Build Business Profits

Leadership is the most important factor in predicting business success or failure. A company’s strength or weakness is determined by its leader.

Recently, I started working with a privately held company that is owned by a family and where a number of family members work in the business. This is a very common picture. What is also common whether the business is family owned or not is a lack of clear direction and day to day discipline where resources are focused on the most important revenue and cost drivers.

I regularly hear a list of excuses and over time while I am working at different companies in different industries, the list is nearly always the same. In nearly every case when I ask a question as to why a certain work function is not performing it invariably comes down to a family member in the job or some loyal employee in the job that has established their way of doing things and the company’s leader is afraid of upsetting the apple cart.

How To Establish Strong Leadership In A Business

When I talk about this subject and give examples of ineffective leadership, most people think I quickly recommend replacing the person. Since some of my clients are family owned companies and the CEO is often the head of the family in addition to being head of the business, replacing that person is not an option. Even if the company is not a family owned business, replacing the CEO is far down the list of preferred options for strengthening the leadership position.

The process of strengthening leadership is detailed in my free course “How To Increase Profits by 30% or More in 90 Days or Less” which you can subscribe to at www.stevepohlit.com This article will further enhance your understanding as to the actions I have taken with clients that have been successful in creating leaders that have helped their companies build revenue and profits.

I have found most leaders do not have a clear plan for making money and so they cannot guide their organization to success. The second most common issue I find is that where a leader does have a plan for making money, they fail to follow the steps that are needed to be taken each day and each week to implement the plan. I would say that among the CEOs I have counseled, most know what makes them money, most know how to make more money, but many do not have the disciplined process in place to make it happen.

My most recent client is a great example and is the motivator for me writing this article. This client absolutely knows how to do the work of their business. The CEO is a master of this work and teaches others how to do this work well. They are awful at knowing how to make money at what they do. In fact, they do not get receive accurate information on their business performance and without change they never will because there is nobody employed in this company who has the training and skills required to produce the information they need. We are fixing that. This is more common than you think. Even where there are people trained on providing required information, it is often too little and too late.

Step number 1 is to make sure there is a clear understanding of what makes a company money and how. Step number 2 is to fine tune the day to day resource allocation so people spend their time making money. Day to day means every day and this is where we run into problems. It is not human nature to follow a disciplined schedule every day no mater how important the tasks are to making money. This discipline deficiency factor is often most acute among CEOs who are entrepreneurs and CEOs who are leaders because they were born into it. So it is important to teach them Steps 1 and 2 first and then if that doesn’t work another person is likely to be needed as the company’s day to day leader.

Recently in Business Week, Jack and Suzy Welsh advised a family member concerned about business direction to recruit a CEO. I really hesitate to disagree with Jack since he has been so successful as the now retired CEO of G.E., but in my experience many companies do not have the experience to hire an experienced and highly qualified CEO. Some that come to this conclusion will rely on a recruiter. This can work but is very risky. Of course I am going to recommend the right consultant. Are there others besides me that will guide you on the approach that I recommend? Yes I am sure there are. If you decide to talk with your banker, attorney, outside accountant, tax accountant, prospective consulting firms or your neighbor, here is what you need to do first:

1. Make sure you have a clear definition of what makes money in your business and how much. This means you need to have good information on revenue trends and gross margin by categories of revenue source.
2. Objectively define your human resource strengths and weaknesses.
3. Accurately forecast your near term cash inflows and expenditures. The worksheet I provide in my free course that I mentioned earlier details how this should be done.
4. Outline what you believe is the best near term strategy for your business (12 months or less) based on your company’s history and performance in the past six months.
5. Take a couple sheets of paper and see what your actual organization chart looks like. Enter the pay for each person you include on this functional organization chart.

The above five steps are not all you will need but when someone is advising you on how to run your business or how to recruit a leader, they better be bringing up at least four out of five of the above or you should be running away from that meeting as fast as you can.

Does a strong leader guarantee business success? There are no guarantees but a strong leader who is fixated on the handful of actions that make the most difference in revenue and profits will give your company the best chance for success long term.

To Your Extraordinary Success,
Steve Pohlit, Business Consultant
www.stevepohlit.com
www.stevereports.com

P.S. I am developing a new blog at www.successtips.us You are invited to check it out and submit your own success tip.

