Articles by Dan Lacy

Business Growth Mistakes

Tuesday, September 29th, 2015

Over the last 30 years I have worked with hundreds of businesses that wanted to grow revenue, make more money and have less stress. I find myself always pushing them to try something new for the sake of growth and (sometimes) survival. When you try something new, there are bound to be mistakes; smart companies learn from these mistakes and the mistakes of others; but some don’t pay attention and end up with the making the same mistakes over and over. In the spirit of saving you time, money, energy and stress; here are some common mistakes that seem to happen on a regular basis.

1.) Wait until your company is up and growing before you formalize it. Some business people like to ease into some of the simple decisions; simple in the beginning but more complicated as time goes on. For example, not clearing your businesses name in the beginning and finding out 10 years later someone has the same name and you have 40 trucks driving around town advertising the other company. Another big one, being in business for years and then not defining an exit strategy (85% of business owners don’t have a formal written exit strategy). Yes it is true that Jesus raised Lazarus from the dead, but I don’t think he is coming back to bail out a business person because they didn’t have a plan to exit their business. Prove fact – every business person will exit their business one way or another. You know the saying “death and taxes”. It’s still true.

2.) Rely on informal agreements with partners. Everything is rosy in the beginning but as the business begins to grow and you start to make money, disagreements rise rapidly. If you don’t have defined overall goals (revenue, profit, profit distribution, ownership, leverage or even management roles) defined upfront, it will create problems. I met a guy who spent 15 years growing his business and in a flash of brilliance gave 51% of his company to his wife so they could be seen as a woman owned business. It wasn’t completely documents so it was unclear if she really had it or not; then she decided he was unfaithful and got a restraining order to keep him away from the business.

3.) Quick to hire and slow to fire.If you are growing quickly and desperate for help, you many times skip the time proven principals and hire warm bodies. Hiring after one interview is like hopping a red-eye to Vegas to get married after one date. There are assessment tools out there today and can help the hiring manager evaluate the type of person they are getting, it is easy quick and very inexpensive. Then we fall in love with loyalty; time on the job; and act we are the government where the employee can stay forever just because of seniority (we all know how well that works). But the business has out grown the employee and the employee is actually unhappy in their current job and would rather be someplace else. We just don’t make the decision to upgrade the position because it is easier not to.

4.) Only hire people who are like you. We like people that are like us, that is just a fact of life. We should be happy we actually have dating in this culture because that gives us a little more time to figure things out. Sales people seem to hire sales type people and engineers hire engineering type people, no matter the type of job. We were all created differently and we each have a unique set of gifts which are different than other people. When we hire, we need to take the natural people strengths into consideration. For example, you are most comfortable with sales type people and you need to fill an accounting position. Do you want your sales people doing the accounting? Or you are a engineer and are most comfortable with people that are exact and careful and you need to hire a person to grow revenue. Who are you going to hire, someone like you or not like you?

5.) Too busy to plan the next step. It is a lot easier to get to your vacation destination when you plan the trip and follow the map. Most business owners (under $5 million in revenue) are too busy to plan where they are going; they think that working harder and putting in more hours will get us the results we want. It won’t. They are more comfortable fixing, installing or selling something than defining the goals and objectives for the next 6, 12 or even 36 months. But what is interesting, the business that grows, planning becomes a very important (critical) part of their growth strategy. So if you want to grow, set aside time to plan that growth. Once you start this process, it will become a best friend; because it tells up without much thought what is working and what isn’t. Planning for the future greatly reduces the stress with managing tomorrow because it is clearly defined. Most of my clients within a three-year window will see a 30%-60% improvement in revenue and a 100% to 300% in profit and cash flow by just doing this one simple step. We have developed a unique process to helping business plan for the next 12, 24 and 36 months. If you will invest 2 hours a month in our process, you will see dramatic improvement in top and bottom lines, guaranteed. It has worked for the last 25 years and it will work for the next 25 years.

