Your Business Priorities for 2018

Even as we are going through the final rush of this Christmas season, it is time for us to determine our priorities for 2018. In a recent article from CFO magazine, they listed the top priorities of six CFO’s for some fairly large companies. Each of the companies was in a different industry ((the full article is here).

As I was read the article I began to have this gnawing feeling in the pit of my stomach. It came from my realization that even smaller businesses are faced with these same issues but they may not have a CFO to help them. Here are the priorities of CFO’s from some large companies that are helping flush out the plans of their companies. You may not have a CFO to help you, but you should have some priorities. Have you thought about your priorities for 2018? How will you execute them?

How do the priorities for these larger companies translate to smaller local or independent businesses? Below are the priorities from the article. I have tried to distill the meat of the article to a few words followed by my thoughts and some suggestions for the smaller business owners or managers:

Here are the priorities of those CFO’s:

A) Survive Disruption – they were specifically referring to the “Amazon effect” and balancing the disruption that comes with growing against just keeping the lights on.

My thoughts: If you are able to read this, and by that, I mean alive and breathing, then you have experienced the “Amazon Effect”. Lower priced, quicker delivery times, and yes disrupting markets to the point of competitors, large and small alike, closing down. Before Amazon, it was the Walmart effect. The truth is that small and medium businesses have struggles that some large businesses do not. So, keeping the lights, making payroll, etc. are challenges that always have to be weighed against “possible” growth plans.

Do:

  • create a culture where your customer enjoys shopping your business more than surfing Amazon’s website. It is convenient to surf so you have to compete.
  • be unique in your product offering, your service, and the shopping experience you create.
  • make sure they know you are here, what you offer and why you are a better option.
  • create a better shopping experience for them.

Do Not:

  • give up.
  • assume this is a marketing problem. It is much more than that.
  • assume that you can’t compete.
  • Assume that there is nothing unique about your business, or unique enough about your business to make a difference.

B) Raise Prices –  This is self-explanatory

My thoughts: this should be a priority every year. Price increases go straight to the bottom line (a point they make in the article as well).  Seems pretty straightforward, right? Well, not so fast. It doesn’t matter what type of business you are in, your prices are in direct competition with your customers/ clients common sense. If what you raise your prices to is so much that their common sense alarm goes off, your customers are off to surf the web regardless of the customer experience in your business.

Do:

  • raise prices if you can.
  • price “main” products and “supporting” products differently. Go easy on the main, and squeeze a little more out of the supporting products.
  • research what your competitors are charging.
  • keep prices within reason of your competitor’s known prices unless your service is that much better and adds value.

Do not:

  • raise prices across-the-board
  • cave to the pressure at the first complaint that your prices are too high
  • attempt to “gouge” on any items. Your customers will forgive getting charged a little more than your competitor but they will not forgive pricing abuse.
  • keep prices the same year after year.
  • assume that you can bomb a price and make it up in volume.

C)Drive a “Culture of Data” – the essence of the article is referring to leveraging data to create growth.

My Thoughts: This is hard for some businesses or at least part of it is. In this context I want data to be synonymous with information. You can never have too much information unless it paralyzes you. You should make it a point to know your business/market.

Do:

  • be sure that you have systems in place to make sure that you have the information to make informed decisions in your business.
  • make sure you are getting timely and accurate financial statements, including a cash flow forecast.
  • make sure that you stay up on latest trends in your industry
  • make sure that you know what your competitors are doing
  • make sure you know the source of your customers
  • use technology to gain an edge/stay relevant in your industry

Do not: 

  • buy anything that you do not need. In some cases, information can be acquired without investing in technology. Technology can be costly
  • go out and buy the latest in software without doing the proper research
  • buy all the options in software at the outset unless they are absolutely needed and can’t be added later.
  • don’t try to manage the implementation of an IT project by yourself. Your job is running the business, don’t take your eyes off that ball.

 

D) Execute Crisply – what this CFO is talking about is making decisions quickly. They don’t think it is necessary to wait for every fact or figure to make a decision… they are focused on moving away from the paralysis of analysis.

My Thoughts: Every business can learn this. Get the best information available and make the decision. You do not have to have every little tidbit of information, just the important stuff. This company had also pushed decision making down to its senior managers, along with the accountability for those decisions.

Do:

  • get the necessary information to make decisions
  • make decisions timely and decisively
  • make managers responsible for decisions that are consistent with their job titles and capabilities.

Do Not:

  • wait for every little bit of information to come in
  • procrastinate when making decisions
  • spend more time second-guessing decisions than you spend working on execution

E) Increase Margins – this CFO is looking at increasing revenue by introducing different products to her customers.

My Thoughts: Increasing margins is always a great thought. As you know there are two parts to this equation… Revenue and Costs. You may already be focused on this. Or, as I see sometimes, you may be locked into a “we are as tight as we can be” attitude. You might be, but then again, isn’t it worth taking a second look.

