The Business Adviser

The Wrong Way To Attract New Customers

2011-12-07T18:06:00.004-05:00

All businesses lose some customers through no fault of their own. Customers move, retire, die, etc. You need new customers just to stay even. Therefore, no matter how good your business is today, you need to be always trying to acquire new customers. There is a right way to attract new customers and a wrong way.

The biggest mistake I see businesses making when trying to attract new customers is making a special offer to "New Customers Only." I have seen ads that offer special discounts to new customers, extra free services to new customers, etc. How do you think that makes the existing customers feel?

If I have been a loyal customer to a bank for 10 years and I see an offer for a higher CD interest rate to new customers, how am I going to feel? If I have been a loyal customer to an auto repair business for 10 years and I see an offer of a free oil change to new customers, how am I going to feel? If I have been a loyal customer to a CPA for 10 years and I see a special discount for tax returns preparation to new customers, how am I going to feel?

When customers have been loyal to a business, they deserve the special treatment. First, they feel they should be rewarded for their loyalty. Secondly, as a business owner, you know that you have had a loyal customer. The new customer who comes in for the free oil change may never come back again. Do you want to risk making a loyal, long-time customer unhappy for the chance (and it is only a chance) of getting a new customer?

My advice is to always take care of the known factors first. Take care of those who have been taking care of you. It takes a great deal of good business practices to keep a customer for many years. Don't let all that hard work and effort go "down the drain" on the chance you may get a new customer.

If you want to offer something special, offer existing customers an incentive to refer new customers. That is much more of a win-win situation.

Remember the old saying, "A bird in the hand is worth two in the bush."

Using Your Business Time Wisely

2011-08-23T13:47:00.009-04:00

"What is the best use of my time right now?" Those are the words that I had framed and placed on a wall in my office many years ago. They are powerful words. It is an important question - one that business people should be asking themselves numerous times throughout their day. Am I using my time wisely?

I believe there are two main factors to consider when answering that question. The first involves your focus. Do you - and your employees - spend your time focused on what has the greatest long term effect on the bottom line? Business owners need to focus on the revenue stream. An associate of mine owns a business that publishes a specialized newspaper. When you ask him what business he is in he will say, "I am in the business of selling advertising." He often says that it does not matter how good his publication is if he can't sell advertising. He can have the greatest publication in the country but if he does not sell advertising he will be out of business. I am not saying that he does not want to produce a good newspaper - he does. He has an excellent publication. But it is the advertising that keeps him in business. What do you think the best use of his time is?

The second factor is the direct trade-off between performing a function which can EARN money for your business versus a function that can SAVE money for your business. Let's start by looking at an extreme situation. If you are a professional baseball player for the New York Yankees, would you be smarter to stay home on Sunday to cut your grass so you do not have to pay the landscaper $100 or are you better off to play in the baseball game and earn the salary that a player makes for one game? The answer is obvious.

Many business owners are so concerned about not paying for a service that they do the work themselves. By performing the service themselves, they miss the opportunity to earn two, five or ten times as much money by making a sale. Often, I hear the excuse that they are doing "paperwork at a time when they could not be meeting with a customer anyway." But the question is still the same, "What is the best use of their time?" Maybe they should be writing or revising their marketing plan. Maybe they could be rehearsing their next sales call. Maybe they could be planning product improvements. Maybe they could be analyzing the competition. The answer to the question is "Perform the function that will produce the best long term results to the bottom line.

Sometimes the business owner spends time supervising a function rather than doing it herself. She has hired someone else to do it. The same analysis is required. Is she better off out-sourcing that function so she does not need to spend time supervising it or dealing with its problems? Even though the out-sourcing may cost more than hiring someone, the business owner must consider her time supervising that function as well as the other resources that the functions consume from the business.

As much as we want to take pride in what we produce and as much as we dislike paying others, we need to realize what adds to the bottom line. Many people believe that Studebaker made a fine quality automobile. Have you driven a Studebaker lately?

What is the best use of YOUR time RIGHT NOW?

When to Get Help for Your Business

2011-08-11T16:09:00.005-04:00

Most people only think about their health when they are sick. Fortunately, some of us are now beginning to learn to think about living a healthy lifestyle so we do not get sick. My message to you is that the wellness theory that applies to our personal health also applies to our business health.

As a business consultant, I get the vast majority of calls from clients when their business is sick. My phones rings when their sales are down, when their costs are too high, when their employees are not performing, etc. etc. etc. In some cases they call me when it is too late. I have had the misfortune of having to tell clients that it is too late for me or anyone else to help them. It is time for them to close their doors for good.

My advice to you is this. Just as it is important for you to live a healthy life style and to see the doctor for your annual physical BEFORE you are sick, the same is true for your business. The best time to call me (or anyone else for help) is BEFORE your troubles begin. We can look at what needs to be done to keep your sales from going down or your costs from going up. We can develop programs to keep good employees and to keep them motivated. We can do the things necessary to grow your business.

My business has increased significantly since the recession started. Why? Because when times were good, everyone was happy. No one was concerned about the health of their business. They were playing golf, fishing, and on vacation. No one felt that they needed any help. My, how times have changed.

Not only are times of prosperity the best time to prevent problems, but it is also the least expensive time to get help. Just as it is less expensive to pay an attorney to review a contract before you sign it rather than pay him or her to try to get you out of a bad contract, it is also cheaper to pay a consultant to review your business practices when times are good than to pay him or her to try to dig you out of a hole. And of course, when times are bad, there is always the issue of even having enough money to pay for help.

Don't wait until it is too late. Keep yourself and your business as healthy as you can.

From Employee to Competitor

2011-06-18T12:09:00.008-04:00

Business owners get many surprises. In my experience, the two biggest surprises - and the ones that hurt them the most personally – are (1) employee embezzlement, and (2) the employee who becomes the competitor. This posting is about the second item – the employee who becomes your competitor.

Have you ever noticed how businesses that are in the same industry seem to be in the same geographic location? Why does “Silicone Valley” exist? Why are all of these businesses in the same geographic location? The answer is quite simple. Employees leave their employer and start their own business “down the street.”

Here is the typical scenario. An employee sees the success of the owner. The employee has worked at the company for several years. She knows the product or service and the industry well. She wants to stop making the boss wealthy and start making herself wealthy. In many cases she feels she “runs the company” because the boss is always golfing or on vacation. One day she walks into your office and says, “I am giving my x days notice. I am starting my own business.” You can’t believe what she just said. She has worked for you for ten years. She has been to your children’s birthday parties and graduations. Now she is telling you that she is going to try to take business away from you? How can she possibly do this to you?

If you are a business owner and this has not happened to you yet, be prepared. It may. Although you can’t stop this from happening, you can make sure you have taken the necessary steps to minimize the effect.

First, make sure you do not lose contact with your customers. I am NOT saying that you should be the only one that talks to your customers. There is a fine line between keeping contact so they do not follow your employee to a new business and having the customer so dependent on you that you will never be able to sell your business. Encourage your customers to deal with your employees but never let then forget who you are. Have lunch with them. Play golf with them. Take them to the baseball game. In other words, socialize with them but let them place their orders through your employees.

Second, know what to say to your customers. Have a plan in place so you are not "on the defensive" and not acting on emotion. In many cases, the ex-employee has started working on his new business BEFORE he gave you notice. In addition, he probably contacted your customers and told them what his plans were in hopes they would become his customer when he opened his new business. The sooner you contact them the better. Do NOT say bad things about your ex-employee. Always talk about the positives of YOUR business.

Third, be prepared to compete. In my experience, the first thing that the employee says when he leaves and starts his business is, "I can do it just as well and SELL FOR LESS." Of course, competing on price is a mistake. In addition, chances are very good that the ex-employee has no idea what his costs will be. Nevertheless, he will sell for less. If you don't want to reduce prices (and you shouldn't), be prepared to let your customers know why they should continue buying from you at the higher price. You need to let them know why your product or service is worth the price.

Some business owners think that because their emloyees have signed non-compete agreements that this can never happen to them. I STRONGLY advise you to consult your attorney about any non-compete agreement. Many do not hold up in court.

You may never have an employee leave and become a competitor - but you do need to be prepared if it does happen.

Changing Your Business Ideas

2011-05-15T15:46:00.011-04:00

Can you change? You know your ideas are right. You believe in them. You just know they will work - someday. You just have to fine-tune them - bigger, faster, more, less, smaller - whatever it takes to make those ideas work.

The real truth is none of us have the correct answer for every situation. Unfortunately, we have developed what we believe to be the best solution and we keep using it over and over again. Even when it has never worked. Because we have been correct on many other matters, we feel we just have to be correct on this one as well.

It is difficult to swallow our pride and admit that maybe this time - maybe on this issue - maybe on this employee - maybe on this vendor - or whatever the situation is - maybe this time we are WRONG.

So what should we do? I believe there are five important steps. First, just as an alcoholic must admit that he/she is an alcoholic before he can solve the problem, the business person must do the same. Admit your idea or method is wrong. Say it a few times out loud. "I AM WRONG." Write it a few times. Make sure you believe and understand that you made a mistake. It does not make you a failure. Not even the greatest hitter in basball got a hit every time he went to bat. No quarterback completes 100% of his passes.

Second, review your objective. Make sure it is what you really want to achieve. Don't try to fool yourself. Do you really want to increase your sales force or does more sales people mean more headaches for you? Do you really want to open another office or does that mean you will have to travel more? Do you really want to expand your product line or does that mean more manufacturing problems that will keep you awake at night? BE HONEST WITH YOURSELF.

Third, develop the new method, process, solution or whatever you want to try. GET HELP if you need it. After all, if your last attempt was not successful, maybe you lack knowledge or skill in this particular area. It is not a sign of weakness or failure to get help.

Fourth, make sure everyone involved knows what the objective is, knows how to execute their tasks, and understand their responsibilities. Train, train and train some more. No team wins the championship without good coaching and plenty of practice. Finally, make sure everyone knows the consequences of not performing their tasks properly. If the team gets a trophy and bonus for coming in last, there is no incentive to come in first.

Changing a process or idea that you have believed in (and probably developed) is not easy. You need to leave your comfort zone. If you want to be successful, it is something you must do.

Being Prepared for Changing Markets

2011-04-05T08:33:00.015-04:00

In December of 2008, I posted an article discussing the importance of being prepared for change. In that posting, one of the questions I asked was, "What will replace the TV remote control in five years?" Well, here we are two years later and we can change channels on our TV using our smart phone or IPad. If you manufactured or sold TV remote controls, would you have been ready for the change?

I remind clients constantly of the need to be prepared for changes in their markets. I am not saying that every market will go away, but during my 41 years of business experience I have seen some markets disappear and some significantly decrease in size.

There are business owners who say they are not worried because they do not sell a high-tech product. You need to keep two factors in mind. First, technology is not the only factor that makes a market shrink or disappear. Changes in lifestyle, trends, demographics and government regulations are just some of the other factors. Men buy fewer suits and sport coats today because dress is more casual than it used to be. Country clubs and fine dining restaurants are going out of business because of changing lifestyles.

Secondly, some products which were never associated with technology in the past, suddenly become part of the technological age. For example, until the early 1990s the words "golf equipment" and "technology" were never used in the same sentence. For many years, golf clubs and golf balls remained the same. Now, we use technology to change many factors of the design of golf equipment to make the game easier for both the pros and the amateurs.

Here are a few questions you should ask yourself so you can be prepared:

Has the market for my product or service been stagnant for the past five years?

What markets can I easily enter based on my company's technical and marketing expertise?

Can I easily exit my current market without having a large quantity of excess inventory and equipment?

Can my employees be easily trained to work in the new market?

How can I quickly get the resources and training I need to be profitable in a new market?

I am sure that you can think of more questions that apply to your particular product or service and industry. The key factor is to anticipate - think ahead. Being prepared to change markets may just be the one thing that saves your business.

Good Communications = More Business

2011-02-22T18:14:00.009-05:00

Many business people have been caught in a speed trap. I am not referring to a speed trap that catches you speeding in your car, but rather the speed trap that causes you to communicate as fast as you can rather than as well as you can.

Because many people use their computer and various mobile devices to communicate, they tend to answer quickly and to "say" as little as possible. Now I am certainly all in favor of quick responses and using as few words as possible to convey your message, but the key is that you must convey your message.

I have kept track of emails that I have sent within the last three months that have contained multiple questions. Almost 60 of the responses did NOT answer all of the questions. Naturally, that causes me to send another email and requires another response - which wastes everyone's time.

I recently sent an email to a client informing her that I was still waiting on sales information from her so that I could continue working on her marketing plan. I asked when she thought she would send it to me. Her response was, "Looking forward to reading it."

Why do people communicate in this manner? Although I must admit I have not studied the problem in great detail, my assumption is that they send emails, text messages etc. while they are in a meeting, watching their kids play ball, eating lunch, watching TV, and even driving. They are not focused on the message and the required response. Secondly, it takes a bit longer and a little more effort to type/text your message than talk. They don't want to take the time or make the effort.

Not only does this situation cause everyone to waste time, it makes the person look extremely unprofessional. Focus on the message. Formulate your response. Send a complete response which can be understood by the recipient. In other words, communicate fully and be professional.

Do You Know Why Your Customers Buy From You?

2011-02-03T20:45:00.008-05:00

Do you REALLY know why your customers are buying from you? We all would like to think that it is because our product and service is better than the competition. But the truth of the matter is, our customers may not be buying from us for that reason at all. If we are going to be successful for a long period of time, we need to know the real reason that our customers buy from us.

Believe it or not, customers buy from businesses for a variety of reasons that may have nothing at all to do with quality, service or even price. Here are some examples of why customers buy from particular businesses:

Location and convenience: The business is close to work or home. If the place of business changes, the business loses those customers.

Lack of knowledge: The customer does not know what other businesses have to offer.

Laziness: The customer is too lazy to do the research to find a better source.

Tradition: The customer's parents always bought from this business so he does also.

Keep the family happy: The customer's children like going to this business so that is where Mom & Dad take them.

Habit: The customer continues to patronize a business even though the quality and service has declined.

Peer Pressure: All my friends go there so I do too - even though it is not my first choice

I am sure you can probably think of many more.

The important issue is that you know WHY your customers are buying from you so you can make sure you do the things necessary to keep them as customers if ....... you move your business .... or if their children go away to college .... or if their friends go somewhere else .... or if they learn about your competitor ..... etc., etc., etc.

How do you find out? Ask them. If you are in a business which has a small customer base, you can arrange customer meetings where you can talk one-on-one. If you have a larger customer base, you should arrange small group meetings (perhaps five to ten at each meeting) with those 20% who constitute 80% of your sales. You can use a written survey or a telephone survey company for the 80% who make up 20% of your sales.

The time to learn is now. My experience has been that once a customer leaves, he or she will seldom give you the real reason. It is much easier to talk to an existing customer and ask them what he or she likes about your business and what you can do to make sure they remain a long term customer.

Be prepared because you may not only be surprised but you may not like the answers you hear. Nevertheless, the important thing is to get the truth and then do what is necessary to maintain a long term business relationship.

Why New Businesses Fail

2010-12-05T19:42:00.013-05:00

We hear many reasons why new businesses fail within the first few years. I was recently asked for my opinion. My answer is quite simple - lack of preparation.

No one would expect to perform with a symphony orchestra without having studied with a great teacher and spent years practicing. No one would expect a football team to win a championship without good coaching and a great amount of practice. Yet people go into business every day knowing absolutely nothing about running a business. No coaches or teacher. No plans. No business knowledge. Why? Because they don't know what they don't know.

I asked a person who was one week from opening a restaurant, "How many people do you have to serve daily at your expected average check size to break even?" I didn't get an answer. I got a blank stare. He had no idea what I was talking about.

I asked a person who had used an online service to set up his LLC if he had an operating agreement. He did not know what that was.

One lady who had no business checking account said to me, "Why does my corporation need a checking account? I am the only stockholder so it is all my money anyway."

I could go on and on. So why didn't they ask for help when they decided to go into business? Since they don't know what they don't know, business looks so simple from the outside. Make or buy a product. Sell it. Put the money in your pocket. That's it. Simple.

You could ask the very same people if they would expect to be able to play the violin with a great symphony orchestra without ever having had a lesson and practiced for hours and hours and hours, and they would say, "Of course not." Neither would they expect an NFL football team to win a championship (or even one game) if the team had no coach and had never practiced.

How can I convince someone to get help BEFORE they go into business? How can I convince businesses that are barely surviving to get help before they are forced to close their doors? I am afraid that is one question I can't answer. I have no idea. Maybe their ego gets in the way. Maybe they are afraid help will cost too much. Maybe they don't know who to ask. Maybe it is a combination of factors.

Are there businesses that become successful that do no preparation? Yes. How can that be? Perhaps they learn quickly and have enough money to operate while they learn. Perhaps they are lucky? I don't know the answer to that one either.

I do know that there is nothing that you can do that will guarantee success and nothing that you do that will guarantee failure. However, good preparation will certainly put the odds on your side.

Be a good friend to someone you know who wants to start a business. Tell them if they want to play the violin with the symphony, they have to get a good teacher and learn to play well.

Who Should I Hire?

2010-09-12T19:04:00.007-04:00

Should you hire the person with great technical expertise and experience in his/her field or should you hire the dependable person with a good work ethic and high integrity who has no technical knowledge whatsoever? The answer in my opinion is quite simple. What is easier to teach - technical knowledge or dependability, work ethic and high integrity?

Often I hear a client say, "I just interviewed a wonderful person - hard worker, very dependable, great references , but no experience in my area of work." They go on to say, "I won't hire him/her because he/she has no experience in my field." My response is, "You have just found a terrific potential employee. Hire him/her." If a person has the ability to learn and the willingness to learn, you can teach a person to be an electrician, programmer, accountant, etc. much more easily than you can take an undependable or lazy person and turn them around.

My first job as a manager was the position of MIS manager, or as we call it today, IT manager. The second position for which I hired someone was a computer programmer. I hired a person, Chris Miller, who had never written a computer program. However, I knew that Chris would be an excellent employee and programmer. He was dependable and a very hard worker. He was a team player. He had high ethical standards. He had the ability and willingness to learn. He was an excellent employee.

With Chris, I never had to worry about excuses. He always did what he said he was going to do. He was on time. He tried his best. He worked until the job was done. Those are traits that are MUCH HARDER TO TEACH than to teach someone to be a computer programmer - or any other discipline.

It would be wonderful if you find someone who has everything you are looking for in an employee. Chances are you won't. So if you have to choose from among certain qualities, choose those that are most difficult to teach (or change). Choose the BEST PERSON - dependable, high ethical standards, good work ethic, team player, etc. Don't sacrifice those qualities for someone who has good technical skills. If the job candidate has the ability and willingness to learn, you will have a great employee.

Be Successful in Business - Think like Andrew Carnegie

2010-07-25T14:46:00.014-04:00

Here is a multiple choice test. What is the inscription on Andrew Carnegie's tombstone?

A. Here lies a man who hired the least expensive CPA, attorney and
business advisers that he could find.
B. Here lies a man who thought he knew everything so he never
asked for help.
C. Here lies a man who knew how to enlist the services of better men than himself.

If you answered "C" you are correct. Mr. Carnegie was smart enough to know that not only are two heads better than one, but that the "second head" should be the smartest one you can find.

So often business owners and managers try to go it alone. They either see asking for help as a sign of weakness or they consider paying for quality help as being a cost they just do not want to incur. The question I always have is, why do business owners and managers think that they never need help? Why do they think they know it all?

Check the website of your favorite NFL football team. You will see listed numerous coaches, coordinators, trainers, scouts, etc. They are all there to help the team win. Professional golfers have swing coaches and sports psychologists. Their job is to help the golfer win.

Do you really know it all? Is your business as profitable as it can possibly be?

To be as successful as you can be in business, you should always surround yourself with the best people you can find. Hire the best employees. Saying that you will not hire someone because they are overqualified is simply nonsense. If you had three hall of fame outfielders on your team, would you not still want a fourth if you could get him?

Associate with other successful business people. Being around other successful people will enable you to hear their ideas and philosophies. They will help you grow as a business person.

Obtain the services of the best attorneys, CPAs and business advisers. The best are worth their fees. They can charge high fees because they are the best. Their advice and consultation will enable you to make much more than they cost you in fees.

If you want to be as successful as Andrew Carnegie you must think like Andrew Carnegie. Enlist the services of the best men and women you can find.

Developing Better Ideas For Your Business

2010-07-05T08:49:00.005-04:00

We have all heard that old definition of insanity - "Doing things the same way over and over again and expecting different results." Despite knowing that, many business owners continue to do things the same way, or perhaps with some small adjustments. When that happens and you are not achieving the results you desire, it is time to go to what I call Zero Based Development.

You are most likely familiar with zero based budgeting. Zero based budgeting says that you do not start with last year's budget and add or subtract an amount or percentage. With zero based budgeting, you throw out last year's budget and every line starts at zero. You develop your budget from that point.

The same should be true with your procedures, practices and policies. When most business owners do not achieve their desired results with their current procedures, practices or policies, they try to make their current ones bigger, faster, or use them more often. When an advertising program is not working, they assume they need to make the ad bigger or run it more often. When a motivational program is not working, they assume they have to make the reward bigger.

In most cases when you are not getting the results you want, it is time to STOP the current practices and start all over again. Start from ZERO. Develop an all new program. As another old saying goes, "Stop beating a dead horse."

Don't let your pride and ego get in the way. Yes, you thought it was a great idea. Yes, everyone said it would work. However, it didn't work. Sometimes it is best not to even worry about why it didn't work. You may never know. In addition, at this point it is better to spend your time developing a new program that has a better chance of success.

Always set a time objective when you develop any program. Select a reasonable time in which you expect a program to achieve the desired result. It you are not sure, ask an expert. It is better to pay someone a small amount of money than to waste a large amount of time and money waiting for something to materialize that never will.

Remember, to keep away from that definition of insanity, consider Zero Based Development. It may be the answer for you.

What Do I Need to Do to Start A Business?

2010-05-23T21:02:00.011-04:00

One of the two questions that is asked of me the most is, "What do I need to do to start a business?" Ninety-nine percent of the time, what the person wants to know is how to register a name, set up an LLC or corporation, etc. What I answer surprises them. My answer is "You need to (1) find out if there is a market for your product or service and then (2) determine how you are going to get that market to choose you instead of your competitors."

One of the frequent mistakes I see is people starting a business without knowing anything about the market. The novice assumes that since she likes the product that she intends to sell, there are enough others who like it as well. Have you ever been to dinner with someone who says, "My meal is wonderful. Here, try some. You'll like it." That person assumes that you will like the entree because she likes the entree. Many people make that assumption when starting a business. Furthermore, she assumes that her hard work will be enough to get people to buy from her instead of her competitors. I wish it was that simple.

