some may want a lot of time to become ingrained before determining a path, others may run most of the project by conference calls or group facilitation.  There really is no “Right way” and there are many variables.  To complicate this further, no two businesses are the same so it is hard to look at a Consultants client list as a means to determine their qualifications.  I always recommend looking at their SuccessesHow far have they taken their clients? Ask references if they added value and clarity to the process?  Did they achieve what they were hired to do for each client?  Did they exceed expectations?   If so, Where & How?

Its about the results!

Before you begin your search keep in mind that Strategic Planning is a process and not a project.  It is not a one and done task.  To begin there is a process that most consultants will follow to insure the appropriate information is gathered and considered (see below).  Then after the initial plan is written and launched the process continues.  This is where many teams fail.  I have seen senior management complete a plan and hand it off to a manager (to implement) to then not look at it again for a year.  How to manage the “Change” is often left out in the planning stage.

Using metrics to make adjustments is often JUST as important as the original plan is.

 

So to answer the question – “..the most important thing to look for..” is a combination of….
  1. someone who understands this process from start to finish
  2. has the capability to get you to stick to it (more on that below)

 

As mentioned, here is a quick look at the general process followed in a Strategic Planning process.

  1. Listens
  2. Investigates
  3. Researches – Benchmarks, Industry, Interviews
  4. Considers your resources
  5. Gap Analysis
  6. Provides support for your chosen direction
  7. Develops an agreeable implementation plan
  8. Follows up – Continued Relationship

The first 4 are to understand your problem, your industry, your people and your obstacles.  The 5th step is both analytical and Strategic, and steps 6 -8 focus on defining and insuring success for your organization.                                                                                    LearnMore-Green-Primary-16

Musts for a Strategy Consultant

What to listen for in their pitch and confirm in reference checks.

  • Acts as Partner  – Goes to lengths to learn the entirety of the problem and solves it the way you would, or in an easily adoptable way for your team.
  • Goal oriented – keeps project and team on track.
  • Project planner – demonstrates the ability to plan, organize & communicate to all involved insuring key timelines & milestones are met.
  • Past successes – history of creating solutions to permanently solve clients problems.  Determines root cause of problem for organization.
  • Multi level understanding – has the ability to see problem from all levels of your organization leading to comprehensive solutions and reduces implementation struggles.

 

Bonuses –

A person with a complimenting style for your team.  A leader who perpetually develops, enables, supports, guides, informs, mentors, comprehensive, and displays patience with your team.  (Ask references)

 

Some common mistakes made
  1. More often than not, Strategy “fails” during the implementation phase, not during the planning stage.  Use a decision funnel to insure each tactic created can be implemented properly or you risk failure.  Execution is key!  Make sure whoever is calling the shots has an understanding of all phases of implementation.
  2. Goals set during Strategy session do not follow the “SMART” methodology, thus, even if implemented correctly, they are either not attainable or pertinent.  In each case, time, energy, and money have been wasted with little to no reward.
  3. Change is not associated with efficiency or market study.  Due diligence is needed.  Perform a SWOT, PEST or industry specific analysis.  Insure Change is tied to improvements and not just profit.
  4. Ad-hoc strategy seldom works.  Vet everything!
  5. Insuring resources are available at all levels or risk frustrating your workforce or customer base.

 

Final thoughts

The ability for this Consultant to influence decision makers through the entire process should be evident.

  • You should feel some respect for the consultant
  • You should feel it someone you need at “your table”
  • You should want to listen to them

 

Hope this helps,

Carpe diem!

 

Business PhotoC.S.Simons Consulting specializes in Management & Business Strategy, offering 25 years of successes for you to benefit from.  Offering a Shared Risk Platform – Results Guaranteed or you won’t be billed!

 

 

179 tips to help Cash Flow

Here is a tip that may help your personal and Business Cash flow.  In 2015 there was an Act passed in Congress called PATH. This $622 Billion dollar tax cut has nearly 100 different provisions to help a wide variety of tax payers.

  • the Protecting Americans from Tax Hikes Act

The essence of this act was to help keep more cash in the pockets(or Bank accounts) of Small & Medium sized Business Entities(SME’s) and the average citizen.  An SME’s  is a business of less than 500 employee’s.  What you may want to speak to your Tax professional  specifically about what is called,

Tax code 179

Tax code 179 is about buying or leasing equipment for your business that may be deducted rather than depreciated.  Depending on the expense, it may let you only deduct a % of the expense, but it will still help you keep the cash in your business. This is different from prior years and I have an example below of how to capitalize on this.

There is a list of approved items this code helps and of course there is an additional tax form that needs to filed.  But it may be worth looking into depending what your expenses were in 2015.  Using a one time deduction rather than depreciating these expenses may bring money back that you can use in your cash flow.

