Do People Really Make the Difference?
I was having a discussion with a banker friend of mine who suggested that businesses that were successful were good at identifying and hiring high quality people. I disagreed. Ouch! That is totally against the grain of conventional wisdom, right? Not really.
More important than hiring high quality people is establishing solid and proven processes that make your business work. Take a look at McDonalds. This business is successful, not because of the quality of the people, but because of the quality of the processes that the people follow. This is why over 75% of franchise businesses succeed while 90% of start-ups fail.
To Your Success -
Where Has All My Money Gone?
I had spent several weeks working with my client getting their books in order and we were now finally able to review a pretty decent Balance Sheet. By that I mean one that was accurate, not necessarily pleasant to look at with tons of money lounging around in the asset area.
I spent a few minutes reviewing with my client what each of the areas were representing, liabilities, assets, equity, etc., when I saw a confused look on the business owner’s face. “What’s the matter?” I asked. “Well”, he said, “I don’t understand why the Balance Sheet shows that I am making pretty good money, but I don’t seem to be taking any of it home.”
So we printed a copy of his Profit & Loss Statement for the year and began to review it as well. Again, this document was an eye opener for my client, a document that was not available prior to this time because of all of the inaccuracies in their book keeping system.
As we began to go over the details I commented to him that one of the biggest culprits causing money to disappear was not controlling expenses. “But we don’t spend money on things we don’t need.” he said. “As you can see, we buy equipment for resale, pay our employees, buy needed office supplies, pay our accountant, attorney, and of course you, but we don’t spend money on unnecessary things. So why don’t I have more in the bank?”
“Are you sure that you only spend money on necessary things?” I replied. “Have you filed your taxes for the year yet?” “Not yet.” he said, “We had to file an extension because we were not ready.” “Oh” I said, “An unnecessary expense because your books were shabby, and how about your payroll taxes? Looks like those were paid a little late last year as well.” “Yes” he said sheepishly, “Another unnecessary expense, I guess.”
I went on to explain to my client that controlling expense means more than just the obvious areas of the business, because it is the hidden, extra expenses, that erode your profits. Keeping your books in order is essential to controlling these types of costs.
Running a business is not easy, if it were, everyone would be doing it successfully.
When I was going through basic training in the military (A while back!) we were made to polish our soap after each shower. I thought it was pretty stupid at the time, but in retrospect, I understand the symbolism of that task. Don’t allow the things you use daily (financials, client records, invoices, etc.) to become unattractive and in disarray. Showering with a clean bar of soap will not only make you feel better but will demonstrate that you are a stickler for details, an essential ingredient for success.
To Your Success -
Loyal Customers Will Persevere
Being in business for yourself is tough. It gets really hard when you come to realize that you need to make a significant change to the way you do business and this change will impact the customer. Perhaps the change is an increase in price, or a change to the way you extend terms, or maybe your product line has to be updated.
When this happens, owners will formulate what I refer to as SID, Self Induced Doubt. They become afraid to make the needed decision to improve their business practice for fear of loosing their customers.
Loyal customers (and you do have loyal customers, right?) may show some resistance, but that is a natural response by everyone when it comes to change. Astute owners will recognize that loyal customers have chosen them as their company of choice, and hopefully you have nurtured that relationship and demonstrated that you truly care for them as customers. Loyal customers will understand that change is necessary to stay competitive, to continue providing top quality products or services, and to ultimately stay in business.
The trick to successfully transitioning in these instances is to position the change as a benefit to the customer. Give them notice of the change and offer assurance that the change is a good thing for them. Your loyal customers will stand by you, your satisfied customers will complain, but stay, and your unhappy customers may leave. So, am I saying that some customers will leave? Possibly, but those that do were probably problem customers anyway, late with payments, asking for unreasonable service, etc. If they leave, perhaps it will be a good thing. Your company will be stronger for it.
Don’t be afraid to change. Without change there is no improvement, there is no progression, there is no growth.
To Your Success -
What Did You Say?
