Why Kindle if You Don't Have to?

Tobin Wolverton is President and founder of thatworks, a business interiors and office furniture provider. He's also a member of Chief Executive Boards International. During a recent meeting, he mentioned that he was thrilled with a Christmas gift he'd received -- an Amazon Kindle.

I asked Tobin to write up his experience with his Kindle, and here's what he has to say about it:

"As a slightly late adopter of technology, I usually wait a year or so to purchase the newest gadget. But typically after purchasing the newest gadget I always wish I had made my life easier by being an early adopter!
"I love my MP3 player for music and my Blackberry for keeping in touch quickly. But my newest favorite device is the Amazon Kindle – a revolutionary device for books!

"While similar in application to an MP3 player for the ability to download and listen to music, the Amazon Kindle allows you to download and read a variety of books, moving seamless from one to the other, with one device. No longer do you need a stack of books on your nightstand or in your briefcase. The Kindle allows you to access to many hundreds of books on just the internal memory – and provides an SD memory slot for even more books if needed. And Amazon allows you to access to many newspapers, magazines and books (literally hundreds of thousands) that can downloaded wirelessly at your command – wherever the Sprint wireless network is available.

"As a business owner I always like the bottom line and I am sure you are now wondering what the costs are for this device. Once you purchase the Amazon Kindle for about $350 the wireless is free and the books/magazines and papers are less expensive than you can purchase them locally. I sat on the sofa a few Sundays ago and downloaded the New York Times Sunday edition for $.75! Books are typically $9.99 or less. The savings of your reading material will more than offset the cost of the Kindle over time. [Ed. note -- Amazon has just released the next generation -- the Kindle 2]

"I am finding I am reading more than ever, especially business books and historical fiction, because the materials are more easily accessible. If you are wondering how you can keep it all together while gaining access to new ideas consider the Amazon Kindle as the latest tool of technology to help you."

It's been amazing to me that in the two weeks since that meeting, I've heard two other people bring up Kindle in casual conversation. Based on this microscopic market sample, it's my prediction that this product is reaching a "tipping point" -- a point where it begins to spread virally, by means of a "word-of-mouth epidemic" : http://www.chiefexecutiveboards.com/bookreviews/bookreview039.pdf

So, if you, like most Chief Executive Boards International members, are looking for ideas to improve either your business or your life, you'll find them in books. And you may find those books for a fraction of the time and effort of buying and waiting on them, on your Kindle.

If you've also discovered Kindle, please click "Comments" below and let us know how you like it.

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Terry Weaver


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

How Much is Not Having a CFO Costing You?

At a recent meeting of Chief Executive Boards International, a member voiced the concern that his company was getting into a cash bind, and he was getting worried. As the Board asked more questions about that, it turned out he didn't have a line of credit for his business. Incredible, in these days of 5% interest. It was just something he hadn't taken the time to set up. As the Board asked more questions, it turned out that he wasn't exactly sure why he was getting into a cash bind -- something to do with "a lot of inventory" and "some slow-paying customers", he thought (maybe).

As the Board drilled a little further into this, he said he really didn't have timely monthly financials he trusted. Bingo. At that moment he aligned himself with, in my own experience, the majority of small business owners who have financial statements that are late and lousy -- they're completely useless as tools to manage a business. At the worst, they're just wrong -- actually presenting a business owner with a mistaken picture of where he is.

Again, in my experience coaching business owners, the first thing we generally find is that the financials are lousy. Most owners pay attention to the things they know -- the core business -- and don't pay much attention to the financials because they don't themselves have a finance background. Generally, they use their financials once a year (or perhaps quarterly) to figure out how much to pay in taxes.

Another member at the table said, "You need to get that fixed immediately. My company is in serious financial trouble today because I didn't realize a year ago that my financial statements were faulty. I didn't realize that each month's apparent profit was offset by costs being charged to prior months that hadn't been closed. I thought I was recovering, and in fact I was digging a deeper hole."

Not having rock-solid, timely financials is like flying with no altimeter, no compass and no artificial horizon. The FAA won't allow that, and for good reason. Those pilots crash.

