Special Orders DO Upset Us -- Alienating a Customer for Life in 1 Easy Step

Every now and then a customer asks for something that's outside your normal business process. Special terms. Special handling. Customized products or services. And you endear them for life if you say yes, right? Maybe not -- you could be asking for some real trouble. Special requests only please customers if they're fully supported by your own business processes. If not, you're asking for trouble -- perhaps an alienated customer for life, or even worse, one who's likely to tell others.

I had a recent near-textbook experience involving two vendors -- one of which I'm a raving fan and the other with which I'll never do business again. In May, I got a call from a nationally-known source of mailing lists, Hoover's, owned by Dunn and Bradstreet. A very capable sales rep named Adam understood my resistance -- that I wasn't ready to sign up for a 12-month subscription to a mailing list service because my experience with mailing list vendors has been universally terrible. The lists are lousy, they miss a huge number of companies that ought to be included in your query parameters, and they're not (as claimed by the vendors) verified or validated.

So, I told Adam I'd be willing to subscribe only with the option to cancel within the first 30 days of the agreement if I wasn't satisfied with the quality of their lists. That's where the fun started. That provision had to undergo legal review, and they actually sent me a multi-page contract to sign. In that agreement, they worked in a 10-day cancellation notice, effectively making it a 20-day cancellation option. I objected, and Adam couldn't make the 10-day notice go away, but he was able to make it a 40-day cancellation privilege with a 10-day notice. A preview of coming bureaucratic attractions, it now appears.

I signed up, agreed to pay two months in advance on my AMEX card (Adam assured me he'd credit the 2nd month if I cancelled), and started pulling lists. Their lists were not only lousy, but lousier than lists I'd gotten elsewhere. As many as 5 people were listed as President of the same company, in several cases. Sometimes with different names, other times with slight variations on the same names. So much for "validation" of the data that's being provided.

At 20 days into the agreement, I'd pulled the agreed-upon number of names for the first month and discovered that my fears were confirmed -- that their lists were no better (worse, actually) than anyone else's. I emailed Adam that I was canceling, and why. He gave it a decent recovery attempt, then agreed by email to process my credit for the 2nd month's deposit (about $300). Then the real fun began. I was watching my AMEX statement for the credit, and imagine my surprise when a third month's charge showed up! Not only not cancelled, but still billing me. And then the same the following month. After several email exchanges, I was escalated to a Vice President named Amy, who insisted on a phone call so we could read the email thread together from the start. Amy said "I'll need to research this and call you back". That was 3 weeks ago, and the last I've heard from Hoover's.

AMEX, on the other hand, handled this with their typical efficiency and consistency. They processed the disputes on the 3rd and 4th month's erroneous billings and issued me credits -- one phone call each. After no response from Hoover's on the 2nd month's credit, I finally called AMEX and filed a dispute for the prepaid 2nd month, and I expect they'll handle that similarly.

So, I have a major vendor with whom I've had not just a bad experience but a terrible experience. I had to go to extra effort to get almost $1,000 in over-billings back, due to their non-responsiveness. Thankfully, I had AMEX on my side.  I'm still a Raving Fan of those guys. 

Hoovers' mistake? Promising a customer a non-standard agreement that they clearly had no mechanism by which to deliver. They're set up to take an order, take 2 months' subscription fee upfront and automatically bill the next 10 months. They do that well. They would do better to just disqualify customers who want something different.

In this environment of hard-to-get orders, are you tempted to comply with special customer requests? Are you setting yourself a minefield by doing so? Perhaps it's worth making sure special requests have their own special approval channel, where someone can ensure that your company really has a business process that's flexible and bulletproof enough to handle them.

If you've taken special orders you wish you'd never heard of, please click "Comments" below and share that experience with others. 

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

Another Business-to-Business Peer Lending Story

As the lending freeze for small business continues, business owners are continuing to find non-traditional sources of capital. In this case, a member of Chief Executive Boards International has discovered a privately-funded, privately managed small business loan program, sponsored by Michelin North America. He's expecting approval shortly on a $100,000 loan at prime rate with a 5-year amortization schedule. 

A consistently solid corporate citizen, Michelin realized that many businesses, whether directly connected to Michelin or not, were having trouble growing due to the current drought in available commercial lending.  So, they decided to do something about it, making $2 million available to businesses that were "disadvantaged" under a fairly broad set of criteria. In this case, "disadvantaged" includes economically disadvantaged -- like not being able to get bank financing because 2009 was a lousy year for your business.  Unlike the nonsense SBA ARC program, they're willing to loan real money -- up to $100,000 for up to 5 years at or near prime rate.

