“You can’t manage what you can’t measure.”

“What gets measured, gets done.”



Those are two complimentary management axioms, and they both happen to be true.

Take the first, “You can’t manage what you can’t measure.” It’s pretty hard to argue with that. For instance, how could we manage our receivables without a measurement of some kind. We couldn’t. So we manage them by “days outstanding” . . . 30, 45, 60 days, or whatever the standard for your company is. You can’t manage to a specific result unless the result is specific and measurable. Or consider how you manage your payroll. You might have a target for how much overtime will be allowed for any given pay period. Or you might want to keep your total payroll below a certain percentage of sales. Again, there must be a specific, measurable goal.

Then take a look at the second axiom, “What gets measured gets done.” Without specific measurements, goals become fuzzy and lack commitment. Let’s say, for instance, you announce that you want the company to grow next year. That’s great, but without a specific target, that could mean anything. Are we trying to grow by one dollar? By a million dollars? By 20%? And obviously, the goal has to be tracked and communicated regularly. If you aren’t telling your people where you are against the goal you have set, they will assume that you’re not tracking the goal, that you’re not paying attention, or that the goal just isn’t all that important. Besides, if they aren’t being told regularly how they’re doing against the goal, how can they possibly help you achieve it?

Some goals can be tracked straight off your standard financial reports. Others may require a more creative approach. This is where Key Performance Indicators (KPIs) can be very useful. For example, if you’re a service company, you might want to track the number of complaints you receive per $1000 of revenue as a quality control measure.

The point is, if something is important enough to be set out as a goal or objective, then it is important enough to carry specific measurements of success, and important enough to regularly communicate those measurements to your people. Otherwise, what you’ve got is not a goal at all . . . it’s just a wish.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Fully Utilize Your Technologies

“Wealth continually grows from multiplying existing resources using existing technologies.”
-Paul Pilzer

Paul Pilzer is an American economist and best-selling author who promotes the notion that economic progress and wealth are driven by technology. New technologies will continue to feed economic growth, but in Pilzer’s view, a lot of growth can come from properly utilizing the technologies we’ve already got.

Most technologies used in small business are vastly underutilized, particularly where software is concerned. We tend to learn what we need to learn in order to accomplish a certain task. We don’t look any further to see what else the program might do for us. Then, when we are faced with a new task, we whip out our trusty software manual and figure out how to do that. So we tend to use our technologies in small bites without understanding their full potential.

How might you improve efficiency and productivity if you more fully utilized the technologies you’ve already got? How might you use those technologies to better serve your customers?

Here’s a thought. Let’s say you’re using some very common software products like Word, Excel, PowerPoint, Outlook, ACT!, and QuickBooks. In your Accounting Department, even if you have only a single bookkeeper, challenge him or her to find one new thing in QuickBooks each month . . . a new tool, utility, or capability that would benefit the company and/or your customers. Find someone in the Sales Department who likes techie stuff and challenge him or her to do the same with ACT! And so on with all the technologies the company uses. Obviously, when something new is discovered, it needs to be taught and passed along to the other users of that technology.

The technologies we have available to us today are so powerful and so versatile that they can help drive a business forward more quickly and more sure-footedly than ever before.
Pilzer teaches us that these technologies are resources we should not ignore . . . that we should embrace them and use them to their fullest potential.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

What Causes Sales?

Just about every business tracks its sales in some way or another. But not all of them track what causes sales. Curious, don’t you think? If we know what causes sales, we can do more of that (whatever “that” is), and our sales will go up. So why wouldn’t we want to track what causes sales?

In some cases, it’s pretty easy to see what causes sales. A company that relies heavily on telemarketing knows that if a salesperson makes 100 calls, he or she will reach the correct decision-maker 35 times, and of those, 10 will result in an appointment. Of the 10 appointments, 4 will result in a sale. So it’s simple. Calls cause sales. So if you want more sales, just make more calls.

Another company, in the construction business, consistently wins 16% of all the bids it submits. Want more sales? Just submit more bids.

A gourmet restaurant noticed that whenever a newspaper or magazine gave them a favorable review, their reservation calls surged. So they redirected money from their advertising budget and hired a public relations firm.

But what causes sales is not always so apparent.

Consider a business that advertises heavily in a variety of different mediums but can’t track which mediums are working and which are not. As a department store mogul once famously said, “I figure only half of my advertising works for me, but I don’t know which half.”

Or worse yet, consider the business that depends on referrals to bring customers to its door. Typically they will say, “We don’t know. People just come to us.” What they should be saying to themselves is, “If we’re a referral business, how can we drive referrals?” Maybe they should intensify their networking activities, or maybe they try offering an incentive of some kind for past customers to refer new business.

The point is, we can’t drive sales unless we know the root activity that starts the sales ball rolling. What causes sales is different for every business, and in some cases where the sales driver is not obvious, it may take some creativity and effort to find it, but it can always be found. And once you find it, you will have the tool you need to set a sales pace that’s appropriate for your business.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com

Learn to Delegate

I’ve written about delegation before, but I continue to think about it because so many small business owners don’t do it very well.

Entrepreneurs often like to pull all the significant levers in the business and push all the important buttons. They built the business and know the critical parts of it better than anyone, so they don’t hand off any core decisions, responsibilities, or activities to anyone else. Yet by failing to delegate, the owner is unable to keep good people and unable to grow the business beyond his or her personal limitations. In the end, it’s a trust issue. What if I do hand off something important to someone else and they screw it up?

Here’s a way to limit your risk and gradually learn to delegate effectively.

Divide the all the company’s identifiable, distinct decisions, responsibilities, or activities into three categories: A, B, and C. When you assign an A responsibility to someone, instruct that person that this responsibility is theirs and theirs alone. They should just go ahead and carry it out. Don’t call, don’t write, don’t report to me when you’ve done it. Just do it.

