KYN Know Your Numbers

KYN: Debt Structure

In this edition of KYN: Know Your Numbers™, we build on the previous topic of Debt Ratio by looking deeper at Debt Structure.

Debt Structure refers to the ratio of current/short term debt to long term debt in your business. This metric provides insight into how you are financing your business’ needs.

Those who know me know that I am consistent in my belief that short term assets should secure short term debt and long term assets should secure long term debt. This is because short term debt (think about your current liabilities) is expected to be paid off with current assets (like cash) whereas long term debt would be paid out with fixed assets (if a lump sum is required versus retiring the debt over time with regular payments.) That premise is Financial Management 101, and while not a hard and fast rule, it is sound guidance.

More to the Debt Structure conversation, we calculate this ratio by dividing Current Liabilities (all payments and payables due in the next 12 months) by Total Liabilities; same for Long Term Liabilities (total debt not yet due within the next 12 months.)  Here is an example:

Current Liabilities Long Term Liabilities

Accounts Payable

$1,350,000 Long Term Debt (LTD) $3,100,000

Overdraft

$687,000

Shareholder Loan

$300,000

Taxes Payable

$27,350

Current Portion LTD

$487,000

TOTAL $2,551,350   TOTAL

$3,400,000

In this example, there are total liabilities of $5,951,350 (calculated as $2,551,350 in Current Liabilities + $3,400,000 in Long Term Liabilities.) The debt structure is 42.8% short term and 57.2% long term. While this is good to know, the next question is “So what?”

On its own, the debt structure ratio does not carry much weight. The value is found in trending the debt structure ratio. For example, if your short term debt trend is increasing it may be an indication of liquidity challenges in your business.

Ideally, calculating your Debt Structure Ratio will cause you to ask more questions and seek more clarity, such as:

  • What types of debt make up my short term liabilities? What are these debts for?
  • Are my short term liabilities trending up, down, or remaining fairly steady? Why?
  • What is the right ratio of Debt Structure for my business/industry?

With economic indicators preparing us for more volatility than years past, and with interest rate increases on the horizon, it is a good idea to have abundant clarity on your overall debt situation. Understanding your Debt Structure, including how your Debt Structure will affect your business under different economic situations, creates an opportunity to “get your house in order,” so to speak, before things start happening.

Plan for Prosperity

The winds of change are blowing. Are you simply going to lower your sail and wait it out, hoping to survive whatever comes? Or are you preparing to chart new courses so that whatever winds you get you are still able to make progress and move forward?

KYN Know Your Numbers

KYN: Debt Ratio

You have probably been told that knowing your numbers is critical to your business management success. Truer words are rarely spoken. However, it is not lost on me that there are A LOT of numbers at play, and numerous measurements you can take…it is easy to become overwhelmed! The question then begs, “Which numbers are the important ones to know?”

If you are in business, you have heard about KYC: Know Your Customer. Well this is “KYN: Know Your Numbers™” and we begin with the Debt Ratio.

The Debt Ratio (also known as Debt to Asset Ratio) is a leverage ratio, meaning it is a measurement of the debt your business holds. The calculation is “Total Liabilities divided by Total Assets” and the result of the calculation tells you how much of your assets is financed. For example, if you have $5million in total liabilities and $10million in assets, your Debt Ratio is 0.5 : 1 (or just 0.5 for simplicity.)

Each industry has a “comfort zone” for where a debt ratio should be. This comfort zone is also flexible (to an extent) depending on where you are in your business’ life cycle. Knowing what the comfort zone is for the industry in which you operate is important.

Why I am Cautious About the Debt Ratio

  1. Because it lends itself to subjective information. Here is what I mean: when buying something, we want the price to be lower; when selling something, we want the price to be higher. While compiling the value of all your assets (a “selling” mindset) it is easy to value what you have at a premium, because A) it is yours, B) you love it, and C) you want to show that it was a good decision to acquire it.
    If the value of business assets is “padded,” then the calculation presents a skewed result to the positive.
  2. Off Balance Sheet Items. Over my 15 years as a lender and business adviser, I couldn’t even count the number of “off balance sheet items” I have had to discover. Whether it be trade credit from a vendor (which would lower the total liabilities), leases and leased equipment (which lowers both the total assets and total liabilities), or “forgotten” accounts payable (which, again, lowers total liabilities), the figures that somehow do not get included in the calculation can lead to a profoundly different result
    If the value of the liabilities is incomplete, then the calculation presents a skewed result to the positive.
  3. Appreciation of asset values “support” increasing levels of debt. Assets that have experienced an appreciation in value (such as real estate or quota) will lower the Debt Ratio with all other things being equal. This can provide an false sense of security to then take on more debt because “the debt ratio is strong and improving.” This is especially dangerous when the new debt is short term/operating debt. Should the value of those assets decline, there will quickly be pressure put onto the business by creditors.

