When your business needs a bigger boat…

We’re gonna need a bigger boat…

In 2017, businesses still manage to suffer from the same problems they have been facing for decades; focusing their efforts on increasing sales while seemingly ignoring the procedures and operations in the process.  The fact that history’s mistakes continue to repeat themselves without many positive signs of improvement on the horizon leads one to believe that the core issue is a lack of capacity, meaning businesses will need to build bigger boats to accommodate all of their growing needs in a sufficient and sustainable manner.   

A business can be like a sinking ship with expenses, culture, and a whole bunch of other issues, weighing down revenue growth.  Yes, some businesses seem unstoppable, which is more likely a stroke of good luck that somehow enable those lucky businesses to excel in spite of that firm’s negligent inclination to ignore and still survive internal issues rather than addressing them.

However, adjustments to the structural size of a firm alone will not be the sole solution to all of a firm’s issues.  While a bigger boat (more resources) can make a project seem less challenging, it does not guarantee success.  Just like having the ability to generate sales is fantastic, believing you can sell your way out of a problem is not a long term solution.   Having an understanding of the internal operations and how the firm’s money is being spent is also a critically important factor, as well.

The business activities that work as a bail-out for the sinking ship generate profits, while operations keep the boat afloat it’s culture and marketing that move the ship along.  The reason I am trying culture into this is while marketing is, of course, a common core competency of every organization,  culture is also often disregarded as an expense that does not offer an immediate measurable impact on revenue performance.  If the cost to acquire a new customer (Customer Acquisition Cost(CAC) =(Total sales + marketing cost)/ # of new customers added per month) exceeded revenue, then the approach that may have the largest financial impact may have to do with culture, while the cost of a sale has a cost for marketing anytime there is a change that affects how employees operate there is a threat from outside influences. It is important to be agile and make changes that support the business and focus on repairing the leak instead of focusing on buying a bigger bucket.

Learning to do more with less is just as important as learning to do less with less.  Meaning, As a result, businesses possess the ability to drive revenue higher as a percent of cash flow from operations by focusing on process improvement over sales performance improvement.

There are actions to fix the whole instead of

When it comes to cutting costs, there are what is seen as the most common or traditional cost cutting measures with the quickest and most visible impact to the bottom line are employee layoffs, which are often referred to as reductions in staff and restructuring.  laying off employees; While business decisions involving terminations, demotions, and added responsibilities without compensation all provide organizations with the ability to quickly reduce costs and drive profits, this approach is often only viable in the short-term, as staff changes of this nature often result in hurt moral and can decrease the rate of productivity and can compromise quality control much farther than anticipated.  Reducing employee pay is always challenging and usually will drive the top talent and high performing people out first.  Reducing benefit programs can also cause the same impact on the staff as pay reduction.  In addition, changing customer service hours, or altering billing terms with little to no notice to the consumers may drive away profitable customers while producing an undesirable impact on the business’s reputation.  Less common, but often more sustainable, cost-cutting measures look to leverage relationships and local communities to support a business in transition which can help with performance, sales, and reputation.

Strategic alliances for marketing purposes can be leveraged more easily when there is a nonprofit or charitable affiliation.  Collaborating with local schools or social organizations for mentorship or internship programs can provide firms with the opportunity to reduce expenditures (Cost Cutting) with low-cost labor options, elevate customer retention and new client acquisition, and promoting a more positive brand image while cultivating stronger relationships in the community.  

Activities that possess a viable means for increasing the dynamics of a firm’s cash flow from operations include the following:

  • Budgeting constraints for outside sales teams that link expenses to performance. The better a sales member does the more access they have to company reimbursement for non-essential business expenses.
  • Performance-based expense-reimbursement standards create challenges to the firm’s culture and the espoused values. As a result, this approach would require the greatest amount of care and focus on change management implementation to ensure optimal successful results are achieved.  

I have personally witnessed the execution of all of these various strategies increase business performance in different industries at different times.

There are many other types of activities to improve operations, as well as improving access to a highly valued workforce that work as repairing a leak to move the boat better. Feel free to comment with any other uncommon ideas that you have seen work.  

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The phrase every executive should avoid

Marketing is everything you think it is and everything you don’t think it is…

While that is stirring around in your big beautiful melon.  