When giving out a B responsibility, you instruct that person that this is still a responsibility that is theirs, but you want to be consulted before they pull the trigger on it.

You can show your subordinates a list of C responsibilities, but you don’t give those out. Those are the decisions, responsibilities, or activities that you will continue to reserve for yourself.

If this is done in a clear, well-defined way, you will have drawn very effective boundaries for your people. You shouldn’t have anyone going off the reservation and doing things they have no authority to do. In short, you maintain control. But better yet, you begin a process of delegation that can grow over time. Again, this is a trust issue. So you build trust as you see how effectively your subordinates handle the responsibilities you’ve given them. Then more of your C responsibilities can become B responsibilities and given to someone else. Likewise, a B can be transformed into an A.

This is an evolutionary way to build delegation into your company’s culture. Ultimately, your subordinates will be doing the things they are qualified to do, and you’ll be left with only those things that truly belong on your plate.

For more small business blogs, visit my website and www.rocksolidbizdevelopment.com

A Word About Management Training

I was in a conversation recently with a guy who works for a technology company, and during the course of the conversation, the subject of “training” came up. He said that his company has a training budget for their technicians, but not for their managers. He said he knows this because he wanted to attend a management seminar, but the owner of the company denied his request. When he pressed the owner about it, the owner said, “We don’t have any budget for management training. We don’t believe in management training here.”

I was shocked. Not shocked that his company doesn’t offer any management training because, unfortunately, that’s a fairly commonplace condition in smaller companies, but shocked that the owner would say it in such a casual, matter-of-fact way. Obviously, this owner either doesn’t believe that managing takes much skill, or he believes that managers somehow manage well instinctively. Either way, he’s wrong.

Management training isn’t and shouldn’t be the private preserve of large corporations. Small companies might not have the resources to run big, formal programs, but with very little expense, they can still offer effective management training. For instance, I know of a small company that has a book club composed of the CEO and his managers. They agree on a business subject they want to explore, select a book on that subject, then spend an hour each week discussing a chapter. The CEO doesn’t always lead the discussion. He takes a turn, but so does everyone else in the group. As a result, the management team gets excited about various business concepts, has a good learning experience, and bonds more firmly as a group. And the only cost is for a few books.

I know a company owner who likes to hold “lunch and learns.” He sets aside periodic lunch hours for his managers and orders in pizza or sandwiches. He then invites someone from the outside to give a brief presentation and then entertain Q&A. This outsider might be his banker, his lawyer, his CPA, or a whole host of other friends, colleagues, and acquaintances in his rolodex who have some business expertise to share with his managers. And it only costs the price of a lunch.

Small business owners often complain that they can’t afford management training, but usually they can. Just because you don’t have the money for fancy executive seminars doesn’t mean you should just give up on management training. As I’ve tried to illustrate above, there are lots of ways to deliver very effective, but inexpensive, management training. It just takes a little creativity and a commitment to doing it.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

The Risk of Doing Nothing

“A ship in port is safe, but that’s not what ships are built for.”

Many companies that survive an economic downturn do it by cutting everything that doesn’t keep the lights on and the doors open. In that condition, they are treading water. They may avoid catastrophe, but they’re not going anywhere. The company is set on “idle.”

Allowing the company to idle until the trouble passes might be the right thing to do, but sometimes companies continue to idle even though the worst of the trouble has passed. Why? In most cases, it’s because the CEO doesn’t trust that business conditions are really improving. Maybe we’re experiencing only a brief lull in the storm before it resumes its full fury.

People . . . and therefore, the corporations they create . . . are at their core, cautious and conservative. We have a sense that doing nothing is a safe bet. It’s not. Doing nothing is a conscious choice, and it may not be the safe choice. Our business history is littered with examples of companies standing by while smart, aggressive competitors swooped in to grab market share and competitive advantage.

Obviously, perilous economic times call for some degree of caution. But beware of too much caution. If you keep your ship in port too long, you’ll wake up one morning to find all the cargo is being carried by a competitor’s ship.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Building Happiness at Work

A friend of mine used to call it the “hum level.” It’s the palpable feel of energy when you walk into a workplace. If people are talking and laughing and generally engaged with one another, the “hum level” is high. If the place is quiet as a church, nobody’s talking, and everybody has their face buried in whatever task they are doing, the “hum level” is low.

When people are happy at work, they are more productive, they interact with customers more positively, and there is less turnover. So what causes happiness at work? A lot of things. We talked about 12 factors that contribute to job satisfaction last week. But there are a couple of key components.

The first is very simple. Do I like the people I work with, and do they like me? That doesn’t mean that I’m best buddies with everyone in the place. It just means that on a whole, I enjoy being with my co-workers and am comfortable that I fit in. That’s why it’s so critical to hire well. One vocal malcontent can poison the atmosphere for everyone.

The second is my boss . . . not necessarily the CEO, but my direct supervisor. Does he or she take an active interest in me as a person . . . my family, my interests away from work . . . or am I just another head count? Is my supervisor accessible and is he or she committed to helping me be successful in my work?

Not very long ago, happiness in the workplace wasn’t discussed much in American business. After all, we’re not running a playground here, right? We’re here to do a job, and if that makes you unhappy, that’s your problem. But as it turns out, happiness at work isn’t some crazy, pie-in-the-sky notion. If it increases productivity, increases customer satisfaction, and decreases turnover, it’s just good business.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

12 Critical Questions

Last time, we met Marcus Buckingham, a senior researcher at the Gallup Organization, and discussed his findings in his excellent book, “Now Discover Your Strengths.”

He has more to offer us.

Buckingham says a workforce can be divided into three categories: people who are loyal and productive, or “engaged,” those who are just treading water or “not engaged,” and those who are malcontents or “actively disengaged.” There are 12 simple questions the answers to which, he says, determine whether employees are engaged, not engaged, or actively disengaged at work.

