Sunday, December 19, 2010

Friends as Employees

“Who ceases to be a friend never was one.” ~Greek Proverb

Every entrepreneur wants to get the best help he or she can. However, hiring friends or befriending employees is a recipe for disaster and should be avoided if possible. Do not mistake being “friendly” and being “friends” as one in the same. You want to be friendly with your staff, but you do not want to be friends with them. There is a vast difference between the two.

Five years ago, a wonderful entrepreneur hired an office manager. This employee’s birthday happened to fall three days after she was hired, and she mentioned to her employer that her parents never really gave her much of a birthday. Hearing this, the entrepreneur went out and bought balloons, flowers and a very nice gift, and even took her out to a very nice lunch. This became a tradition that continued year after year.

The entrepreneur treated this employee as a member of the family and frequently asked her to come along on family get-togethers. Additionally, the entrepreneur kept giving this employee raises as she just could not say no to her friend. Consequently, the employee was being grossly overpaid for the work she was doing.
Over time, as the line between “employee” and “friend” became increasingly blurred, the entrepreneur began to see issues with the employee’s performance. She frequently found work that the employee had not done, but she never brought it up because she feared hurting the employee’s feelings.

The obvious solution was to let this employee go – these issues were more than sufficient to justify termination of a normal employee. But this entrepreneur had not treated this worker as a normal employee. She was a friend, and the entrepreneur was reluctant to take any action knowing the friendship would be lost.

In addition, the employee and entrepreneur shared a strong bond reinforced daily by their close working relationship. Their desks were adjacent to one another, and the entrepreneur just could not see herself running the business without this employee. She felt she was invaluable to the firm.

If not for the economic downturn, this cozy relationship would have continued indefinitely. However, as cash became tight, the entrepreneur was forced to look at all possibilities for cutting costs. As it turned out, the only element she could really control was this employee’s salary.

This was a very difficult decision for this entrepreneur, and I spent a lot of time working with her. Once I was able to articulate that all of the problems they were experiencing with the business revolved around this one employee, the entrepreneur understood what was necessary.

Did I say anything that the entrepreneur had not already considered? No. All I did was reinforce what she knew to be true. That is why advice from an outside consultant is so useful.

The entrepreneur is now in the process now of finding a replacement at a much lower salary. She has promised me that she will not make the same mistake again by befriending the new employee.

Now go out and see if a friendship you have with an employee is negatively affecting your company’s morale or the employee’s performance. If it is, you must either step back into a more professional relationship or consider letting this employee go. This will not be easy, but these issues must be addressed for the well being of your business.

You can do this!

Sunday, December 12, 2010

Employee Input Or In The Catfish Line

“It takes a great man to be a good listener.” ~ Calvin Coolidge

There is no question in my mind that listening to your employees is almost as important as listening to your customers. Time and again, I see entrepreneurs underestimate the value of their employees’ opinions. Many times, entrepreneurs think they are the only ones who know how to improve their business, and it never even occurs to them to ask their staff how they might make it better.

Ignoring your staff is equivalent to a physician ignoring a patient’s concerns. In both cases, valuable information is lost and major damage can be done.

There is a neat company called King Arthur’s Tools. The company is run by Arthur and Pamela Aveling, who in the interests of fair disclosure, are also my good friends and clients of the Jim Moran Institute for more than 12 years.

King Arthur’s sells woodworking tools to both distributors and hobbyists. They either buy or manufacture to their specifications the various components of these tools. When an order is received, a packing slip is generated and sent to the warehouse, where most of the packing is handled by Warehouse Manager Henry Williams. A very loyal and hardworking employee, Henry has been with King Arthur’s for more than three years.

At one of King Arthur’s retreats, the staff was working on the company’s core values. After much discussion, Arthur asked Henry if he could think of anything that could improve his operation. Without hesitation, Henry said that he would like to have cards made identifying him as the one who packed the goods. He thought doing so would reduce the rate of error.

Everyone agreed that this would be a neat idea, and Henry and the staff got to work making the cards the very next day. They came up with three versions. Each version had a different message on it, but all of them included Henry’s picture and the phrase, “Packed with care by Henry.” The three alternate messages were as follows:
1. It was my pleasure assembling your order, and I hope you enjoy using your King Arthur’s tools on your project.
2. Your order was packed with care by Henry. Thank you.
3. King Arthur’s Tools loves to see what customers make with their tools. Post your photos on Facebook.

The response to these cards has been overwhelming. So many customers have commented on how much they liked them and what a neat concept it was. Many customers even called to thank Henry personally for their order.

The cost of implementing this idea was minimal, but the value was considerable. It improved the company’s relationship with their customers and made Henry feel good about what he is doing. It all came about because Arthur and Pamela Aveling were willing to listen to their staff.

Now go out and make sure that you are listening to both your customers and your employees. The best way to get input from your employees is simply to ask for it. Ask your staff if there is anything they think the company can do better. Even if some do not have something to contribute, they’ll know you welcome their input, which is invaluable.

You can do this!

Sunday, December 5, 2010

In the catfish line.

"Trust is the lubrication that makes it possible for organizations to work." ~Warren Bennis

Business is about relationships. These relationships can be with employees, customers or potential customers, and a host of others. Most people would rather deal with someone they know and trust than with a stranger. Just like the old cliché says, it is not what you know, but who you know that determines success.

So many times I have seen struggling entrepreneurs happen to mention their business problems to an acquaintance, who gets them connected with large potential customers. All this comes about because of a relationship between two people.

For this and so many other reasons, relationships are vital to each and every business, and you just never know when or where a relationship will be formed. You must constantly be on the lookout for opportunities to make connections.

About a year ago, I attended the Broward Urban League Gala as my new job with JMI has me helping minority entrepreneurs at Broward College. At the gala, they had multiple serving lines, one of which was for fresh fried catfish.

While standing in the catfish line, I started talking with the very nice couple ahead of me. The man’s name was Ed Key, and he was employed as an administrator at Broward College. We hit it off, so I suggested that we have lunch in a couple of days.

During this lunch, I mentioned that we were coaching minority entrepreneurs and organizing a minority business conference. Without me asking, Ed put me in contact with Norm Seavers, the head of their Entrepreneurship Institute. When I met with Norm, he stepped in and agreed to allow us to hold our minority business conference at their venue and to provide so much other assistance that we needed.

I began mentoring Ed, meeting with him every month during my visits to South Florida. During one of our meetings, he brought a friend of his, Marcell Haywood, with him. Marcell is a very successful entrepreneur, the owner of a company called Dirt Pros EVS. Starting only five years ago with a $300 investment, he has grown this business to over $5 million in sales.

I was so impressed with Marcell. Though he holds a master’s degree, he does not have a formal education in business, yet he has been so successful. During lunch, I asked Marcell if he would be the keynote speaker at our conference, and he agreed.

Our conference was a great success, and Marcell’s talk was the hit of the day. This outcome can be attributed, in large part, to a conversation I had with a stranger in the fried catfish line.

Now go out and work on improving as many relationships as you can. You never know how they will pay off.

You can do this.

Sunday, November 28, 2010

Tips to be a great manager

"Motivation is everything. You can do the work of two people, but you can't be two people. Instead, you have to inspire the next guy down the line and get him to inspire his people." -Lee Iacocca

All of us want to be the best managers we can be. After all, our employees are our company. The more we can motivate our staff to feel good about what they do, the better our organizations will operate. Managing employees takes work and a commitment to help them succeed!

One great thing you can do is to find out what each employee’s goals are and then help them achieve those goals. Finding out what each person really wants out of life does two things. First, it tells the employee that you really care enough about them to ask. Sometimes staff just will not know their goals, which is okay, but just asking translates to caring. Second, once you know what their goals are, you can help them achieve them. It is so surprising to me how many managers just have no idea of what the career goals are of their staff. It is so important to think of yourself as a coach. Like an athletic coach, your job is guide the team members to be the best they can be.

Another thing, you really want to become a full time mentor with each of your employees because this really keeps your staff humming. That doesn't mean you are mentoring employees 12-hours a day, but that you have their success on your mind at all times. Evaluating your employees once a year is a one of those ideas that you really, really have to question. Normally an annual evaluation turns out to be the evaluation of only the last two weeks of an employee's work history. All employees, if they are human beings, need feedback to make sure they are living up their boss’s expectations. With only a yearly evaluation, frustration sets in quickly. I take each staff member out for a meal once a month. During that time, I try to find out how they are doing and to identify their needs. I also communicate how I feel they are doing in a clear and concise manner. Taking them out of the office really tells them that I want to be there to mentor them to be more and more successful. If you find the time to spend a few moments with each employee, you will be surprised what you might find out about your employees and how this individual time with them motivates them to succeed and promotes loyalty within the workplace.

