How to decide if you should invest more in your business

Dear WW: I own a small retail business which has been open for two years. We have a great idea, a great location, and business started off well. But for the last year our sales have been going sideways. I’m not sure what the problem is. My manager thinks I need to pump more money into the business to make it grow, but I’m not sure. TO SPEND OR NOT TO SPEND

Dear Spend,

My favorite part of the ’96 election wasn’t Dole’s theme song (“Dole man”). It wasn’t the return of Perot’s flip charts. It wasn’t even the Kemp-Gore face-off. My favorite moment occurred just before Bill and Bob’s first debate when the President’s staff handed out a press release entitled “Debate Pre-buttal.” This deftly named document refuted all the arguments they expected Dole to make during the debate. Which just goes to show: Clinton may not be a Boy Scout, but he swears by the oath “be prepared.”
It sounds like you need to do a little “pre-butting” of your own and take a hard look at your business (and substitute your bank loan officer as your “opponent”). Of course, you’ll want your review to include all the conventional financial benchmarks (balance sheets, P&L statements, etc.). But also ask yourself the following questions, adapted from Collins & Porras’ classic Built to Last (HarperCollins, 1994):

Are you keeping up with the Jones’s? Remember when banks were only open from 9 to 3? That was in the old days-before 24 hour supermarkets and an Internet that never sleeps started catering to customers’ schedules. Lo and behold: the end of banker’s hours. Well, take a look at your business and see if you find practices that are equally out of sync with customers’ needs. You can’t do this from your desk, though. You have to get out and talk with your customers; visit your competitors; and stay in touch with business trends and ideas from other industries.

Do they love me or love me not? Just how loyal are your customers? Assume not very-and then do everything you can to woo them. Do customer surveys. Mingle with them on the retail floor. Talk to them when they call. Question them earnestly when they’re angry.

Are you ready to take on all comers?  Today ATM machines spit out postage stamps, drug stores push nickel copies, and virtually everything is for sale on the Internet. The days of clear boundaries between businesses are over. What that means for you is you need to guard your back door and keep your eyes peeled for new competitors from unexpected directions.

None of this is easy, of course. It’s hard to look at your business through the eyes of a competitor and be critical about your own affairs. But if you can, you’ll gain valuable information that will help you decide if throwing money at your business is the proper strategy. Scout’s honor.

Bob Rosner is a best-selling author, speaker and internationally syndicated columnist. Sherrie Campbell is a relationship and business professional, having applied her counseling background in a variety of challenging organizational settings. They’d love to hear your thoughts on this topic, especially if you have better ideas than they do. Also check out their complete column archive at workmash.org, “The Boss’s Survival Guide” and “Gray Matters: The workplace survival guide.” Send your questions or comments to bob@workmash.org.

           

How to test your assumptions

Dear WW: My company requires that each salesperson develop projections for the coming year. I have a new boss and she ripped my forecast saying my assumptions were too rosy. But I based them on sales from last year, so they should be accurate. IT’S SAFE TO ASSUME I’VE GOT A PROBLEM

Dear Safe,

If you went sailing you would never assume the wind, weather, tides and traffic would be the same as they were on a prior year’s sail. Yet in business we often leap to the conclusion that next year’s conditions will be a replay of last year’s. Can you say “Exxon Valdez”?
Unfortunately, few things are as dangerous to a business as faulty assumptions-because they are to a business what a compass is to sailors. They orient you to your ultimate port-o’-call as well as through the shifting waters you navigate daily. And assumptions are especially difficult because, for most of us, they are so hard to get a handle on.

It sounds like your boss has fired a shot across your bow. You should grab this chance to re-evaluate the seaworthiness of your thinking. The following questions may help you do so. They’ve been adapted from Asking the Right Questions by Page & Seldon (Prentice Hall, 1994).

Just what are your assumptions? Welcome to the business version of “It’s a Wonderful Life.” For the next several hours you need to examine your company and marketplace from the outside. You need to look at everything that has an impact on your sales: your customers, your competitors, your potential competitors, the economy . . .  Even look at your co-workers because they can influence how well your company delivers on your promises. Write down everything you know about those elements that can affect your sales.

When was the last time you tested your assumptions? Now that you’ve ballparked your assumptions, it’s time to put them to the test. Seek external proof (that is, from a source outside your brain) that what you believe is true. Use the library, trade journals, market research, etc. to correct or fine tune your thinking. One manager I know tried to visit a different competitor every week. Have you made a weekly commitment to stay on top of your assumptions?

