Naming Your Company

I named my first company First Illinois Development Company, Inc. We were doing land development and building homes. I thought the name sounded like a bank and would give us credibility we had not yet earned which it did. The problems were it was long and did not fit well on advertising and even letterhead. It was hard for customers to remember because it was so long and they became confused. They remembered is sounded like a bank but they could not remember which one. I had a customer tell me that they had trouble finding us because they were looking for First National
Development Company.

My second company was Robinson Development, Inc. which was shorter and I thought more memorable. I started the company in the late 80s before the internet became what it is today. When I went to set up a website I discovered there were hundreds of companies with similar names including several that were exactly the same.

As I grew the brand I started sister companies for developing individual residential properties and I used variations of the name; Robinson Homes, Inc., Robinson Development/Bartlett, Inc., Robinson Development/Kenosha, Inc. Etc. What I didn't consider was that the word development meant so many different thinks to so many different people. I began getting advertising aimed at web site developers.

As the company grew I was able to delegate many of the customer relationship duties. Customers, however, wanted to talk to Mr. Robinson particularly when there was a problem. The name First Illinois Development Company, Inc. had the advantage that no one asked to talk to Mr. First Illinois. It implied a larger company with more authority spread among the employees and not centered on the person for which it was named. If you are growing a company and someday envision selling it then a name not associated with an individual might make it easier to sell.

So I have confessed my mistakes. What would I do today?

Pick a name that is neutral and not linked to an individual. Look to the future not just where you are now. If you want to grow oo not name it after a locality such as Chicago Pies because as you grow the name might not work as well as you expand to Milwaukee.

The name should convey a message.  Mom's Pies implies home baked and invokes warm family feelings without linking it to an specific individual. It also limits the product line to pies. Mom's Baked Goods would allow a wider product range without confusion.

Making up a word has the advantage of uniqueness but it can be harder to convey a message. For Example Equifax, the name is short and memorable but from the name you have no idea what they do. A string of letters even if they are initials is hard to remember and I would avoid. Of course FedEx and UPS are competitors who have become successful violating these concepts but you likely do not have the resources to build the brand that they had.  They also started life as Federal Express and Unitend Parcel Service.

In our sink business we sell to countertop fabricators. We had five customers who used Granite Shop as part of their name. We have three Granite Solutions and twelve customers with Precision in their name. More than half have granite or marble in the name. These similarities make it hard for customers to distinguish you from the competition.  

Make a list of names that you like then test them out on family and friends. Make sure there is not anything unintentionally offensive or easily misunderstood. Google the names and see what you get. Unless you are intent on staying local you might want to consider trade marking the name. It is not as difficult as you may think. You can use online legal services such as LegalZoom (another made up name that does imply their services) that can do the search and the paperwork relatively inexpensively.

Your company's name will likely be better if it is short, unique, easy to pronounce and remember, not linked to an individual and convey an image if possible; all concepts that are frequently and successfully violated.

Original material copyright © Thomas Robinson 2010

Business Development: Sales and Marketing

In recent years the term Business Development has emerged to cover what we used to call Sales and Marketing. Try looking for a sales job on any of the popular job hunting websites and there are virtually no sales jobs. They are all looking for Business Development professionals. Sales and Marketing are rarely talked about independently but are very different processes. If you search the popular job hunting website you find very few sales jobs.

Sales is the process of closing the sale. It may involve face to face sales at a retail store, relationship building in business to business sales that result in ongoing orders, negotiating a contract, or a number of other processes. It is the act of interacting with the customer, presenting the specific product that meets the buyer's needs and desires, establishing a price and completing the transaction.

Marketing can present product for sale such as an advertisement for a new car. Marketing can also be used to create demand for a either a product or an industry. A few years ago there was a commercial for mouth wash. Everyone was showing displeasure at the breath of the subject of the commercial. It made a large number of people who had never considered they had a bad breath problem worry about bad breath. The ad and others like it created a demand for a product that no one knew they needed.

Marketing can include brand building through advertising but also sponsoring special events that you would like associated with your company; charity events, school plays, even holiday parades.

Business Development can also include market research, developing or modifying product, tracking sales, looking into new markets. It also includes Customer Relationship Management (CRM.) CRM is an organized way for managing growing a company's relationships with customers and prospective customers. This can be simple index cards with notes on customers to a variety of CRM software.