1) Do I know what is expected of me at work?
2) Do I have the materials and equipment that I need in order to do my work right?
3) At work, do I have the opportunity to do what I do best every day?
4) In the past seven days, have I received recognition or praise for doing good work?
5) Does my supervisor, or someone at work, seem to care about me as a person?
6) Is there someone at work who encourages my development?
7) At work, do my opinions seem to count?
8) Does the mission or purpose of my company make me feel that my job is important?
9) Are my coworkers committed to doing quality work?
10) Do I have a best friend at work?
11) In the past six months, has someone at work talked to me about my progress?
12) This past year, have I had opportunities at work to learn and grow?

Obviously, the more of these questions an employee can answer in the affirmative, the more he or she will gravitate toward “engaged.” The fewer an employee can answer in the affirmative, the more he or she will gravitate toward either “not engaged” or “actively disengaged.”

Do you know where your employees fall on this continuum from “engaged” to “actively disengaged?” If not, you should find out. The very act of asking the 12 questions may move some employees a few notches closer to “engaged.”

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Now, Discover Your Strengths

In his excellent book, “Now Discover Your Strengths,” author Marcus Buckingham and co-author Donald Clifton discuss the work they did for The Gallup Organization to find out what makes successful people successful. What do those successful people have in common that makes them high achievers?

So they sifted through over two million interviews that Gallup had conducted over the years. Two million! The interviewees were doctors, lawyers, policemen, and firemen, white collar and blue collar alike, from many different occupations. The only thing they had in common was that they were successful at whatever work they did. Buckingham and Clifton wanted to find out why. Here’s what they learned.

Successful people understand their own strengths, and they work to nuture those strengths, focus on them, and leverage them. They don’t spend a lot of time trying to shore up their weaknesses.

In our culture, if a child is really talented at math and science, let’s say, but struggles with English and history, what do we do? We get that child a tutor or Mom and Dad work with the child to improve in English and history. Buckingham and Clifton would argue that it makes more sense to invest that extra effort in math and science. That’s where the child’s natural talent lies, so we should work to develop that talent to its utmost.

The lesson for those of us in business is two-fold. First, look at ourselves. Are we wasting time struggling with activities that we’re just not very good at? If so, wouldn’t we make a bigger contribution to the company if we off loaded that stuff we don’t do very well to someone else and focused on things where we really excel?

Second, look at your employees. When you identify someone who is not performing well, consider the possibility that they have been put in a position where they are unable to use their real strengths. Instead of trying to give that person remedial help in an effort to make him or her better at the job, maybe you should ask if the job could be modified to take advantage of the person’s strengths, or if not, maybe those strengths would make the greatest contribution to the company in another job.

When asked, “At work, do you have the opportunity to do what you do best every day?”, out of 1.7 million employees in 101 companies from 63 countries, only 20 percent answered in the affirmative. 20 percent! While that an appallingly low number, it reveals an enormous opportunity. What if we could position the other 80 percent to do what they do best every day? It boggles the mind.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Increasing Productivity

“Increased productivity comes from continually identifying areas where you can achieve 80 percent of your results from 20 percent of your efforts.”

Vilfredo Pareto was an early twentieth century Italian economist who gave us the 80/20 rule. We hear it most commonly used in reference to sales . . . 80 percent of your business comes from 20 percent of your customers. But the mistake we often make is to spend too much time trying to get the marginal 80 percenters to perform like our superstar 20 percenters. Wouldn’t it make more sense to spend most of our time working with our superstars? After all, they “get it.” They understand and appreciate our value proposition, and if we nurture them and are attentive to their needs, they may have the potential to become even better customers.

Where else might we apply the rule? Is it possible 80 percent of our customer service headaches are coming from the bottom 20 percent of our customers? The customers accounting for the least of our sales are often the most demanding and time-consuming. It’s not a bad idea to comb through your customer list periodically looking for customers who demand significantly more service than they are worth and make them available to your competitors.

How about your employees? Think of the activities that are key to your company’s success. Do you believe that 80 percent of those key activities are being achieved by 20 percent of your workers? Again, doesn’t it make sense to invest time and resources in the 20 percenters . . . the people who are really making a difference . . . rather than spending most of your time trying to improve the 80 percenters?

It’s all about leverage. It’s about identifying the customers, employees, systems and processes that are the keys to your company’s success. It’s about making sure you’re constantly working with those keys to make them stronger and more effective. Where can you get an 80 percent result from a 20 percent effort?

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Marketing 101d

So far, we’ve discussed two fundamental marketing questions:

- What product or service do we want to sell?
- To whom do we want to sell it (who is our “prime prospect”)?

Now let’s talk about a very powerful marketing tool, price.

Too often we jump to the conclusion that our price has to be lower than the price of our competitors. Not so. Our price has to be seen as a better value than that of our competitors, but that’s not the same thing as cheaper. For instance, if our product is priced 50% higher than that of our competitor but it lasts twice as long, our product is the better value.

But price also has strategic value beyond dollars and cents. Let’s say our company makes razor blades. We can’t sell any razor blades unless our customers have the handle that holds the blades. So we can put a very low price on the handle (or even give it away) because our customer only needs one. But now we have a captive audience that will need to continue buying replacement blades for a lifetime.

Pricing has great impact on the way we offer our product or service. Maybe our competitor “bundles” the products or services we both offer . . . that is, products A, B, and C come as a set. To buy one, you have to buy them all. Our response might be to offer those products a la carte . . . you can buy one individually or in any combination you want. In similar fashion, our competitor might sell his product in packages of 10. So we might appeal to smaller users with a package of 5 or to larger users with a package of 20.

The list of pricing strategies is endless. But price (and all other marketing considerations, for that matter) needs to be set so that our sales force can sell the way our customers want to buy.

