Credit Cards--Use Them Wisely!

     I visited with a business owner the other day that was seeking our assistance.  She sought our assistance in attempting to resolve a series of cash flow matters.  Her business was very successful at one time, however, with changing economic conditions, her business had experienced some struggles and she had began to use credit cards as a way to help sustain the business.  Sadly, she had maxed out several credit cards as well as having some loans and a line of credit that were fully utilized.   I told her that I would be happy to visit to see if our firm could help resolve some of her challenges.

     We were not in the conversation very long before I determined that we would not be able to assist her. Why not? Well, unfortunately, the business had been propped up on credit cards, 16 to be exact--and they were all maxed out, as well as having several bank loans and a line of credit at its upper limit with little, to no business to help sustain the payment stream.

     The more we talked, the greater concern I had for this business owner. At the end of our conference, I told her that I would make a few phone calls to see if I could find a business owner that may be interested in buying her particular business. Sadly, there was nothing more that we could do for this individual.

     Credit cards are a great tool and used wisely, are very beneficial to a business owner or an individual.   The credit card should always be used sparingly, no matter what phase of the business life cycle you are in, however, you should always insure that there is no balance at the end of each month.  What happens for many business owners is that the credit card becomes a "bridge" to get the business by a short period of decreased cash flow.  Normally, the credit card debt continues to rise and before you realize it, you have reached the credit limit on the first card.  Then, a second card is used to pay off the first card and the spiral continues.

    If you are in this situation, the first step is TO STOP SPENDING--NOW.  Here is where a talk with your banker and your business consultant can help you.  There is no reason to continue in a downward "death" spiral.  Yes, it may be humiliating and embarrassing, however, there is no reason to get into such a deep hole that you will never be able to recover, requiring you to file bankruptcy.

    The steps needed to turn this around can be quite drastic.  You may have to reduce staff, take a second job, sell off assets, take in a partner.  The farther along that you delay the inevitable facing of economic reality, the tougher the decisions are regarding recovery.

     Many business owners feel like going to see the banker is liking seeing the dentist.  It just plain hurts!  The truth of the matter is that the banker wants you to be successful--- after all, he/she loaned you the money in the first place.  The last thing they want is for your business to fail.  However, the banker is going to provide some strong direction and guidance that you may not wish to hear.  The cobnsultant is going to probably do the same thing.  As painful as it may be, you probably need to heed the advice of both individuals.  The real challenge here is usually business owner ego.  Don't let your ego become so significant that your business is allowed to fail.  Both the consultant and banker can help develop a work out plan that may be painful, but will hopefully allow you to sustain and hopefully improve your business operations.

   

   

Partnerships-- Part 2

   Our last post addressed business partnerships and some of the pitfalls encountered by individuals in a partnership relationship.  Additional considerations need to be given careful thought if you believe that you want to enter into a partnership relationship with someone.
   First and foremost, you need to have a rich and clear understanding of each partner's belief, understanding and utilization of good sound business ethics.  If one of your partners either has a shady ethical background or "pushes the envelope", you have to be comfortable with that behavior.  If you have any fear or trepidation about that type of behavior, you should walk away from any partnership type relationship.  Ethics and integrity are hard matters to acquire.  They are even more difficult to retain and enrich.  Becoming a partner with someone who will tarnish your reputation is just asking for trouble.
    Technical expertise is another key factor.  If you do not have the technical expertise to run the business, you become reliant and dependent upon partners whom possess that expertise.  While that may not be a bad thing, you become beholden to the knowledge.  This is something that you need to think about very carefully BEFORE you elect to enter into such an agreement.
     Duties and responsibilities of each partner need to be clearly and  lucidly defined and documented.  This is the only way in which all partners know what each partner is responsible for doing in the business.
     I am sadly aware of one partnership that failed.  Each partner maintained a 50% ownership stake in the company.  One partner was the "sales" force, while the other partner was the "inside" partner.  Everything went well for the first 3 years.  Then, friction, misunderstanding and disagreements arose, causing undue stress and hardships by all involved.  The bottom line in this business was that it closed, filed for bankruptcy and each partner suing the other partner.  Sadly, this matter could have been easily resolved BEFORE the first day of business with the development and use of a clearly identified and delineated partnership agreement.  These partners did not have such an agreement.  Many thousands of dollars was spent on legal assistance by each partner-- with the end being a bankrupt company, employees out of work and very, very frustrated clients.
    This is one area where professional consultation help will aid your overall business effort.  This is indeed a case of READY-AIM-FIRE, not FIRE-READY-AIM!
    Be careful if you think that a partnership is a panacea for business operations.  Such is normally NOT the case.

Partnership--Is it worth it?

