Sales And The CFO Part Iv - Jan 24, 2011
Posted by: David Alan Buslee in Articles
In the prior three newsletters, we explored three of the four basic ways of the increasing your company sales. CFO’s aren’t the “Deal Killers” that Sales Executives seem to perceive them as. CFO’s ask the questions that need to be answered before the company is put at risk. The CFO can provide the CEO the detail they need to boost profits during a time of sales growth.
To reiterate, growing sales is simple really – not easy, just not complex. Besides buying a company and growing through acquisition, there are really only four ways to grow your company:
1. Sell more of the same stuff to the same people
2. Sell the same stuff to different people
3. Sell different stuff to the same people
4. Sell different stuff to different people
Each of these paths to growth is covered with potholes that can pull the axle off your company’s progress. In this Newsletter we will explore the fourth strategy – Sell Different Stuff to Different People.
Sell Different Stuff to Different People
It doesn’t come as any surprise that this is the least implemented and most difficult of the four strategies. It is rarely done as a separate strategy – it is usually coupled with Strategy III – Sell Different stuff to the Same People. In other words, companies and their owners rarely wake up in the morning with an idea to make or market something unrelated to anything that they have made before and to sell it to customers ....
Posted by: David Alan Buslee in Articles In the prior two newsletters, we explored two of the four basic ways of the increasing your company sales. CFO’s aren’t the “Deal Killers” that Sales Executives seem to perceive them as. CFO’s ask the questions that need to be answered before the company is put at risk. The CFO can provide the CEO the detail they need to boost profits during a time of sales growth. To reiterate, growing sales is simple really – not easy, just not complex. Besides buying a company and growing through acquisition, there are really only four ways to grow your company: 1. Sell more of the same stuff to the same people 2. Sell the same stuff to different people 3. Sell different stuff to the same people 4. Sell different stuff to different people Each of these paths to growth is covered with potholes that can pull the axle off your company’s progress. In this Newsletter we will explore the third strategy – Sell Different Stuff to the Same People. Sell Different Stuff to the Existing Customer base Development cost – New products cost money. Money to develop, money to market, money to produce, and money to qualify – even with existing customers. New products steal market share from existing products, unless they are complementary to existing products. If you are a tile company and now you sell grout, which may be a new product.In the prior newsletter, we explored the first of the four basic ways of the increasing your company sales – Sell More Stuff to the Same People. CFO’s aren’t the “Deal Killers” that Sales Executives seem to perceive them as. CFO’s ask the questions that need to be answered before the company is put at risk. The CFO can provide the CEO the detail they need to boost profits during a time of sales growth. Growing sales is simple really. Besides buying a company and growing through acquisition, there are really only four ways to grow your company: 1. Sell more of the same stuff to the same people 2. Sell the same stuff to different people 3. Sell different stuff to the same people 4. Sell different stuff to different people Each of these paths to growth is covered with potholes that can pull the axle off your company’s progress. In this Newsletter we will explore the second strategy – Sell more of the Same Stuff to Different People. Different Measures: Selling your products to new customers can place unusual demands upon your organization. New customers have different expectations. New customers can have new standards. Vendor qualifications can impose ISO standards, which may demand new quality systems, more people, more equipment, more systems. Those costs change the profit profile of the product. What is the cost versus the opportunity?....
