Déjà vu all over again?

How often have you heard that phrase banging against your skull … and how often was it telling you … “I’ve been here before” … “Didn’t we already solve this problem?” … “Why does this subject keep coming up all the time?”

Why do these issues keep resurfacing?

Late last year, I embarked on a retrospective of my first 100 newspaper columns from the last four years. You may recall that I emphasized how often so many of those issues continue to be the same challenges year after year.

They’re constantly resurfacing, often in disguise as a different issue altogether … but really, the same ‘ol, same ‘ol.

Have we become dumb and dumberer?

I promised you then that we would attack the litany of reasons that these same issues keep popping up like whack-a-moles. I don’t think we’ve gotten “dumb and dumberer,” so what’s going on? Why are we tackling the same problems over and over again?

What I discovered is that there is a consistent swarm of resilient little creatures that appear like marbles on a bedroom floor … we’re constantly dodging them, looking for ways to step around them, kicking them to the side … but rarely do we take time to permanently organize them so we don’t trip over them again tomorrow.

There are a dozen forces aligned against us …

In my last column, I tackled one of the biggest reasons these issues keep reappearing  … our inability to make the tough decisions … but there’s much more. By my count, there are at least a dozen universal forces that have united to defeat our best-laid plans.

I’ve decided to rip off their masks and let them be seen for what they are … mostly, our own creations. But for our comfort or timidity or lack of conviction, they have a life of their own and prevent us from getting done and permanently resolving those things that are most important to us.

The next demon on this list rhymes with “it’s the economy, stupid.”

How do companies become “Great by Choice”? 

Jim Collins in his latest book, Great by Choice, explores what differentiates the most successful companies … during chaotic and unpredictable times … from the also-rans.

Why do some companies fail to successfully respond to the obstacles thrown in their way … by a wayward economy, rising energy prices, oppressive regulation, predatory pricing, you name it … while others thrive despite the obstacles?

 10X Companies REFUSE to be overrun by external forces

What Collins found in his empirical research is that the most successful, 10X companies he studied refused to be overcome by these external forces. They recognized that unexpected roadblocks, even the black swans that Nassim Nicholas Taleb wrote about in his popular book of the same name, were simply grist for their mill.

The most successful companies modified their plans but followed them relentlessly, dodging bullets, sidestepping land mines, and confronting immovable objects as just one more tripwire to step over. It was simply unacceptable to “blame” these outside factors or to even proffer them as a reason for failure or disappointment.

Accepting full responsibility is a mindset

More than anything, for these companies, it is a mindset. They embrace the notion that obstacles, of one kind or another, are a permanent part of the natural landscape, and don’t let these inevitable forces derail their plans. They don’t blame these uncontrollable events for every shortcoming and don’t let uncontrollable environmental factors strangle the initiatives over which they do have domain.

When you look through the glass, it’s really a mirror

It’s human nature for us to want to look out the window rather than in the mirror to find the culprit, but that’s the wrong lens. Yes, the environment will throw spitballs at us all the time. We can’t ignore these forces … but we can create a plan to take overcome them.

We can dodge some of them, turn others to our advantage … but we must turn them to our purposes because they probably aren’t going away … and we don’t want to either.

Get Great by Choice for free … from me … but ACT NOW!

Here’s what I’m going to do to help you.

For the first five readers who sign up for my exclusive newsletter and comment on this article when it’s published on Exkalibur.com on Tuesday, Jan. 31, I will send you a copy of Jim Collin’s book, Great by Choice, at no cost to you.

I hope it will also inspire you to become “great by choice.”

Here’s the thing. Heads down. Focus. It’s on you!

In the meantime, focus on what you can control. Don’t blame the economy or any of the uncontrollable forces that conspire against us.

Forget the wet field, the injured player, the referee’s bad call. Have a five-minute pity party if you must … but then, move on.

Persevere. Revise your plan as needed and focus on what you can control. Nothing more. Heads down. Keep going.

Consider the environment but focus on what you can control and you will have grasped the only real thing you can count on.

You.

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This article was published in the January 30, 2012 edition of the North Bay Business Journal, a publication of the New York Times, and a weekly business newspaper which I have served as a regular columnist for over three years. The Business Journal covers the North Bay area of San Francisco – from the Golden Gate bridge north, including the Wine Country of Sonoma and Napa counties. The electronic version of this article, as published by the North Bay Business Journal, may be found here.

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Lary Kirchenbauer is the president of Exkalibur Advisors, providing practical business strategies for family and other privately owned businesses in the middle market. Exkalibur works closely with senior executives and their businesses in the wine and other industries, and hosts the Exkalibur Leadership Forum for leaders of middle market companies in the North Bay. Please visit Exkalibur.com for a library of valuable resources, articles and insights or connect on Twitter, LinkedIN or the Exkalibur fan page on Facebook.

Leadership Obstacles: There’s no one to blame … except yourself | Special Bonus Today is a post from: Sword Tips – the Exkalibur blog

Hope Springs Eternal … But it’s nowhere near enough ….

For most of us, this is the time of the year when hope springs eternal. We’re revved up for an exciting new year, determined to change all of the things that didn’t work last year so we can pound the ball out of the park in 2012.

Nothing wrong with any of that. Commitment, momentum, focus … these are the energies that will fuel our engine and help us jumpstart 2012 with the vigor and rigor that we need to make this year the most successful ever.

Does your gum lose its flavor on the bedpost overnight?

Yet, like most New Year’s resolutions we’ve made, the “gum loses its flavor on the bedpost overnight”.

We soon discover that it’s much easier to start than to finish.

We struggle to keep the engine stoked with the same energy that propelled us into the New Year.

We begin to feel some of the air already coming out of the tires, and begin to wonder … “where did that new-found energy go”?

What’s that whimpering sound?

It comes back to that whimpering sound of “hope springs eternal.” Hope is a powerful emotion and inspires great things. It can give us the strength to launch new initiatives, and with renewed conviction, but it doesn’t include the tools we need to sustain those initiatives.

If we only needed one big burst of energy, say to set the world’s pole vault record on that one single jump, maybe it would be enough … but only if was built in all the preceding years on a foundation of relentless preparation and training that we could sustain until that one big moment.

Build the tools. Blow up stuff that isn’t working

So, instead of just revving the engine, focus on building the tools, the infrastructure, the support systems that enable you and everyone on your team to excel in their roles and exceed expectations.

To do that, you need to objectively assess the systems and procedures available to execute on the strategy you’ve established. (You have one, right?)

Don’t be timid about it. Don’t be afraid to blow up the things that aren’t working, slay the dragons, kill off the tired assumptions that have hampered your success in the past.

The tools today are exceptional … affordable … accessible

Only care about what works today. You know, as well as I, that we live in a world of technology prowess, with powerful tools of global communication, integrated processing, collaborative work processes and a boatload of productivity tools at our command.

They’re getting cheaper every day, and younger people entering the workforce are wed to them like sunshine to daylight.

Invest in them … use them … and make sure they’re implemented to help you reach the leading edge of exceptional customer experience and an exciting workplace that promotes growth and success for all of your colleagues.

Remember the mantra: “Ready. Fire! Aim.

Empower your people.

Set the direction but let them help you figure out “how” to get things done.

Let them experiment, let them fail … let them know that “ready, fire, aim” is okay and that you’d much prefer action that occasionally misfires than no action at all.

Make them believers in your cause, let them become evangelists for the freedom you give them … to dream with you, to be innovative and enthusiastic about helping you build a successful business that will sustain everyone.

Prove to your colleagues that you will “walk the walk”

Above all, invest in the tools.

Empowering people means enabling them, and that means providing the resources that “walk the walk”. It puts teeth into your strategy execution so that the sweat and tears to develop that strategy weren’t in vain.

Of course, if you don’t have a strategy, you’ll probably wish you did as you try to prioritize and sequence the tools that need to be implemented.

Yes, the best time to have a map is when you enter the forest … but it’s never too late to develop a strategy that provides the centerpiece around which you can evaluate the tools that are most important to accomplish your mission.

Hope is a soothing balm. Don’t let it became an embalming ingredient

Step one, then, is to recognize that while hope is a soothing balm that inspires us, it quickly dissipates if it’s built on words rather than deeds.

What are you waiting for?

Get moving. Gather the troops. Ask them what they need to carry out your strategy. Marshall your limited resources, certainly, but also invest them to create sustainable momentum that will move the needle and help you build a successful business.

Hope is not a strategy – action is.

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This article was published in the January 16, 2012 edition of the North Bay Business Journal, a publication of the New York Times, and a weekly business newspaper which I have served as a regular columnist for over three years. The Business Journal covers the North Bay area of San Francisco – from the Golden Gate bridge north, including the Wine Country of Sonoma and Napa counties. The electronic version of this article, as published by the North Bay Business Journal, may be found here.

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Lary Kirchenbauer is the president of Exkalibur Advisors, providing practical business strategies for family and other privately owned businesses in the middle market. Exkalibur works closely with senior executives and their businesses in the wine and other industries, and hosts the Exkalibur Leadership Forum for leaders of middle market companies in the North Bay. Please visit Exkalibur.com for a library of valuable resources, articles and insights or connect on Twitter, LinkedIN or the Exkalibur fan page on Facebook.

Leadership Lessons: Hope Springs Eternal … but it’s not enough! is a post from: Sword Tips – the Exkalibur blog

To tell the truth, I really just wanted to cry.

That was my reaction as I scanned the dining room at the Assisted Living facility into which my 93-year-old mother just moved. Not because it isn’t a terrific facility. It’s one of the nicest I have ever seen, visited or heard about, with a wonderful and genuinely caring staff. No, it’s not that at all. It wasn’t weariness, either, although it did follow on the heels of a draining four-day transition, including a crushing array of painful and tedious sorting, organizing, shopping and hauling to massively downsize and, sadly, to discard even more memorabilia from a rich life of living.

Not all of it mind you. Two big boxes of family history are headed my way, as I’m the last stop for any chance to digitize and preserve almost a century of living so it can be shared throughout the widespread family. All of the forthcoming scanning and cataloging will be a dose of dullsville … invited and welcome, yes … but infinitely time-consuming nonetheless.

It includes hundreds … more likely, thousands … of photographs, yearbook pages, commencement programs, newspaper articles, announcements and the collective minutiae that memorialize a life, two lives really. My father, who passed away 10 years ago … as one who never let a piece of paper slip through his hands … successfully squirreled away records and magazines from as far back as the 1940s and 1950s that escaped our notice in the decade-earlier downsizing round.

It’s not just sentiment or nostalgia

You might figure that the tears are sentimental or nostalgic. I wish it were that simple.
Part of it is the pronounced recognition that your parent(s) won’t be here forever and there’s nothing you can do about it … even though that’s not exactly a news flash. Father Time will collect his fares with no regard whatever for our undying love and devotion for his passengers. Another part of it … and each of these recognitions becomes progressively more heartbreaking … is that their declining faculties are immutable and there is no soothing intervention other than our love and care.

