How do We Help the Less Fortunate?

I am always concerned about the right way to help those less fortunate. The conundrum centers around the old adage of giving fish verse teaching to fish. First of all, there is the perception of wealthy. A couple of interesting data points on that issue:

Wealth is not liquid. It is generally determined by the markets desire to own verses scarcity. I diamond has little intrinsic value outside of its ability as a tool. The real value is determined by the disposable income of the buyer and the scarcity of the object. The same is true of stocks and bonds, or art. You cannot redistribute this type of wealth because it loses its value once you eliminate the buyers ability to buy. The same might be true of a large ocean transport. They can cost tens to hundreds of millions to build. But if we assume no one has the cash to buy it (we are redistributing wealth and cash is wealth) then the wealth value drops to almost nothing. Wealth isn't so much redistributed as evaporated.

What is wealth (top 1%) and who are they? The top 1% includes anyone with net assets of $800,000 or more.(a) There are about 47 million people in the world who meet this classification. There are eighteen million in the United State. Switzerland has the highest density. There are a couple of things to take under consideration. First, it is assets, not income. Young professionals may have a household income of over $200,000 per year, but very few assets. Older people, especially those who have saved wisely for retirement, may have little income, but a lot of assets. For retirement planning it takes about two million dollars in assets to generate $80,000 a year in income. The second considerations is cost of living. A  millionaire in Cape town will live much better than a millionaire in Paris.... By the way, to classify in the top 10%, your assets only have to be greater than $77,000.

So we can conclude that redistribution of wealth would be both hard to identify and hard to implement.

Let's say we find a way to redistribute some wealth without demotivating innovation. We find that fine balance that takes cash from the rich who have excess, but not from the middle class that just needs it to assure their futures. Also, we can't take too much via businesses, because businesses don't print cash, they get it from their customers. Taking too much from businesses will only cause inflation of prices as the business passes it on. Once we have the money, what do we do with it?

Second there is the methodology for helping. Well the "give a man a fish" approach won't work. We all know that. We have seen it over and over. Our entitlement system is living proof. A small per cent will learn to fish while they eat their first fish, but most will procrastinate as long as there is another fish. I have thought and written about the impact of advanced technology on the lower class. It's a train wreck waiting to happen. Most technology advancements displace low level jobs because those jobs are simple and repetitive. They are the exact jobs that the lower class is prepared to work.

Here, I think, is the hard lesson. It is a not so quick an answer. We have to elevate the lower class to have both a positive attitude toward and training in technology jobs. How do you elevate someone's attitude? Our attitude is more positive toward something that we are more comfortable with and understand. By increasing our exposure to different aspects of technology at a very young age, it loses its mystic.   The UK has made it mandatory to teach children to code as early as age five. The idea is to get them comfortable with technology early enough to stimulate interest. They make a game out of it so it doesn't seem all techy and scientific. By the time they graduate it will be as common to them and reading and writing.I think the key is mandatory, because people will not do it of their own volition. I mean if they would, they would already be doing it, right.

Zack Simms is a Columbia School drop out that now teaches programming to over 26 million students at a time. Seriously, he really does. He found that most of his peers didn't have the fundamental computer skills to effectively work in industry, himself included. He first got a friend to help write a program to help him learn programming. This was so successful that other people wanted to use it. CodeAcademy  now has 26 million students from over 100 countries, learning six different program languages. CodeAcademy is only three years old.

At the Davos Conference they talked about 8.4 million jobs left unfilled in technology because of a lack of skills. Technology jobs run the gamut of aptitude. Some are creative like digital art. Some are more hands on like hardware maintenance. Others require planning, programming, installing. Maybe it requires only an high level of technology understanding as in customer service or sales. You don't have to be a geek or a nerd. You can be yourself.

The way to redistribute wealth is to find a way for the lower class to create their own wealth. We might have to give them fish for a while, but I would suggest that we simultaneously nurture them into fishing for themselves. Life is much more enjoyable when a person feels independent and self reliant. Waiting for the government to determine your fish allocation, knowing your life depends on it, is a form of slavery. But knowing you have the skills to catch fish in any pond is freedom.

As more and more simple jobs like lawn care, cleaning, ground transportation, Fast Food Restaurants give way to technology, the lower class has to find a new way of making a living. Building and maintaining the very machines that took these jobs is the best answer. Start them young and when the time is right they will forge their own path.