Obviously, all normal advertising is marketing, training for how company representatives interact with customers is marketing, text, and images on everything from white paper to web pages and business cards is marketing.

For the past 17 yrs, I have seen businesses that over-leveraged themselves to increase marketing expenditures and firms that limit the amount of business cards they give out to keep marketing expense down and everything in between.  Here’s is what I have come to understand. There are three “things” that drive businesses to be successful timing, magnitude, and luck. Timing can be early to market, late to market on right on target. Magnitude not having enough widgets, having too many widgets, or right on target. Luck is the wild card, good luck can make a business succeed regardless of timing & magnitude. Bad luck can crush a business despite all the best efforts, and it(luck) can not be considered at all in any planning. The importance of marketing is directly tied to timing and magnitude. I am not going to lay out the different approaches to campaigns, calendaring, or strategy implementation.  I really just want to share a mindset that should be avoided at all cost by any executive, business owner or division head and that is anyone who utters this are a variation of this phrase;

“We don’t really do marketing here”.

“We don’t really do marketing” is probably one of my most favorite things to hear an executive say.  I have the hardest time not laughing in their face and the more profound they look while spewing the statement the harder it is to maintain composure. Obviously, if that statement made then marketing is being discussed in some manner, and the person making the statement has misunderstood the idea of marketing and how to drive sales. While outbound and inbound advertising is absolutely part of marketing so is the content that is used on websites, business cards, even customer service training is part of marketing. There are Key performance indicators and metrics that impact sales that are also linked to forecasting growth.

Here is a short list of less common practice activities that are part of marketing.

  • Return on Marketing Investment (ROI) = (Sales Growth – Marketing Cost) x 100 / Marketing Investment
  • Customer Acquisition Cost (CAC) (Total sales +marketing cost)/ added customer per month
  • Marketing % of Customer Acquisition Cost (M%-CAC)
  • Success Metrics
  • Channel conflicts
  • Newsletters
  • Landing page
  • Search ads
  • Forms
  • Blogs
  • Social networks
  • Banner ads
  • Vlogs
  • Customer service
  • Logos

Far too often businesses will become so focused on the bottom line that opportunities are missed because “we don’t do marketing”.  In actuality the statement is more likely to be “we don’t understand marketing” or “we don’t do marketing well” there are lots of different recipes to make a nutritious meal but you have to be willing to spend money on the ingredients or know how to cook. Not every business needs a celebrity endorsement or SEO strategy, but they should know who much they are spending on their marketing activity for the simple fact that if you can measure it you can plan for it making timing & magnitude an essential aspect of marketing and business strategy.

Next time you are in a meeting or shooting the breeze, just remember the phrase to avoid. “We don’t do marketing”…

The “business of business” and the “business of politics”

After seeing social media clogged with political rants as well as my daily social interactions being consumed, and everywhere I go I receive unsolicited opinions about people’s political views. This has given me the push to share a few details about what people I am hearing and how things work based on empirical data and life experience.  The topic of running a country like a business and acting as the CEO of a country is what I have been bombarded with.  There are a few key terms that are needed to ensure the points are understood and outlined here: bondholder, shareholder, and stakeholder.

Small Business

How businesses should operate versus how most businesses do operate are not the same.  While this may seem obvious, the issues are still significant.  Most businesses strive to drive the bottom line and focus on shareholder relations.  In small businesses, the focus is on short-term cost-cutting like avoiding investing in personnel, succession planning, marketing, process improvement, and overall strategic planning which usually produce slow grow, product inconsistency, high turnover, and overall failure. The small business issues arise usually from a lack of financial resources or a poor understanding of profit and loss. While some businesses are able to be successful while utilizing a few core competencies they rarely reach full potential.

Larger businesses and corporations

Larger businesses and corporations do suffer from many of the same issues small businesses have for sure.  One of the added challenges to big business is the shareholders and market speculation.  Shareholders often focus on the bottom line and the return on their investment, and not investing in personnel, succession planning, marketing, process improvement, overall strategic planning.  The large business or corporate issues arise from investors seeking short-term returns with the greatest payout without regard for long-term performance.