6.) Let your accountants manage your money. The financial leg of the business has probably the least amount of focus/emphasis put on it than any other functions within the organization. Who wants to deal with the minutia when it is much more rewarding to go after the big deals? No business owner that I know of, so the accounting becomes a necessary evil and is delegated to someone else and not given much more thought. That is until there is a financial crisis. Most surveys and studies I have read reveal that the reason most businesses struggle (or even fail) is heavily weighted toward financial issues. Eight out of ten causes of business problems can be directly traced to financial issues.Your inside accountant and your tax accountant are good sources for telling you what has happened; but financial management is bigger than just looking at what has already happened. Financial management includes: 1) financing, 2) managing bank covenants 3) budgeting – setting standards for your management team to follow 4) evaluating predicted results with actual results and determine problems areas – trouble shooting, 5) cash flow forecasting , 6) tax strategies to insure that debt to worth and working capital is adequate to fund future growth, 7) compensation and bonus program for yourself and key employees, 8) best ways to fund growth, 9) managing daily cash flow and 10) historic financial statement review and analysis.

7.) Make all of the decisions yourself. There are a number of things that work against the CEO that tries to make all the decision themselves: 1) the business will stop growing because all of the decisions flow through one person, 2) the management team won’t grow because they are not allowed to think for themselves and make decisions, 3) the owner, over time will get burned out or his home life will suffer (or worse), 4) quality of the decisions will not be good because the knowledge level is too broad to be moderately knowledgeable in all areas of the business and 5) the owner/CEO won’t grow because there is no one mentoring or challenging the decisions that are being made.

8.) Letting daily activities keep you from the “most important” issues. To grow a business, it takes a lot of practice and effort to focus on the important things first. It means knowing when to delegate, when to rest and when to effectively communicate with your management team. If you allow yourself to be drive by daily activities or solving the latest crisis, you will lose your ability to set priorities and focus on goals. Discipline is the key word here. Most times an accountability partner will enable you to make gigantic steps forward that you could not make yourself. That is why Weight Watchers is so successful.

Dan Lacy
Growth & Profit Coach, Financial Strategist, Cash Flow Doctor, CEO Mentor
dan@dynastybuilder.com
p. 317-678-6310
f. 317-678-3615

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35 Great Business Questions

Wednesday, January 28th, 2015

One of the biggest questions that is continually in the forefront of a business owner/managers mind is – how do I become a better ____________ (you fill in the blank).

So how do we become better? Not long ago, I had a learning break-through. I was in a training session and the leader (Aaron Prickle at Lushin) made this comment: “it’s not the statements you make, it’s the questions you ask.” Aaron was specifically talking about selling, but this applies across the board to just about everything.

Questions ignite imaginations, avert catastrophes and reveal unexpected paths to brighter destinations. Inc. magazine, in the April 2014 issue, has compiled a list of 35 questions from great business leaders that will stimulate your thinking about your own business.

1. How can we become the company that would put us out of business?

2. Are we relevant? Will we be relevant five years from now? Ten?

3. If energy were free, what would we do differently? Or if not energy, then choose another key word that drives your business (labor, storage, fuel).

4. What is it like to work for me?

5. If we weren’t already in this business, would we enter it today? And if not, what are we going to do about it?

6. What trophy do we want on our mantle? Is growth most important? Profitability, stability?

7. Do we have bad profits? Some products/services look attractive, but are they taking the company capital and focus away from its main line of business?

8. What counts that we are not counting? What tangible and intangible assets truly differentiate your business that you currently have no means of measuring?

9. In the past few months, what is the smallest change you have made that has had the biggest positive result? What was it about that small change that produced the largest return?

10.Are you paying enough attention to the partners your company depends on to succeed?

11. What prevents me from making the changes I know will make me a more effective leader?

12. What are the implications of this decision 10 minutes, 10 months, and 10 year from now?

13. Do I make eye contact 100 percent of the time?

14. What is the smallest subset of the problem we can usefully solve?

15. Are we changing as fast as the world around us?

16. If no one would ever find out about my accomplishments, how would I lead differently?

17. Which customers can’t participate in our market because they lack skills, wealth, or convenient access to existing solutions?

