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Sustainability, More Than Survival - ISA Workshop, June 2009, with notes

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This is my presentation to the International Society of Arboriculture (ISA), in Rhode Island, June 2009. It contains many examples of how to run a more profitable tree care business.
It was referenced in the podcast interview with Todd on ArborViews at http://www.isa-arbor.com/podcast/PodcastDetail.aspx?ID=8

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Sustainability, More Than Survival - ISA Workshop, June 2009, with notes

  1. 1. Sustainability: Business Survival in Tough Times Increase Your Profitability, Productivity and Sustainability Keith B. Center [email_address] www.moneytimepeople.com
  2. 2. Sustainability: Business Survival in Tough Times Business owners wear too many hats!
  3. 3. First a Word From Our Sponsors Mason International Business Group, Ltd. <ul><li>Drawing for new book </li></ul><ul><li>Money, Time & People… </li></ul><ul><li>will kill your business </li></ul><ul><li>And CD’s with </li></ul><ul><li>Tools & Templates </li></ul><ul><li>Think and Grow Rich </li></ul><ul><li>As a Man Thinketh </li></ul><ul><li>Acres of Diamonds </li></ul><ul><li>Audio of key chapter </li></ul>www.moneytimepeople.com
  4. 4. Agenda Module 2: Business Owners Wear Many Hats Module 1: Your Strategic Roadmap Module 3: Getting the hats all together… KPI’s Visual Accountability Systems Hat #4 Accounting & Finance Hat #3 Operations Hat #2 Sales Hat #5 Human Resources Hat #1 Marketing ? ? ? What does your elephant look like? Introduction to MOPPS Assigning Value $ Business Vector Alignment
  5. 5. <ul><li>“ Common problems happen commonly… </li></ul><ul><li>… and rare problems happen rarely” </li></ul>
  6. 6. Agenda Module 2: Business Owners Wear Many Hats Module 1: Your Strategic Roadmap ? ? ? What does your elephant look like? Introduction to MOPPS Assigning Value $ Module 3: Getting the hats all together… KPI’s Visual Accountability Systems Hat #4 Accounting & Finance Hat #3 Operations Hat #2 Sales Hat #5 Human Resources Hat #1 Marketing Business Vector Alignment
  7. 7. What Does Your Elephant Look Like? Your business name here Vision V____ My Elephant P1 P2 P3 P4 P5
  8. 8. Vision Exercise 1: Who has a written vision? Share it.
  9. 9. Vision <ul><li>“ IBM is what it is today for three special reasons. The first reason is that at the very beginning, I had a very clear picture of what the company would look like when it was finally done. The second reason was that once I had that picture, I then asked myself how a company which looked like that would have to act . The third reason IBM has been successful was I realized that for IBM to become a great company it would have to act like a great company long before it ever became one. We didn’t do business at IBM, we built one. </li></ul><ul><li>Tom Watson, founder IBM </li></ul>
  10. 10. Vision Millions Video
  11. 11. <ul><li>Where are you today? </li></ul><ul><li>(Business health check) </li></ul><ul><li>Where do you want to be? </li></ul><ul><li>(What kind of company do I want to have?) </li></ul><ul><li>How are you going to get there? </li></ul>Vision Take steps to make YOUR business soar! Aim for the moon, land among the stars Per ardua ad astra
  12. 12. Vision <ul><li>Where are you today? </li></ul><ul><li>Where do you want to be? </li></ul><ul><li>(What kind of company do I want to have?) </li></ul><ul><li>How are you going to get there? </li></ul><ul><li>What kind of person would own that kind of company? </li></ul><ul><li>How do I become that kind of person? </li></ul>And remember, it’s a process, not a plan.
