This week, I have received over five inquiries from people interested in buying existing businesses. Each inquiry was related to getting bank financing and, in my opinion, none of the inquirers did enough research to justify whether the businesses were even worth the amount of money they wanted to borrow.
Human behavior has always baffled me. Why would someone buy a business without an in depth review in regards to the legitimacy of the asking price or a feasibility analysis of whether this will provide a reasonable rate of return on the investment? Sometimes I think people will put more thought into finding a gas station that can provide a $0.05/gallon savings on gasoline than they do in making a business purchase. I say this because I’ve had too many unfortunate counseling sessions with people who have made bad business purchases. The common denominator in most of those instances is that no proper research or planning was done during the purchase process.
In my opinion, the first step in purchasing a business should be assessing feasibility. A feasibility analysis will answer the following questions:
• Do you have the capital to invest into the purchase of this business?
• Do you have the skills to manage and operate a particular business (this is especially important for those who are considering purchasing a business in an industry in which they have no prior experience)?
• Do you have the time to commit to this business?
• Does this business have the potential to provide a return on investment that meets your financial goals?
Some people will argue with me that these questions can’t be answered without assessing value. The point I want to make is that before assessing value of a business you intend to purchase, you should assess the amount of money you can afford to invest. Why bother wasting your time or the seller’s time if there is such a huge gap between what you can afford and the asking price for a business? Also, anyone who purchases a business should have a reasonable expectation of earnings based on how the business will operate after the purchase. You can’t just look at the past performance, there needs to be a forecast of what will change once ownership changes hands.
After you assess feasibility, then you should begin a valuation analysis of the business you want to purchase. The most important thing to understand in doing a valuation analysis is that there is no subjective method for assessing value. There are formulas you can use to make estimates, but the value is ultimately determined by what the seller is willing to accept and what the buyer is willing to pay.
Below is a link to an article with detailed explanations of some of the different business valuation methods you can use as a guide, but I caution you not to consider any formula as an absolute indicator of a value of a particular business.
http://www.toolkit.com/small_business_guide/sbg.aspx?nid=P11_2240
If you have already done your feasibility analysis and you have arrived at an agreed upon value, the next step in the process is a due diligence review. Due diligence is the verification of information presented to you during negotiations. It is also researching more detailed information about the history of the business. The link below contains a fairly extensive checklist of things you may wish to investigate.
http://smallbusiness.findlaw.com/business-forms-contracts/be3_8_1.html
I also strongly suggest that before a purchase is made, you ask the seller for references from some vendors and customers. While the due diligence checklist addresses getting information on customers and vendors, I suggest you take it a step further and actually script some questions on issues such as consistency in service, challenges they may have had with the company and their opinions on operations.
You should also remember that the best due diligence is your own direct observation of how the business operates. While you have to be cognizant of confidentiality issues, if at all possible, try to witness as many details as possible to ensure that you truly understand how this business functions.
As someone who is both purchased and sold businesses, I will add that it is very common to have buyer’s remorse and seller’s remorse. You always wish you negotiated a lower price when buying a business and a higher price when selling a business. As Mary Pickford once said, “The past cannot be changed. The future is yet in your power.”
Friday, September 26, 2008
Friday, September 19, 2008
Be Like Mike
A good friend wrote a comment to my last posting and I wanted to feature it in this posting.
Mike Loiacono and I have known each other since 1973. Together, we started our very first business in 1984 (Spectrum Mobile Disc Jockey Service). He taught me many great lessons about business, while I showed him that people really will dance to “Crocodile Rock” (he almost killed me when I cued that song up at a wedding reception...surprisingly, it didn't clear the dance floor!). Mike has gone on to become a big shot CFO (chief financial officer) for a publicly traded company and I can attribute much of my accounting knowledge to discussions I have had with him. Thanks Mike!
Here's some of what he wrote in his comment:
“I would like to add to your blog if I may. Not only is it important for the business owner to 'learn not to be there' it is equally as important for the business owner to plan for one or more of their employees to 'not be there'. And what I am referring to is the importance of cross-training. A well-oiled machine works as well as the sum of all of its parts. What an organization does not want is for its operations to stumble when one part is missing.
