Management by "Wondering Around"

If you want to reduce the "Cost of Operations" for your company, set the reminder in your Microsoft Outlook program for every hour for a couple of days. Get up from your desk and "wonder around" to specifically observe which employees are busy working and which ones are not. If there are employees that you observe that are consistently not busy, terminate them!

Now is not the time to have "fat" in your organization, now is the time to survive! If there are employees in your organization that are not busy, terminate them!

Why do you need the services of an attorney?

The Federal and State courts have become very complex and it can be very difficult, if not impossible, for a “non-lawyer” to navigate their way through the system without the assistance of an attorney. Even though the judges may understand your intent, attempting to represent yourself can cause timely delays in any resolution of your case. Small procedural errors which a non-lawyer is not aware of can be very damaging to the outcome of your case. In most cases, the best way to protect your rights is to hire an attorney in the specific field of your case to represent you, such as: real estate, bankruptcy, criminal, business, etc.

I trusted her!

A few days ago, my partner and I met with two owners of a small company to have a Listing Agreement signed to sell their company. While we were talking about their business, the owner mentioned "after the embezzlement, we really started to struggle."

The owners had a "full-charge" bookkeeper who embezzled approximately $100,000 from the company because she had signatory rights to their checking account and the bank line of credit. Over a very short period of time, she stole the money and the owners had no idea that it was happening until someone else brought the issue to their attention. The owners said several times during the conversation, "I trusted her!"

The lady was prosecuted but never went to jail. She received five years probation and was ordered to pay restitution. So far, over the past two years, the company has received less than $5,000 restitution and nothing in the past six months because she is unemployed. I know, hard to believe that a bookkeeper prosecuted for embezzling $100,000 would be having a hard time finding work, right?

If you give an employee the opportunity to steal from the company, as they did, they will steal EVERY TIME. There are very simple controls that can implemented to stop this type of problem from occurring. But if those controls are not in place, it is going to be very expensive.

Then, it will be you who is telling a similiar story which will start with: "after the embezzlement, our company really started to struggle!"

“Dominate Your Marketplace”

Most CEO’s don’t understand that complete market dominance is an option available to their company. There is a company in Las Vegas named Shuffle Master, Inc. that owns over 97% of the entire market of card shufflers used in casinos around the world. Binney & Smith is a company located in Easton, Pennsylvania that owns more than 97% of the crayon market worldwide. Then there is a guy by the name of Bill Gates that is attempting to accomplish a similar market share for Microsoft with a software operating system. These three companies know that dominating a market is an option! I will be the first to admit that these types of results of dominance by a company or product are not available to every business. But, I believe that every CEO would be willing to admit that their company does not possess the market share that they should. Why does your company not own a greater market share than it does today? Why are your competitors existing and making a profit with the exact same product or service as yours? There are only a few reasons why your company does not dominate the market place similar to Shuffle Master, Binney & Smith or Microsoft.

Your competitors offer more value with their product or service than your company. More value does not necessarily mean a lower price. It means that they are giving the client a better deal for their money. When the prospective clients recognize this, they do not buy from you. This may sound very elementary, but it is true. If your company is not offering the best value to the marketplace, you should not even expect to win the sale. Many traditional sales training programs are designed for companies that believe all competitors are equal. The following list consists of sales related tasks that are essential to generate more business:

Execute more cold calling.
Provide training for better product knowledge for the sales team.
Train the sales force on better selling techniques.
Work harder than the competitor’s sales force.
Increase the sales and marketing budgets and advertise more.

All of these issues are good, but they do not fix the underlining problem. The company needs to develop an approach to offer more value and a better deal than any of your competitors. There are many, many ways to accomplish this. You need to ask your management team or sales force the question: If you were a target client of our business, what would convince you to buy from our company instead of our competitors? If your team cannot readily answer the question, you have a lot of work to do. You need to offer the marketplace an exciting, real, interesting, quantifiable, recognizable and convincing reason for the clients to buy from your company. Reasons such as: “the company has been in business for 140 years” or “we offer good service,” are not interesting or exciting. Your clients expect good service so therefore you are stating the obvious and not separating your company from your competitors. You must innovate. You must develop an inside reality and an outside perception that creates a competitive edge for your clients.

