Archive for the 'Profitability' Category

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.

05
Oct
15

No-Compromise Leadership Choices Drive Consistency

consistencyNo-compromise leadership = Consistency across all four business outcomes (Productivity, Profitability, Staff Retention and Customer Loyalty). It’s such a simple equation. Yet, within its simplicity is a profound message to all who lead, or seek to lead others. The rich word for me here is consistency. Consistency is perhaps the most challenging aspect of no-compromise leadership to comprehend and live because how one leads is influenced by the leader’s collective abilities, beliefs, behavior styles, perceptions and life experiences.

How long your voyage to no-compromise leadership will take depends on current behavior patterns. Some people are natural achievers while others are procrastinators. There are those who obsess over every minor detail in their quest for perfection. In leadership positions they can bog things down by micro-managing everything. At the other end of the spectrum are those who hate the details and do all they can to avoid them. In leadership positions, they can wreak havoc by communicating in such broad brush stokes that the outcomes they desire are vague and open to broad interpretation … if achieved at all. For a company’s performance and culture to be consistent, its leader must be a model of consistency. This is non-negotiable. It is one’s commitment and ability to be consistent that defines the no-compromise leader.

No-compromise thinking is like an internal compass that guides your leadership behavior in the right direction. No matter which direction you face, it points toward leadership consistency.

By connecting “consistency” to the four business outcomes, it defines a leadership mission of the highest order. Consider the equation as the first line of your job description. Now, take it a step further and consider it the first line of any job description in your company. What would the performance of your company look like if everyone were held accountable for creating and maintaining consistency across the four business outcomes?

So, what does living no-compromise leadership look and feel like? I would have to say it’s the sum of all no-compromise moments, choices, actions, communications and decisions. Given this, how does a leader seeking to practice no-compromise leadership behave? No-compromise leadership is more than just a philosophy or cool business battle cry. It’s stepping outside your comfort zone, looking within for possible motivators and blind spots, and analyzing why a certain decision, course of action, or behavior is chosen. Something as simple as how you conduct your day-to-day time management of what you intend to do, versus what actually gets done, contains a whole host of no-compromise moments and chosen behaviors ranging from high achievement to total procrastination.

Consider the following situations:

  • You’re in your office working on a project with a deadline that impacts the entire company. A team member enters with a pressing issue he wants to discuss. How do you determine the right no-compromise leadership choice in this situation? How do you process the situation to make the best no-compromise decision? Is it a compromise if you stop working on that critical project to address another seemingly pressing issue? Is it a compromise to turn the team member away? The no-compromise leadership way would be to say, “I want to give my undivided attention to your issue. Can we meet at 8:00am tomorrow morning?”
  • You discover that one of your managers has been fudging some reports. It’s the 26th of the month and the team really wants to hit goal. A serious bonus payout is on the line. What would the no-compromise leader do in this situation? A decision to compromise and accept the fudged numbers opens up serious issues of integrity, trust and the consequences that go with that decision. The no-compromise decision to expose the fudged reports is the right decision, even if the consequences are unpleasant.
  • A high school principal witnesses a star football player skipping school the day before the big game. Knowing that any disciplinary action would have tremendous impact on the team, the school and the popularity of this leader – what would the no-compromise leader do? He must do as Coach Carter did at Richmond High School when his basketball players failed to uphold their signed contracts to attend class and maintain grades. Carter banned all basketball activities. The no-compromise principal must take disciplinary action – even if it means losing the big game.
  • A doctor makes a decision to write a prescription for a patient, influenced heavily by the kickback from the drug company and not the needs of the patient. Was the doctor following his internal no-compromise compass? Clearly not. The doctor had the opportunity to make the right choice, but a decision to compromise was made instead. If this doctor is the leader of the medical practice, his decision to compromise for a monetary kickback set a new acceptable behavior pattern for all to follow. He contaminated his company’s culture.
  • A waitress in a restaurant decides to pocket a $10 bill from a customer, in a business that pools tips, because the customer was very demanding and difficult. The waitress felt “entitled” to take the money, but her entitlement thinking guided her into making a decision that compromised one of the core teamwork policies of the restaurant. Her chosen behavior shifted from “we, us, team, the company,” to, “I/me.” The decision took no more than a nano-second to make, but the contamination to the team culture created a breech of trust that will linger for a long time.

The antonym of consistency is inconsistency. From a leadership standpoint, the quest for either begins with a choice. To incorporate No-Compromise Leadership into your daily leadership life, you have to make a choice between no-compromise and compromise – between striving for consistency or allowing and accepting inconsistency.

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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.

07
Sep
15

Six Secrets to Achieving Monthly Goals

hitting_goalsBusiness is about driving growth and making progress. The only way to measure that growth and to know if your company is making progress is to have monthly goals. Interestingly, no matter how scientific or mathematically savvy you are at goal setting – a goal is simply your best guess. If you’re overly optimistic, your goal guesses will tend to be more aggressive and require high levels of coordination and effort. If you’re overly conservative, your goal guesses will be conservatively middle of the road. If your overly pessimistic, your goal guesses will typically reflect the lethargic state of your company under your leadership. If you don’t set monthly revenue goals, you are leaving the fate of your company up to the powers of the universe … which translates into, “If you don’t care – neither will the universe.”