It's not a guarantee program that a bank has to buy into -- it's their own loan program, and applications are approved by their own staff. The application process is somewhat rigorous, as you'd expect, but the criteria for these loans are interesting:

• Creation of Jobs -- Viable projects that can demonstrate the potential to create quality, sustainable jobs
• Market sector and geographical location -- A start-up or existing small-and medium-sized businesses located within the trade area of their North American Headquarters
• Viability -- Supported by a viable business plan, together with relevant financial information
• Uses of funding -- Projects that are linked to the creation of jobs, such as purchase of capital equipment, process improvement, working capital and marketing. 

Note that applicants don't need to have a direct business connection to Michelin, such as being a Michelin supplier.  They grasp the idea that a solid small business base will strengthen not only their suppliers but also provide jobs for people who will eventually need tires.  

Michelin is providing the funding, and then outsourcing loan servicing to a local bank. Here's another example of a company that has a lot of cash on hand deciding to not only sweeten their return (they're not getting prime rate anywhere else) but also do something for the community, as well. They're betting they'll get the money back over the next 5 years, and so am I.   Link to Michelin Loans Site

If you've found similar non-traditional sources of lending in this upside-down financial market, please click "Comments" below and share them with others.

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Terry Weaver


CEO
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http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

The Best Thing Isn't Necessarily the Easiest Thing

A Chief Executive Boards International member made a profound, yet simple observation in a recent meeting. In commenting on another member's uncertainty of his own priorities, he said, "The best thing for you to do isn't necessarily the easiest thing to do." Worth some consideration -- there are usually dozens of ideas, strategies, initiatives or activities you could be working on.

It's not uncommon for the easiest or more comfortable choice to get priority vs. the thing that could be most important or most significant to your business. Why? Because that is sometimes the HARD thing to get done. Perhaps hard in several ways:

• Unfamiliar -- Something you or the organization have never done before
• Uncomfortable -- Terminating an employee, a tough collection action with a customer
• Expensive -- Spending money on people or things that are important long term, but painful short term
• Unpopular -- Taking actions that customers, suppliers or employees don't like

Are you putting off doing something important because it's hard? Have a look at the priority list of your own strategies and see if there's something that you need to just grit your teeth and do.

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

Time to Recalibrate Your Year-End Tax Strategy

As the tax year end approaches, the smart thing to do is minimize taxable income by stalling income and accelerating expenses, right?  Maybe not -- at least for awhile.  This axiomatic, ingrained belief among business owners may cost you a lot of money if you stick with it for the next couple of years.  It came up today in a Chief Executive Boards International meeting, stated as if it was a physical law of the universe.  It's not.  Don't delay -- you have 4 months left to make some major changes in your year-end tax strategies, and they may need to be completely revamped from what you're used to.

Why? The game has changed. Let's examine the assumptions -- that we're going to have to pay tax on the income sometime, and later is better than sooner, since we get to hold onto the cash and keep it earning interest for us. Embedded in that assumption is that the tax rate later is the same as the tax rate sooner, right?

The changed game is that you're probably not earning meaningful interest on the deferred taxes, and also that the tax rate you will be paying in the future is going to be higher than this year's tax rate.  Further, if your 2010 income is likely to be soft, you may have the further advantage of being able to accelerate income into an even lower marginal bracket this year, as well.

The fact is that on ordinary income the highest federal bracket will go up from 35% this year to 40.8% next year, including the effect of some lost itemized deductions.  In 2013, left unchanged, the maximum rate on "unearned" income like dividends and interest goes to a stunning 44.6%. As far as capital gains are concerned, this year's 15% rate goes to 21.2% next year, and since you'll be patriotically helping to pay for the health care of the nation (whether you want to or not), to 25% for 2013.

So, what's the better plan?  For most taxpayers, it's the reverse of decades of conventional wisdom.  Accelerate income. Stall expenses and deductions. For every dollar of taxable income you move into this year, you have a "window" into which you can accelerate 2012 income into 2011 for some of the same benefits.

This also might be a good year to convert some of your tax-deferred IRA investment into a Roth 401(k).  Pay the income tax now at rates lower than we're likely to see for awhile and your future gains become tax-free for life.  See: "Roth IRA Conversions -- Potentially Great Opportunity for 2010" for more details.

If you have a point of view on changes in tax strategy for 2010 vs. prior years, please click on "Comments" below and share them with others.

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CEO
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TerryWeaver@ChiefExecutiveBoards.com

5 Ways to Incentivize Better Employee Health

Are you wondering whether you can charge your employees to offset the cost of their unhealthy lifestyle choices, or to motivate healthy behavior changes?   Apparently you can.   Per a recent Market Watch article:

"According to a Hewitt survey released earlier this year, almost half of large U.S. employers say they currently use or plan to use financial penalties over the next three to five years for employees who do not participate in certain health improvement programs. Such penalties will likely take the form of higher health insurance premiums or deductibles, or higher out-of-pocket expenses than employees who are deemed healthy must pay."

