As we continuing exploring business growth together we come to one of the most essential points that successful companies understand – critical numbers. So what exactly are your critical numbers? They are the metrics that determine your company’s success or failure, and by making sure they move in the right direction you can achieve your objectives and attain greater profitability.
You can’t move your company forward if you don’t know what criteria really matter. It’s crucial that you figure out what activities and metrics drive your business and track them with a vengeance. For some it might be weekly client meetings, for others it might be unit sales… it might even be inventory turn… whatever matters, pay attention to that. Sounds simple, but it’s not. So let’s walk through the process of discovering and using your unique critical numbers.
First, there are different perspectives that help you find your key metrics:
• Basic critical numbers. These are the numbers that you must hit day in and day out to stay in business. For airlines it’s a percentage of seats filled. For a factory it might be units per hour. For a service firm revenue per labor hour drives the bottom line. What is your most basic measure of productivity?
• Weakness critical numbers. These numbers help you turnaround a weakness when they move in the right direction. Think about where you run into trouble and attach a value to it. Is your inventory accuracy lousy? Is your backlog too low? Do you need to diversify your revenue stream away from a single anchor product by a certain percentage?
• Opportunity critical numbers. Opportunity numbers are fun because they let you measure a great leap in your performance. Maybe it’s releasing a new product by a specific date, reducing defects, or finding a new supplier who will allow you to undercut a competitor’s price. Whatever the external opportunity – what critical number will ensure that you grab it?
• Crisis critical numbers. These numbers aren’t as fun – but they’re really important! When your business is in trouble, what will ensure your survival? Cash balance in the bank, a certain debt ratio, or minimum revenue per employee? What will really matter in an emergency?
Now that you know the angles you might take as you think about critical numbers, let’s discuss the actual process. If you don’t already know what your financial drivers are (because they keep you up at night!) here’s how to find them:
1. Ask questions, gather data and analyze. Compare your performance to industry standards and see where you are off base. Talk to customers, employees and investors about what’s important to them. Conduct market research and scout out what competitors are doing. Once you have a lot of information, sit down and analyze it to see where you can have the greatest impact.
2. Define objectives. Strategic planning may have already given you clear objectives, but if you aren’t sure what you need to do first you need to get clear fast. Sit down with managers, staff and even outside contractors to figure out which objectives will be your focus areas for the next few quarters.
3. Prioritize. You can’t do everything at once, so look at the list of objectives that you’ve defined and decide what is most important. Your team can’t achieve anything if you give them too much to track, so focus on 1-3 key numbers for each person, group or department that they have a lot of personal control over. Make sure they have access to the information and resources they need, and that you share progress regularly.
An honest analysis of your current situation and desired situation should yield a plethora of objectives to choose from. Once that list has been condensed, one simple company-wide objective for each quarter will give you a cascade of critical numbers that apply to various people and departments.
I can’t tell you what your critical numbers will be because they vary so much from company to company, but I can tell you this… what the specific metric is that drives your business doesn’t matter. What really matters is that everyone in the company is contributing to the same set of objectives in a tangible, measurable way.
Sunday, March 29, 2009
Friday, March 20, 2009
Cash Flow Management 101
Most small businesses don’t rise and fall on their profits – what affects them the most is CASH FLOW. Cash is your business's lifeblood. Managed well, cash keeps your company strong. Managed poorly, your company tanks.
Knowing what affects your cash flow is the first step to avoiding a cash crisis. Most business owners believe their cash flow is defined as the revenues they generate less the expenses they have to pay. Not true.
The accounting rules that govern the creation of financial statements are not about tracking the actual flow of cash through your business. They are focused on measuring profit or loss at the end of the period - not cash flow.
The "bottom line" of your P&L is net income. And net income does not tell you what happened to your cash balance during the period. Meaning you can show a profit at the end of the month, but have had difficulty meeting payroll on the 15th and paid some bills late along the way. Your statements may show profit but your cash flow stinks!
Cash flow is made up of more than just profit and loss. It also is affected by: Accounts receivable, inventory, accounts payable, capital expenditures, borrowing and changing debt service, the timing of all these activities.
That's why you can't look at your income statement and see what happened to your cash during the month.
Luckily, the first step to improved cash management isn't exactly brain surgery: just start maximizing cash flow. There are many ways for companies to improve their cash position simply by making certain that their billing, collections, and payables systems are operating as efficiently as possible. Try to bring cash into the company as quickly as possible: bill promptly, aggressively follow up on overdue invoices, and, if possible, require up-front deposits when making sales. Then hold onto your cash as long as possible by managing your payables. That means, quite simply, take as long as you're allowed (without incurring late fees or interest charges) to pay your bills.
For more elaborate cash flow management, you must accurately assess your current cash position and make fairly reliable projections at key intervals about how much you'll need to meet expenses in the future.
If you're interested in delving deeper into cash management - shoot me an email at trish@akamai-consulting.com and I'll send you an Excel spreadsheet that will help you make easy cash flow projections for a full 12 months!