  13. 13. Agenda Hat #4 Accounting & Finance Hat #3 Operations Hat #2 Sales Hat #5 Human Resources Hat #1 Marketing Module 2: Business Owners Wear Many Hats Module 1: Your Strategic Roadmap ? ? ? What does your elephant look like? Introduction to MOPPS Assigning Value $ Module 3: Getting the hats all together… KPI’s Visual Accountability Systems Business Vector Alignment
  14. 14. Business Vector Alignment S P B “ Let your eyes look straight ahead, And your eyelids look right before you. Ponder the path of your feet, And let all your ways be established.” Pr 4:25-27 “ When visualizing with closed eyes the money you intend to accumulate, see yourself rendering the service… you intend to give in return…” Think and Grow Rich, Napoleon Hill S piritual P ersonal B usiness
  15. 15. Business Vector Alignment My Mission: To help business owners to increase profitability, productivity and sustainability. “ The one to know when your business needs to grow”
  16. 16. Exercise 2: Who has a written mission? Share it. Business Vector Alignment
  17. 17. Business Vector Alignment Your Mission: Your tag line: “ ____________________________________________________________________ ” Who we are, what we do. How we align with our clients and customers
  18. 18. Agenda Module 2: Business Owners Wear Many Hats Module 1: Your Strategic Roadmap ? ? ? What does your elephant look like? Introduction to MOPPS Assigning Value $ Module 3: Getting the hats all together… KPI’s Visual Accountability Systems Hat #4 Accounting & Finance Hat #3 Operations Hat #2 Sales Hat #5 Human Resources Hat #1 Marketing Business Vector Alignment
  19. 19. MOPPS - Introduction X = KPI, Key Performance Indicator Measurement Organization Policies Planning Systems M O P P S System 2 Operations, Manufactur ing X X X X X System 1 Marketing & Sales X X X X X X System 3 Accounting & Finance X X X X X X X Responsibilities Roles or Functions
  20. 20. <ul><li>If you’re not Measuring, </li></ul><ul><li>You’re not Managing </li></ul><ul><li>Measure right things to get right results </li></ul><ul><li>Critical Success Factors </li></ul><ul><li>- if not done will kill the business </li></ul><ul><li>Need only a few KPI’s </li></ul>Vs. Porsche Boeing 747 MOPPS - Measurement
  21. 21. MOPPS - Organization Functional Org Chart CEO Legal <ul><li>Inc. / LLC </li></ul><ul><li>Name </li></ul><ul><li>Contracts </li></ul><ul><li>401k </li></ul>Accounting & Finance <ul><li>Invoicing </li></ul><ul><li>Cash Checks </li></ul><ul><li>A/R </li></ul><ul><li>A/P </li></ul><ul><li>Asset Mgt. </li></ul><ul><li>Payroll </li></ul>Marketing <ul><li>Mailings </li></ul><ul><li>Newsletter </li></ul><ul><li>Business Today </li></ul><ul><li>Business Alerts </li></ul><ul><li>Follow up Marketing </li></ul><ul><li>Seminars </li></ul><ul><li>Networking </li></ul>Human Resources <ul><li>Find & hire delivery people </li></ul><ul><li>Employee Ins. </li></ul><ul><li>Liability Ins. </li></ul>Administration Sales <ul><li>Business Development </li></ul><ul><li>Calls </li></ul><ul><li>Lists </li></ul><ul><li>CRM </li></ul>Operations (Delivery) <ul><li>Engineering Design </li></ul><ul><li>Project Management </li></ul><ul><li>Training </li></ul><ul><li>Delivery </li></ul>Work ON the business 2-4 hours 20 hours 10 hours 10 hours 2-6 hours Time: Purchasing <ul><li>Office Supplies </li></ul><ul><li>Equipment </li></ul><ul><li>Furniture </li></ul><ul><li>Phones </li></ul>
  22. 22. MOPPS - Policies <ul><li>Values – Understood </li></ul><ul><li>Create Business Vector Alignment </li></ul><ul><li>Have a policy manual for employees </li></ul><ul><li>Have them read and sign it annually </li></ul>
  23. 23. <ul><li>Strategic Planning is an ongoing process </li></ul><ul><li>Business plans are necessary to obtain finance. </li></ul><ul><ul><li>Do a simple one page plan supported by your company financials </li></ul></ul><ul><ul><li>Get a line of credit when you don’t need it! </li></ul></ul>MOPPS - Planning
  24. 24. MOPPS - Systems Measurement Organization Policies Planning Systems M O P P S Systems Detail in Module 2 System 2 Operations, Manufactur ing X X X X X System 1 Marketing & Sales X X X X X X System 3 Accounting & Finance X X X X X X X Responsibilities Roles or Functions
  25. 25. Work On, Not Just In Your Business W MOPPS – The Bottom Line You Your Business
  26. 26. Break 1 <ul><li>Be back in 10 Minutes </li></ul>