A member of Chief Executive Boards International sent me an article from MarketWatch that included various ways you might help recover your costs of unhealthy behavior or (better yet) motivate changes in lifestyle choices:

• Raise all deductibles, perhaps to $2000, with a $500 credit for those participating in screening for cholesterol, blood pressure, tobacco risks, etc.   
• Higher premium copays for smokers
• 10% premiuim copay discount for non-smokers or smokers who enroll in a smoke-cessation program
• Higher premium copays for those with high body-mass indices
• 10% premium copay discount for participation in wellness or exercise programs

Of course, plenty of gray areas exist, depending upon health conditions outside an employee's control.  Read the full MarketWatch article....

If you have taken steps to economically motivate or penalize employees for health-related lifestyle choices, please click on "Comments" below and share them with others.

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TerryWeaver@ChiefExecutiveBoards.com

Frank DeVita's 6 Principles of Business Success

A longtime friend and business owner, Frank DeVita, was a featured speaker at a recent brown-bag lunch for business owners, the Small Business Owners' Forum. Frank is President of DeVita & Associates, a prominent Mechanical, Electrical and Structural Engineering firm he founded in 1984 in Greenville, SC.

Frank was sharing his views on the essential ingredients of starting and growing a business. He defined six principles that were so compelling and universal I asked him for a guest article on his 6 Principles of Business Success. Here’s what he had to say:

"The hard part is you have to do all of them -- you don’t get to pick only one or two, and here they are:

"Passion – Passion is essential. As hard as you will have to work to make your business successful, it will be very difficult to sustain the energy to press on if you are not passionate about it. Passion for a business can sometimes be described as, "I'd probably be doing this for free, but if I didn't charge for it, no one would appreciate it."
  
Running your own business can be tough. On some days, passion may be the only thing that keeps you coming back. I also expect passion from my employees. In fact, one of my standard interview questions is, "What are you passionate about?” It's easy to get tired of a business that you're in for the wrong reasons.
 
"Cash –When you run out of cash you go out of business. You cannot start or grow a business without adequate cash. This is true regardless of the size of your business. In a crunch, cash can be generated or conserved in various ways, such as:

• Reduced or deferred salaries
• Negotiating with your vendors to finance or extend favorable payment terms
• Negotiate favorable payment terms from your customers, including retainers or prepayments
• Securing a line of credit
• Peer lending – borrowing from other businesses or a large, cash-rich customer
• Angel investors
• Private equity investors
  
  When these cash generating or conservation methods are combined they can be very effective, especially if you watch your expenses closely. Remember to consider the cost of debt when forecasting your cash flow. 

3. "Not just one thing – Business owners must pay attention to a lot of different things. You have to sell, acquire new customers, execute work, bill and collect, retain and renew customers, develop systems that support core business processes, hire, train, and retain people. All this must be done while dealing with banks, taxes, regulations, and customer and employee expectations.
     
   Here's the business owner's conundrum. To be successful, you have to be able to do most everything – some things much better than others. However, to be successful you also have to focus your own time on your best and highest use and delegate the rest. In the heat of battle, you will have to pick up a weapon and fight along with the troops, but there are only so many hours in a day, so pick your battles carefully.
    
4. "Hire the best – Pick only people who you expect to be A-players. This does not mean hire a Ph.D. for an office runner, but if you need an office runner hire the best one you can find. You have to have A-players, despite the fact that you'll occasionally slip up and hire some "B's" or "C's". Keep the people that you know are A-players, along with a few "B's". Continue to upgrade or replace "C's", and jettison "D's" and "F's" immediately. The secret to this is recognizing what each group wants and needs:

• A's – Stay out of their way, and keep others out of their way. These people will do well in spite of you. Never lose an A player!
• B's – Train them, coach them and develop them to turn them into A’s. There may be an A in there somewhere, but you need a bench of solid "B's".
• C's – Same as "B's", but don't let their higher needs seduce you into giving them more than their fair share of attention. If they do not become B’s after some period of time, replace them.
• D's & F's – As soon as you identify a "D" or "F", take action. They need a job that's a better fit with the skills they have. See: "When Do You Decide to Do Something About a Problem Employee?" Many business owners and inexperienced managers pour too much time into these "life-saving merit badge" folks to the neglect of those who could actually benefit from their help, and it’s no fair to either the rest of the organization or to the poor performer.
  No one wants to do a bad job or be stuck in a job where they don’t fit. Get rid of your D’s and F’s, once identified.
  
  Finally, invest in your people – spend the time and money to continually improve the skills of all the people in your organization, including yourself. Your people are by far your greatest asset!

5. "Delegate and Predict – The business is looking to you for vision and forward radar. They all know what's happened. They want you to predict what's going to happen. Delegating the day-to-day gives you time for the planning, vision and charting the course to the future. This is working "ON" the business, rather than "IN" the business.
    