As CFO, I have created and implemented a TCE (Train, Cross-train and Empower) program. Each of my employees are not only trained to perform their functions, but are also able to fill in when someone else in the department is out. This type of program satisfies two of my concerns as a manager:
1.) Enabling the department to run effectively even when there is absenteeism (or 'what happens if you get hit by a bus')
2.) I am NEVER backed into a corner by a potentially disgruntled employee who has a gun to my head because he/she is the only one who knows the job.
While smaller (and some larger) businesses may not have the wherewithal to produce training videos similar to those of the major fast food establishment you referred to in your post, it is indeed vital for all organizations to invest the time to develop detailed training manuals for all of the functions of the organization.
An organization cannot allow employee turnover (or absenteeism) to impact customer satisfaction. The best investments a business owner (or manager) can make are the investment of time in the hiring process and the investment of time in training and cross-training.”
Mike's advice is exceptional and I appreciate his sharing of these philosophies. The development of detailed training manuals and “cross training” are best practices that more companies should embrace.
His comment about “the only one who knows the job” is one that particularly strikes a nerve with me, as I have actually seen previously successful businesses fail when a key member of the organization leaves. Management should accept the responsibility to develop contingencies for the absences or departure of each member of their staff. If not, the odds for long term business survival are greatly diminished.
Life happens. Employees are going to miss shifts, sometimes for legitimate reasons and sometimes do to poor judgment. Employees are going to eventually leave your organization. Sometimes it will be by their choice, sometimes it will be your choice and, unfortunately, sometimes it may be due to circumstances beyond the control of either party. While you can continue to value your employees for what they offer your organization, reality dictates that they will not be there forever and your business should be prepared for the temporary or permanent absence of every member of the staff. As Charles De Gaulle once said, “The graveyard is filled with indispensable men.”
Mike Loiacono and I have known each other since 1973. Together, we started our very first business in 1984 (Spectrum Mobile Disc Jockey Service). He taught me many great lessons about business, while I showed him that people really will dance to “Crocodile Rock” (he almost killed me when I cued that song up at a wedding reception...surprisingly, it didn't clear the dance floor!). Mike has gone on to become a big shot CFO (chief financial officer) for a publicly traded company and I can attribute much of my accounting knowledge to discussions I have had with him. Thanks Mike!
Here's some of what he wrote in his comment:
“I would like to add to your blog if I may. Not only is it important for the business owner to 'learn not to be there' it is equally as important for the business owner to plan for one or more of their employees to 'not be there'. And what I am referring to is the importance of cross-training. A well-oiled machine works as well as the sum of all of its parts. What an organization does not want is for its operations to stumble when one part is missing.
As CFO, I have created and implemented a TCE (Train, Cross-train and Empower) program. Each of my employees are not only trained to perform their functions, but are also able to fill in when someone else in the department is out. This type of program satisfies two of my concerns as a manager:
1.) Enabling the department to run effectively even when there is absenteeism (or 'what happens if you get hit by a bus')
2.) I am NEVER backed into a corner by a potentially disgruntled employee who has a gun to my head because he/she is the only one who knows the job.
While smaller (and some larger) businesses may not have the wherewithal to produce training videos similar to those of the major fast food establishment you referred to in your post, it is indeed vital for all organizations to invest the time to develop detailed training manuals for all of the functions of the organization.
An organization cannot allow employee turnover (or absenteeism) to impact customer satisfaction. The best investments a business owner (or manager) can make are the investment of time in the hiring process and the investment of time in training and cross-training.”
Mike's advice is exceptional and I appreciate his sharing of these philosophies. The development of detailed training manuals and “cross training” are best practices that more companies should embrace.
His comment about “the only one who knows the job” is one that particularly strikes a nerve with me, as I have actually seen previously successful businesses fail when a key member of the organization leaves. Management should accept the responsibility to develop contingencies for the absences or departure of each member of their staff. If not, the odds for long term business survival are greatly diminished.