Consider the consequences: what if you’re wrong? And if you’re wrong, would you suffer a surface wound or a fatal blow? Microsoft acknowledged that it had mistakenly assumed that people would want to collect computer CD’s just as they do music CD’s. Now they realize that people are more interested in surfing the endless Internet than owning a finite amount of content. The company shifted direction and redoubled its commitment to the Net. A deep-pocketed behemoth like Microsoft can survive this kind of mis-assumption. Can you? 

And since we’re on the subject of assumptions, let me point out one more. Never assume you know what your boss is talking about. Pin her down. Find out her specific concerns. It’s better to look dumb momentarily as you learn to be smart than to risk running into that same reef over and over again. Happy sailing!

Bob Rosner is a best-selling author, speaker and internationally syndicated columnist. Sherrie Campbell is a relationship and business professional, having applied her counseling background in a variety of challenging organizational settings. They’d love to hear your thoughts on this topic, especially if you have better ideas than they do. Also check out their complete column archive at workmash.org, “The Boss’s Survival Guide” and “Gray Matters: The workplace survival guide.” Send your questions or comments to bob@workmash.org.

How to deal with Sarbanes-Oxley

DEAR WW: I’ve got a small company, and I’m struggling to comply with Sarbanes-Oxley. What a waste of time and money. TOO FARDEAR TOO:

Your e-mail reminded me of something I recently read. A Lake City, Mich., man called Emergency Services claiming that a neighbor had stabbed him in the chest. Authorities later learned that, in reality, he’d stabbed himself and tried to make it look like a neighbor that he’d been feuding with had done it. Tragically, the man bled to death.

Why would I dare bring up such a macabre story? Because, ghoulish as it sounds, this tale of self-inflicted wounds came to mind when I was thinking about Sarbanes-Oxley or SOX, as many call it. This is the law that Congress created after the fiascoes at Enron, WorldCom, etc. to “protect investors by improving the accuracy and reliability of corporate disclosures.” Many have complained about the act, but the problem is that our financial markets were in a panic because so many had treated the corporate treasury like their own personal slush fund. So, in many ways, this act can be viewed as a self-inflicted corporate wound. To help get you pointed in the right direction with SOX, I’ve listed below some of the questions that prosecutors consider when they are pursing white-collar criminals. For more, check out “The Business Guide to Legal Literacy” by Hanna Hasl-Kelchner (Jossey Bass, 2006).

What is the nature and seriousness of the offense, including the risk of harm to the public? This act is really focused on investors, so it’s important that corporations be transparent in their financial decisions.

How pervasive was the wrongdoing, and how involved in it was top management? You can see how much effort has been put into prosecuting the top people at Enron.

Is there a history of similar conduct? If your company has pushed the limits in the past, it could come back to haunt the organization.

Did the organization reveal any wrongdoing in a timely and voluntary fashion? Being dragged kicking and screaming isn’t usually considered voluntary. If you make a mistake, come clean quickly and publicly.

Does the organization have an adequate corporate compliance program? Corporations need to have programs in place so that everyone knows the right way to behave.

Did the organization take remedial action to address the problem? Did you act quickly and decisively?

Will others (stock holders, pension holders or employees) be hurt by taking action against the organization? It’s important to look at everyone affected by any improper behavior.

Can the individuals responsible be held accountable for their actions? Fingers will be pointed and those responsible will be pursued.

How adequate are other remedies such as civil action or other regulatory-enforcement actions? Prosecutors now have a range of options for pursing crime in the suites.

Unfortunately, due to the malfeasance of others, we all have to wear these new SOX. Avoid any self-inflicted wounds and get with the program. We’re all better off in the long run.

Working Wounded poll:

Sarbanes Oxley is.

• Irrelevant, 4.5 percent
• Inevitable, 22.7 percent
• Important, 31.8 percent
• Irritating, 40.9 percent

Working Wounded strategy:

“I do not like Sarbanes Oxley, because I worry there will eventually be a backlash that trashes the whole idea. The GAO and the public accounting sector (I am a CPA and a CIA) had heavy influence on SOX, and you combine SOX with generally accepted accounting principles, auditing standards, and government auditing standards, and … did anyone ever stop to think that these have long since passed the point of being a self-serving full-employment act for accountants and auditors? No amount of internal controls can stop a culture of greed and ego like Enron. I hope that pragmatism will prevail, and the whole corporate governance idea will not be trashed. But eventually the costs of SOX compliance will cause a reversal of this direction.”
Bob Rosner is a best-selling author, speaker and internationally syndicated columnist. Sherrie Campbell is a relationship and business professional, having applied her counseling background in a variety of challenging organizational settings. They’d love to hear your thoughts on this topic, especially if you have better ideas than they do. Also check out their complete column archive at workmash.org, “The Boss’s Survival Guide” and “Gray Matters: The workplace survival guide.” Send your questions or comments to bob@workmash.org.

