The Rector Group
Follow in Youtube Follow in Twitter Follow in LinkedIn

Business Challenge Of The Week

July – Preparing For Profits

Tuesday, July 10th, 2012

Last week I challenged you to prepare the information you need to go out and get financing, whether you need it or not.  The goal of business is to generate a profit.  Let’s assume you have accomplished that.  Now what?What should you be doing with the cash?  Seems like a dumb question right? You would be surprised at how many business owners don’t know how to use their profits strategically.  

Your challenge this week is to prioritize your various uses of cash so you build value for your company, what I would refer to as self-funded growth.

Self-funded growth refers to generating all of your needed funding from internal operations.  This ideally means that you can fund all current operations, build a cash reserve and still have cash left over for reinvestment in the company.  

The reinvestment should be planned and implemented in alignment with the company goals.  Here are some priorities to consider:

Pay Taxes - The first priority you must address is taxes.  You should generally set aside 40% of your taxable profits as you earn them on whatever basis your return is prepared under.  Implementing a regular system of either paying your company’s taxes as income is earned or, if you are not yet required to pay the taxes, setting aside the tax payment money in a safe account, will help you know what portion of the money made actually belongs to you.  

Pay Down Debt - After taxes, your next priority should be to pay down all debt.  For starting businesses, consider setting up term notes over using lines of credit.  Eliminate the temptation of drawing on your line to solve cash flow shortages that in reality postpone needed changes in your business or in your business model itself.  Mature businesses can use term notes for equipment for purchases where the note covers the term of the asset’s useful life.  But this is still second-best to having no debt.

Retain Money For Working Capital - A good “spare cash” target for a business is 2 to 3 months of operating expenses after all other debt has been paid.  You can adjust this number up to 6 months if your business does not have significant receivables or equipment that can be leveraged in a crisis.  You would also add to this amount any major equipment purchases or acquisition plans.  

Pay Dividends to Owners - After the first three priorities have been addressed, it is finally your turn.  This is the point at which the owner(s) can pull cash out or sell or well at that point your options are many.  The company is now a profitable enterprise that has paid all its taxes, is debt-free, and has anywhere from 2 to 6 months operating expenses in the bank.  This is a business that somebody would buy.  But you also have a business that is spinning off a return to its investors (you!), which means that you have a lot of choices. 

Knowing your cash priorities and using your cash to 1) pay taxes, 2) pay down debt,3) cover working capital, and 4) pay dividends to the owner creates value for your company and gives you options that can support your passions in life and what you want to do next.  Isn’t that fun to think about?  

 

To Your Success, 

Bruce Rector

The Rector Group

Tel: 954-356-0439

brector@therectorgroup.com

 

 

 

Sign up here to receive Your Business Challenge of the Week or Forward to a Friend.

 

 

 

 

 

 



July – It’s officially the 2nd half of the year!

Friday, July 6th, 2012

I recently had the opportunity to participate in a panel discussion sponsored by the South Florida Business Journal called “Expand Your Business to the Next Level”.  I was selected as the expert on the topic of “How to find money”.  I got so many follow up questions that I decided to focus the challenge this week on this issue.  I often find that the companies that need money are never prepared to go out and get it.  So with that in mind, your challenge this week is:  Is your company prepared to get financing?  

There are different types of financing that you may be interested in but one thing is for sure – anyone who gives you money is going to want to know some specific details about your company and waiting until you need money is never the best time to go out and get it.

Your challenge this week is to prepare the information you need to go out and get financing, whether you need it or not.

I am going to call this a loan application but it is actually multi-purpose and can be used to inspire and sell stakeholders – you, your bankers and investors, and your employees – on the business and its prospects.  

A good loan application should contain the following:

  • Executive Summary - No more than 3 pages – it should create instant excitement and impact, spell out your company’s mission and clearly state the opportunities you see for your company and/or industry and how those opportunities will result in increased earnings and profits.
  • The Industry – Use credible research from recognized authorities.  Convey the size, growth and signficiance of your industry.  Identify your specific niche in the marketplace.  
  • The Company – History and Major Accomplishments, Divisions/Offices and or Shop Locations, Market Niche/Competitors, Marketing Plan, Clients, Expansion Plans, Company Values/Mission Statement, Profit Centers and Product Lines
  • Management and Ownership – Organization Chart, Brief Bio of Key People, Board of Directors/Advisory Board, Hiring Needs
  • Financial Information/Projections – Forecasts for a 3 year period using a best, probable and worst case scenario for each year on a cash basis.  Include payback of loan in your financials. Historical P&Ls and current balance sheet that will indicate top-line and bottom-line growth.  
  • Purpose of the Investment - Short, compelling and to the point. Spell out exactly what you want and reiterate what you will do with the funds.