Life happens. Employees are going to miss shifts, sometimes for legitimate reasons and sometimes do to poor judgment. Employees are going to eventually leave your organization. Sometimes it will be by their choice, sometimes it will be your choice and, unfortunately, sometimes it may be due to circumstances beyond the control of either party. While you can continue to value your employees for what they offer your organization, reality dictates that they will not be there forever and your business should be prepared for the temporary or permanent absence of every member of the staff. As Charles De Gaulle once said, “The graveyard is filled with indispensable men.”
Sunday, September 14, 2008
Learn to Not Be There
I was at a local business the other day and had a bad experience. I've always had good service at this business on previous occasions, but this time, I was very disappointed with my service. One of the reasons why this experience was bad is because the owner was not there on this particular day.
This is an endemic problem with many small businesses. The business has a good model for success, as long as the ownership team is present, but once unsupervised, things fall apart. It gets to the point that where the ownership team feels they need to be there during every hour of operation.
The stories of small business owners working 80 – 100 hours per week are true, no doubt, because sometimes that’s what it takes to get the job done. I have to admit that not only did I do that, but I was guilty of wearing that as a badge of pride in my early days as a small business owner.
Yet working that many hours is often a sign of poor operations management and could be a tell tale sign that a business is not investing enough time in training their employees. Small business owners who have employees and still work that many hours should question whether they could delegate more of their duties.
It wasn’t long after working the countless hours in my stores that I learned that nothing I did was really that specialized of a skill. I was always the guy who made the bagel dough and baked the bagels in the first few years of operation. On the days I did turn it over to my partner or an employee, I would have this foolish pride in the fact that a few regular customers would notice that someone besides me made the product, because it wasn’t as good as when I made it.
It didn’t take long for me to have the epiphany that if I wanted my business to improve, as well as my quality of life, I could not make myself so mission critical to success. Rather, I should invest the time in training my employees to be as good, if not better, than me in helping out with operations.
I referenced the fact that I worked for a major fast food establishment in a previous post. One of the things that I remember from my experience there is that I had to watch 30 minute training videos before working in any of the stations. Whether it was working the grill, the fryer, the cash register or on janitorial duty, there was a video of how to properly work that station. I still remember how all the employees hated janitorial duty (it was called “lot and lobby”) where we had to change ashtrays, take out the garbage, sweep/mop and clean the bathrooms. Still, we watched a video on how to properly perform all those tasks to this company’s standards.
The realization that these videos were pure genius struck me years later when I told one of my employees at my bagel store to mop the front area floor. I went to do something in the back and returned to the horror of a floor that looked much worse after the mopping than before. You see, I forgot to tell this employee that before you mop a floor, you have to sweep up all the loose dirt. While that may seem like common sense to some, those of us who have had employees learn quickly that for there to be common sense, there needs to be common experiences and training. This particular employee never had to mop a floor before and this was his first experience. I may have made the same mistake the first time I mopped a floor had I not watched that training video at my first job.
Of course, you may have in mind delegating significantly more responsibility to your employees than just a mopping a floor. That is fine as long as you are committed to training your employees to accept those responsibilities.
When approaching training, keep in mind the old maxim to “hire for attitude, train for skill.” Especially when delegating management responsibilities. You can train your employees to develop certain skills, but you can’t change their temperament.
Developing a training program is not easy and it will take an investment of time. Just remember that every minute invested in an effective training program will return countless minutes of your own future productivity.
This is an endemic problem with many small businesses. The business has a good model for success, as long as the ownership team is present, but once unsupervised, things fall apart. It gets to the point that where the ownership team feels they need to be there during every hour of operation.
The stories of small business owners working 80 – 100 hours per week are true, no doubt, because sometimes that’s what it takes to get the job done. I have to admit that not only did I do that, but I was guilty of wearing that as a badge of pride in my early days as a small business owner.
Yet working that many hours is often a sign of poor operations management and could be a tell tale sign that a business is not investing enough time in training their employees. Small business owners who have employees and still work that many hours should question whether they could delegate more of their duties.