How do you calculate ROI (return on investment)?

DEAR WW: I need to build a case for buying a new piece of equipment. What is the process for doing this? RAISING DOUGHDEAR RAISING:

Your e-mail reminded me of how a friend of mine used to talk about “Bob dollars.” She was referring to the way I would take the savings I had made when I bought something on sale and treat it like it was real money that I could use on my next purchase. I might not be able to balance my checkbook, but I sure can do complex accounting in my imagination.

And many of us do this same thing at work. We come up with our own calculations about what we need to do a better job. Unfortunately, the only way to get money to spend to do this is to calculate the Return on Investment, or ROI. This is something we all need to be better at, and I’ve included the basics below. For more, check out Karen Berman and Joe Knight’s book, “Financial Intelligence” (HBS, 2006).

What is the initial cash outlay? Now this seems simple enough. What will you have to pay for the product being considered? But it’s often not that simple. In addition to the cost, there may be training fees involved, setup time, etc. So the dollar amount you are searching for is the total cost until this new product creates actual revenue.

What are all the costs involved? There may also be longer-term consequences. For example, will you have to hire new people or increase other operational costs? Again, take the time to examine all of the cost impacts on the organization.

What are the future cash flows? The tendency here is to be too optimistic. As in all things financial, the key is in your assumptions. What assumptions are you making about the revenue that will be created and can you provide real-world examples to back them up? It will be helpful to collect these assumptions, so you can explain them to anyone reviewing your calculations.

How will the investment be evaluated? This is also more complex than many people realize. There are three ways to evaluate an investment: payback, net present value or internal rate of return. The payback method is the simplest; you divide the cost of the investment by the revenue created by it. This will give you the number of years that will be required to pay back the outlay. Net present value acknowledges that money declines in value over time and is a more complicated calculation because it takes this into account. Finally, in the internal-rate-of-return approach, you compare this investment with other possible ways the company could spend the money. Whatever way you go with your calculations, you should be able to tell if the investment is reasonable or not.
Use these strategies, and you’ll move past Bob dollars to getting real money for your important projects.

Working Wounded strategy:

One winning strategy for dealing with returns on investment (ROI) comes from C.A. in Boston, Mass. “I was really intimidated by business plans, ROI, etc. Finally, I realized that the only way that I would get what I needed was to learn how to make my case for the resources I needed. Needless to say, it worked. I talked to colleagues, looked at other people’s calculations and learned how to be a stronger advocate for my position. This is not as hard as you may think.”

Bob Rosner is a best-selling author, speaker and internationally syndicated columnist. Sherrie Campbell is a relationship and business professional, having applied her counseling background in a variety of challenging organizational settings. They’d love to hear your thoughts on this topic, especially if you have better ideas than they do. Also check out their complete column archive at workmash.org, “The Boss’s Survival Guide” and “Gray Matters: The workplace survival guide.” Send your questions or comments to bob@workmash.org.

How to get the most out of a negotiation

Dear WW: I’ve got a big negotiation coming up and I’m really rusty. I haven’t negotiated a contract in decades. Any chance that I could get a quick refresher course? RUSTY

Dear RUSTY,

We can all learn something about negotiations from Doug Stead. In 1996 he got a speeding ticket for $75.

He was incensed because the evidence against came from a camera mounted along the highway. He sued to prove that it should take more than a photo to send him to court. After paying over $75,000 in court costs, Doug has now depleted much of his families savings. Reminds me of the song, “I fought the law and the law won.”

In negotiations, many of us are more like Mr. Stead then we’d care to admit. We get hung up in making a point and lose sight of the bigger picture. This applies at in negotiations, at work and in outside of work. I’ve listed some tips below to help you keep things in perspective next time you need to negotiate. For more, check out “Pushing the Envelope” Harvey McKay (Ballantine, 1998).

Do you see the negotiation as a partnership or a war? It’s a pity that so many negotiation “experts” are stuck on using war and sports metaphors. War is hell, but a negotiation doesn’t have to be. Go in with a different mindset and you’ll often find your more collegial attitude pays off. One way to do this…

Can you leave something on the table? I think this is the best place to start, consciously exploring how you can make the other side look good. Since most business relationships are more than a one shot deal, it’s dangerous to focus just on winning. I know that “win-win” is a horribly over-used term, but look for places to make the other side look good.