Here is a quick look at some of the items this code includes;
Computers and Software
-Office Equipment and Fixtures
-Large Business Equipment and Machines
-Business Vehicles
-Single-Purpose Structures
-Manufacturing Tools
Informational links-

http://www.section179.org/simplifying_section_179.html

A really nice overview pdf created Wolters Kluwer – https://www.bdo.com/getattachment/2ccf64fd-5806-452d-a27b-d976cf8f146a/attachment.aspx

Click here for more information about Cash Flow from C.S.Simons Consulting
Form 4562 is needed for the deduction-

http://www.section179.org/Form_4562_for_2015_Section_179.pdf

 

A quick illustration, thanks to Crest Capital of how this may help you;

...

 

Carpe diem!

Non Profit Marketing takes “S.M.A.R.T.’s”

A Case Study

A couple of years ago while performing a “Market Study” for a well established Non Profit, I learned of yet another way to utilize the SMART Goal methodology.  This Market Study Project had multiple steps that were designed equally for discovery and for future planning purposes.  Discover who the current supporters were, identify opportunities to reach new audiences AND analyse the existing Communications Plan and aide in developing a new, more targeted approach to plan for messaging.

First, we needed data….

For the first phase, three surveys were designed and well received by the region which provided excellent information of current users, lapsed membership, and of non members.  Multiple avenues were used to reach each base and we had nearly  a 40% return rate (which is very good).  Once compiled we had lots of information to use to determine Attitudes and Motivators.

Many reports and presentations later, our clients were still having a difficult time determining who to target and what to say.  They had never looked at this from the scientific side and didn’t know how to generate goals using this data.  Long story short, I realized the group had a very difficult time creating goals because they had never used the “SMART Goal” technique.

Previous goals were to “increase Volunteers” or “Donations”, but with no details on how to know when you achieved them, or even How you achieved them.

My Corporate Trainer background makes me assume everybody knows and uses the Smart Goal technique, but that simply is not so.  Further more, the entire Board of Directors didn’t use this either and as a result created some unattainable goals in past years.  For those unfamiliar SMART is an acronym that stands for Specific, Measurable, Actionable, Relevant(realistic)& Time based.  The methodology is that SMART is used as a project plan to create a goal.  If you can’t think of a way to answer one of these headers, then you risk setting a bad goal that is not achievable.

The Answer?

I offered to Facilitate a “Goal Setting” session with the Board to help create more concrete, achievable goals that the Marketing team could then build a campaign from.  In one afternoon we were able to unite many different thoughts of what direction this NP should focus based on using the data provided by our firm AND by using the SMART methodology.  As an exercise, I used some past goals and illustrated how if even one component is left out of SMART when forming a goal, that it is likely not achievable.  Then I referred to the notes taken in our initial assessment and proved what they were presenting then as problems were the result of poorly written goals.

Wait, ..Written Goals?

Yes, it is very important when first using this model to write down all thoughts and to then present it to the group for discussion.  SMART is an exercise that helps embed this process.  After time, it will become an integrated behavior or way of thinking, but at first give it it’s due diligence and write them down.

Closer investigation showed that certain goals had been too “lofty” and not Realistic.   The end result sounded nice, but how to get there hadn’t really been planned out.  As a group we broke these down to smaller goals that could be accomplished, once that happened it was easier to attach Measurements to them.  Specifying action steps to help achieve each goal were discussed and they realized that “SMART” is also a management tool to determine what progress they were making.

 Our interviews showed that both the ED and the Board had shown some frustration to each other because the previous goal hadn’t been accomplished.  

By following the SMART technique; Management has direction from the Board and the Board has a way to gauge progress.  There had also been a confusion when setting goals for the organization on the relationship  between time and resources.  Most Executive Directors I have met take on far more than they should.  If the Organization needs it, well, they will find a way to get it done.  This creates a problem over time and literally empowers a BOD to take the Time factor out of goal setting.  If the Board doesn’t  know how to assess the ED’s ability to manage time vs resources, then how can they apply it to goal setting?

Time-bound vs Resources?

This may have been the biggest takeaway of our meeting; the need to insure a goal is achievable with in a certain time frame.  Many do not put timelines with goals for a variety of reasons, and I think I have heard them all.  Understanding that time lines must be part of the foundation of a goal is what makes it a goal.  Otherwise it is simply a dream.  Time lines and accountability make it real and coincidentally, they also make them happen.

Our Results

Over the next month, utilizing the SMART goal method this group was able to develop 3 distinct goals to then ask the Executive Director and the Marketing team to complete.  Each goal gave Specific details of what would be accomplished, it defined how it would be Measurable with both metrics and timelines, it outlined Actionable steps similar to a project plan, the entire team felt these were Realistic steps given the mission of the organization and the new data they had from our Market Study and lastly , the Marketing team felt they could accomplish this goal given the Time they were given and resources that were made available for it.

WHEW!