   But as leaders our intuition had better be pretty good on some “nuts-and-bolts” things as well. For example, are those promised sales really going to get booked? Are your booked projects or sales really going to happen on the promised schedule, or will your customers want them sooner – or later? What is the quality of your receivables – should you borrow against them or mark them doubtful?
    
   None of us has a crystal ball, but if you guess wrong too often it could have serious consequences for your business.
    
6. "Know your numbers – Every business has critical numbers. Not just the easy stuff like did you make a profit, but numbers that are the key drivers for your business. Some call these Key Performance Indicators (KPIs). What are the critical numbers for your business? Perhaps sales per employee; sales per square foot of retail space; gross profit per employee; utilization rate, profit as a percentage of net worth; etc. What is your working capital trend?
    
   It’s imperative to understand the numbers on your Financial Statements – the Balance Sheets as well as the Income Statements, Accrual as well as Cash.
     
   It is important to study your numbers and know what they mean. Ask a lot of questions. The 2009 recession has again taught us that business owners who don't have good financial information or don't completely understand it are in great peril. Many failed in 2009 and some are still in danger of failing. If finance is not one of your core competencies, take the time to learn, and if necessary engage a part-time CFO who can help you analyze your past and forecast your future."

My thanks to Frank for sharing this article with us. These are indeed six principles of successful business ownership, and most successful entrepreneurs with whom I'm acquainted are paying attention to all six all the time.


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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

Social Media Has its Fans among Business Owners

A recent article in the Chief Executive Boards International monthly E-Newsletter generated not only a lot of clickthroughs but also some interesting responses. Upon learning that 76% of employers are blocking social media sites from employee access, we had some contrarian comments from business owners. With the growing belief that social media is useful for business-to-business and Industrial marketing, we're planning an All Member Forum on the topic as part of the CEBI Fall Summit, October 28-29, 2010.
Here are some of the comments we've recently received:

"We have used web filtering software for more than 5 years. It allows fairly granular control and customized permission levels for different user groups.  However, it has become increasingly problematic to block access to social media sites while some user groups are responsible for areas that overlap into social media (paid search, SEO, paid advertising, etc)."

This CEBI member also sent us a link to an interesting white paper:   "Social Media Use in the Industrial Sector"


Another writer was somewhat resigned to the inevitable:

"I have to wonder how effective all this blocking is now that many employees now have smartphones, iPhones, etc where they can check Facebook/email/other social networks at their leisure. As an employer I don't like having employees on Facebook all day, but I think it is kind of like smoking now. Smokers like to go have a cigarette for 5 minutes now and then, employees like to check Facebook for 5 minutes now and then. It is not an ideal situation, but it is today's reality."

Owners whose orientations lean more toward sales see some value in both Facebook and LinkedIn: 

"There are a lot of legitimate business reasons to use social networking sites. LinkedIn has become and indispensable tool for me and Facebook is helpful. Therefore I don't see how you can afford to block these. I would think monitoring the time spent on these sites and setting alerts when someone is on them for an extended period of time would be more beneficial. "

And another:

"We have actually gotten some business opportunities with our younger sales people while they have been online with friends. One time in particular at 11 pm a friend/future client needed a proposal from us first thing the next morning and mentioned it while chatting on Facebook with our salesperson!  Sales is changing and social networking is a communication method for the younger people to stay in touch - and close sales!"

What's your opinion? Please click Comments below and let others know what you're doing to effectively use social media in promoting your business.


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Terry Weaver


CEO
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TerryWeaver@ChiefExecutiveBoards.com

3 Lessons for Living to Fight Another Day

The resilience of American entrepreneurs is not to be underestimated. In just this past week, I've heard from two business owners whose businesses were not able to withstand the recession. Both realized they could not survive and decided to pull the ripcord. In both cases, just in time, before putting a lot of personal assets at further risk.

Not surprisingly, this week's news is that both have landed on their feet and started new ventures from scratch. Owing partially to their own experience and partially to ideas, support and relatioships they've had in place through Chief Executive Boards International, both have brought new ventures to revenue generation and cash flow in record time -- less than a year.

One of these cases provides a number of lessons others wish they'd learned:

1. First, that you need to protect your personal assets from getting dragged into the demise of a business. Unfortunately, I have multiple friends and acquaintances who violated that rule and let assets from qualified plans, such as 401(k)s, otherwise bulletproof even from judgements and bankruptcy, get drained down in efforts to keep banks happy.
     
2. Second, that it's hard to start a business with no money (see item 1). In one of these cases, the new business started with a $300,000 line of credit to cover working capital needs on the strength of the founders' personal balance sheets. Not without risk, of course, but a lot different than liquidating personal assets and putting $300,000 cash at risk.
        
3. Third, that bad times create opportunity if you have some dry powder. That same business found Class A space downtown in an NFL city at bargain rates. A larger company shut down its local office, and offered a sublease at 1/2 their primary lease rate, including all furnishings right down to the fax machine and water cooler! Even better, at the end of the remaining lease period the new business owns all those furnishings. Wow, talk about a fire sale!