Do you avoid fighting over each detail? A negotiation is the sum of many parts. So resist the temptation to go nuclear on each specific detail that you’ve got to negotiate over. See it as a package where you need to give ground on some areas to get what’s most important to you in others. Once you adopt this attitude you’ll be surprised to find how often things that are important to you are less important to them, and visa versa.

Do you take your time? Negotiations are seldom a sprint. That’s why it’s so important to take time to learn about the person and organization that you’re negotiating with. A small amount of bonding on the front end can save a lot of pain later.

Do you avoid talking “out of school”? Remember there is a difference between being collegial and chatty, be very careful about what information that you share with the other side. To quote an old phrase, “Loose lips sink ships.”

Remember, you won’t be in good stead if you follow Mr. Stead’s approach. Rather, use the advice above as your ticket to a better result.

Online Ballot and Contest

Here are the results from a recent workingwounded.com/ABCnews.com online ballot: What is your secret to successful negotiations?

–Try harder, 42.1%

–Try softer, 37.5%

–Try to find someone else to do the negotiation, 20.3%

Working Wounded strategy:

Our winning strategy for successful negotiations comes from Bill S. in Cyberspace. “Most people view negotiations through the lens of a ‘zero sum game,’ which can lead to ‘us v.s. them’ and either/or thinking. Conversely, ‘both/and’ approaches tend to be more cooperative and less confrontational, and thus allow for outcomes which make everyone in the negotiation better off.  They can also be quite creative, although often requiring a negotiator to have taken the time to understand what motivates the folks on the other side of the table!”

Bob Rosner is a best-selling author, speaker and internationally syndicated columnist. Sherrie Campbell is a relationship and business professional, having applied her counseling background in a variety of challenging organizational settings. They’d love to hear your thoughts on this topic, especially if you have better ideas than they do. Also check out their complete column archive at workmash.org, “The Boss’s Survival Guide” and “Gray Matters: The workplace survival guide.” Send your questions or comments to bob@workmash.org.

How to collect money from a customer who won’t pay

Dear WW: I got cocky one day and told my boss that I could get money from all of our dead accounts. Now I’ve got to produce. But every time I call one of these deadbeats I hear a pack of excuses. I’m sure they’re all lying. How do you collect bad debts? BORN AGAIN

Dear AGAIN,

I’ve got the perfect product for you! A store in Izmir, Turkey claims to sell a phone that detects lies. It uses an electronic sensor that notes changes in the human voice. It flashes red if it hears the frequency that usually accompanies lying, green if it registers the frequency that accompanies truth, and yellow if it hears something in between.

Even with the phone, though, you’ll still need a plan for handling each of your debtors. The trick is to be flexible: to listen to each one’s situation and tailor a response to their unique situation. Try the tips below, then check out “Collect Debts” by Sher and Sher (Amacom, 1999).

In person, ask for payment in full. It’s easy to fill your debtor’s mailbox full of letters, but for real impact, talk to them face to face. If that’s not possible, get them on the phone. Ask for payment in full.

Listen. Hopefully, your presence at the door will loosen their hold on the purse strings. If it doesn’t, fight the impulse to fire off your mouth. Instead, use your ears. If you listen carefully, the debtor is likely to give you clues about how to respond next . . .

Through listening, determine the problem. The Shers have identified three main ways that a debtor will respond to a direct request for payment.

• 1. They promise to pay in the future. If you hear such a promise, look for ways to get at least part of the money now. For example, ask for a post-dated check. Or for a partial payment. Or, even, for some THING of equal value. (My dad got a great pair of golf clubs this way.) Close the deal by having them say how they’ll pay, how much, when and where. Write this information down, just in case they miss a payment.
• 2. They say they won’t pay. If you hear this, you have a choice: you can either write off the debt or you can give it to a collection agency. Either way, it’s probably not worth much more of your time.
• 3. They dispute the debt. If you hear this, you have to listen open-mindedly and decide if their complaint is legit. If it is, try offering a compromise, for example, offer them a discount on the total bill. If it’s not legit, or you think they’re just stalling, then it’s probably back to a collection agency or to writing it off.

Collecting debts isn’t easy-or fun. But with good listening skills, and a little creative problem solving, it isn’t impossible either. Would I lie to you about such a thing?

Working Wounded poll:

What is your primary tool for collecting bad debts?

