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Small-Business Guide: With Sales Collapsing, an Owner Turns to a Consultant

July 17, 2013 by Leave a Comment

Here is a quick recap of our sales process at the time the trouble started. Inquiries were coming to us in two forms: as e-mail or as phone calls. We would ask a series of technical questions meant to reveal the functional aspects of the potential client’s table needs. We would also ask about the budget. If we received answers, we prepared a proposal, a PDF that contained images of the options we recommended and information on wood choices, power/data options and pricing.

We saw these proposals as a good way to demonstrate our engineering skills and craftsmanship. I had developed the format myself, and we had used it to good effect, with more than $16 million in sales since 2003. I also developed an assembly-line method for the proposals: ask questions, design like crazy and send them off. Next!

When I promoted one of my bench guys, Nathan Rossman, to sales representative, I taught him the same method. And when I added another sales representative, Don Wuest, a year later, he worked in the same manner. We were brilliant at responding to requests, but we did no follow-up. The funny thing is that it was working. At least it was until it wasn’t.

At the beginning of 2012, I set a sales target of $200,000 a month, and in the first two months of the year, we hit it. But March came in weak: we sold only $135,732. April was almost as bad. And May was even worse. I hired five people in 2011 to ensure that I could get $200,000 worth of work out the door each month. That was now looking like a mistake.

Naturally, I spent a lot of time thinking about what was happening and eventually I decided my problem was the economy. In spring 2012, there was a lot of chatter about poor job growth and the possibility of a double-dip recession. I latched on to that story and convinced myself that the problem was out of my hands. Then, in May 2012, I expressed my concerns to my Vistage peer group and got some good advice from the other business owners — namely, that the problem was not the economy and that I needed to look within my own organization. One of the members of the group, Sam Saxton, owns a company, Salter Spiral Stair, that is in many ways similar to mine. It manufactures custom items and sells them over the Internet. He told me that he had hired a sales consultant who had helped him double his sales volume in two years.

Being told that my selling methods might need improvement was a blow to my pride. I had been closing deals for 24 years, and I thought I had a pretty good handle on how it should be done. But I called the consultant Mr. Saxton recommended, Robert Waks. And to be frank, he came on a little strong. I was not prepared for a sales professional unleashing his skill set on me. While my main method had been to let my product speak for itself, to tell the story of how we designed and built tables, Mr. Waks suggested a different approach. His pitch was that we first needed to understand selling, pure selling.

Ultimately, I found him convincing. His ideas made sense to me. On the other hand, I was aware that I was getting the full treatment from an ice-to-Eskimos kind of salesman. And his services were not going to be cheap. He recommended a three-part contract: first, evaluations of me, my sales staff and our methods. Then a 10-week training course for me and my staff. And throughout that, and continuing for a year, monthly consultations. One meeting would be one-on-one with me, and the other with me and my three salespeople. All of this would cost $37,000 — $8,000 to start, the rest spread out in 12 payments.

We began with the evaluations. My three sales staff members and I were given psychological profile assessments along with a test to gauge our attitudes toward selling. I was given an additional set of questions designed to reveal my capabilities as a sales manager. Mr. Waks also spent a morning listening in as we talked to clients on the phone.

A couple of weeks after the evaluations, I received a thick report with the results. The good news is that we all had potential to be sales professionals, although some work would be involved. The bad news was that I scored a zero, literally, as a sales manager. I was not performing any of the practices that defined the role. No regular meetings. No continuing training for the salesmen. No consequences for failure to meet goals. No data gathering, other than the gross sales amounts.

Soon after the evaluations, we started classes. These were group sessions, and most of the attendees came from small companies like mine. I was one of the few boss-level attendees. We were taught the Sandler method, which focuses on understanding whether the person we are talking to has power and how to get to the decision maker. It also teaches techniques of influencing interactions with potential customers, to maximize our chance of closing a deal. I realized that we had been making some classic mistakes.

In particular, we were giving away our design and engineering expertise and revealing our pricing way too early in the process. It was an easy task for a potential buyer to hand our proposals to our competitors and ask them to beat our price. Also, we were making no attempt to figure out where our customer contacts sat in their company’s hierarchy. We had no idea whether the person we were speaking with could make a decision, and we made no attempt to work our way up the power structure so that we could make our case to the people who would actually choose a vendor. We did not have good systems for keeping track of inquiries, and we were not keeping good records of what the sales staff was doing all day.

By the middle of last July, we started to deploy the new techniques, and we started to close deals again. We also introduced a technical modification to our sales process. Instead of sending out PDFs to clients, we started presenting our ideas in Web chat sessions, using screen-sharing software to show potential buyers a 3-D interactive model of our proposed design. This is very cool to see, but it leaves the client without a set of images to hand to our competitors.

Our sales started to recover in July, and in August we hit our target, closing deals worth $200,607. Even better, we kept up the pace for the rest of the year and, somewhat to my surprise, we have continued to do so. We have exceeded my $600,000 sales goal in every quarter since beginning our sales training.

