Monthly Archive for January, 2017

Two reasons quality service can take you down

Successful customer service is the process of delivering value to customers in exchange for payment.

Surely this is the prime directive of any business. But that process isn’t truly successful unless the relationship can be sustained, and only quality produces sustainability.

But what kind of quality?

“Quality service” is a 20th century term that businesses use to declare a commitment to diligent customer support. But customers typically associate it with, and businesses too often tolerate it as promptly addressing a problem. Unfortunately, here’s what quality service often sounds like:

“We’re sorry we delivered the wrong size part. But we’re committed to quality service, so one of our trucks will be there in an hour with the correct part.”

It’s true. Sometimes quality service like that impresses the customer – and businesses even like to brag about delivering it. But while prompt attention is admirable, it’s not optimal because it has a negative impact on sustainability in at least two ways:

  1. The customer was inconvenienced by inaccurate service – you screwed up!
  2. Allowing an avoidable problem to occur is the worst kind of profit-eating inefficiency.

In the 21st century, successful small businesses have converted their problem-fixing “quality service” to the profitable and sustainable “quality process.”

Put simply, executing a quality process is serving customers correctly the first time. Accomplishing a quality process ranges from the very basic, accurate order filling, to the more complex, integrating into your operation only those vendors that share your quality process commitment. It shouldn’t be breaking news that your large business customers have been doing this for a couple of decades, to eliminate weak links in their supply chain.

The optimal goal of your quality process is sustainable customer relationships. That means 1) you did it right the first time; and 2) you made a profit and didn’t squander any of it on mistakes. Such sustainability is in evidence when customers return to find your profitable business still there, ready to serve them again with your quality process.

So why would anyone live with profit-eating quality service instead of managing with a quality process? Because cash is a drama queen and profit isn’t.

Delivering quality service is practiced by crisis managers. The crisis comes when you could lose a sale – possibly even a customer – because an order was filled incorrectly, creating a hit to your cash flow so quickly and dramatically that it takes your breath away: “OMG, get out there right now and fix this!”  Lots of drama for everyone.

Having a quality process is a commitment to profitability, requiring disciplined, long-view professional management. You’ll recognize it by the sound of no drama experienced by you or your customers … crickets.

Professional small business CEOs know that focusing on a quality process – doing it right the first time – takes a commitment to quality hiring, efficiency training, and a focus on what customers want, not just what they need. These practices produce sustained profitability and, in time, will eliminate your noisy cash flow drama.

Remember, the quality service you’ve been so proud of may seem admirable, but when delivered in response to something that was avoidable, it assaults profitability, threatens sustainability and ultimately will put you out of business.

Write this on a rock … Convert quality service into the more profitable – and sustainable – quality process.

Top 10 Things That Keep Small Business Owners Up at Night

If you ask any small business owner “How’s business?” invariably they will respond: “Well, I can always use more customers.” So if someone asked you what’s the greatest concern of small businesses, you could be forgiven for being wrong if you said they need more sales, because that’s what most people think – especially politicians.

When it comes to buying and selling, small business owners are pretty good at that – every company is founded, and has been built to do those things. But operating a small business in the 21st century has become more complicated than ever before, which is why people who know small business know the best way to find out what’s really going on is to ask the owner what keeps them up at night.

One organization that knows how to ask small businesses the right questions is the National Federation of Independent Business. As you may know, the NFIB’s monthly Index of Small Business Optimism has been the gold standard for such research for 43 years. They also have a quadrennial report that speaks directly to the “what keeps you up at night” question. It’s the NFIB Small Business Problems and Priorities Survey, and in the 2016 report, you may be shocked to learn that “more sales” came in at #45 out of 75 options.

With an almost 15% response from 20,000 members they surveyed, 2,831 small business owners told the NFIB that their greatest challenges weren’t the competition (31), or social media (64), or online retailers (61). What about poor profits? Nope, that’s #16. Even the most initiated observers of small businesses would feel safe in presuming that cash flow would be #1, but this primordial Main Street challenge is actually #25.