This Board session also highlighted the need for the organization to budget money on an annual basis to support the ongoing needs of Marketing.  Previously no money was budgeted(common), but the ED spent it when needed(also common).  How is this good planning? Budgeting and goal setting should be done at the same time.  Money is a key resource when considering Marketing tactics.  General guideline is 5-10% of annual Revenue.

Almost 3 years later that Non Profit has a dedicated Marketing Manager with an annual budget.  Other non profits in the area are looking to them for advice on Marketing and Membership has grown.  They have an annual process of Goal setting before the Budget is determined for the following year(yeah!).  This has also opened communications between the ED and the BOD.  Our facilitation that afternoon featured the SMART Goal methodology which certainly had an impact on the way this group does business.

Click here to read my blog on how to build a Marketing Plan or Communication Strategy   LearnMore-Red-Primary-16

For a look at other Case Studies  –Click here

Business PhotoC.S.Simons Consulting specializes in Management & Business Strategy, offering 25 years of successes for you to benefit from.  Offering a Shared Risk Platform – Results Guaranteed or you won’t be billed!   ContactUs-Blue-Pill-16

 

Carpe diem!

How & When your Competition uses Consultants

Deciding whether to hire a Consultant can be challenging.  “Will they actually help the situation in the long run?” “Can’t we do this internally?”  Finding the right fit, the time of yours needed to get them up to speed,and insuring that everyone (in both organizations) is on the same path is a lot of work.  Not to mention that this will all reflect back on you, the decision maker, for years to come. These are all valid considerations but for many the process of securing the best consultant for the project is the largest sticking point.

Our survey shows that referrals from colleagues is the most popular method to hear about Consultants.  However many business owners tend to not ask colleagues about this for a variety of reasons, the primary being the competitive nature of small business and they may not want to bring up that they could use some help to business colleagues.

Help is here!

Here we will share observations and best practices on engaging consultants.  These have been collected 2 ways; through client interactions, and a survey conducted by C.S.Simons Consulting in 2015 of Small Businesses/Non Profits who have experience hiring Consultants (Firms or Independents). Our survey focused on when the businesses used a consultant and what they used them for.  Perhaps their experiences may help you.

Nearly 2/3rd s of the businesses in this survey relied on a Consultant with in the last 3 years

 

Who uses Consultants

This appears to be a common practice for businesses with less than 500 employees’ and longevity of over 6 years.  The 6th year is a milestone everyone looks for in business because the closure rate begins to drop after 5 years in business.   But even the businesses with greater than 25 years longevity in our survey showed strong support for using Consultants.  While each business listed here would use them for slightly different purposes, it was evident that there was a correlation between utilizing outside experts and business longevity.

Most common uses found in our survey;

Consultants providing an edge to Operational Effectiveness and Strategy were widely used followed closely by function experts that could be used as an “outsource” option like Accounting, Legal or Marketing.

  

How does your competition use them?

The best time to engage a Consultant is when business is going well.  This provides a very different perspective of the business and true advances can be made in efficiency, product design, or even opening up new marketing channels.  Consultants may also be used to gauge future Capital needs, Strategic Growth Planning or Board Development strategies.

 

When do you need a Consultant?
  • The most common time to engage is when there is a known problem or business seems OK, but it could be better.  The key is to find a Consultant who is capable of diagnosing the “root cause” of the problem(s) which are impacting the business.  In these situations many business people spend too much time diagnosing or misdiagnose the problem and then the situation can go from bad to worse.  To properly assess a situation a consultant may conduct Survey’s to measure loyalties (Customer or Employee), establishing Performance Monitors, or conducting Profitability Assessments to help manage product costs.
  • A Crisis situation is also a common time to call in a Consultant.  Here you need to find the right type of consultant(s) who can quickly assess and impact your situation before major changes take place.  Generally this type of problem will cost you much more money in the long run given the level of involvement you need from the consultant or resources needed.  Some Crisis situations are not avoidable and are thrust upon the business.  Labor issue’s, Regulatory issues, Public Relations crisis to name a few. Depending on the Industry this happens in, the general practice is to have a team of Consultants available to help correct the situation and insure business continuity.

Don’t be fooled by reality TV to think someone may come in and fix your business in 48 hrs!

How do you find the right one for your business?

Where does the problem exist?  One of the most common misconceptions that often lead to a higher expense is the belief that the consultant must be an expert in your industry. Yet over 60% of our survey respondents noted that Industry Experience was the most important factor when choosing a Consultant.  There are times Experts are needed and industry experience is valuable.  My point is to make sure you know what type of problem needs to be fixed before making that determination; Industry specific or general management/business practice.  The more observant as to where the problems are with in the business first and not what industry your are in, will get the problem solved quicker and more economically.  Many businesses over spend when hiring consultants because of this.  Assessment like this can be difficult for many businesses that don’t have tools or resources to do it adequately.  If that is the case, finding a good Business Analysis consultant may be the best first step.