Paul Downs, owner of Paul Downs Cabinetmakers, is a regular contributor to the Times small-business blog, You’re the Boss. This article is adapted from a recent five-part series.

Article source: http://www.nytimes.com/2013/07/18/business/smallbusiness/with-sales-collapsing-an-owner-turns-to-a-consultant.html?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

Staying Alive: Why I Would Rather Pay My Employees Too Much

May 8, 2013 by Leave a Comment
Staying Alive

The struggles of a business trying to survive.

Thank you to everyone who commented on my last post, “Why I Pay What I Pay,” about the performance I expect from workers at different wage rates. I was surprised by the number of comments, but I guess that any discussion of pay is going to push someone’s button. That said, I’d like to respond to a couple of points that were raised and also make a few new ones.

First and most obvious: Every dollar I pay my workers has to come out of a client’s pocket. Having cash to make payroll is not a forgone conclusion. We scramble to make sales and bring in revenue every day. The amount of money I have on hand varies widely, but pay day arrives every two weeks like clockwork. This has caused me a lot of stress over the years and often leads me to question whether I am paying the right amount. If I were running a different kind of business — one where I knew with certainty that the money I need to meet payroll will always be there — I would think about wages differently. But I don’t have that luxury. I have to allocate our revenue stream to cover all of our operations, not just payroll, and making a mistake can be fatal. If I spend too much on the wrong thing, there will be no money for some other critical function.

Second, clients don’t care what I pay my workers. In the last three years we’ve had more than 2,000 inquiries for our product, and not a single potential buyer asked about my wage scale. These buyers also do not care whether I make a profit — as long as I deliver what they ordered. And many would probably prefer that I didn’t make any money at all, at least not on their order. As a small-business owner, I understand how important profits can be, so when I’m buying something, I don’t sweat over every penny I spend. I know that I’ll get better service and a better product from companies that aren’t struggling to make ends meet. But that perspective is unusual. Many of my clients have price targets, and they need us to hit them. They are not at all concerned with what I have to do to meet their needs.

Third, the question of how I interact with my employees is up to me. My business model and my history lead me to want to treat them well. I’m with my employees as often as I’m with my family, and I made the decision long ago that I’d rather spend my time with people who are happy to be working for me than people who hate me. It has cost me a lot of money to do this, but I believe that in the long run it has served me well.

I know a number of shop owners, running businesses like mine, who made different decisions about how to pay people. One in particular advertised his shop as a woodworking school, and charged his workers tuition. He then used their labor to build a product line that was sold at regular market prices. On the face of it, it was a brilliant business model, but he closed his doors years ago, and I’m still around. I run into his former “students” now and then, and they all describe the bitter moment when they realized what was going on and how they decided to leave as quickly as possible.

I don’t want that kind of relationship with my employees, and I don’t want to deal with constant turnover. My people are smart and hard-working and that’s who I want to spend my life with. I’d rather err on the side of paying them too much than have to deal with grumbling and turnover. But if I were running a business where turnover is expected — an ice-cream stand in a summer resort, for example — I’d have a different attitude. I’d be a lot more interested in my own reward than the long-term prosperity of my workers. And that would make sense, for that situation. On to some questions.

From kathy d:

I’d be interested in knowing how long a worker spends at each level before he/she can be promoted. Is it simply mastery of the skill set for that level, or is there a regular schedule of promotions/raises?

I’m small, so a promotion path is not a given. It’s just not possible to make that promise in a company this size. I wrote about this in the summer of 2010, and my thinking hasn’t changed.

From Meredith:

Do you offer cost of living yearly increases? Say, 2 or 3%? Or a yearly bonus for excellent performance?

Here’s my question for you, Meredith: Where’s my Cost of Progress Discount? Why am I expected to raise pay steadily when my workers’ skills set is constantly being made obsolete by market forces? Why can’t the workers who are not upgrading their own skills expect a continuous reduction of wages? This would allow their employer to compete in the market through continual, automatic cost reduction. That might sound harsh, but it reflects my reality as a manufacturer.

Seventy-five percent of what we do every day was not possible 10 years ago. I have had to re-invest cash continuously — money that could have gone into my own pocket — on new technologies, new equipment, experiments in process improvement, and employee skills development. Driven by my own desire to make my business more competitive, that effort has kept us in business. It has allowed me to keep my wages where they are. I don’t feel that workers should automatically expect pay raises unless their employer enjoys the luxury of automatic increases in revenue and profit. That’s not happening in my kind of manufacturing. As for bonuses, I have paid them in the past, based on no formula other than whether I was feeling rich and happy at the end of the year. That approach has some drawbacks, so I am implementing a regular, predictable profit-sharing plan this year. I’ll be writing more about it in the future.