These examples are not to suggest that there is malicious intent when providing information to do this ratio, but merely to draw attention to a subconscious behavior that is affected by emotion.

Plan for Prosperity

Knowing your numbers is critical, but only looking at current numbers may not tell you enough. What has been the trend of your debt levels, your assets values, and subsequently your debt to asset ratio? What has led to the changes in your asset values? Was it asset appreciation? Do your assets now include far more depreciating assets than before? What has led to the change in your liabilities? Was it debt paydown, or new long term debt? Was it additional short term debt/operating debt? Are your current liabilities making up a greater portion of your total liabilities than 5 years ago (or 10 years ago?)

In the next KYN commentary, we will discuss the trend of short term liabilities & long term liabilities, and how it affects Debt Structure.

The Uncontrollables

The Uncontrollables

There are many factors at play which affect your business each day. (Oh, look…I’m a poet and didn’t even know it.)

How is your business affected by:

  • NAFTA
  • Trade Wars
  • Real Wars
  • Geopolitical strife
  • Interest Rates
  • Income Tax
  • Sales Tax
  • Foreign Exchange
  • Oil Prices
  • Commodity Prices
  • Utility Prices
  • Inflation
  • Deflation
  • Theft and Vandalism
  • Weather and Natural Disasters
  • The 4 D’s (Death, Divorce, Disagreement, Disability)
  • Physical, Emotional, Spiritual, and Mental Health

You have full control over none of these. At best, you might have partial influence over two or three on that list. Yet you, your business, and ultimately your family will all feel an effect that falls somewhere between minimal and profound.

The way to minimize the negative effect of any of The Uncontrollables is to prepare. You wouldn’t head out on a road trip with an empty fuel tank and no spare tire, would you?

A strong balance sheet (meaning low Debt to Equity along with surplus Working Capital) will mitigate the negative effects of The Uncontrollables. Conducting sensitivity analyses on the likes of tariffs, interest rate changes, tax changes, and foreign exchange will provide your business with the critical knowledge needed to make informed decisions in the face of The Uncontrollables.

Plan for Prosperity

We can scream and holler, protest, or pout all we like in the face of The Uncontrollables; it will change nothing.

God grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.

-Reinhold Niebuhr

Having the wisdom to know the difference between between what you can control and what you can’t is merely the fist step; acknowledgement of what you cannot control on its own will not mitigate the effect of The Uncontrollables. Action will trump intention every time.

Take action to protect your business, your family, your legacy. You need not be a rudderless vessel helplessly surviving on the mercy of the sea. There is no need to be stranded on the side of the road with no fuel, no spare tire, and no phone.

Bubbles2

Bubbles

One of my investment advisers forwarded an article to me recently that contained an especially compelling paragraph. The entire article is US focused, penned by a US writer and published in a US publication (reprinted in Canada in the Financial Post.) Still, the applications of these two sentences are broad and deep:

“…it (recent economic growth) is driven by another round of financial engineering that converts equity into debt. It sacrifices future growth for present consumption.”

– Steven Pearlstein, June 15, 2018

The comparison was being made to the US housing crash that kicked off the global financial crisis in 2008. We all know what happened there; no need to rehash it here.

Yet here we are, barely 10 years later, standing at what some people feel is the precipice of another recession.

“Those who cannot remember the past are condemned to repeat it.”

– George Santayana (Ref.)