It’s also the agonizing reflection that our parents are just not as intertwined into our daily lives as much as they once were. They’ve done their job. They ushered us into an independent life of our own choosing, but in the process, like the images in an old photograph, they begin to fade as time passes on. By divine plan, I suppose, they play a smaller role in our lives, perhaps to make it easier to adjust to their absence as life continues to turn the dial. In my case, it’s exacerbated by 2,300 miles and an ailing brother whose nearby help is unavailable.

We can help to ameliorate the loneliness 

Mostly, though, the tears are about my heartache that the loneliness that often accompanies these life-changing transitions will embed itself even deeper into my mother’s life. Most of her neighbors and dining companions are in the same age group and while they’re all infinitely gracious, kind and welcoming, they’re also for the most part … alone. Many of them languish in almost total anonymity. By themselves. Sitting alone in their rooms for the majority of their waking hours. They’re loved deeply by their families, but those same family members are overrun by the demands of distance and their own lives, and do little to energize preceding generations.

As with many of our problems, we’re pretty good at guiding them to the back of the bus so we don’t have to look at them too closely. It’s not that we don’t HAVE the time … we don’t MAKE the time. Some do, and I freely admit I’m working to do even better myself. But here’s the thing. Our turn is coming. Make no mistake. It’s inevitable, and we can only hope and pray that our children will emulate the example we’ve set when our turn comes.

What does this have to do with building a business?

What does this have to do with building a business? Nothing … and everything. Nothing because our business is supposed to be about creating a sustainable and successful commercial enterprise … and everything because our economic success is closely interwoven with the lives of those around us. If our families are the centerpiece of our lives, and we delight in the love and fellowship they bring, then those same core beliefs and principles must also be embedded in the cultural values that drive our business.

Apply this message every day in 2012

I hope you’ll accept this personal essay as a gentle reminder fit for this holiday season. Don’t let your frenetic social pace, the taste of sweet champagne get in the way of the company of close friends and family that will enrich, and give your life meaning … for all days. Be proactive, reach out to them … nurture those timeless and meaningful relationships that are the foundation of our lives. Whatever you do, don’t forget the precious members of previous generations, near or far, that placed the stones in the path that got you here. Your business, too, will be stronger for the value you invest in your relationships with your partners, colleagues and employees.

As I was leaving to return home, I spoke briefly with a woman clinging to her walker as we rode on the elevator together. She has known my Mom for many years but as she got off the elevator, she turned to me and said gently over her shoulder:

“Thanks for coming to visit. We sure always need it.”

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This article was published in the December 26, 2011 edition of the North Bay Business Journal, a publication of the New York Times, and a weekly business newspaper which I have served as a regular columnist for over four years. The Business Journal covers the North Bay area of San Francisco – from the Golden Gate bridge north, including the Wine Country of Sonoma and Napa counties. The electronic version of this article, as published by the North Bay Business Journal, may be found here.

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Lary Kirchenbauer is the president of Exkalibur Advisors, providing practical business strategies for family and other privately owned businesses in the middle market. Exkalibur works closely with senior executives and their businesses in the wine and other industries, and hosts the Exkalibur Leadership Forum for leaders of middle market companies in the North Bay. Please visit Exkalibur.com for a library of valuable resources, articles and insights or connect on Twitter, LinkedIN or the Exkalibur fan page on Facebook.

It’s not about stuff – it’s about them! is a post from: Sword Tips – the Exkalibur blog

Every Tuesday, we’re sharing valuable and practical leadership tips and tools to help you BE a better leader so you can BECOME a better leader. Remember … you won’t BECOME a better leader until you start BEING a better leader … implementing NOW the changes necessary to adopt the proven strategies of successful leaders. You might start by building on the communication matrix and making sure you’re defending the castle to get done what only you can do. Make sure to take some time so you’re thinking past today. Don’t forget our 12 part Leadership series.

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Do it quickly, don’t look back … and move on

Remember how Mom used to say: “You know better than that?”

It wasn’t that we were ignorant or unaware of what was supposed to be done. Quite the contrary. We knew damn well what we were supposed to do but we just didn’t want to do it. Why not?

Why don’t we do what we know we should do?

That’s the eternal conundrum, isn’t it my friends? Why don’t we do what we know we must do? Libraries are brimming with wit and wisdom to get us to do it — and there’s a bottomless pit of experts, gurus and charlatans filling the self-help sections in bookstores to help us find salvation and explode into extraordinary success.

So, with all of this help available — do you seek it out? — Why do the same issues keep showing up like destructive blood cells traversing our circulatory system?

How many excuses … er, reasons … do we have?

As I was writing some of the recent retrospective columns, I thought I had about three main reasons why the issues I’ve written about over four years keep making the rounds to face us again and again. As I’ve thought about it, however, I’ve found more like a dozen reasons. Too many, really, because it gives us even more excuses — er, reasons — not to resolve the issues before us.

So, over the next several columns, because understanding this organic chemistry question may be the solution most critical to your success, we’ll tackle them.

Symptoms, Challenges … and Solutions

I’ve changed up the format to make sure we don’t dwell on the challenges without taking on the solutions. I’ve also offered some ideas about how to recognize the symptoms as well as how to strap on your warrior mojo to combat these sworn enemies of success. So, in no particular order …

CHALLENGE No. 1: Refusal to make the tough decisions

What are these tough decisions? They’re the ones where your gut knows the right answer but you resist because you know it will bring a lot of blowback. Maybe it’s the termination of a long-time employee or the closing of a facility, but it’s a decision that won’t go quietly into the night.

If delaying these tough decisions resulted in better outcomes, all the better — but the fascinating dynamic of this decision process is that delay or hesitation rarely changes the outcome; it only postpones it. Since the tough decision you don’t make is usually the right decision, it continues to nag at you until you eventually pull the ripcord when you’re convinced for the 15th time that it is the right decision. In the interim, however, you’ve actually created even more turmoil because you, and everyone around you, have had to deal with the ramifications of the wrong decision over these many months. How painful is that?

SYMPTOMS

When you feel that stirring in your gut, when you feel the bile begin to start crawling up your esophagus, that’s a pretty reliable sign something’s amiss. Likewise, when you realize that you’re mired in the world of “paralysis by analysis,” endlessly seeking some fact pattern that will support your unpopular decision, you can be pretty sure you’re postponing the inevitable.

When you stare into the mirror and see “wishful thinking” etched into its foggy surface, you’re there.

SOLUTION

When you know you’re right, whether in your gut or with every fact you can muster, pull the trigger. Do what you know is right. There will always be unwelcome fallout, but that happens just as often when a decision is unanimous. Do it quickly, don’t look back and move on to the next problem.

I know, we’ve spilt some ink on this one — yes, again — but it’s the nucleus of the gamesmanship we play that corrupts our personal productivity, straps an anvil onto the limbs of organizational momentum — and consumes that most precious commodity, time — which is really not a commodity at all — that we could otherwise spend on the next set of decisions that await, like eager novitiates, to invade our headspace.

Get past this one so you can move on to the next one — just like we’ll do next time.

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This article was published in the December 5, 2011 edition of the North Bay Business Journal, a publication of the New York Times, and a weekly business newspaper which I have served as a regular columnist for over three years. The Business Journal covers the North Bay area of San Francisco – from the Golden Gate bridge north, including the Wine Country of Sonoma and Napa counties. The electronic version of this article, as published by the North Bay Business Journal, may be found here.

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Lary Kirchenbauer is the president of Exkalibur Advisors, providing practical business strategies for family and other privately owned businesses in the middle market. Exkalibur works closely with senior executives and their businesses in the wine and other industries, and hosts the Exkalibur Leadership Forum for leaders of middle market companies in the North Bay. Please visit Exkalibur.com for a library of valuable resources, articles and insights or connect on Twitter, LinkedIN or the Exkalibur fan page on Facebook.

Leadership Lessons | Delaying the tough call only makes it worse is a post from: Sword Tips – the Exkalibur blog

In the tumult surrounding the 3D maelstrom (Debt Ceiling, Downgrading and Deficit) of several weeks ago, you may have missed another chilling corporate finance update on the relentless pursuit of performance metrics that extol the sunshine while you’re in the heart of darkness. Yes, there may be some economic value for certain of these metrics, but they’re dangerous barometers of realizable value and highly misleading as to future achievements of tangible operating profits and free cash flow.

Another Sign of the Apocalypse?

Most of us recall the “eyeball counting” that preceded the Dot-Com-Bomb and those certain “Signs of the Apocalypse”, as when your cab driver is telling you what stocks you should buy.

So, in case you missed the New York Times article describing the latest incarnation of these prayerful metrics, “ACSOI” is one the latest inventions. Pronounced as either “ack-soy” or “ask-saw” depending on the source, it stands for “adjusted consolidated segment operating income.”

It may be one of those metrics that falls into the bucket that Lynn E. Turner, a former chief accountant for the Securities and Exchange Commission, once called E.B.B.S., or “earnings before bad stuff.” Sweet, huh?

Let’s leave out some of them stinkin’ marketing expenses

ACSOI is one of three yardsticks that Groupon invites investors to consider and refers to operating profit minus the company’s large online marketing and acquisition expenses. Groupon wants to emphasize that it’s important to segregate the extraordinary cost of obtaining new subscribers vs. the cost of sustaining existing subscribers, which are much less expensive. Interesting information … but similar to a reporting strategy used by Pets.com before they hit the wall at Mach 10 during the dot.com bust.

Does Internet content have a 5 year life?

With similar objectives, the article reports that Demand Media stretches its payments to content contributors over 5 years to emphasize the long life of the content on their site. While Google searches might turn up some of these older articles, there is so much new content that the old adage about “today’s newspaper is tomorrow’s fish wrap” may likewise apply to digital content. (As a result of this treatment, Demand Media turned net income from a -$5M number to a +$5M number. Hmmm ….)

Pay attention, kids. Momma ain’t no pushover.

So, heads-up investors. It may be a different world than the dot.bomb era, and there may be more substance to some of the new technology ventures, but if you’re going to drink the Koolaid … remember that drinking it too fast will make you lose your cookies!

Caveat Emptor!

Does this bother you? Am I making a mountain out of a mole hill? What do you think?

Follow us on Facebook and share your comments there.

Business Finance | Pick a card … any card …. is a post from: Sword Tips – the Exkalibur blog

Nothing in life travels in a neat formation accompanied by bugles and cavalry. A lot of it shows up filthy and unkempt, prominent in the mess we’ve made around our foxhole. These lessons are typically the offspring of hubris, naivete and ignorance … or from overlooking the land mines hidden beneath our feet.