I was watching American Idol last night (I know dog, it sounded a little pitchy to me too) and one of Motown’s greatest performers, Diana Ross, was coaching the contestants on their performances. I admire and respect Diana Ross for what she has accomplished, both as a performer and as a person, so I was surprised to hear her explain to one of the contestants that she needed to be careful and “pronunciate” her words correctly while singing. I looked to my wife and said, “Did she just say ‘Pronunciate’?” I thought Ms Ross had inappropriately combined Pronounce and Enunciate to create a non-existent word “Pronunciate.” To my surprise there is a word “Pronunciate.” Though rarely used in our language, it means exactly what Ms Ross meant for it to mean and was used correctly.
Hearing Diana Ross use a strange word caused me to think about the importance of good communication skills in business. I believe that how we communicate to our customers and clients can directly influence our success or failure in business. When consumers hear slang or improperly structured sentences, they may subconsciously discount our credibility as a business owner and make their purchase elsewhere. Structuring sentences and using words correctly can be very influential in this area and it should not be taken for granted.
I am not an English teacher, nor do I want to pretend that I never make mistakes in grammar or word usage, but there are a few very common things that everyone should avoid.
One of the words I have heard many times from otherwise educated people is “Irregardless.” Hearing this said, for me, is like scraping finger nails across a blackboard. The proper word is always, “regardless.”
Another common mistake is the usage of the pronouns I and Me. Many people think that using the word “Me” is inappropriate, when in fact, it is the only proper grammatical word for the sentence. Example: “It is important for you and I to speak correctly” is an incorrect usage of the pronoun “I.” In this case “Me” is the proper word. Another example: “It is important that you and I speak proper English” is the correct usage of the pronoun “I.”
There is an easy way to determine which pronoun to use. Take the other person out of the sentence and see how the pronoun sounds. In the first example the sentence would be, “It is important for I to speak correctly.” You can see that “I” does not work here and is therefore improper in this example. In the second example the sentence would read, “It is important that I speak proper English.” The use of “I” works fine in this sentence and the pronoun “Me” would sound awkward. Therefore, in this example “I” is being used correctly.
It can be difficult to use the English language correctly, simply because it is very complex and at times illogical. The culture we grew up in can also influence how we speak, and if English is not your native tongue, it can be an almost impossible task learning to speak it properly. For those who have learned English as a second language, I admire you and I can appreciate the challenge you must have, and are facing, to grasp its nuances. For those who speak English as a native tongue, it is even more important that it is spoken correctly. Do not accept that your childhood environment or lack of education excuses you from this vital skill. Learn to speak the language correctly and you will impress more often than not. People do notice what you say and how you say it.
An employee of mine was explaining to me one day why the Hispanic cleaning crew in our building failed to follow some cleaning instructions we had left for them the night before. He explained, “They just don’t speak no good English.” “I guess not” I said, and went about preparing his performance review.
To Your Success -
Small Business Ethics
Ethics in business has become big news over the past several years. We read about the escapades of the executives at Enron, WorldCom and other major companies and shake our heads in astonishment thinking, “How could that happen.” We marvel at the unethical behavior of these leaders while at the same time never considering our own behavior.
Scalable Processes
I talk a lot about the importance of having solid processes in your business operation. Establishing processes that have been tested, refined, and continually examined for improvement is probably, in my humble opinion, the most important thing a business owner can do to insure success in the business enterprise. When you have good working processes in place, your business runs more smoothly and the stress levels associated with the “daily grind” are minimized.
I was working with one of my clients the other day and we began discussing a process that he had put in place to display his product in the show rooms of some of his buyers, on consignment. His plan was simple and seemed like a good one. He would allow the buyer to show off his product in their showroom without invoicing the buyer until after the product was sold to the end customer. There is nothing really unusual about this process except that my client’s product was the only one that the buyer was keeping on consignment. Because this was not a normal practice for the buyer, the buyer had no process in place to notify my client when the item was purchased by the end consumer. So I asked my client how he would monitor that.
My client is a small startup company and is currently doing lots of marketing by hitting the streets and knocking on doors. So he said to me, “While I am out cold calling on new prospects, I can just drop by and see if the item is still in the show room. If it isn’t, then I’ll invoice them and send them another.” He added, “This will also be a good way for me to stay in touch with my new buyers.”