3 Most Important points to consider

  • Do they have the right industry experience to impact your business?
  • Can they share Successes they have with this type of problems?
  • Delivery style that fits your organization?

The most important aspect to finding the “right” consultant firm for your business starts with the initial assessment/interview.  Consulting is a business of relationships and it is never about a quick sale.  This person should take a genuine concern for the situation and your people.  They NEED to be able to influence you and your people, if you don’t feel they add value from the first meeting, you may have the wrong person.  Be prepared to speak to more than one Consultant before choosing.  While both may suggest the same solution, HOW they achieve it for you or through your people may be very different. After Elvis has left the building it is you that will either look great for bringing them in or to be left have to deal with any fall out.

 

The best way to interview a Consultant?

 The single most important part of this process is looking at references or testimonies.  Experience and Knowledge base is important (and expected), but it’s the results and successes the consultant have brought for the client is really what should matter.  What a client has to say on how the consultant delivered the solution, how it was implemented and the ending quantifiable result is what you are looking for.  Websites should be used to gauge authenticity and can give insight on how the firm goes about achieving results with in their specialty.  The last important thing to look for is content.  Do they blog, have white papers or perform public speaking as a way to educate their followers.   Some create content for the sake of creating content.  It helps with Google and may look good but it may lack any real advice or insight.  Saying what has been said by 100 others recently may not add value to your situation.  Consulting is an industry of results.  Making attempts to educate, add value or guide is what you want to look for in your perspective Consultant. There should be an almost immediate impression that this person will solve your problem.

The “Simple” interview method-

  • Don’t feel you need to have the answers – Most of the time consultants are relied on for their analytical skills.  It is not uncommon when first engaging a Consultant to NOT know for what or where you want to use them.  Rely on them to run part of the first meeting and have a very open mind on the process.  Some business people feel they need to “manage” the relationship and always want it to be known they are the client.  Forming a “partner” mentality with the consultant is the best advice I could suggest.  I offer a Privacy Statement upfront with perspective clients.  It is important to feel you can show your consultant any piece of information that pertains to a problem.  The perspective Consultant should establish Trust quickly.  Then just see where the conversation goes.

 

A more organized interview method

  • Having pertinent documents assembled helps significantly.  Many perspective clients have sent me this information ahead of time (after Privacy Statement) which allows a much more focused meeting on what solutions could be offered.  If there are multiple people in the decision process, having them in the same room will often give the Consultant the most accurate picture of the problem to create a proposal from.

 

Contract?

I could go into great length as to how an agreement should look and why you want one to protect your organization, but for the purpose of this article please make sure to include these in your discussions and/or contract.  They protect both parties and detail outcomes.  Here are a few basics;

  • An accurate assessment of the situation to be addressed
  • What is the expected outcome(s)
  • Joint accountabilities
  • Detail any deliverables – systems, training, reports, etc
  • Measurements, Timelines and Milestones
  • Terms, Expenses, Fee’s – included and not included

 

Carpe diem!

 

Business PhotoC.S.Simons Consulting specializes in Management & Business Strategy, offering 25 years of successes for you to benefit from.  Offering a Shared Risk Platform – Results Guaranteed or you won’t be billed!

If you would like to discuss this in greater detail or would like to see more                                               results from the survey mentioned;

ContactUs-Gray-Primary-16

 

 

 

 

Can YOU beat earnings with lower revenue?

Ironically, today’s earnings report from Wal-Mart proves the point I made in my Blog      “Low earnings /Low Profits – What to do?”

I have a love/hate relationship with Wal-Mart.  I often shop their begrudgingly. I would prefer to support a local business, but when I am buying toothpaste my choices are generally a Wal-Mart, Chain Drug Store, or grocery store.  There really aren’t too many local businesses to buy toothpaste from.  Wal-Mart is cheaper, and there are always other items that I get while there.  They save me time and money and there for they are a value.  I support local when possible, but frankly I couldn’t afford to buy as many things if I shopped only local and I am a typical American who wants as much stuff as possible.

Yesterday Walmart announced that 2015 Q4 revenue was down, and they expect very little sales growth for all of 2016.  Same store sales were reported to increase less than 1% in 2015. To insure they can meet or beat earnings, they have decreased operation costs and reinvested in Human Capital, choosing to focus on culture over new market channels.

Announcing the closure of 269 stores worldwide and releasing close to 10,000 workers will surely get a lot of attention.  But Wal-Mart is focusing the narrative on developing its Culture.   Wal-Mart is investing by raising the wages of it workers. This is very strategic since they have a history of Legal and Public Relations issues around wages and practices.  Improving employee engagement will help drive business into their well established retail presence.  I support this strategy, but I think they have a lot of work to do besides raising wages.