If you listen to politicians, you’d think needing a loan is what wakes small business owners up at 2am. Surely you know better than to listen to politicians when it comes to small business or the marketplace, because needing a loan is almost last, at #70. That monthly NFIB Index I mentioned earlier has reported that since 2007, established small businesses have been adhering to what I call “The Great Deleveraging.” They don’t want no shtinkin’ loans.

So what is the numero uno greatest small business challenge? Drum roll, please: The cost of health care. Number 2 is oppressive government regulations. Number 3 is federal income tax on businesses. Number 4 is uncertain economic conditions. Number 5 is tax compliance complexity. And six through nine are also all government related. This next point is very instructive: The first operating challenge to break through the top ten is #10 – finding qualified employees. Let’s review: Nine of the top 10 greatest small business challenges are directly associated with government.

Some might say health care costs are not the government’s fault, but that would be Rip Van Duffus who just woke up from a seven-year nap and never heard of Obamacare. To be fair, let me hasten to add the cost of health care was a small business challenge prior to Obamacare. And this law did “bend the price curve,” as promised. Unfortunately, for the small business sector, Obamacare bent the cost curve up, not down.

Thanks to the NFIB Survey, President Trump and the 115th Congress can’t say they don’t know where to start helping small businesses. Indeed, they’re neck deep with the Obamacare “repeal and replace” debate right now. But here’s some “Breaking News”: We polled our online audience about that issue and 94% said “Yes” to repeal and replace, but half said, “Take the time to do it right this time.”

There’s no doubt that 26 million American small business owners – with health care costs on their minds – had a significant impact on the November election. So my advice to the political class of all three parties – Democrats, Republicans and Trumpicans– is to take the time to get healthcare right this time. And then quickly start reducing the other eight non-operating challenges government is imposing on the most important job creators in America: the heroes of the Main Street economy – small businesses.

Write this on a rock … What’s good for small business is good for the world.

Four letters from your big customers

Consider the ancient proverb: “Any chain is only as strong as its weakest link.” This is about four letters with this proverb in mind, sent to small businesses from their corporate customers – two that have been sent and two that will be.

1. Quality

The first letter was born in the 1950s, when the ideas of the godfather of the 20th century quality process, Edwards Deming, reversed “Made in Japan” from a metaphor for cheap into a mark of quality. During the 1980s, after American industrial competitiveness fell behind global competitors, quality processes like ISO and Six Sigma were adopted, returning “Made in America” to a mark of excellence.

By 1990, with their in-house quality act now together, big businesses realized they needed similar commitments from the small business vendors that had increasingly become more like integrated partners. As such, big business needed to know that the support from these partners would at least not diminish the quality expectations of their customers. Consequently, small businesses started receiving letters from those big customers requesting evidence of quality process practices, if not certification, without which there would be no continued, or new contracts.

2. Y2K

The seed for the second letter was planted by computer programmers in the 1960s. When these programmers wrote date codes with six digits, as in 121565, for December 15, 1965, they did so to conserve what was at the time very expensive data storage. However, they didn’t realize they were creating the literally ticking Y2K time bomb.

Around 1995, experts started worrying that when the clock ticked midnight, January 1, 2000, zillions of lines of date-sensitive computer calculations would fail by going back a century – 010100 would revert to January 1, 1900 – instead of rolling forward to 2000. Consequently, the codes in millions of programs had to be fixed. By 1998, small businesses started getting letters from their larger customers requesting evidence of their “Y2K compliance,” without which there would be no new contracts with eight-digit dates.

3. Sustainability

The third letter was born in the middle of the 20th century, when we started realizing that the solution to pollution was not dilution. Since then, environmental stewardship has evolved from not polluting to sustainability. That word – sustainability – essentially means doing more with less, and it includes making waste useful – especially water. It turns out that sustainability is not just the right thing to do. Since it’s been proven that it can also contribute to profitability and a positive corporate image, it’s become a 21st century business best practice.

You may not yet have received a sustainability commitment and practices letter from your corporate customers, but it’s coming. And because of that best practice thing, it will be irrespective of the current state of the geo-political climate change debate. So start thinking about resources usage, including energy, consumables, production waste – especially water. Start documenting your efforts, practices and performance in recycling, reusing, conserving, etc., so when a customer hands you their “Sustainability Letter,” you won’t have that “weak-link in the headlights” look.