I always advise clients that before they do anything to start a business, they need to do market research to determine (1) whether a market exists and (2) whether or not the market is growing, stagnant, or shrinking. I often have people tell me, "Of course there is a market. All of my friends and relatives say they will buy from me." First of all, I know from experience that they will not live up to that and secondly, your business won't survive by just having your friends and relatives as customers. Without a market, there is no business.

Once you have done the research and determined that there is a market, you need a marketing program that will convince that market (or a good percentage of that market) to buy from you. Just because you make it, does not mean they will come. There have been many businesses that made wonderful products, high quality products, low priced products, or made the first product in their industry, but are no longer in business. Just running an ad that says you are the best, biggest, fastest, cheapest, or whatever, is not a marketing program.

If you do not know how to develop a good marketing program, hire an expert. Marketing brings people to your business who are interested in buying your product. If you don't market properly, no one will come to your door. If you invest in a good marketing program, you will receive a good return. The key word is "good." Therefore, let me repeat. If you do not know how to develop a good marketing program, hire an expert.

So before you worry about a name for your business or how to register it, before you decide whether to be an LLC or S-Corporation, before you start shopping for office furniture and computers ......... determine if there is a market for your product and how you are going to get a big enough percentage of that market to buy from YOU.

Use Your Business Skills and Talents Wisely

2010-03-05T19:50:00.005-05:00

If you had a choice, would you rather earn 10% on $100 or 10% on $1,000? That's an easy question to answer. What about earning a return on your skills and talents? Do you spend your time wisely when using your business skills and talents or do you try to save money by doing things in your business which you should be paying someone else to do? The principle of earning a return on a larger amount of money is the same as earning a return on your best business skills and talents.

Often I see business people spending their time very foolishly. A business person who is a great sales person will spend hours and hours trying to do the accounting for her business in order to save the cost of paying a bookkeeper instead of hiring a bookkeeper and spending her time selling. A very skilled craftsman who does not enjoy sales will spend his time trying to sell instead of hiring a good salesperson and spending his own time on his craft.

"But, " you say, "even though I am not good at accounting and it takes me an extra long time, I do the books in the evening when my business is closed or at times when I can't call on my prospects." My response is that is the time you should be planning your sales calls. Focus on your strengths. Get the return on your best skills and talents.

I use sales or a skilled craft as an example but the theory applies to all lines of work. DO WHAT YOU DO BEST AND PAY SOMEONE ELSE TO DO THE REST.

Many start-ups say they just don't have the money. Then perhaps they should have waited to start their business until they had the necessary funds. I am sure that you have heard that one of the reasons (if not the main reason) that most new businesses fail is undercapitalization. That means they started too soon - before they had enough money to operate the business until the business becomes self-sustaining.

There is no law that says we have to improve our weaknesses. It is often best to NOT try to improve your business weaknesses but instead to pay someone else to cover that area and for us to improve (get the return) and concentrate on our strengths.

Read my opening question again. Use your business skills and talents wisely and you will have a better chance to grow your business.

Do You Know Why You Are Making Money?

2010-02-10T20:32:00.004-05:00

When sales or profit are decreasing, do you start paying attention to the details in your financial statements? Did you ignore the details when sales were increasing and profits were fine? Have you vowed to pay more attention in the future? If you answered “yes” to these questions, you are like many business owners – large and small.

It is typical of many business owners that when business is good, they tend to ignore the details in their financial statements. Am I spending a bit too much on office supplies? Who cares? I have plenty of money in the bank. Is the annual company party more expensive than usual? Who cares? I have plenty of money in the bank. Do I have more employees than I need? Who cares? I have plenty of money in the bank.

Oh No!!!!! Suddenly there is no money in the bank. Cut costs immediately!!!!! Turn off the lights. Lay off some employees. Print on both sides of the paper. Cut costs !!!! Cut costs !!!! Cut costs !!!!! What happened? Why is there no money in the bank?

It's too late. You should have been doing two things when you were making money. First, you should have asked, “Why am I making money?” My brother’s favorite saying is this …….. “If you don’t know why you are making money when you are making money, you won’t know why you are losing money when you are losing money.” How true.

During good times, most business owners never ask “why?” They simply assume they are making all of the right decisions. They think they are doing a good job. Maybe they are. Maybe they are doing a great job of managing their business …… BUT ….. they need to be sure. You need to ask these kinds of questions:

Am I making money because of lack of competition?
Am I making money because of a boom in my industry?
Am I making money because of one super sales person that I have?
AM I making money because my product is a fad?
etc. ..... etc. ..... etc.

Secondly, you need to pay attention to the details even in good times. Some businesses, like individuals, tend to overspend instead of save when times are good. Since they believe that their decisions are the reason for making money and they will certainly continue to make the same kinds of decisions, then they will make money forever. Who cares about spending? Have you used a UNIVAC computer lately? Have you flown on TWA airlines recently? Did you drive to work in your Studebaker today? All of these companies (and many more) made money at one time. Today they are out of business.

The message is this …….. know why you are making money and be as careful with your spending when you're making money as when you are losing money. Don’t wait for the next recession to start saving, cutting costs, and paying attention to every line on your financial statements. Start NOW.

What Did You Learn From This Recession?

2009-11-01T09:21:00.001-05:00

There are those who say you should never look back, only forward. I disagree. Looking back can be very valuable when you are learning from the past. The question every business owner and manager should be asking is “What have I learned about running my business during this recession?”

A good analysis will enable you to perform better in the future. So how do you analyze the situation? Here are a few questions that will help you.

Did I anticipate a recession and when it could start? You may wonder how you can anticipate a recession. Once again, look back. A quick review of previous recessions will show that our economy goes through cycles. When we are in a growth cycle, consumers and businesses tend to think that the growth will last forever. They tend to over-borrow, over-spend, etc. This causes some kind of artificial boom, such as the dot-com boom or the housing boom. When everyone realizes that the boom item (such as housing prices and the mortgage supply) is inflated, then spending, borrowing and everything else stops and into a recession we go. If you look at the years that past recessions started, you can get a good idea of the length of each growth/boom period. You may not know exactly when that is going to occur, but you will have a general feel for the potential start and be better prepared.

Did I respond quickly to the recession? Did you continue on your merry way even though you knew the economy was slowing down? Did you find yourself reacting when it was too late? I can’t predict the future but I can guarantee you this will not be the last recession our economy will experience. Therefore, you should have a “recession plan.” Based on what worked and what did not work for you during this recession, develop a plan so you will be ready for the next one.

Did I only make short-term decisions? Sometimes during a recession, we make decisions to cut costs that save us money now, but hurt us for the future. Did you lay-off your best employees? Did you cut your marketing too much? Did you cut ties with valuable suppliers who may not give you favorable terms in the future? Take a hard, realistic look at the decisions you made and determine what you should have done differently. Make that part of your recession plan for the future.

I think we all agree that we should learn from our mistakes. The difficulty that some people have is admitting that we have made mistakes.

Be honest with yourself. Analyze the past carefully and thoroughly. Develop a plan and be ready. Another recession will come.

How to Set Prices

2009-09-19T18:32:00.008-04:00

Business owners and managers make a lot of difficult decisions. Setting prices falls into that category. Fortunately, there are only two factors that need to be considered when setting your price - (1) margin, and (2) what the market will bear.

Margin (or margin contribution) is what is commonly called "gross profit." Gross profit is the difference between selling price and the cost of goods sold. It is the "contribution" that you have to cover overhead and (hopefully) have enough left for profits. Here is an example. If you sell an item for $10.00 and it costs $3.00 of material and $2.00 of labor to produce, your cost of goods sold is $5.00 and your gross profit is $5.00. For each item that you sell, you have $5.00 to put toward paying your overhead and for profits.

Your overhead (rent, insurance, utilities, etc.) stays basically the same each month. Assuming your cost of goods sold per item stays the same each month (your supplier does not increase the price of the material and you do not give any wage increases), your gross profit goes up or down based on the volume. Thus, the first area to examine is how many items you need to sell at a $5.00 margin or gross profit to cover your overhead. If your overhead is $5,000 per month, you would need to sell 1,000 items to break-even.

That's arithmetic. It is the easy part since your costs are a known (or easy to forecast) factor. The difficult part is determining what the market will bear for a price. Are there 1,000 customers every month who are willing to pay $10.00 for your item? ......or are there 2,000 customers willing to pay $7.50 every month? ...... or 5,000 customers willing to pay $6.00? How many customers are willing to pay MORE THAN $5.00 (your cost of goods sold per item) for your item? That is the difficult question.

If you are selling a product or service that is currently being sold by other companies, you know what their customers are paying. That may make setting the price easier, but your challenge becomes getting those customers to become your customers.

If you are selling a new product or service, setting the price becomes more difficult. You need to do some research. You may need to take some surveys. You may want to compare the features and benefits of your product with the closest existing substitute and then adjust accordingly.

When you finally arrive at a starting price, it is wise to start a bit higher rather than lower. It is easier to reduce a price to generate more sales than to increase it to create more margin. If your price is too high, customers are faster to respond to a reduced price. If it is too low, you may lose too many customers when you increase the price.

Unfortunately, there is no exact formula for setting a new price. Some trial and error is involved. Just remember, it is better to err on the high side.

Those are my thoughts on setting prices. I welcome your commetns.

Don't Apologize When You Increase Prices

2009-08-22T13:44:00.008-04:00

Don't apologize when you increase your prices. Businesses increase prices for two main reasons - either their costs have increased so they need to increase prices to maintain margins, or the business believes that the current prices do not adequately reflect the value of the goods or services they are now providing. So there is no need for the business owner to be defensive and to apologize.

I have often seen letters from suppliers that begin with an apology. "I am sorry to inform you that due to increased costs, we find it necessary to increase our prices." Why do they feel it is necessary to apologize for wanting to make a reasonable profit? Why apologize when you want your price to reflect the value of what you supply?

First of all, no one really cares about anyone else's costs. When you buy a car, do you really care about how much the dealer is paying in property tax? If you are getting a new roof for your house, do you really care about the workers compensation premium paid by the roofing company? Of course not. You are concerned about getting the most value for your dollar. Most people choose products based on whether or not it brings them the value (or pleasure) that they want. Just because a person can afford a $50,000 car does not mean they will buy a $50,000 car. The $25,000 extra that they can afford to pay for buying one car instead of another, may not bring them $25,000 more value (or pleasure or satisfaction - whatever term you choose to use). Thus, no one is willing to pay more just because the seller's costs have increased. So why even talk about your costs.

My advice to clients is to notify clients in a positive manner not a negative manner. Let clients know that you offer a product that is certainly worth what you are charging. Tell them that based on the value (quality, special service, warranty, etc.) that you provide, you are now increasing your prices to reflect that value. That's it. No further explanation is needed. If they agree, they will continue to buy from you at the higher price. If they do not feel that your product provides a value equal to the price, they will not continue to buy from you - regardless of your increased costs.

Be positive. Be direct. Be bold. You need to make a reasonable profit and you need for your prices to reflect what you offer. That's my opinion. Please feel free to express yours in the comments section.

Expand Your Markets to Grow Your Business

2009-06-28T19:46:00.006-04:00

You don't need to expand your product line to grow your business. You can grow your business by expanding your markets. It costs less and the rewards can be great.

Business owners often think that to grow their business they need to add more products or services. While this may help, it can be difficult, costly, and sometimes even confusing to customers when you have too large of a product line. Thus, your alternative is to sell your current products or services to new markets.

Here is a good example. Dave Hill of A-Pro Home Inspection Services inspects homes mostly for buyers and occasionally for sellers. That is what the great majority of home inspectors do. To grow his business, Dave did not add a new service, he simply decided to perform the same service to other markers. One market is owners of newly constructed homes that are still under warranty. Dave inspects those homes before the warranty expires. That lets the owner know what he or she should have the builder repair before the warranty expires.

Dave also inspects homes for renters. Sure, the landlord will pay for repairs if the renter moves into the house and something needs to be repaired. But what renter wants to move into a home that is in constant need of repair? Dave's inspection can help a renter choose a property that needs little or no repair. That certainly improves living conditions for the renter.

In addition, Dave does inspections for homeowners like me - those who know little about home repair and would like assurances before they purchase a new roof - or before they have their basement waterproofed - or simply to know that they are paying a reasonable price for the service they are about to purchase.

Dave didn't add any new products or services to his business. He simply found new markets for his existing service. That is a wise move for Dave and for many other businesses as well.

Before you decide to spend the money to increase your product line, or before you decide to spend more marketing dollars to sell more products or services in your current market, do what Dave has done. Look at new markets. The rewards can be great for a very low cost.

That is my suggestion. I welcome your comments and suggestions as well.

Why Do You Compensate Employees?

2009-05-22T23:01:00.009-04:00

Why do you pay your employees? Is it because they work hard? Is it because they have a special skill? Or do you pay them because of the knowledge they possess? If you are paying them for any of those reasons, then you are paying them for the WRONG reasons.

You are probably wondering why you shouldn't be paying employees for those reasons. Well, just think about it for a minute. There are probably thousands of football players who can work as hard as Tom Brady. But ........ can they produce the same RESULTS as Tom Brady during an NFL game? There are probably thousands of golfers who know as much about the game of golf as Tiger Woods. But can they produce the same RESULTS as Tiger at the U.S. Open? And of course we know many athletes who had great skills but got traded from team to team because they were troublemakers or were underachievers. Or some individuals are like John Daly who has great golf talent but just doesn't seem to use that talent because of his personal problems. Despite their skills, they never produced the RESULTS needed for success.

So why do you pay your employees? You pay them to achieve the desired RESULTS needed to make your business successful.

Many business people are obsessed with work, that is, the number of hours their employees spend on the job. Let me ask some questions. If you had to have a major heart operation, do you want the surgeon who has spent the most amount of hours in the operating room, or do you want the surgeon that has had the most successful operations? Is it the work that is important or the results? Do you want to hire the salesperson who has the record for working the most hours per year making sales calls, or the salesperson who holds the record for making the most sales?

I am sure I can practice as many hours as Tom Brady or Tiger Woods. But no one will pay me to be quarterback of their team or bet on me to win the Masters. You can find hundreds of statistics in every sport, but you can't find one that states how hard the athletes work. Don't worry about how hard your employees work. Worry about the results they achieve.

You may say that results are not possible without hard work. My answer is "Maybe." It depends on the individual. Some individuals work very hard to achieve results while others do not. The point isn't whether they work hard to achieve the results or not. The point is ...... did they achieve the desired results?

A good manager develops an environment which enables his or her employees to achieve results. A good manager focuses on results by rewarding employees for achieving the desired results and not rewarding people just because they show up for work every day. Good managers develop performance review systems that measure results. Good managers develop compensation systems that reward results. Do you really care how hard the surgeon works on your operation or do you simply care about the results?

Those are my thoughts. I welcome yours.

Keeping in Your Name in Front of Your Customers

2009-05-13T19:46:00.006-04:00

Out of Sight .... Out of Mind. Have you ever heard someone say, "Oh yes, I forgot all about old Bill?" Or what about, "Oh yes, I seem to remember that company. I did business with them years ago." Out of Sight .... Out of Mind.

It always amazes me how someone will do business with me and then never contact me again. They seem to think that just because we did business once, I will always think of them when I need the product or service they sell. Actually it is quite the contrary. When I do not continue to hear from someone, I simply feel that they neither want nor deserve my business.

A good business person/sales person constantly keeps her name in front of her customers and potential customers. You want to be the first person who comes to mind when your customer needs the product or service that you sell. It's not magic, it's not rocket science, and it's not difficult. It does take work and diligence.

When I moved to Minneapolis in 1979, I asked my real estate agent to recommend an attorney. I used that attorney to assist with the legal matters of purchasing my home. I was satisfied with his service but I never heard from him again after the closing. Three years later, I purchased my first business. Needles to say, I used a different attorney. That second attorney continued to do legal work for me (and receive substantial fees from me) for the next 14 years until I moved from Minnesota. Just think what the first attorney lost by never keeping in contact with me.

In his book, "How to Sell Anything to Anybody," Joe Girard talks about how he stayed in contact with his customers. Each month they received a card from him. It might have been a card wishing them a happy holiday or simply a card to say "Hi." No matter what the content of the card, he made sure his customers saw his name at least once per month.

Jeff Slutsky states in his book, "How To Get Clients" that he sends his clients note pads containing his name and picture so they will constantly have his name and picture on his desk.

Many businesses use newsletters to keep their name in from of their customers. I have always believed that an informative newsletter is a great way to both provide useful information to your customers as well as keep your name in front of them.

No matter what method you use, just remember ..... Out of Sight ... Out of Mind.

I would like to hear about any methods you use. Your comments are always welcomed.

Who Really is Your Competitor?

2009-04-04T08:56:00.008-04:00

Do you really know who your major competitors are? Most business owners think it is the business down the street that sells the same product or service. Maybe it is ... or maybe it isn't.

A major competitor does not necessarily have to be someone who sells the SAME product or service. It could be someone who sells a SUBSTITUTE product or service. It could even be a change in lifestyles or a change in technology. Here are some examples.

Suppose you own a bowling alley with a small lounge. The members of the Tuesday night bowling league typically stop in the lounge after bowling and have a sandwich and a drink. Your state legalizes casinos and a new casino opens in your town. The league members now go to the casino after bowling instead of going into your lounge. Eventually, the members of the league decide to stop bowling and go to the casino every Tuesday night. Your competitor is not another bowling alley or another lounge. Your competition is another recreational activity.

Many country clubs think that their main competitors are other country clubs. In addition, they think that for the past 10 years potential members haven't had the money to join. That's wrong. Their main competitor is a change in lifestyle. Ask anyone who is 60 years old or older and you will find that there were very few organized activities for them when they were 10 years old, and they were able to walk to them. Today, most parents are driving their 10 year old to organized activities four nights per week and on Saturday. Parents don't have time to join a country cub. It is not that they don't want to golf or don't have the money to pay the dues.

Take a look at daily newspapers and other publications. Some newspapers are in towns that have no other newspapers. Yet they are going out of business. It certainly isn't a competing newspaper that is causing their problems. It is a changing technology.

Of course, competitive situations differ from business to business and industry to industry. The important point is that as a business owner or manager, you ANALYZE YOUR COMPETITIVE SITUATION. Take a careful look at your situation. Make sure you are not making business decisions based on the wrong competitive situation. Those kinds of decisions can put you out of business.

If you have a unique competitive situation, I would love to hear about it. Please post your comments. They are always welcome.

Disaster Plan for Your Business

2009-03-21T11:12:00.015-04:00

Here is a very important scenario for you to consider. What would you do if you arrived at your office tomorrow morning and saw that it was on fire? The fire department is working hard to put out the fire, but it would immediately become apparent to you that almost everything inside your office would be destroyed. Do you have a disaster plan for your business that you could immediately put in place?

My guess is that most business owners and managers reading this posting do not have a disaster plan for their business. I would also guess that many do not even back up their computer files regularly. Could you continue to operate and CONTINUE MAKING MONEY if you had a fire, flood or other major disaster and everything in your office was destroyed? ..... or would you be out of business?

Chances are that you will never have a major disaster for your business. Nevertheless, I'll bet you carry homeowners insurance even though chances are your house will never burn down. You may carry business interruption insurance for your business. That insurance may help and you should certainly carry that type of insurance ...... BUT ......it does not replace a good disaster plan.

Obviously, I can't tell each and every one of you exactly what to put in your plan. However, I can list a number of items for you to consider.

Review your insurance .... NOW. Many business owners buy insurance and then forget about it. Have a periodic insurance review so that you will know that you are adequately covered in the event of a disaster - both in terms of property and in terms of data, business interruption and other areas that may be unique to your business.

Know where you can go to operate your business. Find another business with whom you can share space in the event of a disaster for either business. They could move in with you temporarily or you can move in with them temporarily. Consider getting a number of businesses together who can help each other with space for a short period or time. If you can't do that, know where there is available warehouse space that you could use. Worse case, know where there is a hotel/motel that would allow you to use some rooms as offices.

Know who can help you with finding new permanent space quickly. Establish a relationship with a commercial real estate broker and explain your needs. This will enable him/her to know your needs without starting from the beginning. Thus, he/she can start searching for space immediately.

Know which disaster restoration company to call. If your disaster is such that you are going to call a disaster restoration company, know who to call before you have a disaster. Get referrals from others. You don't want to be going on Google trying to find a company.

Establish an important contact list. Be sure to have a list of people that should be contacted immediately with YOUR NEW CONTACT INFORMATION, such as your temporary phone numbers and email addresses. This list should not only include your customers but also your attorney, CPA, insurance agent, suppliers, etc. Obviously, this list should be kept in multiple locations somewhere other than your office.

Know where to get the equipment, supplies, furniture you will need. When you are in the middle of a disaster, that is not the time to start shopping. When your "back is against the wall," you may not make the best purchasing decisions. Know where you can get what you need when the time comes. As with your contact list, this list should be kept in multiple locations somewhere other than your office.

Have a good computer back-up procedure. Make sure ALL of your computer files are backed up on a regular basis ..... AND ... the back up files are kept in multiple off site locations .... AND ... that you test the backup files so you know they can be used. If you are not disciplined enough to back up your files yourself, hire a company that will do it for you. Some companies will monitor your files and back up your files remotely. In a future blog, this will be discussed in detail.

Have back-up for critical non-computer files. Take a look at your non-computer files and make sure you have off-site copies of what you need. Perhaps you should have these files scanned and converted to computer files so you can easily have off-site copies.

Develop a list of service providers to help you at your new location. To get operating at a new permanent location as soon as possible, you may need to contact contractors, architects, phone and internet companies, furniture providers, computer providers, etc. Once again, you don't want to be shopping in a panic. Develop your list of quality providers that you can quickly contact and providers that you know can and will respond quickly to your needs.

Assign duties in advance. Don't wait until the disaster happens to decide who will perform which tasks to keep you operating. Decide in advance which tasks each staff member will perform when the disaster occurs. Who will call the disaster restoration company? Who will call your insurance company? Who will call the commercial real estate broker? Who will contact the people on your contact list? etc. etc.

Your business my have other special requirements. What is most important is to have a disaster plan in place. The better your plan is, the faster you will be able to recover and both work in a normal environment and return to a state of profitability.

Those are my suggestions. If anyone has additional suggestions, please post a comment. Your comments are always appreciated.

When to Fire A Customer

2009-03-07T15:10:00.009-05:00

Is every customer a good customer? Is the customer always right? Is there a time to tell your customer to go someplace else to buy the products or services they need? When is it time to "Fire A Customer?"

Sorry, but I do not believe that a customer is always right. Yes, sometimes you must tell a customer that it is time to shop elsewhere. I know that is not an easy thing to do and I have only done it on a few rare occasions. However, sometimes it is necessary to fire a customer for the benefit of your business. Here are a few important points to consider.

1. You are in business to make money. As much as you want that well-known customer or that big increase in volume, you have to make money on a sale. Usually the rule of thumb is that as long as your revenue covers your cost of goods sold and there is money left over to put toward fixed costs, then make the sale. I am not saying you need to make money on every sale no matter what the circumstances. Sometimes losing money on a sale is necessary for future sales. But be careful you don't sell at a loss because the customer "promises" future purchases. You need to make darn sure that the potential for future sales is excellent. If not, it's best to fire the customer.