   I  recently visited with an individual that had just ended a partnership relationship with other individuals in a technology business.  Unfortunately, the business was begun just before the economic downturn in 2008.  The business plan was based on data prior to 2008 for the specific industry.  However, the economic downturn of 2008 caused the business to decrease significantly, in the end, loosing substantial amounts of money invested by all of the partners.
   Partnerships are risky and tricky.  This is especially true if you enter into such an agreement with individuals that you may not know real well.  Ethics, financial management, personnel management, purchasing ideas along with an infinite number of other challenges all need to be carefully addressed BEFORE you even contemplate a business partnership.  This is an area where you need a business consultant along with a good business lawyer.  The consultant can help you draft the corpus of a partnership agreement.  The lawyer can take the draft agreement and "turn it into legalese" for you.
    Partnership agreements are vital.  There has to be a majority partner and then at least one, if not more, minority partners.  You cannot have an effective 50-50% partnership-- one of the partners must be the majority partner and be able to "call the shots" if that is required.
    Fiscal and fudicary duties and responsibilities must be carefully delineated in any partnership agreement.  If this action is not done, you will experience extreme difficulty if the partnership requires additional funding or the need for additional capital.
    The partnership program is not for the "faint of heart."  Many strong and long term friendships and relationships have been inextricably ruined because of poor partnership planning and agreements.
    Think hard about becoming a partner with anyone.  Being a partner is NOT all that it is cracked up to be!

How to Prioritize Projects

   A question raised the other day when I gave a presentation to a room full of business owners was "How Do We Prioritize Projects?"  Now, that is an interesting question-- however, the answer is not as complicated as it may seem!
    Step 1 is to identify and list all of the projects.  Don't worry about order, just list them.
    Step 2 is to identify those projects that will fulfill certain goals that you are trying to achieve.  If you are trying to clean up the store, office, shop, etc., then all the projects that are related to order and cleanliness count for A level projects.  Any project or task not associated with order or cleanliness is identified, with B, C, D, etc.
     Step 3 is to combine all like type projects which have distinct, discrete letters.  For example, if you have paint the shop wall as J, and paint the office wall as M, actually you have shop wall as J1 and Office Wall as J2.  What you will find is that there will become a natural grouping of projects once they are all listed and identified.
     Step 4 is to begin accomplishing each task or set of tasks depending on their relative importance to your or your organization.
     What becomes apparent rapidly is that many previously identified discrete tasks are now grouped together.  Here, you find that where you once had many individual tasks, you now have a smaller set of like tasks.  This makes doing the whole project easier.
     There is no right or wrong way in which to do task prioritization.  The key point is to know what is important for you, your organization and then list the tasks.  The priorities will easily "jump out" as to which is first, second, etc.

It Makes Me Not Want To Give!

   I was visiting with a client the other day regarding philanthropic giving.  This business is located in a community that has a strong philanthropic base.  Many people like to give-- and give very generously to any wide variety of causes-- the train depot, the mountaintop park, the merry go round situated downtown, support for the local hospitals and educational facilities including parochial schools.
   As I was visiting with my client, he said that his business is asked, almost daily about giving a piece of merchandise for various fund raising events.  Now, this client's business is a very generous community supporter.  The business is well established in the community and the owner is actively involved in the communities many service clubs, business associations, chamber of commerce and schools.
    What my client indicated is that he rarely, if ever, hears THANK YOU for the support that he has provided to whatever organization is asking for a donation.  Yes, the form letter signed by machine sometimes arrives a couple of weeks after the event, however, he told me rarely, if ever, does the executive director, foundation president or event chairman stop by the business and give a personal thanks.
    As I left, his comment made me think.  Why would it be so hard to stop by and say THANKS if this or any business gave you a nice donation for your fund raising event?  Is it that we have forgot about gratitude?  Is it too much time and trouble to "go out of our way" to stop and say THANKS for the donation that was given for your event?
    I have been involved in a wide variety of community events for many years.  Even when I lived in Washington DC, with all of the traffic and challenges of many million people, I never found it that difficult to personally stop by and tell the business owner THANKS for their support for a cause that I felt passionate about.
    Think about it-- when was the last time that you said THANKS, in person and with sincerity to a business owner who gave you something for your event?  If you cannot remember, go back and do it, thinking nothing about why it was not done before.  Just do it, Nike's slogan-- you may be amazed at how simple gratitude today begets greater gratitude tomorrow.

Management by Walking Around-- It Encourages High Performance!

    I have been out of town this past week in the Midwest visiting with clients.  I elected to drive because I like to drive--- and I wanted the time to really think about the remaining part of 2011.   Interestingly, my car needed some attention.  I took the car to the dealer in the Midwestern Town that I was in.  This is a large Midwestern city, the dealer, a large dealer with many service technicians and specialized equipment.

    Once the appointment was made for service, I  arrived and the service writer took down the pertinent information.  The car was delivered to the technician.  In a couple of hours, the car was returned with the problem repaired.  I paid the bill and drove away to my next appointment.  Interestingly, I got to the appointment, however, the exact problem for which I paid for returned.  UMMMMMMMMM-- either the repair "broke" or we have other challenges!  I cancelled my appointment and returned back to the dealership with the car.  Needless to say, the service adviser was surprised to see me so soon, after all, I had just left 10 minutes ago and only drove 10 miles.

