Monthly Archive for May, 2016

Remember America’s militia on Memorial Day

This is Jim’s traditional Memorial Day column.

Reasonable people disagree on the origins of Memorial Day, but most accept that the practice of decorating the graves of Americans who died in military service began in earnest during the Civil War.

On May 5, 1868, General John A. Logan, Commander of the Army of the Republic, made Memorial Day official with General Order No. 11, which stated in part, “… the 30th day of May, 1868, is designated for the purpose of strewing with flowers or otherwise decorating the graves of comrades who died in defense of their country …” And other than Congress making Memorial Day a national holiday on the last Monday in May, America has since honored its fallen heroes from all conflicts pretty much as General Logan ordered.

When America issued its first call to arms before we had a professional army, it went to the militia, which was identified as “all able-bodied men.”  Called “Minutemen” because they could be ready to fight on a minute’s notice, they were primarily shopkeepers, craftsmen, farmers, etc. Today we call them small business owners.

From as far away as Scotland, America’s Minutemen were impressive. Writing about the colonies’ quest for independence in “The Wealth of Nations,” Adam Smith predicted America would prevail thanks to its militia which, “…turns from its primary citizen character into a standing army.”

Early in the 20th century, state militias became the National Guard and the National Defense Act created the Reserves. In every war or conflict since, America has deployed these latter-day Minutemen (and women) alongside regular forces, where they represented a proportional number of casualties.

On this Memorial Day, as we honor all who paid the ultimate price in service to this country, let’s also remember the long tradition of America’s militia, including small business owners and employees, who served courageously on behalf of a grateful nation. It’s hard enough leaving family to march into harm’s way, but the degree of difficulty of that commitment is compounded for volunteers who also disconnect from businesses and full-time careers.

Contemplating the blessing of freedom wherever it may be found, there is one prime truth: Freedom is not free. As beneficiaries of those who paid the ultimate price for our freedom, our only method of repayment—the only way we can ever be worthy of their sacrifice—is to do all we can to maintain the freedom that they paid for and gave to us.

Write this on a rock … God bless those who paid the ultimate price for our freedom, including past and present Minutemen.

10 reasons to never be too cool for Old School

You may think you’re too cool for “Old School,” but there’s one thing it produced that you can’t be successful without: the fundamentals. Here are ten essential operating fundamentals that are timelessly, beautifully, definitively, non-negotiably, Old School.

Financial statements: Become an expert at understanding your financial statements. Spend more time with the numbers below the sales line on your operating statement. Non-negotiable.

Budgets: Yuck, right? But operations work best with a track to run on. Creating budgets isn’t hard – sticking to them is. Grow some discipline and get on track.

Cash management: Whether sales are up or down, you must be intimately familiar with your cash picture today, tomorrow, and six months from now. Do not delegate this.

Inventory: This is a euphemism for cash. Inventory that isn’t turning is declining in value and must be converted into cash – ASAP. And if you aren’t practicing Just-In-Time inventory management, do it now.

Vendors: Their success depends on yours. Talk to them about managing inventory, improving margins, lowering freight costs, and new ways to serve customers. Get rid of any vendor that only wants to sell you stuff.

Systems: These are the structured components in your operation which may be outdated and unproductive. Scrutinize employee schedules, delivery routes, opening hours, (your idea here). Nothing is sacred! Nothing.

Customers: Categorize them from the most profitable As, to the least profitable Ds. Worship the As, cater to the Bs, encourage the Cs, and let the Ds learn the meaning of self-service. You might even have to fire a few.

Products: Same song, different verse: A-B-C-D. Stock the fast-turning As, keep some of the Bs handy, and only a couple of the Cs. But never let a D spend the night under your roof unless a customer has paid for it.

Add Value: Find out what customers want instead of trying to get them to take what you need to sell. If you don’t add value to your customers’ operations, like your unhelpful vendors, expect to be fired.

Employees: Let them help you find efficiencies and opportunities. Encourage creativity and entrepreneurial thinking. Invest in training. Share your plan and let them help you accomplish it. Empower producers and cut the dead wood.

Bankers: Don’t be a stranger. Good news or bad, an informed banker can help you. But an uninformed banker is a scared banker, and no one ever got any help from a scared banker!
Focus on these Old School fundamentals and success will come and play in the New School backyard.

Write this on a rock … Even if you’re too cool for Old School, you still have to focus on the fundamentals.

Organizational special sauce: an intangible force

“Two all-beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun.”

You may know this line as the commercial jingle describing the Big Mac that McDonald’s created to compete with the Hardee’s Husky, which came with essentially the same condiments, including Hardee’s own special sauce.