Posted by: David Alan Buslee in Articles CFO’s are sometimes viewed as “Deal Killers”. Sales executives sometimes view CFO’s as a necessary hurdle to move past. But to the smart sales executives and CEO’s alike, the CFO can provide direction and boost profits during a time of sales growth. Why is there such a traditional disconnect? To understand the tension, we need to first examine all the ways that you can grow the sales of your company. Growing sales is simple really. Besides buying a company and growing through acquisition, there are really only four ways to grow your company: 1. Sell more of the same stuff to the same people 2. Sell the same stuff to different people 3. Sell different stuff to the same people 4. Sell different stuff to different people Each of these paths to growth are covered with potholes that can pull the axle off your company’s progress. A CFO, working with the vision of the CEO can provide context and feedback specific to each of these growth strategies. Sell more of the same stuff to the same people This strategy is perhaps the lowest risk path to growth. It depends upon the company knowing how its products can solve problems for its current customers that it isn’t already solving. Think “Would you like fries with that”. The assumption is that non-customers can use the same product or service, so just making more of it is easy. The success of this strategies lies in securing one or more sources of benefit. Locally we go through a “loan renewal season” for smaller bank customers. It comes after tax season, so that the owners can provide their tax returns to their bankers. Sometimes these are the first financial statements the owners have seen for the whole year. This year, being my first Loan Renewal Season since becoming a partner at B2B CFO®, I paused to reflect on how relationships, whether banking or social, tend to have the same elements and how we can learn from the experiences. “A relationship requires a lot of work and commitment. “ Greta Scacchi . Remember it is called a “Loan Commitment”. When Bankers make a Loan Commitment to your company, they become investors in your business. Once a year they are required to review their investment and their relationship, to determine if they want to reinvest. Bankers gather the company’s annual financial information and forward it to their underwriters to analyze the performance and prospects of the company. With large customers with large transactional needs, the amount of data available – and required- is significant and can tell those bankers what they need to assess their investment. The financial information for larger companies is easier to analyze because there are similar, public companies to benchmark against. Bankers for smaller customers must be able to add context to the financial information, this context based on their understanding of the business gained through their personal and professional relationship with the owner of the company. “Never assume that the guy understands that you and he have a relationship” Dave Barry Smaller customers, $30 million and less in size, are often in market niches where there aren’t public companies to benchmark against. They depend upon their relationship with their banker, and the “soft” non-financial information he has gained through his interactions throughout the year to add context to the financial data they provide. The two aspects of that “soft” data are intensity and duration. Intensity speaks to the degree of connectedness the company has with the bank and the banker. From the bank’s perspective, is it a single loan, or is the bank handling payroll processing and other service needs as well? How has the company performed using those services. From the Banker’s perspective, how often do the customer and the banker meet and talk about company issues, the economy, and per....
Posted by: David Alan Buslee in Articles The other night I went to a meeting of the Turnaround Management Association. The program was titled “Is the Turnaround Community Missing the Mark?” The presenters, SVP’s of Special Assets from M&I Bank, Park Bank, Associated Bank as well US Bank, had a unified message. They are all very busy – the current economy has strained a greater number of their bank’s relationships than ever before. The sheer volume of the transactions that they are handling now is staggering. But the one thing that each of them agreed upon is that by the time the relationship lands in their department there is very little left to be done. They have to move quickly to preserve the value left to reduce losses, so frequently their interaction with turnaround professionals at that point is to aid in either an orderly liquidation or a sale of the company. The question was then asked by one of the attendees “If it seems that most of the loans are at the point of liquidation when they arrive in your department, where in that continuum of Valued Client to Liquidation would it be better for the Turnaround Professional to engage with your customer?” Tim Bruckner of M&I Special Assets agreed with Paul Niedermeyer from US Bank – the single greatest impact on an account can be made by the commercial lending officer. They agreed that if the line officer takes action more quickly with accounts that are not performing, fewer loans are referred to special assets. As an outsourced CFO, I’m not a turnaround specialist, but by providing the financial guidance and advice that the business needs, I help the bank customer increase their cash and increase their profits. I can provide them with the clarity they need to make the hard decisions before they become the impossible decisions. CPA’s simply can’t provide that help, they