Original Content copyright 2010 Thomas Robinson

Price NOT Biggest Issue

They listened to your presentation and asked all the right questions. You thought you had made the sale but when you follow up you are told, "Your price was too high." It may not be true.  

Telling a sales person their price is too high is an accepted business excuse. If the buyer said they liked the other sales person better it would be uncomfortable for both buyer and seller. If the buyer says I liked the other product better it extends the discussion on the relative merits of the product. The statement your price was too high is an acceptable way for a buyer to end the discussion… if you let them.

Assuming similar quality and service it is unlikely you will lose the sale based on price alone. If the customer does make a purchase from a competitor it is more likely it is based on their relationship with the other company's sales person or the lack of the relationship you have with the customer. When you are purchasing do you get competing bids? If you do do you always go with the low bid or do you buy from the sales person who has helped you in the past with a fast delivery on a lost order? You have a relationship with the sales person.

Your sales people need to develop relationships with your customers but just as important they need to develop relationships with potential customers. It can be difficult to develop the relationship with leads but there are several ways to accomplish it. Keeping in touch between bids not just when asked to submit a proposal such as sending an article that you feel can be helpful to the lead or sending congratulations on awards they receive or other significant publicity.  Personal contact is also very important. Make courtesy calls preferably in person but if not make a phone call. If you ask a lead how business is you might hear about a problem or challenge they have. If you can offer a story about how another of your customers solved a similar problem even if unrelated to your product it can help build a relationship.

In B@B sales if you have a relationship you will get a couple of advantages: You will get a better opportunity to present the advantages of your proposal and you may get some price concession or a second look at the pricing if you are not the lowest price.   

I have had several customers purchase from me instead of with long standing relationships because they saw me more than their other sales person and in almost every case the competitor was cheaper.

Original material copyright © Thomas Robinson 2010

When to Fire an Employee

In a previous article we discussed how to terminate an employee but not when.  In this article we will talk about when to fire an employee.  I once read an article from a respected industry consultant who said the time to fire an employee was the first time you think about it. In my experience I always waited too long. The best solution is somewhere in between.

You have likely invested time and money to hire and train the employee. While it is often personally hard to terminate someone making sure you are doing what is the best for the company and not reacting to an irritation will usually make it easier.

I always thought that the best and easiest way is to have the employee make decision for you.

There are a number of offenses that require immediate termination for the good of the company such as theft, violation of company policy, or disruptive behavior.   If you are certain an employee is stealing but do not have enough proof to call the police you can still terminate the at will employee. It may be best to not get into details of your suspicions. It can only lead to argument or perhaps legal problems. It is easier to terminate an employee for violation of company policy if it is a written policy because the policy is not up to interpretation.  

If the employee steals, violates policy or is disruptive then the employee has decided to fire themselves not you. If you have an employee who is not getting the job done deciding to end the employment relationship can be harder.  There are a number of things to consider.

Does the employee have the training or experience to do the job that is assigned? If you hired the person because they represented that they had the necessary skills did they misrepresent their skills, did you misrepresent the job or could you have designed the job with procedures that make the job easier to perform so you could have hired a less skilled (and cheaper) employee.  

Does the employee have the necessary tools, support and other resources necessary to complete the job or is the workload too heavy for even a skilled employee?  An accurate job description and frequent employee reviews where you discuss company goals and set goals and expectations for the employee are both critical.  With an accurate job description there is no question of what the job is and goals will define the performance you expect. Communicating the failures must be fair and constructive. The best guidance given at high volume and in anger will likely be ineffective.

If you have communicated your expectations regularly and those expectations are not met then it will come as no surprise when you tell the employee that they are being let go. By their performance they will fire themselves.

The worst possible situation is that you realize you have not given the employee the tools to succeed but because the employee is frustrated or angry you decide that the employee relationship cannot be saved.  You still need to do what is best for the company and terminate the employee. Learn from the experience and make sure the next employee has what they need to succeed.

Original material copyright © Thomas Robinson 2010

Margin vs. Markup

Often I hear small business people talk about margin when what they mean is mark up. Because they misunderstand the difference they often do not understand why they have less money coming to the bottom line than they planned.