Positive reinforcement is critical to being a great manager. So many times you hear staff members say that the manager only notices when I screw up and never notices when they do great things! Pay attention to great behavior and always recognize it whenever you see it. On a recent tour of a business I observed the owner who spotted one employee doing some great things. The entrepreneur stopped the tour to tell the employee what a great job he was doing. Recognizing great employee behaviors is a sure way to communicate to your staff how pleased you are with their performance.

Managing employees takes so much work and effort. However, it is so worthwhile because it makes your staff feel so much better about their work. Now go out and improve the ways you manage your staff.

You can do this!

Sunday, November 21, 2010

Alternative Marketing Approaches

“ORIGINALITY is unexplored territory. You get there by carrying a canoe – you can't take a taxi.” ~Alan Alda

So many marketing consultants believe there is only one way to advertise. Some feel that face-to-face interactions are the only way to make sales, building trust first then convincing the client to buy the product. Other experts swear by advertising on social networking sites. However, there are so many other approaches deserving consideration that are simple and just as effective.

We were helping a renowned sculptor, Nilda Comas, whose sales appeared to have stalled because of the shape of the economy. However, she had a database full of over 4,000 former customers and serious inquiries. These contacts were her low-hanging fruit. We suggested that she call these clients and tell them she had some time free if they would like to take advantage of it.

Artists are notorious for not wanting to push their own products, so she was a bit skeptical about this approach at first. But she gave it a try and had tremendous success. On the first call alone, she was able to sell three high-end sculptures.

A small plumbing contractor was having serious difficulty in the current economic climate. She was hemorrhaging cash at a rate of $10,000 a month. Because of her cash flow trouble, traditional advertising was not an option, and even repeat business from existing customers would not have been sufficient to turn the problem around. We had to think creatively about how we could drum up business.

We suggested that she use door hangar advertisements to offer a special price reduction on the first service call. She hired some very inexpensive workers, and for two weeks, they hung 2,500 hangars a day. After just the first month of this promotion, she watched her cash flow go from negative $10,000 a month to positive $16,000.

My co-author, Tim O’Brien, and I have just published a new book entitled, “If You Have Employees, You Really Need This Book.” A very meticulous entrepreneur, Tim spent days and days researching the best ways to market our book. He knew that if we were going to be successful, the book had to be an Bestseller. We would need that stamp of success.

Tim discovered that in order to be an Bestseller, it had to be the top-selling book during a one-hour period on any given day. Tim quickly figured out that we could make this happen by encouraging all our friends and acquaintances to buy the book at a designated date and time. We sent out an e-mail blast to all of our supporters, asking them to buy the book on Wednesday at 11 a.m. If they did, they could go to our website at and get three bonus items. One of these items was a video of me talking about customer service, and a second was an e-book that Tim had written.

This was an innovative marketing effort that brought us great success. At the end of the day, we did become number one in our category at, and we did not have to spend very much to get it.

These are just three examples where alternative approaches to marketing products and services were customized to the entrepreneur’s circumstances and worked brilliantly. This is just the tip of the iceberg. There are so many other ways that can work for your unique set of products or services.

Now go out and make sure that you are considering alternative marketing techniques and not getting stuck in a rut with traditional methods.

You can do this.

Sunday, November 14, 2010

Business and Marriage

“It's all about quality of life and finding a happy balance between work and friends and family.” ~Philip Green

So many businesses are run by husband-and-wife teams. While working alongside your spouse may sound ideal, I can tell you that it is one of the most difficult partnership arrangements out there. Running a family business is like running a normal business but on steroids. Not only do you have to be concerned with all the usual entrepreneurial issues, but you must also deal with all of the family issues that are often so deeply engrained in the business.

For husband-and-wife teams and family-run businesses, one question always seems to arise. What comes first, the family or the business? For some, the answer is that the family always comes first, but for others, the business always takes the front seat. Where this is concerned, it is not so important which school of thought you subscribe to. The critical issue is that the priority is clearly articulated and understood by all of the partners.

We were helping a great couple that had been through so much. The wife started the business but had partnered with an individual that stole money and made her life miserable. It took them more than a year to dissolve this terrible partnership. Much like a very bad divorce, there were many legal and emotional challenges, and the path to the end just seemed interminable.

In order to finally end the long and nasty legal battle, the wife had to sell all of the assets and start a new company. She had to close the business for two months to make the much-needed renovations, and because of legal reasons, they had to form a whole new corporation with the husband at the helm. The wife could not be engaged at all.

While the husband was a great guy, he really had very little experience running a business, and he was equally inexperienced at managing the company’s all-women staff. As his lack of managerial skills began to affect the business, they hit a cash crisis.

Reacting out of fear that he would run out of money and the business would fail, the husband became very dogmatic in managing the staff. His lack of management skills became more and more pervasive, and both the business and the marriage began taking a thrashing. Adding an extra layer of complication to an already grim situation, the wife did not understand her husband’s reasons for adopting such a rigid management style. Soon enough, both business and marriage was floundering.

One day, I got calls from both of them, each saying how frustrated they were with the other. They had reached the breaking point. Their marriage was in serious trouble, giving out under the pressure as the husband struggled more and more with managing the business and the wife became more and more frustrated with her husband.

The following evening, I had dinner with the couple to see if I could help them deal with some of these difficult issues. To begin, I asked them whether they felt the marriage or the business was more important. In unison, they both answered that the marriage was. Once that was established, it was easy to show them what the real issues were and how they could resolve them.

One of their most destructive issues was their lack of communication. As they took turns discussing what they felt were the real issues, the other just sat there in awe. Neither had any clue how the other person felt. Up to this point, they had not been communicating effectively, and as a result, they were completely in the dark about the other’s motivating factors.

The couple came away from our meeting with a newfound understanding of the importance of really listening to what the other was saying. The husband agreed to back away from running the business, and the wife agreed to step up and run the day-to-day operations. They each would have a say in expenditures over $500, and to resolve the communication gap, they would have weekly meetings.

This husband and wife started the evening as two separate people operating in different universes, but emerged as a unified team. As we left the dinner, both husband and wife felt so much better because they now truly understood where the other was coming from, and they were prepared to work together and support one another.

Now go out and make sure that the communication channels are open in your family business, and that each partner’s needs are being met. Additionally, make sure that you all clearly understand what will come first, the family or the business.

You can do this!

Sunday, October 31, 2010

Reward Programs Are So Important To Retaining Customers

Rewarding your loyal customers is so important. That is to say, it is critical that you make a special effort to ensure your frequent customers feel good about your business.

After all, it is the repeat customers who provide a large share of a firm's sales. They are the low-hanging fruit for every business, both easier to attract and keep. Best practices of businesses suggest that 90 percent of sales should come from existing customers and loyalty programs really do help in retaining your existing customer base.

My new job at the Jim Moran Institute requires frequent travel, and I spend a significant amount of time flying Delta. Because I flew so much last year, Delta upgraded me to the "Silver Medallion" level, which entitles me to a number of perks. There is no charge for my checked baggage, I am allowed to board early, I'm fast-tracked through TSA, and I may choose seats in better locations on the plane.

You will notice that all four of these benefits have zero incremental cost to Delta, but they all have substantial value to me — and to all frequent travelers. What Delta has successfully done is set up a loyalty program that makes their customers feel good about their frequent purchases.

Some friends and I bought a gift for another friend who was in the hospital and we all wanted to split the cost. The decision on which credit card to use for this transaction was a function of who would get the most points from the credit card company by the purchase.

Once we determined the extent of the points this one credit card vendor provided, we all were looking into getting one those cards. In this case, the loyalty program not only retained the customer, but brought in new business as well.

Winn-Dixie and PetSmart are two other companies that get it. They print the savings right there on the bottom of the receipt so customers can see it every time they use their loyalty cards.

Where most loyalty programs fall down is it takes too long to get benefits. Such is the case with both my Best Buy and my Office Depot loyalty cards. I have no idea if I have ever spent enough to get any value from them.

Now go out and make sure that you have a program in place to reward your loyal customers. And remember to build your loyalty program in such a way that customers can see the returns every time they interact with your business.

You can do this!

Sunday, October 24, 2010

Spirituality in Business

I was recently called to assist a firm in Miami named Sonshine Communications. The communications and public relations firm is run by a very special entrepreneur, Bernadette Morris, who has held the reigns for more than 20 years. It is a very successful business, and it is also very unique in that it thoroughly incorporates spirituality into the workplace.

As Bernadette was showing me around her office, the first room we came across, right off the main entrance, was a spiritual/devotional room. When I asked about this room, Bernadette said she thought it was so important to have a quiet room for her staff to pray or meditate. I asked her staff about the room, and they said that even if they did not use the room often, it meant a lot just knowing it was there.

On the web, Sonshine Communications is described as “A Christian-based, minority-owned and operated, private corporation providing an array of value-added services in the realm of public relations, marketing, advertising and graphic design.” Additionally, when referring to its code of ethics it says, “The firm upholds a professional code of ethics in all of its creative endeavors and operates under principles of Godly living and Christian character.”

Obviously, spirituality plays a major role in this firm. It is present in every element of the business, and there is no question in my mind that much of its success can be attributed to this commitment to spirituality.