Do:

  • increase prices as the market will allow
  • review all vendor relationships, things change and there may be a better option for supply
  • focus on productivity
  • Incentivise your team for productivity gains with shorter-term incentives based on measurable output and/or cost reduction

Do Not:

  • try to simply squeeze the workforce for more productivity.
  • start and stop incentive plans. Have a clear timetable for the beginning and end of incentive plans.
  • change supplies based solely on price. Make sure that you examine the value proposition for all suppliers
  • change prices flatly across the board.
  • make wholesale cuts in cost (usually translated as headcount) without thorough investigation and a well thought out plan

F) Invest for Growth – this CFO is talking about reinvesting in the business in areas that improve their capabilities. They are only willing to do that if they are able to maintain their margins within a targeted range. This kind of a strategy often requires a thorough look at your processes.

My Thoughts: To really invest in growth you have to know your business. Specifically, you need to know what is driving profitability or what is stealing from your profitability.  If you have this luxury, let your managers manage the day to day operations, with some oversight of course. It is hard to have a vision for the future if you cant see out of the foxhole.

Do:

  • examine your business for opportunities to grow.
  • examine processes with an eye toward making changes that can lead to better productivity
  • examine your processes for ways to improve the customer experience
  • invest in those things that will lead to the growth of your customer base or existing customer purchases
  • thorough research before investing. I have seen many examples in my career where simply asking the right questions could have saved a lot of money and remorse.

Do Not:

  • invest without doing the proper analysis – ROI, cash flow projections, etc.
  • simply rely on the justification that managers provide – their view can be influenced by their beliefs
  • not throw money at a problem and expect it to be miraculously fixed.
  • invest in growth that will take you beyond your capabilities. This will lead to disaster
  • INVEST IN GROWTH WITHOUT A NEAR, SHORT AND LONG-TERM PLAN. I think of this as a “One-Three-Five” plan, viewed in terms of years.

As a final note to business owners: It is Ok to ask for help. There are a number professionals that are focused on providing CFO help to small and medium businesses. I know quite a few of them. They may have even shared this blog with you. Make sure you understand how they work, what the cost might be, and what the deliverables are going to be. They should be someone that you feel comfortable sharing important and sometimes personal information.

I hope that you will find this information useful. However, this is not a how-to guide on how to do these things. Many of them you will be able to do on your own if you can make time. The effect of not doing them because you don’t have time is the same as every other reason for not taking action. It can be devastating to your business. Some of you may want to get some help with flushing out these priorities.  A good CFO should be able to help you with these and will give you value that exceeds their cost. CFO’s with a reasonable amount of experience will be able to help with numerous facets of your business. Financial issues for sure but did you know that many CFO’s can shed light on productivity, insurance costs, legal costs, H/R issues, etc.

Feel free to reach out to me at patrick@concepdyn.com with questions or comments. Due to the number of responses, it may not be possible to answer all of them individually but they may be incorporated in a future blog.

Seriously Speaking: Accentuate the Positive (Part 4)

Mediocrity is failure in slow motion

This is the last installment of the “Accentuate the Positive” series. As you will recall we have been using the Lyrics from the old Johnny Mercer song. Here they are again, just in case you don’t recall.

You’ve got to accentuate the positive
Eliminate the negative
Latch on to the affirmative
And don’t mess with Mr. In Between.

Last time out we talked about how to focus on finding and eliminating negatives in your business. This time let’s focus on eliminating the Mr. In Between”. This is my personal pick for reasons a business may be struggling. Yep, good ol’ “Mr. In Between”.

This injurious dynamic may infect your business. It can be characterized as: Lack of commitment to a plan, inability to give answers, can’t or won’t give direction, etc..  In essence: the ship is drifting. The dynamic here is that the “Leader Doesn’t Lead”.

There are all kinds of “rules of thumb” that get thrown around by “experts”.  Do this, don’t do that, etc. We follow them because we read something by some industry guru that knows my industry better than me. And that’s Ok. It’s a start. However, these rules of thumb may be outdated or they may not be relevant to YOUR business. They may even keep you in the middle of the pack. “Mr. In Between”. You won’t be in the bottom 20% but you won’t be in the top 20% either.  You end up squarely in the middle 60% of businesses like yours. That makes you Mr. In Between, just mediocre. That is not ok.

Mediocrity is simply a failure in slow motion. You might get on the team for a short while but you will never get in the game. Eventually, you will be cut from the team, never having experienced real success.”

Here are MY rules of thumb for avoiding Mr. In Between and mediocrity:

Rule 1: Take “rules of thumb” with a grain of salt. Make sure that they make sense for your business. Many times when we latch on to these rules of thumb they may be from a market or an area that is very different than the one that we are actually in. Costs, selling price, labor costs, etc, may be very different where my business is, as opposed to the “averages” that usually get tossed around.  Make sure metrics that you follow are for your area, business type, business size, etc.

