Joel used to work for me and we had lunch just before he was starting in a new position where he would be responsible (for the first time) for hiring and supervising quite a few staff people. He asked me if I had any advice for him.
Here it is:
- Treat your staff the way you would have liked to be treated when you were in their position
- Establish unequivocal standards, be consistent and don’t compromise… even if it delays getting something out
- You cannot grow if you are not able to delegate effectively and empower your staff to make decisions. Be clear, concise, patient, set realistic deadlines and allow time for review
- Try to give positive comments just before they go home each day
- Develop a culture that makes people want to work for you
This is great advice for anyone in a position where they are managing people.
If you want your business to grow, don’t focus on only the easy financial controls where you can see quick results — such as holding down petty cash expenditures or checking expense accounts for accuracy. Instead, go for the tough steps that affect long-term profits and facilitate growth.
- Watch the cash out flow. Try not to pay bills faster than necessary, but don’t make late payments. It is ok to pay some suppliers quickly to obtain an advantage with them, but you cannot do this with all your vendors.
- Speed up deliveries. The faster customers receive their goods or your services, the more quickly they’re likely to pay for them. Also, faster shipments increase the likelihood of quicker reorders.
- Consider financing. Many businesses make the mistake of paying cash for their capital equipment, often because of the owner’s ego or an aversion to interest payments. Use longer term loans to finance equipment with a deferred payback period.
- Reduce inventory. Fast-moving items and those that compose the bulk of sales are usually a relatively small portion of total inventory. Slow-moving products, on the other hand, often build up into a large share of items on hand. Identify slow-moving items, and sell them off to convert them to cash. Not only does selling excess inventory produce immediate cash, it also cuts future costs by reducing the amount of inventory that needs to be managed and possibly financed. For service businesses, delaying getting work done is the same as inventory – get it done, out and billed.
- Reduce work in progress. Run efficiently by avoiding bottlenecks and backups on the production line. Look for areas where the production process slows. These bottlenecks point to activities that need to be improved. Look for antiquated equipment, untrained workers or an insufficient number of machines or workers.
- Watch customer credit. Preventing customers from extending payments beyond the due date might seem obvious, but few businesses actually adhere to it. That’s usually because it takes time to monitor receivables and even more time to telephone late-payers. Have a report prepared that flags past-due accounts. Read these reports regularly, and have the customer called immediately when you spot a delinquent bill.
- Target big debtors. Despite their best intentions, businesses often let customer credit get out of hand. In extreme cases, companies wind up financing a customer’s business, usually without realizing it. By that time, a customer might owe more money than the net worth of the business. When it comes to large delinquent customers, it should be your goal to be assured of getting paid while retaining the customer. Consider asking for a personal guarantee from the owner, receiving an interest-bearing note and lien on customer’s assets, life insurance on the owner, and agreeing to continue supplying the customer, but only if they pay cash for new orders plus an additional percentage – say, 10% — to pay down the outstanding debt.
- Watch the margins. After companies have been in business a few years, many fail to keep tabs on how much profit they make from each product or service line. Too often, they waste company resources holding on to unprofitable items. Look for higher margin product lines that develop and then start promoting them more aggressively.
- Monitor personnel. In mature businesses, personnel and related costs creep up over time and aren’t watched because of a comfort zone that emerged. Justify the role of each person that works for you. If you have sales people with draws and commission overrides, calculate the actual costs for the sales they generate.
- Profits are essential. Pay attention to the bottom line. Profits are necessary for growth, your personal financial security and asset value creation. Know your break-even point and set targets to exceed it.
Businesses are dynamic and constantly changing and need active and deliberate management and leadership. Establishing financial controls is a major part of that management. Get the right reports delivered daily that you can easily monitor, review and use to get a handle on key aspects of your business.
Many people nearing retirement do not confront the financial issues until it’s too late in the game. The bad news is… financial planning is a process that is better when prepared with more time and planning. The good news is… it can start at any time in a person’s life – but the later you start, the more compromises and adjustments you might have to make.