From ted:

Can you tell us approximately how much the benefits you offer add to the hourly wage? (vacation, holidays, health care)

I can tell you my projections for 2013. We offer personal days, which can be used either for sickness or vacation, along with six paid holidays. New employees get six personal days in their first year of service and an additional day for each subsequent year, topping out at 16 personal days. Add the six holidays, and my long-term employees get 22 paid days off. The overall cost of doing this is tied to the pay rate and length of service for each worker, but in 2013 the total bill for paid time off will be $50,218. This includes the wages and the payroll tax we pay. That’s 5.76 percent of our total wage bill of $872,581 (excluding my pay, which is budgeted at 6 percent of sales).

As for health costs, the company pays two thirds of the cost of ensuring our employees, and their families, who accept the coverage we offer. Twelve of my 16 workers participate, and this year the cost to the company will be $51,565. That is 5.91 percent of our total wages. The two benefits, added together, cost $101,784, or 11.66 percent of our wages. Is that expensive? Again, it depends on the context. For me, it’s not. I’d love to shed the hassle of dealing with health care, but the cost is not going to break me. And what I get for my spending on vacations and health care is a stable, healthy work force. That’s important to me, and I think it makes my shop a good place to work. Is it possible to duplicate that in every business? No.

In closing, I thought long and hard about publishing the last post, as it committed me to live up to my words and pay my people based on a clearly understood formula of skills versus pay. Many bosses wouldn’t do that, for lots of good reasons that boil down to this: published wage scales change the balance of power between bosses and employees. They make it much harder to be flexible (boss’s description) or arbitrary (employees’ description.)

In the last few years, I have made a number of changes to how I run my business, in all cases revealing information that many bosses keep secret. I am hoping that empowering my workers, letting them see what really makes the business run, will help all of us figure out how to increase sales and profits, which we can then share.

But that may not be a good idea. If it is the best way to run a business, why don’t more bosses do it? Am I compromising my own financial future for the sake of starry-eyed idealism? Would my approach work in your business?

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside Philadelphia.

Article source: http://boss.blogs.nytimes.com/2013/05/07/why-i-would-rather-pay-my-employees-too-much/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: ,

Economix Blog: Can Every Group Be Worse Than Average? Yes.

May 1, 2013 by Leave a Comment

FLOYD NORRIS

FLOYD NORRIS

Notions on high and low finance.

My Off the Charts column last week noted that pay disparities had grown in the United States since 2000. The real income necessary to reach the 90th percentile — the top 10 percent of all wage owners — was 9 percent higher in the first quarter than it had been 13 years earlier. The income necessary to be in the 10th percentile was down 3 percent over the same period. The pay needed to be at the median was up 1 percent.

The column showed similar trends among college graduates and among high school graduates.

What I did not point out, but might have, is an interesting statistical aberration. The pay necessary to reach the 90th percentile of every educational group rose less than the overall number. The same was true for the 10th percentile, the 25th percentile, the median and the 75th percentile.

How could that happen? Some readers deemed it evidence that I must have made a mistake.

The answer is that the relative size of the groups changed greatly over those 13 years. There are now many more college graduates working than there were then. There are fewer employees with a high school education or less. That changing nature of the work force meant that there are more (higher wage) well-educated people in the overall total now than there had been in 2000.

Adding to the population changes is the fact that the percentage of people with jobs has fallen less for college graduates (78.5 percent in 2000, 72.6 percent now) than it has for either high school graduates or people with some college education. The share of high school dropouts with jobs, however, is virtually the same now as it was in 2000.

As a result, we can get the following, seemingly unlikely, results:

Median change in real weekly wages, 2000-13

Total: +0.9%
High School Dropouts: -7.9%
High School Graduates, No College: -4.7%
Some College: -7.6%
Bachelor’s or Higher: -1.2%

Article source: http://economix.blogs.nytimes.com/2013/05/01/can-every-group-be-worse-than-average-yes/?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

You’re the Boss Blog: What Business Owners Get Wrong When Looking for Capital

April 22, 2013 by Leave a Comment
Searching for Capital

A broker assesses the small-business lending market.

The life of a small-business owner or entrepreneur can be chaotic. We live from priority to priority, crisis to crisis. There are only 24 hours in a day and only so many hours to sleep. Believe it or not, I still haven’t changed the phone system in our office that I posted about months ago. I have given up on it for now, moved on to higher priorities. As owners, we concentrate on pleasing our customers and whatever urgent issues arise during the day, and we let other issues — even important ones, sometimes — take a back seat.

That’s why I’m sympathetic to business owners who are too caught up in the day-to-day crush to do a good job of looking for capital. Whether small-business owners are looking for debt or equity, and regardless of how far along they are in their business, the process can be exhausting. And while phone systems are fairly easily to replace, a mistake with a debt or equity round can be devastating,

The best advice that I think I can give anyone in the hunt for money is to get organized early, do your research, identify your targets for financing, and pursue them in a focused and methodical way. As small-business owners and entrepreneurs, we often try throwing as much as we can against the wall to see what sticks. But when it comes to looking for money, this approach can consume time and is unlikely to end happily. Still, I see it all of the time.