2. You have limited resources. Some customers are so demanding that they require twice as much of your resources (which means costs) as a normal customers. That's OK if using those resources is not keeping you from acquiring new customers or providing good service to current customers. If they are, then it is time to fire the customer that is using those resources.

3. One rotten apple can spoil the barrel. I am sure you have heard that saying. If you are in a business where your customers come into contact with each other and communicate with each other, then a customer who is a constant complainer can spread negativity to others. You have to ask yourself if that rotten apple is having a negative effect on others. If that negativity is hurting your business, it is time to fire the customer.

4. You are probably familiar with the 80/20 rule. Do an analysis on your customers. Look at the 80% that are only generating 20% of the sales and see what resources of yours they are consuming. Sometimes, by reducing revenue from customers who are too costly, you can actually increase profits. If you need to increase profits to stay in business in these recessionary times, you may have to fire those customers, if that will help you increase profits.

Don't get so wrapped up in day-to-day operations that you forget to do a good customer analysis. It is a valuable function that may help you increase profits and stay in business.

Those are my thoughts. I would like to hear your comments.

Monitoring Your Strategic Plan

2009-03-01T17:33:00.008-05:00

Sure, you know having a strategic plan is important. You wrote one about four (or was it five) years ago. It's in that big, dusty binder in the back room - or is it in the storage box in the basement? Anyway, you wrote a plan. Isn't that good enough?

You probably know the answer to that. NO !!!! Of course not. Would you like your pilot to file a flight plan and then decide to improvise once he reached 33,000 feet and not bother to keep in touch with the air traffic controller? Do you want your child's teacher to write lesson plans and then toss them aside before he enters the classroom and just decide to talk about whatever comes to his mind? As a business owner, you need to DEVELOP, IMPLEMENT and MONITOR your strategic plan.

I am certainly not advocating that a plan is to be developed and then followed without any deviation. I am saying that it is useless to develop a plan and then leave it on the shelf.

As a business owner, you need to not only be disciplined enough to develop the plan, but you also need to be disciplined enough to implement the plan and monitor the progress. I believe that requires help. If you are the owner, I usually recommend outside help. I recommend outside help so you become ACCOUNTABLE to someone else. It is all too
easy to put the task aside if there is no one to ask you about it. With someone else monitoring progress, there is someone to ask you questions. Even though you are the boss, you have to provide explanations.

The two most common ways to have an outsider monitor progress are to hire a consultant or to "trade" with another business person. By trading, I am referring to you acting as the monitoring person for another business owner and that business owner acting as the monitoring person for you. Naturally, hiring the consultant is more expensive. However, it sometimes takes an investment in order for the business owner to "get serious" about the process. If he has paid a fee, he is more likely to continue. Nevertheless, trading can be a good option if the two owners are disciplined enough to follow through with the practice.

Either way, a strict timetable for monitoring needs to be established. You should have progress milestones set so you can measure against those milestones. You can then make adjustments to the plan as needed.

Remember, developing the strategic plan is only part of the job. The plan needs to be implemented, monitored and adjusted as needed.

Your comments are always appreciated. Thanks for reading The Business Adviser.

How Flexible is Your Business Plan ?????

2009-02-06T20:32:00.012-05:00

So you have been in business for ten years, have found a niche, and have been doing well - that is, until the recession started. Now your sales are down 30% and dropping fast. Your customers still think you have a great product/service but they just can't afford it right now. No, they won't even buy it at half the price. So what are you to do?

On December 1, 2008, I posted an article asking if your business was ready for a changing economy. Since that time, I have obtained clients who need help changing directions, re-inventing their company, or finding new markets. These are all good business people who ran their companies well. They just missed one important factor - that their market could go away. Maybe it will come back. What if it doesn't? Or what if they (you) can't survive until it does?

If you were prepared .... if you had Plan B and Plan C ready to go, then you are probably doing well these days. If you weren't prepared, what should you do?

I believe that you have to take two courses of action at once, and that is not easy. First, you have to use extremely creative measures to generate as much cash as possible from your existing markets. That usually means taking on numerous promotions. No matter how small the incremental amount of cash is from each promotion, it is necessary to bring in extra cash. This probably goes against the way you have been managing your business. However, it is similar to being stranded on an island. Survival comes first. Then you worry about getting off the island. Before you can go to Plan B, you must survive. You have to stay in business during the transition to Plan B. I suggest that you do anything and everything that will generate incremental sales.

Obviously, the second course is to find new markets. That can be even more difficult - not because they are not there, but because you have to change your thinking and may have to change the way you operate.

If you only sold to large corporations, you may have to sell to Mom & Pop operations.

If you sold wholesale, you may have to sell retail.

If you sold to individuals, you may have to find a way to sell to businesses.

If you only sold locally, you may need to expand geographically.

If you sold nationally, you may have to sell locally.

If you only sold the "main product," you may have to sell the accessories that go with it.

I am sure you get the idea. Why do I say there are still markets out there? Keep in mind that if the unemployment rate hits 10%, that means that 90% of the work force is still employed. That's a lot of customers !!!!!

But it is difficult to change, difficult for two reasons. First, it goes against what you have been doing, what you believe in, your business philosophy, etc. Secondly, you may have to add, change or decrease personnel, equipment, processes, procedures, etc. And you have to do all this while continuing to survive.

My best advice - Don't do it alone. You need someone (or many people) who have not been focused for the past ten years the same way you have. You need someone who is looking at the situation "from the outside." Get help. Hire a consultant. Set up an advisory committee. Call your CPA. Have numerous brainstorming sessions. Do one, do many, or do all of the above.

You can't sit back and watch the sales go away .... unless you want to go out of business. Get moving ....... and Good Luck!

Selecting a Commercial Real Estate Broker

2009-01-27T15:31:00.010-05:00

HIRE AN EXPERT !!!! Do you fill your own cavities or do you go to a dentist? Anyone who has been a client of mine or who has read my postings, knows that I am a firm believer in doing what you do best and leaving the rest to the experts. This certainly holds true for buying commercial real estate. Buying commercial real estate is a complicated process. Thus, I am leaving it to an expert to provide some helpful information on how to choose and compensate a commercial real estate broker.

The posting below has been provided by Ray Orowetz, P.E. of NAI Pittsburgh Commercial.

Why are buyers of real estate reluctant to pay a commission to the broker who’s representing them? Think professional. Lawyer, engineer, doctor, architect, accountant. They provide a service and get paid by their client. Why not the broker ? The fee for services is established early on with these folks. Why can’t a reasonable fee, or some mechanism, be established to compensate “your” broker ?

OK, maybe it seems counterintuitive. Brokers typically get paid based on a percentage of the purchase price. It doesn’t seem right that they’d work to get the lowest price possible and thus drive down their fee. Is that the problem? Ever wonder how many people you would tell about the broker who got you a really great deal and earned a fair commission? Maybe you wouldn’t tell anyone because you’d want to keep him all to yourself and give him more assignments. Either way, that broker’s going to get more work as a result of providing good service and truly representing your interests. For the truly professional broker, the fee is not the key. It’s a long term repeat business and qualified referrals.

Ever have a broker call you and ask you if you want to sell your property ? What’s the first question you ask. Right. How much are you going to charge me ? What if he said “Nothing, my buyer’s paying me”. That response is intriguing to any seller and it conveys a clear message to the seller that he’s got a serious buyer on his hands and he’s all business. As the buyer, you’re now in a different negotiating posture if you play your cards right and let the broker do his job.

And get this ! The fee you pay to your broker is an expense of the sale. A one time lump sum write off. You don’t get too many of those !

For more information, please contact Ray directly.

Ray Orowetz, P.E.
NAI Pittsburgh Commercial
Phone: 412-860-8898
rorowetz@naipittsburgh.com

Do You Provide More Value Than Your Competitors?

2009-01-09T20:18:00.012-05:00

What do you do for your customers? Do you repair computers or do you teach your customers how to use the latest technology? Does your business rent office space or do you provide an environment conducive to a tenant maximizing productivity? Do you sell insurance or do you enable a client to be worry-free about the protection of his/her assets?

Yes, there are some terms, words or phrases that we are all tired of hearing - bailout, recession, mortgage mess, etc. But two that we should never tire of hearing - and saying and thinking and doing - are "value added" and "thinking outside the box." Yes again, they are over-used terms. Nevertheless, some terms and phases such as "don't put all of your eggs in one basket" and "if it is too good to be true ....." are used over and over again because they are true. (Just ask the Madoff and Enron investors). They have passed the test of time. The same is true for "value added" and "thinking outside the box." If you want to dominate your industry, you MUST provide more value than your competitors. To provide more value, you MUST think creatively.

In September, I discussed the importance of differentiating yourself from your competitors. Unfortunately, most business owners and managers never think about that. They take the easy way out by saying. "We give really good service." That is the very same thing your competitor says !!!!!!!

If you have any question about whether or not you are providing extra value, just ask yourself one question. "Why should a customer buy from me instead of any of my competitors?" If the only answers you have are, "My prices are lower" and "I give really good service," then you are going down the wrong path.

Here is one of the best examples I know about providing value. In 1970 I got engaged. Like most young men, I knew nothing about diamonds. A friend recommended a jewelry store to me and off I went to buy a ring - on my lunch hour. I walked into the store and announced to the jeweler that I wanted to buy an engagement ring. The very wise jeweler said to me, "Well kid, do you want to buy a ring or do you want to learn about diamonds?" The tone of his voice and the expression on his face told me I had better learn about diamonds first. He was right. Four hours later I walked out of the store having purchased an engagement ring. I felt satisfied that I had made a good decision because I had become an educated buyer. They didn't just sell rings. They taught customers about diamonds. That's extra value. Needless to say, I recommended that store to everyone who needed to buy jewelry. And yes, they are still in business today.

What can you do to add value to your product or service? Just think outside the box.

2009 - Will Your Business Be Better or Worse?

2008-12-20T20:19:00.009-05:00

Will your business be better or worse in 2009? Read that question again. I did not ask, "Will the ECONOMY be better or worse?" I asked, "Will YOUR BUSINESS be better or worse?" You are probably sitting there thinking that your business depends upon the economy. But does it really depend on the economy ..... or does it depend on YOU?

The economy is one of our greatest excuses and crutches. It is really easy to blame the economy when our business is down. We often hear business owners say, "I am really having a bad year because of the economy." I am willing to bet that you have seldom heard a business person say, "I am having a great year and it is all due to the economy. It has nothing to do with me."

Anyone who is in business should study economic cycles. They should know that the economy always has a recession after a boom period. Yes, I know that the current recession is worse than usual. However, as a business person you should have been prepared. No, I didn't know when it would start or how bad it would be and I don't expect you to know either. But being prepared is an important part of running a business. Read my last posting.

I have an umbrella in my car 365 days per year. I don't know when it is going to rain. However, when it does, I have my umbrella with me. As a business owner, you can't just plan based on the current economic cycle. That is like the defense of a football team planning for every play to be a run just because the first play of the game was a running play.

Don't sit and complain. No matter what industry you are in there will be opportunities in 2009. If you haven't adjusted your business plan because of the recession, DO IT NOW! If you don't know what the opportunities are, get help. Have a special meeting with your board or advisory committee. Have a brainstorming session with your employees, friends, family and any one else who will help you. Meet with other business owners and exchange ideas. Hire a marketing consultant. TAKE CONTROL!!

I know a real estate agent who started his own real estate agency in the late 1970s when mortgage rates were 14%
and moving higher. He was successful and is still in business today. Do you think he is afraid of the current state of the housing industry? No way.

I have taken numerous steps to adjust my business for 2009. I expect 2009 to be a better year for me than 2008. How about you? Will your business be better or worse? It is under your control.

I wish you all a Happy Holiday Season and a Happy, Healthy and Very Successful 2009.

Is Your Business Prepared For Change?

2008-12-01T16:56:00.008-05:00

There is one thing that I am absolutely, positively sure of in both business and in life. Things will change. If the economy is booming, sooner or later there will be a recession. If it is raining, the rain will eventually stop and the sun will shine. If all of my equipment is running perfectly, some piece of equipment will eventually break down and need repair. If lapels on coats are wide, the style will eventually change and they will get narrow.

The question is ........ "Is your business prepared for change?" No one knows when the change will occur, but we all know that change WILL occur.

Most businesses do not take full advantage of up-turns in the economy or any good opportunity because they are not prepared for them. Likewise, they are hurt more than necessary by a down-turn or other bad situation because they are not prepared.

Here are some questions that will help you determine if you are prepared.

Your biggest competitor tells you he is in financial trouble and would like to know if you would like to buy his business. Are you prepared to take advantage of the situation?

You call a supplier that you have been buying from for the past 10 years to place an order only to find out they went out of business yesterday. Are you prepared to buy from someone else so your business is not affected?

Your biggest competitor went out of business and her 10 biggest customers called you to place orders. Are you prepared to fill those orders?

Your biggest customer goes out of business. Are you prepared to replace him with another customer?

Your two best employees tell you that tomorrow is their last day working for you because they are starting a business together - to compete with you. Are you prepared to replace them and deal with the new competition??

The above questions are not part of a fiction story. They are real situations that happen daily to businesses throughout the world. If you are prepared, you will successfully take advantage of the opportunity or meet the change. If you are not prepared, you may not have to worry because you may end up going out of business.

How about these questions?

What will deliver the TV signal to our homes in 10 years - cable, satellite, or ????????

When will the computer keyboard become obsolete?

What fuel will power our cars 20 years from now?

What device will carry this blog 5 years from now?

Will we be concerned about identity theft five years from now?

When will the remote control for our TV become obsolete?

Many businesses have strategic plans. That plan must be a dynamic, not static document. In addition, it must contain Plan B, Plan C, etc. You can't plan as if everything will stay the same. You MUST plan knowing that things will change. You may not know which things will change or when they will change - but they will change and you and your business need to be ready.

I would appreciate your comments on the subject.

Incentive Compensation System - or - How Not to Give a Bonus

2008-11-02T18:09:00.010-05:00

An incentive compensation system is a compensation system that is supposed to provide an incentive for employees to meet an objective, and then reward them accordingly. Most of the incentive compensation systems that I have seen are complete failures. Why? Because they are planned and implemented poorly. They are missing the two most important ingredients - employee trust in management and a true reward for accomplishing an objective.

Let me explain. How often do you hear employees say one of the following:

We usually get our Christmas bonus around December 15.

I wonder how much my bonus will be this year.

I hope my bonus is as big this year as it was last year.

When employees are making these kinds of statements, their company does not have an incentive compensation system. It is simply giving normal compensation as an extra paycheck. That is how NOT to give a bonus. When a bonus becomes a normal part of compensation, it is not a bonus, it is simply standard compensation.

A "bonus" or incentive compensation payment is a reward for achieving a specific objective. The objective needs to be set by an employee's supervisor. It must be measurable and have a specific date attached to it. It must be discussed clearly with the employee. "Improving communications" is not a measurable objective. "Writing and distributing a monthly newsletter to 100 specific customers by the tenth day of each month" is a measurable objective. "Achieving $100,000 of sales of Product A by December 15" is a measurable objective. Telling an employee, "increase sales this year and there will be something extra for you," is not clearly discussing your company's incentive compensation system with the employee.

The employee should know exactly what his/her bonus will be and when it will be paid if the objective is achieved. Thus, by having a measurable objective the employee knows if the objective was or wasn't achieved, how much he/she will be receiving and when. No guessing or assumptions.

The second ingredient is employee trust in management. It is sad but true that most employees do not trust management when it comes to receiving financial information about the company. Why? First, most employees do not understand the financial end of the business. How often have you heard an employee say, "That didn't cost the company a single cent. They just wrote it off."

Secondly, employees don't see financial statements. Most small businesses don't share their financial information. When it is not shared, employees assume there is something to hide and/or the company is "making millions."

I personally do not believe that you can build this trust simply by sharing the financial information. Some employees will insist that "the owner keeps two sets of books" - a charge that I have heard all too often, because of the employee's lack of financial understanding. Thus, when an incentive plan is developed, it must be based on the EMPLOYEE MEETING A MEASURABLE OBJECTIVE, not the overall performance of the company. The trust must come from the owner or manager always paying the bonus EXACTLY as he/she promised and on the date it was promised -regardless of the overall performance of the company.

If the employee achieves the objective and you fail to pay the bonus because the company had a bad year, you have destroyed all trust.

Let me end where I started. A bonus must be a reward for achieving a measurable objective. It will provide incentive for the employee to work to achieve the objective only if the employee knows that he/she will receive it regardless of external factors, how much compensation to expect, and when it will be paid.

I would appreciate hearing your comments on this subject.

Do You Engage in Creative Business Thinking?

2008-10-06T17:32:00.007-04:00

Is your business in a slump? Are your sales flat? Are you doing things the same way over and over and over again? Do you seem to be always trying to fine-tune the same old ideas? If you are shaking your head and answering "yes" to these questions, now is the time to have a good old-fashioned brainstorming session.

We all fall into a rut from time to time. We become comfortable with the things we are doing and the way we do everything. The longer it lasts, the more difficult it becomes for us to change. But change we must !!!

One of the best ways to use creative thinking is a formal brainstorming session. To lead the session, select someone who is familiar with and who will enforce the only three rules - (1) absolutely no negative comments are allowed, (2) every idea must be written on the flip chart, and (3) we do not stop suggesting ideas until we have two hundred (or whatever number you choose - but it better be a big one) ideas written down. When the sheet is full, it gets taped up on the wall and you start filling the next one.

To maximize your chances for success, select participants from four different categories. Choose two or three people who are familiar with your business and industry. Choose two or three people who are good business people but know nothing about your business or industry. Choose two or three people who are experts in the topic of your session (marketing, productivity, employee motivation, or whatever you are trying to improve). Choose two or three people who are intelligent but are NOT business people (artists, scientists, etc.). The participants from the different groups see things differently. Thus, you will receive a diverse set of ideas. The key is that as the participants shout out ideas, these ideas - no matter how crazy or "far-out" they may be - will trigger new ideas for the other participants. Thus, crazy ideas are not only tolerated, they are encouraged. The sheets are always taped on the walls so everyone can look at every idea that has been suggested.

Once you have reached your quota of ideas, you can rate them. All ideas get three ratings on a scale from one to three, where three is the best. The first rating is effectiveness. If the majority of participants think that this idea will really be effective (to increase sales, lower costs, improve productivity, or whatever your objective is), then give it a three. If it won't be effective, give it a one. If it will be average, give it a two. The second rating is ease and speed of implementation. If the idea is really easy to implement and can be started quickly, it gets a three. If it is hard to implement, it gets a one. If it is in-between, it gets a two. The third area is cost. If it is expensive to implement it gets a one.

Once all ideas are rated, add the score for each rating area so the idea will have a total score. Those with the highest score (Nine) are those that are inexpensive, can be done quickly and are easy to implement, and will have the biggest impact. Those are the best ideas and the ones to implement.

Now the next step is ACTION. You have the ideas. You know what to do. DO IT !!!!!

If you have had success with a brainstorming session - or if you have failed, I would like to hear your comments. Thanks for visiting The Business Adviser.

Having a Board of Directors or Advisory Committee

2008-09-20T12:48:00.009-04:00

No one knows everything. No one has all of the best ideas. Everyone needs help, suggestions and advice. So are you getting the help from others that you need?

I am a strong believer that getting help, suggestions and advice from others is a great asset for business owners. Unfortunately, many just want to "go it alone." I don't know why. Maybe they consider it a sign of weakness. Maybe they don't know who or how to ask for help. (See http://www.squidoo.com/businesshelper) . Maybe they think others just don't understand their business or problems.

No matter who you are or what business you are in, you don't have all of the answers. You don't have all of the best ideas. Others can help you.

Having a board of directors or an unofficial advisory committee can be a great way of getting ideas, suggestions and advice for your business. The key, of course, is choosing the right people. Let me start with the "Don't List."

Don't put people on the board or committee that work for you. If you are signing someone's paycheck and giving them orders on a daily basis, it is highly unlikely that they are going to disagree with you. Do you really think they will say, "That's the dumbest idea I have ever heard?" ....... and sometimes you may need to hear that !!!!

Don't put your attorney, CPA and insurance agent on the board or committee. You already have access to them. You already get their advice and opinions in their areas of expertise.

Don't put close family members on the board or committee. A personal disagreement can easily carry over to business meetings or a business disagreement can carry over to Sunday dinner.

If your business has sales of $250,000 per year, don't select someone who has only worked for a multi-billion dollar corporation. They can't relate to your business. I have seen these types of individuals try to start small businesses after retiring and fail miserably. If you want specific examples, email me at ron@sentrabusinesssolutions.com and I'll be happy to share a few with you.

The "Do List" is quite simple. Do select individuals that have business experience (6 or more years) with a business of your size (regardless of product or industry) and are willing to share their knowledge. What's magic about six years? A great majority of businesses never last to year six. If they make it that long, they are doing lots of things correctly.

Here are a few "extras." If you can select people who do not know each other, that is best. If four of the people you select play golf together every week, they probably aren't likely to disagree with each other. Try to select at least a few who are well-known in the community. This can be an extra help for your business. I am sometimes asked if picking a well-known sports person or other type of celebrity is okay even if they don't know business. The answer is "Yes," if they are an extra person and they know that their responsibility is to bring attention to your business. In other words, if you want seven people on a board, make the celebrity number eight. They can be a help for getting attention to your business. If you are choosing them just to brag that they are on your board, forget it. You are wasting a spot.

Those are my thoughts. If you have other suggestions, I would like to hear them. Please feel free to comment.

Keep Learning About Business And Get Good Advice

2008-09-16T22:01:00.004-04:00

Do you have 10 years of experience or one year of experience 10 times? Are you improving your business skills every month or are you doing the same old things and expecting better results?

I had a teacher in ninth grade that bragged about his "30 years of teaching experience." The truth was that he had one year of experience and used it 30 times. Each year he gave the same lectures and the same tests. Students knew what was going to be on his tests simply by asking those who had his class in any of the previous years.

I see many business people operating the same way. They develop one process or one marketing program or one service and use it year after year after year. I am not saying to abandon something that works just for the sake of change. I am saying that you need to make sure you don't fall into a rut or comfort zone and forget to analyze what you should be doing.

Examine .... learn .... talk to other business owners ..... read .... question .... talk to customers .... analyze .... think .... ask .... discuss with employees ............................ NEVER STOP LEARNING.

All of the above are ways to learn. There is no one right way. There are many ways. Choose the ones that suit you best. I like to read business books, blogs and any business articles I can find. I also like to meet regularly with other business people to discuss problems and opportunities, and to exchange ideas. I like to have periodic, formal brainstorming sessions. I believe that a board of directors or an advisory committee can be a great help. (I'll discuss both in detail in my next posting). Other methods may work better for you.