You will sleep better at night knowing you have this information together and are keeping it current.  If you would like more information on any of the above or help putting it together, let me know.  

Happy 4th of July everyone!  I hope you all have a safe holiday.  

Sincerely, 

Bruce Rector

The Rector Group

Tel: 954-356-0439

brector@therectorgroup.com

 

Sign up here to receive Your Business Challenge of the Week or Forward to a Friend.

 

 



Business Challenge of the Week – Are you willing to abandon some business?

Thursday, June 28th, 2012

JUNE – HOW TO GET WHAT YOU ARE WORTH

(based on Alan Weiss, Value-Based Fees)

Week 1 -Why people give you their money

Week 2What you say affects your worth

Week 3 – How to establish your unique value

You can only give 100 percent of your energy and resources to your business and clients.  When you waste any time on nonpromising or underperforming businesses, it’s negligent.  There’s no other way to put it.

Your challenge this week is to assess your entire client base and abandon a portion of it because that will free up your energy and time to focus on your best clients and future best clients.  While this may seem tough, I promise you it will be one of the most powerful things you do to grow your company and acquire the higher profit, value-based clients you deserve.

Ask yourself these questions about every client:

  • Am I regularly learning anything as a result of this relationship?
  • Am I still adding value that others can’t?
  • Am I being paid well and is my profit as great as with new clients?
  • Am I being challenged and forced to grow?
  • Am I introducing new products and services on a regular basis?
  • Am I getting valuable referrals from this client that are allowing me to open up other channels?  
  • Am I able to experiment and try new things with this client?
  • Am I enjoying this project and having fun?

If the answer to two or more questions is no, move on.  

“You have to let go to reach out.  Let go of those who can easily go their own way before more important clients let go of you.” 

Alan Weiss, Value Based Fees

Sincerely, 

Bruce Rector

The Rector Group

Tel: 954-356-0439

brector@therectorgroup.com

 

Sign up here to receive Your Business Challenge of the Week or Forward to a Friend.

 


 



Business Challenge of the Week – How to establish your unique value

Monday, June 18th, 2012

JUNE CHALLENGES – HOW TO GET WHAT YOU ARE WORTH (based on Alan Weiss, Value-Based Fees)

The last few weeks, we have been focusing on how to price your services based on the value you bring to the table.  We’ve gone through two challenges so far to help you identify where you may be missing the mark.   If you missed either of those, take a minute to review them here:

Week 1 - Why people give you their money

Week 2 - What you say affects your worth

Now you are ready to put it into action.  Your challenge this week is to change the way you charge your clients from time and labor to value based fees.  There are two parts to this challenge.  To make it extra useful, take something you are working on now and go through this process.

Part I – Define the following – the 3 key building blocks of a value-based project:

  1. The business objectives to be met
  2. The metrics or measures that will be used to assess progress and determine success
  3. The value meeting those objectives brings to the client

With these three criteria defined, you can determine the appropriate price that will make good business sense for everyone involved.   I would define good business sense the following way:  What fee range will prompt the client to say, “That was a terrific return on my investment, and I’d like to work with  that company again,” and you to say, “We were paid very well for our contribution, and the margin was excellent”.

Value-based fees are more an art than a science.  You have to not only deliver significant value (what you identified above) but you also have to believe enough in yourself to charge a significant fee, which is usually the toughest part of the sell which leads to Part II of the challenge.

Part II – Establish your own value based on you or your company’s uniqueness.  Here are the 3 key questions you should answer for every single engagement, prior to establishing fees:  (apply this to the project you used in Part I)

  1. Why you?  What value do you bring that others can’t?  Do you possess some unique expertise?  Have you been referred by a trusted source?  Are you in the right place at the right time?
  2. Why now?  Is there some urgency that needs to be considered?  What would happen if the client did nothing?  Would the situation be stable or would it deteriorate further? Is there a limited opportunity to get the project done or the opportunity will be lost?  Is there funding that will disappear if not used?
  3. Why in this manner?  Why aren’t they doing this internally?  Have they tried this in the past and failed?  Have they used other outside resources before and if so, what was the result?  Who else is involved inthe project and why?