In 2003, a study published in USA Today showed that six out of 10 workers would like to see more spirituality in their workplaces. This is especially true today with Generation Y (born after 1980). This age group takes a much more holistic approach to their work life, and spirituality or religion is an integral element.

A number of empirical studies have shown that embracing spirituality will improve the bottom line of a business. A study by a University of Chicago professor found firms that make a commitment to ethics are more successful than companies that do not. A study in Business Week showed firms in Australia that adopted spirituality in their workplaces had greater productivity and less turnover. A study from MIT reported that employees want to practice their spirituality in the workplace without offending their co-workers.

Jeffrey Swartz, CEO of Timberland Shoes, uses his prayer book and his religious beliefs when formulating company policy, and often consults with his rabbi. The American Stock Exchange has a Torah study group, and Boeing offers Christian, Jewish and Muslim prayer groups to their employees.

Like Sonshine, Apple’s offices in California have a meditation room where employees are given a half hour of company time to meditate or pray. They know that doing so will improve the productivity of their staff.

I believe one of the main reasons that spirituality is now playing a bigger role in business is the presence of more women in the workplace. Women typically focus much more on spiritual values then men do. Additionally, the aging of our workforce also contributes to this trend. Baby Boomers are no longer satisfied by materialism and are looking for a deeper meaning in both their work and personal lives.

Now go out and consider how adding a spiritual dimension to your business might fit with your views and those of your staff. I promise your staff will appreciate the effort.

You can do this!

Sunday, October 17, 2010

Managing the Average Employee

"Hire the best. Pay them fairly. Communicate frequently. Provide challenges and rewards. Believe in them. Get out of their way and they'll knock your socks off." ~Mary Ann Allison

So much has been written about rewarding great employees and rehabilitating poor employees. However, the vast majority of the workforce does not fall into either of these categories. Most fall somewhere in the middle. I call them “c-employees.”

C-employees make up more than 80 percent of the average entrepreneur’s workforce. This group is responsible for the majority of output, yet they are all but ignored by most managers. Because they are doing ok, performing at an adequate level and not causing any problems, it is easy to overlook c-employees. But this is a dangerous path. C-employees must be managed – and managed well – in order for the organization to flourish.

A firm we were helping had a policy of rewarding great employees with cash incentives and a tough policy against staff that was performing poorly. C-employees were completely ignored, producing results that you would expect: morale had suffered dramatically. It never occurred to management that these c-employees would feel left out. They thought that since this group was not upset or complaining, everything must be okay.

It is natural for managers to want to work with their better employees since they typically share a similar work ethic, but they have to resist the temptation to devote all their time and attention to top performers. This is not to say that it is not worthwhile or productive to spend time with your better employees. Managers just must make sure that all employees are receiving a minimum level of attention. You simply can not neglect a staff member without paying a price.

Teamwork is not possible unless each worker feels like they are an important part of the team. It is every manager’s job to ensure that each member of their staff feels good about what they are doing, and that they are valued and appreciated.

To ensure my staff felt like an important part of the team, I always made it a point to greet them whenever I saw them and engage them in conversation about something they valued. Whether this topic was their family or a personal hobby, the point was spending quality time with each member of my staff and connecting on a personal level. I tried to go out of my way as often as I could so that every employee – top performer or otherwise – knew that I thought they were important.

Now go out and make sure that all your employees feel appreciated regardless of their performance level. Of course, you want to see them improve, but you can not expect your staff to up their efforts unless they know their current contributions are recognized and valued.

You can do this.

Sunday, October 10, 2010

Focus Your Emphasis on Your Successes

“Don't wait until everything is just right. It will never be perfect. There will always be challenges, obstacles and less than perfect conditions. So what. Get started now. With each step you take, you will grow stronger and stronger, more and more skilled, more and more successful.” ~Victor Hansen

As part of my job, I have talked to and counseled thousands of entrepreneurs. Once I have established a relationship with the entrepreneur, I walk them through the process of listing their successes and challenges to identify what we need to do to fix the business problem. Most often, they want to focus exclusively on their challenges and how they can overcome them.

For some reason, our challenges carry more weight in our lives than our successes. But if improvement is our goal, focusing solely on the challenges that stand in our way is not really the best method of getting there.

In the spiritual world there is a theory known as the Law of Attraction. The premise is that what you choose to focus on determines the things that come into your life. Honing in on the negative will produce negative effects, while reflecting on the positive will bring positive results.

Many probably remember “The Secret,” a very good DVD that came out a couple of years ago. This DVD covered the Law of Attraction and provided tons of examples and testimonials. Story after story was presented as proof of the Law’s primary assertion: focusing on the negative – your weakness – will only manifest as greater weakness.

I am a frequent speaker, and over the last 15 years, I have probably given more than 500 speeches. Additionally, as a professor, I have given lectures three times a week for the last 38 years. Clearly, public speaking is a critical element of my career, and you might be surprised to learn of a very large weakness of mine.

I have stuttered since I was three years old when my mother first took me to speech instruction to get help. I can remember times in high school when my stuttering was so bad that I could not even say the word “water.” I had to say “H2O” instead. To this day, my stuttering comes and goes depending on my stress level – stress dramatically affects my vocal cords.

From medication to speech therapy, I have tried a number of methods for controlling my stuttering. Only one thing has ever worked. The approach that produces the best results is focusing on times that I have been successful.

In years past, when I concentrated on trying not to stutter, it was worse than ever. I have adopted a different approach. Instead of focusing on my weakness, I think about how many speeches I have successfully given, or I visualize how great this speech is going to be. When I focus on my successes in this way, my speeches are normally great.

Many of the entrepreneurs we work with focus on their challenges, and of course, they generate more and more challenges as a result. One entrepreneur just wanted to talk about how poorly he understood financial statements. He was great at marketing and sales, but he did not acknowledge his strengths. He just went on and on about how he could not comprehend this element of his business.

The first thing we did was change his primary focus. Instead of honing in on the things he lacked, we focused on his strengths. This is not to say however, that we ignored his weakness. We got him set up with some great accounting help, but he came at it from a different angle, one where he focused on the things he did well.

Another entrepreneur we worked with was extremely skilled in systems implementation, but weak in the area of communications. When we focused on his strengths, his business improved dramatically, and we were able to solve the communication issue by hiring a communications director to handle the task he was not as good at.

Focusing on your strengths seems like such a simple concept, but it is one that we all tend to forget about. Most often, we dwell on our weaknesses, a practice that serves neither us nor our business.

Now go out and make sure that you are focusing on your strengths.

You can do this!

Sunday, October 3, 2010

Make sure you include overhead in your pricing!

“Profit and morality are a hard combination to beat.” ~Hubert Humphrey

So many of the business owners we help have difficulty dealing with pricing. The question of where to set their prices is a critical one for every company. If set too high, the firm will not pick up much business. If set too low, they will have sales volume but no profits.

Just because a business is maximizing sales does not necessarily mean they are making money. Having revenue coming in is not the same as making a profit, but many business owners confuse the two, especially in a tight economy.

We were helping a very neat company, the owners of which really care about the community. It is important to them to do all they can to make their community a better place to live. They are constantly volunteering for so many activities, and as a result, they have added a great deal of value to the local community. In the process, they have also earned quite a bit of notoriety for their company.

While these entrepreneurs have done an enormous amount of good for the community, their business was not doing so well. They were not taking much of a salary even though the company has been in business for more than five years and is well-established. Although a tad flat, their revenues were okay, but they were not generating sufficient profits. Their net profit margin continuously hovered around one percent after paying themselves their miniscule salary

Being a service business, they were charging by the hour. They were taking just about every piece of business that walked through the door so long as they were able to cover their direct labor expenses and generate a 10 percent profit.

What they forgot to account for in their pricing model is their overhead. Fixed expenses such as rent, office salaries and utilities, to name just a few, have to be paid regardless of the amount of revenue. In the end, they were having to divert about 50 percent of their revenue to cover overhead costs.

By failing to account for overhead in their pricing model, they seriously underestimated the true cost of their services. If each customer is not assigned a fair and equal share of the overhead, one must shoulder the entire burden – or the owner loses a lot of money.

We were able to get this point across to the owners, but they still had reservations about adjusting their pricing model to include the overhead. They feared many of their customers would think their rates were too high. We suggested that the way to overcome this was to price by the job instead of by the hour. This would allow them to charge the fees they need to cover the overhead and still be competitive.

The jury is still out on this business, but the owners now have a plan for profitability that will allow them to grow and be successful. Even more importantly, they can now start taking a salary that fairly compensates them for their efforts.

Now go out and make sure the pricing model you set for your products and services is sufficient to cover all of your costs, including the overhead. If you cannot charge a high enough price to cover your direct costs, overhead and profits, you need to find another way to ensure those expenses are covered.

You can do this!