Yet another member said, "I very nearly sold my company into failure. I realized I was having financial problems that I didn't understand, and finally bit the bullet and hired an experienced CFO I couldn't afford -- for $80k. After a couple of days examining the books, she came in, wide-eyed, and asked, "Are you scared?" [Ed. note: I HATE it when a CFO gets wide-eyed] "She had discovered that by the time we shipped and paid for everything I'd sold, and the customers waited 45 days to pay us, we'd be out of cash. [Read: Game over] "Not having a CFO almost cost me my company."

He went on to say that with her help he survived that scare, and then his new CFO installed systems, controls, forecasting and disciplines that not only saved his company, but also were worth several times what he was paying her (in improved results). Thankfully, just in time before he became another small-business failure statistic -- road kill on the entrepreneurial highway.

So, we're hopeful the member who brought this up gets his financials shaped up into the decision-making tools they're supposed to be. And that the member in trouble because of lousy financials caught it in time to recover. And we're thankful to a member who once again reminded us that failure to fully understand the company's financials is one of the top 3 causes of small business failure. He was standing at the edge of a financial cliff without realizing it, and when he looked down he didn't like what he saw.

Most business owners imagine that their CPA "would let me know if something was wrong." That's an unrealistic expectation for at least two reasons. First, although there are a lot of exceptions, most CPAs do not have CFO experience. They report the news, they don't forecast or shape the news. Secondly, it's generally not their job, as they perceive it. If you hire them to prepare monthly statements and do your taxes, they actually believe you're going to read (and understand) the monthly statements and that the data you gave them to prepare them was accurate. It's like wondering why the scorekeeper at a football game didn't call better plays.

If you've had an awakening to the need for better and more timely financial statements, or the need to hire either a part-time or full time CFO, please click "Comments" below and share your experience and knowledge with others.

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Terry Weaver


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

Aristotle's Rhetoric Revisited -- 5 Ways to Improve Your Closing Ratio

A good friend of mine, Ken Keller, is a retired CEO who I greatly admire. Ken invited me to lunch last week. He has been following the growth of Chief Executive Boards International since I bought the business from its founder in 2004. At that time, he immediately recommended CEBI to one of his business coaching clients, who remains a member to this day.

We were talking about things we at CEBI have learned about marketing, positioning and selling CEBI over the past 5 years. I made the observation that our selling breakthrough has been the realization that selling even a simple membership in a great organization is a relationship-building process. Like myself, Ken learned to sell large-ticket items through personal visits, buying lunches, etc. That simply isn't practical, selling a lower-ticket annual membership to people across half of the US.

So we've learned to build relationships electronically -- first through fax-back, then phone, then email, then newsletters, more email, etc. A lot of electronic "touches" that get us closer to prospects and also keep us closer to our members.

He said, "You know, Aristotle's Rhetoric described all that in the 4th Century BC." And I thought this E-Marketing stuff was new! Ken's a well-read guy.

He went on to explain that Aristotle's Rhetoric was an essay on the art of persuasion, sometimes called The Rhetoric, The Art of Rhetoric, or A Treatise on Rhetoric. Some historians believe it was never intended for publication, but may have actually been a collection of his students' notes, taken at his lectures -- Sort of an ancient forerunner of blogs.

Ken's lunch-table summary of the Rhetoric was:

• Good Character
• Good Will
• Good Sense

Sometimes more academically described as:

• Credibility (ethos)
• Emotions and psychology of the audience (read: prospect) (pathos)
• Reasoning (logos)

Curiously, sales training and sales people have spent an inordinate amount of time on the third element -- the "good sense" or "logic" of the sale. Hence "features and benefits", demonstrations, calculations of ROI, economic justifications, and on and on.

Aristotle's point, and Ken's as well, was that these actually need to be taken in order:

• First -- Good Character. The prospect has to trust you and believe that what you say is true. There's a credibility-building phase in a relationship that has nothing to do with your company or what you're selling.
  
  
• Second -- Good Will. The prospect has to believe that you do, in fact, care about an outcome that's at least as beneficial to herself as to you. It's important that he believe you're more concerned with a good outcome for him than an order for yourself
  


• Third -- Good Sense. Ultimately, you'll need to roll out the features and benefits, the economic justification, the ROI calculations, etc.
  Another good friend of mine, a career sales person of big-ticket capital equipment, once said, "In most cases, the buyer decides what he wants to do and who he wants to do it with, and then works up a set of numbers that justify his original decision. Roughly translated -- decision made on the basis of Good Character and Good Will, then justified by Good Sense.
  
