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Why Are Your Business’s Checks Bouncing?

As a successful business owner, you never want to run into a situation where you end up with a cash flow problem. checksThere is nothing that can ruin your credibility with suppliers faster than handing over a check that bounces. You’ve hired an office manager to handle your finances, but you’re spending money that she doesn’t know about. Then, she pays the bills thinking there’s money in the bank only to discover that those checks are bouncing. This causes embarrassment, leads to extra fees and may even lead to business failure.

Accountability is key. Here are some steps you can take to ensure that your checks don’t bounce:

  • 1. Get an accounting system that you can access and review online or on the go.
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2. Put processes in place so that you know when the system is up-to-date and check it with regular frequency.
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3. Communicate with your office manager, especially if you’re making expensive or high volume purchases.

Accounting Systems

It’s essential to have an accounting system in place that can be accessed at any given time. That said, a system is only as good as the people that are operating it. This means that it’s absolutely essential that anyone within the company who has power to write a check needs to make sure that the amount being spent is posted as quickly as possible. The information provided by the accounting system needs to be up to date so that the correct financial decisions can be made every time.

Processes

One way to make that happen is to set up a process of posting and checking that everyone strictly adheres to. Setting up specific days for posting checks written and accounts received means that you should be able to tell the current state of your business account at a moment’s notice. It will also prevent you from making financial decisions based on out-of-date information. This is especially true when making a large financial purchase that could end up throwing everything out of whack very quickly.

Communicate

Perhaps as important as having an accounting system and an updating process in place is keeping the lines of communication open. As the business owner, you may feel that you have total authority to spend as freely as you like, but doing so without telling the manager puts them in a difficult spot. After all, it is they who will have to field the calls from disgruntled suppliers who have just received a check from you that bounced. If they are unaware that you have made a major purchase that dropped the account balance below what the system shows, they will be unable to explain what the issue is.

Don’t Bounce Checks

It is absolutely impossible to run a successful business if you are not aware of your finances at all times. Writing checks without any forethought will hurt you in a number of ways. You will end up drowning in bank fees and more importantly will lose the trust of the people that you purchase from. You may just find that suppliers will move you to COD status, or may even decide that your business is not worth dealing with. The ripple effect that comes from writing bad checks may very well be enough to close it down permanently.

What’s Your BHAG? Good to Great: A DLB Consulting Book Study

We’ve been studying what makes a company go from good to great over the last seven weeks. Links to the previous posts on these topics are below for your review. Now it’s time to think about how your company can be built to last by setting your BHAG: Big Hairy Audacious Goal.bhag

Good to Great Attributes

Here are the seven things that make a good to great company:

  1. Level 5 Leadership: Leaders with a paradoxical blend of humility and professional will.
  2. First Who…Then What: The principle of hiring the right people before setting the vision and strategy.
  3. Confront the Brutal Facts: The belief that through the difficult times you will prevail in the end so long as you have the discipline to confront reality.
  4. The Hedgehog Concept: The intersection of three circles comprising of what you can be the best in the world at, what you are deeply passionate about, and what makes enough money.
  5. A Culture of Discipline: A culture that combines disciplined people, thought, and action with an ethic of entrepreneurship.
  6. Technology Accelerators: The careful section and pioneering of technology to accelerate growth rather than to ignite a transformation.
  7. The Flywheel and the Doom Loop: The process of pursuing success in one direction, turn upon turn, building momentum until a point of breakthrough, and beyond.

Developing Your BHAG

This framework is essential to building a great company, but goal setting is key. To develop your BHAG you must consider your Hedgehog. Your BHAG will intersect what you can be the best in the world at, what you are deeply passionate about, and what makes enough money. Stay within those three circles, but be willing to change the specific manifestation of what’s inside them.

Enduring great companies preserve their core ideology. Their purpose and core values stand the test of time. However, in order for progress to be made, it must be stimulated by change. Changes that occur in cultural and operating practices and changes that occur in goals and strategies. Create BHAGs that are consistent with the Good to Great framework and you’ll be on your way toward greatness.

What’s your BHAG?

The Flywheel Effect – Good to Great: A DLB Consulting Book Study

Great companies realize that there is no one single event that catapults the company into greatness. Rather, it’s a series of cumulative actions that add up to sustained and amazing results. In Good to Great, Jim Collins refers to this as the flywheel.Flywheel Effect

The flywheel is huge, heavy and creaky. It takes a lot of effort to move it an inch, but you keep pushing. Eventually, the flywheel begins to move until you get the first revolution. After continuous effort, the flywheel begins to pick up speed making rotation after rotation until at some point it’s using it’s own weight to continue the progress. That’s the break through.