(a) Wealth report by the charity Oxfam

Life Turns and Sprints Away

I run across a number of quotes that I think are worth remembering, not so much, because they are motivational, but because they are true. They remind me of basic truths that I must learn to live by.

I think of motivation as the match used to start a campfire. Once the match is applied, it takes effort and fuel to keep the fire going. The match is destroyed and no longer serves a purpose. Of course, you can start a fire without a match it’s more difficult and typically takes much longer. Motivational speakers don’t motivate they provide the match. Each of us must provide the effort and fuel for motivation to take place. The quote may serve as a catalyst for action, but it’s just a catalyst. It’s not a substitute for sustained effort.  

The quote I have been thinking about lately is "Life turns and sprints away, and what could you do but follow? “. It is from Dante "Gluefingers" Lavelli. Lavelli lived between 1923 and 2009. He originally played football for Ohio State but had to leave early to join the Army during WWII. We went ashore in France just after D-Day and fought in the Battle of the Bulge in 1945. On Christmas day of 1946 he caught the winning pass for the AAFC championship in New York City. He is now in the NFL Football Hall of Fame. He spent his years after football as the owner of a small furniture store in Rocky River Ohio.

Lavelli got an opportunity to play football at Ohio State, he followed. WWII started and life changed. Lavelli was drafted into the Army and left football behind. The war ended and life changed. Lavelli was back playing football but not as a college graduate. Lavellie went back to Ohio State between football seasons to earn his degree. Football ended for Lavelli and life changed again. Now he was a small business entrepreneur. Each time “life turns and sprints away” Lavelli followed. He didn’t hang on to the past hoping to prolong it’s existence. Good, bad or indifferent he embraced the future. Given a choice I’m sure he prefered Ohio States campus to the the French battlefield Ardennes. 19,000 soldiers died in less then 45 days. He didn’t live in the horror of those 45 days. He found a way to move on.

Just as I am sure he preferred the hurrah's of winning NFL Championships to the daily grind of keeping a small business running in Rocky River. He won seven championships as a wide receiver for the Cleveland Browns. But it was the furniture store that fed and housed his wife and three children.

The great truth in this quote is not it’s ability to light a match under my performance, but to clarify a simple truth. “Life turns and sprints away”, what else can I do but follow. When I chose to not follow it simply leaves me behind.

Importance of Operational Accounting in the Small Businesses

I read an interesting article this week written by John Nessel. John Nessel is the President of Restaurant Resource Group, a Boston-based consultancy providing financial tools and support services to independent restaurants and the hospitality industry. John’s number one red flag to restaurants failure is “Absence of a well organized and implemented accounting system.” He goes on to say “Printed copies of basic financial statements (Profit & Loss and Balance Sheet) are not adequate for this task because they do not verify the accuracy of the numbers presented.”

Luis Luarca of Allectus, a business management advisory, says “As proper and accurate accounting is the life blood of business, accurate and relevant accounting procedures allow for the opportunity to affect all aspects of business efficiently and effectively.” They both agree on some simple yet extremely important indicators of a poorly run business.

1. An overall lack of understanding concerning financial statements and their importance in business decision making

Understanding the technical definitions of items portrayed in financial statements is a long way from understanding what it really means and how an understanding of the meaning can be used to help run the business for efficiently and more profitably. The structure of the financial statements can mask potential risk and hide growing concerns. Not knowing what do don’t know can hurt you.

2. Over reliance on online bank balances to manage cash flow

The statement or online bank balance doesn’t tell the real story. It doesn’t tell what deposits haven’t cleared, what checks have not been cashed or what credit card transactions are not reconciled. More importantly it does not provide a vision into future cash needs. It is a point-in-time view of the health of cash. It can be dramatically different within minutes as transactions clear.

3. Inaccurate posting of financial information

This can run from simple transposition errors, to the more complex allocation error. One of the most overlooked concerns for small businesses is that the chart of accounts does not reflect the way the owner operates their business. A badly thought out chart of accounts can actually hide business problems until they are too late. Because of this, the allocation of expenses may not accurately show their impact on the business.