  A Sandler Training franchisee said it another way: "A customer has to trust you enough to give you money to solve a problem."

There are other instances of Aristotle's Rhetoric, sometimes to define organizational values. Rotary International has a code of conduct for its 1.2 million members called the "4-Way Test":

1. Is it the truth?
2. Will it build goodwill and better friendships?
3. Is it fair to all concerned?
4. Will it be beneficial to all concerned?

It's not hard to connect the dots between Aristotle's Rhetoric and those ideas, is it? Besides a code of conduct, I believe the 4 Way Test was also intended to persuade people that Rotary was a group of people to whom they would want to belong.

So, how can you use these ideas in your business and your selling activities? Here are five ways you can deploy Aristotle's Rhetoric -- a set of selling principles known for 2400 years:

1. At the outset, ask the prospect about herself and her company -- find out what matters to her. She'll tell you what she will buy if you can let her do the talking. This is very difficult for most sales people.
   
   
2. Find some "common ground" -- something in common that would build her trust in you. Perhaps your prior experiences that relate to what she's doing, what your kids do, who your spouses know, mutual acquaintances, etc. People tend to see others being of good character if they have things in common -- particularly mutual acquaintances.
   
   
3. Help her understand that you're there to help her -- if that results in an order, fine. If not, you've done what you came to do -- help her become more successful. Good will is just that -- the willingness to help someone whether there's an order in it or not.
   
   
4. Then go for the logic -- the features, benefits, ROI, etc. Enough said -- you know how to do all that, or you can find an army of people in your company who do. Many of them claim to be sales people -- they just don't sell very much.
   
   
5. And, above all, behave in a manner that always underscores your Good Character, Good Will and Good Sense. Your prospects and customers instinctively apply that value system, even if they don't articulate it themselves.

If you have some ways you keep Aristotle's three elements of persuasion in their proper order, please click "Comments" below and share them with us.

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Terry Weaver


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

Prompt Payment Discounts -- Seductive and Expensive

In a discussion about cash flow and accounts receivable management in a recent Chief Executive Boards International meeting, the subject of prompt payment discounts came up. In fact, the idea of a prompt payment discount was suggested to a member who was trying to figure out how to accelerate payment of some accounts receivable.


You're probably familiar with prompt payment discounts. You might normally offer payment terms of "Net 30", which means that you expect the customer to pay you within 30 days of the invoice date (or the customer's receipt of the invoice -- interpretations vary). If you quoted the customer Net 30, he is in fact contractually obligated to pay you in 30 days. While few customers would expect you to do work you didn't quote, or expect to pay you less than the total amount you quoted, many are totally cavalier about this important (and legally binding) component of the quotation/purchasing process.


Prompt payment discounts offer "dual terms" of a discount for payment sooner, and the full invoice amount for payment later. Usually stated as something like "1% 10, Net 30", meaning if the customer pays within 10 days she can simply subtract 1% of the invoice, pay it short and keep the money. And you'll write off the 1% as a sales discount.


Now, this is a minefield -- fraught with interpretation and abuse. First, when does the 10-day clock start and stop? Does it start when the invoice is dated? Mailed? Received by the customer? Entered by the customer in accounts payable? And, then when does it stop (the last date the customer can legitimately take it)? The date on the check? The date of the postmark? The date you receive it? The date you book it as income? You get the picture. So, the 10-day compliance becomes somewhat in the eye of the beholder. AND many customers (especially big ones) will take the 1% discount and pay you in 45 days, anyway, and then dare you to come collect it.


The seductive part is that 1% seems like a small price to pay for getting your money sooner. And it many times just disappears as a discount from revenue, rather than showing up as a cost. This seduction was pointed out by a member who said, "That's really expensive financing." Explaining further, he converted the 1% discount into a cost of money (interest) equation. Let's say for simplicity's sake that the customer actually pays in 10 days a bill he would have otherwise paid in 40 days. So, you got your money 30 days sooner. What did that cost you? Well, if it was a $100 invoice and he took a $1 discount, that's 1% per month interest -- 12% APR to "borrow" that money from your customer for 30 days. Here's another way to look at the 12% calculation -- you send a $100 invoice every month, and every month he pays it in 10 days instead of 40. What you've gotten is actually the first $100 10 days sooner than you would have. Yes, you accelerated all the rest by 30 days, too, but how much bigger was your bank account for any given month than it otherwise would have been? Not $1200, but $100. So, what happened was you "borrowed" $100 from the customer for 30 days, renewing that loan 12 times, at a cost of $12 in discounts over the 12 months. 12%, right?