This sounds like a good idea until you begin to scale this process into a larger version. There are two important concepts one must keep in mind if you are developing a good process. The first is that it must be simple and easy to follow. The second is that it must be scalable. By scalable, I mean it must work when you are small and also work if your business explodes and becomes extremely huge. In this example just given, my client’s process would work fine while he is small, but if his business suddenly expanded and instead of two or three businesses displaying his product on consignment, there were hundreds, the process would fall apart because there is not enough time in the day for him to visit all of these businesses. Eventually he would lose track of where his products were and whether or not they had been sold.
Sometimes we will develop a process that appears to be a good one, and over time we discover that it does not work as our business changes. That is ok if you are continually examining the process and improving it as you grow. The important thing is to have the process, make sure it is scalable, and continue to improve it.
To Your Success -
Your Image Makes a Difference
The other day I watched a very compelling movie produced and directed by Clint Eastwood called “Flags of Our Fathers.” It was the story of the WWII battle of Iwo Jima and the resulting media coverage in the US promoting the famous picture that resulted from that event. The message that came from that movie was interesting and one that we as business leaders should understand if we want to be successful.
The message was that image is more important than reality. According to the movie, the celebrated picture of the six Marines raising the flag atop the pinnacle of Iwo Jima was not taken when the flag was first raised, but in fact, at a later time after the battle, during a relatively calm moment. Although not staged, the raising of this flag did not occur during the heat of battle, as implied, and the men who raised it were not the same ones that planted the flag initially.
Our leaders at the time were quite aware that this photograph, and the men portrayed, was not as it seemed, but they seized the opportunity to create a gripping image of our brave Marines at a time when this country needed hope and the support of those at home. It worked.
As a business, it is vital that you maintain an image that reflects exactly what it is you want the public to see. If you own a restaurant, you don’t want patrons to walk in and see dirty tables, floors, or counters, the negative image will stay with them and your business will suffer. If you own an auto repair shop, you want your employees driving clean undamaged vehicles. If you own a florist, you want all of your flowers to be fresh and attractive. If you are a doctor or a lawyer, you want your clients to see you as being successful by creating images of professionalism in your office or waiting area.
Be very careful when making decisions about your image. What people see is what you will become. It only takes one moment for your prospects to decide if you are credible or not. The image they see will determine your success or failure.
Hanging in my office, is a picture of Pete Rose, the baseball player and manager, sliding into home plate in the style that made him famous, headfirst. He was once quoted as saying.” …And there is one more important reason that I slide headfirst. It gets my picture in the newspaper.” Be careful with your image, it is more important than reality, because it defines reality.
To Your Success,
Everything is Broken
Have you ever heard the phrase, “If it ain’t broke, don’t fix it?” I was attending a seminar just last week when I heard the moderator say exactly that. Of course, everyone in the room understood his meaning, as we all do, but in the business world, doing things the way we always have can cost us customers, money, and good employees.
Instead of allowing processes to go on just because they seem to work, we should adopt an attitude of Continual Improvement, always looking for a way to make the process better, even if “it ain’t broke.”
There is an old story about a young girl helping her Mother cook dinner. As the Mother was putting the ham into the pan, she cut off a small piece on each side. Curiously the young girl asked, “Why do we always cut the ends off the ham before we put it in the oven?” The mother replied, “I don’t know dear, it’s just the way Grandma always did it. Let’s call and ask her why.” So they did. When asked, the Grandmother responded with the same answer, “It’s the way my Mother always did it.” So they called the young girl’s Great Grandmother and again asked, “Why do we always cut the ends off the ham before we put it in the pan?” The Great Grandmother replied, “I don’t know why you do it, I did it because I never had a pan big enough to hold the whole ham.”
So you see, we can go along forever doing the same thing, the same way we always have, even though nothing seems to be broken, when in fact, if we would adopt the attitude of Continual Improvement we would begin to ask important questions, the biggest one being, Why?