In the last several postings, we have barely scratched the surface of marketing, and there is certainly a lot more to it than the few points we have discussed. For a more in depth view of marketing, pick up a copy of “Duct Tape Marketing” by John Jantsch or “Meatball Sundae” by Seth Godin. Both are excellent books and both are aimed at small businesses who need to practice sound marketing on a limited budget.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Marketing 101c

This is the third installment in a series of basic marketing concepts. First we described what marketing is, and what it is not. Then we talked about the problem your service or product will solve, the need it will fill, or the want it will satisfy. Now we need to talk about the “who” in the marketing equation.

Who has this problem to be solved, need to be filled, or want to be satisfied? No product has universal appeal, so we need to understand who our prime prospect (ideal customer) is. Here are some things to consider as you think about who you are trying to serve.

● Are there geographic limitations? Maybe your product or service only has value within a certain geographic area. Or you might be limited by distance. A local plumbing contractor, for example, may only be able to effectively serve customers within a 20-mile radius of his shop.

● Are there ethnic or cultural factors to be considered? Some foods, for instance, might be very popular in one culture, completely unacceptable in another.

● What about age? Does our product or service appeal equally to a 15-year old and a 55-year old?

● How about gender? Does our product or service appeal equally to men and women?

● What are my prime prospects willing to pay for my product or service?

The list goes on and on, but you get the idea. You need to know as much as possible about your prime prospects . . . who they are, where they are, what they like and don’t like, how they behave, and how they make buying decisions. And once you know everything there is to know about your ideal customer, the final key question is: are there enough of them to support my product or service?

Understanding everything you can about your ideal customer is critical. If you don’t have a clear picture of who they are, how can you reach them? How can you attract their attention? How can you tell them your product or service even exists? You can’t. So like many aspects of marketing, this may take some time, effort, and maybe money to research, but it’s worth it. Any resources spent here are miniscule compared to the expense of launching a product or service that misses the mark and ultimately fails.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Marketing 101b

This is the second installment of a series on marketing. The first installment set the groundwork by defining what marketing is . . . and what it is not. Now we’ll dig a little deeper into some of the major components of marketing.

The foundational question for marketing is, “What product or service do we intend to offer to the marketplace?” Our product or service must solve a problem, address a need, or satisfy a want. The only reason consumers buy anything is to solve problems, address needs, or satisfy wants. So if our product or service can’t do one of those three things, we won’t have any buyers.

For instance, let’s say we want to open a restaurant. Since we’re Greek, we’ll open a Greek restaurant. There’s a large Greek population nearby and our friends all tell us we create superb Greek dishes. So the “want” we’re going to satisfy is the want for really good Greek cuisine. But wait, there are already ten Greek restaurants in the area and they all provide really good Greek cuisine. Now the question is, does the market really want an eleventh Greek restaurant? And if so, what “want” does the market expect the eleventh restaurant to satisfy that isn’t already being satisfied by the other ten.

We’ll talk about differentiating yourself from your competitors later, but for now, focus on the problem you expect to solve, the need you plan to address, or the want you intend to satisfy. This may take some market research but it’s well worth some time, effort, and even expense to get this part right, because if we get it wrong, our product or service won’t even make it out of the starting gate.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Marketing 101a

This begins a series on marketing. I’ll dispense with the quotes I usually use because I couldn’t find any that I thought were appropriate for this discussion. If you consider yourself to be a pretty savvy marketer, this may be too elementary for you, but for everyone else, read on.

Many small business people are unsure what marketing really is. Everybody engages in marketing or they couldn’t be in business. But often, marketing activities are not done in a systematic, coordinated, strategic way. So let’s begin by talking about what marketing is . . . and what it is not.

Small business people sometimes use the terms “marketing” and “sales” interchangeably as though they are two different names for the same thing. They are not. Sales and marketing are entirely different activities. A friend of mine says it this way: “The job of marketing is to deliver customers for the sales force to sell.” That’s a pretty good definition, I think.

In order to deliver customers that our sales force can sell, marketing must answer a number of fundamental but critically important questions.

- What product or service do we want the sales force to sell?
- What problem will our offering solve, what need will it fill, or what want will it satisfy?
- Who is our prime prospect (the ideal customer who has the problem, need, or want we’ve identified)?
- How do we intend to deliver our product or service? Through retail channels? Via the internet? Through distributors and wholesalers?
- Where should we set our price? That is, what is our prime prospect willing to pay for our product or service?
- Who else is already in the marketplace selling a similar product or service, and how will we differentiate ourselves from them?

The list goes on, but you get the idea. Marketing is the highest strategic activity in any company because if we get marketing wrong, it doesn’t matter how strong we are financially, how efficient we are operationally, or what a great sales force we have. If marketing is wrong, we can’t survive as a company. If we offer a product or service that doesn’t address the problem or need or want it was intended to, we won’t be able to sell it. If we offer it at too high a price, we won’t be able to sell it. In short, marketing will have failed in its mission to deliver customers.

OK, so now we know what marketing is and what it’s supposed to do. In the next few postings, we’ll explore in more detail some of the questions above that marketing needs to answer correctly.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com

Building Trust Through Honest Communication

“Communication is to leadership as the swing is to golf; everyone can do it, but few do it well.”

Consistently, “being in the know” ranks near the top of employee satisfaction surveys. People want to know what’s going on around here. They want to know what their part is. They want to know how events, both good and bad, are impacting the company.

Imagine an assembly line worker at an automobile plant. His job is to insert the same size bolt into the same hole for each part that comes down the line. He doesn’t know what the part is, doesn’t know why it needs to be in the car, and doesn’t know how the car would perform without it. All he knows is that he’s supposed to put the same size bolt into each and every part that comes down the assembly line.

