Solomon Bruce Consulting Blog

Tuesday, May 14, 2013

Is Your Revenue Stream Diversified?

     A company called our firm today to seek assistance in their business operations.  The firm had been 99% dependent upon government contracts until 2008, when the economic recession occurred.  At that time, the company leadership decided to pursue commercial business, as the governmental contractor business had decreased significantly.
      Sadly, the company had been very successful in the years 2005-2008 with government contracts.  That is a GOOD thing-- not a sad thing, HOWEVER, they failed to recognize and realize that without  a diversified revenue stream and being dependent upon only one major customer, any swing could be disastrous.  That is what happened.  The government contract did not bring in the expected revenue.
       The expected government contract revenue was anticipated to help pay for a commercial  enterprise.  The commercial enterprise was established, built up, but did not have any organic funding source other than the anticipated revenue from the government contract.  You can see where this is headed.
       The commercial enterprise spent significant amounts of funding, with the anticipation of the government contract revenue making up any shortfall.  That did not happen.  Company officials elected to take out personal credit card loans to pay for business operations.  Now, 3 years later, the company is almost bankrupt without some injection of capital.  The question that was asked of our team was "could we help with capital?"
         We are not in the financial services industry, however, the company was referred to us by a commercial banker.  Sadly, the firm has no resources and without any capital injection, will probably be out of business within a matter of weeks.
          Where is all of your capital sources?  Are you dependent upon one primary revenue stream, without any diversification?  If the answer is yes, now is the time for some professional consultation help to help insure that you don't find yourself and your business in the same trap as this business.
          Revenue stream diversification is an important part of business operations.  Becoming overly dependent upon one customer or source of revenue is not an optimum condition to be placed in.
          Take a look at your revenue streams-- if they are not well diversified, with no one stream comprising more than 35% of the total, now is the time to explore how to create the diversification required so as not to be in a box relative to dependency upon one unique client or customer.

Monday, May 13, 2013

Suzie is Leaving--We are Moving-- We Reduce Overhead by 60%

     A business owner told us the other day that they were moving to a new location.  Now, this business owner had done all of the calculations that we have discussed on this blog previously and determined that moving made good economic and business sense.
       One of the major determining factors in the move was that Suzie was leaving for another opportunity.  Technology is such that the remaining staff members can pick up the workload that Suzie accomplished.  However, the business owner determined that by moving to a new location, she could save about 60% in overhead!  WOW--60% in overhead savings-- said another way, that would be a 60% increase in profitability or a 60% reduction in expense!
         This is the type of simple analysis that we suggest when a client is considering moving.  This particular business is not dependent upon foot traffic.  The location that the business is currently located is a premier location, in an upscale part of the community in which it is located.  However, the new location is also in a very trendy and growing neighborhood, about 3 miles away from the current location.  What is exciting is that the space in which the business is relocating to has been "re purposed" for offices and is a fun, funky and exciting location, located closer to the center of the business center.
          Suzie, the employee that is leaving the firm is receiving a wonderful new opportunity in the firm that she is going to.  Suzie's loss to the firm actually is beneficial to the firm because of the remaining staff as well as technology enhancements.  Would the owner have relocated the firm if Suzie was not leaving?  I don't know, however, I suspect that a 60% reduction in overhead would be very compelling.
         Have you looked at moving?  Does it make good economic sense?  If yes, then thinking about a relocation may make great business and economic sense.

Friday, May 10, 2013

Government Contracting-- Is it worth it?

     We recently have had some discussions with clients about becoming government contractors.  The question always becomes, at least in the eye of the prospective contractor, easy money.  However, that is not the case.

       Yes, government contracting can be a very good way to enhance your business and make good money.  That depends if you have bid the contract in a profitable manner, have the expertise required and understand how the government pays.