4. Cyber-security

Does anyone need a review of the multiple and significant cyber-assaults that have been made on digital assets and records of American business and government in the past few years? Whether from cyber-criminals or cyber-spies, the threat is real, comprehensive, determined, unrelenting and, to date at least, very successful – for the bad guys.

Expect the Trump administration to push for increased cyber-defense measures for the government to an unprecedented degree. Because of the massive level of business that corporate America does with the federal government, a cyber-security partnership will logically be forged, as they collaborate on cyber-practices, expectations, tools, innovations, etc. This will be the most comprehensive commingling of efforts and shared goals by business and government since WWII. So expect your large customers to begin requiring cyber-security practices verification, either by a letter, or in the specifications of an RFP. Your corporate customers are not going to let you be their weak link.

Write this on a rock … Take a lesson from the Quality and Y2K letters. Set yourself up for success by taking action on sustainability and cyber-security. Do it now!

My 2017 Crystal Ball Predictions

1. Here are my 2017 predictions. My 2016 accuracy was 78%. My 16-year record is 73%.

2. After eight years entrenched at barely 2% GDP growth, the U.S. economy will finally exit perpetual recovery mode into expansion status of at least 3% GDP growth.

3. From 2010 to 2016, regulatory pressure increased on businesses by an unprecedented 80% (Gallup). This investment-suppressing pressure will reverse in 2017.

4. The NFIB Index will report small business optimism increasing for the first time in eight years, as the economy responds to pro-business rhetoric and policies from Washington.

5. As the economy grows, small businesses will see increased profitability due to eight years of deleveraging.

6. For the first time in eight years, small businesses will increase business loan requests.

7. Business startups will increase at a rate not seen for several years.

8. Relevant small retailers will benefit as collapsing irrelevant giants, like Sears, Macy’s, etc., create a Main Street retail vacuum only partially filled by e-commerce giants like Amazon.

9. Small business job creation will lag economic growth due in no small part to productivity technology, which has redefined the growth = jobs symbiosis, forever.

10. With workforce participation at a 40-year low, the growing economy will not directly benefit millions of unemployed and underemployed who lack competitive 21st century job skills, like how to make – or even use – productivity technology.

11. Tax reform and regulatory abatement will cause Corporate America to practice more market capitalism on Main Street and less financial capitalism on Wall Street, benefitting the small business sector.

12. More growing businesses will decide to “Stay private” as short-term performance expectations and expensive regulatory pressures associated with “Going public” increasingly conflicts with the prudence of longer-term planning.

13. Inflation will rise organically with a growing economy – not from Fed monetary policy, which inflation chickens will come home to roost later.

14. Partially due to inflation, the Fed will raise interest rates at least twice in 2017.

15. Global pressures, Trump protectionism rhetoric, if not policies, plus rising interest rates will cause the Dow-Jones to end the year closer to 20,000 than 21,000.

16. U.S. oil production will thwart OPEC attempts to increase prices, leaving the year’s average below $60bbl.

17. Although elected as a Republican, Donald Trump is no party ideologue, and will prove equally frustrating for Republicans and Democrats.

18. In repealing and replacing Obamacare, President Trump will be frustrated by Democrats and Republicans.

19. Complete Obamacare replacement will take longer to accomplish than conservatives would like, possibly years.

20. The Obamacare replacement will include broad market-based solutions (re: Enzi Bill, 2006), plus broad tax credits and no mandates.

21. Obamacare elements of guaranteed insurability and extended dependent coverage will be part of the replacement program.

22. Obamacare popularity now polls upside-down at 51 against/44 for (Gallup). Once established for six months, the replacement system will poll net positive.

23. The smoothest governing issue President Trump will have is with the Congressional GOP on business tax reform.

24. Congressional Democrats will play their perennial bargaining chip of increasing the federal minimum wage and President Trump will make that trade for something he wants.

