Management & Beyond

What does getting better mean?

Getting better means that the global economy is actually stabilizing itself to where it should be.

Sure, the world is in a recession but note that this recession is really an adjustment to reality.

The reality is that we will live in a world without so much credit just as we did in the ‘70s.

As we close this first quarter of the worst global economic performance in history, we must take into account some of the brighter notes of news related to this scrambled economic environment.

Some news of note has been the best four-week performance by the Dow despite continued negative employment data.

This last week, the Dow closed above 8,000 while reports show US jobless rate at 25-year high of 8.5 percent.

The last time the Dow rose for four consecutive weeks was between September and October of 2007 — when the index reached its record above 14,000.

A couple of weeks ago President Barack Obama freed billions of dollars to help the nation’s small businesses, where we will now have a little breathing room in managing our businesses.

Over the last couple of weeks bank accounting rules have been eased as well as there being a commitment from the world’s finance leaders to keep propping up the global economy.

This last Friday’s March unemployment report was the last big hurdle in determining how well things might seem to be.

Is the worst over?  No one is sure just yet, but so far so good.

Does this mean that those of us who have lost our jobs will get back to work soon?

Not really.

We must recognize that the industries that caused this economic meltdown are the industries that are pushing unemployment numbers up.

We must also recognize that those industries that are tied to consumer disposable spending are also as affected, where there is little chance for displaced workers gaining employment in those specific areas.

When we look at our businesses, we must take into account how we are going to manage our business in this new economy, this new opportunity to better our business practices.

Reviewing operations, processes and business structure is of paramount importance now that we have been given a second chance.

Our approach via our proven Operational Accounting methodologies will secure business’ ability to manage the changing economy and secure operations into the future.

This economy has adjusted itself where we now have an opportunity to better our business.

As I have been preaching the idea that American media could be fueling recession woes, I realized this last weekend that the media could in fact be freaking everyone out about this recession.

Ahh, but is that a good thing?

It was reported last week that California was the first large state to feel the effects of the recession when it reported that unemployment in the state was a whopping 10.1%. 

The County of Los Angeles reported a staggering 10.5% unemployment rate as well.

I find this interesting as I travel across the U.S. helping clients better their businesses where I have not seen the effects of a slowing economy. 

In my home state of California (soon to be Texas), I expected to see this fear mongering rhetoric as I was able to enjoy some time off in and around southern California.

Note that the unemployment rate in California and Los Angeles County is the result of out of work real estate agents, loan officers, and other banking professionals. 

Let’s not forget that California, Los Angeles County is home to the two banks that caused this mess, Countrywide and IndyMac Bank.

Of course unemployment is higher!

What I found was enlightening, optimistic and encouraging as opposed to those of us who sit in front of the T.V. waiting to hear the latest doom and gloom from CNN, Fox News, CNBC, Fox Business News, etc, etc.

Remember, we are talking about California where last week California Governor Arnold Schwarzenegger announced a State of Emergency related to California’s drought.

So I am in Downtown San Diego taking in the sights and good food.  As the day came to a close we figured on staying in a local downtown hotel Saturday night to drive back to L.A. the next day.

Sold Out.

It was difficult to find a hotel room in downtown San Diego this last Saturday night.  Not to mention that the streets were packed with restaurant goers where these crowds are only seen in San Diego in the summertime.

Granted there was a convention in town which created the demand that the hotels responded to with an average room rate of $280.00 per night. Wow.

I did a little survey and found that the Hard Rock Hotel as well as the Omni Hotel in downtown San Diego were sold out or nearly sold out.  Recession?  What recession?

Since San Diego was not the place to be due to the convention attendees taking up most of the rooms, we decided to try our luck at Pechanga Resort Casino in Temecula, California.  On our way to the resort, I decided to call just to make sure they had rooms and check on the rate.

Sold Out.

522 rooms sold out on a Saturday night at a starting room rate of $340.00 per night.

How is this resort able to sell out 522 rooms at $340.00 per room in a place that encourages guests to gamble?

Again, I ask are we in a recession or is the media guilty of fear mongering?

Please do not misunderstand that the U.S. economy is in trouble and the trickle down effects of failed bank mortgages will continue to negatively affect growth across all industries (I give it till June of this year).  But, as I have been writing all along, we need to be prepared.

I would like to think that consumers taking up all the hotel rooms in San Diego and Temecula are savvy consumers and business owners that have realized that credit is probably not the best financial resource…anymore.

I would like to think that these consumers and business owners are stirring this economy with good old fashioned, hard earned cash.

Remember that old rule of having just one credit card for emergencies?

Maybe we should heed that caution.  

I have been preaching the fact that business needs to manage its way through these tough times and I have also phrased this economic downturn as tough times rather than bad times.

Why? Because of all the things I have been able to learn over the years is that the U.S. economy or any economy, is cyclical.   Anything for that matter is cyclical; rather what comes up must come down.

In the case of this recession or economic slowdown, I have been listening and helping business owners grasp a better way of managing their businesses where their success is important to our economic recovery.  