Imagine a biotechnology company that spends six months trying to pitch pretty much every Internet investor in the country. Or the owner of a start-up who networks only with lenders who require companies to be profitable and to have been in business for at least two years? Imagine a loan application submitted with financial statements that have fundamental mistakes in them or are months behind. Or consider a business plan to raise investment money that was too poorly written to be understood. I know it sounds silly, but again, I see these kinds of mistakes all of the time.

One of the biggest mistakes that we see is that owners try to raise too much money. They think about how much money they need for the next several years — instead of what they need to make real progress this year. At this point, we often advise owners to go take a cold shower and call us in the morning. If you’re looking for a loan, you need sufficient collateral and cash flow to cover the debt.

The market for capital is inefficient, and in many cases results in gridlock for entrepreneurs, lenders, and investors. The smartest thing owners can do is to make sure they understand how the process works. You should figure out how much money you need and what the best loan or equity solution will be for you. Find an adviser or mentor you trust, one who has been around the block before. Understand what documents your lender or investor will demand, and make sure you have them together before you begin your search. Check your personal and business credit scores, and make sure they are in order.

Remember that when you’re speaking to a potential investor or lender, you’re entering a two-way partnership. They are investing or lending in order to make money. Just as they are interviewing you, you should do the same. How many investments have they made in the last year? If it’s a loan officer you’re talking to, how many loans have they made? What is their personal approval rate in the organization? Who will be making the final decision, and how much influence will they have?

I can’t speak for the investment community, but I can assure you that in the lending community there are thousands of loan officers sitting in bank branches across the country, wanting to keep busy so they can protect their jobs. The more applications that they have open at once, the busier they seem. Don’t put yourself, and your dreams, at their mercy. A properly structured loan or investment in your company can make all the difference to you and your future.

Ami Kassar founded MultiFunding, which is based near Philadelphia and helps small businesses find the right sources of financing for their companies.

Article source: http://boss.blogs.nytimes.com/2013/04/22/what-business-owners-get-wrong-when-looking-for-capital/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

Bucks Blog: Questioning the Motives Behind Your Financial Decisions

February 20, 2013 by Leave a Comment

Carl Richards

Carl Richards is a financial planner in Park City, Utah, and is the director of investor education at the BAM Alliance. His book, “The Behavior Gap,” was published last year. His sketches are archived on the Bucks blog.

When making any financial decision, one of the most important questions we need to ask ourselves is why we are motivated to behave in a certain way. But it’s a question we tend to avoid.

Asking ourselves why we make certain money decisions can be scary because we often don’t know the answer. And admitting that we don’t know the answer can make us feel unmoored. We start to realize that we might be operating without a rudder, tossed about by whatever financial storm crosses our path.

And when we stop to question our behavior, we may not like the answer — or look for someone or something to blame. But if we’re going to improve our financial decision-making, we need to give ourselves permission to think about our motivations without judgment. To start, consider these questions:

  • Why do I invest a certain way?
  • Why do I spend what I spend?
  • Why do I save as much (or as little) as I do?

As part of that process, I suggest:

1. Letting go of the past.

Past mistakes are only useful if they help us avoid repeating the same mistake in the future. Don’t waste a valuable lesson because you’re too embarrassed to talk about it.

2. No shame, no blame.

The moment we start questioning our true motivations, we’re likely to discover that some of what we do doesn’t line up with what we say we believe. If I say that time with my children is the most important thing in my life, but I work long hours to manage a big car payment, then I’ll be forced to deal with that conflict. These conversations often involve someone else, like a spouse or children, so it’s important to give one another the space to talk about money without fear of judgment.

For instance, when my wife and I first discussed moving to Park City, Utah, we looked at a building lot. It cost more than we felt comfortable spending, so we didn’t buy it. When we finally moved a few years later, we learned that the lot was for sale again. But this time around, it was five times more expensive!

It would have been easy for each of us to blame the other for missing that opportunity. Instead, we decided to treat the experience as a lesson. The lot was still more expensive than we could have afforded at the time, a fact we could have easily forgotten if we got caught up in the blame game.

This approach would have helped another couple I know. Over the years, they made a lot of money in real estate. But the couple later lost a large amount of money in the stock market because of poor timing, not poor judgment.  One partner just won’t let it go. Every time the subject of money comes up, the one partner can’t help but remind the other that they would have far more money if it weren’t for that mistake. This attitude must weigh on their relationship.

3. Focus on your plan, not society’s plan.

Questioning your motivations will also lead you to discover things about your decisions simply because you’ve never thought about them before. It’s common for adults to warn children about the dangers of peer pressure, yet adults often forget they are subject to the same pressures. So give yourself a minute or two to focus on what’s really driving your money decisions and not what society expects of you.