The marketplace believes that your competitors offer more value with their product or service than your company. Let’s make the assumption that your company does offer the best value, but the prospective clients are not aware of it. In other words, if the marketplace knew the facts about your company, they would be complete idiots to do business with any other company than yours. The problem is they are doing business with your competition and you need to do something about it. The only possible reason this is happening is your strategic marketing plan does not effectively inform and foster potential clients to influence them to buy from your company. Your advertising message may be attempting to convey your organization’s obvious superior value compared to your competitors but your prospects either are not seeing the ad, don’t believe it or don’t think about your company at the time when they are ready to make the purchase.

In order to resolve this problem, you need to identify your prospective clients and gather information. Your organization needs to develop a sequence of clear, compelling and articulated marketing statements that are directed at each of the possible concerns and build trust and/or brand awareness over time. The bottom line is you are educating the marketplace about your company and why it is a “better deal” to buy from you than your competitors. This master marketing plan should be carefully executed with the entire prospective client base to lead them through this process.

Your target market does not know that your company is even an option. If your prospective clients are easily identifiable, this third reason is an inexcusable problem. To parallel the situation, Microsoft would have had to not know that there are computers outside the state of Washington or Shuffle Master did not know that there are casinos in other cities than Las Vegas. Either you do not have a master marketing plan or you have one that is not working.

“Do you have any “Seven Percenters” working for your Company?”

A few years ago, I was hired as the President / Chief Financial Officer of a $500 million family-owned wholesale grocery distribution business that was in existence for over 60 years. The business was delivering tobacco, candy, groceries, etc. to convenience stores from Maine to South Carolina. When I joined the Company, it was in severe financial trouble:

Negative cash flow
$2 million deficit in retained earnings
Fully drawn bank line of credit
Very low and declining gross profit margins
Extremely high employee turnover
Poor vendor and customer relationships

I joined the Company because of my past successful experiences with “financial turn-arounds.” My immediate goal was to get the Company to breakeven status both financially and for cash flow purposes.

Six weeks after I joined the organization, I attended a meeting of the Company’s sales management. There were nine sales executives at the meeting; the Vice President of Sales and eight Regional Sales Managers. My goal was to evaluate the quality, caliber, moral and attitude of the sales management team. I immediately observed that this meeting was conducted to vent every possible excuse as to why the sales force could not do “their jobs.” Not a single word was said about growing sales, providing good customer service or improving customer satisfaction. Collectively, they complained that:

Prices were too high compared to the competition
Important products were constantly out-of-stock
Fill-rates were very poor and below acceptable industry standards
Product selection for customers was poor compared to the competition
Deliveries to customers were often late causing additional labor costs for storeowners
Delivery shortages and overages were excessive
There are shortages of promotional material from the vendors

After listening for forty-five minutes, I, quite literally, could not stand it any longer. Everything said up to that point was negative and laden with excuses. There had not been one single problem–solving discussion to develop solutions to any of the problems mentioned. It had been a forty-five minute whining session. I interrupted and began asking the questions that I had jotted on my note pad during the meeting. There was an easel in the corner of the conference room still untouched. I went and moved it in front of the sales group to highlight some critical points.

The first question I asked each individual in the group was, “What is your actual job function for the Company?” I certainly had no idea from the dialogue I heard during the first part of the meeting. As I looked around the room, the question generated some very red faces. After a long pregnant pause, I asked the question again. With some frustration, I commented, “If I were to get out your respective job descriptions, what would they really say?” That comment finally got some reaction, and we started to list what they believed were the important functions of sales management for the Company. I wrote the job responsibilities on the easel for everyone in the group to see. By the time we were done, there were eleven primary functions, which included:

Recruit and hire the sales force
Train the sales force
Motivate the sales force
Provide leadership for the sales force
Deliver the goals and objectives of the company to the sales force
Carry out the vision and mission of the company
Act as a liaison between the company, customers and vendors
Obtain product knowledge for the sales force and customers
Provide quality customer service
Provide promotional information of products being advertised by the vendors
Provide direction to the sales force regarding client acquisition