By answering these questions, you will quickly see and appreciate your own value.  Look in the mirror, and practice on the toughest buyer of all.  That, coupled with the value you bring to the client based on meeting agreed upon objectives in Part 1 will help you begin establishing value-based fees for every project that you or your company take on.

“It’s easy to assess your own unique value, but most companies and consultants don’t bother.  If you don’t do it, no one else if going to do it for you.” - Alan Weiss, Value Based Fees

Sincerely,

Bruce Rector

The Rector Group

Tel: 954-356-0439

brector@therectorgroup.com



Business Challenge of the Week – What you say affects your worth

Friday, June 15th, 2012

JUNE – HOW TO GET WHAT YOU ARE WORTH

This month, we are focusing on how to make sure you are getting what you are worth.  As I mentioned in the Business Challenge last week, I’m using a book called Value Based Fees by Alan Weiss as the foundation.   No matter what business you are in, the concepts we will be discussing will help challenge you to rethink and improve your pricing strategy.

As service professionals, we often focus on the tasks we do for our clients as opposed to the outcomes when we are pricing a project.  Of course when we do this, it devalues our worth.  And it’s our fault.  We’ve educated our clients to pay us based on time and materials which is missing the real reason a client hires us which is to improve their condition by meeting or exceeding mutually establised project and business goals.  And that’s worth something.

Your challenge this week is to determine if any of the following apply to you.

Review your company’s website, any printed materials you use and think about what you and your team says during sales conversations.

Do any of the following apply?

  1. Too many words.  Lots of text and very little visuals.
  2. An obsession with the obvious.   “We believe in the highest level of ethics and integrity.”  (Really?  I was looking specifically for an unethical consultant.”)
  3. Overly boastful – Materials focus on what you do and how you do it.
  4. Full of technology and methodology - Lot’s of detail about your approach, steps and jargon.
  5. Nothing of value.  There is nothing that happens as a result of going to your website, reading your materials or event talking with you or your team about what you do that adds value to the reader or listener.  It’s all blah, blah, blah.

If you answered yes to any of the above, you are leaving money on the table with your clients.  Every interaction and activity you propose to your clients must be communicated as an outcome, a result.  The intrinsic value of actions is enormous because they meet the emotional needs of the client and can’t be compared to anything else.  You have the power to influence this by the way you communicate and frame the activity.

For instance which of these is more valuable to the client?

A.   Conduct a strategic planning session with senior management team

OR

B.   Establish an aggressive 2 year strategy that will result in double digit growth and 10% gain in market share.

Which one do you think your client will be happy to pay your fee for?

Start communicating based on how your client will prosper because of their relationship with you.  This is all they really care about.

“Consulting is art and science.  The danger is that we become excellent technicians and lose our aesthetic sense.  We need to pain visions of the future – for our clients and ourselves.”

- Alan Weiss, Value Based Fees

Sign up here to receive Your Business Challenge of the Week or Forward to a Friend. 


Business Challenge of the Week – Why People Give You Their Money?

Monday, June 4th, 2012

JUNE – HOW TO GET WHAT YOU ARE WORTH

It’s a new month so time for a new topic.   I’m taking on pricing this month and challenge you to make sure you are charging and getting what you are worth.  I’m using a book called Value Based Fees by Alan Weiss as the foundation.  While I realize this may be more suited to those of you in the service industry, there will also be plenty of opportunity for those of you who sell a durable product or are in retail to up your game in the pricing area.

Let’s jump right into it.  Your challenge this week is to think about and answer the following questions:

  1. When you get pushback about pricing, do you end up lowering the fee rather than focus on raising the value?
  2. Are you able to translate the importance of the guidane and counsel you provide into long term gains for your clients so they “get it” or do you fall into the trap  of basing your value solely on deliverables, time and materials (low value commodoties)?
  3. Do you only deal with legitimate, economic buyers vs the client that delays payment, argues about your value, randomly changes objectives?
  4. Do you believe in your own worth and high value you deliver to your clients or do you sometimes let doubt and low self esteem drive you into reducing your fees?
  5. Do you still charge by the hour instead of by the project?

That’s it for this week.  Your challenge is to begin thinking about each of these areas.  We will dive into each of them more closely throughout the month.