This type of introspection isn’t easy. I suspect it’s one of the key reasons we do dumb things with money; we’re afraid to know why we do what we do, so we don’t take the time to question our behavior. Knowing might mean needing to change something we’ve grown comfortable with.

We also live in a world that puts a premium on the notion of immediate gratification.  But here’s the thing: Asking ourselves why we make a certain money decision is integral to our financial success, even if it takes a bit of time and effort to reach an answer. We just need to be brave enough to ask ourselves these hard questions.

Article source: http://bucks.blogs.nytimes.com/2013/02/20/questioning-the-motives-behind-your-financial-decisions/?partner=rss&emc=rss

Filed Under: Your Money Tagged With: , ,

Corner Office | Sandra L. Kurtzig: Sandra Kurtzig of Kenandy, on Keeping Companies Focused

December 1, 2012 by Leave a Comment

Q. Tell me about your approach to leadership.

A. I think that one of the most important things in working with anybody, whether you’re the boss or the person being managed, is that you have to have mutual respect. I’ve always been very open and down to earth. I’ve never taken myself very seriously. I show self-confidence, and I think that if you don’t show self-confidence, no one is going to buy from you and no one’s going to want to work with you.

I’m transparent, and I ask people on a regular basis what they like about their job and what they don’t like about their job. What can we be doing better? In your previous job, how did you do it? What worked better and what worked worse than what we are doing now? I’m constantly asking people for their opinions.

A key thing is surrounding myself with people that, No. 1, I respect, and No. 2, I like. Then I ask their opinions and really listen to them. Two-way conversations are an important ingredient for building a company. Nowadays, I hear that so many younger people who are starting companies are so used to working on the Internet that they tend to send only e-mails and communicate with their screens more than they communicate with people around them. You need to interact with people and not just your computers.

Q. How has your leadership style evolved over time?

A. I’m more self-confident now, and I make decisions faster. I know what information I need because I’ve been there, done that before. I’m also more willing to change the decisions and modify them so that we get to the end faster.

I don’t run after “shiny objects.” That’s a mistake that a lot of people make in running a company, especially in starting one. They tend to get a lot of opportunities from people who want to partner with them. And these are just shiny objects, because there are very few partners that end up being right for your company. So I’m much more selective. If I hear something, I’m very quick to think, ‘Hey, that’s a shiny object; let’s get back to work.’ I think that’s what’s so distracting to a lot of companies — they see a big customer or some other distraction, and they spend too much time on it and they lose their way.

Q. What else?

A. I’m willing to take risks. If you don’t have some fear of failure, then you’re not taking enough risks. I probably was much more conservative the first time around.

But I am conservative in hiring. I don’t over-hire. The reason is that you can get a lot more work done with fewer people. If you have a lot of people, you have to give them something to do, and you have to give them something to manage, and then you have to manage them. You can get a lot less done. So you want to have a core set of people while you’re really trying to discover your product, your direction, your market. And the more people you have, the more difficult it is to take risks because it affects a lot more people.

I’m also at a point in my life where I like to choose customers I want to work with, because if I don’t like working with them, we’re not going to be very good at it. And we’ve actually fired two customers. That’s something that I think is important and might be very strange and surprising to people. We had some customers when we first started and we were trying to make our way and figure out the market, and not all of them were ultimately right for us.

Q. How do you hire? What questions do you ask?

A. I would certainly ask people: “Why are you here? What do you know about our company that made you want to interview for this job?” If they haven’t done their homework and don’t even know why they’re there, then that’s a real red flag for me.

The second thing I’ll say is: “Why do you want to leave the company you’re at right now? Looks like you’re doing a pretty good job, and you’re doing well. What is it that you don’t like there?”

It’s always very eye-opening to know whether they don’t like it because of politics, because I always think that people can create their own politics to some extent. So that sort of makes me nervous. They’d better have a pretty good answer to those two things. Otherwise, we’re near the end of the interview at that point.

Q. Tell me more about your point that people can create their own politics.

A. If they say they don’t like the politics at their current job, I’ll ask them, “How’s that affecting your ability to do your job?” Then I would evaluate whether I think that they should be able to handle that and get around it, or whether it really is a serious political situation.

I interviewed somebody and he was telling me all about the politics within the company. The longer we talked, the more I thought he was the one creating the politics.

Q. What qualities are you looking for?

A. You hire people in your own style. If you hire people in your own style, they will in turn hire people in their style. So I want somebody who I feel is open and smart. I’m not saying I’m that smart, but maybe I am a little bit smart.

And I want people who are self-deprecating, who don’t take themselves too seriously.

And are they willing to work hard? If they have just too many outside interests that are going to take away from their ability to focus on the job, then I’m probably a little less likely to hire them.

Q. In those cases when someone doesn’t work out, what’s usually the problem?

A. They’re just in over their head. They painted a picture in the interview that they know certain things, but they really aren’t up for the task. And you can never demote somebody. Sometimes the people that you hire are good, but they’re just not good at the job they’re in, and a demotion doesn’t work. So you have to move on.