Given that a goal is simply a best guess, the secrets to achieving monthly goals have everything to do with how you position, approach and apply effort to achieving those goals. If you want to lose weight and get fit, the first step is to make an unwavering commitment to losing weight and getting fit. I use the word “unwavering” because anything less leaves room for that rogue Twinkie and too many naps. Then comes the diet and fitness plan. Once the plan is set, it’s all about effort and execution. The more focused, intense and flawless the execution, the better the results and the closer you get to your weight and fitness goal. It’s the same in business.

Here are my six No-Compromise Leadership secrets to achieving monthly goals:

  1. Leaders give life and meaning to goals: A goal is simply a number if that’s all you put out there for your team. A goal number has no emotion, buy-in or energy if you don’t position it and give meaning to it. Your team needs to know the story behind the goal, where it came from and what it means to achieve it. If that goal was set with the expectation of everyone showing up and playing hard … tell them that story. If that goal represents the funding of a special project … tell them that story. If hitting that goal is about survival, paying the bank loan, making payroll or paying the bills … tell them that story. If that goal is about funding expansion, hiring and training new staff … tell them that story. Leaders give meaning and purpose to the best-guess goals they set. FACT: A goal is just a number if you don’t give it meaning. People won’t give their all for a number … but they will for a cause.
  2. And the plan is …: Goals aren’t achieved simply by everyone playing hard. Goals are achieved by executing the plan. Each team member knows what to do and when to do it. More importantly, team members know how their individual performance and contribution is essential to the execution of the plan. They know how their teammates depend on them as much as they depend on their teammates. Coordination, execution and mutual trust are the bonds that hold a plan together. Half-baked plans fall apart. Miscues, “but I didn’t know” excuses and finger pointing blame games wreck the execution of an otherwise good plan. FACT: Hitting goal rarely happens by mistake or luck. Hitting goal is an outcome that is both planned and coordinated.
  3. Relentless information flow is the drumbeat: Once the starting gun sounds, it’s all about information flow. Daily huddles are the non-negotiable updates that keep everyone briefed on progress, what to expect today and what needs to be accomplished today. Scoreboards aren’t silly tactics … scoreboards are visual tools to communicate progress and if the team is ahead or behind. During the game, leaders are both coach and cheerleader. And yes, sometimes the leader needs to pull a player from the game for poor performance or acting like a jerk. FACT: Maintaining team progress and a fast pace requires a steady drumbeat of information flow. Often times, that slightly better pace during the game (the month) is the momentum that turns a near miss into a “goal achieved” win.
  4. Adapt and overcome because shit happens: Even the best designed plans are subject to change when reality surprises you with a roadblock. I don’t know how else to put this other than; if you didn’t see it coming … you weren’t present enough and paying attention. That’s a pretty tough No-Compromise Leadership statement because it states that leaders, like the captain of a ship, must be aware of where they are at all times while identifying potential hazards as far out and as quickly as possible. FACT: If your business runs aground, you were off course and didn’t correct fast enough. If your business hits an iceberg … you were asleep at the wheel and didn’t heed the warnings. More goals are missed simply because the leader didn’t identify and address hazards fast enough.
  5. Tick tock and the final countdown: In business, monthly goals are ruled by the counting down of the clock. If your team is off to a slow start the first week of the month, it will have to play catch up. If it’s fast out of the gate, it needs to hold that pace to earn a record win. If it’s the fifteenth of the month and you’re 45 percent to goal … it needs to do 55+ percent in the last half of the month to win. FACT: Hitting goal is all about maintaining focus and the collective sense of urgency of the company. Instilling confidence, pride and a winning spirit in a team is what fuels a sense of urgency. Dictating, prodding and demanding, without showing respect and appreciation, fuels indifference and “I don’t care” thinking. It’s okay to get intense, emotional and spirited if it lifts a team to a win rather than taking a body count just short of the goal.
  6. The final score/win or lose: If your company hasn’t hit goal at least once in the last six to ten months … one or more of the preceding secrets need attention or an entire new approach. The worst approach to a long string of missed goals is to lower the goal to match the lack of focus, performance and sense of urgency. Missing goal month after month is demoralizing. The goal becomes a hammer and something dark rather than uplifting and worth fighting for. A missed goal should be a lesson and an opportunity to assess and adjust. There will be times when life, energy and focus don’t line up properly. That’s okay, as long as the leader pulls the team together and resets everyone back on course to goal. FACT: As with all things in life, hitting goal and the thrill of winning is the direct result of the commitment, discipline and effort of individuals and teams. Every monthly goal win is a cause for celebration followed by assessment and refinement. Every monthly goal loss is a lesson on what the company, as a whole, needs to do better.

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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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