Gregg Steinberg

Wednesday, 30 June 2004 11:55

Forward thinking

Many entrepreneurs and top executives are fortunate enough to achieive early business success. However, to sustain growth and enjoy real long-term success in a global economy, it is important to follow a guideline. Long-term business success is tied to three key factors -- cash flow, profitability and ease of operations.

Here are the top 10 ways to achieve it.

1. Develop a strategic plan. The first move toward developing a strategic plan is a difficult one. Many business owners fall victim to measuring success by how hard they are working and whether there is enough money to cover payroll. In reality, businesses operate best with a plan and methodology for measuring and executing on that plan.

2. Stay flexible to changes in the strategic plan. Business owners who tend to make adjustments in the strategic plan do so during annual reviews, even though one has nothing to do with the other. A strategic plan should be a work in progress that evolves in accordance with sights set on the long term. While flexibility is important, it does not mean businesses should operate without a strategic plan.

3. Transform yourself from company expert to master strategist. Business owners need to focus on planning the future success of the business rather than being mired in the everyday details. Create a leadership team and delegate. This can mean a rather extensive change in roles, but this strategy will help the owner maintain more control over the future success of the company.

4. Focus on short-term growth. Key company goals and matrixes must be maintained and monitored on daily and weekly rather than just monthly. By focusing on growing a business in the short term, there will be far less worry over the long term. By consistently managing and measuring the sales process, benchmarks of performance can be established, met, incentivized and improved upon.

5. Develop reporting systems. No strategy can be implemented without reporting systems that track critical numbers. Examining the key matrixes daily helps to measure and clarify where company efforts need to be enhanced and holds each employee and department accountable for performance.

6. Hold a daily management meeting. This is the best answer for being able to rely on the flow of communication. A daily meeting creates the intensity and focus needed for business owners to identify problems and issues before they get out of hand. Focus only on one key number or one key issue.

7. Control costs by budgeting percentages. It is imperative to establish a set of critical variables for the company. Critical matrixes and their variables are key performance factors that gauge whether a firm is consistent with their goals. Variable discrepancies should be measured on a percentage rather than an absolute basis. Percentage increases or decreases from day to day and week to week should signal change to a business owner, therefore determining why inconsistencies might exist.

8. Offer incentives to key business drivers. Business owners must realize that all employees have the ability to drive or stall the business. Creative incentives that drive should not be limited to senior positions but rather to each employee's contribution to both the profitability and the mission of the company.

Fair incentives should be tied to specific measurables that each employee has control over.

9. Create a new management model. If the existing model has not performed up to expectations, it may be a good time to start fresh. Creating a new management model allows for updating as well as preparing the business for positive change. Incorporate all levels of employees in both the thought and implementation process.

10. Play to win. These guidelines are easier and more enjoyable to adhere to when a company aims high and plays to win. Creating a business plan and setting out to reach its stated goals is an ever-changing struggle. A business that survives is the one that plans to innovate allows for constant change and plays to win.

Gregg Steinberg (gregg.steinberg@ipa-iba.com) is president of International Profit Associates. IPA's 1700 employees offer consulting services to businesses throughout the United States, including Alaska and Hawaii, as well as Canada. Reach him at (847) 808-5590 or at www.ipa-iba.com.

Tuesday, 25 May 2004 06:54

Direct results

Nearly anyone can start a business, but it takes more than technical expertise and gut instinct to grow it successfully.

Here are the top 10 reasons businesses fail, and what you can do to support your success.

 

1. Inadequate financial records. A seemingly small task, such as keeping detailed books and appropriate records of sales and expenses, can affect the success of a business. You need to understand how much money is on hand and how much is owed in order to understand the financial picture. Keep records detailed and current.

 

2. Disregard for or misinterpretation of financial records. Improper funding and failing to keep a close eye on debtors and creditors are examples of disregarding or misinterpreting financial records. Because business owners are handling all aspects of the company, financials tend to be overlooked.

A business could experience profitable years on the books and have solid accounts receivable, but due to poor control, be cash poor. Keep a handle on payables and receivables, don't let customers get too far out and be tough.

 

3. Failure to control costs. Controlling costs requires building an information system that tracks costs embedded in each business function or process. For example, if you fail to track the amount of time it takes to complete a project or build a product, the incremental labor cost cannot be determined.

Develop systems which track actual time expended so that labor costs can be controlled and employees have incentives.

 

4. Lack of internal control. Fraud can occur when owners fail to diligently watch their financial systems. Delegating this job to a business partner, bookkeeper or employee without personal involvement can lead to trouble. Take responsibility by putting controls in place to prevent diversion of funds, property or inventory.