Knowing what affects your cash flow is the first step to avoiding a cash crisis. Most business owners believe their cash flow is defined as the revenues they generate less the expenses they have to pay. Not true.
The accounting rules that govern the creation of financial statements are not about tracking the actual flow of cash through your business. They are focused on measuring profit or loss at the end of the period - not cash flow.
The "bottom line" of your P&L is net income. And net income does not tell you what happened to your cash balance during the period. Meaning you can show a profit at the end of the month, but have had difficulty meeting payroll on the 15th and paid some bills late along the way. Your statements may show profit but your cash flow stinks!
Cash flow is made up of more than just profit and loss. It also is affected by: Accounts receivable, inventory, accounts payable, capital expenditures, borrowing and changing debt service, the timing of all these activities.
That's why you can't look at your income statement and see what happened to your cash during the month.
Luckily, the first step to improved cash management isn't exactly brain surgery: just start maximizing cash flow. There are many ways for companies to improve their cash position simply by making certain that their billing, collections, and payables systems are operating as efficiently as possible. Try to bring cash into the company as quickly as possible: bill promptly, aggressively follow up on overdue invoices, and, if possible, require up-front deposits when making sales. Then hold onto your cash as long as possible by managing your payables. That means, quite simply, take as long as you're allowed (without incurring late fees or interest charges) to pay your bills.
For more elaborate cash flow management, you must accurately assess your current cash position and make fairly reliable projections at key intervals about how much you'll need to meet expenses in the future.
If you're interested in delving deeper into cash management - shoot me an email at trish@akamai-consulting.com and I'll send you an Excel spreadsheet that will help you make easy cash flow projections for a full 12 months!
Friday, March 6, 2009
Developing Action Plans
So, what are action plans really?
Action planning typically includes deciding who is going to do what and by when and in what order for a whole company to reach its strategic goals. Now, if you're a sole proprietor you might be saying, “I AM THE WHOLE COMPANY!” And that’s OK. The design and implementation of your action plan will depend on the nature and needs of your unique business.
Actions plans specify the smaller tasks needed to achieve each of the core strategic planning issues your business faces. They become a bridge across the chasm between where you are and where you want to be. They outline measures of success so that you know when you reach each of the associated goals. They create accountability for follow through by spelling out who will tackle each action, what they need to complete the job, and what time line is acceptable.
"We think in generalities, but we live in detail." Very true.
Here is a quick guide to help you understand how to create an action plan and what elements should be included.
You need someone to take responsibility for each bold step within the action plan. Remember, if you don't reduce the steps to work assignments, they won't happen. And you've got to put someone's name on each one!
I’m working with a client right now who is extremely capable in his field of specialization, but has one huge managerial flaw. He fails to assign specific responsibilities to individuals. Instead, he constantly brainstorms ideas or suggests "we really ought to...,"you should think about..." And that's as close to organizing work as he'll get. Does he have problems? Oh, you bet! His staff comes out of meetings not knowing what to actually implement. They don’t know who is supposed to do what. No wonder the firm suffers from gridlock and chaos.
Let’s look at the elements of a good action plan one at a time:
Strategy: State exactly what strategy you are relying upon to guide the action plan.
Desired Results: Why bother at all? State upfront what will define success (your DESIRED STATE!)
Bold Action Steps: The real action plan should start as a list of the required action steps (or tactics) listed in chronological order so that they flow into each other and nothing crucial is skipped. These steps, taken together, will accomplish the intended strategy. Think about all the activities that must take place and in what order they make sense. What should be done first? What tasks will take a long time? How will the project logically unfold? List the steps in chronological order and by priority.
Assign Accountability: Write someone’s name down as responsible for each step on the list.
What is required?: Without creating a complete project plan for the responsible person, give them the framework to succeed by laying out your expectations of how the action step will unfold and your requirements of their work product. (This gives them the start of their own action plan with more detail!)
Resources and Investments: Naturally, you're going to employ resources to accomplish each action step. These resources may include money, space, equipment, people and information. List the specific resources required to complete each task. Go ahead and plan for allocating the resources to the responsible person as soon as they are needed. And while money is important, don’t discount the need for extra hands or knowledge you don’t currently possess. The resource which turns up scarce more often than any other is the human resource. Time and talent are priceless!
Measure of Success: What will be the key indicators that the action step is complete and has been a success? Lay out several critical factors that you will use to evaluate performance. These could be numbers, ratios, ratings, system changes, a new manual, etc…
Deadline: Things don’t tend to get done without a pressing date on the horizon. Even though you have to be flexible as a manager and allow the strategic plan to unfold in the best way, accountability is necessary to see results. Put down clear dates and set expectations for when each action step will be completed.
Action planning typically includes deciding who is going to do what and by when and in what order for a whole company to reach its strategic goals. Now, if you're a sole proprietor you might be saying, “I AM THE WHOLE COMPANY!” And that’s OK. The design and implementation of your action plan will depend on the nature and needs of your unique business.