After we finished developing the list, I asked the group to prioritize it, from the most important to the least. Next, with these items listed on the left side of the easel, I drew a line down the center. I chose to quiz the individual who was the most vocal during the complaining portion of the meeting. David was a big, confident type of guy and actually liked the attention. I said, “David, I am going to assume for the benefit of this exercise that you worked fifty hours last week.” He nodded approval, and I wrote the number “50” on the top of the pad just to the right of the line that I had previously drawn. Then, I asked how much time he actually did spend last week on the number one priority item on the list. He stated, “Actually, none last week.” I went to the second item and asked the same question. This time, he estimated that he had spent about a half an hour on this function. I wrote down a half an hour next to the second item. By the time I had gotten to the sixth prioritized responsibility on the list, he estimated that he had spend a total of three and one half hours of a fifty hour workweek on the six most critical functions of his job. I stopped the process at that point to recap for the group what I illustrated during this exercise. David had spent seven percent (7%) of his time last week (3 ½ hours of the 50 hour workweek) on the six most important functions of his job as Regional Sales Manager. That also meant that David spent 93% of his workweek either on the less important functions of his job or items not even on the job description.

I looked around the table at the group and quickly estimated that this sales management team had an annual salary expense to the Company of about $1.5 million. Based upon the results of this exercise (7% of a typical manager’s time was spent on the six most important functions of their jobs), they were costing the company an average of $1,145 per hour. ($1,500,000 ¸ 9 Sales Managers = $166,666 per manager, 2,080 annual working hours x 7% efficiency = 145.6 efficient working hours, $166,666 ¸ 145.6 effective working hours = $1,145 cost per hour) For the last forty-five minutes, all they did was literally complain about every aspect of the operational functions of the Company: purchasing; warehousing; distribution; order entry; customer service; accounting; and marketing. Interestingly, I also noticed that the group never complained about the sales department, even though they were obviously failing horribly with their sales effort.

It was at that point that I identified the first of many critical problems and issues that had put the Company in severe financial trouble. I knew then that if I went through the same process with every department in the Company, the results probably would be similar. These problems were not isolated with the sales management. This was just one example of the many problems of every department in the Company. It was apparent that poor leadership, lack of clear, focused direction and absence of personal or corporate accountability caused these problems.

Does some of this story sound familiar? Do you know of companies with similar problems? Do you have any “Seven-Percenters” working for your Company?

When is an Attorney not an Attorney?

A client had a major problem in his business because one of his customers had filed for bankruptcy protection and owed my client several hundred thousand dollars in accounts receivables. My client also had several hundred thousand dollars of this customer’s inventory on hand in his warehouse. When my client was notified that his customer had filed bankruptcy, he immediately called his attorney to get advice as to how to handle this problem. It really was a problem because this bankrupt customer was about 25% of his total annual sales and his company was marginally profitable at the time.

I had just been engaged as a turn-around consultant with this client and he basically turned over the whole problem to my firm. The first thing we did was read all the notifications from the bankruptcy courts, reviewed the financial statements to make sure that we knew exactly what the accurate accounts receivable and inventory totals were and then we called my client’s attorney.

In a very short period of time, we became aware that my client’s attorney was a very good “real estate” attorney, but a very poor attorney when it can to this specific area of the law, bankruptcy, actually “Creditor Bankruptcy.” This attorney should have never took on this type of work for my client because he knew nothing about creditor bankruptcy law and the fate of this transaction really affected the health of my client’s business.

NEVER HIRE AN ATTORNEY OUTSIDE OF HIS FIELD OF EXPERTISE! Michael Jordan was a great basketball player, but if I was going to hire a middle linebacker to play for the Philadelphia Eagles, I would not hire Michael Jordan. Michael was a very talented athlete, but he would get killed on the football field with those highly trained athletes! My client’s attorney may have been a very talented attorney inside a real estate transaction, but he would have been killed (as would have my client with his representation) in this bankruptcy transaction.

Marketing 101. More than Super Bowl ads.

If you watch the Super Bowl every year, you'd think that you are seeing "marketing" with all those big budget commercials. Those entertaining moments are the end result of the marketing process, sometimes. Often they are attempts to be different or funny that don't resonate with the customer, and then they simply don't work.

You can do better. It's easy to market your business. Just follow a few simple steps.

1. Who is the current customer? Answer these simple questions:

• Age
• Male or female
  
• Income
• Geographic area or neighborhood
• Key factors (e.g.- car owner, student, mom)
  
• Why did they select your business the first time?
• Why do they come back?
  

2. Build your business by targeting the following groups:

• Current customers (by creating more revenue per person)
  
• New customers like the current customers (a good target for ads)
  
• A whole new group of people likely to become customers (only after you have reached out to the first two groups above. Going off on advertising tangents is an expensive mistake.)
  