The Flywheel Effect

Getting the flywheel to move in the right direction takes more than just an initial company meeting and a party to announce your plans. Arguably, hoopla and motivation are less likely to get the wheel turning. Instead consider using your vision and hedgehog concept to get started. Here are a few steps to implement as you build the flywheel effect:

  1. Take steps forward that are consistent with your vision and hedgehog
  2. Accumulate visible results
  3. Make sure there are roles to be filled because employees will want to be involved
  4. Encourage participation as the flywheel builds momentum

Everything that we’ve talked about so far in our book study on Good to Great is a piece of the buildup-to-breakthrough flywheel effect. The key is to be consistent and continue to build upon the stuff that works so that the positive effects are magnified.

Building a great company takes a long time. According to the study, the average time for a Good to Great Company to achieve greatness was seven years. There are no overnight success stories. Most overnight success stories are about twenty years in the making. Are you willing to take the next step to become great? I’d love to help you get started.

Confront the Brutal Facts: Good to Great: A DLB Consulting Book Study

In our last post we emphasized the importance of getting the right people on the bus. The right people are internally motivated and your job is to make sure they don’t get de-motivated. In this post we’ll discuss the importance of building a culture that confronts the brutal facts and where open and real communication exist. Confront the Brutal Facts

There’s a difference between having the opportunity to be heard and having your say. Great companies know the difference. To create a culture where truth is heard and problems are solved, consider the four basic practices that good-to-great companies employ.

Lead with Questions

As a leader you must be humble enough to admit that you don’t have all the answers. You weren’t anointed with a crystal ball the moment you got promoted or started your own business. You should ask questions and actively listen to responses. This will help you gain a better understanding of the message and lead to better insight.

Engage in Dialogue and Debate

Become a great moderator. Create an atmosphere where issues can be debated with facts and point-of-views based on information that’s presented. Ensure that all sides engage in the debate and do so respectfully. Then, make a decision and implement the solution.

 Conduct Autopsies

John Maxwell, author of Sometimes You Win—Sometimes You Learn, points out that experience isn’t the best teacher. Instead evaluated experience is. Leaders learn from past mistakes. They take responsibility for the mistake and take the time to truly understand the root cause. In other words, they learn.

 Build Red Flag Mechanisms

The information age brought with it the ability to share and receive data. You have access to this data just like your competitors. However, having data doesn’t do you any good unless you recognize it and then take action. Create a mechanism that allows your employees to raise a red flag when they discover a risk area to evaluate and mitigate.  You can use a physical red flag if you want to or you can simply create a process that enables it.

Confront the Brutal Facts

Good-to-great companies that employ these techniques face adversity with strength instead of fear. They focus on confronting the brutal facts with open and real communication. In the end, they cultivate a culture that drives the success of the company and those who are in it.

Which of the four basic practices discussed today will you employ to drive the success of your company?

Retirement Dreams Require Personal Financial Responsibility

This past year has undoubtedly been the best for the economy since the recession.Personal Financial Responsibility With new tax incentives kicking in, companies are finally seeing profits, where they were just barely, (often not at all) covering their expenses. The economy is expanding again, which is great for everyone involved, but it also means that many businesses are growing complacent. With cash on hand, they are paying off their bills and neglecting to prepare budgets, manage cash flow, and make projections about further growth.

It is this kind of attitude that is perpetuating a recessed economy. Small businesses must continue to plan for the future of their business and their retirement. Some of the recent economic growth can be attributed to the dispersion of bailout funds in the last four years. However, according to the August 2013 issue of The Kiplinger Letter, by 2016 that money will disappear. The economy will begin to shrink again and businesses will find themselves in deficit once again. By 2024, America is going to see interest payments on the national debt quadruple. That’s a serious cash flow issue, and why? Because saving has not been built into the budget. Don’t let this be the fate of your business and your retirement. Now is the time to plan for the success of not only your business, but for your retirement too.

Prepare a Budget with Future Deficits in Mind

Most companies already have a budget, at least a loose one. You know how much you have to pay in expenses such as, employee salaries, benefits, location rentals, lighting, insurance, etc. In general, you know how much money you have to spend every month in order to keep the lights on. In reality, you need to know exactly how much money leaves your account every month. Not only will this help you realize and eliminate waste from your spending, it will allow you to get a hold of your money and make it work for you.

Outside of the minor ups and downs that every business experiences, you need to be prepared for serious financial difficulties. Saving money isn’t just for individual households, as even the government has come to realize this year. Don’t spend every last dollar just because you have more dollars than bills this month. Next month or next year, the situation may be reversed. Think critically about where you can cut your budget and where you can save.

