To make matters worse (as if that was possible), he declared that the United States government is now backing the warranty on a GM vehicle.  Are you kidding me?!?  Did the president just become a used car salesman?  Join me in pledging NEVER to buy a Government Motors vehicle.

We all know the story of the frog in the pot.  Put the frog in a pot of boiling water and the frog will leap out.  But put the frog in cold water slowly turning up the heat and the frog will boil to death.  I’m afraid Americans have become too soft to deal with this nonsense.  This is frightening, folks.  The Venezuelans followed Chavez, Germans followed Hitler.

Americans cannot follow Obama!

So what does this mean for your business, besides being tired.  It means that there is something different going on here than any of us have lived through.  It also means that previous strategies for “waiting it out” won’t work this time around. Then what is a business owner to do.

Manage your business as if the revenue stream you are receiving today is normal.  Manage as if your business is competing for survival with other competitors.  Manage to grow, manage to win.

Most companies are cutting all “non-essential” spending to protect employee jobs.  This means that companies are cutting marketing, research, and staff training to avoid lay offs or salary reductions.  It’s tough to reduce employee costs, especially in small companies where relationships are the culture.  These are good employees and don’t deserve to have their income cut back or eliminated, or their benefits reduced.

If you’re managing for the long term, you must keep your financial ratios in line, especially in your key performance areas.  That means that the long term health of your business, for current and future employees, may be best served by adjusting your payroll as revenues change.  It’s tough, but that’s what successful managers do.

There is a little know unemployment program available to business owners to soften the hit.  By pre-arranging with the state unemployment department, you can reduce employee compensation, either hours worked or salary reduction, up to 20% and your employees will be eligible to receive an unemployment benefit to help offset their reduction in compensation.  You keep your employees while reducing your payroll expense, and no one gets laid off.  Check it out.

Do you know a business that is doing well while our economy is weakening? It’s true that stories abound of reduced revenues, lay-offs and even business failures. Yet, often in hushed whispers, there are stories of companies doing well, even expanding. New companies are starting up. How can this be? Here are 10 tips that can help your business thrive while those around you may be struggling.

1. Cash Flow: For most businesses, cash is king. It must be properly and carefully managed. Look closely at your balance sheet. Develop contingency plans by assuming a drop in revenues of 10%, 15%, even 25% and identifying what changes you would implement, and when, should the worst happen. Closely monitor your actual expenditures against your budget and be prepared to react quickly.

2. Credit: The time to talk to your banker about your lines of credit is not when you need funds. Before your finances reach a troubled condition, it may be wise to increase your available lines of credit. Bankers are more confident with a business manager proactively preparing with a well-thought out plan, than with one who is reacting to a situation that has already gotten out of hand.

3. Accounts receivable: Pay close attention to the age of your receivables. That customer who used to always pay on time may be experiencing cash flow problems. A careful and candid discussion early may help both of you avoid an uncomfortable situation later. You may be willing and able to work with good customers, but if that customer goes under your chances of collecting are slim. If the customer is not contributing to your bottom line, it may be better to cut them off early than to let them run up their debt and not get paid.

4. Accounts payable: If your receivables are aging a bit longer than before, try negotiating with your vendors to extend their payment terms. They’ll appreciate your frankness and if you can extend your terms to more closely match your receivables DSO, your cash flow will improve significantly.

5. Spending: Look for discretionary spending items that you can reduce or eliminate. Your employees are concerned about the security of their job and are watching to see what you’re doing to secure company finances. You might think tightening your belt sends the wrong message but they’ll feel better knowing that you’re eliminating the donuts or complimentary coffee. Even if you don’t need to cut back, sending a message of preparation is welcome.

6. Research: Analyze how a recession could impact existing or potential customers. You may need to eliminate a line of products or modify a service to continue providing essentials while cutting out the frills. Your customers are facing the same conditions as you, so providing them appropriate solutions to their continuing needs makes you a better partner. Can you sell in smaller quantities, ship more efficiently, or recommend new products or services needed in the current economic climate? Is there a new niche you can fill?