You need to attack your financial planning aggressively and intelligently.
Following are some things to consider doing:
- Get rid of debt – especially from credit cards. Next, try to pay down mortgages that have interest rates higher than what you can earn on your investments.
- Reduce spending. Current life styles need to be adjusted to accomplish longer term goals which should include being secure financially. Look at every area of spending including housing, insurance, clothing, medical costs, gifts to children and vacations. An alternative is to work longer.
- Invest in a more tax-efficient manner. Buy bonds and bank CDs in your tax deferred accounts and stocks in your own name. The interest will then be free from current taxation and the dividends and eventual capital gains will be taxed at reduced rates.
- Lower investing costs by using discount brokers; and buying index and exchange traded funds rather than individual stocks and actively managed mutual funds. The costs do count and hold down your overall yields and growth.
- Buy longer-term bonds instead of CDs to increase your yields. Consider setting up a ten or twenty-year bond ladder. A ladder has equal portions of your bond investments coming due annually allowing reinvestments at the then current rates, permitting you to change your investments, or have the funds available for other purposes.
- Understand what you are really investing in. For example, a bond mutual fund is not a “safe” investment. Once made, you can only get back an amount that the market deems appropriate based on the current interest yields. As market yields increase the value of the bond fund will decrease. Of course, the opposite is true if rates drop, the fund’s value will increase, assuming there isn’t excessive leverage within the fund or a major management misjudgment.
- Long-term investment plans should not ignore stocks. A married couple, both at age 70, would have at least one of them living twenty-five or more years – that is long term. The planning should not be to outlive your money. Someone at age 92 can possibly ignore future effects of inflation and plan on spending down principal; but not someone age 70.
- Review your asset allocation a minimum of once a year, and don’t automatically rebalance. Traditional rebalancing refers to asset values and not portfolio yields which is where the cash flow comes from. Also, many of the traditional rules do not apply anymore.
- Consider putting a portion of your assets in immediate annuities to increase your cash flow to guarantee some cash flow for the rest of your life. The downside is that the funds are no longer available to be used for anything else and disappear upon your death. You need to balance wanting a secure cash flow with leaving a “legacy” to your heirs.
- Know your safety nets. If you continue to spend down your assets to maintain “yesterday’s” life style you can always get a reverse mortgage if you own a house.
Each of the above suggestions can easily be done without special training. It does take focus, determination and resolve. No silver bullet can convert any plan into a great plan, but small changes, tweaking and attention will produce immediate benefits and concrete results. And you can start now!
Animal lovers that consider pets part of their family should make arrangements for them while they are able. Most people won’t and cannot do what Leona Helmsley did (leaving over $10 million to her dog), but you can make suitable and affordable provisions for your pets.
You can fund pet trusts using a living trus, or through your will. In either event, you will set aside some money to provide for their continued care in event of your death or disability.
Pet trusts are not much different from other types of trusts. The person establishing the trust appoints a trustee to manage the funds; and designates a caregiver who will receive the funds as needed from the trustee. When the last surviving pet dies, the remaining funds will be distributed as specified in the trust. Many states have pet trust laws including New Jersey and New York, but they are different and, as with establishing all trusts, you must speak with a knowledgeable attorney before you decide how to proceed.
This is not much different from the process for choosing a guardian for minor children. Except in cases of very large funding in the trust, I suggest considering making the trustee and caregiver the same person.
An alternative is a pet retirement home or sanctuary. This is something you can find out about from your vet. In many cases, this will require more funding than with a pet trust and your choice of the residuary beneficiary of the remaining funds might be restricted to the sponsor of the sanctuary.
It’s not too late to order my book – Getting Your Affairs in Order – to give to your father. This book will help him get his affairs in order and knowing that he has done that, will provide great comfort to you, too. The gift will count twice – for him and you.