18. Who uses our product in ways we never expected?

19. How likely is it that a customer would recommend our company to a friend or colleague?

20. Is this an issue for analysis or intuition? If it’s a decision that’s important, recurring, and amendable to improvement, you should invest in gathering data, doing analysis and examining failure factors. If it’s a decision you will only make once, or if you cannot get the data or improve the decision making process, you might as well go with your experience and intuition.

21. Who on the executive team or the board has spoken to a customer recently?

22. Did my employees make any progress today? Forward momentum in employees’ work has the greatest positive impact on their motivation.

23. What one word do we want to own in the minds of our customers, employees and partners?

24. What should we stop doing? Peter Drucker is famous for this question; he was also a great teacher and he always re-enforced the importance of asking questions.

25. What are the gaps in my knowledge and expertise?

26. What am I trying to prove to myself, and how might it be hijacking my life and business success?

27. If the board brought in a new CEO, what would he/she do?

28. If I had to leave my organization for a year and the only communications I could have with employees was a single paragraph, what would I write? Pat Lencioni states that “determining the substance of this paragraph forces you to identify the company’s core values and strategies, and the roles and responsibilities of those hypothetically left behind.”

29. Who have we, as a company, historically been when we’ve been at our best?

30. What do we stand for – and what are we against?

31. Is there any reason to believe the opposite of my current belief?

32. Do we underestimate the customer’s journey? Matt Dixon explains “often, companies don’t understand the entirety of the customer’s experience; how many times have they searched for a solution on our web page, only to go to the Contact tab out of frustration, which is where the company thinks is step one for the customer?”

33. Among our stronger employees, how many see themselves at the company in three years? How many would leave for a 10 percent raise from another company?

34. What did we miss in the interview for the worst hire we ever made? (Here’s one I learned – if you are looking to hire an organized highly detailed person, walk with them to their car after the interview and look inside.)

35. Do we have the right people on the bus? This is very important – your key people could be in the wrong seat.

Dan Lacy
Growth & Profit Coach, Financial Strategist, Cash Flow Doctor, CEO Mentor
dan@dynastybuilder.com
phone: 765-644-8887

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Are You A Slave To Revenue?

Wednesday, April 30th, 2014

Joe has a successful business, revenue continues to grow and he is hiring more people. But the truth is Joe is highly frustrated; he is doing more work but having to chase dollars to keep the operation funded. So he focuses more effort on generating more revenue in hopes that this cash cycle (and the frustration) will lessen. Will the frustration go away with more revenue? How would you advise Joe?

We have been conditioned by our society and encouraged by bragging rights that revenue growth is the most important thing in owning a business. But revenue growth by itself is an illusion and won’t get you the results you truly want. Profit is the key ingredient in business success but it is hard to find out why that is true.

Have you spoken recently with someone who has openly talked about their business profitability? Probably not another business owner or friend; you might with your accountant but what kind of reaction do you get there? Tax consequences, and we surely don’t want that! Every way we turn, there is little emphasis on being consistently profitable in our business. Profit is nearly a six letter obscenity and synonymous with greed, if you believe what you hear.

Here are some beliefs that will help you understand why profit is more powerful than revenue and so important to a business:

●Profit increases cash in the business – profitable businesses will grow their cash position if they are not using that money to reduce debt. So if you want to have more working capital – cash available for about anything – profit will create it.
●Profit increases equity in the business – profitability (flowing into retained earnings) is the primary ingredient that increases equity in a business. The amount of equity directly impacts leverage and this impacts how fast revenue can grow.
●Profits provide more money for the shareholders – When a company is profitable, dividends can be paid to those who have invested in the business.
●Profit increases the ability of the company to borrow. Debt to worth is one of the key elements lenders look at to determine if they will grant more debt. If your company has three dollars in debt for every dollar in equity, borrowing more money is probably not a viable option. Profit is the key to leverage control.
●Profit funds growth – growing revenue creates growth in accounts receivable, inventory and other assets. If one side of the balance sheet grows, the other side has to keep up and that only happens with increases in liabilities and equity. Businesses that are not profitable will have limits on revenue growth.
●Profit pays down debt. Profitable companies will pay down debt much faster than those businesses that are just getting by. Profit turns into cash, which can be used to reduce or pay off debt.
●Profit provides opportunities for employees. It is very difficult to pay good wages and bonuses when there isn’t enough money to keep the creditors and lenders happy. Profitable companies continue to hire great people because they can afford to and that perpetuates itself.
●Profit provides stability – business owners are much more productive when focused on money-making opportunities and not chasing the next dollar to pay a vendor or make payroll. Profit affords a cash cushion that provides that stability.
●Profit provides peace of mind – who has the most piece of mind, the business owner with $100,000 in the bank and no borrowings, or the one with no money in the bank and $100,000 in borrowings?