It wasn’t long after working the countless hours in my stores that I learned that nothing I did was really that specialized of a skill. I was always the guy who made the bagel dough and baked the bagels in the first few years of operation. On the days I did turn it over to my partner or an employee, I would have this foolish pride in the fact that a few regular customers would notice that someone besides me made the product, because it wasn’t as good as when I made it.
It didn’t take long for me to have the epiphany that if I wanted my business to improve, as well as my quality of life, I could not make myself so mission critical to success. Rather, I should invest the time in training my employees to be as good, if not better, than me in helping out with operations.
I referenced the fact that I worked for a major fast food establishment in a previous post. One of the things that I remember from my experience there is that I had to watch 30 minute training videos before working in any of the stations. Whether it was working the grill, the fryer, the cash register or on janitorial duty, there was a video of how to properly work that station. I still remember how all the employees hated janitorial duty (it was called “lot and lobby”) where we had to change ashtrays, take out the garbage, sweep/mop and clean the bathrooms. Still, we watched a video on how to properly perform all those tasks to this company’s standards.
The realization that these videos were pure genius struck me years later when I told one of my employees at my bagel store to mop the front area floor. I went to do something in the back and returned to the horror of a floor that looked much worse after the mopping than before. You see, I forgot to tell this employee that before you mop a floor, you have to sweep up all the loose dirt. While that may seem like common sense to some, those of us who have had employees learn quickly that for there to be common sense, there needs to be common experiences and training. This particular employee never had to mop a floor before and this was his first experience. I may have made the same mistake the first time I mopped a floor had I not watched that training video at my first job.
Of course, you may have in mind delegating significantly more responsibility to your employees than just a mopping a floor. That is fine as long as you are committed to training your employees to accept those responsibilities.
When approaching training, keep in mind the old maxim to “hire for attitude, train for skill.” Especially when delegating management responsibilities. You can train your employees to develop certain skills, but you can’t change their temperament.
Developing a training program is not easy and it will take an investment of time. Just remember that every minute invested in an effective training program will return countless minutes of your own future productivity.
Wednesday, September 10, 2008
Remembering Vic Saracini
In my 17 years as the owner of bagel stores, I have had the opportunity to meet so many wonderful people. Being in retail, I've been blessed to have thousands of customers who would share more than just a business transaction with me. In this post, I am not going to talk about business, but rather, I would like to share a personal story about a customer.
Today I am thinking about a customer who came into my Pennsylvania store back in early May of 1996 and started a conversation with me. The conversation starter was a little sign that I put up announcing the arrival of my daughter, Sarah. Sarah was my second child and first girl. The customer, an airline pilot, noticed the sign and congratulated me. I made a comment how I wasn't prepared to be the father of a girl. He smiled and told me about his two young girls and how they make it so easy. “They are little princesses,” he said, “they are so loving, they are so devoted to their Daddy. It's such a great feeling coming home to them.” It was quite some time ago and I am going from memory, but I am pretty sure he used “princess” and “devoted” when describing his daughters. I think he may have said “beautiful,” as well, but I'm not sure. I really wish I could remember the conversation better.
Why do I want to remember his exact words? Because I want to share the love I heard in this man's voice for his family. I want people to know about this special person, who just came to my store for a quick snack and took the time to share a kind thought and a smile.
September 11, 2001 was a tragic day; not because an infamous event occurred, but because this kind gentleman, Vic Saracini, passed away on that day. While many people refer to that day as “Nine Eleven,” it was more than just a catch phrase, event in our history. It was a day when over 3,000 loving and caring people were senselessly murdered by cowards. I am sure there is probably a more effective way to express my emotions about that horrific day, but the words escape me.
I did not know Vic Saracini well enough for me to be able to write much more. There is a “Garden of Reflection” in Lower Makefield, PA that provides tribute to the lives forever changed on that tragic day.
Garden of Reflection
There will be various remembrances on September 11th this year and for years to come. I hope we not only unite as Americans in remembering the day, but also take the time to think of the people who perished. Their lives may have been taken, but they will never be lost if they remain in our memories.