7. Take what the economy gives you: Are you willing to do business that you avoided when times were better? A real estate agent who avoided first-time buyers because they were unsophisticated, purchased smaller homes, and didn’t have a property to list (creating the potential for 2 commissions) is likely to starve if he doesn’t change. The first-time market is hot but it requires knowledge of short sales, foreclosures, and working with banks. This might not be an area of strength or comfort, but a willingness to learn provides a new stream of revenue.

8. Pricing: Closely linked to cash flow and receivables, aggressively managing your pricing model will keep you strong. Raising prices to adjust for reduced unit sales or cost increases is likely to irritate your customers. Negotiating with your vendors and increasing your productivity should be your first choice. Innovation comes more often from challenges than good times. Your employees may have ideas for eliminating wasted steps that will help them get more work done. Carefully monitor gross and net margins. It is the rare company that can lose a little on every transaction and make it up on volume!

9. Loyalty: Relationships are most important when times are tough. Use caution when dealing with customers and vendors alike. Your willingness to stick by a long-term customer, and to remain with a vendor you’ve used for years, will pay great dividends while times are challenging, and especially when the economy turns around. People remember how they were handled when they were stressed. Scars can last a long time.

10. Never stop marketing: Most companies are finding new customers harder to come by, and existing customers cutting back. Your sales efforts are likely meeting with more “no’s” and the return on marketing expenditures is slipping. Stay in the game. When they said that ‘the tough get going when the going gets tough’, this is what they were talking about. Your measures of success may be slipping; increased activity is the antidote.

Luck exists when opportunity meets preparation. Establishing a financially sound business model while positioning yourself within the economic climate and the relationships you’ve developed will help position your business for new opportunities and streams of income.

Most business owners know there is little room for error right now. So, with which areas of your business do you have to be especially careful?

It is undisputed that your people are your most valuable asset. From efficient operations to new ideas for generating revenue, the contribution your employees make to your organization cannot be overlooked. Ideally, your staff is contributing positively to your company now. But don’t assume that they, and you, are functioning at the peak of your capabilities. This is the perfect time to invest in additional training. Whether it is broad staff development, like leadership or management skills, or something more technical, an investment in yourself and your employees will generate the best return.

Unfortunately, some employees may not be contributing positively to your business. You’ve worked with them, explained your expectations, offered training or some accommodation. But they’re just not on board. Don’t let a negative situation linger too long. These people are more of a drain on you and the rest of your team than it is worth. Help that employee find a better situation by moving them on. We prefer employees who self-select out. But if that doesn’t happen, you have to bite the bullet and let them go.

If you can redistribute the responsibilities of the departing employee to others, do so. Often times, necessity brings out creativity and you’ll find ways perform tasks more efficiently. If you need to re-hire, take your time, know what you need, and hire wisely. You’ve got an excellent opportunity to strengthen your company with a good hire.

I tell my clients, “Hire slowly. Fire quickly.”

The next area to focus on is your plan. We don’t need to discuss here why a written plan is so important, especially when the economic climate is challenging. I do want to emphasize how important it is to have specific and measurable performance objectives. Your plan must include a few targets for your key performance indicators. Key performance indicators are those statistics that best measure the health of your company. They could include revenue dollars per employee, widgets produced per hour, or cash available to pay bills.

Successful business management, and your ability to grow during challenging times, requires a familiarity with your numbers. You must have at your fingertips more than last month’s financial reports. You need the key performance targets and your progress toward attaining them. This information will give you the ability to make operational decisions and to evaluate the effectiveness of those decisions.

Put the quality and development of your staff and knowledge of your numbers at the top of your list of things to do during these economic times, and you’re odds of success will improve immensely.

After all, we’ve been hearing since September that the economy demanded huge capital infusions from the federal government.  Yet despite the $350 billion injected through the TARP program, the billions committed to bailing out companies including AIG, Fanny Mae and Freddie Mac, the auto industry, Bear Stearns and others, economists and business leaders don’t see the end of the current recession.  If anything, they seem to be getting more concerned, not less.

The other “change” that we’ve been told to hang our hat on is the inauguration of the Obama administration.  While we’re told to expect hope, change and transparency, the dearth of specific information coming from the transition team is creating more uncertainty, not less.