Actions plans specify the smaller tasks needed to achieve each of the core strategic planning issues your business faces. They become a bridge across the chasm between where you are and where you want to be. They outline measures of success so that you know when you reach each of the associated goals. They create accountability for follow through by spelling out who will tackle each action, what they need to complete the job, and what time line is acceptable.
"We think in generalities, but we live in detail." Very true.
Here is a quick guide to help you understand how to create an action plan and what elements should be included.
You need someone to take responsibility for each bold step within the action plan. Remember, if you don't reduce the steps to work assignments, they won't happen. And you've got to put someone's name on each one!
I’m working with a client right now who is extremely capable in his field of specialization, but has one huge managerial flaw. He fails to assign specific responsibilities to individuals. Instead, he constantly brainstorms ideas or suggests "we really ought to...,"you should think about..." And that's as close to organizing work as he'll get. Does he have problems? Oh, you bet! His staff comes out of meetings not knowing what to actually implement. They don’t know who is supposed to do what. No wonder the firm suffers from gridlock and chaos.
Let’s look at the elements of a good action plan one at a time:
Strategy: State exactly what strategy you are relying upon to guide the action plan.
Desired Results: Why bother at all? State upfront what will define success (your DESIRED STATE!)
Bold Action Steps: The real action plan should start as a list of the required action steps (or tactics) listed in chronological order so that they flow into each other and nothing crucial is skipped. These steps, taken together, will accomplish the intended strategy. Think about all the activities that must take place and in what order they make sense. What should be done first? What tasks will take a long time? How will the project logically unfold? List the steps in chronological order and by priority.
Assign Accountability: Write someone’s name down as responsible for each step on the list.
What is required?: Without creating a complete project plan for the responsible person, give them the framework to succeed by laying out your expectations of how the action step will unfold and your requirements of their work product. (This gives them the start of their own action plan with more detail!)
Resources and Investments: Naturally, you're going to employ resources to accomplish each action step. These resources may include money, space, equipment, people and information. List the specific resources required to complete each task. Go ahead and plan for allocating the resources to the responsible person as soon as they are needed. And while money is important, don’t discount the need for extra hands or knowledge you don’t currently possess. The resource which turns up scarce more often than any other is the human resource. Time and talent are priceless!
Measure of Success: What will be the key indicators that the action step is complete and has been a success? Lay out several critical factors that you will use to evaluate performance. These could be numbers, ratios, ratings, system changes, a new manual, etc…
Deadline: Things don’t tend to get done without a pressing date on the horizon. Even though you have to be flexible as a manager and allow the strategic plan to unfold in the best way, accountability is necessary to see results. Put down clear dates and set expectations for when each action step will be completed.
Tuesday, February 24, 2009
Be Your Brand
We’re surrounded by brands everyday… the pen with your bank’s logo, the designer handbag, the cross-trainers with a tell-tale swoop on the side, the McDonald’s wrappers in your backseat. We see brands, we respond to brands, we buy brands - but how well do we excel at creating a brand for ourselves or our companies?
In business today branding is everything. If you are a small business owner your products, services, ads, promotional materials, facility and staff all have to project a uniform image that speaks to a target audience. If you are a career woman and want to climb the corporate ladder, you have to master the art of personal branding and learn to view yourself not as an employee, but rather as the President of Me, Inc.
What is a brand? A brand is a collection of symbols, experiences and associations connected with a product, a service, a person or an organization. People experience a brand through every point of contact with the product, service, company or person in question. People translate their experiences, expectations and sensory perceptions into a psychological, symbolic framework that becomes the brand’s image in their mind. I won’t kid you, developing a strong and appealing brand takes time, money and effort. And once a consumer has formed an opinion about a brand it’s incredibly difficult to change it – so devise your brand wisely and adhere to it religiously.
Why does branding matter? I get this question all the time from entrepreneurs who feel that investing in branding strategies is a waste of time since they don’t aspire to achieve iconic Nike, Coke or Wal-Mart status anyway. I’ll tell you why. Branding builds trust. And without trust a business can’t succeed. A brand is simply a promise of the value that customers will infallibly receive from you.
On a corporate level, consider the power of branding as we make buying decisions. Right now I own a VW Beetle convertible and I love my car. I’ve already decided that in a few years I will pass on my current car to my teenage daughter and purchase a new vehicle for myself. What car will I buy? That’s right… another VW Beetle convertible! Why will I re-purchase a Beetle? Because Volkswagen is a strong brand that represents top-quality German engineering, affordability, reliability and fuel efficiency, as well as a car that’s fun to drive. I trust that if a buy another Beetle I will have the same great experience that I have had with my current car. Volkswagen’s brand image, customer loyalty and profitability are dependent upon on upholding the company’s promise on a daily basis.
On a personal level, consider email. Everybody has email and anybody can send you a message, so when you scan your Inbox in the morning how do you decide whose messages you're going to read and respond to first? Whose messages are you going to send to the Trash unopened? The answer relates directly to personal branding. The name of the email sender represents a personal brand. It's a promise of the value you'll receive for taking the time to read the message. If you have a friend who forwards every silly chain letter and cartoon they receive, you probably won’t regard messages from them very highly, but if a business associate regularly contacts you with leads, referrals or relevant news you will regard messages from them as extremely important.