Despite being casualties of the 2008-2009 recession, many business owners have risen from the ashes to fight another day -- to put yet another business on the map, and do so quickly. Statistics are on their side. Many highly successful businesses are founded by people who failed at least once in earlier efforts. 

If you've started a new business after a recent failure, please click "comments" below and share your experience with others. 


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CEO
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TerryWeaver@ChiefExecutiveBoards.com

A Doghouse for Mom?

I saw an article that underscores a near-crisis situation that's brewing  --  the lack of affordable alternatives to care for aging parents.  This is a problem many business owners face, at least if the frequency of it surfacing in meetings of Chief Executive Boards International is any indication.  

The near-crisis dearth of alternatives is underscored by the introduction of the MEDCottage, a 12'x24' manufactured home, consisting of only a tiny bedroom and bath, that you put in your own back yard as a place to keep Mom.  Step those dimensions off in your family room.   

Its special features include a system to transmit vital information to an offsite monitoring service.  Electrical and water service are provided from your home.  Since your back yard probably doesn't have a sewer, it's equipped with a chemical toilet.  No TV, no place for a computer (not even a desk). 

Perhaps this offering doesn't seem as bizarre to you as it does to me.  The idea of an aging relative confined to a bedroom smaller than a Super 8 hotel room, except when she ventures across the yard (rain, sleet, snow, heat), rings the back doorbell and comes in is beyond my imagination. 

My point is not to get in the way of an innovation.  It's that if there's a demand for this, there's a desperate market out there that's found no other affordable way of keeping a roof over Mom's head.  Tragic, indeed.   

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CEO
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TerryWeaver@ChiefExecutiveBoards.com

Excellent Customer Service Salvages a Customer

I had a customer service experience last month that was classic in its origin and exceptional in its execution. The exceptional part of this adventure was that a customer service representative (CSR) at my bank went 2-3 steps farther than expected to help me with a problem. Almost a textbook case of 7 Steps to Turn a Complaining Customer into a Raving Fan.

The classic part was that the problem started with lousy support from my bank's IT department. I had entered a funds transfer online and didn't see it come through for several days. I called the bank and left a voicemail after hours, which was returned by an exceptional CSR right away the next morning.

That's where the exceptional part started.  She listened to the problem, apologized (didn't even suggest it was my fault), asked me all the pertinent questions, and then promised to call back. In less than an hour, she did so, saying she had called the IT department and that they had a temporary problem with online banking, but they had a look and "saw it in there". She told me it would be processed overnight and in my account the next day.

That brings me back to the classic part -- the lousy service from the IT department. A proactive group, realizing they had a problem, would have combed their processing queues -- by hand, if necessary, looking for any transactions that might have gotten hung up. They decided instead to go back to drinking coffee, and simply wait until the affected customers noticed and called up.

So, it's CSR +2 and IT Department -1. Until the following day, when the same CSR called again to be sure I'd seen the transaction in my online account, which I had. Now it's CSR +3 and IT Department -1. Imagine how effective this gal could be if she selling, instead of cleaning up after a weak IT department!!

What struck me was that she did everything right -- as if she had read 7 Steps to Turn a Complaining Customer into a Raving Fan

Now, I'm not yet a raving fan of this bank, mostly because of their weak IT department. Their Customer Service (specifically 1 CSR), on the other hand, has gone a long way to head me back in that direction.

If you've seen Raving Fan quality customer complaint handling, either from a supplier or within your own company, please click "comments" below and share your experience with others. 

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Terry Weaver


CEO
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TerryWeaver@ChiefExecutiveBoards.com

What Have You Done for Me Lately? Employees Want to Know

In a recent meeting of Chief Executive Boards International, members considered the implication of a Right Management survey, indicating that 60% of employees surveyed in 2009 said they intended to leave their jobs when the market got better. Link to Article

In cases where salaries have been reduced or frozen, members are considering salary actions. Others are considering a "survival" bonus -- a one-time "catchup" that doesn't get baked into base pay.

An interesting idea that came out of this discussion is creating and distributing a summary, by employee, of the full benefits provided by the company, including such things as:

• Salary and OT
• Bonus
• 401(k) match/company contributions
• Pension contributions
• Employer FICA
• Employer Medicare
• FUTA
• State Unemployment
• Workers Comp Insurance
• Health Insurance
• Life Insurance
• Disability Insurance (short/long)
• Mobile phones, car allowances, other job-specific perks
• Uniforms, Union Dues, other collective bargaining perks

As you add these up, you'll probably again be reminded of just how expensive an employee is. It's probably a good idea to remind them, too.  More than one member said, "We used to do this -- we just haven't done it in awhile."  