Every Tuesday, we’ll share valuable and practical leadership tips and tools to help you BE a better leader so you can BECOME a better leader. Remember … you won’t BECOME a better leader until you start BEING a better leader  … implementing NOW the changes necessary to adopt the proven strategies of successful leaders. You might start by building on the communication matrix and making sure you’re defending the castle to get done what only you can do. Make sure to take some time so you’re thinking past today.

Our new series on the building blocks of L.E.A.D.E.R.S.H.I.P. begins today. The introductory article, The Cornerstones of Effective Leadership, appeared last week so don’t miss it.

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This is the first article in our 10 part series, The Cornerstones of Effective L.E.A.D.E.R.S.H.I.P.

“You’ve got to give loyalty down, if you want loyalty up.”

— Donald T. Regan

Isn’t there something almost magical about having a loyal friend? They know when we need help and even better, offer their help without our asking. They’re committed to a lasting relationship with us and they inspire us with their loyalty. They don’t judge us, they overlook our shortcomings, and they expect nothing in return. We have no trouble understanding that kind of loyalty.

What is Loyalty?

But there are others we know as “fair weather friends,” good friends even. We enjoy their company, they’re responsive when their help is sought, but they wouldn’t be our first choice to join us in a foxhole.

What is loyalty and how important is it to successful leadership? Some philosophers think loyalty is only a sentiment; others argue that it’s more of a test of conduct than an intensity of feeling. Some argue that it’s a virtue; some claim that disloyalty is a greater vice than loyalty is a virtue.

Others argue that we must set aside good judgment to be loyal; I contend that while steadfast loyalty is a welcome quality, no individual or company should expect mindless fealty.

Is Job Loyalty a Worthless Virtue?

In a serendipitous moment compliments of a recent downsizing, I recently stumbled across an Industry Week article written by a college friend, Charles Day, who went on to become its editor. It was written in 1978 (I guess I can’t claim to be 39 anymore), and I kept it because he interviewed me, among others, for their cover story entitled Is Job Loyalty a Worthless Virtue. (My friend usually had higher standards for interviewees but was trying to help out his old friend, I guess.)’

Is there a “Loyalty Contract” between employer and employee?

In that article, I commented on the mutuality of the loyalty contract between employer and employees. Others observers disagreed, insisting that performance was the only standard and loyal employees who didn’t perform should be summarily dismissed. Yet, it turns out that mutuality is a feature of most of our loyalties, particularly as it extends to the strongest form of loyalty … to “my” groups of families, friends, organizations, countries and religions.

Loyalty is measured by conduct … not sentiment.

True loyalty is measured by our conduct not by our feelings. Loyalty is the fuel of commitment and the bedrock of the diligence and hard work we expect from our employees. It should be calibrated by our commitment to remain loyal in the face of hardship even when it is costly or disadvantageous to us to be loyal.  We may be powerfully attracted to a concept, individual or group, but one’s loyalty must be tested by adversity or may be illusory.

Rally around a common purpose

For businesses, there’s tremendous loyalty associated with a common purpose. Such loyalty was the cornerstone of our own fight for liberty and equality some 235 years ago, creating a powerful bond of patriotism that inspired the vastly inferior forces of American revolutionaries. By way of a more current example, “No man left behind”, the Special Forces mantra, likewise underlies an unforgiving emotional bond that defines individual loyalty and commitment in a team environment.

Sometimes powerful loyalties are in conflict

We’re often torn by the hierarchy of loyalties that persist in our lives. We know, too, that loyalty can be a treacherous slope, as the Nuremberg trials following World War II demonstrated. Whistle-blowing is yet another example where loyalties are overcome by reckless, immoral or illegal behavior.

Work over family? God over country? Patriotism or anti-war protests? It turns out that loyalty is about values and the order in which we place them. Divided loyalties often represent our struggle over conflicting loyalties, and the shifting sands of our commitments as well as the commitment of others.

“Walk the Walk” to build a mutual loyalty program

For leaders, a defined purpose offers tremendous power to inspire employee fidelity that transcends all obstacles. Often, you’ll see those purposes captured in vision and mission statements, and if done thoughtfully, they’ll ignite unrivaled enthusiasm and success. The Container Store is proud that it did not layoff a single person during the recession.

While some benefits were deferred, their philosophy of “employees first” achieved a deeply rooted loyalty between the company and its employees. They “walked the walk” and received the allegiance of their employees by directly setting the example.

After all, that’s the root of loyalty programs that so many companies use to reward loyal shoppers with exclusive experiences, points programs and other benefits. Why not establish a loyalty program for your employees that rivals what’s offered to your customers?

You earn any loyalty unless you truly give it

In the end, you can’t expect loyalty if you don’t give it. By fostering reciprocal loyalty, business leaders bear witness to the transforming power that comes from a loyal work force inspired to reach higher and dig deeper. That kind of loyalty can’t be bought but it’s hard to build a great company without it.

What do you think?

Is there a strong bond of mutual loyalty in your company? If so, how was it built and what sustains it? If it doesn’t exist, why not?

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This article was published in the June 20, 2011 edition of the North Bay Business Journal, a publication of the New York Times, and a weekly business newspaper which I have served as a regular columnist for over three years. The Business Journal covers the North Bay area of San Francisco – from the Golden Gate bridge north, including the Wine Country of Sonoma and Napa counties. The electronic version of this article, as published by the North Bay Business Journal, may be found here.

**********************************************************************************

Lary Kirchenbauer is the president of Exkalibur Advisors, providing practical business strategies for family and other privately owned businesses in the middle market. Exkalibur works closely with senior executives and their businesses in the wine and other industries, and hosts the Exkalibur Leadership Forum for leaders of middle market companies in the North Bay. Please visit Exkalibur.com for a library of valuable resources, articles and insights or connect on Twitter, LinkedIN or the Exkalibur fan page on Facebook.

Leadership Lessons | Start with L = Loyalty is a post from: Sword Tips – the Exkalibur blog

Nothing in life travels in a neat formation accompanied by bugles and cavalry. A lot of it shows up filthy and unkempt, prominent in the mess we’ve made around our foxhole. These lessons are typically the offspring of hubris, naivete and ignorance … or from overlooking the land mines hidden beneath our feet.

Every Tuesday, we’ll share valuable and practical leadership tips and tools to help you BE a better leader so you can BECOME a better leader. Remember … you won’t BECOME a better leader until you start BEING a better leader  … implementing NOW the changes necessary to adopt the proven strategies of successful leaders. You might start by building on the communication matrix and making sure you’re defending the castle to get done what only you can do. Make sure to take some time so you’re thinking past today.

___________________

This is the introductory article to an upcoming 10 part series on the building blocks of

L.E.A.D.E.R.S.H.I.P.

“Some of the greatest battles will be fought

within the silent chambers of your own soul.”

— Ezra Taft Benson

As a business leader, how often have you paused to wonder, “Am I a very good leader?” “Is it possible that I’m really just a ‘legend in my own mind’ and that when I turn around and look closely, not many people are following?”

Leadership is the centerpiece of our business success. We start out with what God gave us, and stumble, fall, grow, learn and build from that foundation, emboldened by our success, nurtured by our failures.

What does it take to be a great leader?

Your business will not survive … let alone thrive … if you don’t become the best leader you can, quenching your own thirst for knowledge while nurturing successful leadership behavior around you. What does it take to be a good leader? How much is inherited, and is that all we’re going to get? Where can we go to fill in what’s missing? What if we apply the best practices that others have learned and shared?

Yes, it’s possible that we’re not quite the leaders we think we are. So, how do we measure our capability and success as leaders? If our company is making money, does that cover it? If our company is growing, have we arrived? Do we just need to look around to see if anyone is following us?

Leadership definitions are limitless

There are countless definitions, metaphors and analogies to describe Leadership, and I’ve probably used all of them on one occasion or another. Leadership is communication. Leadership is influence. Leadership is about achieving accountability. It’s all this … and more.

Inspire people to achieve a common goal

In some form or another, leadership is about inspiring a group of people to achieve a common goal. It’s measured by performance at every level … growth, profits, longevity, turnover, succession … and its demands can be unforgiving.

The libraries and bookstores are overflowing

In many ways, leadership is a bottomless bucket of attributes, skills, qualities and characteristics that are required to move our organizations toward success. Our libraries and bookstores are chocked full with books and articles on the subject. They’ve been written by and from every perspective … from classic sources like Machiavelli’s The Prince, to Sun Tzu’s The Art of War, from the perspectives of Genghis Khan and Napoleon, McArthur and Patton. There are books with a religious perspective, sharing the leadership lessons gleaned from the teachings of Mohammed, Jesus and Buddha.

Who hasn’t written a book about leadership?

There are countless books from and about business leaders of every stripe … from Alfred Sloan who built General Motors, to GE’s legendary CEO, Jack Welch … to technology leaders like Bill Gates and Steve Jobs. Academicians and consultants as well as a wide range of observers and students also fill bookshelves with their thoughts and observations.

What are the Building Blocks of Leadership?

As I launch an extended discussion about leadership over the next several months, we’re not going to re-create or summarize that rich body of work. You should devote time to some of those works, however, as they will provide valuable perspectives and ideas that will inform your leadership style and focus.

Instead, we’re going to explore on some of the most important building blocks of leadership. I’ve been thinking about this a lot over the last few years, and as I’ve talked to CEOs, taken notes and captured my own experiences, I realize that many of these key attributes start with one of the letters in the word L.E.A.D.E.R.S.H.I.P., which we’ll use as a platform for our extended conversation.

Join the Conversation | Next week … L = Loyalty

Next time, we’ll begin with L = Loyalty, a powerful but often misunderstood touchstone of a successful leader. I’ll be writing an article every week over the next several months to stimulate this dialog, which will be published here and in the New York Times affiliate, the North Bay Business Journal.

In the meantime, let’s engage in a vibrant conversation about leadership. Join the conversation and offer your comments. Are there attributes you think I overlooked, or maybe you disagree with my choices? Either way, feel free to share your thoughts along the way.

What do you think are the most important characteristics of leadership? Which ones do you cherish as critical to your success?

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This article was published in the May 16, 2011 edition of the North Bay Business Journal, a publication of the New York Times, and a weekly business newspaper which I have served as a regular columnist for over three years. The Business Journal covers the North Bay area of San Francisco – from the Golden Gate bridge north, including the Wine Country of Sonoma and Napa counties. The electronic version of this article, as published by the North Bay Business Journal, may be found here.

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Lary Kirchenbauer is the president of Exkalibur Advisors, providing practical business strategies for family and other privately owned businesses in the middle market. Exkalibur works closely with senior executives and their businesses in the wine and other industries, and hosts the Exkalibur Leadership Forum for leaders of middle market companies in the North Bay. Please visit Exkalibur.com for a library of valuable resources, articles and insights or connect on Twitter, LinkedIN or the Exkalibur fan page on Facebook.