Walmart recognizes that the growth of online shopping has impacted brick and mortar and they have already begun testing new strategies to target these areas.  Experiments in the Grocery offerings (Organic Product selection & home delivery), introducing their price matching app (which is awesome), the ever expanding electronics section, and the “No Questions return policy” to name a few will go along way to exceed customer expectations and build loyalty.

So…… sales are stagnant, they are giving nearly everyone a raise, and adding to their operational costs….how is this a good plan?

Well to start, the Thursday announcement also mentioned that they beat earnings and brought in a higher dividend than forecast.  Earnings came in at $1.49/ share on a projected $1.46 and quarterly dividend was .50 on a projected .49.  At the open of today their stock is down ~4% and they have fallen ~27% over the last 12 months.

But they still had a 2% increase in dividends and profit!

What would your business do in this situation?  Can you bring in a higher profit while loosing expected revenue?  Would you give a raise to help increase store sales?

Proper planning, strategy, and vision makes the difference.

Carpe diem!

Low Earnings / Low Profits? What to DO?

Stop – Breathe – Plan

Financial Earnings have been reported lower for 8 quarters in a row for the S&P 500(source). Many economists are weary of another recession even though there are some positive signs.  But at the very least Janet Yellens recent announcement of a “mixed picture” ahead speaks to a challenging 2016 and most Financial Advisors are warning of a volatile year.   Large companies are having to do more with less to maintain their budgeted profit lines and meet earnings projections.

Because of this, Big Business has….

  • less overall revenue
  • less people to do the work
  • less quality
  • less R&D
  • less room for error
  • less money to reinvest in smaller businesses

 

Wall street has had to make changes because they need to keep investors satisfied,..

..but Main Street USA needs to do this to stay open!

It is one thing to look at efficiency to help shave money off production or operating costs, but making adjustments due to drastic loss of Top line revenue or disintegrating Market channels is a different problem that will effect the future of your business.

Sound familiar?

There is no difference between what the larger companies are experiencing verses small businesses or Non Profits.  It is simply a matter of scale, everybody has to do more with less while maintaining stakeholders.  Everybody is concerned how these changes will be noticed by their customer base or how it will effect loyalty and future revenues.

But in order to keep things moving, something has to change!

This is not a preferred business strategy, it is a reaction to the economic situation most industries are experiencing.  Large companies arguably have more “fat” to trim when necessary but small companies like “mom and pops” or even Non profits run lean as possible anyways.

To compete with this environment companies are continually searching for ways to maintain quality, customer counts and funding.

Here are 5 Key Differentiators in a business handling this well.
  1. Proactive Strategic Planning.  Too often smaller companies view this as “Crisis” management that happens after the fact rather than as a precautionary planning tool.
  2. Getting a fresh eyes” mindset to business operations, utilizing efficiency experts, workforce development, and sometimes even a “blow it up” mentality.  If you can’t afford outside help, then utilize analysis tools like a SWOT or PEST to help with direction.
  3. Courageous Leadership.  Do the decision makers have the courage to take calculated risks with business operations or market shifts.  This is scary stuff, but once there is enough data, you need to make a decision.  Make sure you have the right data or input from a reputable source.
  4. Understanding CHANGE Management.  Once you have started something, a change will come, but is it the one you want?  Knowing how to control Change and calculate outcomes takes a proven formula and a savvy leader.  Contact me for segments of my white paper entitled “5 Pillars of Change Management” it will define the key components needed to control Change in your organization.  LearnMore-Light-Primary-16
  5. Having Business Intelligence about your customers/doners/followers.   Savvy companies know who is buying their products and what it takes to get them to buy. Knowing the Attitudes & Motivators is key business intelligence that makes for a much more targeted decision about your audience.  Too often a business focuses on who they want to buy rather than who IS buying their product(s).

Avoid being in a position to make decisions that will hurt your business, its customers and your employees because of lower earnings.  If you feel you need help, call an expert.  You have worked too hard to have to cut what is important.

Stop – Breathe – Plan – Call

Carpe diem!

 

P&L’s – The most important number?

I received a question about  our recent post regarding Financial tools every business needs regarding the Profit and Loss Statement.

The question is…

” Which is the single most important number to help manage your business on the P&L?”

The answer quite simply is the “% Variances” column.   Not all P&L reports even have that so what is it?  To truly have an idea where your business needs to be, you need to start with creating a budget.  Every line on a P&L should have a “budgeted amount”  number in it.  This is the amount you expected to spend to yield the profit you planned.  If you don’t do the work to create a budget, then the P&L looses half of its value as a tool to help your businesses ability to generate revenue.

Many know that to help manage your business you compare the “Actuals” to the “Budgeted” columns for each line.  But there should also be a percentage column next to each of these showing the percent of total revenue that each is, which isn’t as common to find in smaller businesses P&L.  It is important to do this because Percentages reflect day to day execution of the operations in your business.