“Establishing value with the client is key.  If the focus is on fees and not on value, the client has taken control of the discussion, and the client’s focus will never be on maximizing your fees.”  Alan Weiss, Value-Based Fees

Sincerely,

Bruce Rector

The Rector Group

Tel: 954-356-0439



Business Challenge of the Week – Remembering Our Silent Heroes

Wednesday, May 30th, 2012

I hope everyone had a great Memorial Day Weekend.  Memorial Day is always bittersweet for me.  On one hand, it feels celebratory in nature as a long weekend filled with BBQ’s and pool parties.  On the other hand and more importantly, it is a day for us to remember and thank the men and women plus their families who fight for our country and give up so much.  One of the great things about our country is our armed forces and the comfort it gives each American knowing they are always in the background fighting for our freedom and rights without us having to think about it.  We can never thank them or their families enough for the sacrifices they make, yet we must keep on trying.

It made me consider all the unsung heroes we have in our businesses who work tirelessly behind the scenes helping to keep our businesses healthy and safe.  I have a team of these people around me who help me.  They help me make sure I send out correct invoices on time, update my website, clean my office, think of me for a public speaking engagment, and so much more.  They help with so many things I’m not thinking about yet they happen.

Your challenge this week is two fold:

One – If you know anyone who has served or is serving in our armed forces, thank them enthusiastically.  Thank as many of them as you can.  Keep the spirit of Memorial Day alive.

Two – Make a point of thanking all the people in your organization, inside and out, who keep things moving behind the scenes without you having to think about it.  You actually may need to take a few minutes to think about it to truly understand how much support you have.

Creating a winning team is important.  Acknowledging that team is powerful.

Sign up here to receive Your Business Challenge of the Week or Forward to a Friend.

Sincerely,

Bruce Rector

The Rector Group

Tel: 954-356-0439

brector@therectorgroup.com

 



Business Challenge of the Week – How Strong Is Your Company Culture?

Wednesday, May 23rd, 2012

MAY – BUILDING A WINNING TEAM

The last two weeks we’ve challenged you to evaluate your current team  to evaluate your current team to determine if you have any problem areas and also to review your hiring process and make some improvements.  Both of these challenges are in support of our theme for the Month of May – “Creating a Winning Team”.

This weeks challenge is focused on your company culture. Company culture is one of the most important components of a successful, sustainable business yet often overlooked because it’s difficult to precisely measure. Yet a strong company culture is what holds an organization together and motivates people within to do the right thing rather than the easy thing.

Your challenge this week is to determine “Do you have a strong company culture?”

Answer the following questions and rate yourself on a scale of 1 – 5 (1 would be all no’s, 5′s would be confident yes’s):

  1. Do you have remarkable employee satisfaction? Are your employees super productive? Do they focus on solutions not problems?
  2. Is there open communication at your company? Do your employees feel empowered to speak up when they see an issue? Are they willing to suggest improvements to current processes and procedures?
  3. Do prospective employees seek your company out because of the reputation you have in your industry and/or community? Do you find it easy to find and retain new employees?
  4. Does your company get recognized by your industry and/or the media? Are you sought after for speaking engagements, participation in events and feedback on important industry or community issues?

How did you do? If you got a 5 for each area, congratulations, you’ve built a strong company culture with results to prove it. If you scored more 1’s and 2’s, it means you have some work to do.

Building a strong culture has to come from the very top. Otherwise it won’t stick. Your employees need to clearly understand what your vision, mission, values and goals are and see, as well as be part of, how that gets “lived” through the organization everyday.

Companies with winning cultures are better able to execute on strategy; their employees maintain a healthy external focus on customers and competitors rather than on internal politics or turf. Employees think and act like owners—they take personal responsibility for overall business performance, not just their slice of it. They also exhibit a clear bias for action, with little patience for bureaucratic debate.

I believe Merck CEO Richard Clark statement sums it up nicely, “The fact is, culture eats strategy for lunch,” he stated. “You can have a good strategy in place, but if you don’t have the culture and the enabling systems that allow you to successfully implement that strategy, the culture of the organization will defeat the strategy.”

Sincerely,

Bruce Rector
The Rector Group
Tel: 954-356-0439
brector@therectorgroup.com

Sign up here to automatically receive  Your Business Challenge of the Week or Forward to a Friend.