The point is that you can't let yourself and your business become stagnant. You have to keep learning and moving ahead. If you stop learning, your competitors will pass you by.

Work hard on improving your management and business skills. Get your ego out of the way. Don't be afraid to say, "I can learn more. I can get better." I have referred to ego in other postings. I believe that ego, greed and jealousy are three of your worst enemies. I am 61 years old and I learn from people older than me AND PEOPLE YOUNGER THAN ME. I learn from people with more experience and from people with less experience. Everyone can teach me something.

Think about how you learn best. Think about what will improve your business skills ..... and DO IT NOW !!!!!!!

Do You Differentiate Your Business ???

2008-09-11T20:22:00.008-04:00

If I ask you, "How are you different from your competitors," what would you say? Would your answer be really specific? Would you tell me something unique? ....... or would I get the usual general statements like, "We give really great service" or "Our product quality is really good."

Successful businesses know how to differentiate themselves from their competitors. It is not just important to do that - IT IS MANDATORY !!!!! First, you must give your potential customers a reason to notice you and secondly, you must give them a reason to become customers and buy from you.

In your strategic planning, you must do two important things. First, determine what your niche is. What are you going to be? Don't try to be all things to all people. For example, let me take it to an extreme. Do you think consumers are going to buy high-fashion, expensive clothing at the same store where they buy dishwashers and refrigerators? (Believe it or not, one well-known retailer thought so in the 1970s. It didn't work.) If you are going to be an appliance store, do you want to sell large appliances like refrigerators or do you want to specialize in small appliances like toasters and irons? Are you going to specialize in upper-end expensive appliances or lower end moderately-priced appliances? Are you going to sell to builders or to the general public? FIND A NICHE AND DOMINATE IT.

Once you determine what your niche will be, the second important area of your strategic plan should be to answer the question, "How do I differentiate myself from my competitors who are going after the same niche?" Let me repeat what I said before. You must give potential customers a reason to notice you and then become customers and buy from you.

If you sell appliances, you may differentiate yourself by giving a special warranty in addition to what the manufacturer offers. You may offer a special preventative maintenance service. You may decide to guarantee that when you are called for service, you will arrive at a specific time rather than within a two to four hour range as most service people do.

Just use your imagination. Ask yourself, "What don't my competitors do?" Survey your customers. Ask them what they would like that no one is currently providing. Yes, it may increase your cost but that cost will be insignificant compared to the extra sales it will create.

Once you know how you are going to differentiate yourself from your competitors, you need to emphasise the difference in all of your marketing. It is useless to be different if no one knows it. Make those differences a featured part of advertising campaigns.

Remember, if consumers do not have a reason to buy from you and to choose your business over your competitors, they are just as likely to buy from someone else.

Thanks for visiting The Business Adviser. I welcome your opinions on the subject. Please feel free to comment.

Managing a Small Business vs. Managing a Big Business

2008-09-03T20:29:00.009-04:00

So what's the difference? Does the size of the business really determine how you manage? In the true sense of the word "management," the answer most managers would give is "NO." ....... BUT ......... there are major differences in being a manager in a small business versus being a manager in a large business.

My first job after graduating from college was for a large corporation. At the time (June 14, 1969), it was in the top 20 on the Fortune 500 list. During my 14 years there, I held management positions in marketing, manufacturing, IT, and materials. Since 1983, I have owned my own businesses. The largest employed about 100 people. Is there a difference? YOU BETCHA !!!!!

There are two major differences. The first is cash. In a large corporation, managers talk about profit and loss. When I worked for the large corporation I never even talked about cash, let alone saw a check or dollar bill. Money for paying our bills was "magically" available when we needed it. I am not sure anyone even knew where it came from. After all, money was received at some unknown location and was disbursed from some unknown location. We just sent requests for bills to be paid. And all employees got paid on time.

With a small business, CASH IS KING. You don't pay bills or meet the payroll with profit. You do it with CASH. Unlike the large corporation where you wait until the end of each month to learn what your profit is, you must know the cash position daily at the small business. Many small businesses have closed their doors with a P&L statement showing a profit but no cash in the bank. If you don't manage cash well, you will not survive.

The second major difference is that a manager in a large corporation is a specialist and a manager in a small business is a generalist. Small businesses can not afford specialists. Most managers must wear many hats and be KNOWLEDGEABLE in many areas.

Instead of hiring people (who need to be managed) to perform all required services, smart small businesses will outsource as much as possible in order to save money. Often payroll and accounting will be done on a contract basis. An HR firm may be consulted when special information is needed or recruiting companies may be used when hiring needs to be done.

Yes, there are other differences but in my experience, these are the two main ones. Yes, the "principles of management" may be the same but "managing" is different.

If you have had different experiences, I would like to hear from you. Please feel free to comment.

Business Ethics

2008-08-23T10:02:00.007-04:00

You are right. There are many different opinions about what is ethical. However, mine is quite simple and direct. Here is my definition of business ethics.

"Doing what is in the best interest of your customers, employees, suppliers and associates while making a reasonable profit."

That is about as simple and straightforward as you can get. Now you probably want me to define the word reasonable. That is not too difficult either.

"If I would be willing to pay that price and I would be willing to have my wife and children pay that price, then it is reasonable."

I think we make the question of ethics too difficult. I like to keep everything as simple as possible. If I am not willing to pay $50 for Item A because I don't believe it has a value of $50, why should I expect you to pay it? Now you may argue that value is different to different people. But that really deals with "wants" and not value. For example, I don't shoot pool. I don't want a pool table. You may look at a pool table and say that it has a value of $1,000 while I say it has a value of zero. That is a matter of "wants." The real question in that case would be, "Would the average pool player who wants to buy a pool table be willing to pay $1,000 for that particular pool table?"

Okay, you say. But what about the person who can only buy the product from you? He is desperate. You can sell him something that no one else has. Aren't you providing a service that no one else can provide? Once again, I refer to the question, "Would I want my children to pay that much for the item under those circumstances?" If the answer is "YES" because I understand that they are getting a special service, then it would be an ethical price. I am a capitalist. I do believe in the laws of supply and demand. I believe that everyone (including the oil companies) should be allowed to maximize their profits. I simply believe that they should be implemented in an ethical manner.

I believe ethical guidelines are important for any business. They should be part of a company's policy or employee manual. Your reputation takes years to build but can be destroyed in minutes.

I welcome your comments. Please feel free to post them in the comments section. What do you think is ethical?

Business Networking

2008-08-15T20:43:00.006-04:00

YES ..... more has been written on this subject than you could ever read (or want to read). I will most likely not tell you anything that hasn't been written before. Nevertheless, there are some very important aspects upon which all good business networkers agree. I would like to highlight them in this posting.

NUMBER ONE: You can't win the lottery unless you buy a ticket. You can't network unless you go places to meet people. Sitting at home wondering how you are going to get into this company or meet that person will not grow your business. Go to every event you can.

NUMBER TWO: Sit with strangers. When I go to a networking event I look for a table that has people I do not know. Many business people want to feel comfortable by being with people they know. That defeats the whole purpose. Get out of your comfort zone.

NUMBER THREE: Wear a name tag that is big enough for people to read. It doesn't need your company's logo, vision statement, etc. It only needs your name in big, easy to read letters so the people you meet can easily remember your name.

NUMBER FOUR: Do NOT bring brochures and fliers. You are not there to sell. You are there to meet people.

NUMBER FIVE: Bring five times as many business cards as you think you will need. The old saying is that "The most expensive business card is the one in your pocket." Give everyone more than one.

NUMBER SIX: Be prepared with your "elevator speech." You need to be able to describe what you do (not your title or what profession you are in - but what you DO) in one to three short sentences. If someone asks, "What do you do?" and you respond "I'm in insurance." you may as well have stayed home.

NUMBER SEVEN: Make sure you have a pen with you. Writing a few notes on the back of business cards you receive will help you remember something special about the people you meet so you can bring it up the next time you speak with them. You can also use it to write the name and phone number of the person who was too dumb to bring enough cards and doesn't have one for you.

NUMBER EIGHT: Don't sell. Ask questions and listen. Show an interest in the person you are meeting. People love to talk about their family, their occupation, and their hobbies or recreational activities. Ask about any of those and then LISTEN.

NUMBER NINE: Send HANDWRITTEN notes the NEXT DAY via good old U.S. mail to everyone you met. I use note cards with my company name and my picture. I write just a short note saying that I enjoyed meeting them. I may mention something of particular interest that they said. If it is someone I would like to get to know better, I tell them in the note that I will be giving them a call in a few days to see if he/she would like to get together. I would be willing to bet that you will stand out because you will be the ONLY PERSON who sent a handwritten note. And remember, send it the NEXT DAY so you are still fresh in their minds.

NUMBER TEN: Call and set up the meeting.

It's not rocket science - just common sense. Yet most people want to go to a networking meeting and talk, talk, talk, and sell, sell, sell. If no one buys - which they probably won't - the amateur networker makes a mistake by simply moving on to the next event.

I think if you follow these ten rules, you will be a successful business networker. What do you think? I'd like to hear your comments.

Employee Motivation - Part Two

2008-08-05T16:13:00.009-04:00

I guess you have all been anxiously awaiting (or maybe not) to hear "the rest of the story." If you haven't read Part One, you probably should do so before reading this posting. Anyway, here is the story.

The employee who worked harder doing his volunteer work than he did on his job was a mystery to me. We were both volunteers at the same organization so when our non-profit organization had meetings, I watched him carefully. He was always leading a fundraiser so he made the typical "fundraiser thermometer" that is commonly used to measure progress toward a goal.

As he was proudly staring at the "thermometer" one evening after a meeting, the light bulb came on in my head. His job at his place of employment had no beginning and no end. He did the same repetitive work each day. There was no goal to hit. There was no means of measurement. He could not stare at a "thermometer of progress" and be proud of his achievement. At the non-profit, he could succeed or fail, win or lose, cross the goal line or be stopped short. At his job, there was no sense of achievement. He had no scoreboard.

The second employee I mentioned in Part One was in a very similar situation. He chose to go to the game because "his" team could win or lose. They could succeed or fail. THERE WAS A SCOREBOARD. There was no scoreboard on his job.

Let's assume you are a football fan. Would you pay $60 for a ticket, $10 to park, $7 for a beer, $5 for a hot dog, etc. just to watch two teams run plays without keeping score? There would be no winner or loser. Of course you wouldn't! You pay to see your team compete and win.

Employees need a scoreboard on their job. They need a thermometer that measures progress. They need something to tell them where they stand. Are they on the 30 yard line or on the 10 yard line? Are they on first base or third base?

When I took over the materials department at a large corporation, there was a significant excess inventory problem. I had never worked in a materials department and was certainly not considered an inventory expert. Within 18 months, I cut the inventory in half. How? Three simple steps. First, I made sure everyone in the department understood why excess inventory was bad for the company. Second, I set numerous objectives (total inventory, inventory turnover, daily receipts, etc.) and covered the walls with charts (scoreboards) to measure progress against each objective. Third, I got the heck out of their way.

Give your employees a scoreboard. Give them a goal to achieve. Give them a target to shoot for. If you do, you will see productivity increase and your company will grow.

What are your thoughts? I'd like to hear them.

Employee Motivation - Part One

2008-07-31T22:16:00.011-04:00

OK .... so we have all read numerous surveys on what motivates employees .... appreciation ... opportunity for advancement ..... compliments .... money ..... great working conditions .... etc. etc. I have never taken a survey of my employees or any employees because I am not sure that they really know what motivates them. I have heard employees say one thing but then respond in a totally different manner. I am not even sure they know what DOESN'T motivate them.

Why? Because what motivates employees constantly changes as their life changes. A single person who is 25 may not mind being told to work until 8:00 each night. After all, he or she still has plenty of time to "hit the hot spots" after 8:00. On the other hand, when that same person is 38 years old, married and has two active children, he or she wants to be home by 6:00 to attend his child's soccer game.

When her kids are in college and tuition costs are constantly increasing, she may not care about how late she works, how much vacation she gets or whether or not her boss ever says "Thank You." At that point, all she may care about is her next pay raise. And when he or she is 60 and the kids have moved out, travel assignments may be just the right thing. Some time away from home may be welcomed.

Family situations, lifestyle, hobbies, age, etc. make each person different and thus, they will respond differently. So the person who at age 40 says "Give me some time off - I want to see my kid's game," at age 55 says "Show me the money - I have to pay my kid's tuition."

Even recognizing these differences, we can still look for common motivating factors. Throughout my years of managing people, I have tried various techniques. Most got just fair, short term results. Then, two situations came to my attention. First, I noticed an employee who worked in another department. His actions puzzled me. He did the bare minimum to get by on his job. He was active in a non-profit, charity organization and in that organization, his performance was exactly the opposite of his job performance. He worked extremely hard and volunteered to lead every fundraiser. I was really confused !!! Why was there such a difference?

The second situation concerned a worker who refused to work in a nice, comfortable environment on a Sunday and get paid double-time so he could go sit in the freezing cold and spend about $100 to watch his favorite football team. Why would he rather spend money and sit in the cold to watch football than work and make the extra money?

Well, as they say in the news business ..... "Full story at 11:00." I'll write more about this in my next postings. Sorry for the tease, but it is too long to put in one posting.

Your Relationship With Your Suppliers

2008-07-29T19:15:00.008-04:00

All too often I hear business owners talk about "how they made their supplier jump." They brag about how disrespectful they were when they placed a large order. They love to take the "I'm the important customer" attitude. Well, maybe you are the customer to your supplier. And there is no doubt that you - as the customer - should be treated well. Nevertheless, I don't believe that it gives you the right to treat anyone badly. In addition, it can be BAD FOR BUSINESS.

"But Ron," you say, "How can it be bad for business? I'm not selling to my supplier. He is selling to me." I say it is bad for business for two main reasons. First, your supplier may take your abuse because he feels it is necessary in order to keep you as a customer. However, if you read my posting entitled "The Two Biggest Marketing Mistakes," you will recall that everyone is either a customer, potential customer or a referral source. If your supplier does not buy from you and is not a potential customer, he is certainly a referral source. He can recommend that others buy from you. If you treat him badly, how do you think he is going to react?

Oh, you may say that he will refer customers to you anyway because the more you sell, the more he sells. Maybe so - but I wouldn't bet on it. We are human and have feelings. Many times feelings will trump logic, especially if we are made to feel badly. Why take the risk?

The second reason that it is bad for business again plays to our feelings and emotions. Who do you want to help? Who do you do favors for? Who do you go the extra mile for? Someone who makes you feel good and someone you like? ...... or someone who abuses you? The old saying is, "You catch more bees with honey than with vinegar." If you make your suppliers feel good and feel important, they will go overboard to help you.

Go out of your way to compliment and thank suppliers - even when they have done nothing special. The better you make them feel, the more anxious they will become to go the extra mile for you.

What do you think? I would like to hear your comments?

Can You Trust Your Partner? - Part Two

2008-07-23T22:19:00.009-04:00

No one wants to believe that their partner would ever do anything to hurt their business or their business relationship. Everyone wants to believe that their partner is just as dedicated as they are. Unfortunately, partnership problems are all too common.

Partnerships are usually formed for three main reasons. The first reason is to combine talents. Perhaps one person is good at sales and the other is a great detail person who can take care of administrative duties. They decide they would make a great team.

The second reason is for financial benefits. One person wants to start a business but does not have enough money so he acquires a partner with the financial resources that he needs. The third reason is having common interests. Two people both love to cook so they decide to open a restaurant together.

Of course, there are many other reasons but the three I listed above are the most common. None of these reason will guarantee a good, safe partnership. None will guarantee the opposite. If you decide to be part of a partnership, you have to protect your interests as though you were the sole owner.

Here is a true story that just happened recently. I talked to a business owner who was part of a partnership. She was the sales person (Ms. Outside) who brought in the business. He was the administrative person who ran the office and took care of the accounting (Mr. Inside). She trusted him. She felt there was no need to question him. After all, for a number of years business was good and there always seemed to be plenty of money to pay the bills and make a profit. She felt there was just no need to "look at the books."

Then she noticed that when she was in the office, there were a large number of calls from suppliers. She happened to notice an invoice from a supplier that was stamped "second notice." When an employee told her that Mr. Inside refused to take calls from suppliers, Ms. Outside decided she needed to ask some questions. At first, Mr. Inside said, "There is nothing to worry about." He became defensive and did not want to provide any financial information. "That's my job," he said. "I am taking care of everything."

Ms. Outside finally decided to look for herself. She was amazed at what she found. After a great deal of research, she discovered he had embezzled over $250,000 and the company was deep in debt. She has hired an attorney - who is not optimistic that she will recover any money.

My prediction is that she will recover nothing. I have seen this happen before and I have never seen a partner recover any significant amount of money. It is more difficult recovering from a partner than an employee.

Protect yourself !!!! Do not go into a partnership assuming that everything will be fine. And equally important is to be open and honest with your partner. Make sure if you are the one "handling the books" that you provide good, frequent financial information to your partners. Don't feel offended when they ask questions of you.

Thanks for reading this blog. Please feel free to post your comments and to pass the name of this blog on to your friends and associates.

Can You Trust Your Partner? - Part One

2008-07-16T09:20:00.009-04:00

In a previous posting, I talked about protecting your business from outsiders and employees. But what about other owners of your business - your partners? Can you trust your partners?

I am sorry to tell you that over the years, I have seen more than my share of embezzlement from partners in businesses. My guess is that none of the partners enter the business relationship with the intention of stealing from their partner. They all enter with the idea that business will be great and they will all make a great deal of money. The embezzlement usually comes about because of one of three reasons.

Reason One: Business is not good. The partners are not taking home enough money to pay their bills. Thus, one partner decides to take more than his share.

Reason Two: Business is fantastic so one partner becomes greedy. She decides that since there is plenty of cash, the money will never be missed.

Reason Three: Business could be good or bad. One partner feels that he is doing way more than his share of the work. Maybe he is "Mr. Inside" and handles all of the administrative duties and his partner is "Mr. Outside" and handles all of the sales. He sees his partner taking customers to dinner and to play golf while he "is stuck in the office doing all of the work." He therefore decides that by embezzling he is "getting his fair share for all of the extra work he is doing."

No doubt there are other excuses that partners use to justify their actions. These are the most common. Of course, none are legal or ethical.

What can you do to protect yourself? First of all, if you don't know how to read and understand financial statements, LEARN IMMEDIATELY. It is a vital part of running a successful business. Take a class, pay a CPA to teach you. It doesn't matter how, just learn to read and understand. You need to be able to know what makes sense on a financial statement and what doesn't. You need to be able to look for signs of trouble. This is your best protection.

Secondly, you should have an agreement with you partner(s) that you will review all financial statements together so you all can ask questions of each other. I always recommend to any company with multiple owners that they generate monthly financial statements.

Third, ask financial questions frequently. Let the partner who handles the accounting or bookkeeping function know that you are interested in the financial details of the company, not just the bottom line. If your partner is embezzling, he can certainly make the bottom line look good no matter what the real situation is.

Fourth, you should have an agreement that any partner can request an independent audit of the financial statements at any time. Just knowing that this option exists can be a good preventive measure.

Finally, have an agreement that the financial statements MUST be audited periodically. The length of time between required audits may have to be determined by the size of your business and the cost of the audit.

I will write more on this subject in the next posting. Please feel free to post your comments.

Two Important Ingredients to Customer Service

2008-07-13T17:25:00.007-04:00

If there is one aspect of marketing that has had more than its share of attention, it is probably customer service. Over the past 10 years, many books have been written on the subject. Of all that has been written, there are two items that I have not seen mentioned. I assume that someone has probably written about them, but I must not have read those books or articles. I believe that they are important enough for me to discuss them in this posting.

The first item is honesty. I don't believe you can possibly give good service if you are not honest with your customers. Many businesses take orders knowing full well they can't deliver what the customer wants. They think if they can come close, the customer will accept it. Or perhaps they can convince the customer that what they are getting is good enough.

I have always believed that it is better to lose an order than not to provide what the customer wants when she wants it. By getting that one order, you will most likely lose future orders AND your customer (or should I say former customer) will tell everyone how you failed to live up to your commitment.

The second ingredient is information. You must keep the customer informed. No one likes to guess what their vendors are doing. They would rather have information NOW. Good or bad, knowing is better than not knowing.

Suppose you call a vendor at 8:00 in the morning to inquire about the status of an order. The vendor representative tells you that he will call you with an update in two hours. At the end of two hours, you have not received a call. At the end of three hours, no call. Four hours later - no call. You call the vendor representative again. You get voice mail. It is three in the afternoon and you call again. This time the representative tells you that the reason he did not return your call as promised is that he had no information for you. He was still waiting to get an answer from the person he asked. How do you feel? Wouldn't it have been better for him to have called you at the end of two hours and tell you that? You have no idea whether he forgot about you, was ignoring you, or was afraid to call because of the information he had.

Be honest and keep your customers informed. You can't give good customer service without those two ingredients.

Your comments are always welcome. If you find this blog informative, please pass on the site name to others who may find it useful as well. Visit our website at http://www.sentrabusinesssolutions.com/.

More Good Technology But Bad Marketing

2008-07-05T10:49:00.009-04:00

After posting my last article, I experienced a perfect example of "good technology/bad marketing." I sent an email to the Human Resources Department of a company. It was a question that only required a one or two sentence answer.

Instead of the brief answer I expected, I received an AUTOMATED REPLY. Just think about that for a minute - an AUTOMATED reply from the HUMAN Resources Department. Maybe they use the initials (HR) so much that the people in the department don't know what the "H" stands for.

The automated response told me that I should go to a specific site and "answer questions about my inquiry." Then the HR department would know who to route my question to so I could get a proper and quick response. How's that for good technology but bad marketing? If I were a betting person, I would be willing to wager a large sum of money that the people in the HR department don't consider themselves to be responsible for marketing. Nowhere in the job descriptions of anyone in that department does it say that they are responsible for selling or marketing. Thus, they don't believe they represent the company to customers, potential customers or referral sources. Obviously, they have not read my previous postings. They don't realize that marketing is EVERYTHING a person sees, hears, feels touches and smells that comes from or is about your company. In addition, they don't realize that they must make it easy for me to do business with them.

From this experience, I have decided that I do not want to do business with them because it is not easy to do business with them. As a referral source, I will tell others that it is not easy to do business with them. They have good technology, but bad marketing. Over the years, I have had similar experiences. And keep in mind, it just doesn't have to be computer-related technology. It can be any type of system or procedure that your business has.

Once again, I strongly suggest you look at every way your company interfaces and communicates with the general public. Do your employees who are "not in the marketing department" know how to represent your company? Have your systems, procedures and technology made it more difficult for people to do business with you? If you want more business, you have to make it easy for people to do business with your company. Keep in mind what I said in my last posting. People are like water. They take the path of least resistance.

Good Technology But Bad Marketing

2008-06-30T21:08:00.005-04:00

Sometimes I see businesses that get carried away with technology. Technology can be a very useful tool. But like all tools, it must be used correctly. Before you decide to put in some "great system" for your company, ask yourself one very simple question. "Will this make it easier for my customers to do business with me?"