The VARIANCE column shows the difference between the budgeted and actual dollars spent, which should also have a % Variance column next to it.  This is an excellent “At a Glance” illustration of how you did in that area for the given period (+/-).

The variance dollar columns are great information for when you need to “dig in” and find why an area was high or low, but comparing that areas “actual” percent to the percent of “budgeted” revenue….

is the single most telling number for performance.

Example:

Sales are up, which would likely mean some controllable expenses are up, right? But how much more should you spend to maintain your margins?  Management needs to make sure expenses are still with in the Budgeted percentage of sales to maintain profit levels as expected.  Simply put if you expected to spend 20% of your expenses on materials, you should still spend 20% on materials whether sales go up or down.  This column helps you keep an eye on that and make adjustments if necessary.   Businesses that have a lot of fluctuation tend to run these reports more often (Food, Retail, etc).  This helps you control your product costs.  Granted, this may also mean that profit dollars are down (assuming revenue is down), but at least you maintain product and fiscal integrity.  That is very important which I have a lot to say about as well as how to impact these numbers, but I will save that for another time.

But the SINGLE most important number, one that a Business Analyst or Owner should focus on first is the % Variance to budgeted because it shows so much information.

Call me if you need help with this, my number is at the bottom of our Contact page.

Carpe diem!

Non Profits & Small Business – 3 Keys to Finance Basics

Businesses of all sizes will eventually need to prepare and manage three basic financial statements.  They are included in any comprehensive Business Plan and I will show you how they are commonly used for business strategy and routine Operations Management decisions.  These are the Profit & Loss Statement (P&L), the Balance Sheet, and the Cash Flow Statement.  I admit these can be both intimidating and confusing yet the sooner a business can use these as a compass the sooner they can be financially independent.

They will be asked for by any Business Analyst, Loan Officer, or Financial Advisor of your business so what are they?

Defined

Profit & Loss Statement (P&L) –  Also called an income statement.  This is a consolidated record showing how much you have spent (expenses) and how much you have made in revenue.  The two are calculated showing what your net income is over a specific period of time.  The period of time these show may depend on the industry you are in and typically are either by calander months, fiscal period(typically 28 days), or weekly.  It is also very common to have quarterly P&L showing a consolidated series of numbers that help you determine if it is time to sound the alarm or not.

Balance Sheet – This is a dashboard of your companies overall health.  It provides a summary of the businesses assets, liabilities and net worth.  Essentially the balance sheet tells you what you own and what you owe.  Assets are resources your business controls such as cash, equipment, buildings, furniture, inventory and money owed to you.  Your Liabilities will be the obligations you owe to others such as payroll, taxes,  Accounts payables or loans.  Your net worth is what is left over.

Cash Flow Statement –  This report demonstrates how cash has flowed in and out of your business over that time period.  Typical software programs to produce all of these would be Quicken or  Peachtree if you do your numbers your self (opposed to an Accounting Firm) or for smaller or really savvy businesses Excel works just fine.

How you use themthe 101

P&L – Depending on the scope of your business the P&L Statement can be very complicated or extremely simple.  The key is to have it inclusive of money going in and out of the business over a set period of time.  All expenses should be categorized so that at a glance you can tell why and where they are up or down from a previous period or the “forecast” budgeted amount .  Similar with revenue.  The more information the better because this tool will not only help track history, but it will help you predict future spending in most areas.  The expenses are commonly broken down into two categories; “Controllable and Non Controllable”.  Examples of non controllable expenses would be rent, loans & taxes.  Controllables are pretty much anything you can say “NO” to (much more on that another time).  This report will subtract the expenses from the revenues and show your “net profit” at the bottom.  This is a very important report for the Operations Management team to utilize and if used properly it can be very effective in containing costs and contribute to a positive cash flow for the company.   But it is not all inclusive and needs to be used in conjunction with the other two forms.

Tip – A “best practice” I have all my clients do is when using a P&L is to have all expenses broken down as a percentage of total revenue that is expected.  Manage by using the percentages and not necessarily the dollars on the form.  Ex:  (Forecasted Revenue is always 100%).  Say labor is expected to be 15% of your revenue $.  Then lets say Revenue is down a little.  The manager can either adjust labor or not during that month.  Well if labor comes in at 14% of  projected revenue, you may still be ok in that category.  If labor comes in at 20% because the manager did not use the P&L to make adjustments, then you have lost money.  Same goes for every line on the P&L.  The more information you have, the better your daily decsions could be!