  27. 27. Agenda Module 1: Your Strategic Roadmap Business Vector Alignment Module 2: Business Owners Wear Many Hats ? ? ? What does your elephant look like? Introduction to MOPPS Assigning Value $ Module 3: Getting the hats all together… KPI’s Visual Accountability Systems Hat #4 Accounting & Finance Hat #3 Operations Hat #2 Sales Hat #5 Human Resources Hat #1 Marketing
  28. 28. Marketing <ul><li>Pricing </li></ul><ul><li>Positioning </li></ul><ul><li>The disconnect with Sales </li></ul><ul><li>Guerrilla Marketing </li></ul>Hat #1
  29. 29. <ul><li>Pricing : </li></ul>Principle of Cost Reduction: PROFIT = SALES PRICE - COST Principle of Cost Plus: SALES PRICE = COST+ PROFIT Marketing Hat #1
  30. 30. <ul><li>The previous equation drives all kinds of different behavior in terms of hunting down cost leaks and fixing them. </li></ul><ul><li>When we get to Accounting and Finance we will cover some of the profound impacts to profitability just by applying some elementary principles. </li></ul>Muda (Waste) Marketing Hat #1
  31. 31. <ul><li>What car do you think of first when it comes to safety? </li></ul>Positioning: The Battle for Mindshare Marketing Hat #1
  32. 32. <ul><li>What watch do you think of first when in comes to prestige? </li></ul>Positioning: The Battle for Mindshare Marketing Hat #1
  33. 33. <ul><li>“ Leadership is the single most important motivating factor in customer behavior” </li></ul><ul><li>22 Immutable Laws of Branding </li></ul><ul><li>The best position is first </li></ul><ul><li>Advertising spend in America is $376 per capita per year! </li></ul><ul><li>Positioning: The Battle for Your Mind </li></ul>Positioning: The Battle for Mindshare Marketing Hat #1
  34. 34. <ul><li>We’re Number Two… </li></ul><ul><li>… We Try Harder? </li></ul>Go for the “creneau” Positioning: The Battle for Mindshare “ Hit ‘em where they ain’t” Gen Douglas MacArthur Marketing Hat #1
  35. 35. Position: The EAB Solution Provider Tim Back Back Tree Service 513-742-TREE [email_address] Marketing Hat #1
  36. 36. 2005 – Mauget was only 1% $15,000 2008 – Injection 12.14% $216,000 in ArborJet products 2008 – Vertical Mulch Air Knife 12.6% 2005 – Vertical Mulch Air Knife 4%, $60,000 Marketing Hat #1
  37. 37. Exercise 3 How are you positioning your company? Share it. Marketing Hat #1
  38. 38. <ul><li>Marketing is not sales, and sales is not marketing </li></ul><ul><li>Marketing is strategic, driving buyer behavior with respect to your company </li></ul><ul><ul><li>Inbound </li></ul></ul><ul><li>Sales is tactical, driving revenue </li></ul><ul><ul><li>Outbound </li></ul></ul><ul><li>“ The aim of marketing is to make selling superfluous.” Peter Drucker </li></ul><ul><li>Idealistic, but you really need both! </li></ul>The Disconnect With Sales Marketing Hat #1
  39. 39. <ul><li>Defining the purpose of your marketing </li></ul><ul><li>Clarifying your benefits </li></ul><ul><li>Targeting your market </li></ul><ul><li>Selecting your marketing weapons (over 100 to choose from) </li></ul><ul><li>Clarifying your identity ( brand ) </li></ul><ul><li>Deciding on your budget </li></ul><ul><li>Creating your Marketing Calendar </li></ul>Seven Step Plan: Enter Guerrilla Marketing Marketing Hat #1
  40. 40. Copyright 2001 Mitch Meyerson and Jay Conrad Levinson. All rights reserved. Reproduced with permission 2006 Are You A Guerrilla? Score 1  10 Marketing Hat #1   16. I take Consistent Action on my marketing plan.   15. Develop marketing Partnerships with other businesses.   14. Consistently use Imagination   13. I look for ways to Amaze my customers with exceptional service.   12. My business is oriented to giving. We make Generosity a part of our overall marketing plan.   11. I build strong one-to-one Relationships knowing that people buy from friends rather than strangers.   10. I use Online Marketing as one of my major marketing weapons   9. I have a clear and specific Marketing Plan that guides my weekly action steps.   8. I focus on having a clearly defined Marketing Niche .   7. Enthusiastic and consistently positive in all my interactions.   6. Measure effectiveness of my marketing weapons.   5. Follow-up consistently   4. Assortment of strategies.   3. I am Aggressive in my marketing efforts   2. I look at all marketing from the Customer’s point of view   1. My words attitudes and actions are all Intentional and based on my marketing goals COMPETENCY