Sunday, September 26, 2010

Promote Your Business

“For every sale you miss because you're too enthusiastic, you will miss a hundred because you're not enthusiastic enough.” ~Zig Ziglar

Repeat customers are invaluable. Whatever your business, you must do everything you can to encourage your customers to come back after each visit, whether online or in person.

I recently took my grandson to Five Guys, a very successful franchise that has more than 625 restaurants. Though I had never tried the restaurant before, I thought my grandson might like it. Turns out, he had been to one before, and I was right, he loved it!

When you walk in, lining each wall are large signs with quotes from newspapers all across the country. Though the words differ from one sign to the next, each quote boils down to one basic message: Five Guys is a great restaurant.

Obviously, the purpose of these wall quotes is not to bring in new customers but to encourage their existing customers to return. By posting these testimonials, I believe Five Guys is sending their patrons the following message: we are a great restaurant, and you need to come back if you want to be part of the experience.

Whether the food is good or not is immaterial to this message. They are simply making the point that eating at Five Guys is a great experience. For my part, I left wanting to come back with my grandson just to feel like I was part of this group of people who loved their food.

Another form of self-promotion is the on-hold telephone message. A study showed that 70 percent of business callers are put on hold sometime during their call. To take advantage of this time with their customers, many firms use these recording to softly sell their products or services. Since the customer has to listen, it is a great opportunity to pitch your products, but again, it must be a soft sell.

Many vendors provide this service, and you can locate them simply by Googling “on-hold advertising.” Costs range from $50 to $200 or more per month. Included in this cost are periodic updates and many of the front-end production expenses. It may seem pricey, but users of on-hold advertising say that they recovered the cost almost immediately and continue to see a return on investment over time.

Both of these methods allow you to promote yourself to your existing customers in a very inexpensive way. Of course, there are many other approaches, and you just need to find the vehicle that works best for your company. The critical issue is that you must make a continuous effort to transform current customers into return customers.

Now go out and find ways to promote your businesses to your existing customers!

You can do this!

Sunday, September 19, 2010

Hiring Consultans

"I am a little concerned that some of the measures that are proposed may simply increase the number of consultants who are telling businesses what they already know." ~Alasdair Morgan

At one time or another, every business will need assistance from a consultant to grow, merge, improve profitability or address some other area of concern. Small businesses just cannot afford to have an IT or HR expert on staff. Consultants provide a very effective alternative, enabling small business owners to access the expertise they need without having a full-time employee dedicated to the specific area in question.

Before hiring a consultant, you must first determine what the real issue is. In many cases, this is much more difficult than it sounds. We are frequently called in to help an entrepreneur with a marketing problem only to discover that the critical issue is actually cash flow. The entrepreneur did not realize cash flow was the problem until we asked some critical questions and examined relevant data.

Some issues such as producing an employee manual are easy to match with the appropriate consultant, but most issues are not nearly as clear. Through careful evaluation, you must identify the correct problem and hire the correct consultant.

As with any expense, you should exercise due diligence when selecting a consultant. Just because one comes highly recommended by a friend or fellow entrepreneur does not mean that they are the best option for you. So much about selecting a consultant involves personal chemistry. To be successful, the consultant must have a good rapport with you and your staff. If chemistry and trust are absent, neither you nor your staff will accept the consultant’s advice.

Price or hourly rate is not the most important factor to consider when hiring a consultant. Frequently you will find that the quality of the consultant correlates with the fee they charge. That is to say, the consultant who charges the lowest fee is often the worst one you can find.

Rather than focusing on the cost, you should consider the value of their results. It is so much better to pay more and get more value than to go for the bargain basement consultant just to save a few bucks.

Another vital consideration when hiring a consultant is your willingness to accept the results. After meeting with an entrepreneur and making suggestions for improvement, we frequently find that they have received the exact same recommendations from a former consultant. When we ask why they did not follow through with the suggestions, they typically say they were too busy.

Bottom line here is if you are going to hire an expert, you must make a commitment to try the recommendations. If they do not work, jettison them, but not even trying is neither effective nor constructive.

When you find yourself in need of an expert’s services, hire a consultant that will add value to your company. Before you make a selection, however, make sure that you have identified and defined the problem that you would like them to address with some degree of specificity. Additionally, make a commitment to follow through and give their recommendations a try.

You can do this!

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Sunday, September 12, 2010

Email: A Blessing or a Curse?

“Take advantage of every opportunity to practice your communication skills so that when important occasions arise, you will have the gift, the style, the sharpness, the clarity, and the emotions to affect other people.” ~Jim Rohn

Of all the technologies that have emerged for communications in the last couple of decades, email is among the most revolutionary. It has completely changed the way we communicate, making it so much easier than any other method that has been available in the last 20 years.

At one time, typewriters were a critical element for communicating via U.S. Mail. It was such a slow and cumbersome process. I still remember struggling to align the paper, and making a correction was very, very difficult.

However, despite all the improvements and efficiencies email brought with it, there are a number of issues that users should be aware of. By far, the most important of these is that once you hit send, it is nearly impossible to recover or amend the message.

In light of this, proofreading is absolutely critical. And more than just checking for grammatical errors, you should be verifying that you have said exactly what you mean and are aware of how your message might be interpreted.

Additionally, email and emotion are a dangerous combination. If you are having strong feelings of any kind – positive or negative – it is best to wait until your emotions settle before hitting send. The fallout from an inappropriate email can be devastating.

I have seen managers send out an angry email to a staff member who messed up, only to realize later that they acted before they had all the facts. The damage from this kind of email can never be repaired.

Another shortcoming of email is that it is a flat form of communication. Consisting of nothing more than words, it is impossible to communicate emotion via email. People often forget this fact and send email messages that really should be delivered in person.

Sending an email to congratulate a team member on some accomplishment, for example, may fall short of the mark since you can not really express your feelings of joy. You would really want to deliver a message like this in a face-to-face meeting or in front of his or her entire team.

Most people, including me, get way too many emails, and one thing that absolutely drives me crazy is receiving a message that covers three or four different items. Sending a message like this significantly impairs the receiver’s ability to respond quickly.

When I receive emails that cover more than one topic, it automatically drops down on my priority list because I have to save the message until I have more time to respond. For this reason, it is so important to cover only one point in each message. You will find that people will respond much more quickly to one-topic emails.

Another of my email pet peeves is long narratives. Most decision makers want just the facts. Email is not a good place to practice elegant writing 101. I want an email that is no longer than one paragraph so I can quickly respond with a short answer. Most people are so limited on time that brevity must be the rule and not the exception with this medium.

The subject line is another critical element. In order to get your message read, the subject line must be both precise and accurate. One entrepreneur wrote “important” in the subject line of every single email she sent. Eventually, her staff began ignoring her messages. The more precise your subject line, the more successful the communication will be.

Lastly, email should not be used to communicate anything that is really important or personal. If you want to tell a staff member about a problem you are having with their work, email is just not appropriate.

For instance, if I have an employee that has not been meeting their sales goals, sending them an email about improving their numbers is going to do more to irritate them than accomplish anything of value. It really is best to address an issue like this in a face-to-face meeting that allows you to discuss how you can work with them to improve their sales.

Overall, email is a very effective communication tool, but it should not be your default. It is just not always going to be the appropriate choice. Now go out and make sure that you are using emails effectively in your organization.

You can do this!

Sunday, September 5, 2010

Customer Service Facts

"The single most important thing to remember about any enterprise is that there are no results inside its walls. The result of a business is a satisfied customer." ~Peter Drucker

Because customer service errors are so glaring and so easy to fix, I focus heavily on this topic in my articles. Recently however, a reader wrote to me (I respond to every email) saying that while she was a believer in the power of great customer service, her boss needed some convincing. She wanted to know what facts I could provide to persuade her boss that improving customer service would increase the company’s ROI.

Right then and there, it occurred to me that for all the time I spend writing about this topic, I have failed to give enough empirical data to support the merits of improving customer service.

A very impressive company named TARP (completely unrelated to the government bailout of banks) has been providing a great service since 1971. This company works with the most renowned firms in our country collecting data on customer service. Their website,, offers an ROI calculator that computes the ROI you can anticipate when improving customer service.

TARP reports that 68 percent of customer defection results when customers feel they have been poorly treated. In a similar situation, a friend of mine walked into a store to buy some new running shoes. His feet tend to overpronate, which means he needs shoes that have special support features built in or else he will wind up running on his ankles.

The two salesmen (the term is used very loosely here) were both 16 years old and utterly devoid of any knowledge about the shoes or my friend’s condition. They were clueless about how to help. My friend would love to shop locally, but if he can not get the customer service he needs, he will simply do his research and order his shoes online.

Lee Resources reports that for every single customer complaint you receive, there are 26 others that remain silent. From this statistic, we gather that we must investigate each and every complaint in order to ensure the problem is not more widespread. Think of a customer complaint less as a “problem” and more as a “blessing.” It gives you the chance to correct a situation before it gets out of hand.