Dan Lacy
Growth & Profit Coach, Financial Strategist, Cash Flow Doctor, CEO Mentor
dan@dynastybuilder.com
phone: 765-644-8887

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Six Ways to Speed Up the Flow of Cash

Thursday, November 7th, 2013

Protecting your company’s cash position and insuring that you have adequate cash flow in future months is critical in our current business climate. The US economy is flat at best, political leadership is anti-business (just look at the tax rates kicking in January 1), the banks are wary of any business without a AAA credit rating, and climbing health care costs are still an issue. If there was ever a time to be “cash flow” diligent, it is today.

What do you do? Here are 6 proven techniques you can use for immediate cash flow improvement:

Profitability – Typically we don’t correlate profit with cash flow, although they are directly tied together. Businesses that are losing money will have more cash flow problems than business that are making money. As we get close to the end of the year, don’t let your accountant talk you into spending a bunch of money to lower your tax liability; sometimes it pays to pay a little in taxes to protect your cash flow and your equity position in your company. If you are making money, your chances of maintaining a positive cash position are very good.

Revenue – This is the first step in cash flow; without a sale, there is no cash to flow. Growing revenue is a positive contribution to cash flow so keep your sales people more accountable on hitting monthly sales targets. Develop a monthly revenue forecast. This can be done by department, geographic area, product line or for each sales person by customer. Be realistic in your forecast, based on historic trends – will your forecast be conservative, moderate or optimistic? Measure each sales person’s performance monthly in a sales meeting. If you need to, take the next step and start measuring behaviors of each of your sales people with call reports (some will already have a pipeline report in their CRM) but look at contacts, presentations, closes and dollars sold per month.

Accounts Receivable – You can improve your collections with these steps:
●Review your A/R report weekly.
●Review each account that is over 45 days old – what is being done? Are promises being made? Get informed on who is paying slowly.
●Get out in the market and talk to your slower customers – see what is going on. You would not believe what impact a “presidential” sales call has on revenue growth. I once encouraged a business owner to call on a slow client and he was appalled at what he learned, but he was 90 days too late.
●Invoice weekly instead of monthly.
●Fax or email each invoice – don’t rely on snail mail.
●On slow accounts, consistency is the key
●Get a good collection agency working for you. I recommend Al Holdren at Atlas Collections in Muncie 765-751-3210.

Inventory – less is better. Inventory is not cash and the less you have of it the better you are from a cash flow standpoint. Work out a plan with your supplier to see if they can deliver more often, convert your old inventory to cash, and measure your current inventory level against your current revenue level – you probably have too much inventory on hand. This is typically the place where dead money sits but few business owners realize it.

Borrowing – make sure you have maximized this resource. If you can restructure or refinance some existing long term assets at today’s low rates, you should jump on it. Although credit is harder to obtain, there are still lenders out there looking to lend money. Exhaust this ability by putting together a good business plan with your company’s last two year’s performance and start looking. If you noticed, many large companies are going to the bond market and building large cash resources at very low costs. We have been very successful in helping business restructure debt, lower interest costs and lower payments to really improve cash flow.

Accounts Payable – more is better. Although suppliers are also tightening up on credit policies, you can normally leverage this relationship for longer terms on repayment. If you are in trouble with your suppliers already, talk to them and show them your plan to repay and how they are going to make more money in your account by selling you more product. But don’t make any promises you cannot keep on repayment because that will hurt you in the long run.

A little bit of focus on these key areas will improve your cash flow dramatically.

Dan Lacy
Growth & Profit Coach, Financial Strategist, Cash Flow Doctor, CEO Mentor
dan@dynastybuilder.com
phone: 765-644-8887

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