Posts Tagged ‘cash flow’

Calculate Revenue Per Employee To Increase Productivity And Cash Flow

July 22, 2010

by Doug Smith, President, The Woodhaven Group

If your company is increasing productivity then chances are the cash flow  of your business is also improving.

That is a good thing.

But how do you know if the productivity of your business is showing improvement?

Is there a quick easy way for an owner or CEO to know if the efforts to improve productivity compared to other businesses is working?

Yes there is.  One quick metric that will give the owner a snapshot is Revenue per Employee.  It is simply total revenue or sales divided by the number of employees.  If your company can increase sales while staying at the same employee level then it tells you that  the combined efforts of all employees is having a positive impact on sales growth and probably on cash flow.

Industries differ in the Revenue per Employee calculation that is reported.  Software companies and oil companies can have a high Revenue per Employee while retailers may show a smaller Revenue per Employee.  J. Bryan Scott showed an interesting table right here of 100 companies and their Revenue per Employee totals.

For the owner, it is critical that you define what an employee is.  I have always liked to use full-time equivalents (FTE).  For example, 2 part-time 20 hour employees equal 1 full-time 40 hour employee.  I would define how many hours is a FTE and divide that into total hours  worked.  That is my number of employees.  I take the sales total and divide by the number of employees to get my Revenue per Employee.  Retailers are often a good example of why FTE needs to be used.  Some retailers choose to employ primarily part-time employees while others choose to employ primarily full-time.  Wal Mart probably has a low Revenue per Employee number if they don’t calculate using FTE.

The other caveat is to recognize when comparing to other companies that they may have a high percentage of their work done by outside contractors who are not employees.  As a result, the company will appear very productive because there would be a high Revenue per Employee reported.  I would imagine Microsoft and oil companies like BP or Shell that use a lot of outside contractors will have high Revenue per Employee calculations.  

When it is all said and done, the truest measurement of productivity using Revenue per Employee is to track the trend in your own company.  Is Revenue per Employee going up or down?  Take the best year of sales and profitability in the history of your company and use that year’s Revenue per Employee calculation as a baseline to compare to.  If I had a bad 2nd quarter, I would want to compare the Revenue per Employee back against that baseline year.  Then I would take action to get to my baseline for the next quarter.

If you have an industry association where everyone computes Revenue per Employee the same way, then that becomes a great way to measure how productive your company is.

As an annual goal for my company, I would always challenge my management team with an aggressive improvement in Revenue per Employee.  I know that if I hit the goal then I probably had a great year from a sales, profit and cash flow standpoint.

I would be interested to know if your company has had success using Revenue per Employee as a productivity calculation.

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Use Google TV Ads To Build Brand And Increase Cash Flow

July 16, 2010

by Doug Smith, President, The Woodhaven Group

As a small business owner or CEO you do not have the luxury of wasting the cash flow of your business while trying to build your company’s brand and increase sales.

One of the quickest ways to blow cash and profit is to invest too many dollars in the wrong marketing channels.

Most business owners have been turned off by TV because of the big ongoing expense and long lead time to produce and schedule a spot.  However, the biggest complaint I have always heard is the inability to truly measure the results of a specific TV spot.

Most small businesses that have included the Internet as part of a well executed  integrated marketing strategy  know about Google’s successful AdWords program.  What you may not realize is that for about the last 2 years Google has been incorporating the mechanics of the AdWords program into purchasing TV spots.

As a small business owner you can find programs on Cable TV and bid on specific spots on those shows.  By using keywords similar to those used in AdWords Campaigns, your company can target programs and times that work best for your marketing strategy.  Best of all, you can measure the results afterwards.

To find out more go to Google TV Ads here.

Successful marketing is all about testing concepts, measuring results, making adjustments and testing again.

Whether you want to build brand or develop a top-notch direct response program, I suggest your company test Google TV ads.

Leverage your knowledge and experience with Google AdWords to become more productive with your TV budget.