Some business owners lose sight of the objective. Whenever you put in a new system, whether it is to place orders, pay invoices, etc., it should make it EASIER for the customer to do business with you. Let's take a common form of technology and examine it - the automated phone system.

I call someone on the telephone because I want to communicate with them. I want to give them information, get information, or both. Anyone disagree with that? Of course not. That is why we make a business call. Therefore, your phone system should make it AS EASY AS POSSIBLE to reach everyone in your company. If I know the person's extension, I should be able to enter it at any time. If I don't, I should be able to hear a list of names. That is easy. I may not know her last name. I don't want to have to enter the spelling of her first name. Does she spell it STACEY, STACIE, STACI, or STACY? Does she spell it MICHELE or MICHELLE? Get the point?

Likewise, when I get to the person's extension and they are not available, I want to hear a SHORT greeting. "This is John Doe. I am not available, please leave a message." I may not be Bill Gates, a presidential candidate or the Pope, but my time is valuable to me. I don't want to hear a commercial for your products. I want to understand what you said. If I can't talk to you, I don't care where you are. I just want to leave a message as fast as possible.

This is true of every type of technology. Keep it simple for the customer. If I don't have my account number, can I just enter my name and address? Do you really need my father's middle name to take my order? And if I have already entered my account number, why are you asking for it again when I talk to you?

MAKE IT EASY FOR THE CUSTOMER TO DO BUSINESS WITH YOU !!!!! Technology is a great tool ....but only if it makes it easy for the customer - NOT EASIER FOR YOU !!

Examine all of your systems. Survey your customers. Ask them what you could change to make it easier for them. Most customers are like water. They will take the path of least resistance.

Dangerous Business Vocabulary

2008-06-26T17:06:00.006-04:00

George Carlin, the comedian who recently passed away, often talked about the seven words you could not say on TV. I believe that there are some words which should either never be said in business, or if they are said, they need to be accompanied by a very detailed explanation.

If you listen carefully when most people talk, they usually are afraid to make a commitment. They use terms which show that they are not really confident about what they are telling you. Here are some examples.

most: I'll have most of the work done by tomorrow. What is "most"? 90%? What 10% won't be done? How will you decide what won't get done?

usually: I usually get there by 5:00. How many times is usually? Will you get there at 5:00 tomorrow? - because that is when I need you to be there.

think: I don't think that will be a problem. Will it be a problem or not? I need to know now so I can be prepared.

should: That should be fine. Will it be fine or not? If it won't, then I need to do something else.

plan: I plan to have it done Thursday. I don't care about your plan. Will it be done on Thursday or not?

next week: I'll call you next week. When next week? Five days is too long a span of time.

I could go on and on. I am sure you get the idea. If you are going to run a successful business, you can't afford to accept that kind of communication from anyone - employees, customers, or vendors. You can only make good decisions if you have good information. You can only run your business efficiently if you have good information. If a vendor says "I usually deliver by 3:00," you really need to know that he WILL be at your company by 3:00. If a customer says "I usually buy 10 of Part A and he orders 12, what will happen if you have only manufactured 10?

Now some of you may think I am taking this to an extreme. I disagree. I believe that business owners that accept less than the best, less than the most accurate, etc. will never realize their full potential. If you get on an airplane that is supposed to go to Denver, you don't want to hear the pilot say, "Welcome aboard. I usually land this plane in Denver somewhere between 5:00 and 7:00. I should be able to do that today." That wouldn't give you a very warm feeling.

Don't let anyone off the hook. Ask them to commit!!!!

Whether you agree or disagree, please feel free to post your comments. I always enjoy hearing the opinions of other business people.

Sales … It’s as Easy as 1-2-3 (Part 2 of 2)

2008-06-24T21:09:00.004-04:00

This posting is Part 2 of 2 of Peter Bruening's article. If you have not read Part 1, it will certainly benefit you to read it first. Peter, owner of The SellingPoints Group, Inc., and the author of The Power Guide to Supportive Selling does a great job in explaining the "basic 1-2-3" of sales. Here is Part Two.

In Part 1 of this article you were introduced to the importance of engaging in the 1-2-3 of sales success (Goals-Activity-Results) to create consistent sales results. Part 2 will describe how you can begin to do this for your business.

Every sales opportunity that you or your company engages in is also a goal. To be more accurate, every sales opportunity is a set of progressive goals. At the very beginning of the sales cycle, the goal is to schedule an initial meeting to discuss the customer’s situation. The next goal is to reach a point of agreement for the customer to consider buying your product or service. Finally, the next goal is to close the sale. Every sales opportunity moves through these three mini sales cycles: Prospecting, the Customer Interview, and Present & Close. That’s it. That’s all sales is. Here’s the real kicker. While I’d love to have you call me so that we could work together – that is, after all, how I make my living – I’m going to hand you the golden key for free. Just for reading this article, I will give you the golden key. It is this: Target dates drive activity which creates results. That’s the 1-2-3 of sales.

In sales, you must always, always, always have a next step that you are trying to achieve in each sales cycle. This next step is the current goal you are trying to close to move that sales opportunity forward. You may be thinking, ‘Big deal. Some golden key. What am I supposed to do now?’ I’m glad you asked! The way to implement this fundamental sales concept is by never ever letting a conversation or meeting end without setting the next step with the customer. At the very least, never let a conversation or meeting end without at least trying a couple of times to set this next step. A good way to think of it is that, at any point in the sales cycle, what you are really selling is the next step! When you get the next step scheduled, you’ve actually closed a mini sale along the way toward your end goal of closing the actual deal. This change in your behavior will have more impact than any single change you can make. And it’s easy to do. It is something that is totally within your control. I can tell you without any doubt that I get more positive feedback from my clients about this one technique than anything else I teach in my workshops and sales coaching engagements.

So, how do you know a next step when you see it? A lot of the time, I’ll be working with a client and they’ll say, “Peter, I always do that. I always set next steps.” “That’s great”, I respond. “Give me an example.” My client will tell me, “Well, I always tell them I’ll get the information they need, and I’ll call them next week.” Is this a next step? No. How about this. “Peter, the customer told me they liked what they saw in my proposal. They wanted to look it over and they said they’d give me a call the week after next.”

Sorry, that’s not a next step either. A legitimate next step must have two elements: a Time and a Date. If it doesn’t have a time or date, then it is not a next step. And if you don’t have a next step, you have a stalled sales opportunity. It is as simple as that.
Sales really is as easy as 1-2-3: 1-Always be closing for your next step with the prospect or customer; 2-That next step will drive activity, both on your end AND on theirs; 3-Activity drives sales results. Consistently implement this discipline in your business, and watch your sales grow. And if you want some tips on this, or on questioning and listening techniques, let me know!

Thanks again to sales trainer and consltant Peter Bruening for taking the time to write for this blog. If you would like to contact Peter for more information, he can be reached at pbruening@SellingPointsGroup.com. More information is available at http://www.sellingpointsgroup.com/. Once again, I encourage your comments on this posting or any posting in this blog. I am sure there are many experienced and knowledgable people reading this blog whose comments can help others.

Sales - It's As Easy as 1 - 2 - 3 (Part 1 of 2)

2008-06-19T17:37:00.005-04:00

In past postings, I have talked about the fact that I feel marketing is basic. Peter Bruening, owner of The SellingPoints Group, Inc., and the author of The Power Guide to Supportive Selling likes to present selling in basic terms as well. Mr. Bruening is a well-known and respected sales trainer and consultant. I asked him to present some of his thoughts on sales. I am posting his response in two parts. Part One is presented below.

I’m asked all the time, “Peter, if you had to boil it down to one thing, what’s the most important thing you need to do to be good at sales?” I like this question, because it makes an attempt to hone in on something basic. Something fundamental. And that’s what successful selling is all about. It’s not about being fancy. It’s about being fundamentally consistent. And this is true whether you are a full-time quota carrying salesperson – or whether you are a professional, such as an accountant, a financial advisor or architect, for example – or whether you own a small or medium business. No matter what you do in the business world, sales is fundamentally important to the survival and growth of your business. I went to graduate school to get my MBA, but you don’t need to do that know that the most basic business equation is: Total revenues minus expenses = net profits. Successful businesses work on both ends of the equation – they maximize sales while keeping expenses in check.
So, what’s the most important thing you can do to be good at sales? Without a doubt, if you’re talking about the part of selling that happens when you are with the customer, the single most important thing you can work on is your ability to ask good questions, and then close your mouth so you can closely listen to your prospect’s or customer’s answers. This ability is part science and part art. And, not surprisingly, it is what I spend a large portion of my time teaching my clients in my workshops and in my one-on-one sales coaching work. If you don’t know what questions to ask, how to ask them, and when to ask them – and if you don’t couple this with the self-discipline to keep your mouth shut as your prospect or customer answers – you cannot succeed at sales. I’ve seen more people than I can count who have what many would consider to be “natural born sales talent” – and then they fail at sales because of the lack of the capability to ask questions and listen. And I’ve seen at least as many people who would never be described as “natural born sales people” succeed at sales because they excel at questioning and listening. This second group of people will never win a contest for knowing the most jokes, and they aren’t necessary the life of the party. But they know about questioning, and they know how to listen.
How do you learn the science and art of questioning and listening? Read books, practice, hire a sales coach, practice, go to seminars, practice, read more books, practice, practice some more, and then practice. Do you get the picture? And there are two kinds of practice. The first is the kind you do by yourself. If you see me talking to myself as I’m driving down the road, you can be sure that I’m practicing a sales technique. I do this on a daily basis. It’s a great way to use what would otherwise be wasted time to improve myself. The second is the kind that you do in live situations with live customers. If you don’t take new techniques and behaviors out to the field of business, you’ll never learn them.
So, while questioning and listening is certainly the single most important aspect of selling, it is actually not the main theme of this article. Right on the heels of this critically important skill is what I sometimes call the basic 1-2-3 of sales. It is actually the same 1-2-3 that is behind success of any kind. Think about it for a second. Any success that you have in life starts with a goal. This goal drives activity. And this activity creates end results. The 1-2-3 of success is Goals-Activity-Results. This is true about any success. Years ago, when I was living in an apartment, I had a goal of owning my own home. This goal drove certain activities – I went to school, moved my way up in career and income levels, saved money – and eventually the result was brought to fruition. Now, three houses later, I have been through this particular goal cycle several times. Each time, my goal drove my activities, and my activities created my end result.

This concludes Part 1. Part 2 of this article will continue to outline how you can engage the 1-2-3 of Goals-Activity-Results to create consistent sales success in your business.

A special thanks to Peter for sharing this information with all of our readers. Please remember, Part Two will be posted shortly. If you would like to contact Peter at the Selling Points Group, he can be reached at pbruening@SellingPointsGroup.com. More information is available at http://www.sellingpointsgroup.com/

Feedback on Protecting Your Business

2008-06-17T18:14:00.008-04:00

First of all, I would like to thank Christine for her comments. If you haven't read them, please go the comments section of Marketing 201. She makes some important points.

Greg Bevington, a partner in the law firm of Bootay and Bevington, sent me a write-up on an area that he feels is very important when it comes to protection. It contains some excellent information which I think every business owner needs to follow. Here is what Greg wrote.

“Piercing the Corporate Veil” – Forming a corporate entity is only the first step in personal asset protection. Sole proprietors’ and/or partnerships’ personal assets and business assets are one in the same in the eyes of the law when it comes to executing a judgment. Obviously, that is a common reason most business owners choose to form a separate entity such as a corporation, limited liability company, limited partnership, or some variation of the previously mentioned forms. This is a smart first step for the business owner, but personal asset protection does not continue automatically. Business owner beware!

It is critical that the business owner who has formally set up his entity continues to act as a formal entity. In its simplest form, a legal “person” can be created in the following ways: an American citizen is born and issued a Federal Social Security number, a person passes away and the “Estate” is issued a tax identification number, or a business entity is created and the IRS issues a Taxpayer Identification Number for that entity. I tell my clients to view the entity as a completely separate “person”, which it in fact is, with an independent set of rules which must be strictly followed. If the rules of the business entity are not followed, a judgment creditor can “pierce the corporate veil” and attack personal assets owned by the business owners. “Piercing the corporate veil” is a legal term used to describe an action to have the corporation set aside for purposes of litigation such that the personal liability attaches, and personal assets can be reached. Aaron Lawson, Piercing the Corporate Veil , Expertlaw.com, August , 2004. Different degrees of ownership may be subject to different degrees of liability, but that is a more complex topic for another day. In general, a formal business entity receives personal asset protection as long as the asset follows its formal corporate procedures, is properly capitalized, and is not a sham company with a purpose only to advance individual interests.

In general, a business entity’s owners will receive personal liability protection when it follows the rules set forth by the entity as stated above. For instance, it is necessary to have a set of by-laws or its equivalent, to have annual shareholder meetings, elect a board of directors or managers, have corporate resolutions passed and records of such kept in minutes for corporate activities such as entering into contracts or buying and selling assets, keep business checking/banking accounts separate from personal accounts (ie, do not commingle funds), or perform any other corporate formality procedure required. These tasks can be easily accomplished by keeping updated minutes.

The above has been written in a general format and is not specific to any particular state or territory in the United States and can vary on the type of business entity created and operating. For more information about business planning and personal asset protection in the Commonwealth of Pennsylvania, please contact Greg Bevington, Esq. of Bootay & Bevington, LLP at 412-650-5940 or email gregbevington@gmail.com.

Once again, thanks to Greg Bevington for providing some valuable information. I welcome all comments on any business subject. If you enjoy reading this blog and feel that someone else could benefit from the information, please pass on the name our our site.

The Two Biggest Marketing Mistakes

2008-06-14T11:04:00.014-04:00

We all make mistakes. No one is perfect. Mistakes are usually accidental. Most mistakes are even excusable. BUT ........... I believe that two mistakes are NEVER excusable. Do I have you a little curious?

You have most likely heard the saying, "Don't burn your bridges behind you." For marketing, you can translate that to say, "You never know where your next order is coming from."

So what are the mistakes? Here is the first ..... most business people do not realize that ......

Every person you meet in the elevator, talk to on the phone, buy from, pass in the hallway, sit next to on the plane, etc. etc. is either . . . .

a customer,

a potential customer, or

a referral source.

They ARE buying from you now, CAN buy from you in the future, or can REFER someone to buy from you.

If I sell left-handed golf clubs and you don't play golf, you may not buy from me now but you may start to play in the future and need left-handed golf clubs. You would be a potential customer. If you are not left-handed, you will not buy the clubs even if you start to play in the future. BUT .... you may know a left-handed golfer. If you like my company and my product, you will likely recommend to your left-handed friend that he buy left-handed golf clubs from me. Thus, you are a referral source.

Everyone is either a customer, a potential customer or a referral source. Think about that when you have contact with other people.

A financial advisor has an office in the same building where I am located. She recently put a sign on her door that said, "NO SOLICITING." I asked her why she put the sign on the door. She said she didn't want people who sell office supplies, copiers, phone equipment, etc. coming into her office and trying to sell to her. I asked her if those people ever used a financial advisor. She said that they probably do. You can guess what my next question was. "Why don't you want potential customers coming into your office?" Then I said, "And if they don't need your services, maybe they know someone who does." I suggested to her that when someone makes a cold call to her office, all she needs to say is, "I will let you tell me about your product or service if you will then listen to me discuss what I sell." She took the sign down.

The second of the two biggest mistakes is not telling EVERYONE what you sell. To be a potential customer or referral source, a person must know what kind of business you have. A plumber comes into your house to make a repair. Does he leave with your business card and brochure? No, he may not need your product but he is certainly a referral source. What about your mechanic, hair dresser, dentist? What about the receptionist at your chiropractor's office?
They all can be referral sources , but they MUST KNOW WHAT YOU SELL.

If you are not treating EVERYONE properly (because you never know where your next order is coming from) and if you are not telling EVERYONE what business you are in (so they can be a customer, a potential customer or a referral source), then you are making the two biggest marketing mistakes.

I have received a great email from an attorney who wanted to comment on my postings about protecting your business. I will present his comments in my next posting. Please feel free to comment on this and previous postings. Your comments are always welcome.

Marketing 201

2008-06-11T23:13:00.004-04:00

I do not consider myself to be a marketing expert. But I do think that anyone who lasts more than five years in business has learned a great deal about it. After all, if you can't market, you can't survive.

What I know, I learned through reading numerous books on marketing, talking to others I believed to be experts, and trial-and-error. I learned a great deal from all three methods. All three methods helped me to determine what marketing is. To me, marketing is anything and everything that your customer sees, hears, tastes, touches, or smells that comes from or is about your business.

Marketing is not just an ad in the newspaper or a fancy brochure. It is not just a special sale or promotion. It is not just a unique logo or catchy slogan. It is not just taking customers to lunch. Once again, Marketing is anything that your customer sees, hears, tastes, touches, or smells that comes from or is about your business. Marketing is ........

the cleanliness of your parking lot.

the appearance of your employees.

showing up on time for meetings with customers.

retuning phone calls promptly.

treating vendors respectfully.

etc. .... etc. ......etc.

Think about this. What would be the larger determining factor in a buying decision .....

seeing a large billboard advertisement, or receiving a hand-written thank you note for referring business to them?

hearing an ad on the radio, or having the sales person show up at your son's baseball game to cheer him on?

receiving a fancy brochure in the mail, or receiving a personal phone call from the owner of the company?

receiving coffee mugs, T-shirts and a tote bag with a logo on them, or receiving a referral for your business?

Now read the above list again and ask yourself this question. Which is more expensive? Chances are the alternatives that you selected as most effective were also the least expensive.

Marketing does not have to be expensive to be effective. I like to repeat for effectiveness so here I go again. Marketing does not have to be expensive to be effective. I am not saying don't spend money on brochures or advertising or give-aways. I am saying THINK about what works best in each situation and what is best for YOUR company. My neighbor had no children. He had a really nice BMW Z4 which I would have loved to have. I have five children. Guess what we had for many years when my children were young - a mini-van, of course. What was right for them was not right for us. Just because another company spends a fortune on advertising does not mean that you have to do so as well.

Jeff Tobe of Coloring Outside the Lines, professional speaker and author of many books on creative marketing, said to me, "You need to out-think the competition not out-spend the competition." With that in mind, I usually avoided expensive marketing programs. I have looked for ways of promoting my businesses without spending a lot of money. When I did spend a lot of money, it was very targeted. I spent it on customers and potential customers where I could get the best return.

Here is an example. I held a speaker series. I invited current customers and potential customers. I selected four speakers to present topics that I thought would be both of interest and helpful to my customers. Each presentation was held separately. All four were held at a local country club in the evening at 6:30 to give my guests ample time to arrive at the club after work. From 6:30 to 7:00 I hosted appetizers and cocktails so the guests could network. The speaker made his presentation for no more than one-half hour. We allowed time afterwards for questions. For those that wanted to leave immediately afterwards, they were gone by 8:00. Others could stay later and network.

That was a targeted marketing program that was informative to my guests and gave them a chance to network with other business people. It was marketing for me that also benefited my customers. Win-Win. For me, it was an image builder. It said that I cared about my customers. I wanted to help them. It increased the credibility of my company. For my customers and potential customers, they learned about a particular business topic and they had a chance to meet and network with other business people. That did more for my business than any ad, promotion or give-away could have done.

That is just one example of many things I have done over the years aimed at out-thinking not out-spending the competition. Once again, I am not an expert. There are many of you reading this blog that have many great marketing thoughts and ideas. I would certainly like to hear what other business people have done that is unique. Please feel free to post in the comments section or email me at ron@sentrabusinesssolutions.com. If you find this blog useful, please pass on the name of the site to other business people that you feel would benefit from reading it.

Marketing 101

2008-06-07T19:28:00.012-04:00

I decided to call this posting "Marketing 101" because I want to talk about basic marketing. Maybe the term "basic marketing" is redundant. Is marketing really something that is basic? Do most business people try to make marketing too complicated? Sometimes, I think they do.

I think there really are four concepts that have to be incorporated into a marketing plan - and they are easy to understand.

CONCEPT ONE: Marketing is an on-going process. There is no magic wand !!!! There is no one promotion, or one advertisement, or one slogan, or one whatever that will cause customers to come running to your business to buy your product or service which over the long term will make you successful. Yes, you can have a promotion (buy one get one, 50% off, free gas fill up with purchase, etc.) that may give a short term boost to your sales. But what happens when that ends? I was naive when I first got into business and started looking for the magic wand. I wanted to find that one slogan, or ad, or promotion that was going to make my sales soar. I never found it. I did find the answer though. I discovered that marketing is an on-going process.

It is a process - not an item. It has no ending as long as you are in business. A promotion, a slogan, a sale, an advertisement are all part of that process. Marketing is the sum of all the parts. It is a process that must be coordinated so all of the parts work in unison.

CONCEPT TWO: You need to decide what you want to be. You can't be all things to all people. You need to have a niche and you have to have your business positioned in the marketplace. Some business owners resist having a niche because they think they are losing opportunities. However, by having a niche, you are perceived as an expert. If you read a lot of marketing books you will find many on the subject. One of the best in my opinion is "Positioning" by Al Ries and Jack Trout. I strongly suggest you read it before you develop your next marketing plan.

Just think of yourself as a customer. Do you want to go to a "jack-of-all-trades" or do you want to go to an expert? Can you imagine a surgeon having a sign that says "Heart operations, back operations, brain surgery, gall bladder removals, dental surgery - all performed here." How confident would you feel? Yes, that example is an extreme. But it helps get the point across that you should want your business to be known as an expert.

Imagine if Sears decided to advertise that they sold "high fashion, upper end clothing for the sophisticated buyer." How many men do you think would be willing to pay $2,000 - $5,000 for a suit at the same place where they bought their chain saw and their refrigerator? Position your business and find a niche.

CONCEPT THREE: Never make price your major competitive advantage. If you do, you will only have customers until your competitor reduces his prices so they are less than yours. People who buy from you because of price alone will leave you as soon as someone else's prices are less than yours. That is as basic marketing 101 as you can get. Nothing else needs to be said.

CONCEPT FOUR: You don't market to your current customers the same way that you market to potential customers. When I talk to business owners about marketing, all I hear them talk about is getting new customers. For some reason, they choose to take the current customers for granted.

I don't believe that one size fits all in a marketing plan. I do not market the same way to current customers as I do to potential customers. If you are shaking your head in disbelief, let me ask you this question: If you were a piano teacher, would you teach a new student who has never played a note on the piano the same way you would teach someone who had been taking lessons and practicing for five years? Of course not ..... and that goes for teaching anything else as well. You should think of marketing the same way. Why would you market to a customer who has been buying your product or service for five years the same way you would to someone who has never heard of your company?