NOP Worldwide reported that a one percent reduction in customer service issues could generate an extra $40 million in profit for a medium-sized company over five years’ time. This solitary fact was earthshaking for me because it so vividly illustrates the considerable impact customer service has on the bottom line. Customer service is not an expense. It is a profit center in its own right.

Another interesting fact reported by Lee Resources is that 70 percent of complaining customers will continue to do business with you if you resolve their complaint. Ninety-five percent will continue to do business with you if you resolve the problem immediately. Too often I see businesses ignore customer complaints rather than dealing with them. Customers really want to stay with you even if there is a problem. If you want to keep these customers, it is crucial that you to make sure you rectify the problem quickly.

Now go out and make sure your customer service experience is great, and that you recognize its true value to your business.

You can do this!

Sunday, August 29, 2010

Passion is so important in running your business!

“Follow your bliss and the universe will open doors where there were only walls.” ~Joseph Campbell

I feel that passion is so vital both in life and in business. Far too often we see business owners who either lack or have lost their passion. Without passion, you become complacent, and complacency is a death sentence for any business.

It is so easy to get off track. Without passion, work becomes a job rather than an exciting new adventure to tackle each day. When complacency sets in, an entrepreneur loses the desire to make necessary improvements. When a business stops improving and growing, failure is not far behind.

I was working with a very successful entrepreneur who came in to our meeting saying, “I feel so good that everything is going well, and I do not want to change anything with my business.” Upon hearing this statement, I wanted to jump out of my chair and force him to see just how complacent he had become. Though he thought that everything was great, the reality was that his complacency was taking his business the wrong way.

This entrepreneur heeded my warning – “Jerry’s kick in the butt” as he calls it – and turned his business around. It is now growing like weeds. Our talk might have been the catalyst that led to this great change, but it was his acknowledgment that his attitude was holding his company back that made the real difference. Rediscovering his passion made him a new man and reinvigorated his business.

In another case, an entrepreneur’s complacency and lack of passion combined with the current state of the economy put his business in danger of closing its doors. I have talked to this entrepreneur tirelessly over the years, but I have been unable to resurrect his passion. Now, rather than running and managing a business, he just goes to work.

These are both very interesting cases, but the truly intriguing part is how differently the two turned out. In the first case, the entrepreneur listened and acknowledged that his lack of passion was having a negative effect on his business. Though the second entrepreneur also listened, he just had nothing left – no drive to run his business. I finally had to recommend that he sell it. If you have no passion for your business, you either need to figure out how to get it back or get out.

Here are some questions to help you evaluate if your passion is where it should be. First, ask yourself if you could start over, would you still choose the same industry and business. Secondly, do you get up every morning excited about going to work? Finally, are you so excited about your business that you want to tell the world how great it is? If you answered “No” to any of these questions, your passion might be waning.

Colleagues and other entrepreneurs are another great resource. Ask them if they think you are getting complacent. Also, let your workforce be your mirror. They will frequently reflect the passion they see in the owner or manager.

Now go out and make sure that you have the passion necessary to be successful.

You can do this!

Sunday, August 22, 2010

Making Customer Service a Priority

“Look through your customer's eyes. Are you the solution provider or part of the problem?” ~Marlene Blaszcyk

One of my favorite topics to speak on and write about is customer service. I am so fond of this subject because I can see the issues from the perspectives of both the business and the customer.

Advertising is set up to bring in new customers. But once advertising has done its job, the focus should shift to keeping those new customers. When it comes to retention, customer service is the key.

Businesses spend large sums of money on bringing new customers in – just look at the size of many marketing departments. Though best practices suggest that 90 percent of sales should be from existing customers, many businesses spend very little on customer service.

Many business owners lose their customer service focus, and this apathy tends to trickle down to the staff. In order to ensure each and every customer feels good about their experience with your company, business owners must make customer service a priority.

Recently, I went to a doctor’s office as a new patient. I had scheduled the appointment for 10:30 a.m., but when the office called the day before to confirm, they had the time down as 12:30 p.m. When I nicely reminded them that the time was 10:30, not 12:30, they replied, “Whoops. Can you change your schedule to come in at 12:30?” When I said that I could not, they said they would work me in at 10:30. This conversation should have been a warning to me of the service I would receive the next day.

As I was getting out of my car at 10:15 to go into the doctor’s office, I immediately noticed that the paint was starting to peel off the building. As I approached the front door, I noticed that it was covered with nicks and cracks and looked like it had been through a war.

As I walked into the waiting room, I felt as though I had traveled back to the 1950s. Everything looked like it had never been updated or repaired.

The offenses continued as I approached the counter to sign in. The person who greeted me was wearing the biggest frown I had ever seen. As if that was not enough, she also threw me a look that said, “What the heck do you want?” Next, when I told her I was a new patient, she practically threw me the clipboard with the paperwork to fill out.

When I returned with the completed paperwork, she was talking with a colleague, and she completely ignored me for three minutes even though she could see I was waiting. Somehow, I managed to remain relatively calm.

At 11:30, they called me back to see the doctor, and at noon, the doctor finally came in. He never acknowledged that he was late or that I might have been inconvenienced by his tardiness.

While the doctor was very good at treating my medical issue, the bad taste left by the extremely poor customer service trumped that fact altogether. I will not be returning to this doctor’s office.

Every business can expect to have some sort of customer service issue, but in this case, the problems were systemic.

So why was the customer service in this office so badly managed? I believe the answer lies with the doctors who own the practice. They only see their job as providing medical treatment to their patients. Everything else is unimportant.

Whether dealing with medical practices or businesses, our focus must be constantly tuned in to customer service. To ensure that every customer has the best possible experience with your business, providing great service has to become a ritual or a habit.

Now go out and make sure that you make customer service a high priority for your business.

You can do this!

Sunday, August 15, 2010

Getting the most from your business signage

"The right name is an advertisement in itself." ~ Claude Hopkins

Over the years, we have helped so many companies that just do not realize the importance of signage. One such business – a dance studio – just did not see any real value to having a sign. However, once we explained the importance of signage and she decided to put one out, the owner had people coming up to her all the time saying, “I had no idea that there was a dance studio here!” As a result of this small and inexpensive sign, this business owner’s revenue increased dramatically.

In another example, a semi-pro football team was having trouble attracting the attendance they needed. Because they played at a high school field, they could not put up a physical sign. As an alternative, a couple of days before each game, they had someone stand in front of the high school and wave a sign at the cars that passed by. Just this small change made a major difference in the attendance for each home game.

Simply having a sign is important, but what the sign says and how it says it is equally critical. In the case of one art studio that we were assisting, the sign focused on the owner’s name and not on the business’ purpose. We suggested that the sign emphasize the fact that it is an art studio instead of spotlighting the name of the owner. This simple change is expected to make a significant difference in their sales.

A sign’s purpose should be twofold. First, in order to attract customers, a sign should include the name of the business as well as what it does. A sign that simply says, “Joe’s,” does not tell potential customers anything about what you really do.

Secondly, a sign raises awareness about your business. It is a constant reminder to anyone who passes the location that it is there. For this reason, your sign should be located where it is visible to the greatest number of customers. If your sign is not visible from many directions, it will not do your business very much good. For example, a bookstore was struggling with sales since they were never able to place their signs where a sufficient number of potential customers could see what they offered.

I think the biggest mistake business owners make is trying to include too much narrative on a sign. A sign must be simple, communicating the name and purpose of the business. If, however, there is something unique about the business, it is vital that this information be included on the sign. For example, if a store is open 24 hours a day, this should appear on the sign since it is an important detail about the business.

Signage, however, is not as critical if you are a destination location, meaning that people find you in order to be your customer. If you manufacture a tool that you sell nationally, for example, signage can be minimal, particularly if you are not located on a highly traveled road.

Now go out and evaluate your current signage. Does it include both the name of your company, as well as what your business does in an attractive, motivating way? Both elements are essential if you truly want to make the most of your signage.

You can do this!

Sunday, August 8, 2010

Business Presentations are so Important

‘It is not so much the content of what one says as the way in which one says it. However important the thing you say, what's the good of it if not heard or, being heard, not felt.’ ~Sylvia Ashton-Warner

One of the most important elements in an entrepreneur’s arsenal is the business presentation. Used to either inform staff of changes or sell a product or service to a potential client, these presentations are critical, and without exception, business presentations must effectively communicate information in a meaningful and understandable way.

I have seen so many business presentations fall flat for a myriad of reasons. When it comes to making a business presentation, adequate is not acceptable. They must be the best you can make them, and in order to be effective, several key elements must be present.

First impressions are crucial. People make judgments about others within five seconds of meeting. Therefore dress, posture and handshake are just as important to delivering a successful business presentation as the information you communicate.

I was at a presentation, recently, which was very good but the presenter looked like he had slept in his suit. He was not considered at all for the work because his first impression was so bad.

Determining the purpose of the presentation is essential because the purpose affects the presentation delivery. For example, if the purpose of your presentation is to inform staff about an upcoming change, it will be very different from a sales presentation.

