Articles by Dan Lacy

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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The Toughest Transfer: G1 (Generation 1) to G2 (Generation 2)

Monday, July 29th, 2013

Nothing is more important to the long term success of a family business than the transition between the first (G1) and second (G2) generation. Approximately 30% of family businesses make it from the first to the second generation, 70% don’t. One might think that making this transition would be easy, but that isn’t the case. The first transfer is the toughest; and yet, if done correctly, it can become the cornerstone for future generations.

Entrepreneurial founders are typically “type D” personalities. They are highly driven, strong leaders and intelligent. They are driven to success – so driven that they often neglect their family during the early years, causing future baggage. They treat their business as their “baby”, giving it equal status with their other children and being just as concerned with its wellbeing and future. Mind you, as the business goes through its growth phase, these owners believe that what is good for the business is good for the family and vice versa. They frequently express – formally or not – that value to the family and value to the business are one in the same. As success and wealth accumulate, the founders begin the soul searching of what’s next for both the family and the business.

Enter the next generation. They enter the business for a variety of reasons: to remain close to their parents, financial security, fast-track careers, future ownership, family legacy, or just because it is expected. Regardless of the reasons for entry, once employed, future ownership is assumed, as is the ascent to management and control. These topics are rarely discussed and even less frequently planned. Parents remain in control until they either willingly give up part of the kingdom or events (like death or disability) require change. Let’s face it – the path of succession becomes a long and winding road for G2.

As time passes, the children are more firmly entrenched in the management of the business and the founders (G1) are semi-retired. Semi-retirement lacks any real definition – it seems to mean less work, but not less compensation or less control. This phase is very confusing to everyone. Parents don’t understand why their children don’t accept that they have made all this possible and they will control the purse strings for as long as they like. Middle-aged children have been waiting for a chance to really take over and prove themselves without parental oversight. Employees wonder: who is the boss? Outsiders try to define who makes what decisions only to find that it changes routinely. It is very confusing – and still no one wants to come to the table to establish a plan.

The problem is that the stars aren’t aligned and no one is even looking through the telescope. Parents want financial security and what is best for the family. They see that being accomplished through their life’s work – the business. They usually want to remain in control until they feel confident that their goals will be met – financial security, family harmony and family legacy. All three are important and the potential failure of any one is just cause to remain in control.

The children don’t necessarily see it that way. They can buy into financial security for Mom and Dad, but not necessarily for the inactive siblings, or to the extent that wealth bypasses them and passes to the grandchildren. Since Cain and Abel, sibling rivalry has existed in most families with more than one child, and the children aren’t always as committed as Mom and Dad to family harmony. As for the family legacy, frequently the children find working under the thumb of G1 demeaning.

How to align the stars? Try focusing the telescope. Here are some suggestions to get that accomplished.

1. Draft a clear Vision/Mission Statement and gain buy-in from all existing and future players, then focus decision-making on meeting the defined criteria.
2. Address family financial security, family harmony and family legacy directly and transparently and include all players.
3. G1 – develop retirement activities outside of the business so that the business does not become the retirement activity.
4. Empower business decision makers (G2) with real control and formally evaluate the results.
5. Separate the importance of family from the value of the business asset.

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

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