Consult This Advisory Board To Improve Business Cash Flow

July 6, 2010

by Doug Smith, President, The Woodhaven Group

It can be lonely as the owner of a growing small to medium sized business.  Often a problem or opportunity may come up and as an owner you wished there was someone to bounce ideas off of that really understands your business.

Owners never have enough trusted advisors to turn to that really know what they are talking about and will shoot straight with them.

Oh yes, there are bankers, attorneys, and accountants and most of them mean well but have not run a business and had to meet cash flow deadlines.  The extent of their knowledge of your business and industry is what you have shown them. 

Here is who I have used over the years as an informal advisory board when I needed a second opinion or felt like I needed a fresh idea:  the CEO or National Sales Manager of my top supplier.

If your #1 supplier has done business with you for years then they probably know your company as well as you do.  They may know your industry even better than you.  You need to tap into that knowledge.

Make no mistake, top management at your #1 supplier has a vested interest in you doing well and your company growing it’s marketshare.  They want to help.  They want your business to be successful.

Unlike an attorney or banker, your supplier is in a unique position to observe and understand the trends taking place in your industry.  After all, the CEO and National Sales Manager are meeting with owners like you everyday across the country.  They know the difference between the superstar managers and the B-team.  They see changes happening in real-time. The existence of their own company depends upon the everyday business decisions being made by their clients. They cannot afford for those decisions to be wrong.

I have often used input from these individuals in my decision-making.  A few of the benefits I have gotten from my best suppliers have been:

  • A unique successful promotion I implemented that had worked for another company in a non-competing market in the country.  I did not have to resort to trial and error advertising.
  • Identified which benefits of the supplier’s product got the best results when featured in advertising spots.
  • Personal introduction to owners in other parts of the country similar to my company.  I then successfully developed a mutually beneficial relationship that has lasted over the years.
  • Suggestions for reputable suppliers in other product lines that other owners had used that did not compete with his company.
  • Cost savings ideas he had seen work in other companies that ended up increasing my business cash flow.
  • Marketing channels that were working or not working and why. 

Developing a close relationship with the CEO and top management of your supplier can also work in reverse.  You may find your opinion carrying more  weight when your supplier gets ready to redesign or upgrade the product you purchase.

The next time you have a problem that seems unsolvable, pickup the phone and run it by your #1 supplier.

It can be a win-win situation for both companies.

One Simple Low Cost Method To Increase Sales

July 1, 2010

by Doug Smith, President, The Woodhaven Group

If sales are down try this low-cost method to increase sales and instantly improve your business cash flow.  The best part is it takes zero advertising dollars.

Look back at the last 3 years and calculate the average revenue or sales per customer that was generated for a year.

Make a list of your top customers and rank them in order top to bottom by year to date volume and determine who is trending to hit or exceed the yearly average.

Now,  make a list of those customers that are trending below the average, set a specific goal per customer to close the gap and have the sales department assign these customers to the top sales people in your company.  Their mission is to move sales volume up on each of these customers so by year-end their volume is at the predetermined average.

Why would this approach work?

First, you have already invested dollars to get them as a customer so no new advertising is needed to get these sales.  Second, the customer likes your company and what you have to offer since they are purchasing from you.  They are just not buying enough.

Try the following steps to increase sales with these customers:

  1. It sounds crazy but ask them to buy more.  It could be that the sales department has just been taking orders and not trying to build the sale.  Tell the customer how much the company values them as a client and would like to do more business than they currently are doing.  Believe me, this will work by itself with some customers.
  2. Increase sales by identifying a product or service that they are not buying that would be a good fit for the customer.  This becomes new sales for your company and sales that should have been generated with this customer all along.
  3. Offer a rebate or some incentive if by the end of the year their total volume hits the target goal.  If you get pushback, tell them the goal is realistic and is just the average amount purchased by the typical customer of your company.
  4. Review the payment history of this account and if it has been good, inform them that as a valuable loyal customer their credit limit has been increased. Like many users of credit they may purchase up to their credit limit.