 Focus on Cash Flow

No matter what your business is, you probably have a good idea of where your money comes from and where it goes. You know your target market, and you know that those people are going to be the source of your income. Now, consider carefully how to tap that money source when you are seeing cash flow problems. In conjunction with formulating a living and budgeting, create a contingency plan that you can implement when sales are slow. Whether this is an aggressive marketing campaign or a new product or service, have a list of ideas and feasible enactment strategies that can help loosen your cash flow when money is tight.

Personal Financial Responsibility

If you want to retire you have to take personal financial responsibility for your business. We can help with cash flow management savings, preparing budgets, cash flow projections, and tying in your marketing plan with your business plan. When you create a good financial structure, your accountant will have less to give to the IRS and more to your bottom line.

Are you ready to live your retirement dreams? Preparation is key and we can help you get there. Call us today so that we can help you chart a better course for your business.

The Art of Delegation – Trust is Key

Many small business owners attempt to do everything, leaving little to delegate until they become so over worked and exhausted that they have no where left to turn.delegation Often times they hire the first competent person (hopefully) that they can find and immediately hand over the keys. In the end, they find that the person that they hired, isn’t as competent as they thought or maybe isn’t quite ready to drive.

In the book Entreleadership, Dave Ramsey explains that effective delegation is analogous to lengthening the rope of trust. When you properly manage your culture, hire and keep the right people, build unity, provide recognition, and creatively compensate your employees you’ll find that delegation opens doors to success like you’ve never imagined.

Two Types of Delegation

According to Steven Covey, there are two types of delegation: gopher and stewardship.

Gopher Delegation-the gopher delegation method is similar to micromanaging. It involves providing the employee with step-by-step instructions on exactly how to do the task and then verifying that the work was complete to your specifications. The gopher position is generally good for entry level job functions that are repetitive and don’t require a lot of thought.

Stewardship-the stewardship delegation method is management-level delegation. It focuses on the outcome rather than detailed instructions on how to get it done. Stewardship delegation requires trust because you are granting that person authority to act on your behalf and then responsibility to carry out the major project or task. Trust must be earned.

Earning Trust

Before you delegate important tasks it’s important to know that you can trust your employees. The process of developing trust takes time, but it will save you a lot of heart ache and drama if you approach it with intention.

There are two attributes that trust worthy people have in common. They are integrity and competency. Wise business owners trust employees with important tasks to the extent that they’ve spent time with them, observed their behaviors, and believe that the employee has both integrity and competency.

Integrity

Integrity is the quality of being honest and having strong moral principles. You should spend absolutely no time trying to work with employees who have no integrity. If they steal from you, cheat on their spouse, or lack moral character, do you think they’ll do an outstanding job for you?  Probably not. Instead, hire someone who has talent, and then work with them letting out the rope bit by bit.

Competency

Competency is the ability to do something successfully or efficiently. You can’t assess competency without observation. Competency is more than the ability to complete the task. It involves the process of completing the task as well. Were the team members treated with respect? Did the project get completed within budget?  These are just a few of the questions you should ask to assess competency.

Once you begin to delegate with authority and responsibility, you’ll display your trust to your entire team. Ronald Regan once said, “Surround yourself with the best people you can find, delegate authority, and don’t interfere.” What type of delegation do you relate to?  Let me know in the comments below.

Building a Culture of Passionate and Loyal Employees in Your Small Business

Building a culture of passionate and loyal employees

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Building a culture of passionate and loyal employees is the best thing you can do for your small business. If you don’t believe me consider the cost of employee turnover. The cost to replace an employee that makes less than $30,000 per year is approximately $4,800 according to CBS news. That’s 16 percent of his or her salary. For employees who make more, expect to pay significantly higher percentages to find a reasonable replacement. It’s clear that high turnover represents a major expense to any business.

Your employees are not cogs in a machine.  They are human beings with feelings, goals, and dreams.  If you treat them like machines, you’ll forever struggle with your operations.  However, if you treat your employees, as you would want to be treated you’ll find happier, loyal employees in the end. For example, if you believe that you’d deserve a raise if you were doing the same work, then give your employees a raise. Likewise, if you believe that you’d receive a reprimand for the work not performed, then have that chat with your employees.

A Great  Example of Company Culture

A great example of a company who truly values their employees is Infusionsoft.  Infusionsoft is located in Chandler, Arizona and has more than 400 happy and loyal employees. Recently, I spoke to a few of them to get their insight on why they are so committed to their jobs and their answers surprised me. They recited their purpose, mission, and values verbatim. I don’t know any other person who can remember their company’s mission let alone recite eight lines of values.  They said that they believe in people and their dreams, and their company believes in them. In fact, they have a dream manager on staff whose job is to help them work towards realizing their dreams.