haven’t worked in a private company environment. Bankers often remark that they have at least three customers that need the kind of financial guidance that I can provide. As a banker, perhaps you should as yourself "has that number changed? Have those clients transformed their financial management – timely financial statements, updated cash flow projections, gross margin analyses, etc. so that they are no longer 'watch' accounts?" I understand that there may be a reluctance to “referring” a client to an outsource CFO. But introducing the customer to a business resource is a service that pays dividends, not only by being a banker that has helped their client through a tough time, but also by moving that customer back along the continuum towards Valued Customer and away from Special Asset. Posted by: David Alan Buslee in Articles Many companies develop strategic and operational plans only to have their value dissipate due lack of accountability. Creating an accountable organization is an ongoing continuous process. “Accountability is a concept with several meanings. It is often used synonymously with responsibility, answerabilityand other terms associated with the expectation of account-giving. In leadership roles, accountability is the acknowledgment and assumption of responsibility for actions, products, decisions, and policies including the administration, governance, and implementation within the scope of the role or employment position and encompassing the obligation to report, explain and be answerable for resulting consequences.” (Wikipedia). The owner is accountable to a number of stakeholders of the company, individuals or companies that may not have an ownership interest but have an interest in the success of the company. Stakeholders include vendors, bankers, and employees as well as the customers who depend upon the product or services. The managers need to be accountable for the promises and performance of the company against plans and projections. To be held accountable, stakeholders must be able to compare actual performance to the promises made, comprehend how performance differed between the promise and the actual, and communicate changes to future performance that the company will implement from that point. “Comparing” requires timely generation of financial statements and any other standards used as Key Performance Indicators (KPI’s). “Timely” means that they are produced after period end so that management can affect the next operating period. “Period End” because some measures might have weekly timelines, some monthly and still others quarterly. In the restaurant industry, nightly P&L’s are generated to monitor performance. Financials generated the middle of the following month can’t be used to affect performance in that month. To compare, the goals and indicators need to be side by side for easy comparison. Without this specificity, you have only set up potholes for failure. When an organization conducts its strategic planning cycle, close attention is paid to the sales plan, budgets and the elements of the cost of goods sold. Organizations look at the controllable costs – Material, Supplies, Labor, etc. But when it comes to benefit costs, the concept of “Planning” seems to be counter intuitive. Most organizations consider them almost uncontrollable and either “grit the teeth and bear it” response to premium increases imposed by the insurance companies or carving out benefit levels or value and cost shifting to the employees to save the increase, getting the same or less for more. But are these really sensible reactions for an expense that is typically the third largest expense after materials and labor? A Strategic Benefit Plan will significantly capitate or reduce total premiums paid without affecting coverages and needs to be a part of every company’s strategic and operational planning cycle. The first step to establishing a Strategic Benefit Plan is to realize that a company can significantly affect premium costs. Just this change in mindset alone is a significant difference in approach. Just as we plan our revenue targets for the next three to five years, sit down and plan what costs the company can absorb and still meet its performance targets. Document the average per employee cost targets for each of the planning years. Remember the SMART goal acronym and apply it to these targets. Just as you would do a SWOT analysis on sales growth targets, you now need to do a similar analysis on the risk pools that cause premium growth. What are the factors that had led to your historic premium growth? Over the next 3-5 years, what other factors may affect the employee pool? What about the dependant pool? Age, demographics and other risk factors need to be considered. If you plan growth in your employee pool, how will your company control (within the law) the potential risk factors that you may hire into your current pool? Document your approach and findings to support that change in strategy. This is especially important for groups smaller than 100, where utilization reports can be hard to extract from the insurer. Controlling the costs of your existing pool of employees requires a pool of funds without increasing the overall costs of your current health care plan. The best way to develop that pool of funds is to move to a high deductible plan from your current plan with a Health Reimbursement Account (HRA) component. For a 100 employee plan with a $500 can cost an average of $10K per employee per year or $1,000,000 in premium per year. Moving the deductible to $2,000 can reduce the overall premium 20%, or $200K. So that there is no affect on the employee, your HRA will reimburse employees for the $1,500 difference between the old deductible and the new deductible, or a maximum risk of $150K. The minimum net savings is $50K. But since most employees rarely hit their deductible, most of the $150K is saved per year – about $125K. Posted by: David Alan Buslee in Articles The previous article “Who is watching YOUR Controller” foretold the current situation at Koss. For those of you not in Milwaukee, or who are not shareholders of Koss, here is a synopsis of the situation as it stands currently. It is alleged that Sujata “Sue” Sachdeva , the now former Vice President of Finance of Koss Corporation, allegedly embezzled some $4.5 million in funds from Koss Corporation, a maker of stereo headphones located in the Greater Milwaukee area over a period of years. The money is alleged to have been used for a lavish spending spree including millions of dollars worth of clothing, much of it unworn, stored at her home, at her office at Koss and at a 1,000 sq. ft. storage facility in the Historic Third Ward. Just recently the allegations were extended to cover some $20 million of suspicious transactions since 2006. My article discussed the effects on a company of not having adequate supervision and controls on a company’s cash and accounting systems. The alleged internal fraud which is currently being uncovered at Koss reveals how large and small companies need someone to review the financials on an ongoing basis. How could this have happened? Koss is a public company, with audited financial statements, a board of directors, etc.! The problem is one of basics, that ALL companies need to both understand and prevent. My earlier article stated “B2B® partners often find that many business owners unintentionally place their employees in a position to steal from the company by giving them almost total control over the company's finances and having absolute trust in them.” Sachdeva, almost immediate upon her hiring was placed in a position of absolute trust. In 1992, just a year after the son of the founder had taken over the company, she was appointed Vice President of Finance. At 29 years of age, Sachdeva was essentially CFO, as the CEO held all three titles – CEO, COO and CFO. A year later, her husband received a fellowship in pediatrics at a hospital in Houston. Michael Koss, the CEO, allowed her to telecommute from Houston to her position at Koss using the phone, fax and computer. This continue for over 10 years and still was the case for an average of two days a week as recently as reported in 2007 in CFO magazine. This level of absolute trust, with all of the electronic means to move funds at her fingertips, placed her in a position where a fraud, as alleged, could both be committed and concealed. High Visibility magazine noted in 1996 that she was the ONLY CFO they knew of in the country to telecommute. Small businesses do the same thing. Business owners are focused on growing the business sales and allow bookkeepers, people they trust, to write checks, balance check books, receive funds and code expenses. Clerks who work for the bookkeeper, like the clerks who worked with Sachdeva, perform the work expected of them in the unspoken understanding that their boss knows what they are doing. In the book “The Danger Zone” Jerry Mills notes that most such schemes are not elaborate. Usually the money embezzled is expensed to Cost of Goods sold. The Journel-Sentinel a....
Posted by: David Alan Buslee in Articles In part one of this series I reviewed what not to do when you are a troubled company and have an SBA loan. In part two, I discussed what the Lender and the SBA could do. Both times I stressed that you need to have a plan, based on facts, to decide your strategy and direction – BEFORE you bring an attorney into the mix. A plan should cover four main areas. Cash Flow – What are your real cash expenses? Can you eliminate some cash expenses – NOT payroll taxes or any other taxes! Having a sheriff lock your doors because your haven’t paid taxes will affect everything else you do. Document your assumptions….the lender will look at those first, before ever looking at the numbers. If you are going for a deferment, your numbers need to be rock solid. You can’t go to the well twice. If you can’t support a reasonable deferment, then you need to consider an Offer In Compromise. Your CFO should create and maintain the Cash Flow Forecasts. Repayment – Have you been paying? Have you been paying what you could? When times were good, were you on time or did it take a phone call or dunning letter? Lenders want to help those who have honored their debt in the past. Responsiveness – When lenders want data, they want it on time and accurate. In many banks, once the deadline for documentation passes, you will be automatically declined for a deferment, and be scheduled for liquidation. In other words, they will shut you down and sell your stuff. Your CFO should be able to provide everything on demand. Collateral – Remember how I have repeated that you need to know the condition of your collateral? No estimates of inventory will work…accurate counts and values. Know what the liquidation value is of your equipment. Don’t depend on fixtures or leasehold improvements, they have no value to anyone but you. You need to know whether you assets can be sold to recover the value of the loan, and if not by how much will you miss it. But wait – you guaranteed your loan…what will happen? Will they kick me out of my house? There are really three options regarding your guarantee. If you didn’t pledge your home against the guarantee, they will probably not act against your principle residence. The bank won’t benefit from obtaining a lien against the home &ndas....