I would do all 4 of the above suggestions for each customer.

Bonus method to increase sales:

After you have implemented the above program to increase sales with the “below average” volume customers, do the same steps with the “above average” volume customers.

The result will be a spike upward in the overall annual average revenue per customer.  This all happens without bringing on any new customers.  You are just maximizing the potential with your current customer database. 

Your business should see a jump in sales, cash flow, and profit.

Slow Economic Recovery Makes Business Cash Flow A Priority

June 30, 2010

by Doug Smith, President, The Woodhaven Group

The economy is not bouncing back as quickly as some expected.  There is confusion and doubt about the path of the economic recovery.  Even the economists that projected a choppy recovery are seeing that the resumption of growth is slower than anticipated.

This means more than ever, it is important for every business of any size to maintain a strong cash flow position.

In my opinion, the facts supporting a continued slow recovery are obvious:

  • Consumer confidence remains mixed at best.  Two different reliable reporting groups  reported May consumer confidence moving in opposite directions.  For many reasons, I believe consumers do not feel good about things now and I don’t see that changing for a while.  The future of the economy is tied directly and indirectly to the feelings of the everyday consumer.  If they are not confident then the consumer will not spend and cash flow of businesses will be impacted.  This important indicator will have to be closely monitored going forward to determine what the real truth is.
  • Housing sales are not showing any upward momentum.  With the government tax credits going  away there are fewer homes being sold.  This decline reverberates throughout the economy.  There will have to be a further drop in prices to trigger an increase in demand.
  • Commercial real estate problems still exist.  Increased vacancies in retail and office space is a reflection of a soft economy.  If businesses do not expand or even reduce in size then they don’t need space.  The landlords holding this space still have mortgages to pay. This problem will still be a front burner issue in 2011.
  • There will be no more government stimulus prior to November 2010 elections. The prior stimulus methods temporarily helped boost the economy.  The political mindset now is to reduce debt.  Going forward,  the private sector has to carry the weight of the recovery by themselves. 
  • The Federal Reserve will not reduce interest rates further.  When it comes to lowering interest the Federal Reserve has done all that it can.  Don’t look for lower rates to further stimulate the economy.
  • The unemployment is still high and will be for the forseeable future.  Government census workers helped boost employment for awhile.  Additional workers will only be hired as business confidence suggests a reason to expect improved revenue over the longer term.  That confidence currently is not there.

So, what should a business be doing?

Here are 7 action steps your company should be doing right now:

  1. Have realistic revenue goals going into the second half of 2010.  Do not gear up for a sales increase that won’t be there.  Your original sales projections for the year may now be outdated.   All other expense areas take their direction from the sales plan so get it as accurate as you can.
  2. Know your business’s breakeven point.  Make sure you operate at or below it.  Failure to do this will consume precious cash flow.
  3. Maintain good relations with key suppliers.  Don’t create surprises for your partners and you will find most of them will be there to help if you need assistance like extending terms.  Do this by communicating how things are going.  It helps your suppliers plan for the future too.
  4. Do not lose existing customers while attempting to generate new business.  New customers cost more to add than keeping old customers. If you have a zero sum game with the number of customers in  your database this too will eat up cash flow. A tip to keep customers happy is to deliver some type of  added value (ie: free shipping, etc) that may not be expensive to do but is attractive to your customer.
  5. Now is not the time to start new projects.  Keep a cash reserve and add to it if possible.  New opportunities will still exist in the future.  Make sure you are there to capitalize on them.
  6. Keep marketing costs in line with revised sales projections.  Do not assume that by increasing the marketing budget that more sales will automatically follow.  Don’t stop marketing but invest dollars in marketing channels that are proven.
  7. Keep gross margin in line.  Do this by making sure you are priced to make a profit.  That does not prevent you from running a short-term promotion that might temporarily decrease gross margin percentage but increase gross margin dollars.