The Building Blocks of Leadership | What are they? is a post from: Sword Tips – the Exkalibur blog

Nothing in life travels in a neat formation accompanied by bugles and cavalry. A lot of it shows up filthy and unkempt, prominent in the mess we’ve made around our foxhole. These lessons are typically the offspring of hubris, naivete and ignorance … or from overlooking the land mines hidden beneath our feet.

Every Tuesday, we’ll share valuable and practical leadership tips and tools to help you BE a better leader so you can BECOME a better leader. Remember … you won’t BECOME a better leader until you start BEING a better leader  … implementing NOW the changes necessary to adopt the proven strategies of successful leaders. You might start by building on the communication matrix and making sure you’re defending the castle to get done what only you can do. Make some time so you’re thinking past today.

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It’s Almost Midnight. Do you know where your cash is?

Okay, I admit it, I’m cheating a little this week … but I’ve got a few good reasons. Well, I’m calling them reasons anyway.

For one, I’m working hard to get ready for our Cash Flow Workshop, “It’s Almost Midnight. Do You Know Where Your Cash Is?” scheduled for May 25th. If you live in the San Francisco bay area, are not a financial executive and want to advance your business finance knowledge, our workshop is tailored for you.

Every successful business executive needs a solid grounding in the principles of cash flow … not artificial placeholders like EBITDA, but the hard, cold cash that Warren Buffett calls the “lifeblood of business”. This is an Extended Learning Workshop that is different than anything you’ve ever attended. There are special conference calls before and after the workshop, a financial literacy test, an E-book … and a private 1/1 consultation with a senior member of Moss Adams LLP, a senior banker from Exchange Bank and me. We’d love to see you there.

Alright, so maybe that sounded a little self-serving but it really isn’t. We’ve got a great group of North Bay sponsors who share my belief that helping small and middle market business owners and executives become better equipped to measure, manage and increase cash flow is the greatest service we can provide to that community.

Join us and we’ll teach you how to increase cash flow. It’s that simple.

New L.E.A.D.E.R.S.H.I.P. Series

I’ve also been planning a new program, the Top Ten Attributes of L.E.A.D.E.R.S.H.I.P., which is directly related to our weekly Leadership Series. Next Tuesday, and for the following 11 weeks, we’ll tackle this fascinating subject and get a dialogue started about the most important attributes of great leaders. The North Bay Business Journal, a San Francisco affiliate of the New York Times, will also be carrying these articles every week during the 12 week series.

What does it take to be a good leader? How much is inherited, and is that all we’re going to get? Where can we get what’s missing? What if we apply the best practices that others have learned and shared? Does that get us there?

Yes, it’s possible that we’re not quite the leaders we think we are. How do we measure our capability and success as leaders? If our company is making money, does that cover it? If our company is growing, have we arrived? Do we just need to look around to see if anyone is following us?

Join the Conversation

Please join us as we engage in a vibrant conversation about L.E.A.D.E.R.S.H.I.P. Maybe there are attributes you think I overlooked, or maybe you disagree with my choices, so feel free to share your thoughts along the way.

What do you think are the most important characteristics of leadership? Which ones do you cherish as critical to your success? Are there some that you think are overrated?

Leadership Lessons | Are you only a legend in your own mind? is a post from: Sword Tips – the Exkalibur blog

“Financial Adrenaline” is a term we love around here because it reflects our commitment to help you turbocharge your business with practical tips and techniques to improve free cash flow, the lifeblood of business. As a further extension of our Financial Adrenaline program, we’re going to share a new Business Finance Tidbit every Wednesday specifically for those business executives who don’t have a finance background. Our current Big River series started with We’re Making Money. Why are we broke? … then No Cash? Can we borrow what we need? and What if our loan collateral doesn’t cut it? Last week, we talked about the need for outside investors.

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“All intelligent investing is value investing — acquiring more than you are paying for. You must value the business in order to value the stock.”

~ Charlie Munger

How important is valuation?

John Wilson, CEO of Ace Business Stuff, spent the last few weeks preparing for his meeting with Lary Blogger. He called a few days ago to follow up on his recent conversation with his attorney, Frank Lee Documents, when they spoke about investors, DilutionA reduction in earning per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities and ValuationThe process of determining the current worth of a company. An analyst valuing a company may look at the company's management, the composition of its capital structure, prospect of future earnings, and market value of assets. Judging the contributions of a company's management would be more subjective, while calculating intrinsic value based on future earnings would be an objective technique..

Valuation is the bedrock for investors

“Hi, Lary. I appreciate your coming by to meet in person to talk further about some of the issues we discussed a few weeks ago. Can we talk about valuation first, since that seems to be the foundation for conversations with prospective investors?

“Sure, John. I think you’ll find from our conversation that while valuation is one of the cornerstones for such discussions, your company’s performance, as well as its promise, is what really underlies any discussion about valuation.”

What you WILL do may be more important that what you’ve DONE

“I’m not sure I follow you, Lary. I understand the performance part – what we’ve done historically will have a lot to do with what the company’s worth, but what does the future have to do with our valuation now?”

“John, let me give you a brief overview of the valuation process, which I hope will make it clearer. As you’ve already figured out, valuation is as much an art as a science, and there are many subjective factors to consider. Certain judgments about future conditions in your industry, for example, and in the economy, can be thought of as ‘subjective’ information since nothing in the future is really ‘objective’.

There are also other factors relevant to the final valuation outcome like the purpose of the valuation, the calculation of “invested capital” and the various discounts that often apply. If we don’t get to those today, we’ll talk about them another time.

How is a company valued?

“In the meantime, let’s cover the two most prominent approaches to value a company’s shares. For each approach, a certified appraiser will select the appropriate method to apply based on the company’s characteristics. Once their work is complete, all of the findings will be taken into account to come up with a fair market value for the company.

The Market Approach looks at sales of comparable companies

“The ‘market approach’ looks for relevant information among public companies, or about the sale of comparable private companies. As you know, there is a gold mine of information available about public companies, but it is more limited for private companies. Appraisers are looking for public companies in your industry with characteristics similar to your company. They will then consider those stock prices and the relevant metrics that may apply to your business.”

“But there aren’t any public companies like ours, at least none we know about. So how is that going to help?”

“That’s only one method, John. An appraiser will also want to look at the sale of comparable private companies from the growing variety of databases available for this data.”

“Can you give me an example, Lary, to illustrate what you mean?”

Study the sale of comparable companies

“Sure. Let’s say that we find a few companies that were sold in the last 12 months or so, with about $20 million annual sales volume. Let’s further assume that they prices at which they were sold translate to something like 1.2 X revenues or 4.5 X EBITDA. We would then try to determine the comparability of your company to those examples.

• Do you use a similar distribution channel to sell comparable products?
• Are the general levels of profitability similar?
• Are the growth rates in the same ballpark?
• Etc.

Then you could apply similar metrics to get one estimate of value for your company.

The Income Method is another valuation approach

“The second approach is the “income approach”, which is usually the most important for private companies. That approach typically looks at the cash flow from future revenues and expenses based on a forecast that you provide, to arrive at a future value.

Then, that stream of cash flows is discounted at a rate that reflects the risk associated with achieving those cash flows. That’s why your company’s future ‘promise’ is so important.”

The importance of forecasting can’t be overlooked

“I see what you mean, now. I don’t think we’ve ever put together a real forecast, I mean we do some budgeting each year, but usually only to get some idea of our expenses. Is a complete forecast that essential?”

“In my experience, it is, John. For one thing, an investor is likely to ask ‘what are your plans for the future’ since they are rightfully looking at how their investment is going to be repaid … sometime in the future … with an appropriate rate of return. Responding ‘I don’t know’ isn’t going to work.”

“I see your point, Lary. Even though we can tell our story, without anything written that illustrates the revenue growth and profitability, it will seem like we haven’t done a very thorough job in evaluating our own future. I’ll sit down with Tom Sampson and hammer something out this afternoon.”

Where does the forecasting process begin?

“John, this is not something you’ll be able to cobble together in a few hours. You need to think carefully about your underlying assumptions for revenue and expenses, and make sure they’re well documented. You’ll also want to get some input from your leadership team about your plans, as well as the related cost structures and investments that might be required to support those plans.

The future investments that may be required to realize your plans will be critical to investors. Access to that funding will be important to the company’s future success and the likelihood that an investor will recoup her investment with an acceptable rate of return.

If you haven’t done it before, you’ll need to set aside some quality time to prepare a thoughtful and thorough forecast.”

Make sure you’re well prepared if you’re courting outside investors

“Getting investors isn’t as simple as I thought, Lary, but I think I understand why it’s important to get it right. I don’t want to give up more equity than absolutely necessary, but I see that the better job we do up front, the better result we’ll get. By the way, does all of this have anything to do with what my attorney mentioned about financial buyers vs. strategic buyers?”

“It all ties together, John. The next time we get together to review your forecast, I’ll show you a useful diagram to explain those principles. In the meantime, you’ve some work to do.”

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TO BE CONTINUED …

This is Part 5 of a 12 part series called the “Big River“. The Big River signifies the growth path that so many companies follow, or are seeking, and the dangers that lurk along the shoreline as the Big River races forward trying to consume everything in its path. Next week, an important valuation framework is included to help you understand the most important concepts that effect company valuation. Make sure you sign up now so you receive every update in this practical series.

Business Finance | What’s the value of my company? is a post from: Sword Tips – the Exkalibur blog

Nothing in life travels in a neat formation accompanied by bugles and cavalry. A lot of it shows up filthy and unkempt, prominent in the mess we’ve made around our foxhole. These lessons are typically the offspring of hubris, naivete and ignorance … or from overlooking the land mines hidden beneath our feet.

Every Tuesday, we’ll share valuable and practical leadership tips and tools to help you BE a better leader so you can BECOME a better leader. Remember … you won’t BECOME a better leader until you start BEING a better leader  … implementing NOW the changes necessary to adopt the proven strategies of successful leaders. You might start by building on the communication matrix and making sure you’re defending the castle to get done what only you can do. Make some time so you’re thinking past today.

___________________

“Being in the lead and winning is not the same thing.” —Rory McIlroy

What a dramatic Masters finish tells us about succeeding

No, really, I had no intention of writing about the Masters golf tournament — again. You might want to start by looking at Madness or a Masters in Business … but, this 75th anniversary “tune-a-mint” that ended a few weeks ago offered more lessons than a kindergarten classroom.

What is True Grit? Do you think you have it?

Most of us think of Rooster Cogburn, either in the persona of John Wayne or Jeff Bridges, when True Grit is mentioned.

But, what is true grit? Never say die? It’s never too late? All those, and more, applied to the crushing legion wrangling for the green jacket on that fateful Sunday. Eight players shared the lead over a few hours on Sunday. As in life, the contrasts were remarkable.