Posted by: David Alan Buslee in Articles In part one of this series, we discussed about the need to approach the Lender with a plan and alternatives. You and your CFO should have pulled together an analysis regarding the collateral condition, cash flow forecasts and debt capacity, and an analysis regarding guarantees. Why is a plan so important? You, as the Borrower, need to direct him to the best possible alternative and provide him with the support for the decision. A Lender’s powers are clearly defined in the loan documentation. A Lender’s general powers typically are, without notice and without the borrowers consent: A. Bid on or buy the Collateral at its sale or the sale of another lien holder, at any price it chooses; In addition, there is a paragraph from the Debt Collection Act of 1982 and Deficit Reduction Act of 1984. It states: "These laws require SBA to aggressively collect any loan payments which become delinquent. SBA must obtain your taxpayer identification number when you apply for a loan. If you receive a loan, and do not make payments as they come due, SBA may take one or more of the following actions:
-Report the status of your loan(s) to credit bureaus What can the SBA do? 1. Deferment – This means deferring some or all of your normal payment. Your cash flow needs to indicate that you can cover ongoing operational costs, but not the debt service on the obligations. As one writer has described it, cash needs to be “juuuuuuusst right”. Your company and your SBA Loan In the past 18 months the US has experienced a vast decline in business and business outlook. This has affected the large (GM, BofA, Merrill Lynch) as well as the small mom and pop store on mainstreet. Daily I talk to business owners who have seen 30 to 50% or more declines in their sales activity. Unfortunately it seems to have affected the smaller businesses – and those who have SBA loans – more than others. Businesses and their bankers are now faced with difficult decisions, and those decisions may affect the small business owner for the rest of their life. What should you do? What are the options and alternatives? The information below will help you through that process. What NOT to do (Courtesy of Dan Betts): Realize that there are three factors that are affecting your approach to solutions: · Stress and Worry – Taxes, Payroll, Guarantees and Family concerns. · Lawyers - Enough said · Innocent Mistakes – making the wrong move might cost you more, so you do nothing. Doing nothing is not an option. The only way to get beyond t....
Posted by: David Alan Buslee in Articles Successful companies are those that execute. That is about as blunt as one can get. Companies executing a mediocre strategy will out-perform any company that fails to execute a great strategy. Then why don’t they teach that at B-School? Because it is messy. Because it has so many variables. Because it involves people! A great manager, Peter Drucker said, obtains extraordinary results with ordinary people. What is the biggest roadblock to execution of a great strategy? “Good Enough”! Excellence is undermined by acceptance of “Good Enough”. Managers and the individuals they work with accept “good enough” when the goal is either poorly explained or seems to move. The key to Great Execution, the key to Excellence, is FACE-time. FACE stands for Focus, Actionable Goals, Compelling Intensity and Engagement Cadence. Focus – some companies are convinced that if a few goals are good, then a lot of goals are great. The idea being that if you have, say 20 different goals, then some of them are bound to be achieved. But studies have shown that the more goals one has, the FEWER are achieved…not on a percentage basis, but on an absolute basis. If a company has 2 or 3 goals, it will achieve 2 or 3 goals. But if it has 4 or 6 goals, it will achieve on average 1 or 2 goals. More than 10, the odds are none will be achieved. I have been a firm believer in having three goals for a company. With three goals, you can avoid gaming between the goals. We all know, I hope, that profit or EBITDA are measures that depend, in part, on accounting decisions or policies. What level items get expensed versus capitalized, how obsolete inventory is calculated or accounted for, etc. all affect these figures. So having a single goal of EBITDA can ultimately be meaningless to the overall performance of the company. A footstool needs three legs to stand on its own, likewise three goals allows the performance of the company to stand on its own. Actionable Goals – The focus of the team should be on goals that they can actually affect. For example, if the corporate goal is to increase cash balances by $250K by year end, the actionable goal may be to improve AR days. The team can then break that goal down into smaller actionable goals that they can immediately affect, such as reduced billing errors, reduced shipping errors, and reduced booking errors. What is a Goal? The best description of a Goal is (verb)(measure) from (X) to (Y) by (when). For example: “Reduce billing errors from 10 per thousand to 2 per thousand in 12 months”. “Reduce” is the verb, “billing errors” is the measure, “10 per thousand” is the “X”, “2 per thousand” is the &ldq....
