Takin' care of business

Have you hit the skids yet? After all, the kids are back at school, school buses are clogging up the highways and nights are getting longer. Sometimes just for kicks my wife and I will hang out on the porch when it gets dark early and pretend that it's still summer. It's not, of course, but pretending is fun.

Pretending is not fun, however, when a business is at risk of making game-changing mistakes.

A business owner recently called me and asked for my evaluation of their current cashflows so I rolled up my sleeves and dug into some antiquated spreadsheets about customers, an unaudited profit and loss statement and an unaudited balance sheet. If those three things sound sorta, you know, casual, it's because they are. In short, it's like keeping your checkbook balance on a paper napkin or a grocery receipt.

Regardless, I did my best and came to the conclusion that only about 30% of the business promised to him by his customers actually resulted in a sale, yet the staff had to go through about 80% of the promised business. They were spending a ton of time working on potential sales that would never transpire, as history showed that the customer-base failed to deliver most of the time. Of course, there were a few notable exceptions, which I pointed out in my moderately formal report back to the client. The staff was frustrated because they felt like they were working too hard and too long. And they were correct. Unfortunately the company was not profiting from their efforts.

Upon delivering the report, I followed-up with a phone call and a lengthy discussion in order to point out some significant cost saving measures. The culmination of the call came when I suggested something radical - eliminating over half of his customers and focusing on the remaining customers that could deliver promised sales on a fairly regular basis. A final suggestion was to perhaps remove one or more of the positions that served the customers since there would be far fewer potential sales to screen in order to get to an actual sale.

To say I was pleased with my findings, both quantitative and qualitative, would be an understatement.

"Christian, I see your point but I'm thinking of adding staff so that we can hit the break-even point," was his response.

(Crickets chirping here, please.)

"Chris, are you there?"

It's as if my hard data and suggestions weren't even heard or acknowledged, and in fact, I was living in opposite world. I had suggested firing clients and staff, focusing on the core business and streamlining things - not taking on additional payroll, headaches and a bigger nut to crack.

Pretending is not a good option if you are a business owner. In fact, it's not a good option for anyone (unless you are a girl pretending to be a fairy princess or a kid that wants to throw the winning touchdown pass in the Super Bowl.)

But we all pretend, don't we? We pretend that a relationship that has been horrible for twenty years is going to change, or that a job we hate will change once the economy turns around or perhaps a child/loved one that has been a hell-raiser will finally come around.

In relationships we call this 'vested,' or in poker we call it 'pot-committed.' In short it means that emotionally it's too hard to remove ourselves and it seems the only logical thing to to is see it through the (already known)outcome.

As a business owner, it's imperative to never become enamored with an idea that stops working or your 'baby.' Focus on the bottom line and once it goes to red, get out immediately.

GM, Chrysler, National Record Mart, Asbestos, Polaroid One Shots, typewriters and carbon copies were all great ideas too. Now they are all either firmly planted along the landing strip of business progress or approaching quickly. Sometimes (most times) technology impedes our ability to keep doing the same thing and make the same profits. The runway is covered with failed landing attempts.

Recognize when the business changes and prepare to make drastic changes to meet the challenge, or prepare to close shop. Those are the only alternatives in business, and in life, actually.

I have a friend that says "if I have to kiss a frog, I kiss the frog and move on."

I urge each of you to find the frogs remaining in your life, kiss them goodbye and move on. Only princesses get to kiss frogs and have them turn into a Prince.