Rory McIlroy, who held the lead over 63 holes of the tournament, entered Sunday with a four stroke lead and watched it quickly evaporate as his game imploded — he shot 80 on the final day — as contenders climbed over him from every side. Eight players as far behind as seven strokes at down tied for the lead at some point on that bucolic Sunday afternoon.

Life is perplexing blend of success and failure

Some rose to great acclaim — Charl Schwartzel didn’t take the lead until the 16th hole on Sunday. He won with a birdie on each of last four holes — never been done before by a Masters winner — and on his first ever visit to Augusta.

What does it take to succeed under pressure?

What happened? What does it take to persevere under pressure … in the face of intense and relentless competition … when it’s so much easier to fold your tent and call it a day? What exactly is in the DNA of perseverance, anyway?

1. Talent

Of course, you’ve got to have talent, you’ll say, that’s a given. True grit isn’t worth much unless you have the capability to succeed, so it’s important to have a clear understanding of your talent and that you apply it where it gives you a competitive advantage. If you’re a fabulous chess player who’s a duffer on the golf course, no amount of perseverance will overcome the futility of joining the PGA tour.

2. Patience

Our talents, no matter how rich, are fleeting … sometimes rising to the surface when we’re booming big drives, other times hidden beneath the surface when we can’t make a putt to save our lives. Time is the father of patience and its greatest adversary is our desperation to get something done quickly. Maybe we waited too long, underestimated what was required or made too many mistakes. True grit will lead to success if we have the patience to allow our talents to ultimately prevail.

3. Purpose

Purpose is essential to direct our energies and supplement the fuel stores supplied by confidence. Without Purpose, we would persist but not prevail, drudging along with no meaningful intent.

4. Confidence

That’s the next ingredient in this gritty stew, a belief in yourself and your talent.  We’re all pretty good at second-guessing our failures: “What could I have done differently?” “Why did I do something so stupid?” “When am I going to learn?” But, that kind of retrospective is like spitting in the soup. Confidence in yourself is the oxygen that fuels true grit.

5. Pluck

Pluck is the ability to remain fearless in the face of adversity. You reject the pain, ignore the fear and fight back the tears on the way to victory.

6. Perseverance

By any other measure, this is strength of character. There’s not a bright line separating this quality from true grit itself, but perseverance may be true grit in a different costume. Let’s call it three parts confidence, two parts pluck, sprinkled with a dash of patience.

7. Endurance

Endurance may be the fraternal twin of patience, but not everyone with patience will endure the obstacles that are strewn in their path. That fortitude keeps us in the game, willing to suffer the pitfalls and obstacles that would deter weaker souls. Patience would be a lonely soul without riding horseback on endurance, and we would only be durable losers much of the time.

True Grit is a magical elixir

True Grit. It’s a magical elixir. Without it, our successes will only be occasional. With it, we can conquer all that’s before us.

We probably can’t get enough of it, can we?

•••

Lary Kirchenbauer is the president of Exkalibur Advisors, providing practical business strategies for family and other privately owned businesses in the middle market. Exkalibur works closely with senior executives and their businesses in the wine and other industries, and hosts the Exkalibur Leadership Forum for leaders of middle market companies in the North Bay. Please visit Exkalibur.com for a library of valuable resources, articles and insights or connect on Twitter, LinkedIN or the Exkalibur fan page on Facebook.

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The North Bay Business Journal, a publication of the New York Times, is a weekly business newspaper which I have served as a regular columnist for over three years. The Business Journal covers the North Bay area of San Francisco – from the Golden Gate bridge north, including the Wine Country of Sonoma and Napa counties.

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Article published as Vol. 87 on April 25, 2010: The electronic version of this article, as published by the North Bay Business Journal, may be found here. ******************************

Any related materials or articles referenced in the published column, or otherwise applicable, are referenced in this digital version of the article.

Leadership Lessons | Do you have the magic elixir of True Grit? is a post from: Sword Tips – the Exkalibur blog

Every Thursday, I’m sharing a new Personal Productivity Tip to help you get more done. Each Productivity Tip is a remarkably simple tool or concept that can be quickly implemented to make a real difference in your personal productivity. When you apply many of them together, they’ll make a big difference in improving productivity, achieving accountability and staying focused on the things that matter the most in your life.

You may want to check out some of the posts in this Productivity series, including the the value of checklists; the importance of getting rid of the crappy stuff;  the nightmare of the cluttered mind; and that feeling of being buried all the time. You can also leverage your resources and apply the lessons of the ARCI chart and the S.M.A.R.T. goals to boost the accountability of your entire organization.

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Which stuff are you working on first?

Don’t we all know there are many tasks or projects that require us to wait for something else to get done first … or for someone else to get something done before we can continue?

We know that “waiting for” stuff is a critical piece of our personal productivity program because it’s the linchpin of the critical “follow up” that we must always be doing.

So, that part is pretty obvious. But, have you ever prioritized your tasks to make sure that you’re taking account of the “elapsed time” that something requires? Here’s the simple hierarchy I try to use. See if it makes sense to you.

1. The 2 Minute Rule

If you can get it done in 2 minutes, do it, get it over with, move on. I think we all know this one.

2. The “Elapsed Time” Effect

Here’s a simple example of how this works.

Let’s say you’re making breakfast. Approach A is that you know you can get out the cereal, sprinkle some brown sugar, cut up some bananas, pour the milk … do all this in a linear fashion, one right after another and have your cereal ready.

What about the toast and coffee? Those take a little “elapsed time”, don’t they? You’ve got to wait for the bread to get toasted, wait for the coffee to brew. You probably already know that and like most of us, start the coffee first. If so, you’ve used the Elapsed Time Effect.

The Elapsed Time Effect says … start with those things that need some time to finish. Start the coffee brewing, put in the toast, then put together the cereal bowl … by which time the toast is probably ready and the coffee almost finished.

Total time with Approach A? Certainly more than Approach B because you’re doing nothing while you’re waiting for the toast and coffee.

How do I apply this concept to other tasks?

It’s a simple concept when you think about it. Imagine that you’re looking at a simple task list that contains these items:

1. Email Sally to schedule Thursday’s meeting in the main conference room
2. Call John to discuss the agenda items for Friday’s meeting
3. Call Mom to say “Happy Birthday”
4. Email the swim coach to send out the revised swim meet schedule

Does it matter which of these you do first? You might say, “No, not really. These are all next action steps I need to take.”

Notice, though, that with items 1 and 4, the people on the other end may need some time to accomplish your request. They may be in a meeting, home sick, not checking email … who knows? There’s no certainty about when they will respond but your email will “get them started”.

3. Do your own stuff last

If you think about items 2 & 3, you can do those by yourself. You don’t have to get anyone “started” on a process, you can start and complete these by yourself. Call Mom and wish her Happy Birthday. Call John to discuss the agenda. Sure, maybe they’re not there and you have to leave a message … but if they’re available, you can complete your task right then.

The key thing is that you’re doing this while Sally and the swim coach are are using some of that “elapsed time” to respond to your request.

Does it really matter?

Yes, even with these 4 simple tasks. But what if you have several hundred in your trusted system? Today, 18 of them show up on one of your lists. Try to prioritize them by how much time you think the other party may need to accomplish the task.

The longer you think it will take them, the higher on your list they should be so that they’ll have the maximum “Elapsed Time” to accomplish the task … you’ll be doing other stuff while they’re doing what you asked (hopefully, anyway).

Save the stuff you can do by yourself until last. You can do that and be done … and you can do that anytime … so why not get the others started first?

It really matters when you don’t get through your lists

This becomes even more important when you get to only 10 of items today … and realize that Sally and the swim coach weren’t even contacted so they haven’t started on anything. If you’ve spent that time doing things that you can do by yourself, you’re behind where you would have been had you started those “elapsed time” tasks first.

Try it out

Maybe this is so brain-dead simple that you’re already doing it. Great. But keep this little swing thought in mind anytime you’re perusing your list to determine what you’re going to do first.

Give the other guy or gal first dibs. Then, deal with your own stuff. Coffee, Toast, Cereal. In that order.

Do you think you do this now? Does it make any difference?

Personal Productivity | Don’t overlook the “Elapsed Time Effect” is a post from: Sword Tips – the Exkalibur blog

“Financial Adrenaline” is a term we love around here because it reflects our commitment to help you turbocharge your business with practical tips and techniques to improve free cash flow, the lifeblood of business. As a further extension of our Financial Adrenaline program, we’re going to share a new Business Finance Tidbit every Wednesday specifically for those business executives who don’t have a finance background. Our current Big River series started with We’re Making Money. Why are we broke? … then No Cash? Can we borrow what we need? Last week, we faced What if our loan collateral doesn’t cut it?

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“The worst mistake is to have the best ladder and the wrong wall.”

~ Donald Rumsfeld

Do you need an outside investor?

John Wilson, CEO of Ace Business Stuff, was thinking about several of the issues that he discussed earlier that day with his controller, Tom Sampson, and what Tom told him:

“Giving our customers an additional 30 days to pay, relaxing collections and neglecting the sale of inventory already on hand, isn’t a very sound strategy.”

Instinctively, he knew that Tom was right and that whatever bank loan they could obtain, it wouldn’t be enough.

What if bank financing isn’t enough?

Ted Deepockets, his long-time friend, had periodically needled John about the pros and cons of outside investors. They had never discussed price, terms or amount, but Ted’s name kept coming to mind over the last several days. John decided to call his attorney first.

“Hi, Frank. What’s new in the legal world these days?” Frank Lee Documents was John’s long-time friend and the company attorney.

“Same-o, John. The legal work keeps piling up so I guess that’s good. How about with you?”

“Frank Lee,” John drew out the syllables to emphasize the double entendre, “business is great, if that’s what you mean. Too good, in fact, but a few sloppy decisions on my part has us with booming sales and no cash. I’m actually thinking about taking on an investor.”

“That’s quite a change, John. You’ve never been inclined to consider that in the past.”

Is it possible to run out of cash while sales are still growing?

“I know, Frank, and I’m still very skeptical about taking on a partner, but we’re really growing. I don’t think we can borrow enough to fund our growth. Even if we tighten up a few things, we’re going to run out of cash before we run out of sales.”

“So, how can I help, John? Do have any kind of proposal or plan in front of you yet?”

“No, but I’m thinking of calling Ted to talk about it.”

“Deepockets might be a good place to start. He always speaks highly of you and what you’re doing, and after that windfall sale of his Saratoga property, he can probably spare a few bucks.”

Equity Investors raise a lot of new issues

“Probably so, Frank. But I’m not sure how to approach him. We’re still figuring out how much money we’ll need and even then, I’m not sure how this works. You and I have chatted before about DilutionA reduction in earning per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. … LeverageLeverage can mean several things. 1) The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment, or 2) The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged.. … ValuationThe process of determining the current worth of a company. An analyst valuing a company may look at the company's management, the composition of its capital structure, prospect of future earnings, and market value of assets. Judging the contributions of a company's management would be more subjective, while calculating intrinsic value based on future earnings would be an objective technique. . . . a lot of concepts that remain pretty unfamiliar to me. I need to understand this stuff – and sooner than later.” John could hear Frank’s stubby pencil scribbling across the page of the dog-eared notebook he always had at hand.