This interview has been edited and condensed.

Article source: http://www.nytimes.com/2012/12/02/business/sandra-kurtzig-of-kenandy-on-keeping-companies-focused.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: ,

You’re the Boss Blog: How a Dashboard Can Set You Free

October 6, 2012 by Leave a Comment
Creating Value

Are you getting the most out of your business?

Creating value in a business often starts with a change in the behavior of the owner. See if this sounds like you:

  • You are involved in most if not every decision in your company.
  • You are afraid to let go because mistakes might get made.
  • It’s easier for you to make the decision because you can do it more quickly.
  • You find it hard to trust that your employees know what to do.
  • If you’re not involved in every decision, you fear you will lose touch with what’s going on in your business.

If more than two of these statements describe you, you may want to consider changing your relationship with your business. If you choose to approve everything, you limit what you and your business can accomplish. Ultimately, when you’re involved in every aspect of your business, your business has to stay small.

The alternative isn’t just turning over decisions to employees; it’s about letting others help you make your business successful.

I’ve seen too many businesses where the owner tries to become a passive owner but struggles with how to stay current with what’s going on. It happened to me. Years ago, when my food vending business opened its second branch, I was no longer in the warehouse with all our vending route drivers every day. At first, I just told people what I wanted. But that didn’t work very well. And when a mistake was made I would yell at the person who made the mistake. That was an even worse idea. Finally, I realized that I needed to create a reporting system that would provide me with critical information. That was crucial to keeping me focused on solving problems and not blaming others.

But doing this required two cultural changes and one technical change. The first cultural change was learning to trust the decision-making power of supervisors and managers. The second was allowing mistakes to be made. I just had to find a way to make sure the mistakes were learning opportunities and not the kinds of mistakes that could put me out of business.

The technical change I needed was a system that gave me critical information on a daily, weekly and monthly basis: a dashboard. We put together a report that showed what our daily cash receipts were, whether each route was hitting its targets or falling short, what the productivity of each route was and how much waste was coming off each route. All of these were critical numbers for us. Tracking them allowed me to stay in touch and gave me an early-warning system for when I needed to re-engage in an area I had delegated.

In many respects a well-designed dashboard is an exception report. It allows you to focus on aspects in your business that need your attention but only when they need your attention. Different businesses will have different numbers to track. It’s important that every owner figure out which numbers to follow. Here’s a hint: don’t look to your profit-and-loss statement for clues; your key numbers aren’t there. For some it’s what their daily cash position is. For others it might be production per hour from manufacturing workers. And, for still others it might be a pipeline report of where the company is on future orders.

Before I installed a dashboard I delegated responsibility but didn’t have an inspection and reporting process as part of my business process. This method of management isn’t really delegation; it’s abdication. My dashboard allowed me to start transitioning from being a screamer to a coach who could have intelligent conversations with managers about critical areas of our company.

For me, building a dashboard came out of crisis. I needed one page with critical information that was sent to me daily. As we moved out of crisis, I realized I also needed a dashboard that showed trends. As our success improved, our dashboard changed. It continues to be a key component of tracking success and pressure points in my businesses.

I found that figuring out what to track was a trial-and-error process, and I think that’s the case for most business owners. Have you figured out what to track in your business?

Josh Patrick is a founder and Principal at Stage 2 Planning Partners where he works with private business owners on wealth management issues.

Article source: http://boss.blogs.nytimes.com/2012/10/04/how-a-dashboard-can-set-you-free/?partner=rss&emc=rss

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DealBook: British Regulator Fines PWC $2.2 Million

January 6, 2012 by Leave a Comment

LONDON — British authorities announced on Friday that they had fined the accountancy firm PricewaterhouseCoopers £1.4 million, or $2.2 million, for failing to safeguard client assets at JPMorgan Chase’s securities business in London.

The fine is the largest ever imposed by Britain’s Accountancy and Actuarial Discipline Board, the local regulator.

The penalty relates to the accountancy firm’s failure to notify JPMorgan that it hadn’t separated more than $8 billion of its clients’ money from the bank’s own accounts in filings with Britain’s Financial Service Authority from 2002 to 2008.

British authorities have cracked down on banks separating client’s money from their own assets after similar issues arose after the collapse of Lehman Brothers in 2008. The American bank reported the mistake to the Financial Service Authority in 2009, and received a £33 million fine for the oversight in 2010, the largest fine issued by the financial services regulator.

“The tribunal found that P.W.C. had committed misconduct in respect of each allegation in the disciplinary complaint before it,” Britain’s Accountancy and Actuarial Discipline Board said in a statement. “The tribunal found the misconduct in this case to be very serious.”

The regulator added that the £1.4 million fine had been reduced from £2 million because of P.W.C.’s cooperation.

