Archive for November, 2015

16
Nov
15

PART TWO: How “Systems” Drive Profit

This will be your last Monday Morning Wake-Up – unless …

When I started writing the MMWUs in January 2008, I was writing it exclusively for salon/spa leaders. Within a few months, I started receiving requests from general business leaders for a MMWU that they could share with their teams that didn’t have the salon/spa verbiage and advertising for salon/spa coaching and training. So, in early 2008, Strategies created a special MMWU for general business.

As many of you know, for over 22 years, Strategies has been providing coaching and training for the salon/spa industry. The general business version of the MMWU has always been the exact same text as the salon/spa MMWU without the salon/spa references and ads.

So after eight years, of sending dual MMWUs, it’s time for the general business version to ride off into the sunset after today.

We went through all the email addresses on this list and moved the all of the addresses we could identify as salon/spa over to our main email list.

IMPORTANT: Click here to continue to receive the Monday Morning Wake-up for salons, spas and medspas. You will read the same MMWU content as always, but with the words “salon/spa” in the title and text.

We hope you continue on as a reader. If not, I thank you for taking the time to read my MMWUs and hope that you found value and inspiration in them.

Neil

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system_gears2Systems bring structure and discipline to the profit creation process. Accuracy and extreme attention to detail is nothing short of non-negotiable. As a business coach, I’ve seen more than my share of “garbage in – garbage out” accounting and financial reports. Blatant errors, improperly posted or categorized entries, expense line items that no one can explain, and huge miscellaneous accounts, are just a sampling of the financial nightmares that regularly occur when poorly designed systems exist. The end result is totally useless financial reports. You just can’t make the best financial decisions with bad data. And with all due respect, sloppiness in the bookkeeping office is a darn good signal that compromise exists at the leadership level. Otherwise, such nonsense would never be tolerated for even a nanosecond.

Profitability systems extend far beyond general bookkeeping. When revenues are generated, there needs to be financial systems in place to ensure proper reporting. And wherever money is spent and purchases made, financial systems must be in place. Checks and balances, there is no other way to control and drive profitability.

Remember, a system is a set of procedures that, when followed, produce a predictable and consistent outcome.

Here is a quick hit list of profitability processes that must be systemized:

  • Proper categorizing of revenue streams
  • Invoice entry and generation (you just can’t have errors on customer invoices)
  • Accurate and timely posting of payables (improperly categorized expenses will make your profit and loss statements useless)
  • Deadly accurate processing of payroll and payroll taxes
  • Purchase Order system to control EVERYTHING that gets purchased (If it’s not in the budget, it doesn’t get spent)
  • System to run weekly financials – complete, accurate and on time
  • Review of weekly “Actual to Budget” comparison reports
  • Weekly accounts payable report (who do you owe money to)
  • Bill paying: What’s the cycle? Who approves what gets paid?
  • Periodic update of cash-flow plan and budget
  • Competitive vendor cost analysis
  • Debt management and reduction
  • Inventory level management
  • Creation of new project budgets
  • Weekly leadership team cash-flow planning meetings (procedures needed to complete the meeting in 30 minutes)
  • Scoreboard updating (daily/weekly/monthly)
  • Financial performance data report distribution to managers and staff
  • Expense reports: Who’s approving them? Are expenses verified and legitimate?
  • Office supplies: What’s the budget, the system, and who’s accountable for it?

Depending on the size of your business, this may come across as totally trivial. It’s not. There are still multitudes of salon/spas that still pay bills and write checks by hand. Today, accounting software like QuickBooks and online bill paying make hand written checks something you’d see on display at the Smithsonian Institution. Hand writing checks may have been fine for Fred Flintstone, but not for anyone doing business in today’s automated world.

Paying bills through your accounting software is a non-negotiable because of the speed and accuracy to financial reporting that computer checks and online payments deliver. Pay a bill by computer and the first thing it asks is, “Who are you paying?” Now you have vendor tracking. Next, it asks, “How much?” Now you have an expense amount. Then it asks, “What expense account should it be allocated to (i.e.: rent, office supplies, cost of goods sold, etc.).” Insert your computer checks and hit “print.” “Cash – Checking Account” on the Balance Sheet is reduced by the amount of the check and the expense is recorded on your Profit and Loss Statement. Out comes the check nicely addressed and ready for a double-window envelope.