If you are still having trouble with this concept, try thinking about it this way. Suppose you were going to take your best customer to dinner and there were five restaurants in your area from which to choose. Three of them you have used many times before and two of them you have never used. Would you be more likely to take him or her to one of the three restaurants that you have used many times before .... or would you go to one of the two restaurants where you have never eaten before? That is a no-brainer. You are not going to gamble with the business of your best customer. No coupon, BOGO, or other promotion is going to influence you. Which one of the three you choose will depend on how they market to you as a current customer. When you call for reservations, which one automatically gives you the time and table you request? When you enter, which restaurant has a hostess that always calls you by name (Welcome, Mr. Smith or Good evening Ms. Jones)? Which owner or manager comes to your table during the meal and acknowledges you in front of your guest as an important customer of the restaurant? Whichever one markets to you best as a current customer will get your business.

Now suppose it is just you and your spouse going to dinner one evening. Would you be willing to try someplace new? What would it take for you to try a new restaurant? It will certainly take something different than the marketing example above because you have never been there before. By now I hope you get the point that marketing to new customers is different from marketing to current customers.

At this time I suggest you read or re-read the three postings on customer retention and on business advisors (those would be your customers). It is important to understand customer retention and how to get marketing information from your customers. For some reason, business owners separate themselves from their customers. It is as if they are performing and must stay in character. Your customers are a great resource. They will tell you why they buy from you. They will tell you why they buy the products that they buy. Customers will be honest with everything EXCEPT one thing. If you sell an upper end product or service, customers almost never admit that they can't afford it. I know quite a few people who gave up their country club membership (coincidentally) when their business was declining. What reasons do they give? "The food is bad ... I don't play enough golf .... my back has been bothering me ... my spouse says I spend too much time away from the family ..... etc." None of them said they quit because they could no longer afford it. Thus, when you are talking to a customer and they say "I don't buy Product A because it doesn't come in green," make sure you ask, "If I make it in green, will you buy it?" If they still won't commit, you will know what the real reason is.

Those are my four concepts of marketing 101. I would really like to hear from marketing experts out there as to whether they agree or disagree or if they would like to add more to my four concepts. You can post your comments directly on the blog or you can email me at ron@sentrabusinesssolutions.com.

Feedback on Forecasting and Insurance

2008-06-06T16:55:00.013-04:00

I received some very good feedback on two recent postings. The first comment was on the posting entitled "Two Tips on Financial Forecasting." In case you did not read the feedback in the comments section, here they are.

Your comments work for 'big business' too and I found this article interesting and valuable reading. I find the budget setting process to be one of the most difficult phases of the year, particularly for non-financial managers. The time and effort spent at the start of the process certainly pays dividends down the line. The only other thing I can add to your script is - once you've committed a cost to an area of expense don't artificially move it to another area if that line goes over budget. People are afraid of overspending, but unless you show true varianceshow can you accurately budget the next time around? Learn from mistakes and remind yourself of valid reasons for overspending so you can judge whether they are a one-off or the start of apattern/new trend.

I certainly agree that the forecasting principles apply to big business as well. I also agree that expenses need to be allocated properly. It is vital that expenses be shown regardless if you are over budget - or should I say especially if you are over budget. I would like to thank the reader for making those important points.

The second feedback came in an email directly to me from Jim Crawford, owner of Crawford Insurance in Pittsburgh, Pennsylvania. Jim agreed with me on the importance of building a relationship in order to enable your insurance agent to provide the best possible service and advice. As an example, Jim pointed out how an agent can save you money by knowing the working of your business. Here is an excerpt from the email.

Workers Compensation insurance can add up to a large portion of your business insurance expense. Some companies can take a bite out of that expense by forming a workplace safety committee that meets state requirements and by applying for committee certification. This may entitle you to a five percent workers’ compensation premium reduction. More importantly, safety committees are a proven tool in helping keep employees safe, injury free and stay on the job earning their full wages. When I know that a company has the opportunity to save on its premium and keep their workers safe, I frequently work with themto set up their safety committee. A good relationship makes accomplishing this
task easier and more effective.

Pennsylvania business owners can learn more about forming a workplace safety committee and obtaining certification by visiting the Pennsylvania Department of Labor and Industry web site http://www.dli.state.pa.us/. Follow the links to Licenses, Permits & Certifications. From there, you can download the application for initial certification. Most likely other states have similar sites to help business owners in their state.

Jim said that any reader who would like more information on this or any other insurance subject can contact him at 412-795-8888 or email crawfordinsure@choiceonemail.com .Once again, thanks to both the anonymous reader and Jim Crawford for adding valuable information to this blog. Reader comments are always encouraged. I know that there are many knowledgeable and experienced business people reading this blog who can help others. Please feel free to contribute. You can add your comments directly to the comment section or you can send an email to me at ron@sentrabusinesssolutions.com.

Protecting Your Business - Trusted Advisors - Part II

2008-06-05T22:27:00.004-04:00

Who would you rather have teach you how to play golf - Tiger Woods or Warren Buffet? Who would you rather have teach you about investing - Warren Buffet or Martha Stewart? I think you get the idea. When you have to ask a question about protecting your business, you need to ask the right person. That is why I am always amazed when someone tells me about legal advice they received from their brother - who is a commercial pilot. Or they tell me about the tax advice they received from their uncle - who is a chiropractor.

RULE ONE: We discussed the first rule of protecting your business - establish financial controls - in the first posting on the subject.

RULE TWO: The second rule - build RELATIONSHIPS with "the big four" was discussed in the last article. We are now ready to discuss each of the big four. Let's start with your attorney.

RULE THREE: Never sign or publish unless your attorney reads it first. I learned many years ago that it is much cheaper to pay your attorney to review a contract BEFORE you sign it than to try to get out of the contract after you have signed it. ......and there are a lot less headaches. The same is true for anything you publish such as policy manuals, advertisements, etc. When I wrote my first employee handbook, I sent it to my attorney before I distributed it to the employees. It came back to me with more red marks on it than my 9th grade term paper. When you have built a relationship with your attorney, he or she knows what your objectives are, what you want to accomplish with marketing, hiring etc. With that knowledge, he or she can be much more effective when reviewing contacts, publications, or any legal documents.

RULE FOUR: Don't buy, sell or file taxes without talking to your CPA. Of course I am not taking about buying copier paper. I am talking about major purchases, sales, expansions, etc. Tax planning is important. Most people think of their CPA only in terms of filing the tax return -and filing is certainly important. I stopped filing my own taxes as soon as I owned a business. However, tax planning is just as important. If you want to protect your business against large tax liabilities, let your CPA work with you on tax planning. You don't start tax planning on February 1, 2009 because you have to file on March 15, 2009. You start tax planning on day one of your fiscal year. You constantly keep your CPA informed on your intentions to buy, sell, divide, combine, etc. Once again, if your CPA is totally familiar with your business and your objectives, he or she will be able to do a better job of helping you plan so you can protect your business from large tax liabilities.

RULE FIVE: Don't hide from your banker. Make sure your banker always knows your financial position. Depending on the type of business you have, you may want to give your banker your financial statements, monthly, quarterly, or semi-annually. Many business owners are afraid to ask their banker for help. A good business banker who specializes in your size and type of business can be a great help to you. They want a win-win situation. Just because you are short of cash doesn't mean you are running your business poorly and need to hide from your banker. Many well-run, growing businesses run short of cash. Growth has a way of causing cash shortages. Anyone who has had to buy inventory or equipment to expand their business knows exactly what I mean.

Once again, that is why it is important to keep your banker informed when you don't need money. Thus, when you do have a need for cash, your banker will know your business and be able to provide what you need quickly. He or she will also be able to recommend the best form of financing for your situation.

RULE SIX: Always ask, "How am I vulnerable?" We all know that we need property & casualty insurance and we know that we need liability and worker's compensation insurance. What we don't know - because we are not insurance experts - is under what circumstances are we covered? Your employee is going to lunch. You ask her to stop at the post office on her way back and buy a roll of stamps. Pulling out of the post office parking lot, she hits another car and injures the driver. It is your employee's fault. Is your business liable? You're playing golf with a customer and discussing business. You hit a shot that hits a golfer in the next fairway. Can your business be sued? You encourage your employees to volunteer for a non-profit organization that is having a fund-raising race. Because of your encouragement, an employee participates in the race and is hit by a car. Is your business liable?

These are everyday examples of real life situations. You have liability insurance but do you need special coverage for special situations such as these? You need to review these and other things that you do and then discuss them with your insurance agent. Does your agent really know your business and how you operate? Don't simply renew the insurance policy you had last year. Don't wait until renewal time to discuss your business with your agent. Develop a relationship and keep your agent informed so he or she can give you the advice that will protect your business.

Please feel free to post your comments - whether you agree or disagree. One of the objectives of this blog is to get everyone thinking and analyzing. Thanks for visiting this site.

Protecting Your Business - Trusted Advisors - Part I

2008-06-01T17:45:00.008-04:00

There are many ways in which you have to protect your business. Some things you can do yourself as we discussed in the last posting. Others require the help of outside experts. Often, business owners tend to want to do everything themselves. Sometimes it is because of their ego and other times it is to save money. Either way, they are making a mistake.

When you have a cavity in your tooth, you don't drill your own tooth and try to fill the cavity yourself. You go to an expert - a dentist. You need to do the same with your business.

Next to yourself, your attorney, your CPA, your banker and your business insurance agent are the most important people in helping to protect your business. Most business owners only think of the insurance agent in terms of protection. All four of these professionals protect your business. When I purchased my first business, the first four speed dial buttons on my phone were - you guessed it - my attorney, my accountant, my banker and my insurance agent.

Often, business owners wait until they have a legal problem, or until it is tax time, or they have an insurance claim, or until they are desperate for cash before they contact one of "the big four." I believe that it is important to develop a relationship with all four before you start or purchase your business. If you are in business already and don't have a good relationship with them, the time to start is NOW.

Before I go on, let me emphasize that it is extremely important to make sure that the member of "the big four" that you select is accustomed to working with your size and type of business. I don't necessarily mean that if you are a machine shop that they only work with machine shops. I do mean that they have to be familiar with machine shops. Unfortunately, I have seen business owners select an attorney for their business because the attorney handled their divorce or personal injury case. Just as your business specializes in a product or service, so do attorneys, CPAs, banks and insurance agents. An insurance agent who does a great job with your homeowner's insurance may not be the best choice for your business insurance. A CPA who specializes in auditing large, non-profit service organizations may not be the best for your business if you are a small fabricating business.

Don't be afraid to ask them about the type of clients that they have. Ask for references. Ask other business owners who you know and respect if they have anyone that they can recommend to you. In my opinion, these are four of the most important people in your business life. If they are good at what they do, they can save you both money and headaches. I have been sued for amounts in the millions, have had large insurance claims, have been audited by the IRS and the state, and have had immediate needs for short term working capital, and I can assure you that "the big four" helped me immensely to protect my business in all of these situations.

When I use the term "build a relationship" with them, I am saying that you need to tell them about every aspect of your business. A physician can only help you if he knows what is hurting you. "The big four" can only help you if they know all about your business. Make sure they are familiar with your physical facilities. Give them a tour. Demonstrate your equipment for them. Show them your products. Introduce them to your employees. Have them meet some of your customers.

Please don't think that I am saying that if you have a machine shop that your attorney needs to be able to operate a vertical boring mill. However, they do need to .........

read your business plan.
know your short term and long term objectives.
have copies of financial statements.
have copies of your employee and policy manuals.
know BEFORE you make major decisions.
etc. etc. etc.

Don't be protective of your business information. Tell them EVERYTHING about your business - the good points and the bad. When the doctor says, "How do you feel?" you don't say "wonderful" if you have been having chest pains. He won't be able to protect you from a heart attack.

In the next posting, I will get into the details of dealing with each of "the big four." Please remember that your comments are always welcome. If you enjoy reading this blog, please pass on the name of the site to anyone else who you feel would be interested in reading it.

Protecting Your Business - Financial Controls

2008-05-31T09:04:00.010-04:00

I would like to thank Diane for her comments. What brought me great satisfaction was the part of her comment that said, " .....it forces me to think about how I run my business." That is one of my major objectives in writing this blog, that is, to get business people to THINK AND TO ANALYZE how they are running their business.

All too often we all get into a rut or a comfort zone. We continue to do things, both business and personal, because we have become comfortable doing them that way. We don't take the time and effort to ask ourselves, "Is there a better way?" No consultant, coach, or whatever a person chooses to call himself or herself can be an expert in all businesses. I have often had people say to me, "How can you help me with my business? You don't know anything about running an X company." The answer is quite simple. A good consultant or coach forces you to THINK AND ANALYZE how you are running your business. Maybe I can't tell any of you how to best manufacture your product or sell your services, but I can ask the questions and discuss the issues to force you to think and to analyze. We will discuss this more in future postings. Now onto the subject at hand.

There are many ways to protect your business. When people think about protection, they think about such areas as insurance, lawsuits, incorporation, etc., and we will be discussing all of those issues in the near future. The one protection that most companies neglect is financial control. I have seen embezzlement take place in major corporations (including a bank where I did business), medical offices, and small service companies. Any business with poor financial controls is a candidate for embezzlement. I have seen embezzlement by partners, long term trusted employees, and the newly hired person.

No system of financial controls will guarantee the prevention of embezzlement. However, a good system will accomplish two objectives -(1) make it extremely difficult to embezzle, and (2) catch the embezzler quickly before he steals a lot of money.

Here are two short real-life examples. A computer service business had two partners. One was Mr. Outside who was responsible for sales and the other was Mr. Inside who took care of all of the administrative duties. Mr. Outside was happy as long as he only had to sell (he really disliked "paperwork and numbers") and as long as there was a nice balance in the bank account. One day Mr. IRS Agent visited the company. Mr. IRS Agent informed Mr. Outside that "no withholding deposits had been made for the past six months." Mr. Outside was astonished. It turns out that Mr. Inside had been keeping the money - along with some other funds - for himself. The company was out of business seven months later and Mr. Outside was near bankruptcy and looking for a sales job.

The second example involves Dr. T and his long-time trusted office manager. Dr. T liked his profession but just like Mr. Outside, he really didn't like paperwork. Mrs. Long-Time Trusted Employee was more than happy to handle everything herself. One day Dr. T received a call from Mr. Patient who complained that his insurance company had paid Dr. T but he was still getting bills from Dr. T's office. Well, you know the rest of the story. Dr. T survived, but his bank account was about $75,000 lighter.

You need to follow three very important policies for financial controls - (1) division of duties and responsibilities, (2) personal oversight, and (3) vacation policy. Division of duties makes it more difficult for an embezzler to hide what he is doing. Personal oversight enables you to catch the person quickly. Vacation poilicy requires someone else to perform the duties which the employee is on vacation.

Although it is impossible to list all cases in this posting, let me give you some examples. Under the topic of division of duties, the person who makes the payroll withholding deposits should not be the same person who opens the mail. Why? If withholding deposits are not made, you will receive a notice from IRS via U.S. mail. Do you want the person who stole the withholding deposit to receive the notice? (I do recommend outsourcing your payroll for that reason and for others that I will discuss in future postings). The person who purchases the inventory should not be the same person who records the receipt of that inventory. The person who pays the bills should not be the same person who balances the checkbook.

I can hear you now. "I am a small company. I don't have all of those different people." In that case, YOU had better be the other person. If you feel that you are not knowledgeable enough, what should you do? You have two choices. You can learn by taking classes. Your local community college probably offers accounting classes that you can take. Your other choice is to outsource the function to your CPA. He or she may have the resources themselves or they may be able to recommend an accounting service that can help. Your CPA is also a great resource in reviewing your overall funancial controls.

As for personal oversight, it is quite simple. First, get into the habit of spot checking ALL financial duties such as checking vendor balances, receivable balances, physical inventory, etc. Secondly, I always selected what I considered to be a major protection item and performed that duty myself. That item is balancing the checkbook and reviewing cancelled checks. I have always said that I can't guarantee that no one would embezzle from me, but I could guarantee that I would catch them at the end of the month.

Finally, beware of the loyal financial employee who never wants to take time off. There are many stories (read the early history of the Hormel Company) about cases of embezzlement that were discovered by employees who were substituting for someone on vacation when they noticed that something seemed out of line.

Remember, YOU and YOUR FINANCIAL CONTROLS are the first line of defense in protecting your company. Don't neglect that duty.

Thanks for reading this blog. If you enjoy it, please pass the name of our site on to others who may enjoy it as well.

Two Tips on Financial Forecasting

2008-05-27T22:24:00.014-04:00

Before I begin this posting, I would like to thank "professorola" for the comments on the last posting. Some valuable points were made. I suggest all readers take a look at them.

The last few postings have been discussing the importance of keeping score for your business. You can't make good decisions without knowing the score. A financial forecast or budget is part of that score.

So what is the best way of developing a cash flow or P&L Forecast? Well, I really can't say that there is one best way. I can say that I have two important rules that I have used for my own businesses and that I always recommend to my clients. The first rule is to start at zero (zero-based budgeting).

Most people want to take the easy way out when developing a budget, that is, they take last year's numbers and add or subtract a percentage. "Let's see now. Our insurance premium averaged about $500 per month last year so I'll add 10% and make it $550 every month this year." In my opinion, you might just as well throw darts at numbers. You need to start at zero. Why? There are two very important reasons.

First of all, if you don't start at zero, you are not questioning whether or not the revenue or expense item should exist next year. Instead, you are assuming that it is a valid revenue or expense item which will most likely increase or decrease. While that may be true for some items, it is not true for every item. If you take a hard look, you may find that you can eliminate some expense items. You also need to consider that new expenses may come into existence. You need to analyze whether or not you will have the same revenue generators next year. In addition, while it may be valid that the item will go up or down, simply adding to or subtracting from the previous year's actual expense or revenue assumes that you did a good job controlling that item last year. Maybe you did - but maybe you didn't. You need to start at zero if you want to have a solid forecast.

Secondly, when adding a percentage, most business owners add percentages that are typically too high because they "want to be conservative." That is a very dangerous practice. When they overspend, they feel good because "they are on or below budget." Wrong! They actually have overspent. Their "conservative" budget has given them a false sense of success. Here is a simple example. Although a business owner believes that he will spend $300 per month on office supplies, he puts $350 in the budget. He then spends $340 per month. What conclusion does he draw? He concludes that he was under budget by only $10 per month. "Not too bad," he says. Actually, he was over his realistic budget by $40 per month.

Is zero-based budgeting a lot of work? Absolutely. But it is necessary if you are going to develop a realistic financial forecast.

The second rule I have is always budget to the lowest level. What do I mean by that? Don't have a line that says "utilities." You need a line item for gas, one for electric, one for the telephone, fax, water, sewage, etc. Don't just forecast postage. Forecast postage for payables, postage for marketing mailings, etc. The lower the level, the more accurate you will be with your forecast. It is just like baking a cake. If you put in the right amount of each ingredient, the cake will turn out just fine.

I encourage you to make comments. Your opinions and comments may be helpful to our readers. If you enjoy this blog, please pass on the site address to others. Visit our website at http://www.sentrabusinesssolutions.com/.

The Financial Forecast - Developing A Budget - Part I

2008-05-24T11:31:00.014-04:00

In the last posting, I talked about the importance of knowing the score. If you don't know the score, you don't have enough information to make the right decision. Without a budget, you can't know the score.

Most people, whether in their personal lives or business lives, don't have a budget. They don't want to take the time and effort to create one. Why? The most common excuse I hear is, "I can't predict the future." They feel that budgeting or developing a financial forecast for their business is a waste of time because things change. .......and they are right - things do change. You get new competitors, new products are developed, new government regulations come into play, the economy changes, etc., etc., etc. Nevertheless, you have to plan. What most people miss are two very important factors. The first factor is that your plan is a means of measurement, not an absolute. The plan is there for analysis -so you can ask the "why" questions concerning your variance from the plan. Those "why" questions are vital to your success. The second factor is that the process of developing your financial forecast forces you to think and analyze BEFORE you make your decisions. Let me explain the second factor first.

There are two financial forecasts that every business should have. You should forecast cash flow and you should forecast P&L. I strongly recommend that you do both but if you only do one, do cash flow. Why? CASH IS KING. Businesses - large, medium, or small - don't survive without cash. You can't pay your employees or your suppliers with receivables or inventory. You need cash. So many new entrepreneurs focus on the P&L statement instead of on CASH FLOW. Profit is great but keep in mind that the P&L statement does not reflect what your cash position is.

OK, let's get back to the forecasting process and how the process itself helps you. No matter which part of the process you are working on, you need to think and analyze your business. If you are working on the cash in side you are analyzing how your cash comes in with questions such as:

Which sales are cash sales and which sales are on credit?
How many of the receivables will become cash in 30 days, 60 days, 90 days?
Can I get more cash sales and less credit sales?
Do I need a line of credit from my bank because of the amount of credit sales I have?
How high should that line of credit be?
How do I collect from deadbeats?
Should I charge a late fee for people who take more than 30 days to pay?
What percentage should that be?
When do I turn over deadbeats to a collection agency?
How many accounts will never pay?
What dollar amount and percentage will the collection agency collect for me?
What will my collection costs be?

If you think about your particular business, you can probably add another 10 to 20 questions to my list. The important factor is to THINK AND ANALYZE. Don't just put numbers into a spreadsheet.

The same is true on the cash out side of your cash flow forecast. Think about the money you are spending. The first question is, "Do I really need to spend money on that item?" If so, then you need to consider the following list of questions:

Is it better to pay less and pay cash or is it better to pay more and get 30 day terms? (Hint: There is no right or wrong answer. What is best in YOUR situation?)
Should I pay cash to get a lower price and pay for it with my line of credit?
What is happening with prices on particular items I need? Are they stable, going up or going down? You need to consider that when forecasting.
Do I have multiple suppliers or do I have just one supplier - and am I at the mercy of that supplier for price increases?
Can I get competitive bids?
Should I buy volume to get volume discounts or will I then have too much cash tied up in inventory?
How should I pay my employees - weekly, bi-weekly, monthly?
Should I pay all employees at the same time or can I have different positions on different pay schedules?
Is my rent (or property taxes if you own) likely to increase soon? Is there anything I can do about it?
Do I really NEED to be spending this much on rent?
What equipment will most likely need to be replaced soon?
Have I considered maintenance costs, breakdowns, etc.?

Once again, I am sure that you can add many more questions depending on your business. The point, once again, is that the process itself, regardless of the numbers, causes you to THINK IN ADVANCE.

In the next posting, we will discuss the best ways of developing the financial forecast for your business. As always, we invite you to post your comments about this blog and to make suggestions about any future topic.

The Business Scoreboard

2008-05-21T10:22:00.008-04:00

Let's suppose you are the head coach of your favorite professional football team. You are in the Super Bowl and there are 3o seconds left in the game. You are on your opponent's 40 yard line. The big question is .... What play do you call?

Your answer will most likely be ..... "What is the score? Is my team winning by 28 points or are we losing by 2 points?" The score will dictate which play you call. You are certainly not going to call the same play if you are losing by 2 points that you would call if you are winning by 28 points.