Now let’s assume our worker knows that the part coming down the assembly line is part of the braking system. He also knows if he inserts the bolt incorrectly, the braking system could fail and cause a collision. And let’s assume he understands that the company wants to position itself as making the safest car on the road. Doesn’t it stand to reason that under these circumstances, our worker would be more careful and more diligent in doing his job?

Your employees will help you reach your goals, but only if they know what they are. They need to know what the company is trying to do and where it’s trying to go. They need to know why their job is important and how it fits into the overall company objectives. So if the job of leadership is to get everyone efficiently and effectively pulling in the same direction, then good communication is key.

Good communication is accurate, complete, and truthful. It’s frequent and sends a consistent message. It invites feedback. And it’s offered in a variety of formats . . . newsletters, memos, all-company meetings, departmental brown bag lunches, individual 1-to-1 meetings. Longer term issues such as the company’s annual goals or its overall direction need to be constantly and consistently repeated, not only to make sure new employees get the message, but also to make sure the message is top-of-mind for existing employees. If we’re exceeding our goals, tell me so I can help celebrate. If we’re falling short of our goals, tell me that too and tell me how I can help get us back on track. If the company’s direction needs to change, tell me what the change will be, why it’s necessary, and how the change may affect my job.

There’s a temptation to withhold bad news or worse, to sugar-coat it. Always a bad idea. When you’ve got bad news to deliver, deliver it straight up. Don’t over-dramatize it, don’t dress it up. Just tell it like it is and describe how the company intends to respond. Invite suggestions and feedback. Your people can’t help you if they don’t know what’s going on.

It’s all about building trust. Employees need to know that you trust them with important company information. They also need to know that they can trust the information they are getting. If you nurture, protect, and validate that trust, you will have created a powerful leadership resource. If you have their trust, your employees will follow you almost anywhere.

For more small business blogs, visit my webside at www.rocksolidbizdevelopment.com.

Cash is King

Is it in your organization? It should be. You should be forecasting your cash for the next thirty days, reviewing it daily, updating it weekly.

Some small business owners are unclear on the difference between “cash” and “profit.” They are totally different. You can be very profitable and still run out of cash. Likewise, you can be in a good cash position even if your financial statements are showing a loss. If you’re not clear on this, have your accountant explain it to you. But for purposes of this discussion, “cash” is the money you have immediately available . . . usually whatever you have in your checking account plus whatever you have in a bank line of credit. When you spend more money than you deposit, your cash goes down . . . you have negative cash flow and that’s bad. When you put more money into the bank than you are drawing out, you have positive cash flow and that’s good.

When you think of a cash flow forecast, think of your check book. Your check book is an historical record of what you deposited, what you spent, and what your balance was at any point in time. A cash flow forecast is the same thing except it’s predicting future deposits and withdrawals rather than recording past transactions.

So to start, you record your “opening balance” which is the cash you can access immediately as described above. Then you schedule the bills you expect to pay (including payroll, taxes, etc.) over the next thirty days and predict the receivables you will collect over the same period. Of course, your “opening balance” will go up and down during the course of the month as bills are paid and deposits are made. If you finish the month with a “closing balance” that is below your opening balance, then your cash flow for the month was negative. If your closing balance is higher, your cash flow for the month was positive.

The real value of this cash forecasting is that it allows you to closely manage your cash on a daily basis. If receivable collections don’t occur as predicted, you may elect to postpone paying some bills until the expected receivables arrive. Or if receivables arrive more quickly than expected, you may elect to accelerate some vendor payments. But most importantly, cash forecasting is an early warning system that alerts you if you are going to run out of cash and gives you time to arrange some bridge financing with your bank

Good cash management is essential to the financial health of a business. Worrying about running out of cash is one of the things that keeps small business owners awake at night. But there’s a cure for insomnia. Each day, look at how much cash you had to start the day, how much was deposited, how much was paid out, and how much cash you had at the end of the day. It can be a simple report that doesn’t take any time to generate or to read. Do it. You’ll sleep better.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Anticipate Your Cash Requirements

“Most companies grow themselves out of business. They either can’t finance (the growth), or they can’t manage it.”


Sadly, when a business fails, it is often not because it was founded on a bad idea. It’s because it simply runs out of money. Even if the business is profitable, it can still be cash-starved out of business. How does that happen?

Several ways.

If the business is a brand new startup, the entrepreneur at the controls will often underestimate his or her expenses. It might be that s/he misunderstood the labor market and ended up having to pay more than expected for key positions. Or, the cost of raw materials or inventory might have spiked unexpectedly. Or maybe sales just didn’t ramp up as quickly as expected. The bottom line is, too many startups try to get their doors open on a shoestring. If their sales forecasts and expense projections are right on target, they may get away with it. But more often, something is overlooked or something unanticipated occurs, and before the fledgling business knows it, it’s awash in red ink.

The second problem small business owners tend to bring on themselves is trying to grow the business too quickly. In almost every case, growth is expensive. A business may need to add people or inventory or equipment or office space to handle the additional volume. An owner may try to handle growth expenses out of earnings (rather than borrowing from a bank or a private investor), but like his startup counterpart, this owner may fall victim to an overly optimistic sales forecast. When sales don’t explode as planned, we suddenly have some significant extra expenses (people, inventory, equipment or office space) without sufficient new sales to cover those expenses.

The problem in both cases is the natural optimism of the entrepreneur . . . the expectation that everything will work out somehow. The “can do” spirit and “full speed ahead” determination is what makes entrepreneurs unique and successful. But it can also get them in trouble if they don’t correctly anticipate their cash requirements.

The answer, of course, is to keep a cash reserve beyond what you believe you’ll need so that when you hit an unexpected bump in the road, it doesn’t put you out of the game. And the bigger the reserve, the better. The bigger the reserve, the bigger the bump you can hit.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Develop Your Own Leadership Style

“The result of leadership is a group of people working toward a common goal because they want to, not because they have to.”