Posted by: David Alan Buslee in Articles Often we try to make the keys to success complex. Whole industries have sprung up around involved methods that purport to drive companies towards successful achievement of their Goal. Six Sigma, Lean, Balanced Scorecard – the various “solutions” go on and on. The more involved the solution, the more the business owner becomes dependent upon a mystic “expert” to guide them to their commercial nirvana. For the owners of businesses who still know the employees by name, who think about their business like a family member, these processes are intimidating. And overwhelming. And ultimately inapplicable to their day to day concerns. Success in business can be, should be, simple to describe and personal to deliver. Something as small and simple as a PEA can describe the elements of success. PEA stands for Preparation, Execution, and Accountability. Preparation: Define, Understand, Decide, Explain Define: Just like a football team prepares for their next opponent, a company needs to prepare for their next year of business. A coach defines his team as a passing team by focusing around a quarterback, or a running team by building around a running back, or a defensive powerhouse that wears down their opponent. Defining their team is important to how they approach the next season. As business owners, defining the business is the key first step to approaching the New Year. One key way to measure of a corporate definition is the owner’s elevator speech. As an owner, think of being in an elevator with a key business prospect. You have six floors to tell this business prospect what it is your company does, and does better than the competition. If you can do it compellingly in 60 seconds, you have defined your company well. Understand: One of the keys to understanding your company’s abilities is to look at it through the eyes of your customer. As the business owner, you should know what draws your customers to your company, what makes it unique enough that they want to continue to do business with you in spite of numerous companies that do much the same thing. How do you do this? The best way is to ask them. The Owner or President of a company should be THE BEST salesman for the organization. Call up your customers, take them out to lunch and ask them for three to five reasons ....
Posted by: David Alan Buslee in Articles Recently I read another blog about the 5 C's of credit -- character, capacity, capital, collateral, and conditions – the mnemonic criteria used to assess a borrower's creditworthiness. Character, capacity, capital, and collateral refer to the borrower's willingness and ability to repay the debt. Conditions include the borrower's situation as well as general economic factors. While these concerns have long be the basis of banks and customers to understand the credit process, in today’s market we need to look at other “C”s to be able to assess the commercial relationship. Character – This is always listed first as it is the basis of the commitment. This comes from the day when a banker could look the borrower in the eye from across the table and judge by the firmness of the handshake and the reputation in the community just what sort of person was asking for money. “How is the owner considered in the community” is a good example of a character question and while asking such questions can be revealing about the owner, what really needs to be considered is the Culture of the organization he runs. How do they treat customers? Vendors? Employees? How the organization treats these stakeholders will reflect how they will think of their credit relationship, because the organization reflects all of the people who affect performance as well as the markets in which the organization operates. CAPACITY – This reflects the way in which the company intends to repay the loan. CASH FLOW is what we should really be thinking about – not a formulaic EBITDA number, but has the company thought about the additional inventory that is demanded for this expansion. What about the increase in Accounts Receivable? More to the point – does the customer track and project their cash flow and cash requirements? It is one thing to provide a static spreadsheet at the time of the credit request based on what the company thinks the cash flow will be, but do they have a way to track and project their cash needs? If not, how will they be able to maintain their cash flow to insure repayment? CAPITAL – This reflects the value that the owner has retained in the business – retained earnings, contributed capital, capital stock. How much money has been invested in the company? A common mistake in looking at financial statements of privately held companies is to think that capital acts the same as in public companies. Not true and dangerous. By adjusting their draws – which are on top of their salaries – owners can change the capital investment in the company during the year. Monitoring the CAPITAL FLOW – are the owners taking more out in draws than the company is generating in earnings – is difficult if the financial statements aren’t being generated according to GAAP on a timely basis. COLLATERAL – Traditionally is what “security” is being offered in the transaction? But let’s face it, no lender wants to be liquidating collateral; the nation is awash in REO property. But a key intent of collateral was to measure the borrower’s COMMITMENT to their business and to t....