So what is a business owner to do?  How do you make plans for the future when you can’t get some degree of certainty about the field on which your business will be playing?  The typical business owner seems to be concluding that the best plan right now is to circle the wagons, make no plans, and react to the evening news.

Nothing could be further from the truth.  I say the “typical business owner” is circling the wagons, and that appears to be true.  The atypical business owner is planning for success.  They know that operating without a plan is the death knell of most businesses large and small.  Without a plan, it is impossible to make decisions, it is impossible to know whether you’re moving forward or falling behind, and without a plan, you can’t adequately react to the changes the economy throws at you.

If you think about it, in terms of planning, the current economy is no different than a booming economy.  Business owners need to look at the environment – the economy, competitors, internal strengths and weaknesses – and make assumptions about what the future holds.  Based on those assumptions, a plan is developed to take advantage of what the future offers.  For the past many years, we’ve had the advantage of a growing economy so our planning was, more often than not, built around assumptions of growth and prosperity.

What has changed is that growth and prosperity are out the window right now.  Your planning assumptions must be built on a weak economy that may be mired in contraction and stagnation for a while.  Planning is not done only in good times.  In fact, planning is far more vital now than in an expanding economy.  When times are good, you’re likely to succeed in spite of yourself.  But when times are tough, the quality of your plan will be the difference between survival and destruction.

For those of you who have developed a well thought out, written plan for your business for this year, congratulations.  You can move forward with the confidence of knowing that even if the economy continues to be challenging, you’ve already decided how you will best adjust your operations to survive.

For the rest of you, get to work and develop a detailed plan of action.  Contact your business advisor and develop the assumptions you believe best represent the climate in which you’ll be operating.  Then make a plan, develop your metrics to measure your performance against your plan, and modify your assumptions if they prove to be erroneous.

If you don’t have a business advisor you are confident can help, drop me a line.

Individual contributors spend 90% of their time in task-oriented activities and just 10% of their time in people-oriented activities.  The best of these workers stand out, either because of the volume of work they complete or the quality of the work they produce, or both.  These super workers go about their job conscientiously meeting and exceeding the expectations of their supervisors and gaining approval for their dependability.

In return, super workers are promoted to supervisors.  Nothing says more about a company’s commitment to its employees than to promote from within.  Typically, the manager calls the super worker into her office on Thursday and offers him the promotion.  Exhilerated, the new supervisor goes home and tells his spouse.  On Sunday night they celebrate his good fortune with dinner at the in-laws.  He reports to work Monday morning as the supervisor.

Sound familiar?  Few companies groom their management teams.  They don’t have a plan of succession and promote superworkers with the expectation that they will get the same level of performance from the people they supervise as they contributed as a worker.  What most companies don’t realize is that a supervisor must spend 50% of his time in people-oriented activities and just 50% in task-oriented activities.  The new supervisor is expected to succeed as a natural extension of his success as an individual contributor.

But most new supervisors don’t know what to do!  They have little confidence of themselves in a supervisory role.  Their direct reports today were co-workers just a few days ago.  Success was measured in personal output; now it is measured in the ability to motivate others to perform.  Most new supervisors are reluctant to perform as a supervisor so as to not lose the favor of former friends and co-workers, and so as not to overstep their authority.  As a result, they fail to meet the expectations of their manager or of their direct reports.

Supervisors must be trained to do the job well.  The ideal is to invest in a leadership development program specific to the needs of the new supervisor as part of a pre-determined succession plan.  Successful companies identify the leader-candidates in their organization and grow them into the next position – before they are promoted.  If the ideal isn’t possible, then shortly after the new supervisor occupies her position, participating in a supervisor development process is essential.  An investment in your human capital is a practical and strategic necessity and the return in productivity and performance will return that investment many times over both in employee satisfaction and retention, and in bottom line profits.

Leaders are not born.  They acquire their skills and attitudes through purposeful and careful training and development.  Leadership in your management team begins with the supervisors.  Don’t let your super workers down by promoting them into a new position without investing in their, and your, success.

“Two all-beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun.”

We’ve grown up on this jingle, it’s been ingrained in us, and McDonald’s success depends on it. Imagine what would happen if you ordered a Big Mac in Orlando and were served something different than when you ordered a Big Mac in Seattle. Sameness is a core component in the McDonald’s brand.