4. Daily and Weekly financial information is not routinely collected, reviewed and acted upon.

Many business owners are too preoccupied with data input to take the time to routinely apply a logic test to the financial information. Expand the effort to daily or weekly information gathering and little time is left to run the business. Owners should spend the majority to their time reviewing financial information for trends and taking action on those trends to improve the business performance. Instead many spend their time with the low level activity of capturing data.

5. The absence of a well organized and implemented accounting system that includes business specific Chart of Accounting, key performance tracking and repeatable procedures.

This seems to be the last thing any small business owners wants to take on. There are a lot of reasons for this. Tactical operational issues take precedence. There is a lack of understand as to the quantifiable benefits. There is a lack of interest or aptitude. All of these are the very reasons that a small business owner should look outside of their own expertise and time. This is a primary skill, much like tax accounting, that should be outsourced.

These trying economic times have brought to the surface ongoing operational issues that were previously covered by a better economy. Although poor profitability might have still been a problem, cash flow allowed these problems to go unaddressed. Many companies managed this through short term borrowing or lines-of-credit. Once credit was constrained and cash flow became an issue, operational inefficiencies came to light.

A lack of attention to good operational accounting may have masked many of these issues until they became a crisis. Crisis management is never a good answer. For some companies it became the only viable answer. The owner must take back control. To accomplish this there must be an in-depth review of how they currently account for financial activity and what that tells them or doesn’t tell them about the health of their business. This many times requires a third party that can objectively assess the environment exclusive of day-to-day operational bias and business ownership pride.

Business Development verses Sales

I was following a car to work today that has the prestige license “VPRES”. I wondered if this person was a teller in a bank. Kidding aside, titles can really be confusing. I’m in the business of creating long-term incremental new revenue. One might think that means adding new accounts or growing embedded accounts. To me the answer is “yes” and “no”, but mostly “no”. I have traditionally approached sales as the means by which a company achieves its annual revenue plan. This includes both growing existing accounts and adding new ones. I like to think that a good rule of thumb is to have 30% of revenue from new accounts. This helps deals with the revenue attrition experienced with older existing accounts.

So in my definition, what is business development? Clearly you have to be able to sell to develop incremental new revenue. But the selling is more strategic than tactical. A good business development person is opening an all new market. The selling is typically to the early adopters who will blaze the trail for the mainstream sales force to take over. I think in terms of a three year cycle. At the end of three years it becomes more of a sales activity than a business development activity. What are the traits of a very good Business Development person?

Sales: Number one on the list. It’s about revenue. There is no reason to have a business development process if the end game doesn’t produce significant revenue growth. Solution selling skills are the minimum requirement. Advanced skills and experience are what you are looking for. Do they have a wide variety of successes or are they a specialist? I believe a variety of experiences is always best.

Marketing: It’s not about spinning an existing product to fit a new market. It’s about finding and validating an all new revenue source. There is a lot of advanced marketing going on here. Market research is paramount to long term success. Remember, in no more than three years you want to turn it over to the rank and file sales teams to exploit. The marketing is not so much copywriting and collaterals as it is messaging. What is the Unique Selling Proposition and what’s the value add that makes the solution appealing?

Product Development: Again, this is not classical product development. But it is the ability to create a new product from existing parts, with an extra dash of new. It is understanding the effort required and the resources available to meet time-to-market. It’s the ability to assure that it is within the product roadmap for the company.

Business Skills: Are they going to treat the company’s money like their money? It cost money to develop a new market. Can they run it like a profit center or are they content to run it as a cost center. Do they understand the investment they are asking for and the return they are willing to deliver? Have they built Pro Forma statements to use as milestones?

In the end, if you hire a sales person for a business development position, you may grow revenue in the short term, but will it dramatically affect the revenue potential of the company in the long term? And the other point is…. If you are looking for a pure hunter to open new accounts, don’t call it business development. If you want a hunter, ask for a hunter and hire someone who is proud to be called a hunter. If they don’t like being called a hunter then they probably aren’t one…..

Unique Sales Proposition

This is one of the least understood and most over used concepts in sales and marketing. Everyone thinks they have one, few companies do. Here’s why….

A Unique Sales Proposition (USP) must have these characteristics:

1. First and foremost it must be unique
2. Second, it has to be easily validated
3. Third, it must have real intrinsic value to the buyer.