Public Relations

How a country operates looking at democracies particular the U.S. the government’s role is to ensure security for the citizens and those citizens are eligible to run and lead the nation. Unlike a business, the country does not use investing in personnel or succession planning in the same way a successful business does. If a country was run like a business the amount of time and money that would be used in maintaining strong relations with the investors would not produce a wealthy population nor a safe secure environment.  Some easy example is when the stakeholder are not taken into consideration.  For instance companies with personnel issues such as Foxconn and Apple, Walmart and low wages,  Wells Fargo and cheating sales goals, and dozens of other companies with class actions suits for discrimination, safety violations, and many other deceptive practices. The most obvious sign of how a country should not be run like a business is term limits for political office. If the country did not have term limits like business employees marketing could be used to manipulate the population into losing more freedom and opportunity than are currently available.  This would resemble a monarchy or any ruler that looks to control news and media.

US debt and bonds: about two-thirds of US debt is held by domestic investors, social security, military retirement plans, government agencies, corporations and individual investors. The rest, about one-third, is held by foreign countries and foreign investors…

The amount of US government debt held by foreign entities equals $14.1 trillion… the largest foreign holder of US debt is Japan, which owns 1.31 trillion. China, the second-largest holder, owns $1.115 trillion.

https://www.foreignpolicyjournal.com/2017/03/15/us-deficit-and-debt-explained/

Leadership and Power

If a country was run like a business the bondholders would have more power in deciding what the country should do. That means that China and Japan would have the strongest most influential relationship because they hold the largest amount of foreign debt. While the U.S does have good relations with those nations the U.S. also have favorable relations with countries with less of a financial investment in the U.S. directly. Also, we would have a really hard time doing business with the amount of debt we generate every quarter. The turnover and impeachment rate for almost every elected official who is unsustainable, some companies bring in new leadership almost once a year before the board finds someone they will tolerate. While in the U.S. the elected officials stay in office if they do great, good, or terrible,  as long as they didn’t get caught breaking the law they usually stay, and can often be reelected. Business and government have similarities and neither are consistently successful or reasonable, but they are far from the same and should not be treated as such.

Citizens

If Governments do a poor job of supporting the stakeholders of the country, then businesses do a terrible job at it. For the thousands of businesses that are successful none of them have made it to the level that the government has for keeping the citizens safe and providing necessities and rights. Ideally, we would be anarchist living under a social contract of peace, love, and a free market, which is as likely as me being a 19th-century pirate and winning over the people with my soothing public speaking ability(Has Not Happened). Every citizen should be involved and aware of the government and no one should try and take that right away and give it to businesses.

Freedom

Businesses have more rules and regulations regarding everything from dress code to language that is acceptable to the behavior of employees is even dictated by the culture of the business.  If people want a country run like a business social and civil uprisings would be a common occurrence.  Just like walkouts, boycotts, and viral videos have a massive impact on businesses for mistreating the stakeholders such as Uber, Pepsi, United airlines, and the list goes on and on.  Regarding government, protests are still a viable option, when the citizens boycott a vote it is the citizens that lose out more than the government. Specifally considering the extermes of retaliatory actions for both arenas.

Business is great for creating wealth and opportunities for people who are willing to work hard, invest in education, and sometimes just lucky.

Here are links to the information that was I used to support the terms.

Bondholderis the owner of a government, municipal or corporate bond. Investors may purchase bonds directly from the issuing entity or on the secondary market if the original bondholder decides to sell prior to maturity. Bondholders are entitled to a return of principal when the bond matures and, with the exception of those who own zero-coupon bonds, periodic interest in the form of coupon payments.

Read more: http://www.investopedia.com/terms/b/bondholder.asp#ixzz4cOjFVI5B

Stockholders: An individual, group, or organization that holds one or more shares in a company, and in whose name the share certificate is issued. Also called shareholder.

Read more: http://www.businessdictionary.com/definition/stockholder.html

Shareholders:is any person, company or other institution that owns at least one share of a company’s stock. Because shareholders are a company’s owners, they reap the benefits of the company’s successes in the form of increased stock valuation. If the company does poorly, however, shareholders can lose money if the price of its stock declines.

Read more: http://www.investopedia.com/terms/s/shareholder.asp#ixzz4cOikbUmC

Stakeholders: person, group or organization that has interest or concern in an organization.