Markup if the percentage added to the cost of the product for overhead, sales and profit. For example, if you buy a widget for $100 and add twenty-five percent for overhead and profit the cost of the item will be $125. The markup is 25%.

The Margin is the overhead and profit divided by the total sale price, in the example above the gross margin is $125/25 or 20%. I you prepared you budget for sales at $1,250,000 and marked up your cost by 20% you would wind with one-fifth less to spend on overhead and profit.   

Margin is often used interchangeably with Gross Margin. Gross margin is the difference between income and the direct cost of goods sold before deducting overhead and cost of sales.

This table illustrates the shortfall you can experience it you only consider Markup.

Cost of Goods sold	Markup %	Markup $	sell price	Margin %	variance
$ 300,000.00	10%	30000	330000	9%	1%
$ 500,000.00	20%	100000	600000	17%	3%
$ 750,000.00	25%	187500	937500	20%	5%
$1,000,000.00	33%	330000	1330000	25%	8%

Original content copyright 2010 Thomas Robinson

Strategic Plan Step One, What Do You Want?

A strategy is a detailed and highly organized plan of action. A Strategic Plan is a written plan for your company's future including what processes and systems will be need to achieve the goals.

Your first step in preparing your strategic plan is to decide what you want not only professionally but personally. Ask yourself what you want out of your business. Do you want to travel more, go fishing or pursue other hobby, or spend more time with your family? Envision what you would do if you were not at work. Envision five years from now and when you are ready to retire.  Make a written list. For example;

·         Play golf three times a week

·         Take my kids to school every morning

·         Never work on weekends or take work home

·         Go on two skiing trips a year

·         Live in a small town

·         Take a cruise every winter

·         Spent a year sailing the Bahamas

·         Own the biggest house in town

·         Own a speed boat

·         Drive race cars

·         Send the kids to college

·         Buy a new car every year

·         Retire at 50

Make the lists as detailed and as long as you like. Prioritize your goals from most important to least.  

Is managing your company the thing that you want to do? If you worked all you life and saved so you could turn your hobby into a business such as owning a SCUBA shop you still need a plan to treat the shop as a business not a hobby so the dream does not destroy you financially.

How much money does your business need to make to allow you to afford your wish list? Is that financial goal possible in your industry, your location or within the scope of your abilities? If one of your primary goals is to live in a town with a population fewer than 1,000 people and you need to sell a million dollars worth of cell phones in that small town then one of your goals needs to change.

Once you have established your personal and financial goals you can begin to establish a plan to accomplish those goals.  Establishing a strategic plan without setting your goals would be like using a map when you do not where you are going.   

Original Content Copyright 2010 Thomas Robinson

Create a Repeatable Procedure

Call it a system, a process, a procedure or even a checklist if you commit the process that you use to run your company to paper instead in the head of one of your employees you accomplish two things; You create a recipe to complete the task the same way with the same results every time and you own the process and should your employee leave you do not have to recreate it. If you have all the employees tasks committed to writing you can hire a less skilled and less expensive employee to do the job.

As an example, think of the national fast food burger restaurant.  Whether you like the hamburgers or not they are the same in every franchise from New York to California. It is not because they hire great chefs to cook the burgers it is because they have a repeatable procedure; fry 30 seconds on one side flip and fry 30 seconds on the second side, put it on a bun and apply a pickle, add a squirt of sauce, a piece of lettuce and the burger is done.  Even the French fry fryer has a timer and there is a clock that tells them when the fries need to be discarded because they have been in the bin too long.

Each item on the menu has a procedure as do such tasks as cleaning tables, emptying trash and restocking the napkins. Because of these processes they can run the restaurant with minimum wage individuals who are still in high school or do not even speak the native language.

So where do you start? The truth is it doesn't matter just start. In the home building business we started with the procedure for doing the biweekly payroll. I had the bookkeeper write the procedure as she did the regular payroll including every key stroke in our accounting program. Two weeks later I took the procedure and tried to do the payroll.  It took a couple of modifications but we developed the procedure. We then formalized the procedure by assigning responsibility by position (bookkeeper not Judy,) and when the procedure would be performed (every second Thursday.)

