Saturday, August 1, 2009

Business is about relationships...

How to Win Friends and Influence People (With easy click Table of Contents)

If there is one thing you take away from this blog about business it is that business is about relationships. The ability to make a widget, (widget is the universal example for a non-descript product) is universal. If two people have straw and brooksticks, they can both make brooms. Now all else being equal, quality, style, color, etc., the single differentiating factor of success for one and not the other will be the ability of one to build relationships.

Value is built when the one building the brooms can "sell" them to potential customers. No matter how good your broom is you can't make any money if no one knows about your product. You have to be able to move the product for the firm to actually have value.

I once spoke with a very successful commercial building developer. His firm was receiving hundreds of millions of dollars from investors all over the U.S. Why you ask? Because his firm had a great track record of success. Knowing this person and watching them work I quickly saw the reason for their success. They were able to build relationships that benefited everyone involved. His firm had built a building and it cost about $5 million to construct. But in short order they sold it for almost twice the amount. The increase in price was legitimate and justified based on one key item. The value of the leases for the space in the building. The reason they were able to get those lucrative leases was partly location, location location, but a tremendous part of the success was they were able to capitalize on their relationships.

Now, are relationships the only thing you need to be successful in business, the answer is no, it should be a big part of your efforts when building a business though. I can go on with a number of examples about how relationships have benefited me in business dealings when no pure business acumen would have saved the day, but trust me on this one build great, sincere, relationships and you will be rewarded. I will talk about how to build great relationships in the next post, but I will recommend one the greatest books ever written on the topic "How to win friends and influence people" By Dale Carnegie. There is a link at the top and a link below to hop over to Amazon and buy it right now. Don't hesitate, just buy the book now and read it. It will be money well spent. Actually read it at least three times. Until the next post, Make the Day Memorable!

How to Win Friends and Influence People (With easy click Table of Contents)

Wednesday, July 29, 2009

Business "Dashboard"

Balanced Scorecards & Operational Dashboards with Microsoft Excel

In the last discussion we discussed how financial management is not essential for business success, but it certainly helps you manage your business better. The primary problem with financial statements is that they are like looking in you rearview mirror for cues on how to drive. Financial statements are all about what just happened, not what is about to happen. Wouldn't it be nice to be able to make adjustments while you are moving similar to how you do when you are driving.

When driving on a road and you see a curve ahead you adjust your speed and direction to compensate so that you don't end up in the ditch. Now try that same curve while looking in the rearview mirror. What is behind you, may not give you any insight as to what is about to happen. Of course if you look in the rearview mirror and see that you are on the shoulder of the road you may have enough time to adjust, but then again you may not. Well managing a business comes with the same challenge. How do you manage a business while looking out the windshield?

That is where the business dash board comes into play. Continuing with the driving analogy, we see that the speedometer is telling us that we are traveling at 75 mph when the speed limit is 65 mph. We can adjust immediately before we get a ticket. The same if we see that there is a hazard ahead of us. We adjust the direction of the car to miss the hazard. Using the view out of the windshield and the gauges on the "dashboard" of the car we can make adjustments during the course of driving.

We can develop the same "dashboard" and "windshield" view for our business so that we are 80% to 90% aware of what the financials will look like when we review them at the end of the month. These tools will allow you to project how our business will perform. Here are a few examples of a business dashboard.

I once ran a outpatient imaging center and we would always look out a week in advance to see how the schedule was filling up. Similar to a fuel gauge in a car, the schedule would tell us if we were filling up or not. If we weren't at a certain capacity level by Wednesday of the week before we could put efforts in motion to fill the schedule. (i.e. call physician offices and let them know that they can get a patient in for an MRI right away if they needed) We could accelerate our efforts and slow them down as needed well before the time had past when we could have had an affect on the financial performance of the center.

With another organization we would set daily targets for foot traffic through the store. If we saw traffic on a particular day not reaching our predetermined goals we would run specials immediately to increase traffic. The ability to respond in the current period is what separates a rearward looking financial statement approach and a forward looking "dashboard" approach.

If you want to seize every opportunity of everyday then look at your business and find ways to develop a business "dashboard" that gives you the ability to be forward looking. You will reap tremendous rewards and torch your competition.

Remember, make today memorable!


Saturday, July 18, 2009

Understanding your financial statements...

Cash on cash return, return on investment, cash flow statements, cash accounting, accrual accounting, on and on and on...where does it end? Many business owners tell me they manage their business by knowing how much is in the banking account. They ask so I really need to be concerned about how to read a income statement, worse yet a cash flow statement?

The short answer is no, many people have run very successful businesses for a long time without having the true ability to read a financial statement. The better question is can I better manage my business if I understood some simple concepts of how to read financial statements and do some simple analysis. Well, the long answer to that is, yes!

Many business owners will tell you that while they may have the ability to run their businesses they are weary of their inability to fully understand what their accountants are telling them. Can you really manage the unknown? Take for instance the plumber who didn't know where the water needed to come from or where it needed to go. He wouldn't be able to perform at his best without that knowledge. Or the electrician who knew that they needed to have a dedicated circuit for an outlet 50 feet from the electrical panel but didn't know exactly what needed to be plugged in there and they place a 120 volt 30 amp circuit when a 240 volt 15 amp circuit was needed. In both cases they can "do something" and probably have to make adjustments along the way and maybe get the job done after a few mistakes. It is the same in running a business, having the right information at the right time allows you to better run your business.

Building a budget in the fall for a January 1st fiscal is very similar to finding out all available information before you begin a plumbing or electrical job. In both cases with contracting work and building the budget you may run into unforeseen issues, but at least you have some guidance before you begin.

Understanding your financial statements so that you can make great decisions is not a must, but it is something that you should strive for. The ability to review data and understand what is going on within your business will help you sleep better at night and it will allow you to make better decisions. But remember looking at financial statements is like looking through your rear view mirror. You're reviewing what happened. You can certainly adjust your course based on this information, but it may take a little while to make the adjustment. Once you are better educated to read financials the next step is to develop a way to build forward looking metrics to allow for more timely adjustments to your course, a business dash board if you will. Business dash boards will be the next blog post, so stay tuned!