Focus On Fundamentals
What would you say if I told you that I am excited about the possibilities for our small businesses in 2001? What if I said I think 2001 could be a great year for our businesses?If you've been hearing experts say we are in a recession, and if your company is experiencing some of the symptoms, like slower sales, you might be inclined to tell me that I obviously don't understand the problem.
Well, if that is your response, I can assure you that I do understand the problem: I cut my professional teeth on the 1969 recession; came of age during the one in 1974; the malaise years of the Carter administration created the 1980 recession and made me happy he stopped being president and took up carpentry; I became a veteran during the 1982 model; and finally, I yawned through the tiny one in the winter of 1990-91.
Here's an interesting point: In my business career of just over 30 years, I am a veteran of five recessions. But there is an entire generation of grown-ups with almost 20 years in the marketplace who only have one notch on their Palm Pilot.
In case you don't know, a recession is commonly defined as at least two consecutive quarters of negative economic growth in the national economy. But recessions are weird in that we may not officially know we've been in a recession until we are out of it.
Don't Worry, Be Happy!
My mother worries about things that haven't happened yet. I'll bet your mother does, too. It's what mothers do. It's not what small business owners do. I would rather focus my emotions and energy on things I can do something about, and that's what I want you to talk to you about.
Selling Is More Fun Than Details
When business is rocking and rolling, it's not unusual to focus so much on sales that you overlook operational inefficiencies and treat organizational problems as nagging irritants which take your attention off of the fun stuff. An old mentor of mine used to say, "Sales cures lots of ills." Notice he didn't say sales cures all ills.
When sales volume drops off, instead of wringing your hands with worry, repeat this very important truth from another mentor of mine: "What you make is not as important as what you keep." In other words, you don't keep sales, you keep profits.
Focus On Fundamentals
I have a list of items I would like you to focus on with new zeal for the rest of 2001. If you do, you may well find that you made as much profit in 2001 as you did last year or the year before, even though sales volume was off.
But what may be more important, when the economy picks up toward the end of this year, and many experts are predicting it will, is your newly fine-tuned organization will be in a position to put record profits on the bottom line as a result of a tighter ship sailing before a sales tailwind and an economic following sea. That's the reason I think 2001 could become a great year in the life of our companies.
Financial statements - Become even more of an expert at understanding your financial statements. Make sure you are getting them before the end of the following month. Spend more time with the numbers below the top (sales revenue) line on your operating statement.
Budgets - Yuck, right?! But operating for profits works best with a track to run on. Creating a budgets won't be hard - sticking to them is. Get on the track.
Cash management - When sales slow down the first casualty is cash flow, not profits. You can operate longer without profits than without cash. In 2001, all small business owners must be intimately familiar with their cash flow picture. If you can't personally manage your aging accounts receivable, at least be the co-manager. Plus, establish an accounts payable policy that maximizes the cash you have without harming your relationships with vendors and suppliers. In 2001, you can't completely delegate this activity.
Inventory - Inventory is a euphemism for cash. If you want to be a happy business owner in 2001, you need to get your hands on all the cash you can. Find a way to convert to cash any inventory that is not turning. If you haven't been practicing Just-In-Time inventory management, DO IT NOW!!!!
Vendors and suppliers - Always remember this: If your sales volume is off, so is theirs. Talk with your vendors and ask them to help you manage inventory, maximize margins, lower freight costs, and develop new ways to support and serve your customers. These guys are on your side. Vendors should always be part of the solution, but even more so this year. If not, get rid of them.
Systems - These are all of the structured components in your operation, some of which may now be outdated, and possibly unproductive. Check your employee schedules, delivery routes, opening hours, (your idea here). Nothing is sacred. If you have to change something you think customers won't like, develop a PR campaign that demonstrates how the changes will help you improve your relationship with them. Sell customers on accepting efficiencies the way you sell them on your products.
Customers - Categorize them: A-B-C-D, from the most profitable As, to the least profitable Ds. Worship the As, cater to the Bs, encourage the Cs, and let the Ds learn the meaning of self-service. You might even have to fire a few customers.
Products and services - Same song, different verse: Categorize them: A-B-C-D, from the most profitable As, to the least profitable Ds. Stock lot's of As, many of the Bs, and maybe a couple of the Cs. What about the Ds? Never let one spend the night in your warehouse.
Employees - Cut the dead wood, pamper the producers. Use your brain trust to help you find the efficiencies and opportunities. Listen to them. Encourage creativity. Invest in training. Help them become successful. Encourage entrepreneurial thinking within departments. Share your plan and let them help you accomplish it. Owners who don't won't be happy in 2001.
Bankers - Don't be a stranger. Lunch with your banker every other month if things are okay. Have monthly reviews if the cash is tight - weekly if it's really tight. Honesty is the best policy. Bankers can help you if you arm them with information, positive or negative. But a banker without information is a scared banker, and no one ever got any help from a scared banker.
New Leverage Model
Now we come to the three components of what I call The New Leverage Model for entrepreneurs in the 21st century:
Networking - This is not the year to go into a cave. Keep exercising those contacts. Keeping a stiff upper lip doesn't mean you have to tell everyone things are great if they're not. Get together with your marketplace friends and help each other. That's right, guys - you might even have to share.
Strategic Alliances - This may be the most important year to emphasize this. Don't miss opportunities because you don't have all of the resources. Create alliances with other companies to accomplish special projects. Take the blinders off and look around.
Technology - It's your friend. Invest in technology. Make sure you know what software is being developed specifically for your industry: Accounting, order tracking, inventory management, and delivery, as well as any operational hardware and software that improves production and efficiency, and lowers payroll. Invest in technology. Even this year. Especially this year.
Refuse To Participate
You've probably heard me say this before. We may have to live through a recession, but we don't have to participate. Take a look at these fundamentals in your operation, identify the low hanging fruit and fix them first, then tackle the more challenging ones one at a time.
Write this on a rock... This can be a great year, especially if we focus on the fundamentals.
