5 Business Resolutions for 2014

I sometimes jokingly refer to myself as a janitor. In my work as the Turnaround Authority, I go into businesses and clean up their messes. And I have seen some doozies in my career, many of which were caused by poor management or a business owner just not paying attention to what’s happening in his company.

This post is for business owners or CEOs that may be looking for a few ways to improve their business in 2014. Here are my top five resolutions for you to help avoid the troubles I’ve seen and the messes I’ve worked to clean up to get the company on the path to success and profitability again.

1. Leverage the talents of others

Don’t aim to be the smartest guy in the room. Hire people smarter than you, who have skills and experience that you don’t have. Take an honest inventory of your own strengths and weaknesses. We all have areas we aren’t as strong in. Successful business owners and CEOs recognize this fact and hire to compensate for their weak areas. Hire those people to help build a strong team.

2. Know where you are financially and always check on your books

As more layers of management are added to a business, the further away an owner may get from the details of the business’s finances. If you are making payroll and paying your bills, you may have turned your attention to other areas of growing the business. Always know where your business is financially. Have someone double-check your payroll. Poke around your books and ask questions on anything you don’t understand.

3. Be aware of conditions that affect your business

An effective CEO keeps up to date on what is going on in the world or the economy that could affect his business. For example, if you own a distribution company you need to know if shipping costs are expected to rise or if oil prices are going up.

Or is society changing so that the market for your product may be shrinking? In 1990 there was a Blockbuster on every corner and many people made it a weekly ritual to go peruse movies. Then Netflix, streaming video and options to watch movies on the Internet came along. All the Blockbuster stores closed late last year.

4. Ask for help before it’s too late

When you are confronting an issue that is beyond the expertise of you or your staff, don’t hesitate to call a consultant or turnaround manager. One with integrity will tell you if you don’t need them. In an initial meeting, it may become evident that you can handle the problems on your own. But if you do need help, it’s better to call earlier rather than later.

Some of my sadder cases have been where I was called in to help a company that could have been saved if only they had called earlier. Sometimes it was just too late to avoid bankruptcy. With others we were able to save them but they were significantly downsized or had suffered large financial losses.

5. Pick a plan and stick to it

As a leader it’s your job to establish a clear direction and to march that way. I’ve seen so many problems arise when CEOs make a plan and garner resources to accomplish that goal, then change their minds later and start over in a different direction.

This often happens with CEOs who are facing a crisis and are unsure of what to do next. They end up following the advice of the last person they spoke to — immediately acting on everything they hear. Gather the best information you can from all relevant parties and make your best decision on which direction to go in. Then stick to it.

However, you do have to continually monitor the numbers, and if they continue to trend downward, react quickly.

Add your own personal resolutions to this list to help ensure your success in 2014. And as a final resolution, resolve to stick to your resolutions!

6 Questions to Ask Yourself to Face Your Business’s Harsh Reality, Part 3

For the last two weeks we’ve been discussing the questions you should ask yourself to confront your business’s harsh reality. Read about Part 1 HERE and Part 2 HERE. This week, we’re going to ask ourselves the next two questions your should be asking.

5. Am I protecting the financial integrity of my company during downturns so that I am prepared to profit during better times?

Bad financial times prompt too many managers to take the turtle mentality. Don’t put your head in your shell until things turn up. Take the opportunity to see what is inefficient in your business by eliminating loss leaders and reducing inventory, and increasing marketing and sales expenses in high profit-margin areas. By shoring up problem areas during a downturn, you prepare your company to run lean and mean at all times.

This is not an excuse to avoid monitoring, evolving and preparing during good times, though. Many companies ride the wave of what’s working and worry about problems after the wave crashes on the shore. That’s the wrong approach. As long as you know it’s a wave, you know it will end. Come smoothly onto the shore, long since ready for the next wave. Companies that ignored this advice (not that they asked me) were satellite TV companies and Blockbuster. They both road their waves until they crashed into the shores of cable television and Netflix.

Speaking of crashing, if all of your assets and capital are invested in one area, and a problem occurs, operations will grind to a halt. If you have a Big Gorilla – one client, customer or product that accounts for 25% of more of your sales – you need to rethink what you’re doing. Along these lines, don’t bet the ranch on other opportunities; remain grounded in your decision making. In our experience, Big Gorillas are one of the top five reasons companies experience crises.