Today I am thinking about a customer who came into my Pennsylvania store back in early May of 1996 and started a conversation with me. The conversation starter was a little sign that I put up announcing the arrival of my daughter, Sarah. Sarah was my second child and first girl. The customer, an airline pilot, noticed the sign and congratulated me. I made a comment how I wasn't prepared to be the father of a girl. He smiled and told me about his two young girls and how they make it so easy. “They are little princesses,” he said, “they are so loving, they are so devoted to their Daddy. It's such a great feeling coming home to them.” It was quite some time ago and I am going from memory, but I am pretty sure he used “princess” and “devoted” when describing his daughters. I think he may have said “beautiful,” as well, but I'm not sure. I really wish I could remember the conversation better.
Why do I want to remember his exact words? Because I want to share the love I heard in this man's voice for his family. I want people to know about this special person, who just came to my store for a quick snack and took the time to share a kind thought and a smile.
September 11, 2001 was a tragic day; not because an infamous event occurred, but because this kind gentleman, Vic Saracini, passed away on that day. While many people refer to that day as “Nine Eleven,” it was more than just a catch phrase, event in our history. It was a day when over 3,000 loving and caring people were senselessly murdered by cowards. I am sure there is probably a more effective way to express my emotions about that horrific day, but the words escape me.
I did not know Vic Saracini well enough for me to be able to write much more. There is a “Garden of Reflection” in Lower Makefield, PA that provides tribute to the lives forever changed on that tragic day.
Garden of Reflection
There will be various remembrances on September 11th this year and for years to come. I hope we not only unite as Americans in remembering the day, but also take the time to think of the people who perished. Their lives may have been taken, but they will never be lost if they remain in our memories.
Saturday, September 6, 2008
Everyone Owns a Number
The title of this post comes from a portion of a presentation I attended in Chicago made by Roger Pell, SVP of Inmatrix. Mr. Pell's company distributes a great financial diagnostic program called Optimist. I've used this software and I am offering an unabashed testimonial for its functionality in helping businesses forecast and improve financial performance.
Below is a link with some information on this software for those who are interested in learning more about it.
Optimist Information
I consider Mr. Pell a kindred spirit. Mainly because the tag-line for his company, Inmatrix, is “making business simple.” You need to look no further than a few past posts to see my claim that business success is as simple as having more income than expenses and I believe that too many businesses struggle because they lose focus and forget to pay attention to some simple financial indicators. The story is always there in the numbers, you just have to know what to look for.
One of the suggestions that Mr. Pell made during his presentation was that businesses should create a culture where “everyone owns a number.” He was referring to open book accounting, which basically encourages businesses owners to share portions of their financial information with their personnel. I have always been a strong proponent of this practice and believe that more businesses would increase their productivity if they shared financial information with their front line employees.
Before you respond with comments that question my sanity, I suggest that you read two books. The first is called The Great Game of Business by Jack Stack with Bo Burlingham. Jack Stack helped turn Springfield Remanufacturing Corporation, a nearly bankrupt division of International Harvester, into a very successful operation using an open book management system that encouraged employees to play the “game” and understand the profit centers that dictate success in their organization (A Stake in the Outcome is another great book written by Mr. Stack).
The other suggested reading is Nuts! by Kevin and Jackie Frieberg. This book is the story of Southwest Airlines and shares some of the interesting business philosophies of Herb Kelleher and his management team in developing a corporate culture that is unrivaled in the airline industry. While open book management is not the focus of this book, there are some great excerpts of how they incorporated this practice and the positive results that were generated because employees were given a stake in profitability and access to key data on performance.
Open book management gives employees incentive to perform and achieve goals, it allows for easier delegation and helps discipline an organization to pay attention to key financial data. There are many variations to implementing this process, from limited short term bonus incentives for employees to full disclosure and offering options for employee ownership (Employee Stock Ownership Plans or ESOPs).
I had my first exposure to open book management when I worked at a fast food franchise in NJ back in 1982. I was working on the cash register for minimum wage, which was $3.35/hour at the time. One night, my manager called a pre-shift meeting with the four register operators and told us we were going to have a “register race.” Whoever rang up the most sales between 5:00 and 9:00 PM would make an extra $1.00/hour for that shift; we worked a 6 hour shift, so this would be a whopping $6.00 bonus. I was up for the challenge and I remembered to ask “you want fries with that?” and to upsell the from fountain sodas to milkshakes.