Make sure you’re getting the right kind of advice

“Here’s what I think, John. Of course, we can help you with the documentation, and you certainly better make sure any transaction like this is well documented. But I think there is someone else who is better prepared to guide you from a business perspective.

He’s had a lot of experience with middle market companies, and has helped companies raise capital during some difficult times. Let’s try to get him on the phone.”

What is dilution … exactly”

After a brief introduction and a few pleasant exchanges, John briefly described his issue to Lary Blogger.”

“So, Lary, can you help me understand what this term “dilution” is all about?”

“Don’t be put off by the fancy term, John. In this context, it simply means that by issuing additional stock to a new partner, you’ll own a lesser share of the company than you own now. You’ll be ‘diluted’. The subject can get pretty complex because there are a lot of ways that dilution occurs, but we can deal with those issues if and when they come up.”

How much money do you need?

“So, Lary, how much dilution are we talking about? How can I make that as small as possible?

“The key question is how much money do you need and what will it cost, which quickly gets around to ’what’s the value of the company’ today? Here’s a simple example to make the point. Don’t get hung up on the math, though, because we can go back over it later.

Consider this dilution illustration

“For now, let’s assume your company is worth $1 million and you own 100% of the stock. The $1 million is known as the “pre-money valuation”, meaning that it’s the valuation before any investment is made.

If, for example, there are 10,000 shares, each share is worth $100/share ($1,000,000 value divided by 10,000 shares). Let’s say you need to raise $300,000 to meet your capital needs. To do that, you will have to issue 3,000 new shares (the $300,000 investment divided by $100/share price).

After the investment, the share price won’t change – it will still be $100/share but there will now be 13,000 shares (the original 10,000 shares plus the 3,000 newly-issued shares). The value of the Company will also increase by the amount of the investment so that the total “post-money valuation” will be equal to $1.3 million (the original pre-money valuation of $1 million plus the $300,000 investment).

What does dilution do to my ownership?

“From this, you can see two things. First, as I said earlier, the share price doesn’t change. Secondly, although you still have the 10,000 shares you started with, the Company now has 13,000 shares outstanding, so your percentage ownership goes from 100%, when you owned all of the 10,000 shares, to around 77% (your 10,000 shares divided by the total number of outstanding shares of 13,000).”

“So, Lary, if I understand you correctly, the valuation of my company is pretty critical to this process. The higher it is, the less dilution I’ll experience. Is that right?”

What can I do to minimize dilution?

“That’s absolutely right. Let’s take our previous example and assume that the company is actually worth more, say $2 million as a pre-money valuation where each share is worth $200.

Now, with a new investor putting up $300K, they would only get 1,500 shares. In this example, there would be only 11,500 shares outstanding (the original 10,000 shares plus the newly-issued 1,500 shares), and you would own about 87% of the company, a full 10% more than the 77% in our earlier example.

Is Valuation an Art or a Science?

“I understand, but valuation is pretty subjective, isn’t it?”

“Yes, John, it can be as much art as it is science.”

“Thanks, Lary. Could we get together in person in a few weeks to talk more about some of this stuff? That would really help me and by that time, I’ll know more about our company situation.”

“Anytime will be fine, John. Just give me a call when you’re ready.”

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TO BE CONTINUED …

This is Part 4 of a 12 part series called the “Big River“. The Big River signifies the growth path that so many companies follow, or are seeking, and the dangers that lurk along the shoreline as the Big River races forward trying to consume everything in its path. Next week, we’ll begin to talk about valuation and how that is such an important consideration when evaluating the potential need for an equity investor. Make sure you sign up now so you receive every update in this practical series.

Business Finance | What happens if we need an outside investor? is a post from: Sword Tips – the Exkalibur blog

As we’ve all learned, most of life’s lessons don’t travel in a neat formation accompanied by bugles and cavalry. They arrive filthy and unkempt, prominent in the mess we’ve made around our foxhole. These lessons are typically the offspring of hubris, naivete and ignorance … or from overlooking the land mines hidden beneath our feet.

Every Tuesday, we’ll share valuable and practical leadership tips and tools to help you BE a better leader so you can BECOME a better leader. Remember … you won’t BECOME a better leader until you start BEING a better leader  … implementing NOW the changes necessary to adopt the proven strategies of successful leaders. You might start by building on the communication matrix and making sure you’re defending the castle to get done what only you can do. Make some time so you’re thinking past today.

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Leadership Lessons | Are Incentives the Cornerstone of Life? is a post from: Sword Tips – the Exkalibur blog

It happened again the other day. I was chatting with a client and in the course of our conversation about someone they said: “I checked him out on LinkedIn.”

LinkedIn has become the de facto “go to” resource for researching companies and most especially people to learn more about them. And, if you’re very interested, you can usually find someone in your LinkedIn network to chat with and “get the scoop.”

LinkedIn now has 100 million members

LinkedIn doesn’t get covered as much in the media as its more glamorous cousins, Facebook and Twitter, but it has grown steadily as a powerhouse in the business environment and now stands at 100M+ members, adding 1 new member a second!

Unlike Facebook, people don’t hang out on LinkedIn for hours, they get in and get out – usually with a specific business purpose in mind. The information you get isn’t about a new restaurant or cute kid stories; people actually share information that’s useful to other business professionals on LinkedIn and use it as a research and networking tool.

LinkedIn is a powerful business marketing channel

Since LinkedIn members are there for business reasons, it’s become a highly receptive marketing channel for you to leverage for a variety of business purposes, including Business Development and Brand Management.

Business Development gets a boost when you leverage the capabilities of LinkedIn.Your sales team can get valuable background information by finding people to speak with who will give you insights you can’t learn from reading a company’s promotional material (former employees are a great way to do that). My favorite business development use of LinkedIn is to leverage your own network members to facilitate a warm introduction.

LinkedIn offers a lot of valuable tools

Once you get your foot in the door of the company you’ve targeted, guess what they’re likely to do? That’s right – check you out on LinkedIn! You can put your best foot forward by “tricking out” your LinkedIn profile with help from the following apps:

• SlideShare Presentations
• Google Presentations
• Behance Creative Portfolio

Behance is a multi-media application that enables you to add video to your profile. Both SlideShare and Google Presentations enable you to add presentations to your profile. You can control your message and present a picture of vitality to anyone who checks you out.

Use it as a tool of brand management

Brand Management has never been so easy and these tools greatly enhance your flexibility in how your brand is perceived. Yet it’s also helpful to know what people might be saying about you and LinkedIn has an app for that as well: Company Buzz. Company Buzz monitors what is being said about you across the Internet and arms you with actionable intelligence to help you manage your brand.

If you’d like to take a more proactive stance using LinkedIn, then seriously consider extending your branding reach through LinkedIn Ads. This tool enables you to target by company (how cool is that??!!), job title, group, gender and age. You have the option of using Pay Per Click or Cost Per 1,000 Impressions (CPM) and can advertise with a budget as low as $10. There’s a lot more to this and I encourage you to check it out.

If you’re not there, it’s time to get there

There are a number of additional apps and internal LinkedIn functionalities that are really terrific. The great part about a lot of them is how they make life easier for you through automation and how they can contribute to your business success.

Are you using LinkedIn to power your business? Have you found specific tools and techniques that have really made a difference?

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About the Guest Author

Celeste Bishop is an Internet marketing guru whose firm, Bishop Market Resources, works with businesses to improve their results through more effective use of their website and Internet marketing channels. Ready for more information you can use about LinkedIn? Try: Easier Social Media Marketing with LinkedIn’s 100M.

Social Media | LinkedIn’s 100 Million Members ARE a big deal is a post from: Sword Tips – the Exkalibur blog

Every Thursday, I’m sharing a new Personal Productivity Tip to help you get more done. Each Productivity Tip is a remarkably simple tool or concept that can be quickly implemented to make a real difference in your personal productivity. When you apply many of them together, they’ll make a big difference in improving productivity, achieving accountability and staying focused on the things that matter the most in your life.

You may want to check out some of the posts in this Productivity series, including the the value of checklists; the importance of getting rid of the crappy stuff; the nightmare of the cluttered mind; and that feeling of being buried all the time. You can also leverage your resources and apply the lessons of the ARCI chart and the S.M.A.R.T. goals to boost the accountability of your entire organization. One more thing. When in doubt, write it down.

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It’s hard to beat a home-cooked meal!

Is there something more delectable than sitting down to a home-cooked meal … fresh, hot with flavors wafting through the air? Some of you may be chefs who prefer to cook it yourself, but I suspect that the vast majority of us savor a meal where our only job is to sit down to enjoy it. Maybe we’ve exerted a little energy to open the Cabernet to go with it, but not much more.

That’s the same feeling we need to create when we sit down to contemplate our Action Dashboard to begin the day. Ready to Savor (it’s all actionable). Fresh (it’s all up-to-date). Hot (it’s ready to eat as soon as you sit down).

The Weekly Review is where all chopping, cutting, food prep gets done

Even if you don’t love to cook, you’ll still need to help with the food prep that takes place in the Weekly Review. That’s where all the chopping, cutting, shaving … preparation gets done so the meal can be enjoyed. To create a powerful personal productivity system, you need to love the kitchen … relish the instruments, love the organized chaos as you sift through the cupboards and refrigerator to find just the right ingredients.

What needs to be done next?

That’s what happens in chapters 5-7 in the Getting Things Done book by David Allen. You can check out the weekly review process in Chapter 8 for some of the nitty-gritty. In short, it’s about recalibrating, refocusing and re-adjusting to evaluate what’s happened during the last week … and what needs to be done NEXT.

You’ve just concluded another week and I hope, got a lot done. But new things have surfaced, the tsunami in your inbox has continued unabated and with all of the meetings and phone calls you completed, more issues have arisen.

Get the “preparation” done if you want to get “something” done

The key to the Weekly Review is returning to your master recipe book and using those fresh ingredients to update your menu. Like any great chef, you’re going to use what’s in season (what’s going on NOW) and make sure you’ve updated your menu to take those into account.

Then it’s time to feast on what you’ve prepared

As a result of clear decisions during the weekly review, you’ve now got the “next physical actions” that you can undertake RIGHT NOW. No indecision, no uncertainty remains. The menu is finished, the food’s ready to bring out just as you like it and now it’s time to polish off each morsel knowing that it’s timed perfectly for your consumption.

Only when that’s done can you sit down to enjoy that scrumptious meal.

Feels great, doesn’t it?

Are you doing everything you can to be able to sit down to savor that meal and hit the ground running next week? What is the most important part of your Weekly Review and how does it prepare you for the coming days?