USP’s are situational. What has unique value in one environment may not have any value in another. So one of two things must happen, either the USP changes based on the environment or the seller must target only the environment in which the USP is truly unique and valuable. The second alternative limits the viability of the market. The first alternative widens the target market but required that the seller understand both the unique value of their products or services and the specific value the prospect is looking to achieve. So the USP starts to look like a BBQ Menu; pick one entre, and two side items. Listing the attributes of your products and services is the easy part, getting past the second characteristic is where most fail the test.

Validating your USP is going to be difficult in traditional terms. Companies like to think their UPS is best-in-class service, leading edge technology, the most this, the fastest that, the only whatever…. The problem is can you prove it? More importantly can you prove it prior to the sale in such a way that your competition is left in the cold. This innately means that the USP must be measurable. If I want to state that my product is installed in more companies than any other like product; do I have the third party validated market share data to back up the claim? Is there another study out there that might invalidate my claim? If I claim to have best-in-class service; can I validate it with third party customer care data? Many benefits are just that benefits, they are not USP’s. I may be able to demonstrate that my clients rate my customer service 97 out of 100, but that does not make it a USP. It makes it very good and is an asset, but unless I can validate that my competition cannot meet that, it’s not a USP.

The last point is the logic test. Who cares? I have a good friend whose company has incredible IP based video server technology. It is truly great stuff. It is incredibly fast and has great features. The problem is; who cares. They compete against analog video servers that are half the price in small configurations and most of the video is never viewed. They lead with their gee-wiz technology just to get hammered on price. They try to tout their reliability, but the prospect counters with “I can afford spares”. The real challenge is to find a market that requires very high camera counts and the video is reviewed on a regular basis. Think casinos…. Think major airports….

The point is that every buyer has a unique set of pain that requires a unique solution. The product or service does not have to be unique, just the sales proposition. When your company can document that your product or service can uniquely address their particular problem, you have a leg up on getting the business. This will shorten the sales cycle and could lead to larger margins.

Your USP is not a tag line on your advertising. It is a tangible benefit supplied to a specific prospect in a specific environment. Don’t look for the magic bullet. Look for an arsenal, a smorgasbord of objective tangible benefits that can be used as the situation dictates.

Defensively speaking, look at your competitors USP’s and be prepared to demonstrate how your product can provide the same benefit. It won’t make your product more attractive, but it will reduce the FUD factor.

Selling in the 21st Century

Selling has changed considerably in the last 10 years. Start-ups have embraced this change because they have to. Older companies are just starting to understand it. This change in driving business, has been brought about to a large extent by the movement away from the concept of “Web 1.0” to “Web 2.0”. The major difference in these two concepts is the Web 1.0 was a more traditional push-pull approach. The idea was to attract eyes to your website and then provide value. This is an electronic form of print advertising, except that there is a lot more real estate to use and a wider geographic distribution. Web 1.0 didn’t fundamentally change sales methodologies. Prospects were attracted to the website, were then pre-qualified by filling out a form and passed to sales as a lead.

Web 2.0 changes that dynamic. Web 2.0 is interactive. The website visitor can change the content by commenting on it. They can add their own spin. Two prospects can debate benefits and add insight for each other. Many Web 2.0 demonstration sites allow the viewer to interact with the demo by inputting their own data. They can have a dialogue with the presenter if there is one. Fundamentally, a prospect can experience the first 2 or 3 steps of the sales cycle without engaging a live person. When the lead gets to sales, the prospect is much more informed and qualified.

Using blogs, twitters and wikis as part of the marketing and sales strategy has become more commonplace. Letting the marketplace create marketing content through interaction provides deeper insight. Sales has to adjust to this new medium. As the prospects and client collaborate on new ideas and approaches, Sales has to keep up. No longer can they rely on marketing material printed annually for their source of information. Smart sales people have their own blogs and twitters. They are engaging their market to build relationships and find opportunities. Social networks can provide new knowledge on personalities, backgrounds, priorities. Reference selling through social networks is a growing tool.

Hiring salespeople with a defined rolodex and an aptitude for cold calling is old school and ineffective. There are just too many screening processes available to the prospect. The average buyer in inundated with spam and junk e-mail, not to mention telemarketing calls. They have e-mail filters and incoming call identification to help them manage unwanted interruptions.