This is only one quote on leadership among hundreds, or more likely, thousands. There is probably no other concept in business that’s gotten as much attention as leadership. But what is it? Most of us think we know it when we see it, but it shows up in so many diverse situations and in so many different styles that it’s difficult to give it a succinct, one-size-fits-all definition.

My trusty dictionary defines leadership this way:
the position or function of a leader
the ability to lead
an act or instance of leading
the leaders of a group

Not really very helpful, is it?

I think the quote at the top is correct in terms of an outcome of leadership. The outcome has to be to give people the confidence and desire to work together toward a specific goal. But what does it look like in action? As it turns out, it has hundreds and thousands and millions of looks. That’s why it defies definition.

I believe true leadership means being authentic, being yourself. You can’t fake it. You can’t imitate someone else’s leadership style. You develop a style of leadership that reflects who you are . . . your personality, your values, your way of communicating. Great leaders come in all sorts of packages. Some are quiet and thoughtful, some are brash and commanding, some are humble, some are arrogant. They all can work. So don’t try to fit into somebody else’s package. Work on developing your own.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Keep Your Company on Track with Key Performance Indicators

I normally begin with a “Quote of the Week,” but I wanted to talk about Key Performance Indicators (KPIs) and didn’t really have an appropriate quote for that topic. So I guess this is a “Tip of the Week.”

While monthly financial statements provide vital information to the management of a business, they have a significant flaw: they are ancient history by the time we get them. There’s not much we can do about events that shaped our financial condition when those events happened four, five or six weeks prior to our seeing the financial statements. So we really need an early warning system . . . quick snapshots so we can see, on a weekly or even daily basis, how the business is performing in key areas. These are Key Performance Indicators or KPIs.

KPIs are different for every business, but there are a few that are fairly universal. For instance, many businesses track sales on a daily or weekly basis to make sure sales are on pace to meet that month’s goal. Cash flow is critical to all businesses, so virtually all of them will watch how efficiently and effectively they are able to collect their receivables.

Then there are KPIs that are not necessarily universal. If you are a wholesaler or a distributor, you probably need a KPI to make sure inventory levels are where they should be. If you are a manufacturer, you might need a KPI to watch waste levels, or another one to watch manhours per unit produced. A service business, on the other hand, may not have inventory or waste to worry about. It may be more concerned about billable hours vs. non-billable hours, or how many proposals are going out the door per day or per week.

The point is, you need to understand what indicators are the most critical to diagnosing the health of your business. And you shouldn’t need a lot of them. If they truly are “key” indicators, you shouldn’t need more than six or eight of them. Think of it like this. Suppose you’re on vacation. You’re having a great time and you would really like to stay a few more days than you originally planned. But before you do that, you better call the office to see how things are going. When you make that call, you can ask six and only six questions to determine if you can stay a few extra days or if you need to hop the next plane home. Those questions are your KPIs. They are not intended to tell you how every last detail of the business is performing. They are only intended to tell you that the most important parts of the business are performing within tolerances, and that the business is not in any imminent danger. If the patient has a hang nail or a sore throat, that’s OK. We need to address those ailments, but the patient isn’t going die from them. But if the patient’s heart is showing danger signs . . .

KPIs can be great tools to spot and address problems early. Used correctly, they can be one of your most powerful business management resources. If you want to learn more about how to use them, pick up a copy of Kraig Kramers “CEO Tools.” He discusses KPIs at length, in easy-to-understand terms.

For more small business blogs, visit my website at http://www.rocksolidbizdevelopment.com/.

Do Your Exit Planning Now

“Planning is bringing the future into the present so that you can do something about it now.”


For most small business owners, the business is their single largest asset and the one they are counting upon to fund their retirement. So wouldn’t it make sense for them to plan when and how they expect to exit the business? You would think so, but many don’t . . . at least not in a disciplined, structured way. They may have a vague notion in their head that they will sell the business for X dollars, but to whom? To an investor? To a competitor? To the employees? And how do they know they can get the price they want for the business? In many cases, they don’t know. There is often a disconnect between what the owner wants for the business and what the business is actually worth.

For example, the owner of the ABC Company has worked hard for many years to build his enterprise, and now, he’s ready to put it up for sale. He already has visions of golf, fishing, traveling the world, and living out his days in comfort. But he is shocked when an offer from a prospective buyer comes in at half of what he counted on. He is further shocked when his advisors (lawyers and accountants) advise him that it is a good offer and he should take it. Everyone is sorry that the market price for the business isn’t what he hoped, but it is what it is. What’s he to do? Postpone retirement in hopes that he can get a better price later? Or proceed with the sale and scale back his retirement plans . . . fewer creature comforts, fewer rounds of golf, and less travel? Neither choice is very appealing, but the real sad part of the story is this: he didn’t have to be in this predicament if only he had done some intelligent exit planning.

First, understand who is the most likely buyer for your type of business. Then educate yourself about how that buyer will value your business. The buyer will, of course, be interested in any hard assets owned by the business . . . real estate, inventory, equipment, and the like. He will also be interested in profitability over the past three to five years. Have earnings been growing, flat, or in decline? He will be critically interested in cash flow, and he will want to know how well your people can keep the business moving when you are no longer there. All these factors enter into placing a value on your business, and depending on the industry, there are probably many other factors as well.

The point is, if you know how the various factors combine to place a value on your business, you can work to optimize those factors so as to maximize the value of the business. And you’ll know what those factors have to be to command the price you expect for your retirement.

It’s never too early to map out your exit strategy. If you’re not planning on exiting the business for 30 years, that’s great! That means you have plenty of time to work your business plan and have it producing the results you want for your exit. Don’t wait. Do it now or you risk ending up like the ABC Company.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Conflict Can Be a Positive Force

“No organization can make good decisions without conflict.”

“If everyone is thinking alike, someone’s not thinking.”


