Good Accounting Practices Must Be a Top Priority

Office staff doesn’t know enough about our accounting system, or accounting in general. The accounting department says they’re overwhelmed. If anyone in that department is out sick, they get really behind. Space is very limited in accounting, and they’re dealing with a lot of interruptions. We could be doing a better job with the numbers side of the business. Any suggestions?

Thoughts of the day: Pay attention when accounting says they’re overwhelmed, as their performance is essential to a healthy business. Putting accounting in an area where they can’t be easily disturbed is a really good idea. Look for opportunities to involve people from around the company in accounting functions. The more your people understand what makes the numbers work, the more they can help ensure a profitable year.

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Family Businesses Need Succession Plans

We’re dealing with a family member who should be retiring. Unfortunately she still owns the stock and is very controlling. We want to take the company forward, but don’t have the authority to do that. She has done some estate planning with experts who don’t seem to recognize that control of the stock is essential for getting on with building the company’s future.

THOUGHTS OF THE DAY: Most small businesses don’t survive the first generation. Use shares to invest the next generation now. Figuring out how to secure the senior generation’s retirement can be a challenge. For business owners who have spent a lifetime managing their company’s profits in order to avoid paying taxes, tax planning can take on outsized importance. Confidence in the next generation’s ability to perform has to be earned.

Not having a succession plan for the business to survive its founder is a recipe for disaster. While 50 percent of business owners plan to pass the business on to the family, only 15 percent go from Gen 1 to Gen 2 and only 5 percent make it to Gen 3. Thirty percent plan to sell to employees, only 5 percent do. Forty percent of businesses close or liquidate.

It’s time for every owner to work out a solid business transition plan, while they still can.

Sharing ownership and control empowers and engages people. Use it to your advantage. Passing ownership to the next generation can be a loaded topic. For owners who have spent a lifetime running the company the way they wanted with little interference from anyone, giving up control is tough. Do it anyway.

Transitioning ownership is fundamental for the company’s long- term survival. Find people who want the business. Give them a stake in the future. Work up to giving them full control, using a timetable and a set of agreed-upon conditions.

Many worry they won’t have enough to live well in retirement. When the company has been the major source of income and assets have been plowed back into the company to keep things running, there may not be enough funds for retirement.

Build a plan to grow company revenue and profit significantly, to pay for Gen1’s retirement and Gen 2’s additional costs. Figure out what the senior generation actually needs to retire. Buy time by elongating the horizon over which those funds must be assembled. Budget funds for your primary task: securing retirement, building the company and transitioning ownership.

For business owners who have spent a lifetime avoiding paying taxes, it’s hard not to focus on the tax bite of transferring ownership. That concern may be overblown. When it comes to tax planning, things keep changing. Estate plans set up before 2014 need to be reviewed. Increasing amounts of value can be transferred tax free — more than $10 million per couple as of today’s writing. Even if taxes are due, it’s better to grow and pay taxes than to let the business fail trying to avoid them.

Start distributing ownership to those who want the business while you’re able to participate in the process. Limit ownership to people inside the business. Use insurance plans to care for family members whose interests lie elsewhere.

A business with a future has a broad, well-trained, highly invested management team. Most owners think it’s even better if some of that team comes from the family. Be certain the kids want the business before you begin a succession plan.

The family’s next generation faces big responsibility and takes big risks when they enter the business. They must match and then beat, the outcomes of their elders. They have to learn the business, plan for the future, take action, face risks and be accountable for outcomes. They must prove themselves worthy by demonstrating increasing skill at running the business. Confidence in the next generation’s ability to perform has to be earned.

Use a development plan with hurdles and rewards that defines how stock is transferred. As the next generation steps up, avoid decision making stalemates by making it clear through ownership who’s running the company.

Looking for a good book? “Small Business Ownership Mistakes: What You Don’t Know Will Destroy Your Business,” by Amy Rose Herricki.

 

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Eliminating Disruptions in Shift Work

We run a couple different shifts most days. We’re finding information doesn’t get shared. We end up duplicating effort as one shift re-does what another shift was supposed to take care of. Not everyone gets here at the same time, so it’s hard to have a meeting. What suggestions do you have to make this work smoother?

Thoughts of the Day: Plan out the work schedule. Plan out what to do when someone inevitably doesn’t show up for a shift. Use notes that turn into checklists to document what’s been done and what still needs to be done. Assign shift supervisors with overlapping check-in and checkout times who must clear up any issues before heading home. Finally, think about a different approach.

