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Archive for November 2015

End Of Year Thoughts

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Do more of this in 2016

Do more of this in 2016

Note: This is the last business blog of the year.  Next week will be a story of some recent light bulb issues.  After that, I will continue with tradition and have blogs with a Christmas theme for the next three weeks and will resume the normal schedule with a business topic on Monday January 4th. 

On the fifth Monday of November, and for the final business blog for 2015 I have a list of things that are on my mind as we enter the final weeks of the year.  Perhaps one may inspire you in some way.

  • Embracing change is the only thing you can do, resisting will eventually cost you.  Catching up isn’t as easy as you think.
  • Similar to embracing change, look for being different.  You can make good money doing what everyone else is doing.  You can make great money by doing it differently.
  • Stay current with your to do list.  It is always easier to do a little everyday than a lot in a rush.
  • Periodically question how you do things.  If you have a system, process or policy that does not contribute to quality, efficiency or making your product or service better consider changing it.  This does not apply to regulatory or compliance related tasks that are out of your control.
  • Don’t underestimate the human capital (people) you have in your company.  Foster a culture that all ideas are welcome from all people in all areas of your business.  Some of the best ideas come from unrelated areas because they are not operating in your paradigm but are already out of the box.
  • Make things as simple as possible. If it is simple then it is easier to learn, understand, replicate and change.  It is better to take time at the beginning to make a process or activity streamlined than it is fixing it after is established.

Have a great week.

Written by pacelinebiz

November 30, 2015 at 8:02 am

Thanksgiving Memories

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Sleep Well After Eating

Sleep Well After Eating

This week is Thanksgiving so I am obligated to blog about it according to the rules that govern internet blogging. Incidentally, the internet has strict rules about the accuracy of what is added to the worldwide web.  Rule number one is; if it is not true then it’s not for you.  I might be wrong about that.  In 2012 I blogged about how it is on the wrong day.  You can read my reasoning by clicking here.  I stand by my views.  In 2009 I took a humorous approach in an unscientific poll that you can read by clicking here.

This year, rather than talking about Thanksgiving Day foods or trying my hand at humor, I am going to prepare a list of my most memorable football games that were played on Thanksgiving.

  • 11/26/98 – Pittsburgh at Detroit – Jerome Bettis and the coin toss fiasco.  

The Steelers lose in overtime because the ref “misheard” Jerome Bettis call the toss at the beginning of overtime and the Lions quickly kicked a field goal to win the game 19-16.

  • 11/28/74 – Washington at Dallas – The Clint Longley game.

Clint Longley beats the Redskins 24-23 after coming in for an injured Roger “the dodger” Staubach. He took over in the third quarter down 16-3 and won it on a 50 year “hail mary”.  A couple of years later in training camp he sucker-punched the very same Roger Staubach and was quickly traded to San Diego.  There are two things you never do; divide by zero and hit the star quarterback.  He never amounted to much after that game on Thanksgiving but he had his moment in the sun – the San Diego sun.

  • 11/25/93 – Miami at Dallas – The Leon Lett* game

Cowboys led the Dolphins 14–13 with only a handful of seconds to go and Miami attempted to win it with a 40-yard field goal but it was blocked by the Cowboys. Unfortunately, Leon Lett of the Cowboys chased after the ball, touched it and the Dolphins recovered it and kicked the winner with a final score of 16-14

*Leon Lett gets special recognition for being a bonehead. In the January 1993 Super Bowl which the Cowboys crushed the Bills 52-17 he recovered a fumble on the Dallas 35-yard line and ran it back towards the end zone.  Around the 10-yard line he began “showboating” and slowed and held the ball out as he neared the goal line.  He did not see Don Beebe, a noted Bills hustling special teams player who chased him down and knocked the ball out of his hand and through the end zone for a touchback.  This cost them a touchdown and, more importantly, set the stage for his gaffe on Thanksgiving Day in 1993. 

Those are three Thanksgiving Day games that I remember and the special Leon Lett Super Bowl gaffe was added in as a bonus. Have a great week and practice your fundamentals Leon!

Your Customer List Should Be Like A Baseball Lineup

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The Babe and Ted Williams

The Babe and Ted Williams are great in any lineup

In baseball there are 9 starters in the field. In REAL baseball, the National league, all nine players in the field also must bat.   Today’s topic is not about the abomination that they call the designated hitter, it is about how to construct your starting lineup the way a baseball manager does.  I assume that right now you’re a thinking I have some explaining to do, and you are right.

This is what I am talking about. Every business, especially a business that has other businesses as their customers, need to manage their “roster”.  What I mean by this is you have to make sure you have a diverse customer base.  Would a baseball lineup do well with only home run hitters?  It might sound like a good idea but probably not since they usually don’t hit for average and are slow on the base paths and strike out a lot which is an unproductive out.  They also typically cost more and would send the payroll well into the “luxury tax” stratosphere. It is better to fill your lineup with singles hitters, hitters with “doubles” power and a home run hitter or two who can change a game with one pitch.

This is how you have to think about and try to construct your customer base. The singles hitters are the smaller customers that allow you to spread your risk around geographic and industry type.  You should probably have a lot of these in your line up.  They aren’t particularly profitable but if you can weed out the ones that are batting at the Mendoza line (a .200 batting average is not good) and get ones that are batting say .275 and up then you are doing well.  The .275 batting average customers are characterized by paying on time and are not much of a headache.  They don’t complain and are not too demanding so despite their smaller size they are good for your line up.   The hitters that are around the Mendoza line are the opposite so don’t take them as customers or ditch them once they become one.  Sorry, but this is the big leagues.