3. Communicate to each of the groups targeted in Step 2 as follows:

• Pick one logo, one color scheme and one tag line and put it on EVERYTHING. Your money farther when people can identify you.
  
• For current customers, use low cost items like gifts with purchase for buying new products or services and loyalty punch cards that increase visits and sales.
• Get all the attention you can from potential customers (including car wraps, signs on the building, cards and postcards you leave everywhere, appearances at events and festivals)
  
• Do not buy ads unless you know, really know that you will be reaching the right people.
  

4. For every marketing effort, include a trackable feature, like a special offer. Measure them.

5. Make sure that your web site is user friendly. Don't bury the important information, like the phone number, to look techno-cool. People will click off!

Those are the basics. More on the fine points of buying ads in a later post.

Reconcile Vendor Statements Monthly!

We asked the Accounts Payable Manager at a Client to request each Vendor / Supplier to fax a vendor statement for our review. As the statements were received from the vendors, each was reconciled to the Client's accounts payable records.

Our investigation disclosed items posted to the vendor’s statements but not recorded on the client's accounts payable records for: Product returns, Advertising allowances, Product rebates, Damage allowances and Volume rebates.

The reconciliation documented over $250,000 of money due the company on the vendor’s statements that were not recorded on the company’s accounting records.

We had the accounting department for the client write up “debits” to the accounts payable and process the paperwork immediately. During the next check run, $250,000 was deducted from the respective vendors and the paperwork was sent along with the correspondence when the check was mailed to each vendor.

Most companies, when they have outstanding credits on their accounts receivables at the end of the year, write them off to "income" rather than notify their customers that they have offsets to their accounts payable that they have not deducted from a check. The customers lose this money because the vendors remove these items from the vendor statements usually after their year-end audit.

Insurance Coverages - Poor Management of Insurance Relationship

A Client had used the same Insurance Broker for over 20 years who was a “personal friend” of the owner. Due to the personal relationship, no one (neither inside the company nor the insurance agency) had reviewed the policies’ coverages or bid the insurance to ensure that the premiums were competitively priced.

1) The Company had a several employees at customer locations providing inspections and other services. Each of those employees was given a company vehicle that he/she could use during the course of their company business.

2) The insurance premium on each company vehicle was $1,200 per year.

3) The company would regularly retire the vehicles between 75,000 and 85,000 miles and replace it with a new vehicle.

4) When the new vehicles were purchased, the company controller would call the insurance broker and report the purchase so that the vehicle was properly insured.

5) Upon review of the “Vehicle Schedule” for the insurance policy verse of the company's fixed assets vehicle schedule, it was discovered that there were 40 additional vehicles being insured per the insurance policy vehicle schedule. The problem occurred because the insurance company was adding the new vehicles on the policy, but not removing the retired vehicles. A new detailed schedule was created and supplied to the insurance carrier showing each vehicle that the company owned during the past three years, the date of acquisition, and the date of disposition. A second schedule was created detailing the list of vehicles owned by the company each month and the insurance premium which should have been charged during that period of time. This information was supplied to the insurance broker who processed a premium credit for the company in excess of $64,500.

6) The client was paying Worker’s Compensation premiums in excess of $550,000 per year. The company did not ask the insurance broker to go out to market and get additional quotes for the coverage from other insurance carriers. We asked another insurance broker to quote on the coverage and did not disclose that we were asking other brokers to quote in the insurance. We received quotes from the new insurance broker for the exact coverage for premium of $90,000 less.

Summary: Our review of the company’s insurance policies and premiums resulted in improved quality of covering the risks for the company as well as reduction in the annual premiums in excess of $160,000 per year.

"Best Practices" to Maximize Profits

A Client had seven regional offices in Florida with no standard operating (“best practices”) procedures for any of the functional areas of the business. “Best Practices” is defined as the most efficient and profitable policy/procedure to be used as a standard operating procedure for all of the company-wide branches.

1) The Client’s headquarters office is in Central Florida with regional offices in several of the larger cities around the state of Florida.

2) None of the regional offices had standard operating procedures for any of the functional areas including: Sales & Marketing, Human Resources, Financial Reporting, and Customer Invoicing.