       Many contractors place undue reliance and dependence upon the government contract.  If that is the case, cash flow always becomes an issue.  Yes, the government will pay, provided you deliver the goods that you said you were contracted to do.  The issue is always the timing of the payment!  Sometimes, government contracts are paid in 120-150 days past the due date.  If your business is using the government payments for cash flow, the problems begin.

      If you decide to become a government contractor, pay close attention to your pay timeline.  If you don't have the line of credit or additional cash in order to "float" the bill until the government payment arrives, then becoming a government contractor may not make good sense.  This is an issue that requires some great thinking before becoming engaged in government contracting.  Knowing what you are getting involved in up front solves many challenges and problems!

Tuesday, May 7, 2013

The Continuing Saga of the new Cell Phone!

     Our firm replaced all consultant cell phones with the new Blackberry Z10's.  We had Blackberry's before, were very happy with them and were excited when the new products were released.  We understood that with new technology comes new challenges!  Wow-- have we found that out!

       Our first replacement cell phone lasted all of 13 hours.  The battery would not charge, the phone would not work.  Took it back to the cell phone store--.  After a four hour hassle with 4 different customer service "specialists", we left with a new phone, charger and battery.  All appeared to be fine.
        Fast forward 3 weeks later, now the phone quits-- in the middle of the morning after what the charge indicator on the battery said was a full charge.  Now, nothing worked!  Again, back to the store.  The answer this time was that we will order you a new battery.  No-- let's have a 3rd new phone.  Well, we cannot do that.  Well, why not?  Well......................................................  never got an answer.  The solution that was arrived at was the battery was dead, we'll replace the battery.  You will get it in a couple of days.  No, let's have a new phone.  UMMM-- well, we don't like doing that.  Well, we really did not care what they liked doing, we wasted another 3 hours at the cell phone store.  We have a new battery-- no reason to replace the phone if the battery is bad.  OK, I understand that logic-- troubleshoot the simple items first.  The phone is working-- the question is how long?  I hope indefinitely.

         Interestingly, we had to go through 5 Blackberry Bold's before we got one that worked.  When we finally got one that worked, a remanufactured one, it worked well.  However, we had to get 4 others that did not work before we got one that worked. 

          Why stay with Blackberry is the question?  Well, it is a great Canadian company and their products are rock solid-- not sure why we have had bad luck, however, once they get going, they do well.

          The customer service at the cell phone store was OK.  With horrible service the first two times and a letter to the CEO of the company, I am not sure that anything really changed.  We'll see how this Blackberry works!  We do like the Z-10-- it is a great device-- when it works.

Now is the time to grow!

     The economy appears to be running on all cylinders.  The stock market reached 15,000 on May 7--a record!  People are putting money in the market like never before!  Perhaps now is the time to enhance/enlarge your business.

      The growth in the Baaken formation in North Dakota is unprecedented!  The Feds say that there is more than twice as much oil as previously forecast.  With this kind of growth, only 4 years after one of the worst economic downturns our nation has seen in the past 75 years, now may be the time to grow.

       However, before you run out and buy all new equipment, new machinery and office space, let's go slow and careful.  Is growing really what you need to do for your business?  WHY should you grow?  What do the numbers say?  We are always harping on the numbers, however, the numbers never lie.  They are, what they are!

      Growing means more overhead, more labor expense, more facility costs, more equipment.  Now, none of this is bad if you have the sales strategy to be able to cover those costs.  Perhaps now is the time to review a complementary market line-- perhaps that line would be a great addition to your current business.  Now might be the time to think about upgrading your current equipment, using new technology to produce a better product with less labor and material costs.  The ideas are endless, however, before you go out and go "hog wild" on spending, make sure that you have a plan.

      A great business plan will address your market share, your costs, your labor and material requirements.  These are all factors which you need to know, review and understand before you decide to grow.  If you need help, our consultants can provide the assistance you need to be able to insure that your growth is in a measured manner.  Now is the right time to grow if you have done the planning and the numbers substantiate your actions.