The statement from Pearlstein referenced above does have application locally: the recent rapid appreciation of farmland has provided a financial backstop to farm businesses that would have otherwise found themselves painted into a very tight corner. The present consumption, elevated operation costs and living costs driven by high priced equipment and higher living standards, is what, in this space, is leading to the sacrifice of future growth. Here is what I mean…

Les Henry recently penned an article titled Saskatchewan Farm Income and Land Prices which was published in Grainews. He compares farm income and land prices having converted both to 2018 dollars to quantify his position. An example Henry uses in the article describes how a friend of his purchased a brand new loaded Lincoln in the mid-1070’s and how the equivalent number of bushels of wheat, the staple crop in those days, was approximately 1,500 bushels needed to purchase that car. My dad used to make the same argument using the example of the only new tractor he ever bought: a 1974 CASE 970 that arrived in the yard with the plastic still on the seat. The qualifying statement was that it only required 2,870 bushels of wheat in 1974 to buy it; about 7 bushels per acre on his small farm. What does 7 bushels of wheat get you today on your farm?

Les Henry believes that current land prices are unsustainable. If he is correct, then we are almost certain to experience a bubble, even if it is a small one simply because of the amount of “equity” being used to backstop present consumption. Equity is in quotes because it was not earned equity from retaining profits in a business, but rather windfall equity from land value appreciation (similar to what set off the US housing crisis.) The rise in land values created the equity that, in many cases, has been turned into debt. Should land values pull back, lenders will be quickly re-evaluating their security and making some difficult phone calls where warranted.

If there is a bubble happening here, all that “equity” that was converted to debt has certainly helped create it.

Plan for Prosperity

We have dedicated a lot of space to discussions on growth here recently. It saddens me to think that future growth may have been sacrificed for current consumption. However, unless the wolves are near the door there is still opportunity to right the ship. Profit opportunities can be found, but it will take work, intention, and likely having to answer some uncomfortable questions.

The last five weeks we have discussed business cycles, elasticity of demand, the power of a network, intentionality in your business, and your vision in your business. It is no surprise that each of these topics, if parlayed into tangible action within your business, translate into a stronger entity that would likely provide a view from high on “success mountain” looking from a safe vantage point well above the “precipice of economic recession.”

If you want some ideas on how to climb higher up onto Success Mountain, please call or email.

 

Cycles

Cycles

“It’s cyclical.”

This statement applies to so much in our world. From interest rates to fashion trends, from climate to markets, so much of what we see, hear, do, say, and feel is cyclical.

In meeting with commercial bankers recently, here are some of the points I took special note of in the conversation:

  • Many of our clients are struggling through a slow-down right now.
  • Very few applications are for growth. Most are to restructure, especially in preparation for increases to interest rates.
  • So many of our clients do not understand their balance sheet or how it affects their business.

The first bullet above led to a longer portion of the total conversation. The banker who made this statement went on to describe how the boom years we have recently enjoyed led many people (entrepreneurs and employed folks alike) to create some bad habits, such as not preserving cash (working capital) and increasing their debt. When things slowed down and business got tight, the debt payments still need to be made, as does payroll, and utility bills. Somehow, the elevated lifestyle expenditures that cycled up during times of easy prosperity did not cycle back down when profitability and cash flow did.

A similar sentiment was gleaned from an ag banker (who asked to remain nameless while granting me permission to include the response below) serving North West Saskatchewan and North East Alberta. When I asked about what the trend has been in that part of the province for farm land prices and rent rates, the response included the following:

“Profitability and cashflow has been squeezed the past 3 years, due to a combination of the weather anomalies (in most cases, more moisture than needed), increase in production costs, and financing needs (and in some cases may be “wants” vs actual “needs”).  Those producers/files with the stronger balance sheets and working capital positions, have fared better through this, compared to some others.”

For any of you who think that your business (or industry) is the only one to have to manage cycles, please understand that cycles are industry agnostic. The market does not care what you’ve been through, what your plans are, or what your name is. Your business plan needs to include M.O.C. – Management of Cycles.

Long time readers of my commentaries know that I have referenced Moe Russell of Panora, IA on more than one occasion. It was from Moe that I first heard the term M.O.C. – Management of Cycles. Moe tells the story of how he picked it up during a chance conversation in an airport with Matthias Grundler, the then Head of Procurement for Daimler. When asked, Grundler admitted that M.O.C. (management of cycles) was his greatest concern.

What cycle are we headed into right now? If we knew, if anyone truly knew, business would be so much easier! The risk, of course, is that we tend to get caught up in recency bias:

Recency bias occurs when people more prominently recall and emphasize recent events and observations than those in the near or distant past.
By putting more credence into recent successes rather than recognition of impending change, we set ourselves up for what is happening in many small to medium sized businesses right now: financial stress leading to major upheaval in the business.