Posted by: David Alan Buslee in Articles Why do we invest time, sweat, and frustration in the traditional annual budgeting process? Think about it. What does your organization commit to its annual budgeting process? It is estimated that the average $10 Million sales company spends over 250 man hours per year in the budgeting process. These are key individuals pulled from the operation of the company to create the budget. Think about all the deception, the managers who sandbag their estimates or who simply cut numbers because “that’s how we’ve always done it.” Think about how they either use last year’s figures or next year’s hopes to produce a “best guesstimate.” Then think about how all of this deception and guesswork gets transformed into the document that is supposed to guide the success and profit of the company for the next 12 months. Many managers will diligently plan their opening moves in this Annual Budgeting Dance – at times more than they plan their actual job. Their goal is to submit something that is sufficiently credible to avoid outright rejection yet remain low enough to be easily reached. They plan strategies so that, when the totals are all compiled, the result will be sufficiently above whatever the magic number that is needed to please, well, themselves, the owners or the board. The Annual Budgeting Dance is an annual rite of passage. It is musical chairs but not nearly as much fun. It explains why managers will float trial balloon after trial balloon. Managers in the field will gasp in exasperation, “Just tell me what you want the number to be. I am tired of guessing.” The Owner will reply, “I want to empower you. It needs to be your number. You need to own it.” The manager quickly lets him know, “It quit being my number long ago.” Or the owner will accept the last budget submitted because the company is already three months into the operating year. In many ways, the Annual Budgeting Dance explains why budgets can destroy motivation and ultimately be disempowering. Many managers use budgets as a crutch: If the amount is in the budget, he has to do it; if it is not in the budget, that he doesn’t have to do it. He never has to make a decision on whether he should do it. So again, why do we keep doing this Annual Budgeting Dance??? Because in most organizations, incentive compensation is based on reaching budget targets. They want to “pay for performance.” In reality this is one of the worst practices in management, because companies end up rewarding managers who successfully negotiate low expected performance and execution - to “under promise and over perform”, instead of rewarding the best achievers. Forget about “being all that you can be”, I have had managers tell me that they “would never agree to a budget that could not be easily reached; it’s just not done.” Business owners used to have a simple goal for themselves and their organizations: stability. They wanted little more than predictable earnings growth. Market transparency, labor mobility, and instantaneous communications have blown that scenario to smithereens. Successful companies develop the ability to constantly change to their environment. In major transformations – like we are experiencing in today’s economy, owners and their advisors conventionally focus their attention on devising the best strategic and tactical plans. But to succeed, they also must align the company’s culture, values, people, behaviors, and metrics to encourage the desired results. Plans alone do not increase a company’s value; value is realized only through the sustained, collective actions of employees who are responsible for executing and living with the changed environment. Significant transformation has four characteristics: scale (the change affects all or most of the organization), magnitude (it involves significant alterations of the status quo), duration (it lasts for months, if not years), and strategic importance. However companies will only reap the rewards when change occurs at the level of the individual employee. Owners often say they are concerned about how the work force will react, how they can get their team to work together, and how they will be able to lead their people. They also worry about retaining their company’s unique values and sense of identity and about creating a culture of commitment and performance. Leadership teams that fail to plan for the human side of change often find themselves wondering why their best-laid plans have gone awry. No single methodology fits every company, but there is a set of practices, tools, and techniques that can be adapted to a variety of situations. What follows is a “Top 10” list of guiding principles for change management. Using these as a systematic, comprehensive framework, executives can understand what to expect, how to manage their own personal change, and how to engage the entire organization in the process. 1. Address the “human side” systematically. Any significant transformation creates “people issues”. An approach for managing change — beginning with the leadership team and then engaging key stakeholders and leaders — should be developed early, and adapted often as change moves through the organization. It should be based on a realistic assessment of the organization’s history, readiness, and capacity to change. 2. Start at the top. When change is on the horizon, all eyes will turn to the CEO and the leadership team for strength, support, and direction. They must speak with one voice and model the desired behaviors. 3. Involve every layer. Change efforts must include plans for identifying leaders throughout the company and pushing responsibility for design and implementation down, so that change “cascades” through the orga....