“We are pleased that this matter has now been concluded. We regret that one aspect of our work on the private client money report to the FSA fell beneath our usual high standards,” the accountancy firm said in a statement.

Article source: http://feeds.nytimes.com/click.phdo?i=7068640dcb7d798986aaf804fe1c54c4

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DealBook: Limited Choices for Yahoo, Each One With Its Own Risks

December 7, 2011 by Leave a Comment

Harry Campbell

Yahoo shareholders should brace themselves again for disappointment. While the board is seeking a deal for the company, Yahoo faces limited options — all with significant downsides and risks.

The cleanest transaction would be for the Yahoo board to sell the company outright in an auction. This, in theory, would give downtrodden shareholders a premium return — one that they have been hungering for since the board turned down Microsoft’s offer to buy the company at $31 a share in 2008. A full sale would also relieve the Yahoo board of the headache-inducing task of rebuilding the Yahoo business and hiring a new chief executive.

Unfortunately, the Yahoo board has apparently refused to solicit bids for a sale. The company hasn’t said why, but the most likely reason is that with the state the business is in, it is unlikely to get a price as high as Microsoft offered four years ago. (Yahoo shares closed Tuesday at $15.84) The Yahoo board simply does not want to face up to the fact that it was a mistake to spurn Microsoft’s offer.

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There are other reasons. Yahoo’s prize assets are a 43 percent interest in Alibaba, the Chinese Internet company, and a 35 percent interest in Yahoo Japan. A sale of Yahoo may prompt a change of control in Yahoo’s agreement with Alibaba’s shareholders, giving them a right to repurchase Yahoo’s stake in this Chinese asset, something they are salivating to do. So, a buyer of Yahoo may not reap the value of Alibaba, further diminishing what Yahoo could get in a full sale.

And frankly, there are not a lot of potential bidders for the entire company. An acquisition would cost more than $20 billion and represent a big turnaround project for any suitor. Yahoo’s outsourcing of its search engine functions to Microsoft also makes it hard for anyone other than Microsoft to take full advantage of Yahoo’s technology.

In the absence of a full sale, Yahoo has been soliciting proposals for a minority investment.

Two competing consortiums have submitted bids to make a minority investment in Yahoo, according to people briefed on the matter. Microsoft, Silver Lake and Andreessen Horowitz have submitted one bid, while TPG Capital has submitted the other. TPG is seeking to bring in Greylock Partners, a venture capital firm whose partners include a LinkedIn co-founder, Reid Hoffman.

The Microsoft/Silver Lake plan would have Yahoo sell its holdings in Alibaba and Yahoo Japan and pay out shareholders, as well as alter the board and appoint a new chief executive. The TPG plan contemplates something similar.

The problem with these plans is that they both would involve Yahoo’s borrowing billions to give shareholders something. The shareholder payout would most likely take the form of a share repurchase that would give the investing group about a 40 percent interest in Yahoo. Together with Yahoo’s co-founders, Jerry Yang and David Filo, the investing group would effectively control Yahoo. Some Yahoo shareholders — in particular, Daniel S. Loeb of Third Point, which owns about 5 percent of Yahoo — are likely to react strongly to this transaction. They would complain that control of Yahoo was being sold without a shareholder vote.

Yet what these plans offer is a way for Yahoo to acquire a management team. That is why the Microsoft/Silver Lake bid — with Marc Andreessen, the Internet wunderkind, on their side — is said to be favored by the Yahoo board and why TPG is trying to work with Mr. Hoffman.

The problem is that this is a high price to pay for a management team. Silver Lake and its partners would be looking to effect a turnaround of Yahoo’s core business akin to what Silver Lake did with Skype. But Yahoo’s public shareholders would be deprived of a significant part of any upside.

Simply selling Yahoo’s Asian assets is also not going to be cost-effective for Yahoo. That is because the other shareholders in Alibaba may have rights of first refusal that they will undoubtedly exercise if they can. No other suitor will bid because of this, meaning that the two Asian companies are in the driver’s seat for buying Alibaba at a low value.

This leads to the last option: Yahoo can remain wholly independent. The board would have to dig in and try to turn around the company and recruit a chief executive who can lead a Yahoo renaissance. Yet, the Yahoo board has had little luck with its last four chief executives and has been prone to making poor choices, the prime example being the rejection of the Microsoft offer.

The one wild card in all of this is Jack Ma, who wants to control the 43 percent of Alibaba held by Yahoo.

Mr. Ma’s problem is that the United States government would almost certainly act under the national security laws to block Alibaba’s takeover of Yahoo. Federal authorities have been applying these laws aggressively to block Chinese acquisitions, including the proposed acquisition of 3Com by the Chinese telecommunication manufacturer Huawei. Even if an election year were not approaching, a Chinese acquisition of one of America’s premier Internet properties is almost certainly a nonstarter.

