Execution Archives - Page 2 of 2 - TurnAround Social Sector Coaching

People tell me that they don’t plan because they have no money. They ask, ‘Why plan if I have no money?’  I normally respond, ‘How do you know that you need money until you plan?’

People don’t like the challenge of planning before finding money. Too many people think that they need money — to think about money.

So here are 10 ideas for Strategic Planning that can reduce or remove the need for cash.

  1. Avoid capital intensive Strategic Plans – Forget your plan to start a new low cost airline from New York to Phnom Penh. You can’t even afford one engine! You also can’t start a luxury clothing store there either. Clothing has to be purchased in quantity in different sizes. Inventory of expensive brands is a large investment and requires cash.
  2. Avoid long term payoff Strategic Plans – You want to find the cure to cancer? You don’t have the time to wait 5 years for drug trials. Do you want to start a new daycare in New York City? It will take a year to update or build and license before it opens. You need to use cash to pay salaries and construction during all that time.
  3. Avoid low cost goods for resale. It’s very hard to buy low cost clothes from Honduras for resale. Walmart got there first and has the power of a volume purchase. They offer to buy $1 million of cheap clothes with only a 1% profit for the manufacturer. It sounds like a bad deal but it actually returns $10,000 in profit to the clothing company.

You come along next and want to buy $5,000 of the same cheap clothing. If you could get the same terms as Walmart, the clothing company would only receive a profit of $5 dollars from your order. They will laugh you out of San Pedro Sula.

Once you pay $6,000 for the same clothing, you will need to raise sale prices back in Phnom Penh. It’s a desperate game that is hard to win.

  1. Build a service based Strategic Plan. Why doesn’t Walmart take over nail salons? Nail salon expenses are mostly labor. Nail polish does not cost much nor does advertising. The playing field is more equal. It’s hard for Walmart to make more money than you in labor intensive business.
  2. Build a materials + labor based Strategic Plan – Since you can’t compete directly with the purchasing power of large companies, add a unique service to the product that you sell. For example, buy cheap clothes in Hionduras and add an identification tag printed with a name and address. The price is no longer comparable to the shirt by itself because you have added a service.
  3. Avoid a Strategic Plan that has a long cash conversion cycle – Dell Computers was an early company that charged customers as soon as the computer order was made. They had the cash before they made the computer! Contrast that to a specialty clothing store that has a large inventory that sells slowly. The store may be quite profitable but requires cash to buy the clothing and then wait a lengthy period of time for the sale.
  4. Avoid a Strategic Plan that requires high fixed costs – Renting a storefront in a mall or on a busy street will require cash even in the slow season. It’s better to sell ice cream from a cart than from a store. There is no rent and the cart can be taken to a warmer climate in winter months or stored. Street fairs are popular because there are no rental costs on the days that you choose not to be open.
  5. Avoid a Strategic Plan in regulated industries – Industries that involve government inspections and licenses take cash and time to learn. The companies that are already in the market have more opportunity. For example, in New York City, there is a great need for the service business of child care. It’s also a business that the City watches closely with inspections, licenses, and regulations. Each of those add to the cost of a service and require cash.
  6. Consider a Strategic Plan that generates loyalty – Let’s assume that you sell ice cream from a cart. You are always on the same corner and you memorize the name of every child who buys a cone. Children love that attention from adults and loyalty will become part of your business model. No cash required for loyalty
  7. Consider a Strategic Plan that assumes one time sales – Tourists often pay outrageous sums of money for trinkets to remember a trip. In Florida, you can pour sand into a bottle and sell Florida sand at the airport. Customers will never return to buy more but they really don’t care if you charge $10 for sand. Cash from a few sales pays for a lot of inventory.

And now, I return to my first point. You don’t need any money until you painfully create the Strategic Plan on how to invest and make more money. A plan that is good and usable is not easy to create. It’s going to take several months and need quarterly review after starting.

Some business ideas require less cash. And no business requires cash until you have a good Strategic Plan.

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A maximum of 10 companies per year develop a relationship for Business Coaching to turn around their company or scale up past a growth barrier.

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I picture my work with a glass of wine and a cup of coffee on my desk. When I start the day, I reach for the coffee. I decide what tasks to do today and I place any of the hard, nasty ones at the top of the list*. I think you know the kind of work that I mean.  I hate to respond to regulatory orders for audits and information so that needs to happen with coffee. Fire someone – definitely coffee.

 

At some point in the day, I can switch to the glass of wine. What’s the difference?

 

Reaching for wine is when I’m working on the stuff that I’m really good at and love. I’m thrilled to spend time out of the office thinking about the whole company. I’m good at the Strategic Plan and building systems to protect the company. That’s why I consult in these areas. It’s drinking from the wine glass.

 

Do you ever stop drinking coffee?