My sales topped out at $800 for the period and I won the race that night. The fact that I still take pride in this silly little accomplishment evidences the power of a adding a little competition to the workplace (I will add here that part of the incentive to succeed was that I also had a silly little crush on my manager, Kathy).
Let's look at the results of that performance in a different light. I found out that night that I had usually generated $650 in sales per evening. So for an additional $6.00 cost, this corporation got an extra $150 in sales. The average food cost at this franchise in 1982 was around 22%. So when considering that all their other operating remained the same, they made an extra $111 that night ($150 - $33 food cost - $6 Rick bonus) by creating this incentive. Actually, they probably made even more, as my coworkers also were likely to have performed a little bit better than normal.
When implementing an open book management system, management still holds the keys to the amount of information that they share with their employees. You may not want to share everything, but at the least, I suggest keeping employees in the loop in regards to productivity benchmarks that you use to measure their performance.
If you don't have measures in place, now would be a good time to start. Accountants love when they hear, “you can't win the game if you don't keep score.” As part of any continuous improvement process, you should have some way to gauge productivity and efficiencies. These are often called “key performance indicators” (KPI) and they can be based on operating, marketing or financial benchmarks. An acronym often used when considering a KPI is SMART. This stands for: Specific, Measurable, Achievable, Relevant, Time bound.
Most KPIs are industry specific, so if you are not sure what measures to use, I suggest that you start reading some industry publications. You can also give our office a call and we can put our NYS SBDC Research Network to task in helping you out! I've added a link to their blog in my sidebar and suggest that you check out some of their great links to resources, as well as their interesting posts.
Below is a link with some information on this software for those who are interested in learning more about it.
Optimist Information
I consider Mr. Pell a kindred spirit. Mainly because the tag-line for his company, Inmatrix, is “making business simple.” You need to look no further than a few past posts to see my claim that business success is as simple as having more income than expenses and I believe that too many businesses struggle because they lose focus and forget to pay attention to some simple financial indicators. The story is always there in the numbers, you just have to know what to look for.
One of the suggestions that Mr. Pell made during his presentation was that businesses should create a culture where “everyone owns a number.” He was referring to open book accounting, which basically encourages businesses owners to share portions of their financial information with their personnel. I have always been a strong proponent of this practice and believe that more businesses would increase their productivity if they shared financial information with their front line employees.
Before you respond with comments that question my sanity, I suggest that you read two books. The first is called The Great Game of Business by Jack Stack with Bo Burlingham. Jack Stack helped turn Springfield Remanufacturing Corporation, a nearly bankrupt division of International Harvester, into a very successful operation using an open book management system that encouraged employees to play the “game” and understand the profit centers that dictate success in their organization (A Stake in the Outcome is another great book written by Mr. Stack).
The other suggested reading is Nuts! by Kevin and Jackie Frieberg. This book is the story of Southwest Airlines and shares some of the interesting business philosophies of Herb Kelleher and his management team in developing a corporate culture that is unrivaled in the airline industry. While open book management is not the focus of this book, there are some great excerpts of how they incorporated this practice and the positive results that were generated because employees were given a stake in profitability and access to key data on performance.
Open book management gives employees incentive to perform and achieve goals, it allows for easier delegation and helps discipline an organization to pay attention to key financial data. There are many variations to implementing this process, from limited short term bonus incentives for employees to full disclosure and offering options for employee ownership (Employee Stock Ownership Plans or ESOPs).
I had my first exposure to open book management when I worked at a fast food franchise in NJ back in 1982. I was working on the cash register for minimum wage, which was $3.35/hour at the time. One night, my manager called a pre-shift meeting with the four register operators and told us we were going to have a “register race.” Whoever rang up the most sales between 5:00 and 9:00 PM would make an extra $1.00/hour for that shift; we worked a 6 hour shift, so this would be a whopping $6.00 bonus. I was up for the challenge and I remembered to ask “you want fries with that?” and to upsell the from fountain sodas to milkshakes.