If you've done something to remind employees just how many benefits they're getting from their employment, click "comment" below and share your experience with others. 

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Terry Weaver


CEO
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TerryWeaver@ChiefExecutiveBoards.com

Secure Your Own Mask First Before Helping Others

 

Hate commercial air travel? Despite your aversion, the airlines do teach an important life lesson on every flight. What's that? "Secure your own mask first before helping others." This is extraordinary advice that applies to an amazing number of life's challenges -- things that regularly come up in meetings of Chief Executive Boards International. No, it's not "selfish" or lacking in charity or volunteerism. It's not "don't help others", but rather "Secure your own mask first."

What are some of those situations? I can think of several:

• Problems with kids -- Addiction, acting out, self-destructive behavior, eating disorders, learning disabilities, chronic or life-threatening health issues. The list is endless, and most experts' first recommendation is that the parents themselves get into counseling.
  
  Changing the kid's behavior is challenging, stressful, and full of disappointments beyond the parents' control. What they can control are their own responses and developing the coping skills necessary to deal with a card life dealt them beyond their control. Kid issues can tear a couple apart if they don't find some support beyond themselves.
   
• Addiction of a loved one, significant other, etc. I learned The #1 Thing to Know About Addiction in a CEBI meeting. You can't help the addict at all -- in fact, most anything you try will make the problem worse. What you can do is get to an Al-Anon chapter to help yourself understand, accept and cope with the situation. Secure your own mask first.
   
• Retirement savings vs. college funding -- If you have to make a choice between the two, most experts advise saving for retirement. The kids can figure something out -- many of us had to. They can borrow money to go to college and pay it back after they get a job. Don't try that plan for your retirement -- it's probably a non-starter.
   
• Problem employees -- There's generally a lot of collateral damage around a problem employee. Rather than getting entangled with trying to "fix" the problem employee, worry about yourself, the company and the rest of the employees. Do what's better for them, which is addressing the problem head-on with the problem employee, resulting in either a behavior change or a termination as quickly as possible. The survival of yourself and the company are not worth jeopardizing for any problem child on your payroll.  See "When Do You Decide to Do Something About a Problem Employee?"
   
• Business Failure -- If you even suspect that your business is in trouble, be sure to secure your own mask before helping others.  You need to conserve energy, attitude and cash to fight another day. That means making sure you have financial assets outside the business that are protected from creditors, the bank, etc. Others may have to take a back seat to your own financial survival. After all, you'll never make them whole if you don't conserve some seed corn for your next career adventure, whatever that turns out to be.

This article isn't about being unwilling to help others. It's about keeping yourself in a position to do that. When adversity strikes, the important thing is to be sure you're in the best shape possible to help those affected. In many cases, "Secure your own mask first before helping others" is the best way to do that.


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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

An Orgy of Ideas

Here's an excerpt from a recent Wall Street Journal Online Article that describes why the "collective brain" of a group of Chief Executive Boards International members meeting regularly to help and advise each other results in both innovation and extraordinary outcomes. It underscores several ideas from Alvin Toffler's book Revolutionary wealth. First, that knowledge is promiscuous. Secondly, that a piece of knowledge alone is trivia -- its value exponentializes when combined with other knowledge. And, finally, it confirms that "innovation is a contact sport".

"Trade is to culture as sex is to biology. Exchange makes cultural change collective and cumulative. It becomes possible to draw upon inventions made throughout society, not just in your neighborhood. The rate of cultural and economic progress depends on the rate at which ideas are having sex.

"Dense populations don't produce innovation in other species. They only do so in human beings, because only human beings indulge in regular exchange of different items among unrelated, unmated individuals and even among strangers. So here is the answer to the puzzle of human takeoff. It was caused by the invention of a collective brain itself made possible by the invention of exchange.

"Once human beings started swapping things and thoughts, they stumbled upon divisions of labor, in which specialization led to mutually beneficial collective knowledge. Specialization is the means by which exchange encourages innovation: In getting better at making your product or delivering your service, you come up with new tools. The story of the human race has been a gradual spread of specialization and exchange ever since: Prosperity consists of getting more and more narrow in what you make and more and more diverse in what you buy. Self-sufficiency—subsistence—is poverty."

Note also the "dense population" idea. Two or three people talking about an idea or problem are one thing. 6, 8 or 10 knowledgeable, thinking people talking about it are a completely different thing. And the results are amazing. If you haven't spent a day recently in the company of a number of thinking people knowledgeable of your field, figure out a way to do so. You'll be glad you did.

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

Start Planning Today for Your Partner's Exit

I was asked a question the other day about the advisability of starting a business with partners. This is a regularly-discussed topic in Chief Executive Boards International meetings, providing a lot of insight into partner-partner dynamics. I've also had personal experience with 2 different partners in the past and I've developed these points of view with respect to partners.