Productivity Tip | Who doesn’t love a home-cooked meal? is a post from: Sword Tips – the Exkalibur blog

“Financial Adrenaline” is a term we love around here because it reflects our commitment to help you turbocharge your business with practical tips and techniques to improve free cash flow, the lifeblood of business. As a further extension of our Financial Adrenaline program, we’re going to share a new Business Finance Tidbit every Wednesday specifically for those business executives who don’t have a finance background. Our current Big River series started with We’re Making Money. Why are we broke? … and continued last week with No Cash? Can we borrow what we need?

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“Anyone who lives within their means suffers from a lack of imagination.”

Oscar Wilde

Where do we start?

Tom Sampson, the controller for Ace Business Stuff, was in his office considering how to explain to John Wilson, the Company’s CEO, the issues related to the Company’s borrowing capacity and the weaknesses in the Company’s Balance Sheet.

Tom pulled together several schedules for his meeting with his CEO that afternoon, but was still struggling with how to get across some of the subtleties that he knew John would want to understand. Tom knew that his CEO was absolutely committed to the Company’s success, yet became very frustrated when his convictions about future performance collided with the bank’s concerns about current performance.

What factors will the bank consider?

Tom knew that the bank considered many factors when judging an asset-based loan. Having enough collateral to support the Company’s borrowing request was only part of it.

How do they measure the strength of the collateral?

One key ingredient is the quality of the collateral. Tom had often expressed concerns about the Company’s liberal return policy, as well as its lenient collection policy. He knew the bank would examine the Company’s historical product return rate and its collection policies and they might fall a little short.

What is the quality of our receivables?

It was likely that the generally-accepted 80% advance rate against receivables would be reduced by the bank given the Company’s product return rate of around 7%, meaning that the Company only netted about 93% out of every sales dollar. Tom knew that the return rate was unacceptably high and while they were working on it, they hadn’t made much progress.

Is there any bad debt expense?

Tom was pretty sure that the 8% margin over the target 80% advance rate would not give the bank a sufficient cushion. Most likely, the company would be unable to borrow at an 80% rate … more likely, something like 70%, which would be pretty tight.

What about our inventory value?

“Hi Frank,” Tom said when he reached the Company’s warehouse manager. “John and I will be visiting with our bank next week and I wanted to get an update from you on some of the older inventory we still have on hand. Any movement on any of that?”

“Not really, Tom,” Frank replied. “I’ve reminded the sales guys every time they wander through here, and I know John has talked to David about it.” David is the company’s sales manager, a capable executive but one who, in Tom’s opinion, always looked forward to next season’s products without much accountability for inventory that remained unsold for the past season.

“Tom, you know John. Like the rest of us, he hates writing stuff off but some of this stuff, well, I don’t think the customers really want it anymore.”

What are you doing about slow-moving inventory?

“Thanks, Frank. I know I need to talk to John further about it. I’ll get back to you with whatever I learn.”

This is why their inventory turnover is declining, Tom thought. He knew that the sales department, with John’s tacit support, was unwilling to reduce prices on products that an outsider might consider obsolete, believing that they could be sold “if they could just find the right customer”.

They rarely did, so the inventory just sat there. Once the “salable inventory” was identified and examined by the bank, the common 50% advance rate for inventory might also be under attack.

Are you paying enough attention to your balance sheet?

Tom considered various ways to overcome these issues but also realized that the Company’s Balance Sheet was also working against him. He didn’t have a current schedule handy, but he knew he needed to update their various ratios so he could show John, in black and white, exactly what was going on.

What are some of the ratios the bank cares about?

Tom knew that their Current RatioA liquidity ratio that measures a company's ability to pay short-term obligations. It is a well-established measure of a company’s liquidity, which divides Current Assets by Current Liabilities to evaluate whether the current liabilities could be paid as current assets are converted to cash. A higher number demonstrates the Company’s superior ability to generate cash to pay its short-term obligations. The Current Ratio is also known as the 'liquidity ratio', 'cash asset ratio' or 'cash ratio'. was tolerable but not great. He also realized that a greater concern would be the Quick RatioAn indicator of a company's short-term liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. The higher the quick ratio, the better the position of the company. The quick ratio is calculated by dividing the net amount of (Current Assets - Inventories) by the amount of Current Liabilities. This ratio is deemed a closer measure of liquidity, referring to how quickly the Company can generate cash. Since inventory has to be sold before a receivable is created, the Quick Ratio shows whether a Company is likely to struggle with its current obligations if its inventory is not sold on a timely basis. Also known as the 'acid-test ratio' or the 'quick assets ratio., which was not very strong, barely half the size of the current ratio.

To be forewarned is to be forearmed

A lot was on the line. They weren’t just asking for a collateral loan. It was a balance sheet loan, too, and Tom hadn’t even dealt with those issues yet.

“John,” Tom said when he called his CEO and got a voicemail recording. “I’ve got a few more things I’d like to prepare for our meeting, a few more schedules I’d like to put together. I’d like to push our meeting out by 24 hours so I can be better prepared and show you a more comprehensive picture.

“I’ll give you a call in the morning to reschedule our meeting.”

Do your homework

Have you carefully prepared for your meeting with the top executives in your company? Will you “bring it” when you meet with your bank or will they find you stumbling around for answers that you should know cold?

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What’s next?

This is Part 3 of a 12 part series called the “Big River“. For me, Big River signifies the growth path that so many companies follow, or are seeking, and the dangers that lurk along the shoreline as the Big River races forward trying to consume everything in its path. Next week you’ll learn how to begin to evaluate your bank borrowing capacity.

Business Finance | What if our loan collateral doesn’t cut it? is a post from: Sword Tips – the Exkalibur blog

Every Thursday, I’m sharing a new Personal Productivity Tip to help you get more done. Each Productivity Tip is a remarkably simple tool or concept that can be quickly implemented to make a real difference in your personal productivity. When you apply many of them together, they’ll make a big difference in improving productivity, achieving accountability and staying focused on the things that matter the most in your life.

You may want to check out some of the posts in this Productivity series, including the the value of checklists; the importance of getting rid of the crappy stuff;  the nightmare of the cluttered mind; and that feeling of being buried all the time. You can also leverage your resources and apply the lessons of the ARCI chart and the S.M.A.R.T. goals to boost the accountability of your entire organization. One more thing. When in doubt, write it down.

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What the hell is the Zeigarnik Effect?

Have you ever heard of the Zeigarnik Effect? It’s named after a Russian psychologist, Bluma Zeigarnik, who stumbled across the notion in the 1920s that waiters remembered orders that were still unpaid better than those that were already completed. She returned to her lab, ran several experiments and further discovered that people remembered tasks better if they’d been interrupted doing them than if they’d completed them.

“Psychic Tension” drives us to closure

What she concluded has a lot to do with our short-term memory’s propensity to forget completely. The more we try to hold things in our short-term memory, the harder we have to work to remember them. It takes a lot of cognitive energy but with few results. Anyone have a different experience?

No surprise … we also seem to have a better memory for those things we have not yet finished. The “psychic tension” it creates remains a stimulus for us to keep moving forward, wrestling with that idea and continually straining to bring it to closure.

What’s the significance for Personal Productivity?

So, what does this mean for personal productivity? A bunch of things.

We’re Masters of Procrastination!

Some like Jeremy Dean on his great PsyBlog, relate the Zeigarnik Effect to our remarkable capability for procrastination. He concludes that we’re more likely to cogitate about something that’s unfinished so that not starting something is less productive than getting it started any way you can. So, instead of gasping at the size of the mountain in front of you, get started by aiming for a base camp. Remember the Chinese proverb, “A journey of a thousand miles starts with the first step”? When in doubt, just start.

Believe it. Momentum Drive Success

Finally, it confirms one of my precepts … that momentum has tremendous power that is often overlooked. If you build some momentum by moving toward your objective with even the smallest step, you’ll be amazed at how that wave of energy will lift your spirits and help you drive something to the next level that would otherwise languish.

What do you think?

What are you doing to defeat the Zeigarnik Effect … to overcome procrastination … to generate momentum toward your objectives? What’s working and what isn’t?

Productivity Tip | Anyone heard of the Zeigarnik Effect? is a post from: Sword Tips – the Exkalibur blog

“Financial Adrenaline” is a term we love around here because it reflects our commitment to help you turbocharge your business with practical tips and techniques to improve free cash flow, the lifeblood of business. As a further extension of our Financial Adrenaline program, we’re going to share a new Business Finance Tidbit every Wednesday specifically for those business executives who don’t have a finance background. Last week we began our 12 part Big River series so you can pick up the story there.

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“Creditors have better memories than debtors.”

Benjamin Franklin

What happens if we run out of cash?

John, are you ready for our meeting? We said yesterday that we were going to meet to go over our financial projections and review a possible bank proposal.”

“I’ll be right there, Tom,” John Wilson, company CEO said to his controller. He reflected on their conversation last week about the Company’s expected negative cash flow and the need to borrow from their bank, most of which resulted from giving extended terms to their customers. John learned his lesson and wanted to avoid borrowing, but Tom had been pretty explicit about the need.

First, we need to review our short term cash needs

“John, I’ve gone over our short term cash needs again,” Tom said after they gathered in the conference room and were looking at some numbers on the overhead projector. “I’ve created a simple example on the screen with all the numbers shown in thousands. I’ve assumed a $200K line of credit (shown with a bright blue border). On Line 1 - Net Cash Flow, you can see the expected negative cash flow in the next three periods, of <$161,000>, <$75,000> and <$4,000>, respectively. [See the Sample Chart, below, to refer to these items. Line Numbers and Categories are bold-faced for easier reference. The numbers are shown in thousands.]

How much cash do we need?

If you look on Line 3 – Cash Required, you’ll see how much cash we’ll need in excess of our Opening Cash Balance for each period. Line 3 – Cash Required shows the money we need to pay our payroll and normal operating expenses on time. Line 4 – Line of Credit Used this Period, shows how much we’ll need to borrow in each period so that we have enough cash to cover those bills as well as the $150,000 Minimum Cash Balance we need to support out working capital needs. Below that is the new Line of Credit Balance (Line 5), and below that is our Remaining Availability to borrow against our line of credit.”

“Tom, I’m not following you.”

“Sorry, John. Take a look at Period 1 (marked with a bright red border) on Line 4 where you’ll see the borrowing of $96K, shown as Line of Credit Used This Period. The $96K on Line 3 - Cash Required represents the difference between the negative cash flow from our operations of <$161k> on Line 1 and our Opening Cash Balance of $65K in Period 1.

How much do we need to borrow to meet our needs?

Can we borrow enough at the right time?

“Thanks, Tom, I’m with you. It looks like you’ve set up the financial model to borrow enough money to cover our cash needs and to show what borrowing power we have left.”