We tend to veer away from conflict. It can make us feel uncomfortable, or even downright shaken. It can inspire anger, anxiety, hurt feelings, and a lot of other negative outcomes. So we avoid it. We try to play nice and hope everybody else does the same. If we can’t say something nice, our mothers taught us, don’t say anything at all.

If we could create such a place . . . a place free of conflict . . . would you want to work there? Probably not because it would also be a place free of passion, free of divergent points of view, and free of lively debate. It would be pretty boring. And it wouldn’t be an industry leader, it would be at the back of the pack.

The fact is, properly managed, conflict moves a business forward. New ideas are vetted in the heat of debate. Ideas that survive the heat give us confidence that we may actually be on to something here. Ideas that wilt under a robust discussion probably don’t deserve to see the light of day. It’s the rite of passage that separates the good ideas from the not-so-good.

So how do we manage conflict so that it’s a positive force and not a detrimental one?

It starts with the simple notion that we can disagree without being disagreeable, and we build that simple notion into our culture. Mostly that means we have to make it “safe” for people to disagree or to take opposite points of view. So we vigorously defend our own position, but we don’t assign unworthy motives to our opponent. We assume that everyone is well-intentioned and honestly motivated. When people know they can stand up and say what they believe without being castigated or impugned, guess what? They will!

As part of any good decision-making process, we need to hear a variety of opinions. We need healthy, robust debate that brings out divergent thoughts without getting personal. If we manage that well, we get everyone’s best thinking, and when the smoke clears, we’re still friends, colleagues, and members of the same team.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Making It Safe for Your Customers to Buy

“Today’s decision makers are reassessing every spending and investment decision they make. They are looking for ways to reduce delay or cancel purchases and investment decisions, and they are seeking certainty that desired results will be achieved as planned.”


At a recent business meeting, one of the participants complained, “I’ve never seen so much indecision. Our customers just won’t pull the trigger. They get right up to the point of buying then back away, putting off the buying decision until next month or next quarter or longer.” That drew a lot of “me too” responses around the room, so it became a lengthy discussion topic. Why is this happening?

In these tough economic times, with budgets screwed down to the last dime, people are fearful. One poor buying decision could shake the whole organization and may cost jobs . . . including the job of the person who made the poor choice. So people are looking for safety . . . assurances that the product will perform as promised, that the expected ROI will be achieved, or that the anticipated cost savings will be realized. That’s not new. Sales people have always had to convince skeptical buyers that their product or service will perform as advertised. It’s the degree that has changed . . . buyers no longer want assurances, they want guarantees. They want their buying decisions to be bullet proof, and until they are, those decisions will be delayed, delayed, delayed.

So we need to make it “safe” for our customers to buy from us. How do we do that? The answer is probably different for every business, but the best example of an industry that really bent over backwards to attract skittish buyers is the auto industry. People weren’t even coming into showrooms because they were afraid of losing their jobs and of being saddled with big car payments. So what did some car companies do to make it “safe” to buy? They said, “No problem. If you lose your job, you can give us the car back.” Pretty radical stuff.

Iron clad guarantees of specific outcomes can be difficult if not impossible. There are too many variables that are outside the control of the seller. So focus on those things that are under your control and that you can guarantee. For instance, you may not be able to guarantee that a market research assignment will deliver the answers the client hopes for, but you can guarantee that you will assign your best, most senior researcher to the project, and that the answers will be accurate, validated, and above reproach. You can also guarantee the methodology that will be used to conduct the research and the controls that are in place to assure the quality of the data.

Traditionally, we probe buyers to discover where their pain is. Now it’s a little different. We have to probe for where their fear is and find ways to overcome it. The success of our sales effort depends on it.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Embrace Change

“If there is no change, there’s no need to manage.”

What would happen in your business if one day your managers just didn’t show up? What would their subordinates do? Well, they would probably just do what they did yesterday. And if the managers still didn’t show up the following day, the subordinates would just continue doing what they had done all along. This could go on for quite awhile, and actually, things would probably run pretty smoothly.

Until something would change.

It might be a new technology, turnover of personnel, something different in the marketplace, or a new competitor . . . it could be a lot of things. But something changes and suddenly we can’t simply continue to do what we’ve been doing. We’ve got to adapt to the change, and that’s the job of management.

It’s tempting to blame outside factors when a company doesn’t perform as it should. We say, “It’s the economy,” or “It’s the high cost of energy,” or “It’s unfair competition from China,” or we make some other excuse that our company’s poor performance is somehow not our fault. But it is our fault. As business managers, it’s our job to anticipate, respond to, and adapt to change. It’s what we’re paid to do.

If we can’t compete with the Chinese on mass-produced products, maybe we change our focus to short-run, custom-made products. If the high cost of energy is hurting us, we look for conservation opportunities or introduce more energy-efficient equipment or come up with a pricing strategy to pass that cost through to our customers. The point is, it doesn’t matter whether change-induced problems are caused by external forces or not, it’s still our job as managers to solve them.

We can’t complain that it’s unfair this is happening to us and say, “Woe is us. We’re doomed!” That’s a recipe for going out of business. We need to accept change as a constant in our business lives, acknowledge our responsibility for dealing with it, and welcome it as a challenge.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Key Management Activities

“Running a company is easy when you don’t know how, but very difficult when you do.”

Below are some activities that make running a company difficult, and tend to separate strong small business operators from those who are struggling. It is not intended to be a comprehensive list, and the list is not in any particular order. It is intended to provoke some self-analysis . . . to make you ask yourself if you are handling these activities as well as you should or if you might need to refocus on some of them.

Facing Your Problems - Do you accept responsibility for guiding your company through a changing competitive landscape, or do you blame your problems on external factors (the Chinese, the cost of energy, the economy, etc.)?