I’ve been pounding away at running your financials weekly. The only way to do this is to totally and completely (that means 100%) automate all of your bill paying and accounting procedures. Until this is accomplished, you’re never going to see the whole picture.

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Please share your thoughts with me about today’s Monday Morning Wake-Up. Click below to comment.

Pass this e-mail on to your business colleagues, managers and friends. They will appreciate it.

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09
Nov
15

PART ONE: Disciplines of Creating Profit

profit#1Profit is simply a measurement of business performance. It’s the reward for generating revenues, doing great work and staying within budget. Job security, advancement, better benefits, being able to invest in the best training, getting the best equipment, etc., are all part of profitability. Realizing all of the amazing opportunities that profitability can deliver will require a no-compromise sense of urgency. Urgency is paramount to achieving profitability.

When a business culture takes a lethargic, lack of urgency, approach to profitability, it gets in its own way. It’s akin to letting go of the controls that allow leadership to guide business activities toward its profitability goals. The cash-flow plan is demoted to the “optional task list,” or evolves into nothing more than an annual ritual that is rarely, if ever, looked at or put into play. Reviewing financial reports or having cash-flow planning meetings happens when it happens, if at all. Financial discipline and consistency is out the window.

Profitability will not take care of itself. Leaders must not only lead by example (that means you don’t violate the budget and expect everyone else to follow it), you must keep profitability at the forefront of all decisions and actions — at all levels of the business. Sense of urgency causes a production worker to suggest a better technique or adjustment in a process to improve quality and trim costs. It causes retail staff to design a special promotion to move out that slow moving merchandise. It causes service providers to multi-task when there’s downtime rather than hire more support staff. It causes sales representatives to make that next sales call, or book that flight in advance to get the best fare.

Here are the essential no-compromise disciplines that must be in place to begin achieving your profitability goals:

  • Can you read and understand every line item on your financial reports? This includes your Balance Sheet, Income Statement, and Statement of Cash Flows. If not, what’s your plan to learn how? This is non-negotiable.
  • How often should you receive complete financial reports on your business? If it’s not at least monthly (that’s only twelve sets of financials a year) it’s not often enough.
  • How much time lapses from the end of the month until you receive your financial reports? If this exceeds two weeks, it’s too long. Find out why and address it. If you have in-house bookkeeping, there’s no excuse not to have timely reports within days after the end of the month. Any good in-house accounting software and a competent bookkeeper should be able to produce timely weekly financials. This is non-negotiable.
  • Do you have a cash-flow plan that guides your revenue targets and expense budgets? If not, why not? Financial reports tell you the score during and after the game ends. Your cash-flow plan is your financial playbook. Follow the plan, be fiscally responsible, and your financial reports will improve. You cannot grow a business without following a cash-flow plan. This is non-negotiable. The plan is simply a “best guess.” The more you do it and the more you live your cash-flow plan, the better you can predict the future.
  • Do you have weekly cash-flow planning meetings? If not, why not? Having a cash-flow plan is pointless without comparing it to actual revenues and expenses. Are you over or behind your projections? Why? What do you need to do today or over the next week to correct or get back on track? This is why I prefer weekly over monthly financials. I don’t want to find out at the end of the month that we were overspending mid-month.
  • Who attends your weekly cash-flow planning meetings? (I hope you’re still not stuck on the sharing numbers thing.) All department leaders need to be present. In larger companies with many departments, separate cash-flow meetings focusing on numbers that are key to that area need to be held weekly.
  • Do employees know the score? If your response to, “Hey boss, how’re we doing?” is “Not good enough,” the people responsible for doing the work have no idea what’s going on. Scoreboards and daily huddles are non-negotiable.
  • Does your company require purchase orders to control spending? If not, why not?
  • Is your payroll percentage under control? What is the ideal target payroll percent for your business? What will it take to achieve this?
  • Are your inventory levels under control? Money that’s tied up in excess inventory is a cash drain. What’s the plan to get inventory under control?
  • If you’re a retail business, are you controlling inventory levels and turning your inventory as often as you need to? Slow inventory turns, in retail, kills cash flow.
  • As the leader of your company, department or division, are you setting the right example to create a fiscally responsible business culture? If not, why not?