In the last four days, I have received unsolicited emails from my clients where they are touting better than expected sales as well as better than expected profits from their business. One has even highlighted the fact that his sales are down from this time last year, but his profitability is up.

How is that possible? It actually is possible, that’s what we do.

So now we have this pretty impressive speech from the President last night as well as comments from Federal Reserve Chairman Ben Bernanke, stating that this recession will end by the end of 2009 and full economic recovery will take another two to three years.

President Barack Obama made significant promises in last night’s address to Congress where we should now feel more confident about this recession ending by the end of the year.

I feel just a confident about the tide changing. The big question is, are you and your business ready to take the place of those businesses who didn’t heed the warning to get organized, manage costs and develop better processes?

As I have written many blogs and articles regarding this economy and our responsibility in garnering help for our businesses, I feel it time that those businesses that have prepared and can move into the next level prepare to do so by the end of this year.

There are many vacant businesses out there that did not plan and therefore have unfortunately become a victim of this economy, but for those businesses who have prepared, now is the time to plan to make a move.

Can a business actually have negative annual sales but still generate profit as some of my clients have?

Yes, a business can do that. That is where our skill at Operational Accounting Consulting comes into play.

Good luck everyone,

The U.S. National media has done a great job in perpetuating a doom and gloom scenario for the next couple of years.

I do agree that things are tough, but as I have commented before, we are headed backward into the ‘70s.

For those of you who remember, the ‘70s, the world operated via cash and little credit.  The last 20 years of economic expansion has allowed us to operate via credit and little cash.

We need to get used to operating via cash again, just like we did in the ‘70s.  I trust disco will not return in this time.

I stress the importance of learning to plan and strategize how in fact we will use cash because whether we like it or not, times will get tight.

Notice how I said tight and not tough.

Tough will be for those of us who do not plan, tight will be for those of us who have the vision to plan and ride this out so we can come out ahead when it’s all over.

After all, that is what business is right?  Survival of the fittest.

I can appreciate an article via the Associated Press today where we are doing a great job in reducing our dependency on credit.

For someone like me, this article is an indicator of good things to come…if we plan.

On another note, I have noticed over the last two months that as consumer spending is lower overall, we are still in business and our businesses are still making purchases.

Yesterday, I was in a Los Angeles Staples store to see that small business owners are still buying things.

Not only are they buying things for their businesses, but they are buying big ticket items like printer/copiers.

I asked the manager of that store is she has noticed a decline in sales and she said no.

As a matter of fact she said that this last Sunday was their largest sales volume they had seen in months.

Hmm.  Is the media scaring us into managing our cash?

If so, good job.

I was also in Atlanta Georgia in November at another Staples store and noticed similar spending.

Bottom line is that we are going to go through difficult economic times, but we have the choice to make them tough or tight.

As we have now moved into the reality of the New Year and uncertainty in the economy, I find that with all the “panic” there are still service oriented businesses neglecting one thing.  Customer Service.

For those of us who own businesses that rely on customers (which is pretty much all of us), now is NOT the time to treat your customers as if they are bothering us.

I say this with great distain for those businesses (public and private) that do not take the time to re-train employees in how important each and every ONE customer is to our business.

Yes, ladies and gentlemen in these tough times there are still businesses out there that really don’t care if you walk into their business or not.

Well, at least that’s what it feels like via poorly trained employees that seem frustrated to serve you or those employees who seem to “cool” to acknowledge you would like service.

It’s as if employees despise being at work and we (customers) are a distraction to them just hanging out, getting paid.

In my continued work toward my Ph.D. and researching organizational failures, I have the luxury of studying this dynamic within businesses to realize that in these tough, uncertain times, we cannot afford to lose customers.

We have to re-train our employees, our managers; ourselves to make sure we provide the service required by our consumers.

We cannot blame business failures on the economy.  That issue will not be relevant soon, where we must re-train our employees to do the best they can to keep that customer coming back for more.

 

I thought this an interesting topic to cover.

The cost of information.What is it you are wanting to know about your business, rather what would you like your business to tell you?Some business owners operate off a “gut feeling”.Hmmm, it might rain today, business will suffer.Ladies and Gentlemen, that is not the type of information you should be using to make business decisions.Ever heard of that old saying, “you’ve got to spend money to make money”?Sure you have.  In this context I am refering to you investing the money in your business you will need to garner valuable information that will support your business in the bad times, as well as the good times.

I recently spent time with a client who was a little reluctant to assign the task of gathering particular data (labor, material, time) to a full-time employee.  The client was even reluctant to spend any time gathering data.Ladies and Gentlemen, if you don’t take the time or spend the money to gather data that is of paramount importance to your survival, I say it is a matter of time before the financial posture of your business puts you into a difficult cash crunch.I have seen it time and time again.  Trust me…it will happen.

For those of you who are not aware of what is going in the macro/global economy, banks are afraid to lend each other money! That means that if banks are afraid to lend to and from each other, they sure as heck are not willing to lend to us, the small business owner.

