This is Not Nuclear Winter

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As a business owner, three things to monitor.

  • Cash
  • Revenue vs Expense
  • Balance Sheet

Cash
Cash is king. And, only cash is cash. Accounts receivable isn’t cash, inventory is not cash, only cash is cash. You are going to need it. Preserve cash, tap your lines of credit, apply for government backed loans and grants.

Revenue vs Expense
Your monthly cash flow statement might need to be a weekly cash flow statement. Most accounting systems have embedded cash flow statements, but they don’t look forward very well. Try this simple one.

  • Cash Balance
  • Anticipated cash during the period (month, week) from revenue sources and accounts receivable.
  • Anticipated expenses during the period (month, week) including payroll, rent and any other necessary expense.
  • What’s left? If it’s positive, that’s good. If it’s negative, that is your burn rate.

Your burn rate will eat your cash, so how much do you have in cash reserves to cover? Without modification in payroll, paying your rent, paying your vendors, how long can you last?

Balance Sheet
Most businesses can get their expenses underneath their revenue. It’s painful, but has to be done. It’s not the profit/loss that kills most companies, it’s the balance sheet. It is mortgages, institutional debt (term loans) and covenants that go with. Having other assets, such as crypto in Secure Cryptocurrency UK or other investments, can help diversify and provide more flexibility during tough times. You can also learn about the Best Altcoin Exchange available in the market today. Make sure you know your banker, high quality communication early will help. Your bank will usually put you out of business before your landlord or your vendors.

Make sure you have your survival plan in place. If you want your kids to take over your business someday and secure their future, it is advised that you work with experts in financial planning for future generations.

Rate of Change in the Plan

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“Good work, so far,” I said. “If things work out this way.”

“Well, it’s a plan,” Miguel replied.

“What if things don’t work out this way?”

Miguel closed his eyes, trying to visualize something he had not considered. When he opened his eyes, I could tell he had drawn a blank.

“You expect things to occur, your customers to want a certain product line and your volume of orders to reach a specific threshold. What will you do if these things don’t happen?” I continued.

Miguel shifted in his chair. “I know. I was thinking, as I put this plan together, am I working to finish the plan just to get it done? Or am I really thinking through different scenarios. This year already seems a bit weird. Sales are sluggish even though we have really been working our bids.”

“So, what do you think?” I asked.

“I think the world changed faster than our plan.”

Trouble in River City

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In the midst of Covid 19, we had an earthquake (5.7) yesterday here in Salt Lake City. As we look forward, evidence of economic contraction is appearing, for some, aggressively attacking. This is not a time for panic, but a time for rethinking.

Lee Thayer, (Leadership 2004), speaks about necessity and its importance in the workplace. The entrepreneur, who starts a business, only puts in place that which is necessary. Only necessary equipment is purchased. Only necessary people are hired.

As time advances, and the business becomes more complex, necessity becomes more complex. And management decisions are made to bring on more infrastructure to support that complexity. Sometimes those decisions are accurate; sometimes those decisions miss the mark.

During this rethink time, look around. Re-think your work-flow. Re-think your personnel structure. Carefully examine what your customer wants, to make sure what you deliver is necessary.

Some of you are already hurting, do not give up hope, rethink. Some of you are thriving, don’t think you have dodged a bullet.

Wash Your Hands Again

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After 9-11, the question emerged, how do we get back to work? Sure there was a lot of short term (and important) work in putting our lives (country) back together, but we soon emerged to a new normal. And we had to get back to work.

COVID-19 presents the same problem. While we are in the midst of hand-wringing, wondering what we can do short of washing our hands seven times before lunch, at some point we have to get back to work. There is no basketball, no hockey, no soccer, perhaps a three year old football game on ESPN. At some point we have to get back to work.

And, what does it look like when we get back to work. While we are thinking about washing our hands one more time, could we think about our first moves to the new normal. We have changed our routines. Handshakes become chicken wings to the toe tap to more distance greetings. Some things we have adapted will become permanent.

Those permanent adaptations will seem clumsy at first, just not the same, but permanent nonetheless. And the clumsiness will become practiced, and those among us who practice will become competent at a new way. And the new way will improve on par with the old way. And, we will wonder what took us so long to get over our resistance.