Building a Culture of Passionate and Loyal Employees

I’m sure you don’t have to hire a dream manager to turn your culture around, but you can take a few steps to get started in the right direction. In the book Entreleadership Dave Ramsey recommends building unity within your teams. Here are five things you should consider in order to build unity:

  1. Communicate—We discussed how to create a culture of communication in my last post here. Let your employees know how good they’re doing, how well the company is doing, as well as when things aren’t looking that cheerful. You just might find a creative solution to that problem that you’ve been struggling with for so long.
  2. Shared Purpose—You know you have a committed culture when your employees can recite your company’s purpose from memory. Everything you do should correlate to your company’s purpose. When it does, your employees will notice it and share in it too.
  3. Axe the Gossip—Gossip destroys everything that you’ve worked so hard to build. Don’t participate in it, and consider implementing a policy that reprimands it. Problems or gripes are fine, but problems shared with peers that can’t fix them are considered gossip. Hand problems up and recognition down if you want to build a unified team.
  4. Solve Conflicts—Disagreements must be solved in a constructive manner. Part of being a leader involves helping your team grow together before they grow apart. Have the courage to deal with the conflict.
  5. Let Incompetence Go—Team members become demoralized when they are required to picking up the slack for a peer who is incompetent. When you keep an incompetent person in a role they can’t fulfill it makes the leadership appear to be incompetent as well. When you let the incompetent employee go, you send a message that performing with excellence is required.

Building a culture of passionate and loyal employees isn’t easy. You’ll have good days and bad days. But if you make an effort to stay true to the tips in this message, you’ll find a more peaceful work environment, increased productivity, and less turnover.

Earlier in this post I talked about Infusionsoft’s culture. Do you have a great culture in your company? Let me know. I’d love to share it as an example in a future post!

Make a Decision Before Your Competition Does it For You

Decisions

Canglour Glen, road junction for 2012 photo.
© Copyright Robert Murray and licensed for reuse under the Creative Commons Licence

According to the Houston Chronicle, indecisiveness is one of the factors that causes over 50% of small businesses to fail over the span of five years. Fear of criticism, failure, or even success may stop us right in our tracks. Fear is a natural reaction to many key business decisions, and criticism is part of the package too. Don’t be afraid of it. Instead, recognize it for what it’s worth, and take steps to make those key decisions before your competition does it for you.

Here are 9 things you should consider when making a decision:

  • Overcome Fear–Fear is the biggest obstacle to overcome when making decisions because it often causes paralysis. You may be afraid of making a mistake, losing money, getting sued, or losing customers. This fear causes indecisiveness and lack of innovation. Before long, your competitor is on your heals ready to overtake the dream that you worked so hard to achieve. Be determined to make a decision regardless the uncertainty of the outcome.
  • Set a Deadline–If you’re going to wait on a decision, make a conscience choice to come back to it by calendaring a due date. If you can’t make a decision today because you’re not in a good place emotionally, you’re angry, or drained, remember to set a date to revisit the decision. By setting a date you allow yourself the time to be intentional.
  • Allow Enough Time–Realize that bigger decisions take more evaluation, thought, and time. Conversely, small inexpensive decisions should be made instantly.
  • Break it Down–Break big decisions into bite-sized chunks. Narrow down options to the few best, launch your product in test markets, create a focus group, or do a survey. This way you’ll have the data that you need to formulate your decision without tackling the problem all at once.
  • Gather Your Data–Research and gather information and opinions.  Options are powerful because they remove fear. Ask yourself, “What’s the worst-case scenario?” Most of the time death isn’t in the equation when you play out the worst-case scenario. Even if the worst-case scenario is hard to swallow, as long as it’s survivable you can still move forward with the decision. Always strive to have a few good options to choose from because they improve the quality of the decisions that you make.
  • Evaluate the Financials–Evaluate the financial impacts of the decision. Determine if you’re willing to risk your entire business on one decision, product, or idea. I wouldn’t recommend it. Wait to revisit the idea when the timing is right.
  • Values–Ensure that your decision matches your values. There’s nothing worse than saying that you believe in something and then doing something totally contradictory.
  • Seek Advise–Seek the counsel of experts and your spouse. Ask those around you who have knowledge in a field that you’re not an expert in, understand the information they’re providing, and use the information to make an informed decision. It’s a good idea to get your spouse to weigh in on the decision as well.
  • Journal–Journal your thoughts about the problem and potential solution. When you take the time to articulate your thoughts on paper, you process the information once again and engage another part of your brain to help you make the decision.

Aristotle said, “There is only one way to avoid criticism: do nothing, say nothing, and be nothing”. You will make mistakes, but generally the cost of these mistakes is less than the cost of indecision. Doing nothing is a great way be one of those 50% of business that close after five years.  What decision are you struggling with today?