Scheduling is both art and science. If possible, buy some scheduling software. Most industries have systems that have been customized. Check with your national industry association to see if they have any recommendations.

Have a go-to person who oversees and approves all of the schedules. It’s this person’s job to match workload and personnel. Make sure this person is good at providing write-ups of what has to happen since they won’t always be on site and the shift supervisors need direction on what work they’ll have to handle.

Put one person on each shift in charge of quality and compliance and another person in charge of inventory. These two also need to be able to work with software to track and report. If possible get an inventory system in place that the scheduler and inventory manager can both look at to know what’s in stock and what needs to be ordered to help them plan out what each shift needs to work on. The quality manager checks that work is completed on time, is error free and provides feedback to shift supervisors. Make it clear what has to happen if employees want to swap shifts. Who do they go to for permission and how does permission get recorded so everyone is on board? What do replacements need to know and how are they informed? Is there any specific training /certification needed for a replacement to be eligible? What does the original shift worker have to do to ensure their work is properly covered?

Keep a schedule that everyone can access. If everyone doesn’t have access to a computer, post a daily roster — looking ahead at least two weeks. Show replacements by crossing out the original worker’s name, so that everyone knows who is responsible for ensuring the shift is covered.

In case of breakdown, make it the original shift worker’s responsibility along with the person who agreed to cover the shift to diagnose and prevent problems in the future. Meet with both to discuss the breakdown and ask them how they could have avoided the problem. Put suggestions in writing and make them part of the policy manual, which gets distributed to everyone.

Set aside time to cross train people so they can step into each other’s jobs. Have day-shift people train on the evening shift, and vice versa, as there’s a different boss, rhythm and set of tasks that have to be dealt with on each shift.

As much as you want teams to be self-managing, you still need points of contact. Make shift supervisors the primary point of communication between shifts. Everyone feeds them information about what’s going on before, during and after each shift. It’s their job to work with their teams and each other to smooth out disruptions.

Any time there is a change in shifts, that’s a disruption to work flow. Disruptions equal loss of productivity. Investing in equipment necessary to have more people work at one time may be less costly than dealing with constant interruptions from shift changes. Think about asking employees to work longer hours but fewer days — people may enjoy having more days off during the week and can be more focused during the concentration of work days.

Looking for a good book? Try “Work Rules! Insights from Inside Google That Will Transform How You Live and Lead” by Laszlo Bock.

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Get Your Succession Plan in Order Now

We have always tried to recruit good people, promoting from within if possible. We think we have people in place who could play a significant role in the company’s next generation. We need to understand their capabilities and commitments on a whole different level. And we need to be clear about our expectations of them. Is there a match? If we mess up, this company’s future could be in doomed, or we could be back in the driver’s seat exactly when we’re ready to retire.

Thoughts of the Day: Planning out the next generation can be a challenge. “Now” is almost always the right answer when considering if it’s time to get moving on figuring out the future. Looking for talent inside the company is smart. Knowing when talent has to come in from outside is crucial. Figuring out any gaps well ahead of time gives you options.

Looking to the future can be intimidating. Thinking who might run the company when you’re no longer around shows that you’re mortal and replaceable. Who wants to admit to either of those? Most owners underestimate the time and effort needed to form a succession solution. Or, they get busy running the company and don’t make time to work through the detail. Or, they follow the model they have followed — one person in charge — without realizing that a management team might do a better job.

Lack of clarity about succession leaves employees farther down the line in the dark as to what might unfold if something were to happen to the current owner(s). If something unexpected happens, you want people who are prepared to step up. You want everyone in the organization to actively support those who do step forward. It’s easier to follow a plan already in place that everyone agreed to when there was the benefit of time to work through details.

It is preferable to be prepared with a solution than to be caught short. That means taking time to brainstorm and plan, even if those plans eventually get scrapped in favor of new plans. Having options is always better than being faced with a critical decision and no preparation.

Start by assessing the talent pool inside the company. Ask people what they’re good at, what they want to learn about and where they see themselves in the future. Expose employees to leadership and opportunities beyond their current roles.

Make it part of everyone’s job to participate in some form of outside education every year. Try job sharing with a peer company to expose your employees to another way of doing things and to bring in people who might look differently at how business gets done. Find out who wants to step up and who is more comfortable taking a backseat role.