The advice of several business writers and the advice I've adopted is: The day you start talking with a potential partner, start planning for the partner's exit. I've seen a few (very few) partner situations work out over the long term. When they do work, it's great -- partners have someone else to count on, to confide in, and to pitch in when things get tough.

There are a couple of clear-cut reasons partners eventually disengage.

First, it's not unusual, despite their claims otherwise, for partners to fail to understand, appreciate, respect and value the strengths and contributions of each other. What the other guy is really good at, which may be something you're lousy at, looks easy. That's the way it's supposed to look. Never mind that he may have worked a whole career to hone that skill, and puts a lot more time into it than you ever see. Partners have different work styles. Some work best at their desks. Others work best away from the office. Again, those hours put in out of sight of each other are easy to disregard as contributory to the success of the business. Ultimately, this factor manifests itself in one partner feeling like he's putting in all the work, and then splitting the money. Curiously, as the partnership becomes more dysfunctional it's not unusual for both to hold that same opinion.

The second is more complex. Partners naturally grow apart. The drivers, motivations, ambitions and passions that originally brought the partners together don't evolve and mature at the same pace or in the same directions. One partner loses his passion for the business, or develops a passionate interest in something else. One partner decides it's time to change his work/life balance, perhaps scaling back his interest in the business and paying more attention to his spouse, family, health or volunteer/philanthropic interests. One partner wants to continue to grow the business, thereby building his net worth, while the other has his "number" covered and is looking for more of a lifestyle business - one that provides some cash flow but doesn't require 110% effort every day. One partner suffers a health setback, either his own, a spouse's or an aging parent's, thereby recalibrating the priority of the business in his life.  Kids leave and spouse wants to travel.  Grandkids arrive.  The list is endless. 

Ultimately, as these natural work/life priority changes drive the two partners' interests apart, it becomes ever more challenging to keep the partners feeling like each is carrying his share of the load. At that point, partners separate. In my own case, I once had a partner who had been fully retired for at least 4 years before he joined me. He had never owned a business before. He was getting bored with full-time volunteerism and thought my business would be interesting and fulfilling, which I think it was. One day, however, he came in and said, "You know, this is just starting to seem too much like a job." That said it all. We were at different places in our personal lives (partially due to an age difference), and just weren't on the same page as far as how the business fit into the rest of our lives.

So, start planning at the outset for your partner's departure. How? Buy having a fair, balanced, rock-solid buy-sell agreement in place before you start -- something you can live with if you want out or you want your partner out. Stay abreast of your liability to a partner, just in case he comes in one day and announces he's pulling the buy-sell trigger. If the business has been successful, it'll take some cash to take him out -- perhaps even some debt. In cases where the separation is regarded as fair by both, it's easy for the partners to remain friends, despite having decided they didn't want to work together any more.

If you've had experiences with partners, good or bad, please click "Comment" below and share them with others.

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

You're the Lead Dog -- Are You Acting Like One?

In the world of sled dogs, if you're not the lead dog, the scenery is always pretty much the same. Goes for business owners, as well. You'd think that business owners were, by definition, lead dogs, wouldn't you? Except that many business owners don't act like lead dogs -- they keep their scenery pretty much the same by working in the business every day. There are 250 days a year when you can go to the office, and most days at the office (working in the business) look pretty much the same. 

According to a very successful member of Chief Executive Boards International:

"If you're not spending a day a quarter on the issues that are important, you're probably not running your business -- it's probably running you" 

                                                  Click here for the complete video interview

Yet many business owners seem to believe that every one of the 250 available work days in a year need to be spent in the trenches, slugging it out with the competition, bank, vendors, employees, etc.  As if doing those same things over and over will somehow produce a different result. 


Successful business owners do act like lead dogs, by controlling and changing their own scenery. They're constantly scanning the horizon for new ideas, and putting themselves in places and situations where they're finding new and different ideas, many times from completely different types of businesses and industries. In fact, there are major limitations to what you can learn from your own industry. When was the last time you heard of a business that failed or underperformed for lack of industry knowledge? Rare. You can probably get good ideas from others in your own industry. You're unlikely to get breakthrough ideas from others in your own industry. Click here to learn the difference between directional (incremental) and intersectional (breakthrough) ideas.


Let's face it. There are 250 days a year when you can go to the office and do the same things you always do when you go to the office. Will the business crater if you're not there 5 or 10 of those? Might those 5 or 10 be better spent getting recharged with some energy and ideas you wouldn't have come by in another day at the office? Get out a bit. Go to an all-day or multi-day seminar. Go to a Trade Show. Join a Rotary Club. Join a CEO Peer Group. Do something to put yourself in front of other thinking people who will challenge your assumptions and provide you some intellectual scenery you wouldn't have otherwise seen.


If you've found sources of good ideas you wouldn't have had on your own, please click "Comment" below and share them with others.