I find this ironic.Small business is the back bone of the U.S. economy.Without the ability to borrow cash, most small businesses who rely on monthly loans to make payroll, will simply not have the money to make payroll.Believe it or not.As small business owners, we must get organized and spend the time and money to hear what our business is telling us.In nine clients this year alone, I have been able to save them over $700,000 in operating costs and generate almost $200,000. in realized gains - not seen before.How did we do that?  Investigate, analyze, implement.We have to be prepared for the tough times to come. 

I imagine it is exciting for you to have a small business because now you are your own boss. 

You get to take time off whenever you need, you get to make business decisions and you have allot of pride in the business you have built.

Good for you!  You should be proud of yourself.

Most people just sit around and daydream about owning their own business, but you when out and did it!

Great job.

Make sure that you are aware of all aspects of running your business.

There is much more to running a business such as the financial posture of the business, cash flow, operations, sales, marketing and the dreaded, tax man.

Don’t forget about the tax man in the form of payroll taxes, sales tax and quarter taxes.

It’s OK, don’t get nervous.  All business, small, medium and large have to face these operating issues.

Some do it well and some do it poorly.

I always recommend paying attention to the financial aspect of your business as this is the most imporant piece of any business.

Look at Starbuck’s.  They have been growing at a 25% rate, per quarter, since 1992.

Now look at them.  Today they announced they will close 600 stores in the coming year because they now realize that too many stores costs too much money.

My point here is to manage your business accordingly where you keep on eye on your finances.

How do you do that?

Simple.  Most accounting software packages have tool inside of them to guide you everyday, every week or every month.

QuickBooks is one of the most popular accounting software packages out there and are very easy to use.

Successfully operating a business is easier than you think.  Just pay attention to the financial side of the business and everything else will fall into place.

I have seen over 300 small businesses over my ten years of consulting where all of the businesses had the same issue.

Lack of financial management. 

Most people would say that these are tough econimic times for small business, where some of that is true to some degree.

Small business, as well as most business, small or large, survive off of what we call consumer disposable income.

Simply put, disposable income is the money consumers have to spend after they have paid for the essentials of life.

This is called discretionary income.  These are the things we need to pay for such as our mortages, health insurance, gas, etc.

Disposable income are those things we can afford to “not” purchase such as a latte from Starbuck’s, vacations, movies, etc.

It was announced today that Starbuck’s will close 600 of its stores in the coming year.  That is bad planning on Starbuck’s part.

All business is subjected to the rise and fall of dispoable income where I strongly reccomend writing a business plan for your business.

Whether your business is small, medium, or large like Starbuck’s, you need a plan.

Even though you have been in business for years or are just starting out in business, you need a plan.

A business plans allows you to manage exepenses, develop strategic marketing plans, and more imprtantly, a business plan will help you survive these tough economic times.

Don’t worry, things will get better, they just will.  But, you have to be able to survice unitl things get better.

With today’s credit crunch and the housing market continuing to implode, most entrepreneurs and small business owners are finding it difficult to operate their business due to a lack of working capital.

The quick solution is to run to the bank for a loan or source relatives to help manage these difficult times in our small business. 

Bank loans or any kind of loan for that matter is not the correct solution. Believe it or not, most small businesses have working capital imbedded into their operations where it takes a trained eye to find it.

Most small business owners don’t realize that simple management of cash flow and a little due diligence relative to managing the sources and uses of cash flow can actually create most of the working capital we all look for.

Sure we’re going to have to tighten our belts these days to ride out the housing crisis, which by the way will eventually spill over into our businesses regardless of what we service or sell. It’s osmosis. We need to understand that most small business is built via consumer’s disposable income where a lack of cash or a decrease in consumers’ disposable income, will eventually affect our business as well.

Oddly enough, most economist predict a recession where last month’s consumer disposable income rose to over 9%, it is getting harder to predict which way the next 15 months might take us.

For those of us that are relatively knowledgeable about Microsoft Excel and have a working understanding of macros and or formulas, you can create a simple spreadsheet that allows you the ability to project and manage the sources and uses of cash as it relates to your particular business.

It’s really rather simple where all you have to do is create two columns in a new spreadsheet document where one column should be titled “estimated” and the column right next to that should be titled “actual”.

To the left you want to incorporate the four parts of your income statement, such as sales, COGS, expense and finally total income.

Once you have this basic template set up in a new Excel spreadsheet you will begin to see how it should calculate via a couple of formulas.

The cash flow tool is easy to make and easy to manage with your dedicated input on a daily or weekly basis.

I give all my small business clients an Excel template like this so they can use it to manage the ebbs and flows of their business.

There are many ways to manage cash flow in our small business where taking on a loan is not the best solution.

There are many templates of cash management tools on the Internet and there are many reporting tools inside the typical accounting software package suck as QuickBooks and SBT/ACCPAC where we may not need to source a bank loan.

But, if you do need to source loans to generate working capital, make sure you are diligent enough to manage the expense you will incur via the loan payment.

Oh yes, and make sure you are able to incorporate the interest expense your business will incur via that same loan.

So, what’s more cost effective, due diligence in a cash management process or a bank loan?