A positive:   Banks appear to be adding fewer reserves for bad loans than before.  This will increase earnings and should start freeing up money to lend to consumers and businesses. This will be one source of cash flow that well run businesses will need in order to grow going forward.

Make sure your business model and financials are in good shape to access this cash from your bank as it becomes available.

Cash flow is the lifeblood of any business, especially in uncertain times.  Make sure you are protecting it.

Have A Down Payment Pricing Policy To Speed Up Cash Flow

June 29, 2010

by Doug Smith, President, The Woodhaven Group

Does your business perform a unique service or make a custom-made product?  If so, start including a down payment requirement when quoting a price for services or products.  This will dramatically speed up your business cash flow.  Combine this with extended terms from suppliers and that line of credit at the bank may not be needed.

Many companies are reluctant to ask for a down payment out of fear that it will upset the customer.  Our society has trained customers to expect to pay a down payment when purchasing certain products and services.  Most consumers would expect to be asked for a down payment when purchasing a home or car.  Unless your business is a retail transaction in a store where the customer gets the product immediately (ie:  restaurent, drug store, oil change, etc.), then try this tip and see your business cash flow take off.

It should always be a policy that any custom product or service  should require up to 50% down payment.  These funds early in the transaction can be used to offset materials & labor, marketing, and sales cost.  Or, just put the cash in your bank account and earn interest.  By receiving a down payment it also shows commitment on the part of the buyer.

Examples of a few products or services that should be getting up front down payments are:

  • Landscaping projects
  • Website design
  • Home or commercial remodeling of any kind
  • Caterers
  • Interior decorators
  • Direct mail design and production
  • Tailoring
  • Machine shops
  • Excavation
  • Dock repair or replacement
  • Mold remediation

Always make sure a complete purchase order or contract is signed by both parties spelling out the contract price, amount of down payment and balance owing so there is no misunderstanding at the end of the job how much the final payment will be.

Put this pricing policy in place today and watch your business cash flow immediately increase.

13 Foolproof Steps To Delivering Superior Customer Service

June 25, 2010

by Doug Smith, President, The Woodhaven Group

If a goal of your company is to increase the sales, business cash flow and net worth for shareholders, then superior customer service has to be at the center of everything you do.

Your business can have cutting edge technology at the best price.  The structure and funding of your company can allow you to scale the enterprise quickly.  Your business plan can be the envy of venture capitalists and angel investors.  Your start-up may have been listed last year on the Inc. Magazine’s Top 500 fastest growing companies. 

In spite of that, if your customer service is not the best it can be then nothing else matters.  Your company will lose marketshare.

In speaking with companies of all sizes from many various industry groups, I find most saying that the difference in their own company from the competition is their customer service.  Really?  I find myself wondering if these companies really know what superior customer means.

From the corner office to the front lines it is time for all companies to step back from the day-to-day operations and ask themselves what superior customer service means, what does it look like, and how do they deliver that unique trait to their customers.

Here are 13 foolproof steps to delivering superior customer service.  Ask yourself if your company is doing the following:

  1. Listening To Your Customer:  It all begins here.  You may think that you have the world’s best value proposition, product, service,and employees.  But does your customer or prospect agree?  Ongoing feedback on how your company is doing is critical and the only opinion that counts belongs to your customer. Feedback may be from a customer forum on your website, a live person taking calls or some other method .  Review the information discovered at a meeting of top management.  A characteristic I have noticed of successful companies is that the customer is discussed frequently at management meetings.  Unfortunately that does not happen enough in most companies.  The simplest and most effective feedback process I have ever seen belongs to Nordstrom department stores.  They have a half page with horizontal lines.  Across the top it says “I would like to hear from you”.  Thats it.  As a result, Nordstrom gets their customer’s top of mind opinion without being distracted by a series of survey questions.  The comments may be positive or negative but I am sure management reads every one of them.
  2. Timeliness Of Replies:  None of us has enough time in our day to get done what needs to get accomplished.  Your customer is the same way.  When they ask a question, request a quote or have a problem you must respond as quickly as possible even if you do not have the answer.  Anything less screams to your customer that they are not a priority to you.  With email and voice mail available, there is no excuse for not getting back as soon as possible.  Have a process in place to measure the timeliness of replies.
  3. Maintain A Good Reputation:  Is your business the first one the consumer thinks of when they need a solution to a problem or need a desire fulfilled?  If you are a restaurant, are you the first choice where to dine for the weekend?  Are you the plumber at the top of everyone’s list when a leak occurs?  A good reputation is not just a result of superior customer service.  Your mother was right about reputation.  Make sure you maintain a good reputation whether it is on consumer forums, with the Better Business Bureau, or at the corner coffee shop in the morning.
  4. Always Be Professional:  No one has to do business with your company.  Show respect in everything you do.  Make sure all employees act and look like they want to earn your customer’s business.  The business environment is no place  for bad language, off-color jokes or an arrogant attitude.  It is  not a secret that people want to do business with other people they like and respect.  The most expensive advertising campaign can be off set by one  employee needlessly making a prospect feel uncomfortable.
  5. Stay  In Touch:  Don’t be like the insurance agent I once had.  The only time I saw him was when it was time for the renewal.  Especially in business to business relationship,  an occasional phone call asking how sales are going is appreciated.  Even better is if you can refer a prospect to your client that might turn into a sale.  Nurture the relationship.  It will pay big dividends.
  6. Show You Are A Team:  Have you had an experience with a company where you wondered if one department within  a company even knew that another department existed?  Or, someone could not help because “that is not my job.”  A reflection of a well run company that delivers superior customer is a consistency throughout the organization in meeting the needs and wishes of every customer.  Make sure your line of communication and processes are in place and there is a synergistic approach to serving the customer.
  7. Don’t Rationalize:  No one is perfect, especially businesses.  Mistakes happen.  When they do occur, admit it and put in place a solution that will make the customer satisfied.  Most customers are understanding.  They just do not want to battle for a solution when the fault is not theres.
  8. Don’t Prejudge:  Every customer, every client, every prospect should be treated as if it’s the only one the company will ever have.  Some of the finest restaurants in America do a great job of making sure each visitor has an unforgettable experience.  That is why some of these establishments have been around for 50 years or more.  Too often, in some businesses, the way a prospect dresses or the size of the company dictates the quality of service given.  Don’t ever let the culture of your company go in this direction.
  9. Does The Business Give Back To The Community:  Superior service does not stop at the doorstep of the customer.  Contributing to the improvement in the daily life of a customer and its employees is indirectly an example of superior service.  Donating services or dollars to worthy causes that helps the community will be recognized and appreciated by both customers and prospects alike.  Many a business has lost out on a sale because a prospect remembered that a competitor contributed to a local worthy cause.  Think of this as customer service and not a line item called “donation expense” on a financial statement.
  10. Are You There For Your Customer In Tough Times:  As individuals and businesses, we all go through tough periods in our lives.  Only then do we really know who our friends are.  You may have a client who unexpectedly loses their largest customer, has a catastrophic fire or suffers the untimely loss of a key executive.  Helping out may be nothing more than extending payment terms for a period of time to help your customer’s cash flow.  I have even seen a company loan an executive to help the client transition through a loss of management.  Gestures like this are never forgotten.
  11. Is Your Product Or Service Easy To Use:  Was the solution to your customer’s problem created by engineers with no thought given to the end-user?  The problem gets solved but a PhD is required to get through the instruction manual.  Superior customer service dictates that usage of the product should be effortless.  I recently reviewed a new CRM system that was promoted as being the latest and best way to manage the interactions with customers and prospects.  It worked.  I could not understand how to use it, so I passed on buying it.  Keep it simple and your customer will be asking how they can buy more of what you are offering.
  12. Do Something Unexpected:  Sometimes superior customer service happens when someone goes out of their way to satisfy the customer by doing something totally unexpected.  This one event may solidify the customer relationship for life.  I know.  It happened to me.  I took my Lexus into the dealership for a routine service and told them I needed it back that night since we were driving to visit my son at college 700 miles away.  That evening they apologized and said the car was not ready since a part had to be ordered.  All of their loaner cars were being used.  I expressed my concern that I needed my car since we were going to be gone 5 days.  The service manager said, “No problem,” handed the keys to a new Lexus setting in the showroom and said “See you in a week..”  That was superior customer service and totally unexpected.  I don’t know how many cars I have indirectly sold by repeatedly telling that story.  Does your company have similar experiences?  If not, why not?
  13. Take Time To Educate Your Customer:  Your customer is incredibly busy and yet needs to keep up to speed with the changes in their industry.  Your company can perform a valuable service by having an ongoing education program directed to your customer.  It can be in the form of webinars, podcasts or e-newsletters featuring key topics of interest with experts in your specialty.  This is added value to the customer relationship that will be appreciated.       