     Here is what becomes interesting--- the service advisor was surprised that I returned so soon.  He was surprised that the repair either did not work, or the problem was more extensive.  OK, whatever the challenge is, we need to get it repaired!

      The service advisor took the car back to the technician and said, "We'll see what is wrong!"  OK, fair enough-- sometimes fixing one thing causes another part to fail.  Again, another couple of hours transpired and I went to check to see where we are this time.  The service advisor took me to see the car with the technician working on it.  The technician  told me what he did the first time, what the problem was and how he repaired it.  Now, the car back again for a second time, a "repeat", the technician retraced his troubleshooting steps and found additional problems not identified the first time.  The car was repaired, the technician drove it and returned it saying that no additional problems surfaced.

       Now, I have to say that I left satisfied-- although I lost the better part of a day getting the car repaired!  The technician told me that he was professionally certified and he felt bad that the car was a "repeat".  The technician told me that with electrical problems, sometimes it takes more than one time to fix the problem.

       What was impressive with this particular dealership was the fact that the owner of the dealership was walking around the whole time that I was there.  He was constantly walking, talking and watching how the operation was functioning.  The operation ran smoothly-- obviously, people were empowered to make decisions and customers left satisfied.

       The service advisor told me that he had just come to this particular dealership about 6 months ago and at his previous dealership, the staff rarely, if ever, saw the owner.  The service advisor pointed out that this dealership was well run and very efficient.  That was my observation as well.

       Are you out among your staff walking around, seeing how things are going?  Do you know what is going on "down on the floor?"  Do your staff feel a sense of pride and professionalism with their job?  That is what I sensed at this particular car dealer--and I think one reason was is the owner was visible, approachable and interested in everything that was going on.  Management by walking around works.  If you have not tried it, check it out-- get out and walk "the floor".  You may be amazed at what you learn.

     

Do Your Employees Know Your Corporate Values?

    I read in the paper the other day about a business that has been cited by federal regulators for failure to comply with federal regulatory rules.  Now, this is not uncommon in any business that has federal regulations which must be followed, however, this business was cited with several deficiencies, that required resolution.

    When visiting with another client, I asked him if his staff, of which he has approximately 60 full time staff members, knew what his mission, vision and purpose values were.  I conjectured that probably 23-30% of his staff may not know them.  He told me that he would agree with my conjecture.

     As we discussed this matter, my client told me that one of his key goals this business year was to insure that his staff has a better understanding of the corporate goals, visions and mission of the organization.  He also told me that he was going to become more involved in helping his staff achieve their personal goals, be it education, better financial management, etc.

      Goal attainment in any organization, be it large or small, is a function of constant communication between the leader and all team members.  If you don't continually and constantly visit with your team members, preferably every day, it will not take long before the team will "forget" what they are really here to do.  Oh, the task will get done, however, it may not be in the manner in which you had hoped it to be completed. 

     Have a team meeting at least weekly-- does not have to be long, however, long enough so that everyone knows where we are going for the upcoming day, week, etc.  The differences will surprise you!

Your Financial Numbers Report on the Health of your Business!

     If you are not feeling well, you go see a medical doctor.  The doctor orders a series of blood tests to check  your blood to see if there is anything out of order.  Once the medical doctor has the results of the blood tests, the doctor can the diagnose and prescribe medicine or other procedures in order to cure your ailment.
    The business consultant uses your financial numbers to check to see if there is anything out of order with your business.  Like the blood tests that the medical doctor performs, the business consultant uses financial reports to analyze your business.  Once the consultant has reviewed your finances, the consultant is able to give you solid advice on how to improve your business operations and profitability.
    We participate in an economic development group designed to help businesses grow and prosper.  A case that was recently presented to us revealed that the business owner did not understand his numbers or how they impacted his business operations.  This is not uncommon with many business owners.  Many business owners are very competent in performing the "core competency" of the business, but are much less adept at actually managing the business and making a profit.  After all, is that not what we are in business for---- to make a profit?
     Our firm is seeing more business owners that continue to struggle with possessing a good understanding of their financial picture.  Finances are the real life blood of the business-- and if the business owner does not have this in-depth understanding, the business will not grow and prosper.
     If you are a business owner or non profit executive, the finances are the most important part of your business day.  Learn to review those financial sheets every day, week and month.  Spend some quality time with your accountant--- plan on at least 3 hours per month initially to go over your numbers.  Ask your accountant questions that may help you preclude tax liabilities later in the year.
      Many business owners believe that if there is money in the check book, the business is making money.  That may or may not be true-- however, a good understanding of how your finances are developed will help the business owner make wise financial decisions.
     Use a business consultant to review your finances.  The business consultant will want to analyze the finances to see where you can reduce expenses and increase profits.  The business consultant may discover trends that have previously gone unnoticed or not identified.  The professional services fee of the business consultant is normally returned many times after a thorough review of a businesses financials.  The added benefit of the business consultant is that many consultants deal with many different firms and industries and can provide the business owner with insight that can be valuable in making strategic financial decisions.