Another way good way to decide which procedure to formalize is in reaction to a frustration.  A business that did sales and distribution as a manufacturer's rep has weekly and monthly reports for the salespeople. The salespeople were frustrated because the reports were often late, for wrong dates or in a variety of wrong formats. The company created a written procedure including all the keystrokes in the accounting program to create the report clearly defining the time frames the report were to cover.  They then assigned responsibility in this case the shipping clerk, the frequency (weekly every Monday and monthly first business day of every month.)  A reminder was added to the calendar to remind the shipping clerk. For this procedure a feedback loop was added (email President when reports are sent to salespeople.)

The more procedures you have in writing the less you depend on individuals who can leave at any time and if an employee does leave you will have an instruction manual of their job for the next employee.

Original content copyright 2010 Thomas Robinson

Lowest Price

It is very unlikely you can afford to be the low price leader. If you are competing in you market on price alone it is unlikely you are producing the quality or service that leads to long term repeat sales and referrals.

If you looking for a cheap pair of shoes you can go to the big box store and find a pair of shoes for less than ten dollars. You will have to look through all the boxes on the shelves and if you size is not on the shelf then you cannot get it.  It is likely the shoes will not last very long and may hurt your feet but they are cheap. The store will tell you that the cheap prices are because they buy in bulk to control the price which is true. But because they price comes first quality and service suffer.

If you want a quality pair of shoes you go to a store specializing in the shoes you want. You will have a salesperson trained to help you find the shoes and try them on. The store will have back stock with more sizes. The shoes will look better longer, fit better and wear longer. You will pay a higher price at the time of sale but you received better service and better value.

Price, service and quality are like the legs on a three legged stool. If the legs are not all equal the stool falls over. No one can be the lowest price and have the highest quality and service. That is not to say that there cannot be different levels of quality and price. You can buy an economy car or a luxury car. The level of the quality is matched by the level of service and price.  If your customers believe they can buy a luxury product for the price of the economy version it is your challenge to educate them on your quality.

Sales in any economy is about educating the customer about the value of the product you offer. In a difficult economy where consumers feel that companies need their business it is even more important.  You need to understand you unique selling proposition and all you quality features.  You need to present them to potential customers in simple and unthreatening way that does not bore them or turn them off.  

As Aldo Gucci said, "The bitterness of poor quality is remembered long after the sweetness of low price has faded from memory.”

Original Content copyright 2010 Thomas Robinson

Credit Policy

Issuing credit to customers is always tricky. If you set limits too high you can get burned. If you set them too low then you risk upsetting a good customer.

If you are in the retail business you can outsource much of your credit risks to a credit card company but this can cost you several percent of the sale. Even many wholesale businesses have begun accepting credit cards as a way of mitigating the credit risks. Several of the major credit card services even advertise to the wholesale customer on TV, radio and direct mail.

 Accepting credit cards can improve cash flow because you get the money in a very short time often within forty eight hours of making the sale. If you issue credit to the customer it is likely you will not see the money for thirty to sixty days.  Assuming all the bills are paid, payment is paid on average in forty five days and the credit card fee is two percent then you are paying sixteen percent per year on the usable cash.  

The credit card companies have developed procedures for limiting their exposure. They have application forms and credit checks.  They still get burned. If you are going to issue credit you need to develop a way of determining the credit worthiness of your customers. You need to create a credit application that identifies the owners of the company, the time the company has been in business and other venders they do business with so you can get references. There are services that will investigate these "applications" for you but they can be expensive.  Set criteria for issuing credit and determining limits and stick to them.

The application form should request a personal guarantee from the owner of the business.  A personal guarantee makes the owner responsible for the bill should the company for any reason be unable to make the payment.  In the past many owners who believed in their companies would not hesitate to sign personal guarantees. With the change in economic conditions even owners of quality companies are reluctant to make these commitments.  Failure to make personal guarantees does not necessarily mean the company is a bigger credit risk.

Be particularly wary of new customers who want a large line of credit and will not sign a personal guarantee. When a company begins to have cash flow problems they often begin vender surfing a process of purchasing from multiple sources. When they reach their credit limit, instead of paying their bills they just switch venders.  Any sudden changes in buying patterns can be a warning that something is wrong. It may only take a phone call to determine that the sudden increase is due to a legitimate reason and not vender surfing.