What can branding do for you? People engaged in branding seek to develop or align the expectations behind the brand experience with the thing being sold, creating the impression that a brand associated with a product or service has certain characteristics that make it unique and desirable. A brand is one of the most valuable elements in an advertising campaign, because it demonstrates what the product or service being sold is able to offer in the marketplace. In a job search, your personal brand is often more valuable than your resume or references, because it showcases the actual capabilities, power and presence you will bring to the workplace.
Good branding offers several benefits:
1. Premium prices. Careful brand management, supported by a clever marketing campaign, can be highly successful in convincing consumers to pay high prices for products which are extremely cheap to make. By manipulating the projected image of your product or service, you can move customers beyond a logical valuation of the cost. This is why t-shirts at Madonna concerts are $50 when they only cost .50 to make – good branding!
2. Trust and loyalty. When people have a positive experience with a brand, they're more likely to buy that product or service again. People who closely bond with a brand are not only more likely to re-purchase, but also to buy related items, to recommend the brand to others and to resist the lure of a competitor's low price. ‘Harley Davidson’ is tattooed on more bodies than any other brand – can you earn and anchor such loyalty in your own customers?
3. Memorability. A brand serves as a container for your reputation and good will. It's hard for customers to go back to "that store on 28th street" or to refer business to "some plumber named Dan." Memorability can come from using and sticking with an unusual color combination/logo (Target), distinctive behavior (Home Depot’s greeters), a catchy name (Google, anyone?), or with an individual, even a style of clothing (Hillary Clinton’s pantsuits). Develop your own identifiers and nail them to your name in the minds of the public.
4. Lower expenses. It takes money, time and passion to create a brand, but once it's created you can maintain it without having to tell the whole story about your product or service over and over again. For instance, a jingle people get stuck in their head continues to promote the company when it’s not on the air. Levi’s jeans continue to fly off the shelves even though you seldom see them advertised on TV anymore – that’s because generations of people love Levi’s and the company can afford to relax a little.
I certainly can’t go into all the nuances of how to engage in branding in a short article, but I hope that you have developed a deep respect for the process of branding, and that you understand how the strength of your professional or personal brand will impact your success.
Align your entire business behind a strong brand that resonates with potential customers, and commit yourself to delivering on your promises, and sales will naturally rise.
In business today branding is everything. If you are a small business owner your products, services, ads, promotional materials, facility and staff all have to project a uniform image that speaks to a target audience. If you are a career woman and want to climb the corporate ladder, you have to master the art of personal branding and learn to view yourself not as an employee, but rather as the President of Me, Inc.
What is a brand? A brand is a collection of symbols, experiences and associations connected with a product, a service, a person or an organization. People experience a brand through every point of contact with the product, service, company or person in question. People translate their experiences, expectations and sensory perceptions into a psychological, symbolic framework that becomes the brand’s image in their mind. I won’t kid you, developing a strong and appealing brand takes time, money and effort. And once a consumer has formed an opinion about a brand it’s incredibly difficult to change it – so devise your brand wisely and adhere to it religiously.
Why does branding matter? I get this question all the time from entrepreneurs who feel that investing in branding strategies is a waste of time since they don’t aspire to achieve iconic Nike, Coke or Wal-Mart status anyway. I’ll tell you why. Branding builds trust. And without trust a business can’t succeed. A brand is simply a promise of the value that customers will infallibly receive from you.
On a corporate level, consider the power of branding as we make buying decisions. Right now I own a VW Beetle convertible and I love my car. I’ve already decided that in a few years I will pass on my current car to my teenage daughter and purchase a new vehicle for myself. What car will I buy? That’s right… another VW Beetle convertible! Why will I re-purchase a Beetle? Because Volkswagen is a strong brand that represents top-quality German engineering, affordability, reliability and fuel efficiency, as well as a car that’s fun to drive. I trust that if a buy another Beetle I will have the same great experience that I have had with my current car. Volkswagen’s brand image, customer loyalty and profitability are dependent upon on upholding the company’s promise on a daily basis.
On a personal level, consider email. Everybody has email and anybody can send you a message, so when you scan your Inbox in the morning how do you decide whose messages you're going to read and respond to first? Whose messages are you going to send to the Trash unopened? The answer relates directly to personal branding. The name of the email sender represents a personal brand. It's a promise of the value you'll receive for taking the time to read the message. If you have a friend who forwards every silly chain letter and cartoon they receive, you probably won’t regard messages from them very highly, but if a business associate regularly contacts you with leads, referrals or relevant news you will regard messages from them as extremely important.
What can branding do for you? People engaged in branding seek to develop or align the expectations behind the brand experience with the thing being sold, creating the impression that a brand associated with a product or service has certain characteristics that make it unique and desirable. A brand is one of the most valuable elements in an advertising campaign, because it demonstrates what the product or service being sold is able to offer in the marketplace. In a job search, your personal brand is often more valuable than your resume or references, because it showcases the actual capabilities, power and presence you will bring to the workplace.