Plan for Prosperity

Trying to fight against the market cycles (or industry cycles as it may be) is like trying to fight gravity. Like it or not, it will affect you. Cycles have been happening for a lot longer than you’ve been in business, and will continue to occur long after you are gone!

“Bullet proof your balance sheet during the good times, so you can catapult ahead of your competitors during the bad times.
If you get greedy during the good times, you’ll likely be on your knees in the bad times.”

Moe Russell
President, Russell Consulting Group

Look back to the response above from my ag banker colleague; those (businesses) with the stronger balance sheets and working capital…have fared better through this…” The businesses that built a balance sheet to protect them during a down cycle are the businesses that are ready, and as such will take advantage of the opportunities presented by a down cycle. Those opportunities range from additional labor (that may have been laid off from a financially weaker competitor), picking up assets (land, equipment, or buildings) that may have been relinquished during the down cycle (and are likely far cheaper now,) or possibly even buying out a competitor who has been left in a weakened state by the market cycle.

“Market cycles will hurt some, but offer opportunity to others.
The difference between who suffers and who prospers is…Who’s Ready.”

– Kim Gerencser (March 2013)

Which side of that line do you want to be?

Elasticity

Elasticity

Elasticity is an economic term that assesses the change in demand of a good or service relative to changes in other factors, such as price, consumer income, or supply. Goods and services are said to be elastic when they are more sensitive to changes in other factors. Examples of elastic products and/or services would be new home construction, extended vacations abroad, and (sadly) savings accounts. Inelastic goods and services have very little change in demand when other factors, such as price, are changing. Examples are gasoline, utilities (natural gas, electricity, water) or an ambulance ride (no one dials 911 for an ambulance, but then shops around for the best price…)

When considering what your business provides, whether it be products or services (or both), what types of elasticity affect the demand for your offerings?

The most common type of elasticity is price. How does a change in the price of your product or service affect demand?
Another type is supply. How does a change in supply affect demand for your product or service?
Another type is customer income. How does change to your customers’ income affect demand for your product or service?

One factor that contributes to elasticity of your product or service is the availability of a substitute product or service. Who are your competitors? What makes you different from them? Are they local? Do they operate online? Etc.

A business that had exclusive distribution rights on a high quality brand name product felt that its business was immune from price elasticity. While not over-charging, they did become complacent in their marketplace because they believed that their competition provided inferior products. When competition arrived in their marketplace which their customers felt was better value (price vs quality), the business suffered.  At this point, they were forced to react to their market’s pressures. Reactive is never as good in business as proactive.
(How many specific examples can you think of that are aptly described by this generic story?)

If you have experience recent changes in the demand for your product or service, one of the many factors to consider is elasticity (customer service and product/service quality are the foremost factors to understand in this realm.) However, this will be very difficult to quantify without sufficient business record keeping and information.

Plan for Prosperity

There are many factors that affect your marketplace and your position in it. This becomes even more complicated in the current age of technology. How are you planning to stay relevant? Or better yet, how are you planning to innovate, to lead the market and not just keep up with it?

Understanding the elasticity of your product or service is an important piece of knowledge that accentuates your ability to position your business in your marketplace. It will give you more power to prepare for how those multiple factors (such as price, supply, and customer income) will affect your business.

Elasticity is not a perfect function, nor is it the only measurement you should employ. There are anomalies: I think it is sad, and a little dangerous, that new electronic devices (like smart phones) and consumer debt appear to be inelastic, yet should be highly elastic.

goal planning

Intention

It has been said that whoever enters the room with the greatest intentionality will win.

While I disagree emphatically with any win-lose proposition in business, the heart of the message shines through: intention wins the day!

What type of growth has your business experienced over the last 5 years? Was it intentional, or did it just happen? We have stated in recent commentaries that accidental growth is not sustainable, and the reason it is not sustainable is because more often than not the credit for the success is misplaced.

My friend, Tom Stimson from Dallas, TX, works exclusively with audio-visual companies and writes a newsletter he has titled Intentional Success®. 

“Does your business grow or decline seemingly outside of your control?

Do you wonder whether there will be any profit left at the end of the year?