• Eraser, 25%
• Carrot, 34.3%
• Stick, 40.6%

Working Wounded strategy:

Our winning strategy for dealing with a debtor comes from Larry B. in Harrah, OK. “It’s not always practical to meet face-to-face with each individual, so try these tips next time you have to call. Don’t lean back in your chair with your feet on your desk when collecting, stand up. Your relaxed attitude will come through in your

voice. Always ask for payment in full by a specific date and time. You just might get it! Be prepared to overcome their objections. Ask them specific questions about his/her financial situation. You have the right! They owe you money! Listen! Nine times out of ten, if you ask open-ended questions they’ll tell you where the money is. Be assertive (not aggressive). An aggressive attitude on the telephone when trying to collect will produce a ‘hang up’ every time.”

Bob Rosner is a best-selling author, speaker and internationally syndicated columnist. Sherrie Campbell is a relationship and business professional, having applied her counseling background in a variety of challenging organizational settings. They’d love to hear your thoughts on this topic, especially if you have better ideas than they do. Also check out their complete column archive at workmash.org, “The Boss’s Survival Guide” and “Gray Matters: The workplace survival guide.” Send your questions or comments to bob@workmash.org.

How to measure success in your business

Dear WW: I’m newly promoted to management and suddenly I’m drowning in financial reports and numbers. How do I make sense of all this stuff? And what particular numbers should I focus my efforts on? NUMBER CHALLENGED

Dear CHALLENGED,

You’ve heard of the expression “eating your investment”? Before the last stock market hiccup, restaurants in New York and Boston gave that expression a whole new meaning. Several featured meals with genuine gold flakes on top. No, not as a garnish: this gold was meant to be eaten! One example: risotto of summer’s gold squashes with leaf of 24-carat gold.

You’re right: managers are presented with overwhelming reems of financial data. Fortunately, there are only a few critical measures you need to understand to avoid eating your own investments. I’ve listed several below. For more, check out Charles Handy’s book, “21 Ideas For Managers” (Jossey-Bass, 2000).

Is that an investment or a coast you’re thinking about cutting? Investments are things that maintain or gain value over time (like property). Then there are costs-expenses that your business incurs that don’t hold value (like paperclips and electricity). Know which you’re dealing with BEFORE you make a cut. One example: most businesses treat employees as a cost that can be cut whenever necessary. But once you’ve trained employees, they grow in value. Treat them as investments and cut them only with great care.

Are you losing money on every sale, but making it up in volume? Of course not! Who would be so idiotic? You’d be surprised. Know your break-even point and DON’T sell below it. (Unless you have a powerful, strategic, short-term reason, such as lowering prices to get a major new customer. If so, raise them back over break-even as soon as possible.)

Is that a smart investment, or a rescue operation? You know the phrase “throwing good money after bad?” In business those “bad” expenses are called sunk costs, and the best thing to do is forget about them. No matter how much money you’ve sunk into something that really OUGHT TO work, don’t spend more unless that’s genuinely the best place for those dollars TODAY.

Sure it’s profitable, but will it pay the bills? Yes, you want to focus on profits: you need to bring in money over costs. But there’s also that little matter of cash flow. The most lucrative contract isn’t “profitable” if you don’t have cash on hand to pay the bills.

Are you looking at past success or future? Your balance sheets show you what has worked well up ‘til now. But they don’t tell you what will work well in the future. Before you commit to new expenses-whether continuing past expenses because they’ve been successful, or making new purchases because they’ve worked for someone else-consider a range of options. Look forward, not back.

Hopefully, you’ll never find yourself eating your investments. But if you do, may I suggest the risotto with golden squashes and leaf of 24-carat gold?

Working Wounded poll:

How important to you is your employer’s bottom line?

• It ain’t my problem, 10.7%
• It’s something I’m aware of, 41.3%
• It’s something I worry about, 47.9%

Working Wounded strategy:

Our winning strategy for staying on top of the money comes from Roger D. in Oklahoma City, OK. “I have to tell you the truth-I always thought my company was ripping me off. But then I got a new boss who thought it was important to teach us what really happened to the money where we worked. He taught us about profit and loss statements and balance sheets. But you know what, we started to care. I’m even proud to say that I was able to save the company a bunch of money by switching to a new supplier. Hey, your employees do care, but only when you take the time to tell them what’s really going on.”

Bob Rosner is a best-selling author, speaker and internationally syndicated columnist. Sherrie Campbell is a relationship and business professional, having applied her counseling background in a variety of challenging organizational settings. They’d love to hear your thoughts on this topic, especially if you have better ideas than they do. Also check out their complete column archive at workmash.org, “The Boss’s Survival Guide” and “Gray Matters: The workplace survival guide.” Send your questions or comments to bob@workmash.org.