Good branding offers several benefits:
1. Premium prices. Careful brand management, supported by a clever marketing campaign, can be highly successful in convincing consumers to pay high prices for products which are extremely cheap to make. By manipulating the projected image of your product or service, you can move customers beyond a logical valuation of the cost. This is why t-shirts at Madonna concerts are $50 when they only cost .50 to make – good branding!
2. Trust and loyalty. When people have a positive experience with a brand, they're more likely to buy that product or service again. People who closely bond with a brand are not only more likely to re-purchase, but also to buy related items, to recommend the brand to others and to resist the lure of a competitor's low price. ‘Harley Davidson’ is tattooed on more bodies than any other brand – can you earn and anchor such loyalty in your own customers?
3. Memorability. A brand serves as a container for your reputation and good will. It's hard for customers to go back to "that store on 28th street" or to refer business to "some plumber named Dan." Memorability can come from using and sticking with an unusual color combination/logo (Target), distinctive behavior (Home Depot’s greeters), a catchy name (Google, anyone?), or with an individual, even a style of clothing (Hillary Clinton’s pantsuits). Develop your own identifiers and nail them to your name in the minds of the public.
4. Lower expenses. It takes money, time and passion to create a brand, but once it's created you can maintain it without having to tell the whole story about your product or service over and over again. For instance, a jingle people get stuck in their head continues to promote the company when it’s not on the air. Levi’s jeans continue to fly off the shelves even though you seldom see them advertised on TV anymore – that’s because generations of people love Levi’s and the company can afford to relax a little.
I certainly can’t go into all the nuances of how to engage in branding in a short article, but I hope that you have developed a deep respect for the process of branding, and that you understand how the strength of your professional or personal brand will impact your success.
Align your entire business behind a strong brand that resonates with potential customers, and commit yourself to delivering on your promises, and sales will naturally rise.
Friday, February 13, 2009
The 800 Pound Gorilla in the Room
Something has been bugging me throughout the long-winded analysis and never-ending media coverage of the U.S. financial markets. It's this concept that several gargantuan banks in this country are 'too big to fail'.
First and foremost, we are supposedly a free market economy, and that means that if you stink in business, rip off customers and take chances that don't pay off you are allowed to fail. Not to mention the fact that, in spite of huge injections of taxpayer money, several financial giants are in fact failing and failing miserably. There's no way they will still be in business in 20 years no matter what we do.
After taking the time to learn about the little 'securities shell game' that led to the stock market debacle, and after listening to the pathetic excuses offered by top bank executives, I am convinced that quite a few bloated multi-national banks deserve to fold. They have been reckless... they have securitized the nation to the brink of disaster... and when their bets haven't pay off they have held out their hands to Washington with the excuse that they are 'too big to fail'. And we bought it!
Bankruptcy and annihilation are exactly what these banks deserve. There are literally thousands of smaller banking institutions in this country who are fiscally sound, who have strong loan portfolios and who are still lending. They have a right to grab the market share of over-sized behemoths who fold. They are far more capable of building a diversified system that spreads risk around, cares for consumers and enforces accountability. No one should get a free pass or an automatic bailout simply because they dominate a huge percentage of the market. All the more reason to let them fade quietly in the night to trouble us no more.
The surf industry is not banking, but there's a lesson to be learned from recent events. In December of 2005 a monopoly folded. Surf legend 'Grubby' Clark faxed out a letter to shapers around the globe saying that his factory was closing effective immediately. Clark Foam at the time manufactured an estimated 90% of the surfboard blanks used in board production worldwide. Surf magazines and blogs from California to Hawaii to Australia predicted ruin for the entire industry.
Can you guess what happened? The free market economy kicked in. There were several lean months in which shapers had a tough time getting enough blanks to keep going, but a new crop of innovative and driven blank manufacturer's cranked up production and filled the gap. Within 6 months supply levels were strong and prices had stabilized due to increased competition. Clark Foam cornered the market because they were there, not because they were the only ones who could... and when a gap opened up capitalism flowed in with new upstarts, better technology, wider selection and fair prices.
Both Washington and Wall St. should take note. Right now the quandary is this: we can't undo the past. We can't go back and fix billions in toxic assets. We can't retroactively limit the size of banks. We can't launch new rules right in the middle of a recession and allow the immediate failure of the banking system. It would spiral the U.S. into a real Depression! So for now, we'll probably have to prop up some financial institutions that have been completely irresponsible.
But I hope that the government will learn from past mistakes. In a free market economy nobody is guaranteed a rescue - nobody gets to dodge the rules. I don't know what all the solutions are. A socialist state doesn't seem alluring; limits on bank sizes, government-ownership of private firms or heavy-handed regulation. But there must be a balance somewhere in which the fundamentals of the banking system change and common sense reigns. CitiGroup, AIG, Bank of America and other institutions should probably be broken up into smaller, more palatable units. Some deregulation should probably be rolled back to bring in more oversight and accountability.