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Terry Weaver
CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

8 Steps to Managing Your Business for Success

I spent a day recently with a couple of business partners whose grasp of their business was really impressive. They were absolutely on top of every key success factor in the company, a mid-sized professional services firm. Here's their 8-point formula for success:

1. They Plan -- These guys actually have a written strategic plan (and have had for 6 years). Objectives define where the company is going, Strategies define the big-picture initiatives and Action Plans establish the what, when and by whom of getting the plan accomplished. The plan is revisited and formally updated at least every 2 years. It's a collaborative effort, including minor partners and employees, as well.

2. They keep excellent financials -- They've worked diligently to get their costs and revenues aligned month-by month, so they can tell exactly where they are in growth and profitability at all times. Committed costs for work done by subcontractors are accrued each month, so they don't kill the income statement the month the bill comes in. Bonuses are accrued each month, despite being paid quarterly or annually. They manage their business on accrual-basis numbers, so the timing whipsaw of receivables and payables don't obscure their operating results. They watch their Balance Sheet, forecasting cash needs well in advance and they use a Line of Credit to absorb the variability in timing of receivables and payables (rather than leaving a lot of cash in the business for working capital).

3. They forecast backlog -- On a monthly basis, the partner managing operations forecasts each project's revenue and manpower needs month-by-month, going out almost two years. They see months where they'll be covered up and months that will be slack well in advance so they can push and pull project schedules or outsourcing to level out workloads.

4. They forecast bookings -- A recently-added forecast now tracks their prospecting pipeline, anticipating project size and month secured. As confidence levels rise on a given prospect, some of those make their way into the backlog forecast (identified, of course as "anticipated).

5. They forecast staff requirements -- They have a keen sense of revenue to headcount, so the above forecasts allow them to plan recruiting of both entry-level and senior people. They've matured to a mostly "grow your own" strategy as far as internal leadership is concerned, and they have developmental plans in place to meet the leadership needs of their future growth plans.

6. They work on the business, as well as both working in the business as billable resources. They set aside time to plan and they also execute.  With good financial instrumentation and good forecasts, they can focus on crisp execution, rather than fighting surprise wildfires. They get things done, both short and long-term.

7. They're accountable -- The partners are accountable to each other for doing their parts in the day-to-day operation and the long-term strategies of the company. In large part, this is due to having a collaboratively-developed plan that they've all had a hand in and bought into.

8. They use outside help -- They realize they need expertise beyond their own trade and experience, and they engage external resources, regarding those costs as an investment in their success.

If you're looking for a model by which to steer a mid-sized company, I'd encourage you to consider these guys' "8-step program". It's working for them, building a valuable company, and throwing off some enviable cash flow, as well.

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

It's Starting -- Employee Turnover Rises with GDP

The season has arrived for a spike in employee turnover.  Do your employees still feel they've sacrificed for your business, and that you've never made it up to them?   If you put your employee hat on, would you still feel like you're in the hole income-wise?  It may be time for you to shell out -- either some raises or some "we made it" bonuses. 

There's a pervasive continuing attitude among business owners that "they're lucky to have jobs."  Employees don't see it that way -- the music playing in their heads goes more like "I took a pay cut (reduced hours, no bonus, etc. -- you fill in the blank), and I haven't seen anything in return."

What they do see is increased orders, increased backlog, increased expectations, increased workload (productivity is up -- you're doing more with less, right?), and in many cases no increase in compensation.   And they're starting to vote with their feet, according to a recent Wall Street Journal online (wsj.com) article. 

This article is a "wake up call" for business owners.   If you haven't done anything meaningful (in the pay envelope) to recognize those who believe they helped pull your company through the recession, it's time to think about it.  And it's surely time to look at the "soft" side of turnover, as well -- specifically: 

• Engagement -- Employees, particularly GenY'ers, want to feel their jobs mean something in the big picture.  Have you reminded them lately of the good things your company's products or services do for the world at large? 
• Trust -- Do they feel they have been, and are being treated fairly?  Perception is reality. 
• Appreciation -- The more personal, the better -- have you let them know (lately) that you appreciate them, their work, their contribution, etc.?  A personal note or conversation means a lot.  Likewise, a company event (picnic, pizza lunch, etc.) could be a good platform for an appreciation talk by yourself. 
• Opportunity -- What can employees who have stuck with you expect in the future?  (Take off your "lucky to have a job" hat -- that one's not selling any more)

We'll be discussing this topic at upcoming Local Board meetings of Chief Executive Boards International.  True to our "we share ideas" tagline, we also try to provide forward radar for business owners -- to alert them to emerging trends and potential potholes before they fall into them personally.  Experience is the worst teacher -- it gives the test before it presents the lesson.  Better to learn from someone else's experience. 

If you've done things to avert potential post-recession turnover among your employees, please click "Comment" below and share them with others. 

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Terry Weaver
CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com