You can kill off your zeal and joy by only drinking coffee. We all have some hard tasks that need to get done. The trouble starts when you never have time to get to the wine that revives your vision and gives you new energy.

 

We are all exactly equal in one way. TIME

Maybe you read this as owner of a 10,000 worker company. I direct 150 staff. The President directs 4 million workers in the Executive Branch. It doesn’t matter. We all came in early this morning with the same exact amount 10 hours to work. The day marches forward for princes as well as paupers.

You are probably doing some coffee work that wastes your essential leadership time and robs the joy.

  

Outsourcing

I listened to one leader who tries to outsource everything except his core strategic tasks. What a fantastic idea! In my workday, I need to get more contracts for my company and build relationships with owners. Or I can spend the day hunting for the last audit and certificate of incorporation. Which use of my limited management 10 hours will move the company forward the most?

 

Outsourcing Benefits

  1. The company that accepts your outsourcing knows how to do that one task
  2. You don’t have to hire excess capacity or worry about hiring/supervision/unemployment because everyone is working for the other company.
  3. Some outsourcing reduces criticism

 

Outsourcing Cautions

  1. Choose an outsourcing company that is similar to your size. ADP is too big for most companies and they don’t really need your money.
  2. Plan how to measure whether the outsourcing is effective and how often to monitor. If you fire the janitors and bring in a cleaning company, you will need to have clear measurements of success, monitoring, and fraud control for theft. If you just give some strangers the keys and go back to your Strategic Plan, plan for a lot of coffee in days ahead 🙂
  3. Be careful of agencies which do so many kinds of jobs that they know a little about a lot of things. That’s like hiring yourself 🙂
  4. Watch for business changes and make sure that the contracted outsourcing still meets your needs. I use Netflix and recently got Amazon Prime. Suddenly, I wonder why I am still paying monthly for Netflix which I don’t watch that often.

 

10 Good Outsourcing Examples

  1. Payroll and Human Resources with a company such as APS. For us, APS is not too large so we can always speak to someone. Payroll is not that complicated for a payroll company. The software calculates taxes and pays employees. It’s ok not to watch them too closely since the employees and IRS are also watching. Many will also store required company documents and appraisals, training videos, time off requests. Etc. If it’s easy to use, then there is no downside to outsourcing.
  2. Janitorial – your part time janitors may be the worst. Few really want the job and janitors know more places to hide than the building inspector 🙂  Sadly, the janitorial company has similar trouble so you have to set this up carefully.
  3. Legal and Audit – you probably already outsource this
  4. Consultants for planning, cash management, and fraud – me 🙂 Very effective if the practice areas match your needs. Be careful with consultants who think they can do everything.
  5. Consultants to renegotiate loans, contracts and fire long term staff. Sometimes a fresh start is needed but consultants can be a buffer.
  6. Food – I’m amazed at service companies who run their own kitchen with all the problems of spoilage, regulations and staff. Outsourcing can’t be worse than what you are doing.
  7. Transportation and office equipment – lease everything and let someone else worry about repairs
  8. Clerical – we use Dropbox to store all corporate documents. 137,000 files today. A staff member in Indonesia labels them. I don’t have a filing cabinet in my office.
  9. Social media – there are a million eager workers in other countries who know more than you do about Google Analytics. Give it away
  10. Accounting and Accounts Receivable – an accounting and budgeting package always balances. You don’t have to check the assets against debits and credits! Once you have accidentally dropped a major line in an Excel chart from the SUM function, you will outsource and never look back

 

Conclusion

You are probably hesitating because you have seen some expensive quotes for outsourcing. True. So it comes down to three choices

  1. You hire another executive level staff member to take many of the coffee tasks while you save your 10 hours for leadership $$$$
  2. You burn yourself out and don’t advance the company because your life is all about the coffee jobs and you don’t even look at the wine. Company hires new CEO $$$$$
  3. You outsource and pay for some of the costs by reducing some operations staff and one less supervisor. $$

The coffee jobs are required but not essential. The wine jobs are all about the leadership and joy of the job. You have to find a balance that works for you and the agency. Outsourcing is one tool to take the 10 hours you are given today and invest it wisely. Start today.

If you want One Minute TurnArounds by email, please sign up!

GDPR – Your email is collected by an automated system so that the One Minute Manager posts can be sent. You will be invited twice a year to a two hour Scaling Up workshop for CEOs and EDs. Annually, you will be offered an Ebook and asked whether the resources of TurnAround Business Coaching are helpful.

A maximum of 10 companies per year develop a relationship for Business Coaching to turn around their company or scale up past a growth barrier.

 

 

*Tracy, Brian. Eat That Frog!: 21 Great Ways to Stop Procrastinating and Get More Done in Less Time. San Francisco, CA: Berrett-Koehler, 2007. Print.