 

5. Poor sales and customer relations. Generating sales and sustaining customers is a challenge, but a high level of customer satisfaction contributes to increased revenue and profitability. Talk with your customers about their needs and focus on client interests. The extra effort to increase customer service and sales will set your business apart from competitors and increase sales.

 

6. Insufficient working capital. Most businesses start with a small amount of capital. And although a business might be able to survive for a short time on little capital, but eventually money will run out.

The initial development of a business is crucial and should be supported with a financial cushion for unexpected costs. Determine your daily cash flow requirements and maintain a financial safety net.

 

7. Lack of adequate and appropriate insurance. This is a major cause of failure not often considered. A family dependent on income generated from their business should carry long-term disability insurance. It is far more likely to file a disability claim than file a claim on a life insurance policy.

Adequate life insurance is still critical, as it protects owners and family from financial hardship. If inventory and/or other assets are not adequately insured, a disaster can destroy the business. Companies should also have the proper level of insurance for flooding, workers' compensation and other potential liability insurance.

A broad range of insurance is necessary for the protection of the business and the family of its principals.

 

8. Failure to adequately train employees and develop employee relations. Create a work environment that keeps staff happy and motivated. Team member involvement in the business, such as team activities, training and increased education, promote a feeling of ownership. Well-trained, happy employees will treat their work as more than a job.

 

9. Improper strategic planning. Develop realistic and precise goals, including deadlines, in a formalized strategic and operational business plan. Include employees in this process and consult the business plan regularly to confirm that objectives are being met.

 

10. Track key business matrixes. If more business owners had control over factors that cause businesses to fail and tracked their key business matrixes, their business would succeed regardless of economic conditions. Companies that measure specifically their key matrixes tied to benchmarking goals have a better chance of turning problems around.

Integrating business matrixes is a solid investment and should be part of the continuing process as the business grows. Gregg Steinberg (gregg.steinberg@ipa-iba.com) is president of International Profit Associates. IPA's 1,700 employees offer consulting services to businesses throughout the United States, including Alaska and Hawaii, as well as Canada. Reach him at (847) 808-5590 or at www.ipa-iba.com.

Friday, 29 October 2004 05:29

Productive developments

Creating an environment that exudes a corporate culture geared toward overachieving is key in any industry.

While it is easier to measure in some industries than in others, measuring and creating performance criteria in a professional service firm can be challenging. But it does not have to be that way.

Professional service firms, like all other companies, have key matrices that they operate under. These can be calculated at an overall corporate level, departmental levels and at individual position levels.

It is incumbent upon senior management to identify, benchmark and track their firm's key matrices. Once this is accomplished, not only can firm performance be measured daily, each employee and each department can be measured daily as well.

Given this data, it is possible to design incentive compensation programs designed around performance criteria -- criteria that is specific, measurable and attainable. In this manner, each individual employee, each department manger and even each company executive can have personal compensation and incentive packages geared toward both meeting quotas and goals and also on excess profit-based incentive programs.

The key to daily management of the overall organization and each individual department is the ability to track what is happening on a daily corporate flash report. If you cannot measure it, you can not manage it. The roots of measuring are the benchmarked key matrices. Utilization of this methodology provides firms with a real-time ability to hold both employees and overall departments accountable, not just at the end of a financial reporting period, but hourly or daily. Why manage the game after the final whistle blows when it can be managed on a play-by-play basis?

When a company is run in such a way that everyone knows they can measure themselves against others or against stated tangible goals, productivity and performance tend to increase. The company then has the ability to publish this data on a regular basis internally, creating a positive environment of both individual and departmentwide competitiveness.

With these programs in place, performance awards are easy to define. Why wait for the end of the year to offer these? Instead, give them out throughout the year and create an environment that revolves around rewarding constant measurable excess performance.

The question often comes up around year-end based bonus programs. All too often, these programs become expected rather than earned by employees. Across the board, year-end bonuses do not act as an incentive. They actually have the opposite effect.

After all, if a self-perceived overachiever gets a year-end bonus similar to that of an employee who just does what is required, where is the incentive to excel? Rather than cut back, the overachiever finds a new employer that recognizes and rewards performance.

The key to running a productivity-based organization that consistently outperforms its own lofty goals is designing performance and incentive plans that are constantly achieved by a few and realistically achievable by many.

Constant and frequent reward wins the day.

Gregg Steinberg (gregg.steinberg@ipa-iba.com) is president of International Profit Associates. IPA's 1700 employees offer consulting services to businesses throughout the United States, including Alaska and Hawaii, as well as Canada. Reach him at (847) 808-5590 or at www.ipa-iba.com.