Is success something you hope for, or are you actually doing the things that cause success to happen?”

-Tom Stimson, owner of The Stimson Group

Prophetic words.

So, to decipher whether the growth your business has recently enjoyed has stemmed from intentionality or luck, one must do a post-mortem.

project post-mortem is a process, usually performed at the conclusion of a project, to determine and analyze elements of the project that were successful or unsuccessful.

Source: Wikipedia

This definition assumes that there was a specific project involved, which would have had goals, objectives, parameters, and timelines all clearly defined. Such a project would illustrate clear intentionality. In the absence of such a project with its defined benchmarks, how do you conduct a post-mortem?

(HINT: It is pretty tough to find what you don’t know you’re looking for.)

Suffice it to say that if we don’t know what to look for to conduct an accurate post-mortem, then our growth was most likely unintentional.

My big questions regarding unintentional growth are:

  1. Who/what gets the credit for the success?
  2. How do you replicate this success if you don’t know what led to it?
  3. If attempts to replicate the success fail, what gets credit for the failure?

This circles back around to the most simplistic of questions that many entrepreneurs have difficulty answering: Why are you in business? What do you want your business to accomplish?

These two questions are foundational in my work with privately held businesses. Without the clarity these questions provide, setting direction and establishing growth goals, is quite difficult.

Plan for Prosperity

Intentional growth requires a number factors to be present:

  1. Specific outcomes declared.
  2. A plan to achieve those outcomes.
  3. A review of actions and outcomes to determine if expectations were met or not, and why.

To satisfy these factors, simply have a vision to establish goals, build a business plan describing what you’ll do to achieve those goals, and maintain a system to compile information along the way so that you can measure your progress.

In the absence of those factors, growth is, at best, accidental.

Vision

Vision

Where are you looking?

As an entrepreneur, there are numerous issues clamoring for your attention. Which ones get your time and focus?

If your business is a vehicle hurtling down the highway, where are you sitting in the vehicle and where are you looking?

  1. Driver’s Seat
    The now defunct automaker, Pontiac, once used the tag line “Built for Drivers.” Many years ago, a good friend owned a Pontiac Grand Prix. As I got in, and looked for the seat adjustments, I found that there were not many and they were manually controlled; whereas his driver’s seat had full power adjustment and more. As I poked fun at the lack of amenities in his car, he casually fired back, “Built for drivers.”
    The driver’s seat is command central. There is little that cannot be controlled from the driver’s seat, and practically nothing can be controlled elsewhere which is not controllable from the driver’s seat. The control is centered here.
    In your business, the metaphor of the driver’s seat is not just a seat for one (I am sure you do not want a culture of autocracy in your business). With whom are you sharing control? Do you all have the same goal for where the business is going, or are you all tugging at the wheel trying to change direction, arguing over heat versus air conditioning, or fiddling with the radio?
    Maybe you are sitting in the passenger seat, providing navigation assistance and influencing the decisions of those in the driver’s seat? Just be aware that if you are in the passenger seat, it takes a more concerted effort to see what the driver sees. Read on…
  2. Dashboard
    Truck DashbaordThe more comprehensive the dashboard, the better. Personally, I am highly frustrated at vehicle dashboards that have only three gauges and a plethora of warning lights. By the time any of those warning lights appear, it’s too late, the damage has been done. Whereas a a dashboard full of gauges allows me to monitor all the critical functions of my vehicle (my business.) My ideal dashboard looks more like this photo.
    Are you looking at your dashboard? Is your dashboard full of gauges or warning lights? If you have ignored the gauges, you will still get a warning light (and possibly an alarm) indicating your working capital is depleted, your staff is unproductive (maybe even leaving your employ), or your overhead has gotten out of control. These alarms could come from your banker, your key managers, or your accountant. But once the alarm has sounded, is it too late? It is much easier to proactively respond to an overheating engine by watching the gauge on the dashboard rather than getting an alarm telling you “it’s too late, now pull over and stop.”
  3. Rear View Mirror
    While most drivers fail to look in their rear view mirror enough, entrepreneurs tend to look there too much. While it is human nature that our past experiences shape our future decisions, it is impossible to move forward if you are only looking back. (Notwithstanding, I continue to be amazed at how many drivers do not look back, even when their vehicle is in reverse!)
    Take a look back regularly. Acknowledge the decisions that created the path left behind. Learn from them. Make better decisions going forward.
  4. Out the Windshield
    New drivers tend to look down the hood of their vehicle at the road immediately in front of them. By doing so, they often fail to recognize a hazard up ahead. This practice can result in severe reaction to avoid a hazard which may put the vehicle out of control which may result to a collision, injury, or worse.
    New entrepreneurs often have the same behavior: they tend to look only at what is immediately in front of them. Like the new driver, this can result in extreme adjustments from a reaction to avoid a hazard whether perceived or real. Does this apply only to new entrepreneurs? Sadly, no.
    By keeping your eyes up and on the road ahead, the driver can identify potential hazards early and adjust strategically. She can scan the landscape to the left and right for wildlife and intersecting traffic. Doing so allows her to be prepared to respond quickly and accurately versus panicked and severely.