Times have changed and companies must change with them. Take the time to reevaluate the interaction between clients, marketing and sales. Look for sales people who have embraced the new technologies and know how to use them to drive performance. Have they defined their social networks and do they know if and how these networks affect their performance.

Driving Mechanisms and Critical Events

This subject has come up a lot lately. It’s interesting how many people in sales don’t understand this very simple concept. If there isn’t a change agent going on in the business, change will not happen. If this change is not tied to a drop dead date, it will not happen in a predictable timeframe. When you say it out loud is sounds intuitive. When I talk with clients and they are lamenting about long sales cycles, unpredictable forecasts and why their sales people can’t close business, my first thought goes to these two concepts. Let me explain further….

Almost every professional sales person has now figured out that they have to solve a business problem to stand a chance of closing the deal. They understand that uncovering and validating the pain is important, if not critical. The top echelon even goes as far as to have the prospect validate the value of the pain in their own words. They get the solution to belong to the prospect by having them articulate the need and the value to themselves of meeting that need. Mike Bosworth in “Solution Selling, Creating Buyers in Difficult Selling Markets (McGraw-Hill 1994) defines a prospect as a buyer who has admitted a problem. So you understand the buying process, you are dealing with the decision maker, they have a budget allocated, you have not only uncovered the business pain, you have gotten the buyer to admit to it and put a value on it. Deal closed, right!

Why is the deal still in the pipeline three months from now? How do you overcome objections when there aren’t any? The checks in the mail.

The reason is there are no driving mechanisms and/or critical events to cause the decision to be implemented. Your prospect, the CFO or the VP of Purchasing has never processed the paper because there are other pressing issues or no issues at all. In James Clavell book “Shogun” (Cornet Books 1975), Lord Toranaga constantly reinforces to Blackthorne that no decision should be made until it has to be made. The driving mechanism might be a face-off with his arch-rival, but there is no attack; therefore no critical event. The same is with sales. There must be a driving mechanism such as a reorganization, critical financial crisis, or new business process. Something which causes the potential buyer to consider alternatives to what they are doing today. This is what got you to the presentation and the proposal, but it won’t close the deal. Too many times we get this far and assume the deal will now close.

This is where understanding the critical event becomes extremely important. If I am going to forecast this sale, I had better understand when and why it’s going to close. If my solution is part of a process required to achieve a goal, I need to work backward from the launch or introduction date of the new process to create my critical event. “If we cannot start implementation by next week, we cannot make the launch date of May 17^th.” “If your new plant is scheduled to go into production on July 1^st, then we need to….now”

If they want to improve your AR process or their sales process, but haven’t actually committed to when they must accomplish it, then I can’t forecast the close date on my deal. If they want things to be better, but don’t have a time line for making them better, then I can’t predict when they will buy, if ever.

Even when the pain is real and the cost of the solution is less than the problem, without something driving the buyer to implement the solution, there is no deal. This is why opportunities linger in the pipeline for months and then fad away…..

How do you catch wild pigs?

There was a Chemistry professor in a large college that had some exchange students in the class. One day while the class was in the lab the Prof noticed one young man (exchange student) who kept rubbing his back, and stretching as if his back hurt. The professor asked the young man what was the matter. The student told him he had a bullet lodged in his back. He had been shot while fighting communists in his native country who were trying to overthrow his country's government and install a new communist government.

In the midst of his story he looked at the professor and asked a strange question.

He asked, 'Do you know how to catch wild pigs?'

The professor thought it was a joke and asked for the punch line. The young man said this was no joke. 'You catch wild pigs by finding a suitable place in the woods and putting corn on the ground. The pigs find it and begin to come every day to eat the free corn. When they are used to coming every day, you put a fence down one side of the place where they are used to coming. When they get used to the fence, they begin to eat the corn again and you put up another side of the fence. They get used to that and start to eat again. You continue until you have all four sides of the fence up with a gate in the last side. The pigs, which are used to the free corn, start to come through the gate to eat; you slam the gate on them and catch the whole herd. Suddenly the wild pigs have lost their freedom. They run around and around inside the fence, but they are caught. Soon they go back to eating the free corn. They are so used to it that they have forgotten how to forage in the woods for themselves, so they accept their captivity. The young man then told the professor that is exactly what he sees happening to America.