Over the years, the term “special sauce” has been re-deployed beyond the burger wars, from condiment to handy metaphor. Management and organizational commentators, like me, have co-opted the term to identify a level of organizational performance beyond extra effort. Here’s how I’ve observed organizational special sauce in the marketplace.

Organizational special sauce isn’t a strategy or campaign, nor can it be achieved with a slogan or mission statement. No special sauce was ever the child of an algorithm, big data, or other amalgamation of ones and zeros. To the chagrin of Wall Street quants, organizational special sauce is an incalculable, unprojectable, and intangible force. It’s 100% performance leverage produced by a single active ingredient: human beings loving to work together toward something they all believe in.

This leverage kicks in like a turbo after quantifiable, tangible leverage reaches its RPM red line. Every business would like to have organizational special sauce but few ever do, because the elements that foster it are not easy to achieve, including, but not limited to:

  • Hiring the best people, who are then respected and valued.
  • Excellence as a non-negotiable performance standard assumed by all stakeholders.
  • Leaders demonstrate all the aspects that define the word: courage, integrity, morals, ethics, commitment, decisiveness, humanity.
  • People are not interchangeable parts, as if they were modules.
  • Corporate values flow to the organization’s last mile as a minimum expectation.
  • Delegation includes responsibility AND authority.
  • Corrective action first presumes shortfalls result from best efforts, and the first management step is redemption.

Here’s how organizational special sauce manifests:

  • Peerless products and services.
  • Industry-leading employee retention.
  • Prospective employees line up to join the organization.
  • Employees and partners are proud of and claim the organization’s excellent reputation.
  • Ethical actions and integrity manifest as devotion to the unenforceable.
  • Customers become the organization’s best salespeople.
  • Teams work harder than they ever did, while having more fun than they ever had.
  • And the classic marker: quantum leap performance.

You can’t demand, buy, or acquire the intangible leverage of special sauce, you can only foster an environment that gives rise to it. It’s an engagement sweet spot that produces results beyond expectations and projections – quantum leap performance.

Organizational special sauce is possible, but rare in public corporations, because it doesn’t conform to the analytical expectations of the Wall Street 90-day conference call. Our here on Main Street it’s more prevalent, where small business leaders know special sauce comes from the intangible resolve of their valued and respected employees.

Write this on a rock … Contributing to organizational special sauce is one of the hardest and most beautiful things you’ll ever do at work.

Investor search mistakes to avoid, part 2

Last week I introduced you to a list of mistakes businesses make when searching for investment capital. The list came from a book by my friend, Andrew Sherman, titled, Raising Capital. As we learned, there’s more to acquiring capital than a business plan.

So now let’s take a look at the rest of Andrew’s list, and, like last time, each one is followed by my thoughts.

Mistake: Not understanding the investor selection process.
Don’t deliver information with a fire hose when a pitcher is preferred. If there is interest, investors will request the full details as needed.

You’ll need three documents: an initial, one-to-three-page executive summary (the pitcher), an intermediate 10-page (+-) model, and a long one with all numbers and research (fire hose). Deliver the last two only when requested.

Mistake: Too little research and analysis.
You must have market/industry research and analysis to back up your assumptions and projections. Investors don’t value promises or hunches. Don’t show extensive data until requested, but reference and summarize what you’ve learned in the short models.

Mistake: Underestimating the funding chronology.
If your funding requirements and the investor’s investment schedule are not in sync, guess who makes adjustments? Remember, to an investor, urgency sounds like desperation. And this will be true for crowdfunding as well.

Mistake: Being afraid to share your idea.
Sherman says you can’t sell if you can’t tell. Get a non-disclosure agreement that fits your project and use it. Investors not only expect to sign an NDA, they won’t respect you if you don’t give them one.

Mistake: Being dollar-wise and investor foolish.
Trick question: Which is the best alternative: a) $1 million from investors who know nothing about your industry; or b) $500,000 from investors who have industry background and contacts? Since the value of an investor relationship is usually more than cash, “b” is often the correct choice. Consider all forms of investor participation when evaluating an offer.

Mistake: Getting hung up on initial ownership and control.
Establishing ownership and control is where most investment negotiations break down. Here’s a handy rule: He who has the gold makes the rules, which usually includes control. Business founders are typically better served focusing more on the investor exit plan and less on initial control.

Accomplishing a successful investor relationship requires thoughtful preparation plus skillful negotiation.

Write this on a rock … Know the rules before pursuing an investor search.




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