Corporations can never again be allowed to become 'too big to fail'. Massive failure is supposed to be the fate of businesses that make dumb decisions. Smarter survivors will pick up the pieces, take over the customer bases of extinct companies and enrich the economy. We cannot allow the current crisis to reoccur.
Right now we need to deal with the 800 pound gorilla in the room. The stimulus plan doesn't address this crucial issue. Neither does the Treasury Department's proposal for the remainder of the TARP money. But someone has to - and soon.
First and foremost, we are supposedly a free market economy, and that means that if you stink in business, rip off customers and take chances that don't pay off you are allowed to fail. Not to mention the fact that, in spite of huge injections of taxpayer money, several financial giants are in fact failing and failing miserably. There's no way they will still be in business in 20 years no matter what we do.
After taking the time to learn about the little 'securities shell game' that led to the stock market debacle, and after listening to the pathetic excuses offered by top bank executives, I am convinced that quite a few bloated multi-national banks deserve to fold. They have been reckless... they have securitized the nation to the brink of disaster... and when their bets haven't pay off they have held out their hands to Washington with the excuse that they are 'too big to fail'. And we bought it!
Bankruptcy and annihilation are exactly what these banks deserve. There are literally thousands of smaller banking institutions in this country who are fiscally sound, who have strong loan portfolios and who are still lending. They have a right to grab the market share of over-sized behemoths who fold. They are far more capable of building a diversified system that spreads risk around, cares for consumers and enforces accountability. No one should get a free pass or an automatic bailout simply because they dominate a huge percentage of the market. All the more reason to let them fade quietly in the night to trouble us no more.
The surf industry is not banking, but there's a lesson to be learned from recent events. In December of 2005 a monopoly folded. Surf legend 'Grubby' Clark faxed out a letter to shapers around the globe saying that his factory was closing effective immediately. Clark Foam at the time manufactured an estimated 90% of the surfboard blanks used in board production worldwide. Surf magazines and blogs from California to Hawaii to Australia predicted ruin for the entire industry.
Can you guess what happened? The free market economy kicked in. There were several lean months in which shapers had a tough time getting enough blanks to keep going, but a new crop of innovative and driven blank manufacturer's cranked up production and filled the gap. Within 6 months supply levels were strong and prices had stabilized due to increased competition. Clark Foam cornered the market because they were there, not because they were the only ones who could... and when a gap opened up capitalism flowed in with new upstarts, better technology, wider selection and fair prices.
Both Washington and Wall St. should take note. Right now the quandary is this: we can't undo the past. We can't go back and fix billions in toxic assets. We can't retroactively limit the size of banks. We can't launch new rules right in the middle of a recession and allow the immediate failure of the banking system. It would spiral the U.S. into a real Depression! So for now, we'll probably have to prop up some financial institutions that have been completely irresponsible.
But I hope that the government will learn from past mistakes. In a free market economy nobody is guaranteed a rescue - nobody gets to dodge the rules. I don't know what all the solutions are. A socialist state doesn't seem alluring; limits on bank sizes, government-ownership of private firms or heavy-handed regulation. But there must be a balance somewhere in which the fundamentals of the banking system change and common sense reigns. CitiGroup, AIG, Bank of America and other institutions should probably be broken up into smaller, more palatable units. Some deregulation should probably be rolled back to bring in more oversight and accountability.
Corporations can never again be allowed to become 'too big to fail'. Massive failure is supposed to be the fate of businesses that make dumb decisions. Smarter survivors will pick up the pieces, take over the customer bases of extinct companies and enrich the economy. We cannot allow the current crisis to reoccur.
Right now we need to deal with the 800 pound gorilla in the room. The stimulus plan doesn't address this crucial issue. Neither does the Treasury Department's proposal for the remainder of the TARP money. But someone has to - and soon.
Saturday, February 7, 2009
Survival Key #1: Become a Problem Solver
Obviously, the global economy is down and the U.S. is in a recession... but how is your economy? Just because a lot of your competitors, business partners and friends are struggling doesn't mean you have to.
Win at the survival game by preparing rather than panicking... by channeling your energy outward rather than inward. The first key to jolting your business out of panic-mode is to switch your focus back to the customer.
Many companies forget at times that they exist solely to solve problems for people. And although a temporary loss of momentum during an economic upswing may not do much damage - it's a company killer during a recession.
Avoid the trap by remembering your crucial role as a problem solver, and taking the time to slow down and look at each and every transaction from the customer's point of view. Before you try to make another sale or call on the next customer, look at the real world, so you can develop real ideas and relevant answers for both consumers and for yourself.
Analyze your reality, and compare it to their reality. Before you run one more ad, visit one more potential distributor or move any farther in creating a new product, you have to know what the total situation is. In order to understand consumers, relate to them, help them, serve them and, ultimately, sell them, you have to get inside their head. Of course your long-term goal is selling, but in these times, "closing deals” may be the last item on a long list.
Don’t make the fatal mistake of just defining your own situation and obsessing about your own problems. You also have to define your customer’s situation, the market situation and your company’s differentiators so that your messaging speaks to people in a language they understand and connects with their needs on a deep level. People are cash-strapped and sick of being pitched by desperate sales people - don't become one of them!