  41. 41. <ul><li>“ I don’t know who you are. </li></ul><ul><li>I don’t know your company. </li></ul><ul><li>I don’t know your company’s product. </li></ul><ul><li>I don’t know what your company stands for. </li></ul><ul><li>I don’t know your company’s customers. </li></ul><ul><li>I don’t know your company’s record. </li></ul><ul><li>I don’t know your company’s reputation. </li></ul><ul><li>Now - what was it you wanted to sell me?” </li></ul><ul><ul><ul><ul><ul><li>- Scowling Executive </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>From Ogilvy on Advertising </li></ul></ul></ul></ul></ul>Marketing Hat #1
  42. 42. Agenda Module 1: Your Strategic Roadmap Business Vector Alignment Module 2: Business Owners Wear Many Hats Hat #4 Accounting & Finance Hat #3 Operations Hat #2 Sales Hat #5 Human Resources Hat #1 Marketing ? ? ? What does your elephant look like? Introduction to MOPPS Module 3: Getting the hats all together… KPI’s Visual Accountability Systems Assigning Value $
  43. 43. Sales is a Process <ul><li>Low price vs. high priced sales processes </li></ul><ul><li>Business Vector Alignment in sales </li></ul><ul><li>Find More, Win More, Keep More </li></ul><ul><li>Sales Key Performance Indicators </li></ul><ul><li>Additional ideas </li></ul>Hat #2
  44. 44. <ul><li>Hippocratic Oath? </li></ul><ul><li>“ First do no harm” </li></ul>Sales is a Process Hat #2
  45. 45. <ul><li>Huthwaite’s Research: </li></ul><ul><li>Is your product or service a “ high ticket” or “ low ticket” item in the eyes of your customer? </li></ul><ul><li>There is a difference in how they buy </li></ul><ul><li>Questions work </li></ul><ul><ul><li>“ What are the implications?” </li></ul></ul>Sales is a Process Hat #2
  46. 46. <ul><li>Aligning what you do best… </li></ul><ul><li>… with what they need most. </li></ul><ul><li>Asking </li></ul><ul><li>“ What are the implications?” </li></ul>Sales is a Process Hat #2 SPIN Selling:
  47. 47. <ul><li>Find More : </li></ul><ul><li>Marketing </li></ul><ul><li>Public Relations </li></ul><ul><li>Prospecting </li></ul><ul><li>Networking </li></ul>“ This business of selling narrows down to just one thing, seeing the people. Show me any man of ordinary ability who will go out every day and earnestly tell his story to four or five people every day, and I will show you a man who just can’t help making good.” Frank Bettger Sales is a Process Hat #2
  48. 48. <ul><li>“ The most important secret of selling is to find out what the other fellow wants… </li></ul><ul><li>… When you show a man what he wants, he will move heaven and earth to get it” </li></ul><ul><li>How I Raised Myself From Failure or Success In Selling, Frank Bettger </li></ul>Align what you do best, with what they want most, then… Win More : Sales is a Process Hat #2
  49. 49. Tree Mortician Remove storm damage $1,200 Opportunity sounded like this… Sales is a Process Hat #2 Tree Physician $8,320 He left with this!
  50. 50. <ul><ul><li>“ Moments of Truth,” Jan Carlzon </li></ul></ul><ul><ul><li>A simple “Thank you” card </li></ul></ul><ul><ul><li>Customer Relationship Management </li></ul></ul><ul><ul><ul><li>Rule of fives </li></ul></ul></ul><ul><ul><ul><li>Keeping in contact </li></ul></ul></ul><ul><ul><ul><li>Many software packages available </li></ul></ul></ul><ul><ul><li>Customer satisfaction surveys </li></ul></ul><ul><ul><li>Customer loyalty programs </li></ul></ul>Sales is a Process Hat #2 Keep More :
  51. 51. <ul><li>“ Prospect, Present, Follow up” </li></ul><ul><ul><ul><ul><ul><li>Brian Tracy </li></ul></ul></ul></ul></ul><ul><li>What do you measure? </li></ul><ul><li>How do you measure? </li></ul><ul><li>What KPI’s? </li></ul>Sales Key Performance Indicators: Sales is a Process Hat #2
  52. 52. Sales is a Process Hat #2 Sales Call Daily Log:               Total                               Friday               Total                               Thursday               Total                               Wednesday               Total                               Tuesday               Total                               Monday     (Customer Contacts) Networking Customer   Sales Visits Appointments Set Actions Requested Contacts Dials Day/date
  53. 53. Sales is a Process Hat #2 Sales Pipeline:
  54. 54. … if you my friend don’t get no cash” “ Winning Through Intimidation”, Robert Ringer “ Closing deals is so much trash… Sales is a Process Hat #2 Remember!