Along similar lines, you must also determine what you want to accomplish as a result of your presentation. Making a presentation without having clearly defined the results you want to achieve is like driving on a road without a destination.

To illustrate, imagine you are giving a sales presentation. Your purpose is to provide a client an overview of your services. Your desired outcome might be that the client recognizes a product or service that could be beneficial to their operation. In another example, if you are making a presentation to your staff to introduce a new organization chart, your desired outcome would be that the staff accepts and welcomes the new structure.

Understanding your audience is another critical element of the business presentation. When I am teaching classes to my college students, I have to spend a fair amount of time going over the basics as they all come from different backgrounds. However, when I do presentations to business audiences, I get right down to the point I am trying to make and then show how that point stands to benefit them.

While PowerPoint is a great tool for making business presentations, beware of the pitfalls. Avoid too many slides. I can not count the times I have wanted to go to sleep during a presentation that had too many slides. If you put me in a room, dim the lights and lose my attention, you have completely defeated the point of making the presentation because I am obviously not going to comprehend or remember the material. A good rule of thumb is that you should be able to cover one slide every three minutes. It is so much better to cover less and allow participants the opportunity to ask questions that will delve deeper into the subject matter.

When using PowerPoint, you should also pay special attention to the appearance of the slides. They should look professional and not like they were prepared the night before. With any business presentation, every step must be meticulously planned out and well executed.

The final essential element of a business presentation is the call to action. If you do not ask your audience to take some sort of action, the presentation really does not have much value. For example, in a sales presentation, you might want to be asked to come back to make a more in depth presentation to the top brass. In a staff presentation, the desired action might be improved coordination among departments.

Some of the best business presentations that I have ever seen are those that Steve Jobs gives to introduce a new product. They are impeccably orchestrated, and the blend between the speaker and the slides is seamless. You can view the recent iPhone 4 introduction on Apple’s website,

Every entrepreneur, manager and salesperson must make business presentations. They are the vehicles by which you communicate information, and they need to be great.

Now go out and make sure that your business presentations are structured properly and are getting you the maximum results possible.

You can do this!

Sunday, August 1, 2010

You need profit centers for your business.

“Profits are like breathing. You have to have them. But who would stay alive just to breathe?” ~Maurice Mascaranhas

One of the most basic tools available to entrepreneurs is a profit center. A concept originated in the 1940s by the great management guru, Peter Druker, profit centers divide a company into smaller entities allowing entrepreneurs to measure results more easily. These results can be used to hold each unit accountable for desired profit levels or simply to ensure that they are generating sufficient profits.

Though not prudent for organizations with sales of less than 10 percent, businesses that sell more than one product should use the profit center model. Without profit centers, managers have a very difficult time figuring out their goals and objectives.

Profit centers are simple to set up. Accounting software such as QuickBooks allows entrepreneurs to easily evaluate unique profit centers by assigning different categories of accounts for both revenues and expenses.

When using profit centers, costs and revenues should be allocated to each center. While revenues are easy to allocate, costs are a tad bit harder. It is important to realize that the bottom line profit for the center may not be 100 percent accurate due to the process of allocating fixed costs. However, as long as the reporting process is identical each month, the measurement will be valid.

Most businesses have no problem allocating variable costs to a profit center. For example, we were working with a lawyer whose practice covered many areas, but he was unsure of where to spend his time. Profit centers allowed this lawyer to clearly measure and manage how much time he and his staff spent with each client every month. For a retail operation, the direct costs would be the cost of products sold, which again, is easily measured.

The process gets more difficult when it comes to allocating fixed costs. Each center must cover its fair share of the company’s overhead. For example, each profit center should be charged a pro rata share of the CEO’s salary.

The allocation of fixed costs can be handled a number of ways. One option is to apply the overhead as a function of sales for each profit center. A second alternative is to allocate the costs as a function of how much floor space they utilize. And the list goes on. Whatever the chosen allocation method, as long as it is consistently applied, the measurement will be fine.

Now go out and make sure you have a profit center set up for each element of your business. If you are having difficulty setting up profit centers, your accountant can provide assistance.

You can do this!

Sunday, July 25, 2010

You must define the purpose of your business!!

“The first principle of ethical power is Purpose. By purpose, I don't mean your objective or intention-something toward which you are always striving. Purpose is something bigger. It is the picture you have of yourself – the kind of person you want to be or the kind of life you want to lead”. ~Ken Banchard

Most businesses have a mission and vision statement, normally developed during a strategic planning session. However, these statements very rarely address the real purpose of your business, and I feel that purpose trumps mission and vision statements every time.

I am not saying that vision and mission statements are unimportant. I am only saying that a business must first have a clearly defined purpose. Otherwise, it is too easy to get off track when developing mission and vision statements.

A statement of purpose should be very short – no more than one sentence – and should provide a foundation on which mission and vision statements build. Take for example the Jim Moran Institute’s Outreach Program. The purpose is, “To help entrepreneurs be more successful and profitable without ever a charge.”

When our kids were around five years old, they had a favorite question. They must have asked this question at least 25 times every day, driving us absolutely nuts! You guessed it. That question was, “Why?”

As crazy as it made us to hear it over and over again, asking “why?” was their way of trying to understand this very complicated life we live. Now, my daughter has to listen to her very special son ask, “Why, mama?”

So what does this little anecdote have to do with purpose statements? “Why?” is one of the two questions that entrepreneurs must ask themselves when generating their purpose statement. “Why are we in this business?” And the second question: “What do we really want to get out of it?”

In addition, while mission and vision statements are typically crafted without any emotional hooks, a purpose statement should generate some emotional feeling in order to really be accepted by the staff. Staff may not know or understand your mission and vision statement, but they need to understand and be able to express the purpose of your business.

A financial institution’s purpose statement might be something like, “To provide exceptional financial services to our customers while ensuring a reasonable rate of return.” The purpose of a men’s clothing store might be, “To be a family business that strives to make each customer look and feel good about their clothes.” An awards/trophy store might say their purpose is, “To sell products that make people feel good about their accomplishments.”

Conceived by founder, James Dyson, Dyson’s purpose is as follows: “To make things that work properly.” Not only is it very clear, it is easy to get behind because it makes most people feel good to have this as their purpose.

Now go out and make sure that you identify the real purpose of your business and develop a statement that encompasses it. This must be done in order to ensure your staff is on the same page.

You can do this!

Monday, July 19, 2010

Do Not Get Involved in the Minutia of Running a Business

There are two levers for moving men – interest and fear. ~Napoleon Bonaparte

From employees to finances to marketing, there are so many issues for entrepreneurs to deal with when running their businesses. These concerns are always going to exist, but it is critical that you do not let the minutia overwhelm you.

We were dealing with a very successful entrepreneur whose business was having some sales issues. He had recently moved the person in charge of sales to another position, and now there was no one to run the sales operation. He was the ideal candidate to step in, but he just could not seem to do so.

After much discussion, he finally admitted that he just did not feel that he could step away from running the business to tackle these sales issues. When asked why, he said he felt he had to stay involved in the business or it would implode.

Upon closer analysis, it became apparent that he was involved in every detail of running the business. He felt that it was his responsibility to ensure every mundane task was accomplished.

The true irony of the situation was that he thought he had to deal with every little thing in order to keep his business from falling apart, but he was so caught up in the minutia that he was letting his business slip. Even though he knew what the real issues were, he felt that he could not step away from the tasks that he considered so vital.

No matter how much I tried to convince him to jump in, handle the sales and let go of the day-to-day details, he just could not do it. He was so wedded to what he had done in the past, and he just did not see how his behavior was causing the firm to hemorrhage.

Although we do not know what became of this entrepreneur, there is so much to be learned from his example. Entrepreneurs must continually remind themselves that their time is worth at least $100 an hour. Consider whether the business is getting value from what you are doing. It is so easy to get involved in tasks that are urgent but not important. Reminding yourself that your time has high and measurable value to your business will help you remain focused on those tasks that are in its best interest.

I have found that one of the best tools for time-starved entrepreneurs is a time log. Record what you do every 15 minutes for three days. For most people, this is a very illuminating exercise as it allows them to look back and see how much time they are wasting on interruptions. If you can free two or three hours a week, then you can work on the important elements rather than the urgent ones.

Now go out and make sure that you are doing what is necessary to keep your company viable without getting caught up in the minutia.

You can do this!

Monday, July 12, 2010

Select Your Business Lawyer Very Carefully

“If you come to a fork in the road, take it.”~Yogi Berra

Most business owners wind up needing a lawyer at some point. This can be for a whole variety of reasons, but often, businesses need a labor attorney to defend them against aggressive attorneys who are representing ex-employees.

We were helping a partner in a business who wanted to buy the other partner out. The partners could not come to an agreement on the price, so they ended up going to court.

After months of dealing with the complex legal system, a hearing was finally scheduled. The judge would determine the value of the business and how to divide the assets.