When your business offers superior customer service you are really telling the customer that you genuinely care about their company and them personally.  It allows your business to better understand your customer and deepen the relationship.  You will find price becomes secondary.  The satisfied customer will become the best marketing tool you have.

Make sure “superior customer service” is more than just words.

Will Telecommuting Increase Business Cash Flow ?

June 24, 2010

by Doug Smith, President, The Woodhaven Group

It seems like business owners and CEOs wake up everyday trying to find a new way to increase business cash flow, productivity and sales.

A tool being used more frequently these days to achieve those goals is telecommuting. 

Telecommuting is the process of an employee working somewhere other than at the office.  Usually this means the employee is working from home.  The increased utilization of the Internet has allowed this alternative workplace to become much more popular.  For many businesses it has turned out to be a win-win situation for both the employer and employee.  The telecommuting employee is typically referred to as a teleworker.

Is it something your company should be doing?

Most researchers and business consultants will advise you that it is the right thing for your company to do.

My answer to that question is that yes, teleworkers are going to become a larger percent of the workforce in the future and your company needs to include them as a part of your employee mix.  However, for the program to be successful, your management team must do their homework first or the concept could fail.  There are benefits and concerns that must be addressed.  Here are just a few of them:

Benefits:

  1. Improved Productivity:  There are university, corporate and government studies that show the teleworker operating out of their home is a more productive employee than the employee in the office.  Reasons often given are fewer interruptions, less stress, and a fresher employee ready to work due to not needing to deal with the issues of commuting  to the office. This may be true but, frankly, I am not sure how much more productive the employee working from home really is. There are distractions at home also.  Laureen Miles Brunelli had interesting comments on this subject in a 2009 blog post on About.com  You can read Laureen’s blog post here.
  2. Less Office  Space Needed:  This can be a real cash flow savings for the company.  Less space needs to be leased, no utility or phone cost, and office and workstations can be eliminated.  Those are all real measurable savings.
  3. Flex Time For the Employee:  A real benefit for the teleworker is the opportunity to utilize flextime in their day.  The day can be broken up allowing the teleworker to take time to address home and family issues and still get the job done.
  4. Can Reach High Quality Candidates:  I have seen individuals with advanced degrees who, due to family commitments, have to stay at home.  Yet they still want to realize their professional ambitions.  If they were required to come to an office this high quality candidate would be lost to the company.
  5. Can Utilize More Part Time Employees:  Depending upon the scope of work, the teleworker may not need to be a full-time employee.  For instance, two 20 hour part-time data entry workers might be the best solution for both the company and the stay at home employee.
  6. Opportunity To Employ Handicapped and Retired Workers:  There are some excellent handicapped workers and retirees who choose not to work in an office environment.  They become a real asset to the company working out of their home office.
  7. Improved Morale:  Studies have shown that teleworkers have  higher morale  than those in the office environment resulting in less turnover.  Not having to commute to and from work would be a morale booster by itself to many workers.
  8. Bad Weather Is a Nonissue:  No problem with snowstorms.  While the regular office may be closed for the day, the telecommuting employee carries on as if nothing happened.
  9. Geographic Location Is Not a Problem:  Working remotely allows the company to hire the best candidate regardless of where they reside.  I once hired a telecommuting employee from 600 miles away because she was the best candidate available.  Also, if the spouse is relocated to another city, your company’s teleworker can follow the spouse and continue on as if no move occurred.  