Balance Sheet –  This report is generally broken into a few areas.  Assests will be broken into categories depending on how accessible they are or how quickly you may expect to use them.  “Current or Fixed”  is common terminology.  Current assets, often referred to as “Liquid” means you could use it today if needed (cash, accounts receivables, or short term investments) and are usually listed first.  Followed by Fixed assets which may be a building or equipment you own.  While you could free up money invested in these it may take some time to access it.  Under Fixed assets you are likely to find “Depreciation” which is the amount of money estimated to be used up from the fixed assets. Meaning,  if you had to sell them today, what would they actually be worth?  If you subtract the depreciation from the Fixed assets you will determine how much is available or “net Assets”

Liabilities are listed next and they are everything that the business owes to someone else.  Accounts payable, taxes, loans, wages, etc.  Similar to assets these are also categorized by time frames, although Liabilities are listed by due dates.  If your business has a invoice that has 90 days on it, it won’t be listed on your P&L, but will be listed on your balance sheet.

Both the assets and the liabilities are then subtracted from the assets to determine a businesses “Net worth” or “Owner Equity”.  In short it is a snapshot of what you would have left if you had to sell the business today after you paid everything off that you owed.  Most would agree, it is a good idea to keep an eye on this figure!

Cash Flow Sheet –  depending what type of business you are will determine the frequency in which you use this report.  Any organization that may have an unpredictable revenue stream will rely on it more frequently.  As one Non Profit client put it, “this report essentially shows you how much air you have left”.  This report will not only list what cash is expect to come in and go out of the business, but it calculates a time frame of how long the business could continue should things change drastically.  Generally measured in days weeks or months depending on the size of the Balance Sheet numbers.  In a larger corporate environment this is only reviewed by the most senior level Executives but for Small Businesses and Non Profits, who tend to live “day to day” this can be a helpful report to review quarterly.  Because using just a P&L, like so many companies do, can be deceiving.  It may look like you made money during a specific period but other expenses not appearing on a monthly P&L may come to terms.  Remember the 90 day invoice I mentioned earlier?  Well that may also need to be paid which can throw off your cash accounts.  A Cash Flow sheet would show what will be due and help you plan for it so you don’t become over extended.  As mentioned this is particularly important for many small or seasonal based businesses and pretty much all Non Profits.

As mentioned most software packages on the market will take a lot of the work out of creating these important reports for you.  All it takes is a small time investment to load all the information on a daily basis.  If you prefer to hire an Accounting Firm to get you started, I work with several I would be happy to recommend.  I guarantee that using these standard Financial tools will improve your businesses ability to generate revenue.

For more business basics click here for information on our Business Boot Camp Workshop

Carpe diem!

Ask an Expert – Creating a “Hiring model”

Stephanie asked-

“I need to hire for a new retail venture in 2016.  When I heard you speak, you referred to a “Model” to use when recruiting.  Where can I find those?”

The “model” needs to be created by you specifically for a position or department.  It is a fairly easy process to develop and one that will pay off in the long run.  It helps build a sustainable workforce well suited to help generate revenue.    A hiring model captures the key strengths and attitudes (skills, personality, work experience and even core values) of an ideal candidate for a particular position.  Stephanie you need to literally make a list ahead of time of what will be needed by a candidate to succeed at this job in your environment.  You can then formulate questions for you or your team (open ended ofcourse) to ask during the interview or simply use the “model” as a litmus test when reviewing a candidate.

Let me break these areas down further and show you how I have used them on Hiring Models and or looked for them during Interviews.  Be sure to read my 3 tips at the end!

Skills

Hiring Model -really look at what is needed to get the job done proficiently.  Skills simply illustrate someones capabilities and knowledge base.  If you need a person to be extremely detailed, don’t just look for that skill listed in their work experiences, look for it IN the person.

Examples (customer service, computers, time management, organizational, communication, detailed, analytical, etc)

Interview – perhaps their work isn’t a great example of what they can provide. Lets say they also volunteer and run large events for a charity or church, that takes a lot of organization, attention to detail and coordinating,  so they may very well be capable of performing what you need.  That person may have not brought this experience up because it didn’t seem relevant to the job to them or they thought bringing up religion opened the wrong door.    So listen to what they offer in “icebreaker” questions, because you often get great information you can follow up on.  Asking someone to “tell me about yourself” can provide you very useful information that is technically unsolicited (which protects the interviewer).  People often have many skills that may not be used in past work experiences but may help your business.  You challenge in the interview is to find them!

-The better you know what it takes to complete a given job, and the better you can break it down to a set of skills, the higher the chances of finding someone who can excel at their job.

Personality & Attitude-

Hiring Model  – culture is important and culture isn’t found in your book of Policies and Procedures, it is found in the heart of the business on a daily basis.  Personalities help drive your culture and diverse personalities can either strengthen or break down the teams dynamic.  Personalities and attitudes are an important part of your businesses ability to generate revenue.   We have all been on those teams where either someone else on it became our best friend or we found a person that we couldn’t stand and made us want to leave the job .  So how does it fit in the Hiring Model?  Well if you are adding to an existing team,  you need to have an understanding of the interpersonal dynamics on your team.  What type of person do they want to work with?  While it has nothing to do with completing the job, it has a lot to do with how comfortable that person will be with the existing group of workers.  If the person is uncomfortable or makes others uncomfortable, quality and productivity may go down and turnover may go up.  I am not suggesting clones, but similar or complementing styles.  Building a new team for a new venture like Stephanie mentioned is a great time to build a synergistic team because you are hiring everyone at the same time.   Read a case study where this had a huge impact.