Plan for Prosperity

Whether you sit in the driver’s seat or the passenger’s seat, you have the best perspective to see what is ahead. Discuss the observation and decide how to respond. (Vision/Strategy)
There is a reason the rear view mirror is a fraction of the size of the windshield. Use each of them accordingly. (Progress)
Build yourself a dashboard that allows you to quickly and easily monitor the most critical functions at a glance. This dashboard information is only useful if current and accurate. (Monitor & Control)

Where are you looking?

Growth subtopics part 1

Sub-Topics of Growth (Part 1)

Last week, we opened up the discussion on the many facets of growth, and then touched on the many sub-topcis of those different facets. This week, we’ll being digging deeper. Here is a graphical reminder of what we started.

Facets of Growth 1

Customers

A foundational rule of the investment advisor world is KYC: Know Your Customer. When I was a part of that world, it was paramount that Know Your Customer protocols were religiously adhered to. The main tenet of this requirement was that an advisor could not offer proper investment advice without first knowing some very important information about their client: age, retirement goals, income, risk profile, and net worth are but a few of the critical details that must be signed off. No exceptions. By offering advice and/or selling investments to a client without proper KYC, the advisor is risking his or her career. Yes, it is potentially that severe.

Who are your customers? What do you know about them? Do you know enough about them to be able to anticipate their needs? Is their business growing? What are their challenges?

Who are your potential customers? What do you have to do to find them, attract them, keep them? This is a lot like dating; pursuing a courtship you might say…

The list of anecdotal evidence as to the importance of customers is long, as is the list of reasons why keeping your existing customers is easier and less costly than constantly finding new ones.

How do you market to your existing clients? Your future clients? Anecdotal, but it is amazing how often you can hear it said from an existing customer, “Oh, I didn’t know you had that!” Do your clients know about all the products and services you offer?Customers matrix

People appreciate being appreciated. Often as simple as a Thank You note, appreciation cannot be undervalued in your eyes. Convert your clients to “raving fans” and they will do your marketing for you by telling others about how good you are. Give them a hat or jacket, and they become a mobile display of your branding.

Service sells. It sells more products. It sells more service. It sells an incredible number of books. Often times it can even sell a crappy product…several times over! Most importantly, service creates loyalty. What are your service standards? Do you have an established procedure for how you provide service?

There are many ways to segment customers, but for this conversation the important distinction we will draw on is whether your customers are relationship customers or transactional customers. One isn’t better than the other. Wal-Mart has built a global empire on doing business with transactional customers. Other retailers try to create relationships with their transactional customers by implementing loyalty programs (Ref. Canadian Tire money, PC Optimum Points, etc.) Again, it is not that one is better than the other; what is important is that you know which space you play in. If you are a relationship business but treat your customers as transactional, you are probably losing customers and wondering why. If you are in a transactional business but you treat your customers as relationships, you’ve probably got incredibly happy and loyal customers which might confuse why your net profit margins are so poor.

To toss out one more anecdote, “Customers are your reason for being in business.”

Product or Service

Whether your business deals with products, services, or both, it is best to know what you do best, which of your offerings is most profitable, which is least profitable, and where to dedicate your time. This can only be done with accurate data on business performance (we will discuss more about Information Management in Part 2.)

Where does your product or service fit on the value chain? Do you manufacture from raw materials? Do you retail to the final user? Do you provide logistical solutions? Are you providing ancillary services somewhere along the value chain? Every step in the process is important, some more than others. If the link you occupy can be internalized (consider Wal-Mart (again) which owns its own trucking fleet) or eliminated altogether, taking some time to examine your business’ future would be advisable.