If you are selling a big-ticket item and sales are sluggish, think about the reason why. Maybe such a huge investment is daunting to potential customers even though they need and want what you are selling? Maybe installation is a barrier? Maybe concerns about reliability or repairs is creating resistance? Can you offer a better guarantee or free installation to overcome those buying obstacles.
If you are having difficulty collecting on invoices and your cash flow is is causing problems, ask yourself why people aren't paying - or talking. Do customers simply not have the cash? Are they stockpiling out of concern over the future? Your mission is simply solving the problem for them. Can you approach customers and offer payment plans to ease their cash crunch and still keep money flowing in? Can you create a positive incentive to pay on time such as a 5% discount for paying within 14 days?
Such simple strategies... and so obvious once the transactions are examined from the customer's perspective.
I challenge you to share your ideas and thoughts with your customers, so they can become aware of how serious you are about helping them and building your business in a positive way. Doing this will not only demonstrate your professionalism, but will also give your customer's peace of mind - and perhaps a little peace of mind will rub off on you as well.
Problem solving and true consumer understanding will not only set you apart from your competitors (who at this very moment are panicking and merely trying to sell, sell, sell!), but they will also keep your customer relationships strong through difficult times. When times become better - and they always do - you will have earned the loyalty you deserve by being a champion for solutions your customers care about and demonstrating your advocacy for their best interests.
Win at the survival game by preparing rather than panicking... by channeling your energy outward rather than inward. The first key to jolting your business out of panic-mode is to switch your focus back to the customer.
Many companies forget at times that they exist solely to solve problems for people. And although a temporary loss of momentum during an economic upswing may not do much damage - it's a company killer during a recession.
Avoid the trap by remembering your crucial role as a problem solver, and taking the time to slow down and look at each and every transaction from the customer's point of view. Before you try to make another sale or call on the next customer, look at the real world, so you can develop real ideas and relevant answers for both consumers and for yourself.
Analyze your reality, and compare it to their reality. Before you run one more ad, visit one more potential distributor or move any farther in creating a new product, you have to know what the total situation is. In order to understand consumers, relate to them, help them, serve them and, ultimately, sell them, you have to get inside their head. Of course your long-term goal is selling, but in these times, "closing deals” may be the last item on a long list.
Don’t make the fatal mistake of just defining your own situation and obsessing about your own problems. You also have to define your customer’s situation, the market situation and your company’s differentiators so that your messaging speaks to people in a language they understand and connects with their needs on a deep level. People are cash-strapped and sick of being pitched by desperate sales people - don't become one of them!
If you are selling a big-ticket item and sales are sluggish, think about the reason why. Maybe such a huge investment is daunting to potential customers even though they need and want what you are selling? Maybe installation is a barrier? Maybe concerns about reliability or repairs is creating resistance? Can you offer a better guarantee or free installation to overcome those buying obstacles.
If you are having difficulty collecting on invoices and your cash flow is is causing problems, ask yourself why people aren't paying - or talking. Do customers simply not have the cash? Are they stockpiling out of concern over the future? Your mission is simply solving the problem for them. Can you approach customers and offer payment plans to ease their cash crunch and still keep money flowing in? Can you create a positive incentive to pay on time such as a 5% discount for paying within 14 days?
Such simple strategies... and so obvious once the transactions are examined from the customer's perspective.
I challenge you to share your ideas and thoughts with your customers, so they can become aware of how serious you are about helping them and building your business in a positive way. Doing this will not only demonstrate your professionalism, but will also give your customer's peace of mind - and perhaps a little peace of mind will rub off on you as well.
Problem solving and true consumer understanding will not only set you apart from your competitors (who at this very moment are panicking and merely trying to sell, sell, sell!), but they will also keep your customer relationships strong through difficult times. When times become better - and they always do - you will have earned the loyalty you deserve by being a champion for solutions your customers care about and demonstrating your advocacy for their best interests.
Monday, January 26, 2009
Guess what? You're in Sales!
At some point in every business’ growth cycle the leaders lose sight of their real job – sales. They get hung up on staffing issues, quality improvement, planning or new product development and completely forget that if no one is buying what they’re selling they have a huge problem.
In order to grow your company, you must remember that your business is sales. Your business is not the product you manufacture. Your business is not the service you provide. Your real business is marketing and building the internal capacity to successfully sell and deliver your products and services to a multitude of consumers.
Most business owners don’t initially launch their company because they are a great manager or a born marketer. They start their particular business because they possess technical skill in a certain area of expertise such as making glass vases, roofing houses, fixing computer systems or teaching people how to ski. So, when it comes to marketing, small business owners are often fish out of water.
That’s a colossal drawback in today’s competitive business climate, because you can make the most beautiful vases in the world, or be a whiz at troubleshooting computer glitches, and if no one knows you exist you’ll be bankrupt in no time. Or if you design a product that no one likes except you, you’ll have no market for what you are selling. You simply can’t generate revenue without mastering the process of bringing in and retaining customers!