Interview – One great way to assess this is to have a “key” employee(s) interview the candidate also.  If all parties think they can work with this person,  you can feel much more comfortable with the “fit”.  Lastly, as a manager you do not manage peoples personalities you manage or correct their behaviors.   You only get one chance to make a decision based on someones personality and that is in the Hiring process.  Terminating based on personality can get a business owner into legal hot water.

Work Experience

Hiring Model  this one really depends on what job you need filled.  Regulatory or certified level employee’s need a certain level of experience to show they can perform and are competent.   But for most positions, if you focus on a candidates experience you are really focusing on the level of training the past job(s) provided this person and the management staff of each location.  I have seen people work their way through levels of management that weren’t really qualified to even be a supervisor on my team.  Titles are nice but don’t hire primarily on the titles someone has attained.  Many hiring managers falsely assume that experience implies competence.  Competency is what you really need to look for in this category.  In forming your Hiring Mode think about two things;

  1. What do you need this person to be competent at?  Which of the skills you listed will this person need to use most frequently?  Pick the top 2 or 3 and focus on those.
  2. think of the Top companies you may want to see candidates from, or key positions that are similar to what you have available.  You will find particular companies that share Hiring, Training & Development styles with your company, and those typically provide good candidates.

 

Interview – Form questions around how they got those jobs, what they felt they learned while doing them, and how those experiences help them be a better employee today.  Quiz them a little in areas they need to know to do this job to help gauge competency.  Usually in this area you can also get a good sense of what they are like to work with by asking questions around co workers or how they responded to a supervisors feedback.

When assessing professional experiences I always look for progression.  Do they aspire to move up the ladder?  or are they comfortable doing the same thing day in and day out?It is important to match this to your position yet ambition is important to a degree in all candidates because you need your new hire to have ambition in there new position.  Do they seek resources when faced with a challenge or take an easy way out like “just do as I am told” or my favorite “not my job”.  Clearly you need to insure their level of ambition is realistic also, someone who thinks they will be promoted next month may not be what you need!  History WILL repeat itself here I promise.

I strongly recommend questioning about jobs they have had that may not even be pertinent to what you want this person to do.  Ask “how they achieved, why they wanted that, what did they take away from it” and you may be very surprised in what you find.  But do not disqualify someone just because of certian job experiences, this can be a huge mistake for an interviewer.  Sometimes great people have to accept jobs at mediocre companies and often large companies hire and promote people for the wrong reasons, it is just to hard to tell which it is on an application you are looking at.

Lastly, consider how long it may take in the positions listed from a candidate to be competent and what the persons next roll was.  Ultimately think of what accomplishments you would like your candidate to have as it relates to there Work Experiences as a gauge.

Values 

Hiring Model probably the single most important part of a Hiring model in my opinion.  What are the core values of your company ?  Core values should be a guiding force behind all hiring and firing in your company.  You may have 3 or 15 of these, figuring our which ones may be most beneficial to the position you are hiring for can help build a great  Hiring model.

Some examples of commonly found “Core Values”.

  •  If hiring for a service based position, you may want a person to exhibit “Loyalty” or “Passion to serve others”.
  • Someone who will be working with the public and excepting cash needs to be “Customer Focused” yet firm enough  to “Protect company interests” in the event of a small confrontation.
  • Someone in sales needs to demonstrate “Patience” yet assertive and “Willingness to listen” is critical to close a sale.

If you don’t have these printed on your wall somewhere, jot down single words or small phrases ahead of time to help you keep focused during an interview and give others a better idea of what type of person you are looking for.  Another method that works is to have a tick sheet with you when you interview.  Have all the Core Values as column headers.  Every time you feel someone exhibited that value in your interview(s), mark it down to review later.   Get people talking and telling stories about work, school, or even volunteer work  and you will probably find common links.  The more you hear a particular value the more genuine it usually is.

3 tips on matching your model employee to candidates

  1. Sometimes the best employees are the ones with little “work experience” and huge similarities with the values, personality, and attitude you need in this position.  
  2. Skills can be taught, and I would rather teach someone how to do it then someone else doing it.
  3. Training on Values, Attitude, and Personality won’t happen.  People generally don’t learn these, they only conform to company policy.  Having a natural fit will benefit the workplace greatly.  Assuming you have the means (time, resources, systems, etc) to provide skills train, this can help you build a sustainable workforce the helps generate revenue for your business.

Questions?