The same is true in business. The score will determine which business play you call. You have to know your business score. Just what do I mean by "business score?" For the typical small and mid-size business, there are five items that make up what I call the business score.

Cash on Hand: How much cash do you have NOW? How much is in the bank?
Receivables: How much do you have and when will they become cash?
Payables: How much do you owe and when do you have to pay it?
Budget variance: Are you on budget with your P&L and Cash Flow Statements? If not, are you better or worse? WHY?
How much gross profit (margin) do you make on each item you sell?

To be successful over the long term, you must constantly monitor the five items I have listed above. Without knowing each of the items above, you can't make a good business decision. You can't call the right play. Just think about any sport. Does Tiger Woods play aggressively or conservatively? To decide, he has to know where he stands against the competition.

In the case of a business owner, she has to decide whether or not to take the order even though her profit margin will be only 25% of her normal profit margin. Should she sponsor the local charity race? Is business bad enough that she has to lay off her best employees? Without a scoreboard that shows her business "score," how can she decide what to do?

To keep score, three things are necessary. First, you have to have a good accounting system. It does not have to be complicated or complex. But it has to provide the reports you need to keep score. Secondly, you need to update it at least weekly so you can get reports that are CURRENT. Getting one set of reports at the end of the year won't do you any good for decisions you have to make all year long. Finally, you have to take the time to review and analyze the reports. Don't tell me you are too busy. You can't win the game if you don't know the score.

Here are two very real situations of what happens when you don't keep score. A friend of mine opened a restaurant in a mid-size city in Minnesota. Despite all that he knew he should do, he was always too busy to keep score. Finally, as money was running out and he was about to go out of business, he decided to look at his gross margin. He discovered that he was selling most menu items for less that his food and labor costs. One month later he closed the doors.

Three gentlemen I know started a real estate related business in a southern state in the late 1990s. Sales grew rapidly and the checkbook always had a large balance. They had plenty of money to hire more people, buy more office equipment, etc. Since the checkbook always had a large balance, they thought they were business geniuses. The only part of the score that they ever looked at was the checkbook balance. Of course, that is important, but it is only one factor of the company's score. They never looked at payables and receivables. Suddenly, the real estate market in their area went down, way down. The checkbook balance was significantly smaller. It was then that they started to look at the other components of the score. Too late! They had a great deal more in payables than receivables. For the last few years they thought that their expenses seemed really high, but they had not done budget planning so they had nothing with which to compare them. Six months later the company no longer existed.

Do I tell you about these true stories to scare you? YES, I DO. It can happen to you and it probably will if you're too busy to keep score.

The next posting will discuss "how" - how to budget and how to keep score. Please post your comments. We are always anxious to know your opinions. Visit our web site at http://www.sentrabusinesssolutions.com/. If you want to email me directly, you can email ron@sentrabusinesssolutions.com. Thanks for reading our business helper blog.

Employee Documentation

2008-05-19T16:05:00.009-04:00

I am sure that this sounds familiar to you .......

He said ....... She said

I said ..... You said

We said ..... They said

It's my word against your word

.....and on and on and on.

When employee behavior is not documented, it becomes difficult to remember exactly what happened and even more difficult for the business owner or manager to have any credibility. I can hear your objections now. "Document? Don't you know how time-consuming that is? Are you aware of how much effort it takes? I'm too busy to stop what I'm doing to document that my employee came in late for the third time in five days. I have many important things to do. After all, I have a business to run."

I have heard all of that before. Well, I have news for you. Employee documentation is an important part of running that business. If you have been reading this blog, you know we talked about the importance of hiring the best employees because employees represent you and your company. We said it was very difficult predicting who would turn out to be a good employee. Well, when you have chosen the wrong employee (and we all do that from time to time), or when a good employee goes bad for any one of several reasons, you have to be able to take the proper action.

The opposite is also true. When an employee has performed exceptionally well and you want to give an employee a raise or promotion, you want to be able to justify your action. You want to give raises and promotions for the right reason - because of job performance. And you certainly don't want to be accused of showing favoritism. Thus, whether you want to terminate, discipline, give a salary increase, or promote an employee, documentation will be a major ally in accomplishing the task.

Here is what has worked well for many business owners and managers. The day before the employee starts work, you have their employee file prepared. It contains the standard employee documents such as their application, resume, W-4 form, I-9 form, etc. It also contains an "employee documentation form." That form will be used to record those action which will justify your future decisions - salary increase, no salary increase, promotion, demotion, discipline, termination, or whatever course of action you are considering.

The form should contain the date that the behavior or situation occurred and the date you are making the entry. It should contain ample space for you to describe what occurred, i.e. employee arriving late, calling in to report off, receiving a high compliment from a customer, helping a fellow employee achieve a sale, etc. Finally, it should have place for the employee to initial and date to acknowledge that you reviewed the situation with him and he is aware that it has been recorded in his file.

Document quickly after a situation has occurred. The more time that elapses, the harder it is for you to recall exact details - and the more likely you are to let the actions "slide."

With this kind of documentation, there is no future "I said .... you said." It is all recorded in black and white with both parties having signed in agreement to what occurred. All too often an owner or manager says, "That is the fourth time you were late this month," and the employee says, "No, I was only late one other time." He asks the owner to name the dates and the owner is sure he was late but can't remember when. All credibility is gone.

Yes, it is time-consuming to document. It takes time away from other things that you would probably enjoy doing. Some business owners have difficulty talking about the unpleasant subjects to their employees. If you do, then you need to either learn how, or get out of management. Disciplining employees is as important to a business owner as disciplining children is to parents.

Just remember, the documentation form is your ally. It helps protect you, your business and your employees, and it will be an important tool for performance reviews.

In future postings we will discuss the performance review, employee motivation, and management by objectives. Reader comments are always welcomed. Readers are also encouraged to suggest any topics that they would like to see discussed in the future.

The Employee / Policy Manual

2008-05-18T14:17:00.009-04:00

Developing a marketing program is fun. Taking a customer to dinner is fun. Making a big sale is great fun. Writing an employee or policy manual is not fun. It is grueling work. Nevertheless, it is very necessary.

An employee manual provides two very useful purposes. First, it explains to your employees what all of your policies are - and I do mean all. Secondly, it provides protection for your business. If you have a well written manual which is properly distributed to all employees, no employee can ever say they "didn't know or didn't understand." Everything is spelled out in black and white.

Keep in mind that your employee manual is not written in stone. It can be changed often as new policies need to be implemented or existing policies need to be clarified or explained in more detail. Let's begin by discussing the first purpose.

I usually start the employee manual with general rules of employee conduct. I certainly can't list everything for every type of business in this posting, but I will provide some detailed examples. Suppose you start with your dress code. How do you expect employees to dress? You need to be very specific. What I think of as business casual may not be what you think of as business casual. If the last place you worked allowed you to wear jeans to the office, you may think of jeans as business casual. I, on the other hand, may think of business casual as a nice pair of dress slacks, a dress shirt, but no tie. That is why it is important to be specific.

Other items you should cover under the topic of employee conduct are:

personal use of company property (computers, cell phones, office supplies, etc.)

absenteeism

tardiness

altercations with other employees, vendors or customers and general disruptive behavior

safety rules (depending on your business, this topic may be a separate section)

employee theft

sexual and other forms of harassment

smoking

use of alcohol and illegal drugs

drug testing policy

personal visits by friends or relatives

illegal activities on company time and property

It is important to state what the penalty could be for violating a policy. I use the word "could" because your attorney may advise you to state it that way. For example, your manual may state, "Anyone absent three times in one year without a valid medical excuse may be terminated." If you substitute the word "will" for the word "may," then per your own policy, you would be required to terminate the individual. The word "may" provides an option. I am not an attorney and do not give legal advice so I suggest you receive legal counsel from your attorney on such matters.

A second section should cover employee compensation. You should discuss such items as:

pay ranges for job classifications (this will depend on the size of your company)

time frame for performance reviews

types of pay raises - merit, length of service, etc.

method used for determining commissions if they apply. This should include what happens if an employee starts the sales process but then quits or is terminated prior to the sale being completed. It should also cover split commissions, etc.

overtime pay

exempt versus non-exempt employees

..... and any compensation matter unique to your company

A third section should cover company benefits. List the benefits provided. Once again it is important to be specific. Do the benefits start on the first day of employment or do you have to be employed for 90 days? What family members are covered? What benefits are paid for by the employee? If an employee has used up all of her vacation time, can she take time off without pay? Remember, don't leave a chance for assumptions. List any common benefits that you don't offer. For example, if dental is not included, say so. This way there will be no confusion.

A fourth section should discuss performance reviews. Describe in detail when and how performance reviews are conducted. It is important to let employees know from day one that they will be evaluated periodically on a formal basis. And .... it is extremely important that you adhere to the schedule and procedure that you have outlined in the manual. If either changes, change the manual.

As I previously stated, depending on your type of business, you may need a separate section on safety. Some businesses will have sections that are unique to their industry such as customer record retention, locked file cabinets and desks, information that can or cannot be left on voice mail, email retention, shredding of documents, etc.

I think by now you get the idea. As I previously stated, I can't cover all policies for all types of industries. The important thing for you to remember is to cover everything you can think of and be specific. Here are two other important factors. First, do not distribute an employee/policy manual without first having it reviewed by your attorney. You need to make sure that none of your policies violate any types of laws। Second, when you distribute the manual, include a page which the employee signs and returns to you. The page should state that the employee has read and understands the content of the handbook. I always number my manuals and keep a log of them. I also include on the signature page the revision reference (A, B, etc.) and the day of the revision. Each time the manual is revised, I require the employee to sign another page stating that he received the manual and understands the contents. Of course, you have to give the employee adequate time to read the manual before returning the signature page.

The second purpose of the employee/policy manual is to protect the company। Here are two personal examples। I had a sales employee quit prior to a sale being completed. My manual stated that an employee had to be employed at my company when the sale was completed (including receipt of payment by the customer) in order to receive the commission. When she did not receive the commission, she filed a complaint with the state Department of Labor and Industry who began an investigation. I simply sent them a copy of the manual and her signature page to the Department of Labor and Industry. That ended the investigation. They said she had no basis for her complaint.

A second case involved an employee with one of my other businesses। He said a manager had promised him that he would receive a 10% raise at the end of his third month of employment. When he did not receive it, he sued my company in small claims court. When my manager had his turn to speak, he simply showed the judge a copy of our manual which stated that no one was eligible for a raise until they had been employed for six months. He also showed the judge the signature page. Case closed.

In both examples my company was protected by the manual। Had I not had those policies in writing and had I not had the employee sign the page stating that he/she understood the contents, I could have lost both cases। Both would have cost me time and money.

A good employee/policy manual can be a great friend to a business owner. No matter how busy you are, no matter how much you would rather do something else, make sure you have a comprehensive manual.

Please feel free to comment on this or any of our postings. Your suggestions for future topics are always welcome. Visit our web site at http://www.sentrabusinesssolutions.com/.

Employee Orientation and Training - Part II

2008-05-17T15:35:00.010-04:00

Orientation and training is certainly not a glamorous part of running your own business. However, it is an extremely important part if you want to be successful for the long term. Notice I added the words "long term." I have seen many short term successes over the years. These are companies who happen to hit their industry at the right time. Maybe they became a home builder during a housing boom in their area. Maybe they got into the mortgage business during the refinance boom. Maybe they started selling sports memorabilia when the professional football team in their city won the Superbowl. It is kind of like the "one hit wonders" of the entertainment industry.

If your objective in owning a business is to start the business, build up the sales quickly and sell it a year or two later, then you certainly don't care about building a strong foundation. On the other hand, if you intend to own the business for many profitable years, then a good orientation and training program is a vital part of that foundation.

The purpose of an orientation program is to enable new employees to become familiar with the company as a whole. The program should present the company's vision, goals, policies, etc. It should also take care of "housekeeping" matters such as direct deposit for paychecks, insurance forms, vacation requests. The employee manual should be given to the employee at this time.

Training is teaching the new employee the duties and responsibilities of her new position. While an accountant and a sales person may be in the same orientation meeting, they would most likely not be in the same training session.

"But Ron," you say, "I am a really small company with only two employees. I don't need to do all of this." Yes, you do - even if you only have two employees. Do you want to have two GOOD employees, two mediocre employees, or two bad employees?

The Orientation Session: There are two reasons to have a formal orientation session. The first is make the employee feel as though he is part of the team. You make him feel welcome. He meets the other team members. The second is to learn about the company. These are two highly integrated objectives. The more an employee knows about the company, the more he will feel that he is a part of the company. Some of the items which should be covered in the orientation program are:

History: Tell your new employee about the history of your company. When was the company started? Why was it started? Where? Is it in its original location or has it moved? Who was the founder? Even if you are the owner and this is your first employee, give him this type of information.

Vision, Mission, Goals: Show your new employee your mission and vision statements. Explain why you chose that particular vision for your company. Tell her what your company's goals are. How can you expect her to help you achieve those goals if she doesn't know what they are? How can she feel that she is part of the team if she doesn't know where the team is going?

Employee/Policy Manual: Review your policies with your new employee. These policies should be in writing in the form of an employee or policy manual. The manual should contain all policies from dress code to vacation requests. Yes ...... even if you just have one employee you should have a manual. (We will cover the content, structure and purpose of the policy manual in the next posting).

The Training Program: Don't hire an employee if you don't have a training program in place. Let's go back to the professional football team that drafted the college quarterback and the recently graduated surgeon that we discussed in the last posting. You thought it was ridiculous for the team not to teach the quarterback the plays and have him practice with the team prior to his first game. You certainly didn't want to be the patient receiving the heart transplant from the untrained surgeon. Why do you think that it is okay to have your customer (the person who puts money in your pocket) receive a product or service from your untrained employee?

When you develop your training program keep three important concepts in mind.

Assume the new employee knows nothing! Don't say, "Well, I am sure that you know X, don't you?" How do you think she is going to answer? Whether she knows or not, with a question phrased in that manner she is going to say, "Of course I do." Start from point zero and train/teach everything. Even if she knows already, the training will be a good review.

No matter how simple you perceive the job to be, have a training manual with all of the instructions. Have checklists in the manual so employees have to remember nothing. Everything is in writing for them. Develop a procedure that requires them to use this checklist and a procedure whereby you can follow-up to make sure they were used. It doesn't matter whether you are hiring a custodian, a painter, an accountant, a marketing VP, or whatever. Have a training manual for the position.

Follow-up, follow-up, follow-up and follow-up some more. As I said in the last posting, Tiger Woods is the number one rated golfer in the world ......and he still has an instructor. He has someone watch his swing to help him get better. You need to watch your employees and help them get better. You should have a formal program to follow-up on their performance. Never let them (or yourself) stop learning and improving.

In the next posting, we will discuss the employee/policy manual. Please submit your comments and suggestions. You can visit our web site at http://www.sentrabusinesssolutions.com/.

Employee Orientation and Training - Part I

2008-05-14T22:26:00.020-04:00

Selecting the right employee is only one third of the process of having a good employee. Suppose you have done the things that were presented in the last posting to put the odds in your favor when selecting an employee. Suppose you are successful - you have selected an employee with the potential to be a good, if not great, employee. Now what? What is the next step?

Many business owners stop at this point. They take the "sink or swim" approach. Or as they like to (defensively) call it - On the Job Training. Yes, OJT is a method of training employees, and yes, OJT can be an effective training procedure under the right circumstances. However, there is a huge difference between OJT and "sink or swim."

What I mean when I refer to "sink or swim" is that the business owner has given the new employee no orientation and no training. He simply says, "There is your desk," or "There is your equipment," or "There is the dining room and kitchen." And then he says, "Well, what are you waiting for? Get to work."

Imagine a professional football team drafting the number one college quarterback. The quarterback signs his contract. The coach walks over to him and says, "Welcome to the team. Our first game is at 1:00 on September 3. It's a home game. Be at the stadium about noon so you'll have time to find a uniform that fits you. See you then." How well do you think the quarterback - and the whole team - will perform?

Or what about a medical student who graduated from medical school last week showing up for her first day of work at the hospital and the chief of surgery says, "Welcome to General Hospital. You are scheduled to perform a heart transplant at 8:00 tomorrow morning. Good luck." How would you like to be the patient?

Both of those examples are absurd. But I have seen it happen over and over again in the business world. Why does it happen? Why do business owners fail to provide proper training? I believe there are three main reasons. First, everyone (even business owners) makes the assumption that what is easy for them is easy for everyone. What is common sense to them is common sense to everyone. Of course, that is not true. I know very little about trigonometry. I had one semester of trig in school and I really struggled with it. I didn't enjoy it. A few years ago, an employee of a client was trying to explain a trig problem to me that he was using for a machining operation. After his fifth try he said, "My goodness Ron, this is so easy. Anybody can understand it!" He just couldn't comprehend how I could possibly not understand the trig because to him, it was so simple. To me, understanding accounting and financial statements is so simple. It all makes perfect sense. Yet, there are those who have difficulty understanding it.

Obviously, a business owner knows the operations of her business very well. Otherwise, she wouldn't be in that business. To her, it is simple. Therefore, she unconsciously concludes that there is no need for her to explain it to the employee. Wrong!

The second reason that the business owner selects "sink or swim" is timing. Business owners have a sense of urgency. I believe they need a sense of urgency to be successful. However, employee training is an exception. The owner says, "We need the job done now because the customer is waiting" so a newly hired, untrained employee performs the task. The question is, "Do you want the job done correctly, or do you just want it done now?" You may lose a customer if the job is not done now, but you will certainly lose many customers if the employee never learns how to do the job correctly.

But it is not your fault, you say. An employee quit without notice and now you need the new employee to fill his shoes quickly. Well, shame on you for not having backup. Does that football team that we talked about have just one quarterback? You may not be able to afford to have employees sitting on the bench, but you can cross-train them.

The final reason is time and effort. It does take time and effort to train someone, either by the business owner or another employee. It is work that does not produce immediate profits. Owners do not like that kind of work. Training takes the trainer away from his own duties. My answer to that excuse is that it takes effort to be the number one golfer in the world. Tiger Woods practices EVERY day, not just when he feels like it. Even though he is Number One, he still has an instructor. If the number one golfer in the world makes that kind of effort to be the best, what kind of effort should you make to be the best in your business? He was voted Number One. He earned it by his performance. Your business has to earn it as well. It takes effort to be number one in anything, even business. If you want your company to be Number One, your employees have to be Number One.

The next posting will talk more about the orientation and training process. Please feel free to post your comments and also your suggestions for future topics.

The Hiring Process - Part III - The Interview

2008-05-13T17:56:00.010-04:00

I don't know which is easier, predicting the Dow Jones Industrial Average one year from now or predicting which potential employee will be as good as you expect. Selecting employees is a very difficult process. In my 37 years of business experience, I have no idea how many hundreds - or maybe thousands - of potential employees I have interviewed. I do know that I have had my share of surprises.

Interviewing is not a perfect science. There is no method, system, test, etc. that will accurately and perfectly predict which employee will be a good employee and which will not. What you as a business owner must do is put the odds in your favor. That will give you the best chance - but no guarantee - for success.

Here are some suggestions that have worked well for others:

UNDERSTAND WHAT YOU ARE SEEING: In an interview, you are seeing the candidate at his or her BEST. He is wearing what he considers to be his best and most appropriate clothes for the interview. She is using what she considers to be her best manners. He is using his best vocabulary to describe his past responsibilities. She is being as respectful of your position as she believes necessary. He is using his best ....... she is using her best ......... etc., etc., etc.

If you are interviewing for a position which will deal with customers and you expect your employee to be dressed appropriately and be well-groomed, but the candidate's shoes aren't shined, his shirt is wrinkled, and he has a large spot on his pants, don't expect him to dress better after he has the job. This is his best - when he wants to get the job.

If the job candidate was disrespectful to the receptionist when she entered the building, don't expect her to show respect to her fellow employees once she gets the job. This is as good as she gets. You need to understand that what you are seeing is the best. It is all downhill from here. And don't think you are going to easily change those attributes after he or she is hired any more than you can change (or try to change) your fiancee after you are married. If you are pleased with what you see and hear, that's wonderful. If not, end the interview early.

Interview in Multiple Environments: Most business owners conduct one interview in her or his own office. That is fine to start. However, should the candidate get the job, he is not going to spend all of his time in the business owner's office. Depending on the position for which I am hiring, I may have one interview in my office, a second the next day on the golf course, a third a day later at dinner with the candidate and his/her spouse or significant other, and a fourth a day later in a conference room or other business setting. By doing this, I can see all sides of the candidate. What is her character like? Is she competitive on the golf course? Does she "bend" the rules? Does she treat the restaurant staff respectfully at dinner? How does she interact with her spouse? Does she allow him to talk or does she need to be the center of attention? Of course, not everyone plays golf so you may need to find another activity where you can test her character. But I am sure you get the idea. People prepare for the standard interview. They know how to answer the usual questions about strengths and weaknesses, goals, etc. Interviewing them elsewhere and not asking questions but just observing actions will tell you quite a bit about the candidate.

Get the Opinions of Others: I am a firm believer that two heads are better than one. Have one or two other people in your organization interview the candidate. It can be someone who will be a peer to the candidate or it could be a manager. The point is to get a second or even third opinion. The other interviewer(s) may see something that you missed -good or bad. If this is the first person you are hiring, ask another business person whom you respect to conduct the additional interview.

Don't Trust Their Word: "How are your writing skills?" you asked. "Oh, I am a very good writer," he replied. If you need someone who can write good reports, ask him to submit a sample prior to the interview. See for yourself. Don't just accept his word. If she has to be proficient in Excel, ask her to sit at the computer and show you. I recently worked with a client who hired someone based on her word. She said she was very knowledgeable in a particular accounting software. She was hired. Five weeks later she was gone. She barely knew how to open the program, let alone operate the software.

Do A Background Check: Do you really think that those three people he listed on his resume as references are going to say anything bad about him? Perform whatever background checks that are legally permissible. You need to know the truth.

I can see you shaking your head now. Is this guy crazy or what? Who has time to do all that?

You do. You have the time if you make it a priority. Remember, THAT EMPLOYEE WILL REPRESENT YOU AND YOUR COMPANY. Isn't it worth the time and the money to have yourself and your company represented well?

We all hear it every day - "You just can't find good help anymore." Yes, you can - if you look for it the right way.

Please submit your comments or suggestions for future postings. You can post your comments on this blog or email info@sentrabusinesssolutions.com.

The Hiring Process - Part II Pre-Screen Candidates

2008-05-12T17:53:00.011-04:00

Do you really want to interview someone who doesn't want the job? Do you really want to interview someone who is not suited for the job?

I am a firm believer in weeding out job candidates before the interview. Don't waste your time or their time. Whether you need to fill the position of CFO, restaurant server, store manager, or delivery driver, there are ways of pre-screening the candidates to make sure that they want the job and to make sure they are suited for the job.

You are probably saying to yourself, "No one would apply for a job that they don't want." Of course they wouldn't - if they knew certain facts before the interview. Unfortunately, most times a candidate knows very little about the job prior to the interview.