Mr. Ma recognizes this. He doesn’t want Yahoo’s American operations, and he is said to be talking to the Blackstone Group, Bain Capital and other private equity firms about teaming up to buy the American operations, leaving Mr. Ma with all of Alibaba. Softbank might join this group to purchase the 35 percent of Yahoo Japan owned by Yahoo.

No matter what Yahoo does, Mr. Ma may decide to push for a full sale of Yahoo to his consortium or a third party. He doesn’t care who wins the bidding, because he would argue that a full sale would activate his right to repurchase Yahoo’s Alibaba stake.

Mr. Ma has reason to fear a minority investment in Yahoo, because it would take away the leverage he would have if he made a full bid. So, expect Mr. Ma to make a lot of noise if Yahoo goes the minority investment route.

All of this means that Yahoo is faced with a series of bad choices, with the board focusing on staying independent or taking a minority investment. The bravest and perhaps riskiest of the two is independence.

In either case, determining the fate of Yahoo is likely to be a messy business for some time.

It’s Time to Grade This Year’s Deals

The year is nearing its end, and it is once again time to reflect on the deal-making successes and failures of 2011. As in prior years, I’ll be doing my part here at Dealbook by awarding year-end grades. The A’s will go to deal makers who performed superbly and deals that succeeded spectacularly. The F’s will go to the year’s deal-making failures.

If you know of a deal that fits either category and would like to nominate it for consideration, please send an e-mail by Dec. 15 to dealprof@nytimes.com. Self-promotion is welcome, as are reasons why you think a deal or deal maker qualifies.

I’ll be posting the grades shortly thereafter.

Steven M. Davidoff, writing as The Deal Professor, is a commentator for DealBook on the world of mergers and acquisitions.

Article source: http://feeds.nytimes.com/click.phdo?i=146afb02645cb7104d12eb58390e69ec

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Some Unemployed Find Fault in Extension of Jobless Benefits

October 7, 2011 by Leave a Comment

“They’re going to end up spending more money on unemployment benefits, while less money is coming in on tax returns,” he said, suggesting that the government should focus on measures that might encourage businesses to hire. “Far better to relax some of these outrageous regulations.”

Make no mistake — Mr. Tolleson, 54, has collected unemployment checks, saying he had little choice. But his objection to a policy that would probably benefit him shows just how divisive the question has become of providing a bigger safety net to the long-term jobless, a common strategy in recessions.

President Obama wants to continue offering benefits for an extended period of time, a maximum of 99 weeks, as is now the case. The measure is part of his jobs bill, which he once again called on Congress to pass in a press conference on Thursday.

If the extension is not renewed, benefits for more than 2.2 million people will be curtailed by mid-February, according to the Department of Labor. The Obama administration estimates that with no extensions, a total of six million people will run out of benefits over the course of next year.

Unless job growth picks up sharply, many of those people will struggle to stay out of poverty. Unemployment benefits, which average $298 a week, help families and serve as economic stimulus because most of the money gets spent right away on basics. Liberal and many centrist economists say that the economy is too weak now to withstand the shock of a sharp drop in those payments.

Still, conservatives contend that extending benefits pulls money from other parts of the economy, discourages people from finding work and increases the unemployment rate. Some Republican politicians have gone so far as to suggest that people living on unemployment are simply lazy. Even President Obama’s pick for head of the Council of Economic Advisers, Alan B. Krueger, has acknowledged that increasing unemployment benefits prolongs unemployment, as conservatives were quick to point out when he was nominated in August.

To some taxpayers, unemployment extensions are just another big government expenditure that comes out of their pockets and goes into someone else’s. Some would rather see the money spent on projects with a return, like building highways and schools. Others prefer freeing businesses of expenses like the health care plan and new regulations.

Even among those struggling to find work, Mr. Tolleson is not alone in his views. In a recent survey of the unemployed by Rutgers University, more than one in four respondents was opposed to renewing the current extended unemployment benefits. Three out of five said recipients should be required to take training courses.

Mr. Tolleson, who lives in Houston and whose last good job was working for a group that aims to replace the income tax with a national sales tax, said he filed for unemployment after a church said it could not help him otherwise. But, he said, he knows the money is not free: “They either tax it from somebody who’s making money or they’re going to print it — either way, the economy goes down.”

Theresa Gorski, a pharmaceutical sales rep in Detroit before losing her job 17 months ago, once shared his skepticism of prolonging unemployment benefits.

“If you would have asked me five years ago, I would have said no, because I always considered myself a Republican,” said Ms. Gorski, 50. “But now being in this position, with a college education and lots of work experience behind me, I find myself swinging more liberal, and more Democrat. And that would never have happened before.”

This recession has left more people unemployed for longer than ever before. In September, nearly seven million people were receiving unemployment benefits, and the Census Bureau says the payments lifted more than three million people out of poverty last year. Keeping the extensions in place for another year would cost $49 billion, the White House estimates.

Article source: http://feeds.nytimes.com/click.phdo?i=77d2899d9d81920a377efefb5f814884

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