My sales topped out at $800 for the period and I won the race that night. The fact that I still take pride in this silly little accomplishment evidences the power of a adding a little competition to the workplace (I will add here that part of the incentive to succeed was that I also had a silly little crush on my manager, Kathy).
Let's look at the results of that performance in a different light. I found out that night that I had usually generated $650 in sales per evening. So for an additional $6.00 cost, this corporation got an extra $150 in sales. The average food cost at this franchise in 1982 was around 22%. So when considering that all their other operating remained the same, they made an extra $111 that night ($150 - $33 food cost - $6 Rick bonus) by creating this incentive. Actually, they probably made even more, as my coworkers also were likely to have performed a little bit better than normal.
When implementing an open book management system, management still holds the keys to the amount of information that they share with their employees. You may not want to share everything, but at the least, I suggest keeping employees in the loop in regards to productivity benchmarks that you use to measure their performance.
If you don't have measures in place, now would be a good time to start. Accountants love when they hear, “you can't win the game if you don't keep score.” As part of any continuous improvement process, you should have some way to gauge productivity and efficiencies. These are often called “key performance indicators” (KPI) and they can be based on operating, marketing or financial benchmarks. An acronym often used when considering a KPI is SMART. This stands for: Specific, Measurable, Achievable, Relevant, Time bound.
Most KPIs are industry specific, so if you are not sure what measures to use, I suggest that you start reading some industry publications. You can also give our office a call and we can put our NYS SBDC Research Network to task in helping you out! I've added a link to their blog in my sidebar and suggest that you check out some of their great links to resources, as well as their interesting posts.
Tuesday, September 2, 2008
Contingency Planning
(note: I posted this before finding out that September is "National Preparedness Month"...seems even more appropriate now!)
I am heading off to Chicago later today for the Association of Small Business Development Centers (ASBDC) annual conference. I have worked in three other SBDC networks and this conference provides the opportunity for me to visit with some old friends from Alaska, Arizona and Indiana. I also look forward to reconnecting and sharing war stories with some friends I met while doing relief work coordinated by the ASBDC after Hurricane Katrina. The ASBDC recruited this effort and I was joined by personnel from Florida, Maryland, Massachusetts, Nebraska, New Mexico and Tennessee to serve in Hattiesburg, Mississippi to help some small business owners deal with the aftermath of that storm (http://cccsbdc.blogspot.com has some details on that experience).
With Hurricane Gustav currently pounding away at the Gulf Coast, it provides a stark reminder on how the forces of nature can wreak havoc on our livelihoods. Millions of people were evacuated over the past few days and it is unfortunate that many will return to bear witness to the powerful damage that wind and water can do to homes and businesses.
As the sun shines here in Plattsburgh today, and in many other areas of the country, the storm that is pounding the Gulf Coast is also providing us the opportunity to learn a valuable lesson. As John F. Kennedy once said, “the time to repair the roof is when the sun is shining.”
In business planning, we talk about market analysis, marketing strategy, financial forecasting and operational management. Usually, risk management is just an insurance quote that goes on our profit and loss projections. Many business owners go no further than getting their insurance policy and putting it into the filing cabinet. Yet, I learned how important my insurance agents were to my businesses in short order as they helped me through a series of difficult issues ranging from wind damage, lightning strikes, worker injuries, earthquakes, theft and vandalism (thanks Dennis Regan & Norm Tyler).
With the power of hindsight, I wish I had given risk management and contingency planning more thought. As an eternal optimist, I think more about what can go right than what can go wrong. Reality is that life happens and things do not always go as planned.
While I have faced some challenges that resulted in some fairly significant financial loss, I count myself fortunate that the results of both the natural and man-made disasters I faced were minimal relative to what others have encountered. While I am no expert in disaster preparedness, I became better over time, learning from my mistakes and developing contingencies for future events.
It became common practice for my wife and I to add to our employee manual what we would do in the case of future events. We covered things such as power outages, equipment damage, earthquakes, windstorms and snow/ice events. Another thing that we did was to prepare for economic issues. We derived our family income from our businesses, so we always had a plan to whittle down our living expenses and to earn income outside of our businesses if sales slowed or stopped due to any series of events.