“That’s right, John. You can see from Line 3 that we need to borrow $40,000 in Period 3 to meet our cash needs. However, you can see that we’ve maxed out our $200,000 line of credit by then (see Line 5 – Line of Credit Balance) so we can only only borrow $29,000. In theory, we’ll have a negative cash balance of $11,000 (Line 6 – Net Cash Balance), but we can probably manage that by deferring a few payables, but that’s not a sustainable policy.”

When does our cash flow return to positive?

“So, if I’m reading this right, the good news is that we return to positive cash flow in periods 4 & 5, our cash position starts improving again and we can even pay back some of our loan.”

“That’s right, John. It gets pretty close in period 3, but our borrowing capacity starts to grow after that. It improves because we expect to have a large, positive operating cash flow in the 5th period, when our receivables finally get collected.”

Do we qualify for a $200,000 line of credit?

“Tom, are we sure we can get a line of credit of $200,000? That’s your assumption, isn’t it?”

“Yes, I used a target line of credit of $200,000. In reality, our balance sheet is probably not strong enough to justify anything other than an asset-based loan. In that situation, the bank advances money as a percentage of our outstanding receivables and inventory. The line of credit will vary based on those balances each month, but it should be in that general ballpark.”

Do we need an Asset-Based Loan?

“Tom, I think I get the general idea but I do want the specifics. Can we reconvene this afternoon and go over the details? Maybe you could update this table to reflect how the loan availability changes based on inventory and receivables?

You can also teach me a little about an asset-based lending program and educate me about your concerns with our balance sheet. I really need to understand this. Can I check back you sometime after 3:00 p.m?”

“Sure, no problem, John. I’ll be waiting.”

What’s your experience? Do you have borrowing capacity to deal with unexpected cash shortfalls? Do you have an early warning system to let you know about a cash crunch that may be coming?

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TO BE CONTINUED …

This is Part 2 of a 12 part series called the “Big River“. The Big River signifies the growth path that so many companies follow, or are seeking, and the dangers that lurk along the shoreline as the Big River races forward trying to consume everything in its path. Next week you’ll learn how to begin to evaluate your bank borrowing capacity using an asset-based loan program. Make sure you sign up now so you receive every update in this practical series.

Business Finance | No Cash? Can we borrow what we need? is a post from: Sword Tips – the Exkalibur blog

What Does It Take to be a Great Leader?

As we’ve all learned, most of life’s lessons don’t travel in a neat formation accompanied by bugles and cavalry. They arrive filthy and unkempt, prominent in the mess we’ve made around our foxhole. These lessons are typically the offspring of hubris, naivete and ignorance … or from overlooking the land mines hidden beneath our feet.

Every Tuesday, we’ll share valuable and practical leadership tips and tools to help you BE a better leader so you can BECOME a better leader. Remember … you won’t BECOME a better leader until you start BEING a better leader  … implementing NOW the changes necessary to adopt the proven strategies of successful leaders. Start by taking a look at our communication matrix to make sure you’re working at improving your communication success.

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Attention Span of a Mosquito?

How many times have we asked Are Distractions Destroying Your Brain? Whatever happened to that blank sheet of paper you were going to use to THINK, you know, that old-fashioned approach to problem solving and the creative process? Do we agree that Google is making us stupid?

These are but variations on a theme … our increasingly short term focus. We’re trying to do too much, keep track of a lot of stuff, fend off the intruders that keep pouring over the horizon … fighting today’s fires but missing the extraordinary value of a long term perspective.

“Our Time Horizon is Forever”

We’ve talked about Warren Buffet’s most recent shareholder’s letter. He’s well known for his long-term perspective, which infuses such homilies as “At Berkshire, our time horizon is forever” and “that to finish first you must first finish”.

Who else will balance the Short Term vs. the Long Term?

The key is to balance the need for short-term performance with the long term perspective that creates a lasting business. In our discussions about leadership, we have often referred to what only the CEO can do to focus on those special things that ONLY YOU can do.

Peter Drucker in The American CEO (full article requires WSJ login), supplemented by A.G. Lafley, former CEO of P&G, have written about what only the CEO can do … and one of their key findings is the importance of the balance between short and long term objectives. (Full article must be purchased from HBR.)

It’s correctly identified as one of the most important roles that a CEO must fulfill … because no one else has the knowledge, both inside and outside of the organization, to provide that balanced perspective.

Would you act differently?

What would you do differently as a leader (and in other aspects of your life) if your time horizon was truly long term? How would you make business decisions if you were thinking about what your business would look like in 5-10 years rather than next week?

Give it a try this week

My bet is that your decisions would be quite different. Try it this week. When a salesman asks you about how to get a higher price on a particular deal, stop and reflect on how it might affect your long term relationship with that customer.

Are you trying to squeeze every last nickel out every time?

Is your salesman focused only on maximizing his commission?

Is this really the best deal for the customer in every way?

The difference between long-term relationships and short-term performance

Many of you are thinking … easy for you to say.

“If we don’t get these next few sales this month, we may not be able to make payroll” … or some variation on that theme.

“We’ve got bills to pay, investments we need to make right now. We can’t ignore that for what we might be able to achieve in 2015.“

You’ve got to be present to win

There’s no question that current performance is life-sustaining. We can’t ignore it … but we can be mindful of our long term goals and make sure that a quick buck in the short term isn’t destroying our ability to build a lasting business. The salesman example is but one poignant reminder of the conflict between doing the right thing and thinking only of today’s success.

What is your perspective?

What are you doing to think long term? Are you encouraging your team to think long term or is this month’s performance the only thing on every one’s mind? Does it make any difference?

Maybe it’s time to lace that triple espresso with a long walk?

Leadership Lessons | Thinking Long Term – or just for today? is a post from: Sword Tips – the Exkalibur blog

“Financial Adrenaline” is a term we love around here because it reflects our commitment to help you turbocharge your business with practical tips and techniques to improve free cash flow, the lifeblood of business. Every Wednesday, we’re sharing a new Business Finance Tidbit specifically for those business executives who don’t have a finance background. You’ll get a head start by reading Warren Buffett’s letter to shareholders this year, and his comments about depreciation.

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“The importance of knowing accounting can not be underestimated, it’s the language of business. If you don’t know it, it’s like being in a foreign country without knowing the language.”

Warren E. Buffett, CEO of Berkshire Hathaway, Inc.

We’re making money … but we’re broke?

“We’re broke,” Tom mumbled to himself. Tom Sampson is the controller of Ace Business Stuff and was reviewing his latest calculations about their cash flow.

“What do you mean, we’re broke?” Tom looked up sheepishly to see John Wilson standing in his doorway. He fingered his collar and turned to address the company’s CEO. “We can’t be broke because business has never been better,” John said. “Our sales are up over 20% and we’ve even knocked a few percentage points from our costs so our margins are up, too. Our operating expenses are about where we expected, so we should be hitting the ball out of the park.”

How can we be out of cash?

“How can that be, Tom? We just agreed that we’ve having a record year.”

“John, we’ve discussed this before. Profits aren’t the same as cash. Profits are the excess of revenues over costs, measured when we deliver our products. Cash flow is the excess of what we collect from those sales, less what we use to run our business. They don’t always occur at the same time . . . or the right time.”

“But, Tom, if we have more revenue than costs, then we’ve got to have extra cash, particularly if we’re on our way to a great year. Something’s wrong here. Have you double-checked with the bank?”

You’ve probably heard a version of this somewhere

This conversation, in many forms, takes place every day in conference rooms and hallways across America. You may have been in a few. Business is starting to grow again; the company is ready to start investing in people as well as property, plant and equipment. It’s expanding operations, adding product lines and serving customers. Business is prospering . . . but there is a limited understanding of the accounting and cash flow implications of those plans.

Have you double-checked with our bank?

“John, I don’t need to check with our bank. There are no missing deposits and we’ve reconciled all of our accounts. The problem is that we’ve invested all of our cash in the business and we’re not going to be able to meet payroll.”

“Didn’t you see this coming, Tom? You said we’re on top of the bank stuff and our accounts are clean. Why didn’t we see this sooner?”

“John, we’re lucky we’re even seeing it now. It was only when I saw our receivables climbing faster than our revenue that I knew something was off. It was Jody who told me that the salesmen got approval to extend our payment terms from N/30 days to N/60 days.”

“We had to do that, Tom. Our customers have expanded their purchases from us because we’re able to offer more generous terms than our competitors. That’s what’s fueling our growth.”

There are lots of ways to run out of cash

“Which is exactly why we’re out of cash, John. We’ve got all of these extra sales but we haven’t collected any cash from them yet because we’ve given the customers longer to pay. Nobody told me, or our purchasing manager, so we didn’t have a chance to reach a similar deal with our own vendors. So, we’re stuck with having to pay them on time, plus with the people we’ve added, our payroll is up and we have to pay that every 2 weeks no matter what.”

We love the Big River … but it consumes everything in its path

What John Wilson, CEO, is painfully discovering in this simplified example is that the flow of profits and the flow of cash are asynchronous, that is, they don’t follow the same pattern. The kind of accelerated growth that ranges at or above 15% per year is what I call the “Big River”, and the bigger the river, the greater its impact on everything in its path. It’s indiscriminate as it absorbs the cash faster than the profits can keep up.

In the conversation between Tom and his CEO, the Big River is consuming all of the company’s liquid assets. Managing the growth rate of your business is critical because the growth rate is the engine that drives so many of the issues critical to our business success. DilutionA reduction in earning per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. … LeverageLeverage can mean several things. 1) The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment, or 2) The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged.. … ValuationThe process of determining the current worth of a company. An analyst valuing a company may look at the company's management, the composition of its capital structure, prospect of future earnings, and market value of assets. Judging the contributions of a company's management would be more subjective, while calculating intrinsic value based on future earnings would be an objective technique. … LiquidityThe ability to convert an asset to cash quickly. Also known as 'marketability'. There is no specific liquidity formula, however liquidity is often calculated by using liquidity ratios. . . . . and more.

What’s the best way to evaluate the impact of growth?

“Great, Tom, the sooner the better. I’m thanking my lucky stars that I invested what I did when we started this business. Otherwise, we’d be even further in the hole.”

Where is all that cash going?

“It’s not as bad as all that, John. I think we’ve got a good story to take to the bank. We’ve got solid receivables and inventory, so we should be able to borrow enough working capital to get through this period, collect our receivables and better align our terms with our vendors and our customers.

“You were right, John. This is a good time to call our bank.”

What’s your experience? Have you run out of cash just as you thought your business was picking up?

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What’s next?

This is the first part of a 12 part series called the “Big River”. For me, Big River signifies the growth path that so many companies follow, or are seeking, and the dangers that lurk along the shoreline as the Big River races forward trying to consume everything in its path. Next week you’ll learn how to begin to evaluate your bank borrowing capacity.

Business Finance | We’re Making Money. Why Are We Broke? is a post from: Sword Tips – the Exkalibur blog