Concerns:

  1. Lack of Social Interaction:  This might be the biggest concern.  The teleworker operating from home does not participate in the “water cooler” conversations or have the opportunity to have a lively discussion at break time with others about the ball game on TV last night.  There must be a process in place to engage the work at home employee if they are the type that requires a lot of social interaction.  A behavioral analyses of the telecommuting candidate might be a good idea to use during the hiring process.
  2. Can the Worker Stay Focused:  Is the  teleworker self disciplined, organized and have the ability to manage their day?  If not, the productivity issue becomes a concern not a benefit.
  3. Is There Buyin From the Manager:  A work at home employee has to be managed differently than the one down the hall from the manager.  Goal setting with specific measurable results and deadlines is critical.  Managing to results is the way to make the teleworker accountable.
  4. Could There Be a Culture Problem:  Not all jobs are a good fit for the telecommuting program.  If there are employees in the office that perceive the teleworker as a slacker that does not pull their weight, then the productivity concern might shift to those employed in the office.
  5. Promotion May Not Be An Option:  If the employee wants to move quickly up in the organization, then working from home may not give them the opportunity to develop and show off their people management skills.  A manager career path training program might necessitate the employee only being in an office environment.
  6. Security Can Be a Problem:  If the teleworker has access to the company database and confidential documents, it is imperative that steps are in place to protect these valuable assets of the company.  A disgruntled employee working remotely can do serious damage.
  7. Are There Savings In Office Equipment:  If the company reimburses the teleworker for a computer, fax, printer and other office needs then how much savings were actually realized?  In some companies the teleworker uses their own home computer with no reimbursement.
  8. Overtime Can Be An Issue:  A happy productive at home employee can easily surpass 40 hours per week.  While managing to results is good, the company still must be in compliance with all labor laws.  This includes not only overtime but also making sure workmens compensation is paid. 

Incorporating telecommuting into your employee strategy can be a real source of additional business cash flow.

It is just important to do your due diligence to assure yourself that the program will be the success that you expect it to be.

I Quit. Oh No! That Was My Top Customer!

June 23, 2010

by Doug Smith, President, The Woodhaven Group

One of the great “moments of truth” in the history of a business comes when a long time loyal customer quits and decides to take their business to the competition.

It can be like a family member dying.

When this happens, the sales, profit, and business cash flow of the company can take a major hit.

It can and should be a shock to everyone in the company.  I hope it never happens to you.  However, if it does there are 2 basic questions that must be answered immediately:

  1. Why did the customer leave?
  2. How do we get the customer back?

Here are 5 thoughts and questions I have on addressing why a long time customer left:

  1. First, the owner or CEO should personally be the one to analyze what happened.  It is not acceptable to lose an important customer or client and the responsibility falls primarily on the shoulders of the person at the top of the organization.  As a leader, you cannot be in the business of losing your top customers.
  2. If this customer found a reason to leave then it should be assumed that your company might be on the verge of losing other customers due to something you are doing or not doing.  This customer is like the canary in the mine.
  3. The owner or CEO should visit the other owner or CEO and have a heart to heart talk.  Find out exactly what the problem was that caused this decision and ask where the breakdown was occurring.  Chances are it was not one reason only.  Often there was an ongoing issue that was communicated repeatedly to the company, and in the opinion of your client, the issue was ignored or not taken seriously.
  4. Initiate immediately a listening campaign with your other large customers. It should be assumed that if the competitor persuaded one important customer to change then they will leverage that decision to go after your other top accounts.  A senior manager needs to visit your customer’s top management and find out if there are any problems brewing.
  5. The management team should meet back at headquarters and compare notes from all the conversations.  Are there common threads that require an action plan be put in place?  Some issues that may be identified are:
  • Has the processes in place to do business with your company become too complicated?  Has it just become too difficult to do business with your company?  For example, think of a customer service problem where the customer has to speak to numerous people and no decision is made.  Is your company lacking one point of contact for a customer to go to that would simplify the process or has your company become loaded with territorial silos.
  • Are your employees just going through the motions?  Are they taking customers for granted?  Is there a morale problem that impacts the relationship with all customers?  If so, why is there a morale issue?
  • Is there a growing quality problem?  Do finished products have mistakes and have to be remade?  Are shipments not delivered completely?  Are deadlines not met?
  • Do you have competitors now offering the same product or service as your core product and selling it at a lower price?  Has the competitor re-engineered your product to deliver more benefits?  Even a #1 product in the marketplace has to keep evolving to stay ahead of the competition.  