Original Content copyright Thomas Robinson 2010

The Dirty Truth About Price

I thought this article on the value of relationships in selling was excellent.

The Dirty Truth About Price

Price is important, but it doesn't make or break the sale.

By Charles H. Green   |   November 11, 2010

If you think you lost your last sale on price, you're probably wrong. If you think you'll win your next sale by lowering your price, you're probably wrong. And even if your customer told you that you lost the last deal on price, and hinted that you could win the next sale on price, you'll probably still be wrong if you think it's about price.

The simple truth is price is overrated. It's not irrelevant -- you do have to be competitive. And it's not trivial -- your price does send lots of signals. But it's overrated. Let me explain how and why that's true, and what it means for you.
Why Price Is Overrated
If you grew up in a western economy, you've been bombarded with consumer messages about price your entire life. As you got older and more educated, you heard economists talk about supply, demand and price.If you're in a B2B business, or even a complex B2C business, price is what your customer talks about. You hear your competitors are undercutting you; you won't get this new account unless you drop prices, and you have to address cost-cutting pressures. The talk is all about price.
The behavior, however, is not.
Customers Don't Walk the Price Talk
In many of my training sessions, I ask attendees to envision their most recent competitive loss and tell me how often the customer said they lost on price. The answers range from 25 percent to 60 percent.
I then ask them to envision their most recent competitive win and tell me how often they won on price. The answers range from 0 percent to 10 percent -- and it's usually 0.
Think about what that means. It means that what customers tell you they do is not what they really do. It's not that they're lying; they don't intend to mislead. No, what's going on is about the relationship -- or the absence of a relationship.
Price and Relationships
Put yourself in the position of a buyer. You ask for bids on widgets from Seller A and Seller B. You need good widget quality; if you have problems, you want prompt, responsive service.
Both sellers have a good product, but you feel better about Seller A -- you get along with them, they seem sincerely interested in you, they're responsive to your questions, they seem to get who you are and what your business is. Seller A is also priced 4 percent higher than Seller B.
It's probably an easy decision to go with Seller A. The 4 percent price premium is worth it to you to sleep well at night. You might bargain them down, but you'd be willing to live with the 4 percent.
Now what do you tell Seller B? You don't want to offend them -- they've done nothing wrong. You want them around to bid again in the future. At the same time, you have no intention of getting into a fluffy discussion about organizational "fit" or chemistry with a losing bidder you don't know well. What do you do?
You tell them their price was too high. It's true enough; if their price had been 20 percent lower, you might have gone with them. And they can't ask for data, because it would be illegal or unethical to share it. So you're safe blaming price.
And that's what happens. Price is the socially acceptable way of saying no. It's the business equivalent of "It's not you; it's me." It's what you tell your suppliers the problem is. And if they don't understand the real issue, that's their problem.
The final proof: If the customer really did want you, but your price was too high, what would they do? They'd come back to you and say they want you, but that you have to lower your price.
Price does many things. It's a cost to the customer, it's a competitive signal and it's your profit. But it's also a signal about your relationship.
If your customer says you lost on price, odds are you have no relationship. Go work on that, not on your price. If you have a good relationship, you'll at least get an honest discussion on price, not an excuse.

Charles H. Green is the founder of Trusted Advisor Associates, a West Orange, N.J.- based consultancy specializing in building trust, and a speaker and executive educator on the role of trust in professional services. He is the author of Trust-Based Selling, and co-author of The Trusted Advisor

Create a Purchasing Policy

Even if you are doing the purchasing yourself you should create a policy as a reminder for yourself and a standard for when you can delegate the duty.

Your policy should include who can purchase for the company. What items can each person purchase – are there different buyers for overhead item than production items?  Are there limits that need approval from higher authority monetary limits, length of contract or others?

Do you require multiple suppliers for critical items? Is no one vendor to have more than a given percentage of your work so that you can change venders? Do you require multiple bids on all purchases or only larger purchases?

Are there critical suppliers who will be selected based solely on quality or critical trait?  Who writes the specification and can it be altered or changed based on price, delivery or service offered by vender?

What is the company's position on employees who do purchasing accepting lunches, Christmas presents or other gifts?