Then why all this noise about change? “The only constant in life is change.” Maybe if we could stop changing for a little while, life would settle down and stress would go away. Fair enough. Change is stressful and constant change creates constant stress.

Unfortunately, in business change is where fortunes are made. Fifteen years ago, we had the local sub sandwich shop with bread from the local bakery. Along comes Subway cooking bread behind glass doors right behind the counter. Overnight, the sub sandwich business changed.

25 years ago, Switzerland owned the watch business. When inventors from the Swiss watch-making institute invented the quartz-movement watch, Swiss watchmakers were appalled. Without a main spring, winding, or movement, it couldn’t possibly be a watch. So unimpressed were they that they didn’t patent the idea. So Seiko Japan and Texas Instruments took their idea – and most of the watch making revenues and profits.

While you’re busy trying to create sameness and uniformity in your business, someone else is changing something that will attract your customers. Whether it is an evolution in the product, or a lower cost approach to manufacturing, change is happening all around you, faster and more frequently than ever before.

When you can foster and encourage change in your organization you’ll improve the likelihood of success. There are four stages of change that organizations and their people must go through. Stage one is resignation marked by depression and helplessness. Stage two is resentment – we’re angry that things are changing and asking “Why me?” Stage three is acceptance and peace. “It is what it is, I don’t have to like it.” Finally, stage four is ambition. Energy is directed in a positive direction. Both you and your organization are poised to change to improve your own performance and surpass your competition.

Unfortunately, people resist change by nature. It means traveling into the unknown and an admission that whatever we are doing, it is less than the best we can do. While change has become chic, we still hear, “Change is good, you go first.” Successful leaders inspire their teams to be on the lookout for new and better opportunities. Most importantly, they give permission for trial and error.

So if you seek improvement in the performance of your organization, embrace change. For success is found in the next great idea. You just have to diligent in finding it.

http://www.nytimes.com/2008/12/06/business/economy/06jobs.html?_r=1&hp

On the same day, Time reported that the foreclosure rate is running at record 3%.  Again, they don’t tell you that 97% of mortgages are not in foreclosure.

http://www.time.com/time/business/article/0,8599,1864746,00.html?imw=Y

For friends or family members that may be struggling right now, the statistics are irrelevant.  They are in pain and my prayers go out for them.  But what can you do?

Plenty!  If you own a business, you have the ability to contribute to turning the economy around.  How, you ask?  Begin by putting all the negative information presented daily by the media in perspective.  The economy isn’t strong and there are challenges we must all face.  But you can survive and even grow if you take advantage of what the market gives you.

Revisit your business plan and be open to change.  For example, if you sell real estate, your business may have been built on second or third-time home buyers.  That market is weak right now because few buyers exist for the home your traditional buyer currently owns.  If they can’t sell their current home, they can’t buy a new home.  However, the market for first-time home buyers with solid credit and a down payment is strong.  The inventory of bank-owned homes is at its highest in years.  By changing your focus and getting the education you need, you can shift your focus to the new market that provides opportunity.

Similar opportunities exist in many businesses.  Are you willing to shift your focus from a market you favored but isn’t good now, to one which you avoided in the past but is where the money is today?  Are you willing to work harder and compete smarter for the opportunities that are out there?  If you’re not, your competition will.

Successful business owners are focused on the performance goals they have for themselves and are prepared to make the shifts necessary to take advantage of what the market gives them.  Current economic conditions demand that you revisit your plan and make adjustments where necessary.

You never know.  You may find yourself calling that friend or family member and offering them a job because your business is expanding!

Good luck!

The first step in strategic planning is the development of a statement of values.  For most entrepreneurs, this seems easy.  Honesty.  Customer service.  The customer is always right.  Employees are most important.  But if the statement of values is to be anything other than simple platitudes, it is important that these values have meaning for you and will be adhered to when making decisions that impact both your customers and your employees.

For example, how do you handle a customer who is dissatisfied with the product they bought from you a week ago?  Let’s assume the product is not unique, it’s available all over town, and you don’t know this customer or remember the purchase.  And the customer doesn’t have a receipt.  And the package has been opened.  And the product has been used.  You’re not going to be able to return it to your vendor or resell the item.