Most times a job candidate applies because he or she is answering an ad. Sometimes the candidate has attended a job fair or similar event which has the purpose of attracting potential employees. Maybe the candidate heard about an opening in your company from an existing employee. No matter which method applies, none of them tells the candidate much about the job. It is impossible to describe the job in an ad or to discuss it fully at a job fair. Thus, the candidate comes to the interview not knowing much about the position at all. That is why a second stage or pre-screening stage is needed.

All interested candidates should be given some form of application package that they can read prior to filling out an application and submitting a resume. That package should contain DETAILED information about the job. If travel is required, how much? Is it one day every week or five days every week? Is the travel to small towns in the Midwest or places like London and Paris? Don't just say "Knowledge of Word and Excel is required." Be specific. What do you expect them to know and to be able to do with Word and Excel?

"But," you say, "I don't have that kind of business." Alright then, let's take a restaurant that is hiring servers. Here are some questions that should be answered BEFORE you even have the server complete a job application.

Will the server be working the same shift each day?

How often do servers change shifts?

How long do they stay on the same shift?

How many weekends per month are they expected to work?

What holidays is the restaurant open?

What percentage of the holidays does each server work?

Does each server deliver the food from the kitchen to the customer's table or does the server just take the order?

Does the server have to bus tables?

I think by now you get the idea. The answer to those and other similar questions will determine whether a person wants to apply for the job or not. Providing this kind of information in advance serves as a pre-screening process. It will save you many hours.

What about formal "job testing programs" for pre-screening employees? There are many types of programs available. Some are quite simple while others involve extensive assessments by highly trained industrial psychologists. They are generally only used for upper level positions but could be, and should be, used for all positions. Remember what was said in a previous posting. The employee who talks to the customer is representing you and your company regardless of what level position they may have. That employee is "the company" as far as the customer is concerned. (In future postings, we will discuss job testing in greater detail.)

Give some serious thought to your particular business. Don't spend hours interviewing someone just because they answered an ad. Know that the person you are going to interview wants the job and is suited for the job.

The next posting will discuss the interview itself.

Please feel free to post your comments and to submit suggestions on any topics for future postings. We invite you to visit our web site at http://www.sentrabusinesssolutions.com/.

The Hiring Process - Part I

2008-05-11T12:29:00.013-04:00

If you want to have the best employees, you need to have a good hiring process. With most business owners, the process starts when the candidate walks in the door for a job interview. Unfortunately, that is too late. The hiring process must start long before that. It must start before you even start advertising that the job is available.

Clearly Define The Job: You can't hire the right employee and the best employee if you haven't CLEARLY defined the job. What are the tasks the employee needs to perform? What are his or her responsibilities going to be? How much authority will he or she have? I'll bet you are saying right now, "But with MY business, things change all of the time. Everyone has to wear many hats." You think that makes your business different? It doesn't. Every business faces changing times, changing regulations, changing products, suppliers, etc. Nevertheless, you have to plan. That plan includes the jobs to be performed and the employees who perform them.

That is another reason for hiring the BEST. When you hire the best, they can be flexible. And you need to build that feature into your requirements. What do you forecast as future tasks, responsibilities and authority as your business grows?

Define the Rewards: What is the starting compensation? When will I give salary and benefit increases? What promotions are available? Is a share of ownership a possibility?

Define the Requirements: What skills, education, and experience are required to meet the requirements of the job. PLEASE NOTE: If you use terms like "good communications skills, works well in a high-energy environment, good people skills," you are in a great deal of trouble.

What does "good communication skills" mean? I see it all of the time in employment ads. Does it mean you can write good reports? Does it mean you make good presentations? Does it mean your fellow employees like to talk to you? Have you ever met anyone who said that he did not have "good communication skills?" If you need someone who can write good reports, define the requirement as such.

What is a "high-energy environment?" (or other similar terms I see in ads to describe what the owner considers to be a busy - if not chaotic - environment). Define what specific requirements are really needed.

Define the Good and the Bad: No job is perfect. Be honest. What is the downside to the job? I have always been completely honest with candidates and told them what I consider to be the downside of the job. Why? I don't want them taking a job and then being surprised. That will result in poor productivity, distrust of my word, and an employee who will probably start looking for another job. All of that is bad. What is the upside to the job? Be honest as well. You're not going to try to sell the job to the candidate, but you will want them to know the advantages of working for your company.

Now you may be sitting there saying, "But I am not hiring a COO, I am hiring a janitor." Okay. How to you think it will reflect upon your company if a customer uses your restroom and it wasn't cleaned properly ... or your sidewalk wasn't completely cleared of snow and ice after the snowstorm .... or the dust is piled high on the bookshelves in your waiting room .... etc.? Whether you are hiring someone at the top of the organization or the bottom, you want to hire the best. To hire the best, you need the right hiring process.

Our next posting will discuss the pre-interview screening process. Please submit your comments and suggestions. They are always welcome.

Hire the Best Employees !!

2008-05-11T10:28:00.013-04:00

I once saw an ad in a magazine by an employment agency. The ad contained a picture of an empty chair and the words, "It is better to leave this chair empty than fill it with the wrong person." Truer words were never spoken.

Nothing that you spend money on in your business is more important than employees - not your equipment, not your building, not your office furniture - nothing. Let me prove it to you.

I am an avid golfer. I am sixty years old and I have been playing golf since I was 15 years old. That means I have been playing golf longer than Tiger Woods has been alive. I am going to play a golf match against Tiger. The rules are as follows:

I get to use the best golf clubs made. Tiger has to use an old set made 25 years ago.

We are going to play a golf course that I have played over 100 times. I know the course and have a great plan for how to play it. Tiger has never seen the course and thus, has no plan.

I get to have an experienced caddy who can give me great advice. Tiger is going to have to carry his own clubs and has no caddy to advise him.

Who are you going to bet on to win the match? What - you are going to bet on Tiger? Why? I have the best equipment, a great plan, a professional advisor, and I have more experience playing golf than Tiger does.

Of course, you are going to bet on Tiger. He has the talent and the ability. They overcome all of my "advantages." The same is true with employees. Who cares if you have a great plan if your employees can't implement it. Who cares if you have great equipment if your employees do not use it to its potential. Good employees will improve a bad plan. They will correct bad policies and procedures. They will replace bad equipment and get the most out of good equipment. Good employees will overcome other deficiencies in your business. Bad employees will never utilize your resources to their fullest potential.

Here is more food for thought. Your employees represent you and your company to your customers. All of their actions reflect upon your business. Suppose you walk into a Sears store to buy a new lawn mower. You observe two sales people standing nearby talking to each other. They look up and notice you but choose to ignore you and continue talking. You finally get tired of waiting and ask them for assistance. One agrees to help you. You ask questions about the various lawn mowers that are displayed. The sales person can't answer your questions. His general reply to all questions is, "They are all pretty good." You ask for more specific details. He rudely replies, "You can read the directions." and walks away.

You walk out of the store saying to yourself, "Sears employees are rude and give terrible service. I'm never shopping there again." You have condemned thousands of employees and an entire organization based on the behavior of two employees. That is the natural response. Why? Because those two employees represented Sears to you.

The same is true of every business. If you have bad service at an Olive Garden Restaurant you don't say that one server at that particular Olive Garden Restaurant is bad. You say that Olive Garden Restaurants have bad service. Why? Because that server represents the company to you. You don't know the CEO. You have never done business with the VP of marketing. Your contact with that company is that server.

When a baggage handler loses your luggage ..... when a mechanic doesn't repair your car properly .... when the receptionist at the law firm doesn't greet you properly ..... when the claims agent at the insurance company ....etc. .... etc. .... etc.

Do you want to spend thousands of dollars on marketing to attract customers and then have your employees chase them away? I don't think so. If money is tight, save it on anything other than employees. Hire the best, train them and train them and train them again, and reward them properly. Training will the subject of a future posting.

Your comments are always welcome. Please feel free to suggest any subject you would like discussed in the future. Visit our web site at www.sentrabusinesssolutions.com.

Customer Retention - Part III

2008-05-10T21:02:00.009-04:00

Rule Three of Customer Retention: Support your customers or help solve a problem.

We all know that we should give good customer service. We all know that we should sell a quality product or service. Those are the basics. If you don't sell a quality product or service or don't give good customer service, you won't have to be concerned about customer retention. You won't have any customers to retain!!!!!

In Rule Three, I am talking about two things. First, by "support your customer," I am telling business owners that if their customer has a business, they should support that business. Suppose you own a hair salon. You have a client that owns a dry cleaning business. Where do you take your dry cleaning? If you want that client to be a loyal customer, don't you think you should also be a loyal customer?

I learned from my father (who owned his own business) many years ago that you should support those who support you. My father told us that these people put food on our table and we should return the favor.

What if you own a hair salon and you have two clients that sell the same product or service? That really isn't a problem. You let both clients know that you have his competitor as a client. Tell both of them that in the interest of fairness, you will be giving half of your business to one and half to the other. I have done this numerous times with my businesses and have gained their respect - and loyalty.

But, you say, what if a client sells a product that I don't need or use. No problem - if your client sells something that you don't need or use, you have two courses of action. First, can you buy it as a gift for someone else? Or, you can help the client promote his business. You can pass out her business cards to someone you know who can use the product. You can display her brochures in your salon. You can find out what kind of businesses she sells to in order to determine if there is someone you know in that industry. The more you help your customers and clients to be successful, the more loyal they will become to your business. If you are displaying their brochures and passing out their business cards, are they likely to go to your competitor?

And then there is always the question of price. What if I can buy the product somewhere else cheaper than I can buy it from my customer? Are you really going to ask that question? Just think about it for a minute - if it takes you that long to reach the correct answer. First of all, do you want your customers to price-shop you? Secondly, ask yourself, "Is it better to buy from a customer at a slightly higher price or lose the customer and spend money trying to replace him? Okay, I am glad we got that question out of the way.

What about those customers who do not own businesses? You can't buy from them. What do you do? That is the second part of Rule Three " ..... or help solve a problem."

Let your customers know that you are willing to help them. You can do so in many simple ways. If you have a retail store, you can have a bulletin board where they can display small ads for items they want to sell or are looking to buy. If you don't have a retail store, you can have a classified section of your newsletter. Let your clients know that they can place a free ad in your classified section. Perhaps they are looking for someone to help care for an elderly parent. Maybe they want someone to refer a good piano teacher for their son or daughter. Your newsletter will help them solve a problem.

Use your imagination. Tailor a way that best fits your business. Keep in mind that by helping in this manner, you not only build loyalty but you also differentiate yourself from your competitors. That will be the subject of a future posting.

You can also help by promoting their favorite cause. Maybe they volunteer for a non-profit organization and the organization is having a fund-raiser. You can display their posters for that fund-raising event.

Supporting a customer's business or helping them solve a small problem costs you NOTHING and it BUILDS LOYALTY. It helps you retain customers. Once again, ask yourself the big question. "Is it easier and less costly for me to support and help my customers or is it easier and less costly to replace that customer?" I think by now you know the answer.

Customer retention is a vital part of business success. Don't neglect it.

As always, you are encouraged to submit your comments and requests for a posting on a particular subject matter. You can visit our web site at http://www.sentrabusinesssolutions.com/.

Customer Retention - Part II

2008-05-10T12:26:00.008-04:00

In Customer Retention - Part I, Rule One stated the importance of keeping in touch with current customers and clients.

Rule Two - Reward Current Customers with a Loyalty Program.

The airline industry was one of the first industries to popularize the loyalty program with frequent flier programs. (How they hurt their programs is the subject for another posting.) Any kind of loyalty program, as long as it provides a reasonable benefit to the customer, is good for your business.

Frankly, I see many bad loyalty programs which I believe harm a business more than they help it. Why? Because the reward does not provide a reasonable benefit. It is extremely important to remember that any program must be "win-win." You win by keeping the customer happy and keeping him as a loyal customer. The customer wins by getting something special or something free. If you develop a program thinking that you are going to fool the customer and be the only winner, your program will fail ..... and not only will it fail to bring in more money for you, but it will also most likely cause you to lose customers. A reward is only a reward IF THE CUSTOMER BELIEVES IT IS A REWARD, not if you are simply trying to make more money.

Let's look at an example. A restaurant develops a loyalty program that offers if you buy seven meals, you get one free. So far that is reasonable. However there is "small print." You can only get your "free meal" on Monday night (because that is the slowest night for the restaurant and they are losing money on Mondays) and you have to purchase a beverage with the meal (because after all, the owner wants to get some revenue from this offer and the beverage has a high profit margin). Besides, that is when the restaurant has those specials at a lower price to try to attract customers. Since the restaurant is selling at a lower price anyway, they are not giving as much away. Is the customer going to think that this offer is worth much? Probably not.

First of all, why is business slow on Monday? ....... because most people don't eat out on Mondays. So is the restaurant going to fool them with this offer? Is the customer's desire to eat out on Monday going to increase? That is highly unlikely.

"BUT" the owner says, I need the business on Monday. That is the day I am losing money. My restaurant is packed on Thursday, Friday and Saturday. If the restaurant is losing money on Monday - close on Monday. Don't open that day. That's no rocket science.

Okay, so how can the restaurant afford to let customers use their free meal on a busy night? Well, keep in mind what I said about "win-win." First, your objective is to reward (thank) the customer. Secondly, you want the customer to continue coming into your restaurant. That is your "win." If people are standing in line to get into your restaurant every Thursday, Friday and Saturday, maybe it is time to increase prices. An increase in price - even while losing a few casual (non-loyal) customers - will more than make up for the free reward meal. Analyze it. Do the math. And get rid of the "purchase drink" requirement. The customer will most likely purchase the drink anyway. Let it be his decision.

The same is true for any other business. Don't try to use your loyalty program to push slow moving products. The fact that it is a slow moving product should tell you that few people want it. Why would someone want it as a "reward"? Are you trying to fool the customer? If it is a slow moving product, DON'T CARRY IT IN INVENTORY!

It is important to remember that trying to fool the customer with any kind of offer is a very bad policy. I recently was in a shopping center when I saw a sign in front of a clothing store that said, "Buy one suit, get one free." Naturally, that got my attention so I went into the store. Of course, once inside, I found out that this offer only applied to certain suits. I looked at the suits. I had a good laugh. The suits to which the offer applied went out of style about 15 years ago. I walked out of the store thinking that I don't want to do business at that kind of establishment. And yes, I did tell many other people not to bother going into that store.

Don't try to fool the customer. The loyalty program - or any other offer - has to be "win - win."

RULE TWO OF CUSTOMER RETENTION: Develop a good loyalty program - and make sure your customer will feel that he or she is receiving a reasonable benefit for being a loyal customer.

Please remember that your comments and suggestions for future topics are always welcome. You are also invited to visit our web site at http://www.sentrabusinesssolutions.com/.

Customer Retention - Part I

2008-05-09T14:18:00.014-04:00

I have often seen ads that contain a special discount. To my dismay, the discount is followed by the words, "New Customers Only." When a business offers a special discount to new customers only, what is that business saying to its existing customers?

Here is an example. A chiropractor in my area has been running an ad for a free massage for (you guessed it) "New Patients Only." Now suppose you had been a patient of that chiropractor for five years. You have always paid full price for your chiropractic services and for other services she offers such as massages. Now you see this add that says new patients - those who have never spent one single cent with this chiropractor - can get a FREE massage. If you want a massage, you have to pay for it. You have been supporting her for five years and you get nothing. How does that make you feel? Do you think your chiropractor appreciates your business? Does that ad make you feel important?

I had this happen to me with a vendor that supplied a service. He was passing out discount coupons for "new customers only." I quickly informed him that I had better receive the same discount or else I was taking my business elsewhere. I got the discount.

Any successful business person knows that it is much more expensive to get a new customer than to keep an old one. Yet where do most business people put their emphasis when it comes to marketing? Please do not think that I am saying that getting new customers is not important. It certainly is. I learned way back in Marketing 101 that every business loses about 5% of their customers every year through no fault of their own. They move. They die. They retire. Their sister-in-law becomes your competitor so they buy from her. Your customer's business goes bankrupt. For all of these reasons - and more - you have to get new customers. I understand that. However, what I am saying is that most businesses place too much emphasis on getting new customers rather than keeping their existing customers and working to have their existing customers become better customers. A business just can't overlook the importance of their existing customer base.

Let's take some simple examples. Suppose you have 100 customers. Each month they each buy 10 of Item X for $5.00 and 10 of Item Y for $10.00. Just think if you could get them to buy one more of each item each month. Or .... what if you could get them to buy one less of Item X and one more of Item Y each month. Better yet, what if you could get them to buy all 20 of Item Y and none of Item X. Whether you increase the volume that they buy or whether you improve the mix of the products they buy, you are going to make more money. The best part of increasing the volume from current customers or improving the mix is that you are still dealing with 100 customers and they are customers who you already know .....and ......who already know and trust you. That is much easier and less expensive than trying to find 10 new customers to get to know and trust you.

So how do you retain customers? The first step is building a good customer database. As I discussed in the last posting, you must know who your customers are and how to contact them.

When I say, "Who they are" I am not just talking about their first names. You need to learn about their family, hobbies, favorite sports team, etc. Why? Because when you show anyone that you have an interest in them, they feel important. Everyone, including me, likes to feel important. When you walk into a restuarant and the owner says, "Good evening, Mr. Jones. Would you like your ususal table," how does that make you feel? Compare that greeting to the usual cold greeting by a hostess who is finishing her cell phone call as she says to you, "Smoking or non-smoking?"

When you KNOW your customers, you can call them just to have a pleasant conversation, to ask how his daughter did in her recent softball game, or how her son enjoyed his lastest trip. This is an easy and no-cost way of keeping your business in front of your customer. Compare the cost of that phone call to an ad in the newspaper or on the radio.

I can hear the objections now. But I am a financial planner with 2,500 clients. I can't call 2,500 people. Maybe not, but you can call some, send personal hand-written notes to some, and send a monthly newsletter to the remainer of your clients. You can decide who gets called. Maybe you call the top 20%, write notes to the next 20%, and send newsletters to the rest. Have you ever heard that old saying, "Out of sight, out of mind?" The less our customers hear from us, talk to us or see us, the more chance there is of them forgetting us. If they forget us, they won't buy from us.

In Joe Girard's book, "How to Sell Anything to Anybody," he talks about sending a greeting card to every customer every month. If you have too many clients or feel that you are too busy, there are companies that can provide the service for you.

RULE ONE OF CUSTOMER RETENTION: Know who your customers are and keep in frequent contact with them.

In the next posting we will discuss more methods of customer retention. Please remember, we welcome comments and suggestions for future topics.

Who Are The Experts?

2008-05-08T21:11:00.008-04:00

So your business is slow. Your sales just aren't increasing the way you think they should. You decide you need a fancy promotion to attract new customers. But you have a problem. You can't come up with any ideas that seem to work. What should you do?

You decide you need to get an "expert" to help. Who should you call? Should you call the experienced, high-priced consultant who advertises that he can provide the help you need? What about the college professor that has written all of those books? Surely she has some great ideas. Maybe you should ask the young MBA for help. He seems to know about the latest trends in business.

Well, in my opinion, the correct answer is ......NONE OF THE ABOVE. You should talk to your current customers, your past customers and potential customers. If you don't know their names and how to contact them, then shame on you. I don't care if you sell ice cream from an ice cream truck. You should have found a way to learn your customers' names and have their contact information. It could have been as easy as having them fill out a form to win a free ice cream cone. The point is .... talking to your customers -current, past and potenial - is critical, so you need to know who they are and how to contact them.

Why talk to them? The answer is simple. Current customers and past customers already know your business. They can answer two of the three most critical questions - Why do they buy from you, and why did they stop buying from you? Potential customers may not know your business but they can answer the third critical question - Why don't they buy from you?

Is it that simple? YES !!!!!! Why hire someone else to ask questions that you can ask yourself? When you talk to your customers yourself, you not only hear their words, you also hear their emotion. Do they sound happy to buy from you because your product or service helps them solve a problem? Do they sound disinterested because they are buying from you today only because you happen to have the lowest price? Do they sound happy to buy from you because your and your staff make them feel important? Do they sound non-committal because they buy from you because they just happen to pass your store on their way home from work? Listen to both what they say and how they say it.

Once you know why current customers buy from you, you can then build on that strength. You can find out what will make them buy more from you - either more of the same product or more products.

Learning why past customers stopped buying from you is a bit more difficult. Some will not want to tell you the truth. For example, few customers will admit that they can't afford your products. If you run an upper-end spa, a customer may give a false reason rather than admit she can no longer afford your services. That is why it is extremely important for you to talk to them yourself instead of hiring someone else or simply sending out a survey.

It is important to find out why a potential customer is not buying from you. Is it because they have a false impression of your product or service? Do they think you are too expensive when your prices are very reasonable? Are they familiar with the inventory you stock or the variety of products you sell? You will never know unless you ask.

When you develop a plan to attract new customers without talking to current, past and potential cutomers first, you aren't really developing a plan - YOU ARE GUESSING !!!!

In addition, by "interviewing" your customers, you are taking the first step in a very important process - customer retention. Customer retention programs are very important to the growth and financial health of your business. Businesses seem to always focus on findng new customers rather than increasing sales to existing customers. That will be the subject of our next posting. Please feel free to post your comments or request topics for a future posting.

Hello Business Owners

2008-05-04T16:06:00.004-04:00

Welcome to all business owners who are interested in learning more about the best ways to run a business and to exchange ideas with other business owners. I also welcome those of you who are considering starting a business or who are in the process of getting it up and running.

This blog will contain articles by many different experienced business owners and by people who are considered experts in their field. Having been in the business world for 37 years, I have a rather large network of experienced and successful entrepreneurs who are eager to help others. There will be articles on a variety of business subjects such as market share, hiring potential employees, identifying the best customers, outsourcing, business insurance, accounting software, etc.

I am hoping that the articles that appear in this blog will be helpful. Some articles may not give you new ideas or solve your problems, but rather reinforce your existing thoughts, plans or policies. Perhaps rather than directly providing a new idea, the articles may trigger other thoughts which may be helpful.

To those of you who are experienced business owners, please do not toss aside this blog after reading only a few postings. Remember it only takes one new idea, overcoming one challenge, taking advantage of one opportunity, etc. to take your business to the next level. I have read and continue to read many business publications. Much of the content of these publications is material that I have read many times before. Nevertheless, I always find someting in each publication that I find useful.

Your comments and suggestions are always welcome. If there are subjects of particular interest, please send them to me and I will be happy to find someone in my network who can discuss the subject. If you have had success with a particular promotion, policy, procedure or anything else that you would like to share, please send it as well. And of course if you disagree with anything that you see written here, don't hesitate to express your opinion. Open and honest discussion will make us all better business people.

I plan to begin with specific subjects tomorrow, May 8. I look forward to writing and to hearing from you. You can email me at ron@sentrabusinesssolutions.com.