Create a policy regarding purchasing from relatives of friends?

Is there information in your purchasing specifications that is proprietary or confidential? How do you expect this information to be protected? 

Do you have minimum inventory that you need to maintain either a specific quantity or a time requirement such as two weeks supply? If a vender keeps sufficient inventory can you purchase "just in time" to minimize inventory and maximize cash flow? What is the lead time on the purchased items and how does that impact cost and inventory?

On non inventory items what is the process for requesting, specifying and pricing, bidding and ordering?

You should have a standard contract or purchase order for purchases. Who can sign contracts for the company? When does an attorney need to review the contract? Who can agree to changes in the standard purchase order or contract?  In a future article we will discuss a purchase order system to control purchases and costs.

Original content copyright Thomas Robinson 2010

Create an Equal Employment Opportunity Policy

The threshold for compliance with the national EEO and most state laws is fifteen employees but even if you have less than fifteen employees it is good to have a policy in place so you do not forget as you grow or have to scramble to put one together.

There are a number of simple policies on the internet that give you a great start including the link below.  

Sample EEO Policy Human Resource Guidebook

Sample EEO Policy

Equal Employment Opportunity
Policy Number ___

APPROVED BY:
EFFECTIVE DATE:
LAST REVISION:

Purpose:

To state the commitment of the system to Equal Employment Opportunity.

Policy:

1.    The XYZ Company is an equal opportunity employer. No person is unlawfully excluded from consideration for employment because of race, color, religious creed, national origin, ancestry, sex, age, veteran status, martial status or physical challenges.

2.    The policy applies not only to recruitment and hiring practices, but also includes affirmative action in the area of placement, promotion, transfer, rate of pay and termination.

3.    Executive, management and supervisory levels have the responsibility to further the implementation of this policy and ensure conformance by subordinates.

4.    Any XYZ Company employee who engages in discrimination will be subject to suspension or termination.

5.    Any supervisory or managerial employee who knows of such behavior and fails to take immediate and appropriate corrective action will also be subject to disciplinary action.

6.    Any individual who is the target of discrimination is encouraged to discuss the matter with the Department Director.

7.    Any individual who feels such a discussion would be or has been futile, unsatisfactory or counterproductive should contact the Human Resources Department.

8.    A member of the Human Resource staff will be designated to investigate the claim.

9.    The accused individual may be suspended pending the outcome of the investigation.

10.    Retaliation against claimants will not be tolerated.

XYZ Company is proud to be an equal opportunity employer.  We are committed to providing equal employment opportunities to you and all other persons without regard to race, creed, color, religion, national origin, sex, marital status, citizenship status, age, veteran status or disability.

  Furthermore, we will not tolerate any form of discrimination or harassment of our employees by co-workers, supervisors, customers, or vendors.  This commitment extends to our policies on recruiting, advertising, hiring, placement, promotion, training, transfer, wages, benefits, termination and all other privileges, terms and conditions of employment.

Original Content copyright 2010 Thomas Robinson

Create a Purchasing Policy

Even if you are doing the purchasing yourself you should create a policy as a reminder for yourself and a standard for when you can delegate the duty.

Your policy should include who can purchase for the company. What items can each person purchase – are there different buyers for overhead item than production items?  Are there limits that need approval from higher authority monetary limits, length of contract or others?

Do you require multiple suppliers for critical items? Is no one vendor to have more than a given percentage of your work so that you can change venders? Do you require multiple bids on all purchases or only larger purchases?

Are there critical suppliers who will be selected based solely on quality or critical trait?  Who writes the specification and can it be altered or changed based on price, delivery or service offered by vender?

What is the company's position on employees who do purchasing accepting lunches, Christmas presents or other gifts?

Create a policy regarding purchasing from relatives of friends?

Is there information in your purchasing specifications that is proprietary or confidential? How do you expect this information to be protected? 

Do you have minimum inventory that you need to maintain either a specific quantity or a time requirement such as two weeks supply? If a vender keeps sufficient inventory can you purchase "just in time" to minimize inventory and maximize cash flow? What is the lead time on the purchased items and how does that impact cost and inventory?

On non inventory items what is the process for requesting, specifying, pricing, bidding and ordering?