  55. 55. Agenda Module 1: Your Strategic Roadmap Business Vector Alignment Module 2: Business Owners Wear Many Hats Hat #4 Accounting & Finance Hat #3 Operations Hat #2 Sales Hat #5 Human Resources Hat #1 Marketing ? ? ? What does your elephant look like? Introduction to MOPPS Module 3: Getting the hats all together… KPI’s Visual Accountability Systems Assigning Value $
  56. 56. <ul><li>McDonald’s or Manufacturing? </li></ul><ul><li>Both use systems to create profits </li></ul><ul><li>What is the key to McDonald’s success? </li></ul><ul><li>… The McDonald’s System </li></ul><ul><li>What is the key to Toyota’s success? </li></ul><ul><li>… The Toyota Production System </li></ul>Operations Hat #3 TPS is a Way of Thinking… ...not just a way to manufacture cars!
  57. 57. A B C V S M ABC = VSM A ctivity B ased C osting = Operations Hat #3 Getting to Lean: V alue S tream M apping
  58. 58. Operations Hat #3 Value Stream Map for a Fast Food Restaurant: Time waiting = 105 to 135 seconds Value add time = 150 seconds
  59. 59. Exercise 4 Process for tree care Operations Hat #3
  60. 60. <ul><li>Assemble teams in the morning at 7:00AM </li></ul><ul><li>Look at estimates </li></ul><ul><li>Figure out which team does what project (s) and allocate time </li></ul><ul><li>Assign projects to teams </li></ul><ul><li>Load up trucks, equipment and tools </li></ul><ul><li>They drive to location </li></ul><ul><li>Meet with client, make sure that the right job is being done </li></ul><ul><li>Do the job - removal, vertical mulching, injection, etc. </li></ul><ul><li>Drive to next job </li></ul><ul><li>Assemble teams in the morning at 7:00AM </li></ul><ul><li>Look at estimates </li></ul><ul><li>Decide which team does what project (s) and allocate time </li></ul><ul><li>Assign projects to teams, with maps and directions </li></ul><ul><li>Load up trucks to standard , check equipment and tools </li></ul><ul><li>They drive to location (have routes been optimized?) </li></ul><ul><li>Meet with client, make sure that the right job is being done </li></ul><ul><li>Do the job - removal, vertical mulching, injection, etc. </li></ul><ul><li>Drive to next job </li></ul>Operations Hat #3 Value Stream Tree Care:
  61. 61. Operations Hat #3 Value Stream for Tree Removal: Process: Arrive on site Validate tree, inspect with owner Set up equipment, bucket, chipper Start climbing / limb removal Chipping Trunk removal Chipping Stump grinding Cleanup Manpower: Three man team One climber Two on chipper Physically demanding High risk work Brings in $3,000/day/Team
  62. 62. Operations Hat #3 Value Stream for Injectables: Process: Measure tree at breast height Determine number of plugs & formulation Fill injection device Drill Plug Inject Clean up Document when to follow up and gain agreement from owner. Manpower: One person Not physically demanding Low risk work Brings in $3,000 to $5,000 each Three people $9-$15,000/day
  63. 63. www.goilawn.com <ul><ul><ul><li>60 new customers in one day </li></ul></ul></ul><ul><ul><ul><li>Saves 85% of time to do accurate estimate </li></ul></ul></ul><ul><ul><ul><li>Estimate and quote accurately from the office </li></ul></ul></ul><ul><ul><ul><li>Low cost to acquire a new customer ($1.79) </li></ul></ul></ul><ul><ul><ul><li>Accurate estimates increase customer confidence </li></ul></ul></ul><ul><ul><ul><li>Gives users a competitive edge to bring in new business </li></ul></ul></ul>Operations Hat #3 Value Stream for Snow Removal Quotes: Google Earth vs. Go iLawn
  64. 64. Agenda Module 1: Your Strategic Roadmap What does your elephant look like? Introduction to MOPPS Business Vector Alignment Module 2: Business Owners Wear Many Hats Hat #4 Accounting & Finance Hat #3 Operations Hat #2 Sales Hat #5 Human Resources Hat #1 Marketing ? ? ? Module 3: Getting the hats all together… KPI’s Visual Accountability Systems Assigning Value $