So, what are you thinking about as you wash your hands, again?

Value of Advice

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Rory would not be deterred. “But, I am young, and, you are experienced. I have listened to you before and your advice has been helpful.”

“I am flattered,” I replied. “But, better to clarify your own understanding of the problem than to take my word for it. My advice is worth no more than you are able to make of it.”

Stuck in a Dilemma

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“I am stuck in a dilemma,” Rory explained. “It’s a quandary, so I have come for your advice.”

“And, you think I can help you?” I replied.

“You always have before.”

“I think you are mistaken. I can help you clarify your thinking, but as for my advice, it is only good for me. I can only tell you what I know based on my experience. What you need to know will be based on your experience. I can help you understand your experience, but, your problem, your dilemma will still be yours.”

Assessing Capability

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From the Ask Tom mailbag –

Question:
It was a pleasure working with you last summer. I’ve been introducing the concept of Time Span to my colleagues and its been helping us lead tough HR conversations. Some were wondering if you had an assessment to help determine someone’s time span capacity.

Response:
This is a very popular question.  The answer is completely counter-intuitive.  Elliott’s caution was clear. Don’t go around judging people.  Do NOT play amateur psychologist.  You didn’t go to school for it, you don’t have a degree in it, your chances of being wrong are about 50/50, same as flipping a coin.

HOWEVER, most hiring managers are expert at the work.  Most hiring managers understand effective behavior and ineffective behavior.  Stick where you are an expert.  It’s all about the work.  I do not judge people, but, boy, do I judge the work.  By careful examination of the problem-solving and decision-making in a role, most hiring managers can easily pinpoint the level of work in the role.  If we can understand the level of work in the role, then the selection decision is easy.  “Is this person effective in the task assignments at this level of work, or not?”

Don’t play amateur psychologist, stick where you are an expert.  It’s all about the work.

How Was I Supposed to Know?

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“And, what was your contribution to the problem,” I asked.

“What do you mean?” Mason responded. “I didn’t even know about it for two days.”

“As a manager, you always have contribution. The only way to an effective solution is make sure that you are not part of the problem. So, what was your contribution to the problem?”

“I’m still not sure what you mean,” Mason replied.

“Let’s see,” I started. “How about these, for contribution –

  • You put pressure on the sales team to find new customers.
  • You designed the production process without a provision for expediting an order, including notifications should an order be expedited.
  • You designed a production process where expedited orders derail current production output.
  • You designed a min/max for raw inventory, with re-order thresholds that allowed for out-of-stock.

“You can stop,” Mason protested. “How was I supposed to know this would happen?”

“Exactly. How were you supposed to know?”

The Problem We Name

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“You said you had one problem, but you were able to tell me several more,” I started. “Here’s the list –

  • An upset customer.
  • A RUSH order that delayed other orders.
  • A rogue salesperson that went around protocol.
  • A quality inspection process that wasn’t followed.
  • A shortage of raw materials with a lead time.

“Yep, I think you got them all,” Mason shook his head.

“And, I asked you which problem you were going to solve, knowing that everyone on your team, and everyone on the sales team sees the problem in a different way. Even the customer sees the problem in a different way.”

“And, I was just thinking last week that everything was under control,” Mason surmised.

“So, which problem are you going to solve? You see, each stakeholder sees the problem differently because they see the solution (that they want) differently. Each stakeholder would name the problem differently because they each see a different solution. The problem we name is the problem we solve.”

Which Problem?

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“I have a problem,” Mason explained. “We just produced a batch of 1000 parts that are all defective.”

“Tell me more?” I asked.

“It was a RUSH order for a new customer. Came in at the last minute, the salesperson wanted to impress, so he worked around all our procedures and expedited the order, against all caution.”

“So, what’s the problem?”

“The problem is we have an upset customer for that order and now we are late on all the other orders that were already in the queue.”

“And?”

“And, I have a rogue salesperson who doesn’t follow protocol,” Mason backpedaled.

“And?”

“And, we have a quality problem on first-piece-inspections.”

“And?”

“And, now we are out-of-stock on raw material because we used it all up for this rush order, with a three day lead-time.”

“So, which problem are you going to solve?”