You should have a standard contract or purchase order for purchases. Who can sign contracts for the company? When does an attorney need to review the contract? Who can agree to changes in the standard purchase order or contract?  In a future article we will discuss a purchase order system to control purchases and costs.

Original content copyright Thomas Robinson 2010

Collect Alarm Codes

You likely have a number of alarms including fire and burglary.  You may use the key codes daily but there are likely other codes you use infrequently.  

If your alarm connects directly to your local fire department or police department record the phone number and contact to call if you have a problem. We had an alarm that would need to be reset when there was a power outage. Talk with the company that installed the alarms and get all the codes and a written set of instructions on how to reset the alarm. It is much easier to collect the information in advance than it will be with the alarm blaring and the sound of a siren approaching your office.

Collect the phone numbers and contacts at the Alarm Company and Installation Company if different. You may also need account numbers or model and serial number of the alarm unit.

Original content copyright 2010 Thmas Robinson

Purchase Orders

A purchase order is an offer to buy a specified product in a specified quantity and at a specified price. Once accepted it becomes a contract between buyer and seller.

It is likely you buy raw materials, components or even contract labor on a regular basis. Too many small businesses handle these transactions with nothing but a verbal order often with little or no discussion on price. Many times they routinely sign the vender's proposals along never considering the onerous terms in small print on the reverse side.

If you prepare a written purchase order it allows you to specify the exact product, state the price you expect the pay and the terms of the agreement. If you order 300 blue widget bolts you purchase order may say 300 each blue widget bolts with nut part number xyz704 at a price of $.35 per unit. It avoids the confusion of changing parts or changing prices. And the onerous terms on the reverse side can be to your advantage not theirs.

Have you ever ordered a part and after the delivery is received and the parts are already in production discovered a price increase you didn't know about. After the parts are half gone is the wrong time to discuss price.

If you send the order and they send the parts then there is no argument to be made.

In our home building business purchase orders were very detailed. For example, if we were writing a purchase order to a drywall contractor we including specifications (what materials we expected to be used and what the final product was to look like and perform), scope of work (what was included materials, labor, clean up, finishing), how it was to perform over time (no nail pops, no visible seams in normal light), the price to be paid and when it was to be paid (30 days from completion.)

If possible you should develop unit prices for the items or services you need regularly. It keeps the price from creeping up and keeps vender honest. Once you are comfortable with the system you should develop a system where you pay off the purchase orders. When we were building homes we would send out the purchase order in duplicate – one white and one pink. When the work was completed the trade contractor had our field superintendent approve the work and the contractor returned the pink copy as their invoice. We paid off the purchase order. If there was extra work done then the contractor had to get the superintendent to write a revision to the purchase order.

The revision system did a couple of things for us; it highlighted contractors who were constantly going over budget and made our superintendents responsible for tracking and reducing changes. The superintendent had to fill out a report on each revision giving the reason for the change. I reviewed these forms monthly. It allowed us to pinpoint problems and work to correct them. In one case we found that our cleaning contract on one subdivision was getting more revision than on another. Upon investigation we discovered that one of our superintendents was not making sure the home was ready before they brought in the cleaning contractor.  With a little training we reduced the overage.

After we instituted the purchase order system we reduced our budget variances went from almost five percent of cost to less than one percent. Our trade contractors screamed when we told them we were paying off of purchase orders but within a few months they loved it because the system reduced paperwork and spread up payments.

Your staff will also likely think it is too difficult in the beginning. Stick to it and it will be one of the best things you can do for your company.

Original content copyright Thoms Robinson 2010

The Boss Dies: the Long Term Plan

In a previous article we discussed how to prepare for the day after you die. In this article we will discuss your long term plan for your company.

If you have a partnership and anticipate one or a group of partners will take over if you pass then this plan should be underwritten by an insurance policy that provides for a buyout at a predetermined price. This price should be reviewed at least annually to make sure it is still appropriate and the insurance plan should be adjusted as necessary. It is likely that you will want to hold the insurance policies personally. You will need to pay income taxes on the premiums but if you do die your family will avoid a huge tax bite. 

