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From our years
of business management and small business consulting,
we developed a list of actions that business owners
can do on their own, without help from anyone, that
will improve their management effectiveness and profitability.
These actions are:
Raise
prices
The surest, quickest way to increase unit profit is
to raise prices (or service rates). Many of our clients
are reluctant to raise prices for fear of losing business
or offending customers. They may be right; it is a function
of local competitive conditions. But, in many instances,
the company has not raised prices in years and/ or price
themselves at the lower end of competitive rates while
providing above average product and service. Proper
pricing for your products or services can usually be
found in answer to these questions:
1) who are your direct competitors ?
2) what do they charge for their products and services
? and
3) how would a typical customer rate your company in
relation to your competitors?
Collect
old invoices
You have let problem invoices slip because collecting
them can be unpleasant and your hands might not be altogether
clean in some of the disputed billings. There is really
no good reason to put off collecting and several good
reasons to do it now:
1) you need the cash,
2) it is an unresolved problem,
3) it is a bad example, and
4) you need to get on with other business.
You need to steel your nerve and just do it. Keep emotion
out of collections, but be persistent. Settle for what
you can get and stay out of court whenever possible.
Laying
off "dead wood"
This is another unpleasant task that keeps getting put
off. Most of our clients are genuinely concerned about
their employees. The non-productive employee may be
a friend or a relative which makes termination even
tougher. (In fact, we had assignments where firing "dear
old Aunt Bertha" was the major part of the desired
consulting work.) Even if you think you may need the
employee when business picks up, it is seldom worth
the intervening loss in pay to keep the non-productive
employee on the payroll. Other employees know that "Aunt
Bertha" is non-productive which undermines company
morale.
Visit your
banker when you do not need a loan
Typically, our clients do not like bankers and are too
busy to cultivate relationships with them. The only
time bankers become important is when the company needs
a loan; consequently, you are at a disadvantage. Think
of bankers as sales prospects. Visit them. Invite them
to your company. Help them understand your business.
Show them your plans and budgets. Tell them how you
are doing vs your plan. Granted, for small business
owners, many of the larger bank chains can be difficult
to work with, but most communities have small, independent
banks geared to making small business loans. Find one
and work with them pre-need.
Keep
a daily To-Do list
It is simple, obvious, and seldom done consistently.
Small business owners spend the majority of their time
putting out brush fires. The phone rings and you learn
that a supplier has failed you, one of your good customers
is unhappy, a key employee is sick, and you jump in
to resolve the problem while the important work is pushed
to the back burner. The to do list is a reminder of
the important things to be done. It takes mental discipline
to make out an intelligent list and follow it. But,
then, in the end it takes mental discipline to be successful.
Get better
terms from your vendors
If you have a good payment history (and sometimes if
you don't) and the bank and other vendors will not say
unkind things about you, you have a shot at getting
better terms from your vendors. Sometimes, it is a discount
for early payment. (The annual interest on these discounts
is outstanding; you won't get anything like it on CDs
or common investments.) More often, you can get more
days to pay which will improve your cash flow. Those
of you who sell to major corporations know they are
not reluctant to force their terms on you - payment
in 60 or 90 days or more. It is their way of using "vendor
capital" to finance their company. To a lesser
degree, you can use vendor terms to help finance your
company.
Train your
replacement
Most small businesses have a head person who makes all
the major decisions (this is the reason most small businesses
stay small). Most likely, this person is you. What would
happen to the company if something were to incapacitate
you? You may or may not have an "heir apparent".
If not, you need to find one. But, the "heir apparent"
will not be able to do your job until he or she has
some of your experience. Lay out a list of "essential
experiences" and schedule the "heir apparent"
to gain these experiences. The best experience is actually
running the company when you are on vacation, at a trade
convention, or out selling. You may even be able to
take off more time when you have a capable replacement.
Hold
staff meetings regularly
Communication is a major problem in many client companies.
Key employees feel "out of the loop". Some
employees gain power by withholding information. Turf
wars develop. The "fix" to this problem is
simple - talk to your employees on a regular basis.
The key is holding productive staff meetings (as opposed
to time wasting employee gatherings) is an agenda and
a chairman that keeps the meeting on topic. We often
recommend a rotating chairman among the staff members
and a timed, open discussion a the end of each meeting.
Be
a manager not a friend
Your employees are looking to you for leadership and
direction. Sometimes, our clients, particularly those
that are "up from the ranks", are more friend
than manager to their employees. It leads to many problems
that could be avoided if the boss had maintained some
distance and professionalism in dealing with his/ her
subordinates. It takes discipline, but choose your friends
outside the company. Don't socialize with your employees
and don't get involved in their ongoing problems. You
can be a concerned employer, but that is different than
being a pal.
Fire
the irreplaceable employee
Do you have an employee who, if he or she left for any
reason, your company would be ruined or severely damaged?
If you are that irreplaceable employee, see Train
your replacement. Your company is, in effect, hostage
to the irreplaceable employee. It would be an exceptionally
moral employee who would not use this power over you
and the company to his or her advantage. You need to
make this employee replaceable ASAP by assigning one
or preferably several employees, possibly including
yourself, to learn and master the irreplaceable skills
that the irreplaceable employee has. And follow up to
ensure that these skills are learned and applied.
Hire
for attitude, train for skill
Overwhelmingly, the key ingredients for a good employee
are work ethic, attitude, and other personal qualities.
But, most employers start looking for employment candidates
with work related experience and skills. The friendly,
helpful clerk that impressed you at the department store
may be a better sales rep than the stock clerk who already
knows your products. With a good attitude and reasonable
intelligence, you can teach your products and services
to a new employee. It is much harder to develop a good
attitude and personality in the new employee.
Define and
enforce company culture
Do not kid yourself. Every company and organization
has a culture in terms of "how we do things around
here". Most companies do not bother to define their
company culture and most of those that do come up with
a list of well meaning but empty platitudes. And yet
there is no single factor more important in the success
of a company than the attitude and conduct of its employees.
It begins with a list of values that are most important
to the company. In nearly every case, these are your
values or the values of the company founders. Write
them down and enforce them. State a company value and
ignore it and the whole exercise will become a company
joke.
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