There may be other problems but it is my guess that one or  more of the above will be the cause of your business divorce. 

So, how do you get the customer back?

The reality of the situation is that you may not be able to.  Chances are the other company struggled for a long  time to arrive at this decision and will probably stick with it.

Regardless, here is what I would do:

  • Chances are the problem stemmed from a series of people issues.  I would put in place one point of contact and that person would only be the owner or CEO.  No one else.  If this is the real problem, then this solution will communicate how seriously the owner considers the situation.  
  • Schedule weekly meetings chaired by the CEO to review the status of the account with your lost customer’s management team.
  • Revisit with the customer’s CEO or owner the reasons why they chose to do business with your company to begin with.  Psychologically this allows the customer to resell themselves on what they liked about your company.  It also shifts the conversation from a negative to a positive one.
  • Identify the #1 feature that the customer likes and consider offering it at no  charge or reduced cost for a period of time.  Possibly throw in extended terms.  If you think it is too costly to do this ask yourself the cost of acquiring the new customers needed to replace the volume of this one top revenue generator.
  • If the customer is still reluctant to change back, ask if your company could take a reduced position in serving them instead of losing 100% of the business.  There is a good chance this strategy will work.   

One benefit coming out of this is that the CEO of your company will get a clearer picture of what is working and not working in the company.  That is a positive thing.

The best way to prevent this loss from happening again is to be proactive by making sure your management team is taking the following 4 actions:

  1. Listening to your customers
  2. Managing with timely accurate metrics to find where the company is falling down
  3. Keeping your employees motivated and focused on the customer and not themselves
  4. Making sure your value proposition and core products are in tune with the wants and needs of your target customer as well as the marketplace. 

In my opinion, losing a top customer is a leadership issue.  Sales, cash flow, profit and net worth will suffer.

Don’t let it happen to you.

The Personal Value System Of A Salesperson Can Quickly Kill Your Business Cash Flow

June 20, 2010

by Doug Smith, President, The Woodhaven Group

One mistake many sales people make when selling to a consumer is to project their own personal value system into the selling process.

That is a major mistake that can be the difference between closing the sale or being disappointed with the outcome.  The result is no sale and no addition to your business cash flow.  The prospect ends up buying  from the competition and your company needlessly lost revenue.

I have seen many salespersons not want to build the sale because they personally believed the total price would be too much.  In other cases where financing the transaction is an important option, I have seen salespersons not quote monthly payments because they never personally finance any purchases and do not believe anyone else should either.  Others don’t offer the product in a certain color because they personally do not like that color.  One retail salesperson I knew did not present one line of clothing to customers because she personally did not like the designer.

This happens in sales forces of all kinds and can be a cancer that will kill sales and valuable cash flow.

Sales managers need to train their sales forces to ask questions and gather plenty of information from the prospect about what the prospect wants and needs.  Then tailor the product or service offering based upon that information only.

The next time you see the sales volume of a sales person drop consider that one option may be that they are projecting their own personal value system into their selling process. Correct it and  both your sales and cash flow will increase.