Business Challenge of the Week – Improve Your Hiring Process

Monday, May 14th, 2012

Most business owners struggle with finding and hiring great employees. Your challenge this week is to analyze your current hiring process and make some improvements. Here are some areas to kickstart your review process:

  • Do you hire for skillset or mindset? Having the right skills and experience is certainly important but mindset should also be a critical factor. The right mindset includes things like: open to feedback, committment to learning, integrity, kindness as well as sharing your company’s core values.
  • Do you include your core values in your ad and/or interview process? In order to live your core values at a company level, you need to hire people who share them. Here’s a tip to help attract employees that share your company core values. Place your core values in your ad and ask the candidate to send a paragraph explaining how they demonstrated those values at their last job. If they make the cut to the interview process, after you have met them and asked them if they have any questions about the job they are applying for, ask them to write a paragraph explaining how they would exemplify those values if they got the new position. If you aren’t doing this currently, start immediately.
  • Do you talk more or listen more during the interview? If you find that you are doing more talking than listening because you are selling the company and yourself over getting to know the candidate, STOP. During the interview process it’s important to ask a lot of questions and let the interviewee talk so you can see how they communicate plus put them in as many situations as possible that they have to react to with real life examples such as how have you handled a situation like this before in your previous positions or how would you handle it if we were to hire you. Don’t make the interview all fluff and no substance. Put them in situations where they have to act like the exercise in #2.
  • Do you use any personality tests to help with your hiring process? Personality tests can be a huge time saver for your company in the short and long run. Employment personality tests measure choice, preference, values, behavior, decisions, attitudes, and job-related interests. It gives you insight into why people do what they do and helps you determine if they would be a good fit for the position. I recommend you hire a professional to help you determine which tests to use and how best to interpret them and make them part of the hiring process.

Once you are ready to hire someone, do the concert test with them as discussed in last week’s challenge.

Good luck!

Sincerely,

Bruce Rector
The Rector Group
Tel: 954-356-0439
brector@therectorgroup.com

Sign up here to receive Your Business Challenge of the Week or Forward to a Friend.



Business Challenge of the Week – What would you do?

Tuesday, May 8th, 2012

MAY – BUILDING A WINNING TEAM

It’s a new month which means it is time to focus on a new area of your business.  So far we have covered:

  • January – Strategy
  • February – Money
  • March – Marketing
  • April – Sales

May is about providing you with challenges around building and maintaining a winning team for your organization.  Remember you are only as good as the people you surround yourself with so the challenges this month will help you surround yourself with “A” Players.

Your challenge this week is adapted from Guy Kawasaki’s “Art of Recruiting”.  He calls it the Shopping Center Test but my version is called the Concert Test.  He uses it during the recruiting process but I’m adapting it to use for all of your key team members.

Ready?  It’s really quick and really easy to do.  But the results are very revealing.

  • Take a moment to list you key team members – those people whose roles are vital to your success.  I want you to write them down on a piece of paper.
  • Now go through this for each team member one by one:
  • Suppose you’re at a concert, and you see your team member.
  • He/she is fifty feet away and has not seen you.
  • You have three choices:
  1. beeline it over to him and say hello;
  2. say to yourself, “If we make eye contact then I’ll say hello, or maybe they will see me and come over,  if not, that’s okay too;”
  3. make a point to not look in that direction again and go the opposite direction when you leave.

If you don’t pick number 1 for each person on your team, than you’ve got a problem that you need to address.  It may not be that the person isn’t right for the team, but clearly there is an issue with that person if you will not make a simple effort to connect outside the office when the opportunity arises.  My advice is figure out what it is and deal with it immediately.  How you deal with it may need to be extreme too – maybe they need to be let go and you just don’t want to deal with it.  This is an all too common problem.

Hopefully as you think about each team member on the list, you will choose #1 each time. If you don’t, then deal with it; don’t just rationalize it somehow.  Resolution may not be easy, but forthrightly addressing the issue, and ensuring that you’ve got the correct players in place will be significant to the future success of your organization.

Remember, without people a company just an empty building.  Make sure you’ve got the right ones in place.

BONUS CHALLENGE:  Do this same exercise for your customers as well.  It may be time to get rid of some of your customers.  

 

Sincerely,

Bruce Rector

The Rector Group

Tel: 954-356-0439

brector@therectorgroup.com

Sign up here to receive Your Business Challenge of the Week or Forward to a Friend.