  65. 65. <ul><li>It has been said that French is the language of love, </li></ul><ul><li>HTML the language of the Worldwide Web, </li></ul><ul><li>But accounting is the language of business </li></ul>Accounting & Finance Hat #4
  66. 66. First, A Lesson in Waste Accounting & Finance Hat #4
  67. 67. Tuning Your Accounting Systems For Maximum Business Impact Accounting & Finance Hat #4 $45,000 NET INCOME BEFORE TAXES 195,000 Total Operating Expenses 75,000 Administrative Expenses 120,000 Marketing Expenses Operating Expenses 240,000 Gross Margin 360,000 Cost of Sales 600,000 Sales THE TOMMY COMPANY STATEMENT OF EARNINGS (Income Statement)
  68. 69. <ul><li>Inventory </li></ul><ul><li>Accounts Receivable </li></ul><ul><li>Accounts Payable </li></ul>Where to Look for Waste Accounting & Finance Hat #4
  69. 70. <ul><li>A 3 Man Tree Removal Crew </li></ul><ul><ul><li>Works a 10 hour day </li></ul></ul><ul><ul><li>Brings in $3,000 for removals </li></ul></ul><ul><li>The problem is overhead </li></ul><ul><li>Equipment </li></ul><ul><li>Insurance </li></ul><ul><li>Workers Comp </li></ul><ul><li>Cost of </li></ul><ul><li>storage - </li></ul><ul><li>equipment </li></ul><ul><li>and trees </li></ul><ul><li>High Risk </li></ul><ul><li>Environmental </li></ul><ul><li>Expenses </li></ul><ul><li>High </li></ul><ul><li>Equipment </li></ul><ul><li>Cost </li></ul>Tree Mortician <ul><li>High Labor Cost </li></ul>Accounting & Finance Hat #4
  70. 71. Tree Physician <ul><li>Three one man crews </li></ul><ul><ul><li>Bring in $3k to 5k per person </li></ul></ul><ul><ul><ul><li>Total $9k to $15k per day! </li></ul></ul></ul><ul><ul><li>Low labor cost </li></ul></ul><ul><ul><li>Low equipment cost, insurance </li></ul></ul><ul><ul><li>Low risk </li></ul></ul><ul><ul><li>Low workers comp exposure </li></ul></ul><ul><ul><li>Low physical demand </li></ul></ul>Air Knife Accounting & Finance Hat #4
  71. 72. <ul><li>Inventory Turnover = Cost of Sales / Avg. Inventory </li></ul><ul><li>Type of Inventory Holding Cost Cost per Year </li></ul><ul><li>Finance 10-12% </li></ul><ul><li>Insurance 1-2% </li></ul><ul><li>Storage and Handling 1-3% </li></ul><ul><li>Taxes 2-3% </li></ul><ul><li>Shrinkage 3-10% </li></ul><ul><li>Total Holding Cost = 17% to 30% </li></ul><ul><li>If inventory = $300k </li></ul><ul><li>Then holding costs = $51,000 to $90,000 / year!!! </li></ul>Inventory: Accounting & Finance Hat #4
  72. 73. <ul><li>Cost of Sales / Avg. Inventory = $360,000 / $90,000 = 4:1 </li></ul><ul><li>If Inventory is reduced from $90,0000 to $60,000 </li></ul><ul><li>Cost of Sales / Avg. Inventory = $360,000 / $60,000 = 6:1 </li></ul><ul><li>Result: Reduced holding costs = $30,000 x 17% to 30% </li></ul><ul><li>= $5,100 to $9,000 </li></ul><ul><li>Business impact, using an average of $7,500: </li></ul><ul><li>Gross Margin improvement = $7,500 / $45,000 = 16.7% !!! </li></ul>Inventory Turnover: Accounting & Finance Hat #4
  73. 74. <ul><li>Current Receivables = $30,000 </li></ul><ul><li>Average number of days outstanding = 50 days </li></ul><ul><li>Proposed days improvement </li></ul><ul><li>resulting from a 6 month action plan = 10 days </li></ul><ul><li>Percentage improvement = 20% </li></ul><ul><li>Business Impacts: </li></ul><ul><li>Effective increase in working capital = $6,000 </li></ul><ul><li>$6,000 less to borrow at 10% to 12% = $2,400 to $2,880 </li></ul><ul><li>Gross Margin Improvement = $2,600/ $45,000 = 5.8% </li></ul>Accounts Receivable: Accounting & Finance Hat #4
  74. 75. <ul><li>Impact so far = 16.7% + 5.8% = 22.5%!!! </li></ul>Inventory and A/R Improvement: Accounting & Finance Hat #4 $ $
  75. 76. <ul><li>Take advantage of supplier discounts </li></ul><ul><li>E.G. 2Net10, or 2% discount if paid in 10 days </li></ul><ul><li>If inventory turns = 4:1 and average Inv. = $90,000 </li></ul><ul><li>Therefore purchases = $270,000 / year </li></ul><ul><li>Business Impact if only half of purchases have 2% discount: </li></ul><ul><li>Gross Margin improved by $2,700, or $2.7k / $45k = 6% </li></ul>Accounts Payable: Dealing With Suppliers Accounting & Finance Hat #4