As a customer, we’ve all been in this situation.  We’re not trying to take advantage and are being as honest as we can be in returning this product.  We’re not expecting the store to take it back.  So when they refuse to refund our money or seek our satisfaction in any way, we may not leave angry.  We’re also not likely to favor that business over any others, or to tell too many others about the company’s outstanding service.

As a vendor, we’ve been here, too.  We don’t know whether the person actually bought the product from us.  We are going to take a hit if we refund or exchange the product.  If we let our employee make the decision about whether to accept this return, the employees will give away the store, because they never make the right decisions for our business.

I stopped at a large chain convenience store this morning for gas.  I had a coupon for a discount which meant I had to go into the store to pay.  The sign on the pump said it was a pre-pay only pump.  I had to use my card or go into the store before I could purchase gas.  So in I went.  I had to leave a driver’s license or a credit card with the clerk because I didn’t know how much gas I needed.  Now I go out, pump my gas, and go back in to pay.  A terrible inconvenience for me.  When I commented to the clerk that they must have a real problem with drive offs, he said they’d lost $5,000 in the month prior to instituting the pre-pay policy.

As a customer, I was disappointed.  I had to take two trips into the store if I wanted to use the coupon that they provided.  I was told that they didn’t trust me to pay for my gas.  I had to leave my identification with a clerk I was supposed to trust not to copy or misuse it.  While I understand the vendor’s frustration, I’ll avoid that store the next time.  In the process of protecting their own interests, they’ve disrespected mine.

So which is it?  Honesty, customer service, respect for the employee?  Or when push comes to shove do we look out for ourselves?  These are difficult decisions for business owners, especially when finances are tight.  But how you handle these situations is what brings your statement of values to life and demonstrates to your employees whether the statement has meaning or is just a marketing ploy.

So what do you stand for?  And how far are you willing to go to live by the values you’ve declared as important to your business?

Sound familiar?  Being in control of your own destiny is right at the top of the list of reasons people get into business for themselves.  They want to make their own schedule, have flexibility, work less.  Yet, except for a small minority of business owners, what they end up with is just the opposite.  They are the first one at work in the morning, the last one to leave at the end of the day, and the only one who can’t call in sick.  All of the employees want, and take, vacations while the owner keeps the business afloat.

What’s going on?  You’re the boss but the business is controlling you, not the other way around.  In my experience, there are two causes here.  First, the business owner has far more at risk than do the employees.  After all, its your name on the door and if the business fails, the employees go off and find another job.  The owner has to deal with the “funeral” and the grieving process goes on for years.  On the other hand, success depends on the owner, alone.  The employees aren’t going to make the business lucrative; they’re just employees.  And I don’t have enough money to hire top-notch employees, so mine are only interested in themselves and their paycheck.

Or are they?  That brings us to the second thing causing the business to control the owner, rather than the other way around.  Everyone wants to feel that their contribution is important.  They want to live up to an expectation you have of them.  They want to grow in their career.  Your employees are no different.  They want to be trusted and they want to succeed.  It’s the owner who is too afraid to give them a chance, to trust to her employees the important decisions.  She is creating frustrated employees who underperform.

You’ve heard this many times.  Hire the best.  Pay a little extra for good people who can contribute.  They will make you more money than they cost.  Yet the small business owner continues to hire less than qualified employees, then won’t (or can’t) invest in training.  The owner is left to complain about being unable to trust her business to her employees.

Control is a double-edged sword.  It’s nice to have, lends a feeling of power, and fools us into believing that we are self-directed.  The real power comes when you give up control.  Empower your staff to make decisions and to take control.  They will make mistakes.  So will you.  Give them permission to make mistakes and to learn from them.

When you’ve established a strong organizational set of values and a compelling vision, employees will, more often than not, make the decisions you’d expect.  When you hold them accountable for well-understood performance standards, they’ll work to meet those standards.  Employees might fall short once in a while but they will learn and do better the next time.  You will be amazed at how much more “in control of your destiny” you’ll be when you shed some of the control you retain.

And you can take that vacation, without the blackberry, without the cell phone, without worry.  Good luck and good business.