3) There was no monthly financial reporting (“accountability reporting”) for the regional offices other than their sales and payroll totals.

4) Each office was autonomous of the other offices responsible for their own sales and payroll totals, preventing each from enjoying the benefits of the other offices’ knowledge and experiences.

5) Each office had its own unique set of forms, policies and procedures that the Branch Managers would use to operate their individual branch.

6) After actual accurate financial statements were restated, only two branches were better than break-even with profits and cash flow.

A standard set of “best practices” policies, procedures, forms, goals, objectives, and budgets were developed and implemented. Within three months of implementing the new business infrastructure, policies and procedures, seven of the eight branches were both profitable and experienced positive cash flow for the first time in several years.

Weekly branch management meetings were developed to implement a vehicle for the management team to share information between them. They were then able to help each other solve common problems, compare data about customer bases, and discuss successful “best practices” within their branches to help improve sales and increase profits.

Company Credit Cards - They will steal from you!

A client here in Orlando issued gasoline credit cards to all employees driving company vehicles. When the company set up the account with the vendor, however they did not put the proper control policies and procedures in place for the credit cards. The employees used the cards for personal use…therefore stealing company funds!

If you give employees the opportunity to take money or resources from the company because of improper or non-existent controls, THEY WILL STEAL FROM YOU!

The employees were using the company credit cards for their personal vehicles, buying beer, food for lunches, etc. at the gas station where they were buying the gas.

One employee purchased $4,800 in gasoline in one month with the company card. He had his friends meet him at the gas station, where he would use the company card to pay for gas for their vehicles; and they would give him cash for the purchase at a discount, of course. A list of controls for company credit cards:

1. Every time the card is used to purchase gasoline, the employee must enter the mileage from the vehicles’ odometer. The credit card company monthly report would calculate the average miles per gallon for the vehicle from the last purchase. This control would indicate that the card was only being used for the company vehicle and not other personal vehicles.

2. A maximum limit purchase amount of $75 is set by the credit card company so the employee could not use the card during the month for personal use for a large dollar amount. Also, the card can only be used once per day.

3. The credit card company is instructed that the card could only be used for gasoline and oil changes and nothing else, including food purchases.

4. The monthly report from the credit card company is reviewed by management every month for discrepancies noted per vehicle. If there were any problems, the employee would be held accountable for the problems and written-up and noted in the employee’s personnel file. Multiple warnings would constitute disciplinary action or termination of the employee.

Business Supplies - Staples Accepts Competitor Coupons!

I buy my business supplies at a local Staples. I belong to their Staples Rewards plan. Most of my purchases have a rebate (10% of net purchases) that comes monthly in the form of a coupon through the mail. This past month I have received over $105 dollars of rebates. These rebates reduced the pain of the cost of the paper, ink, etc. for my business.

I also belong to the "Rewards" programs for the other two business supply companies, Office Depot ("Worklife Rewards") and Office Max ("MaxPerks"). Each of them send me coupons in the mail such as: $10 off if you send $40, a 25% discount. I don't think that I have made a purchase this year of business supplies without using one of the three business supply stores discount coupons....at Staples. Staples will accept any competitor's discount coupons!

There are also coupons sent to me by email. When I see the email, I open it up, print it out, and put it in an envelope in my car. I don't ever want to be caught at Staples without an ample supply of "Dollar off" coupons!

I also check the prices on all three Sunday ads for products that I may purchase soon. If one of the competitors have a lower price than Staples...I take the ad with me to the store and they will match the lower price.

Staples usually have rebate deals on different items, usually paper. When I buy a product that has a rebate, I take the time to go home, get on line and file the information immediately so I don't forget to claim the rebate. Staples now has a very simple process where you can file for the rebate on line and track it. Sometimes you get a coupon, a prepaid credit card or even a check in the mail. Recently, I bought some very expensive paper for a business plan that I was writing to print for the customer. The paper cost $12.95 retail and had a rebate for the product for $11.95, netting the price down to $1.00. What a DEAL!!!

Do you know your customers?

Before you spend any money on marketing, spend some time figuring out who your customer really is. Businesses often market to people they wish were their customers, not to those who are likely to become customers.

To get a clearer picture of who your customer is, ask the front-line personnel- receptionists, phone sales people, customer service reps, etc. They'll tell you.

If you have a diverse product line, you may have different target audiences, depending on the type of product.