Rule 2: Differentiate your business: Ask these questions: Is my business in a typical market for the industry? Is my business unique in my area? Are my products or services the same as others around me? Are my employees (Am I) capable of creating a difference between my business and others in the area? It is highly unlikely that you can be the best in everything. First, start out by striving to be the best in ONE thing. If you can’t compete on price then have better products, or better service, or…

Rule 3: Engage with the people “of” your business. I use the word OF because your customers, your vendors, and your employees are a part of your business. Make them feel like it. When decisions are needed make them. When answers are required give them. Stay engaged with the people of your business. Talk to them, reward them, get feedback from them, and thank them.  They will be part of the history of your business. Hopefully, that history will be a success story written over many years.

Rule 4: Own your Brand, your quirkiness, your uniqueness. Here in Louisville, there was a restaurant named Lynn’s Paradise Cafe. Now, this was a unique place. It was quirky. People came in pajama’s, it had weird (in a good sense) decor, and the food wasn’t ordinary. They were different and they owned it. People loved it. The place was always packed. And now that it is gone… the people of LYNN’s miss it.

Will your business be missed when it is gone?

Rule 5: Make sure that the systems you have in place allow you to SEE your business: Do you get reports that let you see what is working in your business? Can you see what your cash flow is? Do you get Cash Flow Statements along with P&L’s and Balance Sheets on a timely basis?  Make sure you have a cash flow forecast for at least six months. How can you know where to drive the car unless you know how much gas you have to get there? It is the same with cash. Know it. Talk to your CFO (if you have one), Controller, Accountant, Managers or Employees.   Are they too busy to get it all done in a timely manner? Are they focused on the right things? You don’t have to “hire” people but you may need to get them some help.

Remember to Accentuate the Positive, Eliminate the Negative and don’t mess with Mr. In Between


 

 

You’re Too Close to Where You Got In

Ok, let me see if I understand your plight.

You are a small business owner. When you started your business you were full of enthusiasm, things were working and customers were coming out of the woodwork (or at least you had enough to sustain you).

But now, now you are struggling. The excitement is gone. Now there are not enough customers to sustain you. The numbers are just not favorable for  you staying in business.

When working with clients in this situation I am reminded of a story. I am unsure of the origin. The story goes like this:

One night, a mother heard a loud thump come from her son’s room. She immediately jumped out of bed to see what had happened. “What happened?” she asked her son. “I don’t know. I guess I stayed too close to where I got in.” You have to love the pure honesty of children.

I find this happens with business owners too. When you start your business, it is new, full of excitement, full of hope, and you are finally working for yourself. Or, maybe you just took over the family business. It’s been successful for years.

But now, those things aren’t true. Nothings changed with the business. You still have good stuff to sell. You still provide excellent service. You just aren’t getting the customers that you once did. Oh sure, you have your regulars that come in. You love them but, they aren’t enough to sustain you.

One very likely possibility is that you, like the little boy in the story, have stayed too close to where you got in.  Before you know it you feel a bump, you look around, and barely recognize your business. You are not alone. This is a common trap. And one that I believe causes a lot of businesses to fail. You see, when you opened up, the customers that came were found in the following ways: had seen an advertisement, found you by accident, sought you out for a specific product or service, or (and this is always good) someone referred them to you.

Unfortunately, most of these customers have moved on. We are inundated with messages from lawyers, restaurants, retail stores, doctors, dentists, Real Estate Agents, etc. Guess what? We have a short attention span. We practice selective blindness and selective hearing. We tend to fall into the habit of doing business with whom we hear/see most often. This behaviour does not favor the small business. You see, curiosity will get us into your business, but we will quickly fall into our old habits and shop “the names”.  Only two things will change this.

  1. the experience (product, service) is so exceptional that we connect with you the very first time, and then every time thereafter.
  2. your business pops into our mind when we think of something that we need, great rolls, that awesome massage, the unique gift, etc. This really only happens if you have “connected” with us most recently.

The first one you’ve got covered. If not, or if you are not sure, let’s talk.

The second one may be a little bit more elusive for the reasons I have outlined above. You have likely tried ads, flyers, maybe even radio, and some have even had TV spots. You have even tried things like Groupon and RetailMeNot. All of these can be costly. And, unless you have a large, very large that is, advertising budget you will not be able to “connect” with us enough to break the hold of the big guys by using these methods. You just can’t stay “in front” of us enough.

Now, I am not telling you to stop all of that. Remember, you may find some customers in those ads, or even in those “coupons”.  But how much will you gain vs. how much will you give up? My experience tells me that advertising salespeople are very good at providing statistics about how many people they reach. But, do they actually reach us soon enough before we buy to influence us. All I am saying here is: be very, very selective.

Maybe it is time to try something brand new and exciting, and successful and…  Continue reading “You’re Too Close to Where You Got In”