How to make a partnership work

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The partner we thought we had has turned out not to be a true partner. We feel like they went behind our backs and directly approached our customers and our employees. This, after they’d agreed to keep hands-off.

Thoughts of the day: How much do you have in common with your partner candidates? What do you have in writing to document your agreements? Check backgrounds before starting work. If a deal sounds too good to be true, it probably is. Get everything in order up-front.

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Brace yourselves, growth is coming

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A major referral source for us is gearing up for a big summer push. That’s the good news. The bad news is that they are worried if we can we keep up. This is a great problem to have, but we need to solve it. How do we assure them that we can meet their needs? This will be a big leap forward for us.

Thoughts of the day: First, make sure you want the influx. Assuming you do want the work, build plans to gear up and assign people to implement those plans. Put someone in charge of monitoring workflow and quality. Meet with your staff to fill them in on what’s expected. Build in time to celebrate successes and let off steam.

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Staying on top of projects requires communication and accountability

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We found out projects that we thought were done, weren’t. Other projects weren’t done profitably. How do we get control?

THOUGHTS OF THE DAY: Build tools to track your work. Use checks and balances. Hold a weekly project review meeting. Formally hand off every job at the beginning and at the end. Make profitability an accountability with teeth.

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Include Every Team Member in Setting Goals

Common company wide goals – we don’t have them. We’re all self-interested in what we’re doing, and sometimes it’s hard to understand each other’s pictures. Not sure if we’re lacking the patience or the perspective we need. When we do make goals, they seem loose, they don’t get transferred to the entire team, and we don’t take them seriously. There are no consequences to not meeting our goals.

Thoughts of the Day: Even if you don’t have written goals, you do have goals, you just don’t know it yet. As owners it’s important that you take hold and decide what you stand for. There are always consequences for your actions or inactions. Remember that there is strength in numbers, learn to help each other get ahead.

Every day, people get up, go to work, get things done, and then go home. Intentionally planned out, or simply drifting along, most people manage each day to get moving and accomplish some things. Conscious and unconscious activities are the outgrowth of conscious or unconscious goals – to get moving, to earn some money, to be in contact with other people, to get something done.

Thinking through long and short term goals, actions and consequences allows one to act pre-emptively to achieve what’s desired. Written goals, backed up by a list of action steps needed to achieve those goals, tends to increase the likelihood of the goals coming to be. Working consciously through goals and actions can also increase the chance that undesired consequences can be anticipated, and avoided or minimized.

Human behavior starts with thinking selfishly, what’s good for me. For some people it evolves to, “How can I accomplish what I need while also thinking about the needs and wants of others?” Expanding one’s horizon beyond self-interest allows for the possibility of taking in additional ideas and contributions from others.

No one person has all the answers. A group working to solve problems and learn from each other’s experiences tends to result in higher level outcomes than does a single person working alone. In the process of working out bugs, communicating about what needs to happen, and sharing individual know-how, a higher level of performance emerges based upon the group’s collective abilities.

It does take patience to listen as one member of the group, and then another, talks about how their experiences are relevant to the situation at hand. It may feel as though there isn’t enough time to wade through the clutter of multiple participants inputting what they consider to be important. In the process of trying to saving time, it’s easy to overlook the nuggets that each team member can add to a group project.

People in the organization look to the owners for leadership and guidance. Behaving without regard for your peers, ignoring the goals and motivations of other team members, shutting off discussion – are these really the things you want to be known for? Or would you rather be seen as a person who encourages the talent around you, as someone who helps people grow by fostering an environment of cooperation and collaboration while working towards the greater good?

Consider compromise to find the balance between what you want and accommodating the needs of other team members. Allow for the possibility that helping each other may lead to new insights and experiences that could never have emerged if you were working on your own.

Use the process of defining and setting specific, tangible goals to your advantage. Discussion, documentation and negotiation are all great toold to help you better understand where your teammates are coming from, and to educate them about what you consider to be important. Ask all team members to join in it will remind them that they are crucial to the growth of the company, and will make them committed to achieving the goals. Use breakdowns in communication and teamwork to your advantage, treat them as learning and strengthening opportunities. Refuse to walk away when things get tough. Hold your team members accountable for doing the same.

Looking for a good book? Good Luck, Creating the Conditions for Success in Life and in Business, by Alex Rovira and Fernando Trias de Bes.

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Time for a Mid-Year Check Up on Finances

Want to be sure that we show a profit this year. Know we can’t have both high profit and low taxes. Where is the balance? Need to be sure to show the bank improvement over 2012. What stats should we be watching?

Thoughts of the Day: Building a successful company means that it is growing both revenue and profitability. Focus on building reserves and getting ratio improvements when comparing assets, liabilities and equity. As long as your company needs to borrow money, think of the bank as a partner who needs to be kept informed.

When managing in a downturn, it’s essential to have an accurate picture of where the company is headed – immediately and mid-term. Define any shortfall, rather than ignoring the problem, by comparing revenue forecast to expense budget. Do everything possible to reduce the shortfall to zero by cutting expenses and focusing on profitable revenue. Identify use of lines of credit and other debt instruments to close any gaps. Figure out ahead of time if the company risks running out of cash. Be realistic.

While the finance department is usually focused on reporting on historical performance, and keeping controls in place, its greatest value comes from creating a go-forward picture. Planning out the forecast of revenue and building an accurate expense budget is a way of showing everyone where the company is going, in financial terms.

Set revenue targets that everyone can agree on. Don’t over or under forecast. Use the budget to plan out critical expenditures needed to boost sales and marketing, in order to get the company back on track for profitable growth.

Look at crucial ratios that will determine whether or not the company can obtain additional financing. Compare current assets (cash, accounts receivable, inventory) to current liabilities (accounts payable, lines of credit, current year’s portion of long term debt). The ratio needs to be 2:1 or higher.

Next take a look at debt: equity ratio. That needs to be under 2.5: 1. Companies with the greatest difficulty meeting that ratio tend to be young, under capitalized firms, and companies that have been taking losses for a long time.

If the company is at or above 2.5, and there are no funds available from the owners, the company is going to have to make do with what it has available. It may also be at risk of having it’s lines called by the bank. Treat this situation very seriously by building a plan to boost profits and sales immediately, without taking on additional debt.

Many times the debt: equity ratio is okay, but the current assets: current liabilities ratio is too low. If that is the case, consider terming out some of the credit line, thereby moving debt out of current liabilities, into long term. This move won’t impact the debt: equity ratio, but it will improve the ca: cl ratio.

Once the company starts to produce profits, use the money to pay down debt and build reserves at the same time. $1goes to debt service, $1 into cash reserves. Building up cash reserves will give the company more room to manoeuver than paying down debt alone.

If the company is struggling, keep the bank informed. Banks don’t like surprises. They want to see an owner who is knowledgeable, forthright, and working to solve problems with the resources available. Demonstrate that by sharing plans and reporting with timely data.

Ask the bank to meet with you, to review existing reports. Ask for their suggestions. What additional reports do they think you should be looking at? What ratios would they like to see? How often? They can be helpful, if you open the door to a cooperative relationship, and they may see things that you don’t. The best part: their advice is usually part of the package of services they offer, you might as well make use of it.

Looking for a good book? Never Run Out of Cash, The 10 Cash Flow Rules You Can’t Afford to Ignore, by Philip Campbell

Want to print this article? Time for a mid year check up on finances

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