The alternative? There's nothing wrong with debt, particularly to fund working capital (AR being a big piece of most people's working capital). If, instead of borrowing the $100 from the customer, you'd have gone to your bank and borrowed it in the first month as part of a revolving line of credit, you'd probably have paid about 5% APR. Keep in mind that the customer was going to pay each of the bills every month anyway -- you just got the benefit of not having to fund the first month's delay, right? So, who would you rather borrow from a bank at 5% or a customer at 12%? More importantly, you can pay the bank back on any days when you have excess cash, and your cost of money is zero for those days.


Or look at it yet another way. Let's say EVERY customer took your 1% offer (after all, they're earning 12% interest by doing so, why wouldn't they? Let's also say your business is a "median" performer at, say, 8% pretax operating profit to sales. Except that you take a 1% haircut on operating profit because of all those discounts. What's 1% of 8%? 12.5%, right? So everyone in the company has to work 12.5% more hours, you have to buy 12.5% more material and get 12.5% more orders to support your prompt payment strategy. Whether you actually need the money or not -- you're stuck with living by the terms you offered. You could make a tiny improvement in your operation, become awash with cash, and still be working 12.5% harder because of your discount offer.

Now, all of this assumes your credit is good and your collateral is solid. If you can't get a bank to loan you money for working capital, you have worse problems than a prompt payment discount will solve.

You might do better with a late payment penalty. In this case, you have to invoice the customer for the late fee. And you have to aggressively pursue collection of the late fee. They're hard to collect, and you'll find yourself writing off some, but they do make the point -- you deserve and expect to be paid on time, and you'll take action if that's not the case.

If you have some favorite ways of accelerating cash flow by reducing Accounts Receivable, please click "Comments" below and share them with us.

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Terry Weaver


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

The 20% CEO

In a recent meeting of Chief Executive Boards International, a member said he was realizing that his accessibility in the office (open door policy -- supposed to be a good thing, right?) had evolved into his getting continuously interrupted and dragged into day-to-day operations. His senior managers found it easy to consult him on decisions they should have been making themselves. (Employees love this -- it exonerates them from accountability for their own decisions if they get the boss's agreement. Or, worse yet, get the boss to make the decision -- total absolution. See: http://www.chiefexecutiveblog.com/2008/02/want-your-employees-to-be-independent.html)

If it wasn't others interrupting him, it was his overhearing conversations in the hallway, and jumping into them himself. Again, a compulsive behavior for many CEOs who realize that they can, in many cases "do it better" than any given employee any given day. In most cases it's a fact. And in most cases, not the best and highest use of the CEO's time.

Then he said something stunning. He said "I actually looked at how I'm spending my time, and discovered that it's on doing a lot of things a CEO shouldn't be doing. In fact, I discovered that my company doesn't have a CEO 80% of the time."

WOW! -- You could have heard a pin drop in that room. It was like he'd taken a 2x4 and whacked most of the other members up the sides of their heads. Members' heads cocked sideways, and I could see the wheels turning as they did their own math. And then the frowns as they didn't like the result. And the pens and pencils scribbling that observation into their meeting notes. In fact, 50% of the members at the meeting listed that one epiphany as something they took away from the meeting.

Be honest. How much of your time is actually logged doing real "CEO stuff"? So, what percentage of the time is your company without a CEO?

If you're a CEBI member, you're at spending at least eight days a YEAR on "CEO stuff". That's more than a lot of midsize business owners, in my experience. If you're not a CEBI member, give a listen to what member Harry Loyle has to say about that question, among other things: http://www.youtube.com/watch?v=4aKoYfbiSos I know Harry's company is not without a CEO 80% of the time.

If you've discovered your company is without a CEO for more than 25% of the time, click "Comments" below and let us know what you were doing with the other 75%. And how you're going to change those habits so your company has the CEO it deserves -- the majority of the time.

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Terry Weaver


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