25. President Trump will nominate two Supreme Court Justices in 2017.

26. Trump will manage Putin/Russia, but be greatly challenged by China.

27. The most serious global economic threat will come from issues associated with China’s government-controlled financial/banking system.

28. President Trump will regard cyber-attacks from states such as Russia, China, etc., as de facto acts of war.

29. By the end of 2017, very little, if any of the Mexican border “Wall” will have begun.

30. Hundreds of sanctuary cities will become President Trump’s most challenging domestic issue. The cities will lose, but probably not until after 2017.

31. The Trump administration will only pursue an increased deportation strategy against undocumented, known criminals, but will stop accepting so-called, Syrian refugees.

32. The Obama administration’s undermining of Israel in the U.N. will increase debate intensity about U.S. financial support of the world body.

33. While dealing with Brexit, the Euro Zone will also be challenged when Italy tries to use the 2015 Greek bailout playbook.

34. In defense of his legacy, President Obama will not adopt the precedent of outgoing presidents to stay below the public discourse radar.

35. Within two years, Barack Obama, and/or Hillary Clinton, will be proposed for a high-ranking U.N. position.

36. Senator Joe Manchin (D) from West Virginia, will become a (R).

37. The Alabama defense will deliver the NCAA Division 1 title for The Tide, defeating Clemson in consecutive Championship Games.

Write this on a rock … Buckle up. The Chinese curse, “May you live in interesting times,” will not cover 2017, partially thanks to Twitter.

Sustained small business success requires two kinds of passion

Over the years, as I’ve talked with many a budding entrepreneur about to start their business, it continues to amaze me how many haven’t conducted anywhere close to a prudent amount of research or due diligence on their baby. Indeed, they often act as if they must get their business going … right … now … or … they … will … just … POP!
This kind of impatience is dangerous.
Doing my best to talk them down off the ledge, I walk the fine line of tough love, between slowing them down to the speed of reason and smacking their entrepreneurial passion into a wall.
When would-be small business owners get that far away look in their eyes at this impetuous stage, they have plenty of passion for what the business does. They can’t wait to sell suits, manufacture plastic parts, bake bagels, or (your baby here). And passion for what they want to do is not only a good thing, it’s essential.
But without a healthy interest in - if not an attraction for - business fundamentals, passion has only slightly more value than a dream. In truth, if the balance between your baby and operating fundamentals gets out of whack, that’s when your dream becomes your nightmare. Trust me. I’ve had to make payments on one or two of my nightmares, after the thrill was gone.
This will be on the test: Success as a small business owner requires two kinds of passion:
  1. The love of what you want to do - your baby. If you haven’t been a mother, this is akin to how a mother loves her newborn, and it’s the easy kind. Spoiler alert!  It’s too easy.
  2. This kind of small business passion is less adorable, but in no way less important. This is passion for becoming an operating professional. It makes you dedicated to learning and practicing management fundamentals. If done right, you’ll actually acquire a peaceful acceptance of a return-on-investment timeline that pushes the deferred gratification envelope beyond what you ever thought possible, let alone acceptable.
See, I told you it was less adorable. The closest kin to this kind of passion is that which is required for parents to love their teenagers - during those times when you don’t like them very much, but you still love them … anyway.
It’s critical for a starry-eyed startup to distinguish between, and be dedicated to both passions, because passion for what you sell won’t be enough when:
  • Payables exceed receivables
  • You’re making payroll and there isn’t enough cash because you didn’t manage the cash (”Is it Friday already?!”)
  • When customers are the most difficult
  • When an employee becomes part of the problem
  • When your bank loan request must have current financial statements, including a 12-month cash flow projection showing how the bank will be repaid
  • Your operating derailment here
Brace yourself! This list is like a “What’s inside!” teaser on the cover of a very thick catalog of abiding small business operating challenges. Fending them off will require you to deliver on the management fundamentals you became good at because you had that second kind of passion: you became a high-performing, professional business owner, not just someone who dreamed of being one. You were passionate about what you do, and just as passionate about how you do it.
Write this on a rock … Sustained business success - year after year - requires passion for what you do, AND for how you do it.

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