How do you market your product or service? Is your marketing reaching the right audience? How do you know? As mentioned above, if any of your current or future customers says, “I didn’t know you had/did that!” then marketing offers tremendous growth opportunity!

I cannot recall where I heard it, so if any readers of this post know who said it first, please let me know so I can provide attribution:

“Innovate or die.”

-please help me fill in this blank

Any product or service that is not under consistent evaluation for opportunities to innovate will find itself on the trash heap of great ideas/products that failed to keep up! Apple was making a runProduct_Service matrix at being the largest company (by market capitalization) in the United States, if not the world, from consistently introducing a new product that was nothing more than innovation to an existing product (which an innovation of a previous products….and on and on…) In this day and age where the consumer has an insatiable appetite for the new & improved, latest & greatest, “give it to me right now”…well, innovate or die takes on a very important meaning.

What is the return you are achieving on the investment you have made in your product or service? Keep in mind, your investment is more than monetary; it also includes time. The time you spend on low profit products or services will leave you less time to invest in the higher profit products and services that you offer. Remember, this time investment must also include family time lost (or otherwise allocated.) Obviously, businesses cannot just ignore anything that does not provide the highest profit, but knowing where your best returns are stemming from will allow you to maximize your return on investment.

Plan for Prosperity

Last week we offered six facets to growth; this week we delved into two of them and provided nine sub-topics, each of them a growth opportunity. By looking into any of these subtopics and leveraging the growth opportunities you have available, can you improve your entire business by 1% this month? If you can do that this month, can you do it every month. An improvement in your whole business of 1% per month means that your business will have grown by 12.68% more than if you had done nothing. That’s 12.68% better than you would have done, 12.68% better than last year, 12.68% straight to your bottom line.

Who’s ready to get growing?

 

Interruption

Interruption

This shouldn’t be here.

It shouldn’t have gotten done.

But the thought of missing a Tuesday for the first time in 172 consecutive Tuesdays has me doing something I probably shouldn’t be doing. I should still be in bed. I’m very weak.

Actually, I should be in Boston to attend a conference I’ve been looking forward to for a year. But, illness can have a way a derailing all of our best laid plans.

Over the last week-and-a-half, both of my children have been affected by a different iteration of  the virus that is currently going around. My oldest took the least of it; my youngest was nearly hospitalized. I managed to dodge it, until I didn’t. It caught up to me on Sunday, the day that was all planned out: tidy up work before my trip and, of course, pack for the 5 day venture. As my condition worsened, I made the call at 5pm to cancel my travel plans. By 8pm, I was headed for emergency.

This has been the first time I haven’t gotten out of bed in 2 whole days since, well, that story is a little personal.

I have heard a disappointing number of business owners over the years express how they need to hold on to the reigns and keep control; their justification is that they need to be needed. They feel that their purpose is to control the business. How unfortunate.

What happens to the business of an owner with that mindset who suddenly took ill? Does the business stop? What should be told to customers, employees, suppliers?

If you are a business owner, ask yourself the following to gain some insight into your business continuity plan:

  1. Can your business run without you there every day?
  2. Is there someone, or several others, who know what you know so that your business can operate uninterrupted in your absence?
  3. Do you have health insurances (disability, long term care, critical illness) to cover your personal financial obligations during an illness so that you won’t be draining cash from your business during that time?
  4. Do your loved ones and/or your key people know who to contact and what to do in case of your severe illness or sudden passing?

As a solo-preneur, I am my business. If I’m not working it, my business stops. So for the last few days, things have stopped. Can your business afford to stop?

Plan for Prosperity

There are few guarantees in life, and yet it happens too often that we don’t plan for that which is guaranteed. Maybe us weak humans have difficulty facing our own mortality? Maybe it’s something more narcissistic? No matter what it is, we’re all going to get sick now and again (whether it’s a minor illness from which we recover or something more serious) and we are all going to die…someday. If we aren’t prepared for the inevitable, the people left behind are the ones who will be hurt the most.

Take some of that (perceived) unpleasantness onto yourself and do this hard work so that you can save your loved ones, your employees, and your legacy the pain of trying to keep things afloat while you’re out of the picture.