There is no debating that the profitability begins with the right disciplines. Creating sustainable and predictable profitability begins at the leadership level. It cannot be faked or given lip service. The no-compromise leader must live financial disciplines, inspire it and relentlessly build a culture to support it.

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Please share your thoughts with me about today’s Monday Morning Wake-Up. Click below to comment.

Pass this e-mail on to your business colleagues, managers and friends. They will appreciate it.

02
Nov
15

You, Your Salon/Spa Business And The Path To Greatness

greatness2There is a huge difference between having the desire for success and actually achieving your definition of it. Desire is a longing for something; success is an outcome. Greatness is something else entirely. Success, based on your interpretation, is earned, while greatness is bestowed. Greatness is how your peers and the world around you define your success and that of your company.

What does greatness looks like? For a company to enter the coveted realm of greatness, its values, thinking and actions must synchronize to create an unyielding gravitational pull that draws it through levels of success to greatness. The only thing that can disrupt this gravitational pull is a compromise in the company’s values, thinking and/or actions.

Let’s explore what this gravitational pull looks like in a successful company versus a great company. Yes, there is a huge gap between success and greatness.

  • Doing many things right: It has a leader (or leaders) capable of inspiring performance and consistency. It demonstrates steady sales, financial discipline and profitability. It has functional levels of authority. It delivers on its brand promise, giving it impressive customer loyalty. Employees have opportunities for growth, giving the company a reputation as an attractive place to work. The company is regarded by its peers as a worthy competitor in its marketplace or industry.
  • Values and purpose driven: A company that lives in the greatness realm certainly does all of the above, but there are distinct differences. More than any other single factor, great companies are both values and purpose driven. This instills the highest degree of trust throughout the company, because intentions are clear. Values, purpose and trust create a rock-solid foundation to support a dynamic and empowering culture. The company culture is transparent – no hidden agendas exist.
  • Cherish your mojo: Even in the most competitive of industries and marketplaces, a great company stands out, not only as a brand leader but in the manner in which it conducts business internally with its employees and externally with its customers. It innovates faster than the competition. It does things so differently and consistently well that it wows its customers and leaves the competition asking, “How do they do that?”
  • Capacity to embrace change: Another mark of a great company is its ability to adapt, respond and change as the world it functions in evolves. Call it optimal leadership, innovation or a superbly accurate ability to predict the future, but great companies always seem to already be where the competition wants to be. Again, competitors ask, “How do they do that?”
  • Successful but not great: A company can be successful, even though its leadership is a bit inconsistent, some of its systems are weak, follow-through is sometimes spotty and performance is average. It will work through challenges and find a way to grow and prosper. But a successful company will never rise to greatness as long as it continues to ignore or tolerate its propensity to be average.
  • Average ‘anything’ warning lights: In fact, average anything barely stands a chance of gaining a foothold. Why is this? A great company’s values, beliefs and standards simply won’t allow it. Average anything is quickly identified and cut out. It’s no different from the values, beliefs and commitment of a world-class athlete to do everything it takes to win, including relentless training, to do it better than anyone else.
  • Enduring greatness: Successful companies come and go; great companies have the capacity to endure. But to endure, great companies can never falter, even for a moment. Compromise of values, beliefs or trust is the beginning of a fall from greatness unless resolutely and completely restored. Yes, many great companies will fall from greatness and remain successful, but the magic will be gone and is unlikely to return. For greatness to endure, no-compromise leadership is not optional. It is an ongoing process. The leader of a great company must continually review the practices of the company. Companies that coast along will not achieve greatness.

In his book Small Giants: Companies that Chose to be Great Rather than Big, Bo Burlingham profiled 10 diverse companies, from a document storage and retrieval company to a delicatessen. Burlingham sought out successful companies that had the opportunity to go big but chose greatness instead. They resisted the temptation to expand beyond what the owners felt was right for their companies. Simply put, they chose to nourish and protect their greatness.

The path to greatness begins with one question … how good do you want to be? If your answer is to be the best, you chose a road less traveled, a road that will test your determination to create something worthy of admiration. Only a few go the distance; you can be one of them. Small giant or big giant, it doesn’t matter. Go for greatness.

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Please share your thoughts with me about today’s Monday Morning Wake-Up. Click below to comment.

Pass this e-mail on to your business colleagues, managers and friends. They will appreciate it.




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