Because of the intricacy of the case, the partner we were helping had to hire a personal lawyer, a corporate attorney and a forensic accountant. Both the personal attorney and the corporate attorney were selected based on recommendations. The personal attorney was suggested by a very good friend, and the corporate attorney was referred by the forensic accountant.

Relying solely on recommendations when selecting attorneys can be dangerous. In this case, the personal attorney turned out to be a criminal defense attorney, and the corporate attorney was a labor attorney. Neither lawyer had in-depth experience in business litigation, nor were they certified in business litigation by The Florida Bar.

Clearly, I am not an attorney, but I have had to deal with them on a continual basis. Over time I have learned that all lawyers are not the same. Just because someone has a law degree and passes the Bar does not mean they are competent in the area that you need assistance. You need to find an attorney that specializes in the issue you are having.

When shopping for an attorney, I suggest you start by asking friends and relatives. Take those recommendations then do some research. Consider how many similar cases the attorney has taken through trial. Narrow your list to several possibilities and meet with each. It is important that you talk to more than one so you have a comparison on which to base your selection.

Another great way to find an attorney is via referral from your local Bar Association. Again, you must select one that specializes in your type of case.

The Florida Bar defines a certification as follows: “Board certification recognizes attorneys’ special knowledge, skills and proficiency in various areas of law and professionalism and ethics in practice.
Certification is the highest level of evaluation by The Florida Bar of the competency and experience of attorneys in the areas of law approved for certification by the Supreme Court of Florida.”

The Florida Bar’s website,, is a helpful resource. The site shows if an attorney has had any problems with The Florida Bar and how their peers have evaluated them. It also lists any certifications the attorney holds, and allows you to search by certification and location.

In addition to the lawyer’s experience and certification, you will also need to consider whether you want to go with a large or a small firm. Large firms charge for any and all individuals that help in the case. These fees can add up in a hurry.

On the other hand, small firms charge lower rates, and you will receive much more attention. However, smaller firms will not have the network of associates that larger firms have to pitch in and help with your case.

Hourly fees are important, but when shopping for a lawyer, there are other factors that could mitigate a higher fee. For example, one attorney might charge more than another, but the individual’s experience level could result in lower total fees.

Finally, you must have a written document that lays out how any retainer (advance) funds will be used and when more funds will be needed.

The bottom line here is that if you need an attorney, you need to put in the time and do your due diligence to determine whether or not the attorney will be an asset in your case. The selection process boils down to one critical factor: whether or not the candidate is experienced with the specific issue that you are having.

You can do this!

Sunday, July 4, 2010

Reward Staff When You See Them Doing Great

"Men do not value a good deed unless it brings a reward." ~Ovid

We were helping one entrepreneur who said he never recognizes and rewards good behavior because he is afraid that for every good thing he sees, there could be several bad things that he does not. When asked about it, he said, “If I say anything about good behavior, I may not have the opportunity to reprimand the employee when they do something wrong.”

When I heard this statement, I honestly almost fell out of my chair. I was shocked to hear this from him because I had thought he was a great manager! The sad thing about it is that he thought he was a great manager too.

If you are really going to be a great manager, I believe that you must recognize good behavior whenever you see it. After all, one of the objectives of a manager is to make sure their employees feel good about what they do. Good behavior must be recognized on the spot in as public a manner as possible.

So many managers tend to hoard these complements, not realizing that there is no limit on the amount of rewarding they can do. When our children were small, we repeatedly read them a story about “warm fuzzies” and “cold pricklies.”

The story said that we have the capacity to dole out endless amounts of either of these. The ultimate message was that we should give out “warm fuzzies” at every opportunity as they make other folks feel good. “Cold pricklies,” on the other hand, make folks feels bad. Managers should apply this same theory to recognizing good behavior among their employees.

Many managers refuse to give out “warm fuzzies” because they rarely got anything from the people around them. However, they must learn to give rewards, or their staff will not respond very well to them.

There is a school of thought among some managers that an employee should get their reward from simply doing their job. However, as human beings, we need to be told that we are doing well and are appreciated. Remember, your staff spends more time with you than they do with their families. Sure, they are paid, but every employee needs to be rewarded as frequently as possible.

Just recognizing good behavior is great, but you must do so with true sincerity, otherwise the message will not be heard. To illustrate, take this for an example. How many times have you had a restaurant manager stop by your table and ask how your meal was, all the while demonstrating about as much concern as a golf club would? The point is that with any type of reward, it must be done with sincerity and honesty.

As I go around helping businesses, I often can tell which ones make their staff feel good just by watching their employees interact with customers. If you start being conscious of your employees’ good behaviors and rewarding them accordingly, I promise that the morale of your business will improve dramatically.

Now go out and make sure your management team has made it a high priority to reward good behavior when they see it.

You can do this!

Sunday, June 27, 2010

Growth is Not Always a Good Thing

“Slow buds the pink dawn like a rose from out night’s gray and cloudy sheath; softly and still it grows and grows, petal by petal, leaf by leaf…”

~Susan Coolidge, “The Morning Comes Before the Sun”

We were helping a young entrepreneur who started a business four years ago with $10,000. Through hard work and smart decisions, she has grown the business to $8 million.

Her goal each year has been to grow sales by at least 30 percent, and even in a difficult economy, she has been able to meet or exceed this goal every year. Now she wants to continue this growth path.

She financed her business and growth with internal or retained earnings, and doing so has left her with very low equity. Now, she has financed 99 percent of her assets, and debt financing is her only means of obtaining the capital necessary to continue growing.

She came to us for help because, with her debt ratio so far out of whack, banks would no longer lend to her. She was at a loss as to how she was going to finance this year’s growth. She knew something was not right, but she just could not articulate or diagnose the problem.

This entrepreneur suffered from what I call “Growth At Any Cost Syndrome.” She thought that if she did not grow, her business would fail.

The problem with growth is that even though sales are up, cash flow needs can easily reach double the sales amount. To support increased sales, you must be able to finance additional receivables and larger inventories on top of a multitude of other costs.

If a firm has too much debt and is trying to grow, they have only two options. First, they can try to raise additional equity capital. The problem here is that so many small businesses cannot attract minority shareholders. This is because there is no control with minority equity interest in a small business. In addition, minority shareholders will not have any liquidity. The bottom line is that acquiring new equity capital from outsiders is very difficult – if not impossible – for most small businesses.

With option one ruled nearly impossible for a small business, only one alternative remains: to slow the growth down – even stop it altogether – and allow equity to build up through retained earnings. This is a very slow process, but it is the only dependable way of setting the stage for future financing. Growth sucks up cash, and slowing its progression is the only way to allow your cash stores to replenish.

Our advice for this entrepreneur was to slow her growth rate. While resistant at first, she quickly realized that this was the only way she could get where she wanted to be.

Increasing sales is not always the best strategy because it normally does not allow you to build up the infrastructure you need to grow your company. If you find yourself in a position like this entrepreneur, slowing your growth to allow cash and profits to build up is a very viable alternative.

Now go out and make sure that you have a growth plan in place, and that the plan ensures you are not taxing your resources.

You can do this!

Sunday, June 20, 2010

You can deal with problem employees

“The tougher the job, the greater the reward.” ~George Allen

Problem employees are the bane of every manager’s existence. By “problem employee” I mean an individual whose behavior negatively affects the morale and operations of the entire business in a significant way. For some reason, every organization seems to have at least one of these. Examples of some problem behaviors I commonly see are as follows:

1. An employee just does not do what he or she is asked even after repeated requests.
2. An employee’s temper causes everyone to tip-toe around them in fear of inciting their anger.
3. An employee is habitually late.
4. An employee’s extreme negativity detracts from the business’ mission.

Whatever the problem behavior, there are two ways of dealing with it. One is to do nothing, and the other is to take action. However, in about 99 percent of cases, ignoring the problem only makes it worse. Why does this happen? In my opinion, it is because doing nothing and pretending the problem will go away on its own is tantamount to encouraging – even rewarding – the undesirable behavior.

You must also consider that allowing one employee’s bad behavior to persist destroys your credibility as a manager. Whether you acknowledge it or not, your entire staff knows that there is a problem, and when you do nothing, your staff wonders why you do not act. In the end, your inaction dilutes your effectiveness as a manager.

One firm that I was assisting had an employee that was habitually 15 to 30 minutes late. Sometimes the manager took corrective action, and sometimes he ignored the problem. When dealing with these less severe kinds of behavioral issues, consistency is critical. If employees perceive you or your policies to be inconsistent, your credibility will be non-existent, and problem behaviors will escalate.

Where more serious problems are concerned, you must address the issue no matter how important or valuable the employee is. No employee should become so valuable that you cannot do without him or her. The minute an employee becomes invaluable, you allow that employee to take you hostage. The goals and mission of the department must be given a higher priority than the welfare of one problem employee.

One effective way to approach a problem employee is to ascertain the real issue, then address it in a meeting. The sooner this meeting takes place, the more quickly the problem can be resolved.