All businesses could benefit from developing their own contingency plans. Hopefully, your plan will be more well thought out than the haphazard and reactionary documents that I created. Think about natural events, mechanical issues, utility issues and what it takes to keep your business running (and your family fed!). Of course, your priority should include planning to promote the safety and welfare of you and your employees.
Below is a link to a helpful website.
http://www.ready.gov
I also encourage you to spend more time with your insurance agents. They have experience in dealing with these types of issues and the have real solutions to help your business. One of the powerful images that I remember from visiting Mississippi in the aftermath of Hurricane Katrina is in the photo below. I am not promoting this one insurance company, but it sends a clear message that life goes on as long as life goes on. Being prepared for these events just makes it a little easier.
I wish those in the Gulf Coast the best as they ride out this storm.
I am heading off to Chicago later today for the Association of Small Business Development Centers (ASBDC) annual conference. I have worked in three other SBDC networks and this conference provides the opportunity for me to visit with some old friends from Alaska, Arizona and Indiana. I also look forward to reconnecting and sharing war stories with some friends I met while doing relief work coordinated by the ASBDC after Hurricane Katrina. The ASBDC recruited this effort and I was joined by personnel from Florida, Maryland, Massachusetts, Nebraska, New Mexico and Tennessee to serve in Hattiesburg, Mississippi to help some small business owners deal with the aftermath of that storm (http://cccsbdc.blogspot.com has some details on that experience).
With Hurricane Gustav currently pounding away at the Gulf Coast, it provides a stark reminder on how the forces of nature can wreak havoc on our livelihoods. Millions of people were evacuated over the past few days and it is unfortunate that many will return to bear witness to the powerful damage that wind and water can do to homes and businesses.
As the sun shines here in Plattsburgh today, and in many other areas of the country, the storm that is pounding the Gulf Coast is also providing us the opportunity to learn a valuable lesson. As John F. Kennedy once said, “the time to repair the roof is when the sun is shining.”
In business planning, we talk about market analysis, marketing strategy, financial forecasting and operational management. Usually, risk management is just an insurance quote that goes on our profit and loss projections. Many business owners go no further than getting their insurance policy and putting it into the filing cabinet. Yet, I learned how important my insurance agents were to my businesses in short order as they helped me through a series of difficult issues ranging from wind damage, lightning strikes, worker injuries, earthquakes, theft and vandalism (thanks Dennis Regan & Norm Tyler).
With the power of hindsight, I wish I had given risk management and contingency planning more thought. As an eternal optimist, I think more about what can go right than what can go wrong. Reality is that life happens and things do not always go as planned.
While I have faced some challenges that resulted in some fairly significant financial loss, I count myself fortunate that the results of both the natural and man-made disasters I faced were minimal relative to what others have encountered. While I am no expert in disaster preparedness, I became better over time, learning from my mistakes and developing contingencies for future events.
It became common practice for my wife and I to add to our employee manual what we would do in the case of future events. We covered things such as power outages, equipment damage, earthquakes, windstorms and snow/ice events. Another thing that we did was to prepare for economic issues. We derived our family income from our businesses, so we always had a plan to whittle down our living expenses and to earn income outside of our businesses if sales slowed or stopped due to any series of events.
All businesses could benefit from developing their own contingency plans. Hopefully, your plan will be more well thought out than the haphazard and reactionary documents that I created. Think about natural events, mechanical issues, utility issues and what it takes to keep your business running (and your family fed!). Of course, your priority should include planning to promote the safety and welfare of you and your employees.
Below is a link to a helpful website.
http://www.ready.gov
I also encourage you to spend more time with your insurance agents. They have experience in dealing with these types of issues and the have real solutions to help your business. One of the powerful images that I remember from visiting Mississippi in the aftermath of Hurricane Katrina is in the photo below. I am not promoting this one insurance company, but it sends a clear message that life goes on as long as life goes on. Being prepared for these events just makes it a little easier.
I wish those in the Gulf Coast the best as they ride out this storm.
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