Blogging for Profits Issue No.9 How To Use The Powerful Motivators Recognition and Praise In A Special Blog To Help Grow Profits

You probably have noticed companies in the hospitality industry encouraging customers or visitors to acknowledge outstanding service, or to comment on their dining or hotel experience. Maybe you have read a survey card delivered with a the check at a restaurant. There are businesses where you are asked to write a note or complete a form if an employee did something extremely well and made the experience at that place of business more pleasant than you expected. Some companies send on line and off line surveys asking for feedback.

All of these programs were started and then duplicated by someone who realized that by asking for feedback you demonstrate you are interested in doing things better and want your customers to be happy. Employee recognition programs were started by someone who knows that praise and recognition are the two most powerful motivators.

Blog are a great tool to further enhance the customer comment and employee recognition programs. This article details how using blogs for customer feedback and employee recognition should be structured. When implemented properly, revenue and profits will increase as direct result of this effort. In this Blogging for Profits series, every issue is focused on how to use blogs to increase revenue and profits. All prior issues can be found at www.stevereports.com Register now at the main page and read all the issues starting with No. 4 Issues 1-3 are posted in their entirety at the blog.

Companies in the retail industry often face significant challenges to achieving consistent growth in revenue and profits. Large companies with very recognizable brands like Dell, Wal Mart, Home Depot and Microsoft as examples have all recently reported issues that have affected profit trends.

No company had ever succeeded long term with a low price strategy. Go to Wal Mart’s web site a look right below their logo. It reads “Always Low Prices…Always!” Now they are modifying their product offer in many stores in an attempt to become appealing to shoppers with more money to spend. Will it work? I wouldn’t do it. However, I am not their CEO and they didn’t ask me. Why are they doing it? They see the results being reported by Target, Kohls and others who appeal to a customer base more affluent than the typical Wal Mart shopper. Is Wal Mart a leader or a laggard on the spending trends? Laggard.

What about some of these other companies? Microsoft was to big and clumsy to recognize how fast and furious Google’s model took hold. They also ignored Apple and the iPod until the results kept hitting them in the face. Firefox has 12% market share and open office is growing at a rapid pace. The information on these trends and others are public information and largely ignored by Microsoft. Now it is an underperforming company.

Not that long ago McDonalds was in the news as being one of the companies that was experiencing difficulties with profit performance. Now that has changed and McDonalds has been reporting very good sales and profit growth in recent quarters while some of the leaders in recent past like Cheesecake Factory, Outback Steakhouse and a number of others have been reporting softening sales and profit.

What’s changed and what has McDonalds done different to capitalize on the changes? The Federal Reserve has just announced the continuance of their “let’s kill the economy program” with the 10th or 14th or whatever in a row increase in interest rates. Then there is the ongoing international issues which continue to keep the price of oil at record highs. So while unemployment remains relatively low, the costs associated with credit card debt and gasoline prices affect a lot of things including where people eat, how much they will pay for a meal and how far they will drive when it is optional. McDonalds is lower priced than many of the sit down restaurants and offers an increasing number of food items that are not as high in calories and cholesterol causing ingredients which leads to another shift in demand patterns. With the increased awareness on price due to the pressures of higher fuel costs and interest expense, this is a perfect opportunity for restaurants to implement loyalty programs with meaningful incentives. It is also a great time to be spending more on the customer service experience in the restaurant. Of course just the opposite is occurring with increasing regularity.

There is frequent publicity on the obesity issue in the US. This new story for the media seems to have had an impact on what foods people order to eat. McDonalds recognized this trend and started adding appealing salads to its menu about three years ago. The salad category is accounting for a significant portion of their increased sales and profits. At the gym I visit there is a big poster ad for McDonalds grilled chicken salad. Not only is it big, it is appealing. Applebees is devoting more of its menu to health conscious customers but I have not seen much change in the Outback chain or others. I have noticed more convenient stores offering a wider selection of higher quality foods including soups and salads. Many convenient stores seem to notice what people want faster than other companies and adjust.

Many of the examples used in this and other articles are taken from information published about public companies. This information is readily available as public companies are required to report on their business to their shareholders. This information often offers tremendous insight as to strategies that work and ones that don’t. Today’s Success Tip: pay close attention to the trends for your niche markets and adjust your offer accordingly.

Steve Pohlit, Business Consultant
“Helping Business Make Extraordinary Profits Now”
www.stevereports.com
www.stevepohlit.com

Part of what both Rich and I advocate is the leveraging of skills. For example if you are great at sales, it would be a mistake to have you devote a lot of time to maintaining the accounting system. I am sure you understand the principle.

Register for Blogging For Profits and read all of this
post plus issues 4-7 in their entirety. Registration is FREE at
www.stevereports.com