  76. 77. How do you feel now? Accounting & Finance Hat #4 Total Improvement Potential Inventory + A/R + A/P = 28.5%
  77. 78. Break 2 <ul><li>Be back in 10 Minutes </li></ul>
  78. 79. Agenda Module 1: Your Strategic Roadmap Module 2: Business Owners Wear Many Hats Hat #4 Accounting & Finance Hat #3 Operations Hat #2 Sales Hat #5 Human Resources Hat #1 Marketing ? ? ? What does your elephant look like? Introduction to MOPPS Module 3: Getting the hats all together… KPI’s Visual Accountability Systems Business Vector Alignment Assigning Value $
  79. 80. <ul><li>Hiring </li></ul><ul><li>Firing </li></ul><ul><li>Disciplining </li></ul><ul><li>Developing </li></ul>Growing your business is all about people Human Resources Hat #4
  80. 81. <ul><li>Hiring: </li></ul><ul><li>Everyone wants to hire at the top of the resource pyramid – the extraordinary people </li></ul>Hat #4 Human Resources Why? To get extraordinary results Stars Can be Developed Unqualified Untrustworthy
  81. 82. <ul><li>Hiring: </li></ul><ul><li>Everyone wants to hire at the top of the resource pyramid – the extraordinary people </li></ul><ul><li>Why? To get extraordinary results </li></ul><ul><li>The big question is… </li></ul><ul><li>How to get extraordinary results from ordinary people? </li></ul><ul><ul><li>The answer is to systematize the business using Standardized Work </li></ul></ul>Stars Unqualified Untrustworthy Human Resources Hat #4
  82. 83. Hiring: Climbers Highly skilled, high cost Human Resources Hat #4 Injectors Highly sytematized, lower cost
  83. 84. <ul><li>Hiring: </li></ul><ul><li>3 C’s – Character, Competence, Chemistry </li></ul><ul><li>Use objective tools – many exist </li></ul><ul><li>Interview by more than one person </li></ul><ul><li>Interview more than one candidate </li></ul><ul><li>Outside help </li></ul><ul><ul><li>References </li></ul></ul><ul><ul><li>Screeners / Recruiters </li></ul></ul><ul><li>For Salesmen </li></ul><ul><ul><ul><li>“ Hire for the intangibles, train on the tangibles” </li></ul></ul></ul>Human Resources Hat #4
  84. 85. <ul><li>Disciplining & Firing: </li></ul><ul><ul><li>Policies </li></ul></ul><ul><li>Remember MOPPS? </li></ul>Human Resources Hat #4
  85. 86. <ul><li>Policies and Procedures: </li></ul><ul><li>Using the employee manual? </li></ul><ul><ul><li>Update annually </li></ul></ul><ul><ul><li>Have employees review and sign annually </li></ul></ul><ul><ul><li>When correcting an employee refer to the manual and disconnect yourself personally from the confrontation. </li></ul></ul><ul><ul><ul><li>Remember: It is the policy that they have violated, not you. It’s a failure to meet their commitment. </li></ul></ul></ul><ul><ul><ul><li>And DOCUMENT the discussion! </li></ul></ul></ul><ul><ul><li>And if you have to fire, seek legal counsel </li></ul></ul>Human Resources Hat #4
  86. 87. <ul><li>Development: </li></ul><ul><li>Encourage a learning environment </li></ul><ul><li>Make them accountable to each other </li></ul>Human Resources Hat #4
  87. 88. <ul><li>Don’t forget to invest in developing yourself </li></ul><ul><li>And assign time that you need for your personal development to work on the business </li></ul>Functional Organization Chart Human Resources Hat #4
  88. 89. Agenda Module 2: Business Owners Wear Many Hats Module 1: Your Strategic Roadmap What does your elephant look like? Introduction to MOPPS Business Vector Alignment Assigning Value $ Module 3: Getting the hats all together… Visual Accountability Systems ? ? ? KPI’s Hat #4 Accounting & Finance Hat #3 Operations Hat #2 Sales Hat #5 Human Resources Hat #1 Marketing
  89. 90. Getting the Hats All Together Business owners wear too many hats!