The book is about organizing papers, documents, final requests and making arrangements for what is wanted to occur during significant life events. When you give the book to a loved one and they follow the purpose of the book, following through on their wishes will be much easier for you. You will save time, not be conflicted with complex decisions of who gets what, know who was selected to handle the affairs and how and what, if any, their payment will be, and needless fees and taxes will be avoided. If minor children are involved (whether yours or your grandchildren) guardians will have been selected along with an “allowance” so that there will be no confusion as to what funds are available to use for the care of the children.
Death is a morbid subject, but when things are not in order – no will, no road map of where things are, no list of passwords, no one designated to oversee the collecting and distribution of the assets – the sadness can be overcome by annoyance and anger that there was so little regard for those left behind.
This book has clear descriptions of what should and needs to be done and how. Buy copies for your loved ones, and yourself. They will be comforted and so will you. Hopefully not for a very long time!
I just returned from an 18-day vacation to China. It was eye opening and mind expanding. Everything I had thought about China was wrong and was from impressions developed in a previous age. There were no disappointments or anything to complain about. I highly recommend a similar trip.
Before I get into details, thanks are due to Sarah Cirelli, our extraordinary social media leader for posting my blogs every Tuesday and Thursday during my absence. Thanks to her, my twice a week consecutive string of blogs since February 2012 is intact.
We visited Shanghai, Beijing, Xi’an, Wuhan, the Yangtze River Gorges, Chongqing, Guilin and Hong Kong by guided tours. We saw modern cities and power plants that did not exist a generation ago with construction cranes everywhere we went. We strolled in Tiananmen Square, walked in the Forbidden City, gawked at the Pandas, climbed the Great Wall (well a teeny part of it), marveled at the Terra Cotta Soldiers, had foot messages and were diagnosed and prescribed herbal remedies for our so-called ailments, went to Jade and Silk factories, learned Chinese Calligraphy along with a few Chinese phrases, participated in tea tastings and a family lunch in a private residence, attended Kung Fu, Acrobatic and Chinese Dancing shows, ate a lot of very good Chinese food, went to many other places and were surprised about the openness of the Chinese people we met and the capitalism prevalent in China today. We were also paired with a great group of people along with our dear traveling friends and were led by well-spoken guides and an excellent and caring tour director.
I could go on for hours about the wonders we saw– both ancient and modern – and will be glad to share my experiences if you call me… but I don’t want to get to a point of boredom for those not interested. Justice Felix Frankfurter once described a bore as someone who responds when asked “How are you?” I can add to that question “…or how was your vacation?”
When I am on vacation, I don’t respond to phone calls or emails, or commit to prescheduled calls, unless a true emergency arises [keeping in mind that no one will die if I can’t be reached for a couple of weeks – especially with the strong backup I have]. Vacations are not just a change of scenery, but a time to rest the brain, reduce stress, rejuvenate your body and possibly experience and absorb new things. I believe taking calls, answering emails, following up with clients, tracking staff and getting involved in the regular routine and activities thwarts the purpose and benefits of a vacation.
I hope all of your future vacations are as good as mine was.
Sometimes the simplest solution is the best.
One method I use is to periodically perform many of the procedures and functions that are done in my office. I am not looking for loads of work, so I usually choose a part of a project that is not voluminous. For example, if I want to test the procedures the tax administrator is following when she assembles tax returns, I’ll choose a small one to do, and then I’ll actually assemble it. In doing the one return, I get to test all the procedures that are followed. Some of the things I particularly care about are that all the procedures are followed uniformly and that the instructions are easy to follow and easy to use for training others. I am also looking for ways to streamline the system. I feel it can only be effectively done if I “get my hands dirty” once in a while. A manager can’t be effective and set up systems if he never gets up from his desk.
When confronted with an overcrowded closet, remember that there is always a hanger on the floor.
When using your computer, if you set it to automatically put the current date on what you are doing instead of retaining the date you entered when you started, you lose the ability to know when it was originally done.
It takes longer to back into a parking spot than to back out.
A good method is to make sure you understand the task at hand before starting—and making sure your associates fully understand what they are to do before they start.