If you want to make your business “the best it can be”, to borrow from the Army slogan, look closely at those processes that “ain’t broke” and improve them, and the next time you hear someone say, “If it ain’t broke don’t fix it”, let it remind you to fix something today.
To Your Success,
Capitalism is Not a Dirty Word
Exxon recently reported that their annual profit for 2006 was in excess of $39 billion dollars. Notice I did not say earnings, I said PROFIT. When this was being announced on the evening news, the reporters interviewed several people who were pumping gas into their Luxury SUVs at their local Exxon station. They were all singing the same song, “It is immoral for Exxon to make that much money while we are spending over $2.00 a gallon for gasoline.” Some were even suggesting that the government take action to keep Exxon from making that much money.
Does it make you angry to hear that kind of news? Not me. I believe in capitalism. It is the American way. It is why this country has propelled itself to become the world leader in commerce. It is why we have the highest standard of living in the world. It is why Bill Gates can go from being broke to the richest man in the world. It is the “American Dream.” To expect our government to put restrictions on corporate profits is an insult to our way of life. Besides, the report on Exxon did not explain the whole story. In order for Exxon to earn $39 Billion in profits, it had to spend $338 billion, making its profit margin a slim 10.46%, hardly anything to write home about.
Why aren’t we complaining about Citigroup who earned 24.03% margin by gouging us with credit card interest? Or how about Pfizer and Merck, pharmaceutical companies who earned 22.82% and 19.59% margins respectively, while many of the people in this country can’t afford medication. No, instead we cry over Exxon’s earnings, not realizing that each year we spill more gasoline at the pumps than the Valdez did off the Alaskan coast.
Exxon is no different than any other business. They sell their products at a price based upon what the market will bear in order to make money, support economic growth, and satisfy their stakeholders. If you are unhappy with the profits of Exxon, buy your gas someplace else, stop driving around in inefficient, gas guzzling automobiles, support other forms of energy as a way to reduce our dependency on oil, car pool, use mass transit, but stop whining when you hear reports that prove capitalism works.
By the way, Microsoft earned 25.86% margin last year and soon we will all be forced into buying their new operating system, Vista. Are you enjoying that big screen TV you have in your living room? Texas Instruments earned 18.51% margin last year. Face it, Capitalism is not a dirty word.
To Your Success,
Are You Choosing To Fail?
It is an interesting phenomenon with us humans… we migrate toward those things that are harmful to us as individuals, as a people, and also, as business owners. We go through life making choices on how we live our lives, the activities we participate in, the things we watch, and the things we eat, all of which become the essence of who we are. Left to themselves, things will deteriorate. It takes positive effort to cause improvement. Unfortunately, it seems that we have a propensity to take the easy road in life, the one that allows things to decline, instead of the hard road which yields positive improvement.
Take a car for example. If all we ever do is drive it around town, or worse yet, let it sit in our driveway, what happens? It begins to fall apart. To keep the car at its peak, we need to change the oil regularly, rotate the tires, check the belts, insure the proper fluid levels, and myriad other inconvenient maintenance chores. If the car just sits, it will begin to rust, tires will become flat, fluids become sludgy, etc. In other words, left to themselves things deteriorate. And so do we.
We choose those things in life that are harmful to us. We choose to sit on the couch and watch TV instead of going to the gym to work out. We choose to eat pizza and fast food on the run instead of taking the time to sit down to a quiet, healthy dinner. We choose to dream and never take action to see it fulfilled. We choose to let others decide our political leaders instead of voting ourselves. We choose to pollute our air instead of applying technology to keep it clean. We choose to build bombs instead of relationships. As business owners, we choose to let the status quo determine our fate instead of applying change proactively to improve our lot.
Kermit the frog once said, “It ain’t easy being green.” We are all green when it comes to life, and believe me it’s not easy. We must take an active approach to make a difference in our lives as individuals, as a people, and of course, as business leaders. We must force change. Left to themselves, all things will crumble. If a year from now you are doing the same things you are doing today, you will be worse off for wear and tear. Lack of change means failure. Are you choosing to fail?
To Your Success,