Focusing on Profit – Do you focus on top line sales growth to the detriment of bottom line profit margins? Do you excuse an erosion of your pricing with, “We’ll make it up on volume,” or “We’re doing this to gain market share,” or “We just need to get a foot in the door,” or “At least we’re covering a little overhead?”

Managing Cash – Is it King in your business? Do you carefully manage payables, receivables, and inventory to keep as much cash as possible in the business? Do your people understand the importance of managing cash and are they trained to do it effectively?

Planning – Do you have an annual plan? Do you use it throughout the year as an essential tool for managing your business?

Managing Profitability – Do you know which products (or services) are the most profitable and which are the least? Do you know which customers make you money and which do not?

Delegating Effectively – Do you surround yourself with talented people? Do you give them important responsibilities and the authority to exercise those responsibilities?

Making Decisions – Is there a decision making process in place that prevents “analysis paralysis” and assures that important decisions will be made without needless delay?

Studying Financial Statements – Do you study your financial statements each month and thoroughly understand the story they are telling? Do you share appropriate financial information with your key managers?

Using Key Performance Indicators (KPIs) – Do you use them to keep a daily/weekly hand on the pulse of the business? Do your key managers know and understand the KPIs you’re watching, and are they watching them as well? Do you chart them using a 12-month trailing average?

Communicating Effectively – Do you hold weekly 1-to-1 meetings with your key managers? Do you regularly communicate with the rest of your organization through memos or newsletters, all-company meetings, individual department meetings, or “brown bag lunches?”

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Stop Doing That!

“There is no point in doing well that which you should not be doing at all.”

It’s not unusual. We just continue to do certain things in the business because we always have done them. Or we continue to do them because it would be a pain in the neck to train someone else to do them. Either way, we end up doing things that are not the highest and best use of our time. As a result, the business doesn’t get as much of our real talents as it should.

For each of your daily activities, you should ask yourself, “Am I the only person capable of doing this?” If someone else could do it (or could be trained to do it), then someone else should do it. And that someone else should be going through the same self-examination, and shedding lower level activities to someone else. In the end, all activities should be pushed down in the organization until they reach the lowest level where they can be competently done.

Or maybe there are some activities that should be scrapped altogether . . . activities that no one should be doing. Our sole reason for being in business is to serve customers, right? So for any given activity or expense, it would be reasonable to ask, “How does this benefit our customers?” If there is no customer benefit, direct or indirect, then it’s also reasonable to ask, “Why are we doing this?” Try an interesting audit. For every activity and every expense in the business, look for a corresponding customer benefit. If you find some that don’t pass the test, you will be able to save time, energy, and expense in ways that won’t affect customers.

Whether you push activities further down in the organization or discontinue them completely, it’s all about the effective use of time. It’s about making sure everyone in the organization is unburdened of work that should be accomplished at a lower level, freeing them to fully leverage their highest talents and skills.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Instill Self-Confidence in Your People

“A good leader inspires other people with confidence in the leader. A great leader inspires them with confidence in themselves.”

Over the years, I’ve been on a lot of “plant tours.” Usually, our guide is the owner or CEO or plant manager, and the focus is usually on the systems and equipment being used in each step of the manufacturing process. But awhile ago, I was on a tour that was fundamentally different in that the focus was on the people doing the work. In this case, the owner was our tour guide, and at each work station, he introduced us to whoever was operating that station. He would always introduce that person as a consummate professional saying something like, “I’d like you all to meet Harry James. Harry has been with the company for 15 years, and not only can he take this machine apart and put it back together blindfolded, he can make it do things it was never designed to do.” Then he would ask Harry to explain his work and how it fit into the overall manufacturing process. This routine was repeated again and again at each work station, and in each case, the employee spoke with authority and easy competence.

It was obvious that the company had invested a lot in training its people well. But it was also obvious that the culture in that company made people feel important, honored, and trusted. Of course, the owner was leading our tour, but I have no doubt that his people would have performed just as efficiently and effectively whether he was present or not.

If you make people understand the importance of what they do, train them to do it well, and give them positive feedback so they know they are performing at a high level (and that their performance is noticed), self-confidence inevitably follows. Self-confidence plays a huge role, not only in the employee’s effectiveness, but also in the employee’s job satisfaction. It seems to me that if the result is a more effective, content employee, then the effort to promote self-confidence in your work force is well worth the effort.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.

Talk Less, Listen More

“People can’t see it your way until you first see it their way.”

Listening is an essential skill whether you’re at work or at home, whether you’re the CEO or an hourly worker. Yet it’s a skill that many of us either never acquired, or have allowed to lapse. In a conversation, do you find yourself crafting your next statement of brilliant insight rather than listening to what your discussion partner is saying? Or if your discussion partner is saying something with which you strongly disagree, do you try to interrupt without letting him or her finish the thought? When your discussion partner is speaking, do you allow your gaze to drift away from him or her?

Your friends, family, co-workers, customers . . . everyone wants to be heard. And not heard in a superficial way, but genuinely heard and understood. Hearing and understanding someone does not mean you agree with them. It simply means you’re paying attention and allowing them to get their thoughts fully formed and on the table. If you don’t listen closely and you don’t allow them to fully express themselves, then what do you think happens when you speak? They don’t listen. They’re too busy thinking about how they can get your attention and complete the thoughts they believe you didn’t hear.

There’s another reason to hone our listening skills. Despite our brilliance, insightfulness, and superior intellect, people may surprise us with ideas we hadn’t considered or points of view we hadn’t appreciated. Really. It can happen, but you have to begin with an open mind.

So turn off all those other voices in your head, ignore any other distractions, and listen, truly listen and try to understand. Ask questions and test your understanding by paraphrasing what you’ve heard so your discussion partner knows you’re paying close attention. Then and only then will you be heard and understood.

For more small business blogs, visit my website at www.rocksolidbizdevelopment.com.