Posted by: David Alan Buslee in Articles Employee Theft: The Missing Margin A quick perusal of statistics coming out of this recession has been the rise in employee theft. From petty cash misappropriations to stock shrinkage, employee theft is on the rise. A study published by the Chubb Group of Insurance Cos. found that executives at 60 percent of the companies surveyed expect employees may steal money or equipment from the company. Executives at 34 percent expect their employees will steal from their clients. A study released by the Association of Certified Fraud Examiners, estimates that the typical company loses 6 percent of its annual revenue to fraud, which can include theft of company property, corruption schemes and accounting trickery. For many companies, the 6% can make the difference between profit and loss. There are a number of tactics to prevent theft – restrict access to inventory, establish and maintain proper controls over cash, etc. But as the economy moves to a service economy, how do you prevent theft by service workers, where there is little tangible evidence of their “production”? In a service environment, what is often stolen is the most important asset – time! Time can be stolen in a number of ways. First and foremost – the internet. Time spent surfing, shopping, or just checking up on their Facebook can steal enormous amounts of billable time. One engineering company terminated an employee who was devoting over half his time to World of Warcraft play! The best way to prevent theft is to eliminate the temptation. Restrict access to the internet whenever possible through the use of software to eliminate websites and subnets to isolate computers. Also, monitor usage on a regular basis – there are a number of software packages that allow you to see just how long your workers are spending at each site they visit. Second – Second job. Another company had a head of Engineering who was always busy, working in the lab or at his computer. Trouble was, a lot of the time he was doing reverse engineering work for his own client base. The company who provided him a paycheck was hosting this work unknowingly – providing the tools, equipment and time for this obviously profitable sideline. Employees in a service environment need to have meaningful metrics for productivity and those metrics need to be Measured and Monitored. And just as access to inventory is limited, time spent on significant pieces of equipment (spectrum analyzers, CMM’s, etc.) should be matched against work logged at that work center – better for costing and better for control. Finally – Lead by example. Employees can sense when the rules don’t apply to management. If they see this inconsistency, they will seize it to justify their own actions. This is true especially in this current economy wher....
Sales And The CFO Part Iii - Dec 26, 2010
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There is no cost and no obligation whatsoever for my assessment of your customer. Simply by calling your customer and saying “Can we meet for lunch? I have someone I’d like to introduce to you” may be the first step that Tim and Paul agreed would be the best first step in helping troubled clients.
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What To Do With A Bad Sba Loan Part 2 - Dec 10, 2009
B. Incur expenses to collect amounts due under this Note, enforce the terms of this Note or any other Loan Document, and preserve or dispose of the Collateral. Among other things, the expenses may include payment for property taxes, prior liens, insurance, appraisals, environment remediation costs, and reasonable attorney's fees and costs. If Lender incurs such expenses, it may demand immediate repayment from Borrower or add the expenses to the principal balance;
C. Release anyone obligated to pay this Note;
D. Compromise, release, renew, extend or substitute any of the Collateral; and
E. Take any action necessary to protect the Collateral or collect amounts owing on this note.
-Hire a collection agency to collect your loan
-Offset your income tax refund or other amounts due to you from the federal government
-Suspend or debar you or your company from doing business with the federal government
-Refer your loan to the Department of Justice or other attorneys for litigation
-Foreclose on collateral or take other action permitted in the loan instruments."
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