As above, consider the advantages of protecting your company’s financial integrity for more profitable times. There are always competitors who have issues, and if you keep cash or credit lines available then you can take advantage of someone else’s mistakes, acquiring new product lines or growing old ones.

6. Do our financial departments have sufficient controls and a fraud awareness policy?

75% of the fraud I discover is from first time offenders. That means the people who ultimately commit the fraud are not those who will come up in criminal background checks. Therefore, when working with your auditor, integrate sufficient checks and balances.

As the CEO you have to have a constant feel for your business financially. Walk the company and manufacturing floors – be hands on. Don’t let your guard down by taking your tie off and lounging in your office. Stay involved.

I once had a BBQ at 1 a.m. for a production crew at a company that ran 24/7. While doing this I discovered a multi-million dollar fraud. Do what would be considered out of the ordinary, and you never know what you’ll find.

One thing I recommend without exception is making your CFO/Controller take a two week vacation once a year. Don’t even let him in the building. Sit at his desk, or have someone else do it, and see what happens. You’ll be surprised every time as you find duplicate expenses, continued payment on cancelled leases or sold equipment, and perhaps personnel that don’t exist.

Conclusion

I hope these 3 posts about the 6 Questions to Ask Yourself to Confront the Harsh Reality of Your Business have been helpful. I’d love to know the answers to any of them if you care to share or questions that you would add to the list and that help you confront your harsh reality. Please share in the comments section below.

“Good Times, Bad Times, You Know I’ve Had My Share”

If matters go badly now, they will not always be so.

– Horace

Business is cyclical, and the ups and downs are unavoidable. You have limited control over the corporate environment you operate in, and it’s often hard to exert immediate influence even within your own company.

But understanding this should help rather than hurt the way you manage your business affairs.

What you can control is the way you anticipate and react to the circumstances that cause periods of growth and decline. Always be aware of what factors influence the success of your business most strongly, and try not to be too phased when times are tough.

One of the most common mistakes I see amongst leaders of failing companies is that they re-act instead of take a proactive attitude towards their business.

Learn from their mistakes.

Don’t rely on the numbers you’re given. Don’t become complacent. Don’t believe projections. Have contingency plans. Have checks and balances. Face the harsh reality of your situation. Develop alternatives to your primary model and product offerings. Walk the floors of offices and manufacturing facilities.

Take Blockbuster, for example. Since its founding in 1985 until recently, things had been going well for the video and gaming rental giant. The company found a combination of products and services that were in high demand and it grew nationally as a result. But they failed to proactively seek an opportunity like their now main competitor, Netflix.

Now Blockbuster corporate strategists spend most of their time reacting to the evolutions of the movie rental marketplace that Netflix overwhelmingly controls. The company filed for Chapter 11 bankruptcy in September, 2010. Your company, like Blockbuster should have done over the years, needs to keep evolving whether the times are good or bad.

It is true that the biggest battleships are most difficult to turn around, but there isn’t a battleship too big to sink.

Keep Your Business Healthy

There are a few very important things to keep in mind to keep your business afloat and healthy:

1. You need to focus on overcoming the turtle mentality in your company. When things are going  badly, many people have a tendency to try to hide from and ignore the problem. Make sure that through an open communication policy, people feel comfortable sharing their concerns regarding the business. Wouldn’t you rather know if there is a problem that needs your attention while it can still be fixed?

2. Remember, it is not only your own perceptions and attitude you need to manage. Keep a positive attitude even during hard times. People look to you as an example, and they often jump to conclusions based on your behavior. You need to communicate with your colleagues and employees. If the business is in bad shape, be honest, but engage and reassure everyone in the process to make things better. Ask for their ideas and opinions, especially if they are key stakeholders.

Once, acting as CEO at a company with 24 hour operations, I decided to hold a barbecue for those working the night shift. At 1 am, I began cooking on the grill and talking to the team members. As a result, I discovered a multi-million dollar fraud case. Act out of the ordinary and you never know what you’ll find.

No matter how tough things are in the business, you have power. If you take steps to be a proactive leader, keep a policy of open communication with your employees and colleagues and maintain a positive attitude, you will likely land smoothly when a wave comes, rather than crashing onto the beach.

What bad times have you experienced? How did they end?