  90. 91. Key Performance Indicators KPI’s
  91. 92. X = KPI Measurement Organization Policies Planning Systems M O P P S MOPPS Responsibilities Roles or Functions System 1 Marketing & Sales System 2 Operations, Manufactur ing System 3 Accounting & Finance X X X X X X X X X X X X X X X X X X
  92. 93. <ul><li>Are we in alignment? How do we know for sure? </li></ul><ul><li>What is the misalignment costing us? </li></ul><ul><li>How do we get in alignment? </li></ul><ul><li>How much will the fix cost, and also make for us? </li></ul><ul><li>How do we know when we are done? </li></ul><ul><li>How do we stay aligned? </li></ul><ul><li>The answer is to have business systems with KPI’s </li></ul>Business Vector Alignment The key issue is alignment of business objectives along with personal and spiritual
  93. 94. Simplified Scorecard Key Performance Indicators
  94. 95. Discuss KPI’s That You Are Using Exercise 4: Key Performance Indicators
  95. 96. The Bottom Line: <ul><li>If you are not measuring… </li></ul><ul><li>… you are not managing! </li></ul>Key Performance Indicators
  96. 97. Agenda Module 2: Business Owners Wear Many Hats Module 1: Your Strategic Roadmap What does your elephant look like? Introduction to MOPPS ? ? ? Assigning Value $ Module 3: Getting the hats all together… KPI’s Visual Accountability Systems Business Vector Alignment Hat #4 Accounting & Finance Hat #3 Operations Hat #2 Sales Hat #5 Human Resources Hat #1 Marketing
  97. 98. Visual Accountability Systems Visual Accountability Systems empower employees to hold each other accountable, thus reducing the need for supervision. As a result the owner/manager has more time for driving business. Remember: If it isn’t seen, then it’s hidden. And if it’s hidden it can hurt you.
  98. 99. Visual Accountability Systems Where Systems with KPI’s meet Visual Controls Focus + Accountability + Visibility = Profitability + KPI’s 2 3 4 5 Wk 1 Leads Sales Production Returns KPI $ $ $ Input Output
  99. 100. Visual Accountability Systems “ A visual device can stand in the place of a supervisor by answering questions asked on a day to day basis…” Sherrie Ford “ The main purpose of visual control is to organize the working area such that people (even outsiders) can tell whether things are going well or are amiss without the help of expert.” Dr. Chao-Hsien Chu “ The ability to understand the status of a production area in 5 minutes or less by simple observation without use of computers or speaking to anyone.” Dr. Richard A. Wysk “ A visual device can stand in the place of a supervisor by answering questions asked on a day to day basis…” Sherrie Ford
  100. 101. Visual Accountability Systems <ul><li>Consistent </li></ul><ul><li>Local </li></ul><ul><li>Visible </li></ul><ul><li>Timely </li></ul><ul><li>Owned </li></ul><ul><li>Understood </li></ul><ul><li>Audited !! </li></ul>
  101. 102. The OR Status Board Visual Accountability Systems
  102. 103. Visual Accountability Systems
  103. 104. Visual Accountability Systems Printouts provide finer detail `
  104. 105. Visual Accountability Systems 2 3 4 5 Wk 1 Leads Sales Production Returns KPI Where Systems with KPI’s meet Visual Controls Focus + Accountability + Visibility = Profitability Think about your _____________________________ your own ______________________ C ritical S uccess F actors and develop K ey P erformance I ndicators + KPI’s $ $ $ Input Output
  105. 106. Mason International Business Group, Ltd. <ul><li>Drawing for new book </li></ul><ul><li>Money, Time & People… </li></ul><ul><li>will kill your business </li></ul><ul><li>And CD’s with </li></ul><ul><li>Tools & Templates </li></ul><ul><li>Think and Grow Rich </li></ul><ul><li>As a Man Thinketh </li></ul><ul><li>Acres of Diamonds </li></ul><ul><li>Audio of key chapter </li></ul>www.moneytimepeople.com Book Drawing
  106. 107. Sustainability: Business Survival in Tough Times Keith B. Center Mason International Business Group 513-459-7309 [email_address] Increase Your Profitability, Productivity and Sustainability www.moneytimepeople.com

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