Truly great marketing is an art form - and the strongest companies are willing to invest in professional help to do it right. But every business owner should know their customer base, understand the basic appeal of their products and services, and think like a marketer.
At its most basic, marketing is a three step process:
1. Understand consumer desire. You can’t sell to people you don’t understand, so get intimate with your ideal customers right away. Think about every transaction from their perspective. Learn what they like and don’t like, where they hang out, who they respect… their age, race, gender and income range. Nothing is too small to pay attention to. This process let’s you create a profile of who your best customers are, and will arm you with the data to find them, speak to them, and tailor your business model around issues that are important in their world.
2. Develop an offering that fits your target customers. If you’re selling diamond rings for $10,000, and your target customers are middle-class suburban teenagers who like ‘bling’, it’s not going to work. They can’t afford what you’re selling. Armed with information about your target audience you can make sure that your products and services meet their needs and fit their budget. Maybe in this instance you could create a flashy line of costume jewelry that would suit your target customers better? Or maybe you could re-engineer your products and promotions to appeal to a better target market - upper class professional women.
3. Connect consumers to the products and services they need through a sale. This step represents the most obvious stage of the marketing process – reach a customer and close a sale. You have to know where to reach your target audience, what to say that will peak their interest, and how to remove barriers to buying. Whether you are advertising on TV, writing an editorial column in the local paper, hosting a networking event or making a speech – you have to keep your focus on penetrating your target market and convincing them to make a purchase from you.
There is another key element to the marketing process that is critical and frequently overlooked… What comes after a successful sale? Businesses tend to focus on obtaining new customers to the exclusion of following through on their brand promises and retaining the customers they already have. You need to have a system in place to follow up with customers, encourage repeat purchases, invite referrals and ensure satisfaction.
As you grow your business, I urge you to examine every level of your company from your customer’s perspective. Successful entrepreneurs know that each sale has to be mutually beneficial and consumer-focused to move them a step closer to their ultimate dream of running a large, thriving organization. By thinking like a marketer and acknowledging your never-ending role as the chief salesperson on your team, you too can set yourself up to succeed down the road.
In order to grow your company, you must remember that your business is sales. Your business is not the product you manufacture. Your business is not the service you provide. Your real business is marketing and building the internal capacity to successfully sell and deliver your products and services to a multitude of consumers.
Most business owners don’t initially launch their company because they are a great manager or a born marketer. They start their particular business because they possess technical skill in a certain area of expertise such as making glass vases, roofing houses, fixing computer systems or teaching people how to ski. So, when it comes to marketing, small business owners are often fish out of water.
That’s a colossal drawback in today’s competitive business climate, because you can make the most beautiful vases in the world, or be a whiz at troubleshooting computer glitches, and if no one knows you exist you’ll be bankrupt in no time. Or if you design a product that no one likes except you, you’ll have no market for what you are selling. You simply can’t generate revenue without mastering the process of bringing in and retaining customers!
Truly great marketing is an art form - and the strongest companies are willing to invest in professional help to do it right. But every business owner should know their customer base, understand the basic appeal of their products and services, and think like a marketer.
At its most basic, marketing is a three step process:
1. Understand consumer desire. You can’t sell to people you don’t understand, so get intimate with your ideal customers right away. Think about every transaction from their perspective. Learn what they like and don’t like, where they hang out, who they respect… their age, race, gender and income range. Nothing is too small to pay attention to. This process let’s you create a profile of who your best customers are, and will arm you with the data to find them, speak to them, and tailor your business model around issues that are important in their world.
2. Develop an offering that fits your target customers. If you’re selling diamond rings for $10,000, and your target customers are middle-class suburban teenagers who like ‘bling’, it’s not going to work. They can’t afford what you’re selling. Armed with information about your target audience you can make sure that your products and services meet their needs and fit their budget. Maybe in this instance you could create a flashy line of costume jewelry that would suit your target customers better? Or maybe you could re-engineer your products and promotions to appeal to a better target market - upper class professional women.
3. Connect consumers to the products and services they need through a sale. This step represents the most obvious stage of the marketing process – reach a customer and close a sale. You have to know where to reach your target audience, what to say that will peak their interest, and how to remove barriers to buying. Whether you are advertising on TV, writing an editorial column in the local paper, hosting a networking event or making a speech – you have to keep your focus on penetrating your target market and convincing them to make a purchase from you.
There is another key element to the marketing process that is critical and frequently overlooked… What comes after a successful sale? Businesses tend to focus on obtaining new customers to the exclusion of following through on their brand promises and retaining the customers they already have. You need to have a system in place to follow up with customers, encourage repeat purchases, invite referrals and ensure satisfaction.
As you grow your business, I urge you to examine every level of your company from your customer’s perspective. Successful entrepreneurs know that each sale has to be mutually beneficial and consumer-focused to move them a step closer to their ultimate dream of running a large, thriving organization. By thinking like a marketer and acknowledging your never-ending role as the chief salesperson on your team, you too can set yourself up to succeed down the road.
Subscribe to:
Posts (Atom)