The doubles hitters are the customers that are a little larger in size and more profitable. Perhaps they have grown from the single hitter category or shrunk in size from the home run hitters but you need some of these too.  They give your line up some punch and can soften the blow if you lose a home run client.  They can also grow into a home run hitter so cultivate them and help them get to the next level for your sake and theirs. You need a decent amount of these in your line up but you must be careful about them since they might be a little volatile either growing or shrinking and it may affect your relationship.  It they become a problem they might be worth trading to another team.  It might be addition by subtraction.

The next category of customer you need is the home run hitter and these are the best but you have to make sure they don’t lead you down a path of dependency. A concentration risk in your customer a base is a problem you must manage.  Typically the customer will account for a large percentage of revenues or it might be a single industry.  Think about the building supplies company that catered to new construction when the bust hit in the late 2000’s.  Many small businesses are automatically going to have a concentration risk geographically since they only sell to a small area.  A wholesale distributor whose business is limited to deliveries in one county or a couple of counties is an example.  A retailer who has one store and has little or a zero online revenue stream is another example.  Keep the home run hitters but make sure you have a good base of other customers to offset when a home run hitter signs with another team.  Free agency is always going to be a risk.

I hope this will make you consider adjusting your lineup if it is needed. Have a great week.

The 33 – A Movie About The Chilean Mining Rescue

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Go see a movie!

Go see a movie!

Over 5 years ago I wrote about the Chilean mining accident that played out over two months in 2010. I used that rescue as a way to glean business lessons from the drama that unfolded. Read what I had to say by clicking here.  Today, I don’t have a business lesson to share but I noticed the recent advertising for a movie about the rescue.  It will be released on November 13thwith the title The 33.  This will be a theatrical release rated PG-13 and not a made-for-TV movie.  I am surprised there was not a movie of some sort about this already.

The movie has Antonio Banderas, Lou Diamond Phillips, James Brolin and Gabriel Byrne with lead roles and they were the only actors I recognized from a long list of names. At the time of the rescue I had a strong feeling of relief and joy that the rescue was successful after they were trapped for over two months.  I needed a feel good story back then as I was weary of the financial crisis of 2008-2009 and the BP oil spill that happened in the spring of 2010.

I am planning on seeing the movie and if I don’t get to it at the theatre, I will stream it on Hulu or Netflix when I get a chance.   From the Wikipedia hyperlinked article it appears the movie has had mixed reviews but I won’t let that stop me from going.  I am always in the mood for a feel good story.  The only question I have about this is; why did it take 5 years to get this thing made? My guess is that it had something to do with money.  It always does.

Have a great week and look for the movie at a theatre near you.

Written by pacelinebiz

November 9, 2015 at 8:01 am

A “Growing” Problem

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Growth Can Have Ups And Downs

Growth Can Have Ups And Downs

The second blog I ever wrote which was posted on September 15, 2009 was about the concept of operating leverage.  Today, I am going to talk about another concept that might make your eyes glaze over from boredom. The concept is taking advantage of variable costs that are fixed within a specific range of sales or production.  Some may call these costs step-fixed.  Before you reach for the aspirin bottle or click to your Facebook account, I promise I will try to keep this simple and won’t have any difficult mathematics, charts or formulas and there will not be a test either!

What am I talking about? Okay, let’s start with some basic definitions.  A fixed cost stays the same regardless of the amount of activity a business has.  Rent for example will stay the same whether you have sales of a million widgets or three million widgets.  This assumes you don’t change your agreement with your landlord and get more space.  Variable costs change or vary with the number of units sold or produced.  Raw material costs for example are a direct variable cost.  Indirect variable costs are things (or activities) like a fork lift operator, shipping or receiving person, maintenance staff, an office receptionist or even, dare i say, an accountant.

Sometimes people use a dirty word to describe these type of activities. They call activities which are not related to the revenue generating or production process “overhead”.  Most of my career I was “overhead”.  I didn’t like being called that because accountants and those who support the revenue generating/production process are people too!  Even IF we use words like widgets.

Now that we have the concept of variable, fixed, direct and indirect costs out-of-the-way let’s delve into today’s topic. This is relevant to the small business owner in many different lines of business. The idea I want to explore is getting to the edge of needing to add that incremental variable input cost.  I hope the term “incremental variable input cost” doesn’t make your head spin.  It shouldn’t once I explain what I mean.

Adding another maintenance employee to keep machinery and equipment in good working order is an example.    The decision to add is difficult since the cost of the new employee will be about the same as the first one but spread over a smaller amount of sales and profit to absorb that cost. For example, if your sales increase to the point that you need 1.28 maintenance men to keep up with maintenance, you have a problem since maintenance employees only come in increments of one.  One way to avoid the need to hire is to increase his productivity by adding to his skills through training or by providing him with better tools.   If that is not an option you can outsource, utilize a part-time employee or have the existing employee work overtime.  This can be fine as long the “limbo” period doesn’t last too long and you either increase sales to support a second full-time maintenance employee or sales or production levels go back so that one employee is adequate.

Many companies have a very hard time growing because of this.  To add to the complexity; you might have to add another person in addition to the maintenance employee at the new sales level.  The first thing I would advise is to increase sales to get to the edge of needing to add staff as fast as you can.  The reason being; until then your operations are not at its best productivity.   To put it another way you might only need .81 maintenance employees at your current sales level and the cost of one full-time employee is an unproductive use of a full-time resource.  Some may say it is a waste as harsh as that sounds.  Once at the “edge”, the safe way is to take baby steps, as stated above, by investing in training or tools for productivity gains or use part-time, overtime or outsource until you feel confident you can push through to the next level without taking a hit to the bottom line.

I hope this helps if you are nearing the next step. Have a great week.

Written by pacelinebiz

November 2, 2015 at 8:01 am