Make sure to profile the jobs at the top. What are the jobs today? What skills and talents will be required five to 10 years from now as the company continues to grow and the marketplace changes?

It’s worth noting that any organization knows what it knows — and that’s not everything. There are ideas, solutions, suggestions and options that others have thought about that could be useful to consider. Some of those outside ideas might get rejected and some might be a fit. Ignoring the possibilities that others can bring to the table is just plain dumb.

Constantly challenge your team to get smarter, faster and better at what they do by exposing them to things outside the company. Ask employees to take courses, go on sabbatical, spend time working for another company. Try anything that helps to expand their horizons with information that they could bring back to help your company.

If there are gaps in what the company needs to know — at present or in the future — you have a couple options. Hire the talent. Hire teachers to train your employees. Get people to practice through simulations — for example take time off and let your employees deal with what comes up.

Right now, unless you’re in crisis, your company has time to work through its succession planning needs. Working on successions planning is job number one for every business owner. Ensure that the company is prepared for change and smooth transitions, ready to step into its future when the old guard steps down.

Looking for a good book? Try “Leaders at All Levels: Deepening Your Talent Pool to Solve the Succession Crisis” by Ram Charan.

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Is it Time to Hire More Sales People?

I don’t know if I have enough salespeople. Our organization is growing, and I want it to keep growing. We’re starting to plan for next year and the year after that. How do we figure out how many salespeople we will need to hit our goals?

Thoughts of the day: One answer is this: You can never have enough sales, so you can never have enough salespeople.

Look at historical patterns to establish realistic goals. Consider ways to boost productivity of salespeople. Make sure costs are in line. Plan well in advance as it takes time for salespeople to mature.

Just because your sales team hit plan last year doesn’t mean it will hit plan again this year. Things happen, things that would have been difficult to foresee or impossible to predict.

Growing the sales force in advance of the need for growth in revenue is a smart idea. There are few things that a company can invest in that can guarantee future profits. Done right, a sales force is one of them.

Look at data from previous years to figure out smart expectations for an average salesperson. Look at the growth track, washout rate and range of production from low, high and median performers. Consider both revenue and gross profit contribution.

Decide who and what you want to use for a success model — not too big or too small. Look at the bulk of your salespeople for examples of realistic expectations. Evaluate high- and low-volume producers in terms of variety of customers, profitability and ability to expand a portfolio and retain existing business.

Match what salespeople have typically accomplished in relation to company objectives one to three years down the road. How many salespeople are maxed out or declining? How many have realistic growth potential? Are there any with the ability and opportunity to become super producers? Could moving a person from one territory to another increase the ability to contribute?

Before adding to the sales organization, take a look at what’s behind it. How much work do salespeople do that has nothing to do with sales: order entry, research on the territory, follow-up to ensure orders go out on time, gathering information on competitive threats and how to position — all things that a great salesperson will make time to do. But think how much more productive your salespeople would be if they didn’t have to do all that. Consider beefing up customer service, assigning account assistants or adding marketing resources to do nonsales legwork for your salespeople.

If some people are approaching retirement, offer to hire a junior person to help. In return, have them train the new people on best practices. Eventually customers will have to transition from one salesperson to another. Wouldn’t it be great if the account person who’s been backing up their primary salesperson takes over when the primary retires?

Think about boosting training and recruiting resources. If you can hire better and reduce turnover, you’ll be better able to focus resources on the most productive people. As you get ready to add more salespeople, make sure that you have the right cost-payoff ratio. Commission plans should be calculated on gross profit, not on revenue. Tie incentives to activities that lead to maximum sales growth. Extra commissions should drive more sales, and if they don’t, they should be eliminated.

Get your sales compensation plan right for the new salespeople. Rather than continuing the way things have always been, make adjustments before expanding. Even if it means you have two tiers of compensation, get the plan right going forward with the new people.

Get a realistic picture of how long it takes for your typical salesperson to mature. Don’t plan on replacing someone in less than a year if it takes several years for a salesperson to come up to full speed. Plan conservatively by building a farm team for sales. Bring people on in customer service and give them an opportunity to compete for openings in sales.

The bottom line — build your sales organization every year. Whether you’re thinking about bringing on your first salesperson or evaluating how to grow a nationwide team, it’s always worthwhile to build for growth.

Looking for a good book? Try “The Sales Acceleration Formula: Using Data, Technology, and Inbound Selling to go from $0 to $100 million” by Mark Roberge

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