If you have a vision for the company when you are gone make sure it is practical. Will the person you choose run your company do it your way or their way. Will they run it for the benefit of the owners of the company or for their own benefit? Is this person capable and willing to run the company? It is very unlikely that your company will run successfully for long if an employee is expected to run the company and provide an income for your family without the benefits of ownership.  If you expect the company to be sold then think through the process and map a plan. If you think it would be better to complete ongoing projects and then liquidate map that plan.

You should have life insurance in an amount to at least cover the outstanding balances on unsecured business loans. You may also want the insurance to cover the cost of hiring a manager to institute your plan.  

If you leave the company to a relative make sure they are capable not only in ability but can they or are they willing to take the time away from their own career or vocation to manage your company.  It is easy to believe that your children are capable of running the company just because you were. Second generation business are nearly always fail because the next generation does not have the ability or the pride of ownership that it took to build the company.

The best thing you can do to assure the long term value of the company  is structure the company with systems and procedures in place that allow the company to run without you. If the company can run without you while you then you truly have a valuable asset and not just a job. It is far easier to sell an asset than a job.

Original content copyright Thomas Robinson 2010 

Look at Your Lease.

If you are renting your facility get out the lease and read it. It is likely you signed it and put it in a drawer and never thought about it again.

Make sure you know what you need to maintain and what the landlord needs to maintain, particularly the heating and cooling system. If you are required to have the heating system serviced regularly then make sure it is being done. I had an acquaintance who neglected the maintenance only to find that he had to replace an expensive roof top unit.

Check the expiration date and when you have to renew your lease or give notice that you are moving out. Failure to give proper notice may lock you into an expensive lease or a penalty payment. If you want to stay make sure you start negotiation soon enough to avoid negotiating from a weak position.

Look for hidden costs you need to plan for if you have not already; tax payment, common area maintenance, and utilities. If you are billed monthly for these costs is the bill an estimate. Can you be billed for overages and increases? Is trash removal included or are you required arrange it yourself or will you be billed by the landlord? Do you pay the utilities such as heat and electric? If you are in a suite in a larger building is there a way to confirm you are only paying for the utilities serving your unit? I know of a case where a company’s monthly electric bill was cut in half when the tenant next door moved out. They had been unknowingly paying the bill for both units for years. 

If you make modification to the building such as move doors or partitions or even install machine foundations what is your responsibility if you move? Do you have to remove the improvements or restore the building? I know of a case where a tenant installed a foundation for a large machine. When He moved out the landlord claimed because it was mounted permanently on a foundation it was a fixture and need to be left as part of the building. The landlord was hoping had an agreement with the former tenant’s competitor to rent the space and the machine.

Put a reminder in your calendar to review the lease annually so the requirements are fresh in your mind.  

Original content copyright Thomas Robinson 2010

Sit in Your Employees’ Chair

Take the time to sit at each work station/desk of your employees.  Look around carefully.

Is the work station including chair, desk, computer, keyboard, lighting, etc conductive to good working conditions?  If you want the most efficiency out of your staff they have to have a comfortable and efficient work space.

Are there distractions: loud noises, flashing fluorescent lights, wobbly chair, glare from window? Can these items be corrected? If the items cannot be corrected can the work station be relocated?  You should consult the employee for distractions that might not be obvious unless you spend a lot of time at the work station such as glare from the sun at certain times of day or times of year.

Are there personal items which may be offensive to customers or other employees; pictures, posters, vulgar or out of place jokes taped to the wall? The danger of offending customers or even sexual harassment lawsuits with inappropriate posters or make shift art far outweigh any humor value.

Is the technology at the work station including phones, computers, calculators and other tools working correctly? Does the employee have training or literature on the items to operate them efficiently? Is the equipment outdated for the job you are asking the employee to perform? Can you get more efficient by standardizing equipment for all employees? For example is all employees have ht same printed it might reduce the number of different ink cartridges your need to keep in stock.

Is the location or other physical attributes of the office most advantageous? For example is the administrative assistant who works with numerous other employees centrally located?

Does the room need paint? Does the door work correctly? Are the windows and blinds or other window covering in good condition and functioning? The workspace is not only a workspace but should be inviting for customers and venders who visit. Does it express a positive image to these visitors?

Make a plan to make corrections and upgrades as needed.

Original content copyright Thomas Robinson 2010