Without exception, when a problem employee is removed, the morale of the entire business improves dramatically. While terminating employees is not a pleasant experience, the price is much higher when you allow a problem behavior to continue. Additionally, in so many cases, termination was exactly what that employee really wanted. They just did not have the courage to quit.

Problem employees affect every single staff member, and I guarantee you that your staff would rather work harder and longer than put up with bad behavior. They will all be willing to pitch in if it means their working environment will be improved.

Problem employees can have devastating affects on the morale of your entire department. By dealing quickly and fairly with these employees, you ensure that your business remains a wonderful place to work.

You can do this!

Monday, June 14, 2010

Getting a Loan: The Rules Have Changed

“If you don’t like something, change it. If you can’t change it, change your attitude.” ~Maya Angelou

So many of the entrepreneurs we help at the Jim Moran Institute are expressing frustration with financial institutions and their new lending processes. In the past, entrepreneurs could get bank loans without too much hassle. However, because of the recent credit crunch, these financial institutions have adopted much stricter loan requirements.

Financial institutions have a gross margin of less than five percent. That is, the differential between the rates they lend and the rates they pay depositors is very low. Under normal circumstances, financial institutions have to make 20 good loans to make up for one bad loan.

Because of the collapse of the real estate and construction industries, many financial institutions have experienced large losses. As a result, their ability to take on risk has been significantly diminished. In general, bad loans reduce income, which in turn, reduces a bank’s equity. Once the bank’s equity goes down, their ability to lend decreases dramatically.

While financial institutions would like to give more loans, they are simply unable to do so. If banks or credit unions are making commercial loans at all right now, they are requiring so much more in an effort to minimize their risk. For example, they now want great business plans backed up by documented facts, not projections.

Many entrepreneurs are taking these heightened requirements personally. However, things have changed, and entrepreneurs just need to understand the new rules.

First, if you are going in for a loan, you just need to expect it to be a much more exhaustive process than previously. Just about all financial institutions are now requiring some form of collateral to cover the loan. While this might seem onerous, it is just a precaution these financial institutions are taking to ensure they do not lose any more money. The more collateral you offer, the higher your likelihood of getting a loan.

Additionally, financial institutions are carefully evaluating a borrower’s ability to repay the loan. We are working with a business that is looking to secure a loan for the property they are using. In this case, the financial institutions are requiring personal guarantees (which is normal), but they also want documentation showing the business’ past financial performance. They want to ensure the business is going to be able to make rent payments back to the owners, thereby minimizing their probability of loss.

If you are currently in the market for a loan, you just have to realize that the rules have changed drastically. Getting a loan is much tougher, but understanding the new rules and being able to anticipate what financial institutions are now looking for will make the process far less frustrating.

You can do this!

Monday, June 7, 2010

Economics of Green Alternatives

"Civilization and profits go hand in hand." ~Calvin Coolidge

Lately, I have seen more and more businesses adopting new technologies to save energy and garner applicable tax incentives. While saving energy and other natural resources is critical to our earth, these decisions must be made within an economic framework.

Before my inbox is flooded with emails from environmentalists, let me just tell you that I have been driving a Prius for the last four years, and I am a staunch believer in the responsible stewardship of our natural resources. However, in business, green technologies must always be evaluated within the economics of reality. The question entrepreneurs must ask is not how many natural resources will be saved, but whether or not saving these resources is economically viable.

From geo-thermal to solar, new green technologies are very expensive right now, and the amount a business can end up spending on them is unlimited. The technology is also changing rapidly, which normally means falling prices. Additionally, over time, existing technology will need repairs, and those repairs could become very expensive as new technologies emerge.

As with any investment, you must look at the rate of return. I frequently hear people talking about a 10-year or longer payback, which refers to the number of years required to recover the initial project cost out of the annual savings. For example, if a new technology costs $100,000, and the additional annual savings are $10,000, the payback is 10 years.

The problem with payback is that it ignores the time value or opportunity cost of money. A better way to evaluate these green investments is by the project’s real rate of return.

Going back to the example of the $100,000 investment, we see that they recover enough through savings to pay back the cost of the project in 10 years. While this sounds okay, it does not consider rate of return, which most businesses should be using. In this case, when we take the time value of money into account, we see that the annual return on this investment is only eight percent.

After establishing the ROI, every entrepreneur should determine their opportunity cost. That is, if a firm could earn a higher rate of return by investing elsewhere, from an economic point of view, this would not be a sound decision. However, if a higher rate of return was not available, the firm should feel confident in this investment.

While investing in new environmental technologies feels great, this is not an adequate basis for making prudent business decisions.

Now go out and make sure you have processes and procedures in place to help you make rational decisions when evaluating green – or any other – technologies.

You can do this!

Sunday, May 30, 2010

Ethics in Business is so Important

"Live with integrity, respect the rights of other people, and follow your own bliss." ~Nathaniel Branden

One of my favorite shows on TV is the reality series, “Survivor.” Since it has been on the air, the show has sent people to 20 of the world’s most remote locations to survive, compete and gradually vote one another off. It is a very interesting game that teaches you quickly that honesty and integrity are easily traded off when a million dollars or winning is at stake.

In the last two seasons, there was a player by the name of Russell Hantz, an entrepreneur in the Texas oil tanking business. He competed viciously with no regard for the feelings of his fellow players, and absolutely no concern for his integrity and honesty. Basically, he would lie constantly to advance his position by way of the elimination of one of the other players, with no regrets at all. Throughout these two seasons, all he said over and over was that everything was “strategic” – in essence, that the ends justified the means.

While no one player was completely truthful, Hantz took his deception to such an extreme that it amazed me. He would swear on the lives of his children and say absolutely anything to promote himself and his agenda.

In both seasons, Hantz lasted long enough to become one of the top three finalists. The winner is selected from among the top three by a jury consisting of the last 10 contestants to be voted out. In neither season did he win the million dollars, and in the last season, he did not even receive a single vote. Obviously, he was a master at manipulating people to promote himself, but all this amounted to nothing in the end since the jury did not care for his style of playing the game.

What I took away from this show – which, incidentally, I think I am addicted to – was that on “Survivor” and in life there is a cost for bad behavior. While the ends are important, the means by which you achieve those ends are infinitely more critical.

Some might be thinking, “Clearly, ‘Survivor’ is a great show, but what does it have to do with business?” I think the lesson for every entrepreneur is that while success is fantastic and worthwhile, the measures you take to achieve success are really what count. The old cliché, “What goes around, comes around,” springs to mind. If you abuse or take advantage of people on the way up, they are going to do everything in their power to make sure that you fail.

Most entrepreneurs have the opportunity to be less than honest in so many ways. However, every entrepreneur that I have ever known, realizes that the outcome is not nearly as important as acting with integrity in the pursuit of it. Being strategic is important to the success of every business, but doing it without integrity and honesty is a road to disaster. The entrepreneurs that I have seen follow this path just about always fail.

Now go out and make sure that you operate your business with integrity and honesty in the pursuit of your strategic goals.

You can do this!

Sunday, May 23, 2010

Establishing priorities for Customer Service

“Look through your customer’s eyes. Are you the solution provider or part of the problem?” ~Marlene Blaszczyk

During my recent trip to South Florida, a colleague of mine was checking out of the hotel that we were staying in. The morning that we were due to check out, the hotel somehow neglected to put a bill under her door, and she had to go up to the front desk to request a copy.

Just as she began speaking to the front desk attendant, his phone rang. He answered the phone, leaving my friend standing there while he dealt with the problem – a guest needed directions to a restaurant. As soon as he hung up, another call came in. This time it was directions to the airport, and my friend was basically ignored while the attendant helped the caller. Believe it or not, this happened a third time with a guest who wanted to leave a wake-up call! Each minute that passed, my friend got angrier and angrier, but she managed to maintain her composure in spite of the incredibly bad customer service.

I have no idea why so many staff members believe that they have to deal with the telephone first rather than the client who is looking them in the face. I cannot tell you the number of times this has happened to me in doctors’ offices, and I have found this to be one of the rudest things possible. I have made an actual trip into the office, and then the priority is given to someone who calls in, regardless of the purpose of the call. This is just bad business.

I believe the best policy is to always give the priority to the customer who is physically present in the business. However, this is not to say that staff should ignore the telephone if they are with a customer. If an employee is dealing with a live customer and the phone rings, the employee should ask the customer if he or she could answer the phone quickly. They can then answer and say something along the lines of, “Thanks for calling XYZ Company. I am currently assisting another customer. Would you mind if I put you on hold for X minutes (however many they think the delay will be)?” This way the staff member acknowledges the customer on the phone but gives priority to the person in front of them.

While this sounds like such a simple concept, it really needs to be said over and over again with some sort of monitoring.

We have gotten this point across very successfully by using role-playing scenarios, after which we observe staff to ensure that the training worked.

Now go out and make sure your staff has been trained on how to assign priority when serving customers.

You can do this!