Stakeholders can affect or be affected by the organization’s actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees, government (and its agencies), owners (shareholders), suppliers, unions, and the community from which the business draws its resources. Not all stakeholders are equal. A company’s customers are entitled to fair trading practices but they are not entitled to the same consideration as the company’s employees.

An example of a negative impact on stakeholders is when a company needs to cut costs and plans a round of layoffs.

http://www.businessdictionary.com/definition/stakeholder.html

Changing Consumer Habits

While I was digesting the news this week I heard how well Walmart was doing in Q4.  Full disclosure, I have limited shopping experience at Walmart.  My online shopping is for products that I can’t source locally or when I need a specific quality item and I have positive experiences with a specific online brand.  As for Walmart and their domination of the low-cost retail market, here are my insights as to the change in customer behavior and how Walmart had been the beneficiary of changes in the market and buying habits.

Earning and Work life balance

“ Walmart’s doing really well while people are more likely to stay in, shop online, binge watch movies and order pizza.”  paraphrasing news broadcaster.  With more freelance and gig-jobs, part-time work is not only common, but for many, part-time work has become a necessity, especially in highly populated areas where the competition for jobs is much more intense.  The full-time work that is available is more demanding of people’s time, thus reducing work/life balance.  It has been hypothesized that people are avoiding the expense of going out to shop not only because of the great ease of online shopping, but also because the product quality is not as important as it once was to many consumers, who are now placing greater value on low cost and reduced time over the quality of the goods.  This has made Walmart an ideal player in the market according to the hypothesis.

Freelance and Gig work

I also think that there is a bigger and sadder picture that leads to this type of customer behavior in the current market.  While I have not conducted any academic research to support either assumption at this time, it has been reported that the poverty and wealth gap is growing and changing the world, and these effects are more apparent than one may think.  The population is in part taking in more non-traditional forms of employment such as gig and freelance work, where using their own assets to make a profit such as delivery, and hospitality services, (Lyft, Air BnB) making the population more exhausted.  Now people are coming home from a much longer than what was once considered a normal working day (8 hours).  The flexible and remote workforce injects work deep in the home life and adds stress when there is no option for  “leaving work stress at the office”… because the office is home.

Quantity over Poverty

While many Walmart employees cannot even afford to raise a family on a single income, the need for families and independent adults to have more than one income makes it harder to have free time and expendable income to do things like go out and enjoy anything let alone one of America’s favorite pastime such as retail therapy.  The sales associates at discount retailers often do not have the same drive to sell as their commission seller counterparts can drive up engagement and make the shopping experience more of an event than a necessity.  Because discount retailer sales associates who work on an hourly wage are very aware that customer service is no guarantee of additional compensation, the customer experience is often sub-par to that provided by sellers who are rewarded with more lucrative sales incentives.

Free Time Well spent

It seems that the comparisons that can be made from the increase in discount and low-cost retailers with low-paying jobs has had a spillover onto a larger segment of the population of working adults.  For the people taking on additional work (be it freelance, gig-work, or having multiple part time employment), the free time available for going out to enjoy one’s self has fallen to the wayside, resulting in a gap that has been filled in by binge watching tv, social media, and RPG’s with food and goods purchased online that include purchases that are undoubtedly delivered by a person working their way through the day until the start of  their next gig just a few hours later.

Profit at all cost

Walmart’s 10k states: “strategy is to lead on price, differentiate on access, be competitive on assortment, and deliver a great experience.  Leading on price is designed to earn the trust of our customers every day by providing a broad assortment of quality merchandise and services at everyday low prices”.  While there are many large companies that compete on cost in many different industries, in the long term, the customer loses out more than the firms because of the increase in waste from products that are of poor quality, or made with the intent to be replaced quickly.  As time goes on, low-cost products give way to low-wage jobs, and the decrease in resources perpetuates the problem.

Haves and Have more

The greatest resource that is depleted, in my opinion, is the population that does not receive an education, training, apprenticeship, or mentorship that produces understanding and value of self, time, and community.  That is where Walmart now profits, and will continue to profit from the masses working and working and working to buy stuff and enjoy the little free time they have.  Simply because they do not have the time between their multiple-job work days from logging on or signing in to generate a few extra bucks to dedicate to finding what is really needed: better products, better people, and better relationships.  This is what’s overarchingly driving the gap between the wealthy and everyone else from a consumer’s perspective…maybe.