There is a lot to be said concerning government entitlement programs, not all of it is bad. But I want to address the entitlement programs in our lives, the ones that we create for our own benefit. They are the short cuts in our lives that at the time seem expedient, but later sap us of the drive end energy to push through much harder issues.

In college I took four semesters of calculus. Four mind numbing semesters of proving theorems that were printed in the back of our CRC. It was a slow and repetitive process that didn’t seem to have a goal other than to make us work harder. Once I got to Differential Equations and Applied Differential Equations I understood why. This process of proving what had already been proven provided me with the framework to analyze much more complex ideas. The hard work in the beginning prepared me for the work ahead. I could validate amazing concepts that previously seemed impossible to comprehend. (Calculating the center of mass of an irregular object) Many students never got to “Diffy Q” to see the fruits of their labor.

How many times are we so busy multitasking that we lose the lessons that eventually imprisons us in mediocrity? We are looking for a free lunch thinking that it will always be free. The problem is that it will be free as long as you never want to be more than you are. We slowly lose our ability to think outside the box. Psychosclerosis sets in. We become so convinced that new ideas won’t work, that we lose the ability to move forward and grow. We start to love the fences around us. They bring us comfort. We start to believe we will always be able to provide for ourselves and our families using only the skills, talents and knowledge we presently have. We can somehow start to coast to the finish line. I see this happening to younger and younger generations

.

Continually strive to stretch your imagination and knowledge. Go through the pain and sometimes boredom required to grow. Never stop. It will pay tremendous dividends for years to come.

"A government big enough to give you everything you want, is big enough to take away everything you have." - Thomas Jefferson

Hire Slow, Fire Fast

This is an adage we all know. Typically we hire faster than we would like because each employee represents work that is piling up. We fire slowly, partly because it is unpleasant and partly because we just somehow expect it to fix itself. In some cases I would even suggest we fire slowly because we don’t realize there is a problem until we’ve had to deal with it for some time. My background is sales and marketing, but throughout my career I have managed many operational types as well. To me, operational employees are easier to evaluate because they typically are in the middle of the business cycle. They are given work to do and there is an expectation of the quality and quantity of effort. Problem employees produce sloppy, incomplete or no work.

Sales people are a different kettle of fish. When they come on board there is a natural expectation that it will take time for them to come up to speed. In many cases they have to build a pipeline. If the sales cycle is six months, it should take on average six months to close their first deal. Most sales people don’t start completely from scratch, but there is a very good possibility that their territory have been vacant for some period of time and is therefore more or less dormant. So how long do you give a new sales person before you start the “are you the right person” discussion?

My suggestion is day one. Each business should have a documented and repeatable sales methodology. That methodology has certain milestones. There are leads and suspects and prospect and qualified prospects and proposals and contracts. There should be prospecting scripts and data gathering outlines and proposal templates. There are a myriad of tools available to start evaluating the progress of a new sales person the very first day. Each new sales person should have a 90 – 120 day plan that outlines expectation. The expectations should be targeted toward results, not activity.

Here’s the hard part, you’ve got to pay attention. You can’t have your best sales person training the newbie. That creates two problems. If you follow a program for the first 90 – 120 days you will quickly find out if the new sales person can perform certain critical aspects of the sales methodology. You can compare their performance against a standard at each phase of development. This developmental approach is better for the company and the employee. If your sales methodology works for the sales team in general it will work for the newbie. They perform better within the sales culture of the company, thus making more money and so do you.

If they cannot master a critical component of the sales methodology and you’ve tried every mentoring approach you have, then it’s time to have the “are you the right person” discussion. I personally believe that if you are having the “are you the right person” discussion you, as the hiring manage, screwed up somewhere. Sometimes we don’t like to admit that, so we keep pushing a square peg into a round hole. We all make mistakes. Good managers recognize them before they affect results and correct them. Other managers make excuses or cover them up.

Here is the really good news for you…. If you have a program and you’re following it, then the new sales person knows where they stand at all times. The “are you the right person” discussion might be brought up by them. They see the goals, they see they’re not making them, they understand they have a problem. The discussion is not a shock. My guess is that if you have a decent hiring process and a decent development process, then this discussion will very seldom ever take place.

That’s the goal anyway….