Strategic Planning Blogs Archives

3 Ways to Maintain Long-Term Business Success

Human nature is inescapable, and we all experience its challenges from time to time. We do not mind doing a task that has to be done when it is easy, when we are interested in it, or when it does not get in the way of what we really want to be doing. But, when a task is difficult, out of our comfort zone or not interesting to us, our likelihood of doing it well decreases dramatically. Entrepreneurs are no exception, but in order to attain long-term business success, we must learn how to do the difficult, tedious tasks.

If we are not diligent, we may find ourselves making excuses, denials, and rationalizations instead of doing what we know we should. This can run counter to our own best interests. To quote a famous cartoon, “We have met the enemy, and he is us.” (Pogo, Walt Kelly).

We all know about the high failure rate of start-ups. There is also a high rate of businesses that have had initial success then closing. The owners were unprepared for and unwilling to do the things that a profitable, well-run company requires. They did not understand that early achievement does not guarantee on-going success.

Wins do not always lead to more wins – they can instead, sometimes lead to complacency. Building and maintaining long-term success takes on-going effort and skill. If you want to be better, you have to do better. Here are 3 places to start.

For the following three questions, the answers should all emphatically be “YES,” but you should also be able to back up your assertion with facts.

Do you act like your money matters?
- This one seems like a no-brainer, but the truth is many owners do not fully know how to read or understand their financials. This means many do not know how to manage, plan or implement change based on numbers rather than guesses and feelings.
- What are your margins? What is your break even? What does it cost to run your business daily? What is your loaded labor rate? What is your bid to award ratio? What is your cash flow cycle?
Do you act like your employees matter?
- Most employees need active management. Telling them what to do, walking away and expecting them to do it without training, oversight, and follow-up is not management. Sitting in your office and saying, “They know what to do, why won’t they do it?” is really saying, “I don’t want to do my job. Why won’t they just manage themselves?”
- What is your utilization rate? What are your turn and churn ratios? What does it cost you to hire and train a new employee? Are your managers managing or are you a fireman, babysitter, and policeman? What is your productivity rate? Again, knowing your numbers is an important aspect to long term business success.
Do you act like your product and customers matter?
- You are in business to sell something to someone. Owners can lose sight of that truth, especially when they have met some of their goals. Product and customers become secondary considerations, rather than primary. It is a rare company who can survive a decline in product quality and customer service.
- What are your rates for waste, scrap, and rework? What are your warranty costs? What is your market absorption? Can you define your demographic? How diversified are you? What do your customers want that you do not sell? Do you know your inventory turns by product line? What are your costs to carry inventory?

If you want to achieve long-term business success, you have to do the work; there are no shortcuts. A business must be built on the firm foundation of good leadership, discipline, and execution. Success is not final; there is always something else just over the next hill. It is there, but you will only see it if you are looking for it.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

How Much “Hidden Talent” is in your Company? Almost None

Talk to any business owner about their business, and it won’t be long before the conversation turns to the problem of finding talent and keeping it. It’s a key issue in the marketplace. Those who do that well, succeed. Moreover, those who don’t, well, they end up having a hard time.

They all know that employee engagement means more productivity, better quality and ultimately, higher profits. The best of them usually want to learn how to tap into the “hidden talents” of employees.

The amount of “hidden talent” in most businesses is near zero.

The best definition of talent I know is “the ability of a person to perform a duty or action.” If it’s a natural ability, they were “born to do it.” It’s innate. If It’s something they’ve learned, then they have picked up this skill over time, moving from “conscious incompetence” to “unconscious competence.” A learned skill becomes a talent when it’s so ingrained that you can’t tell whether they were born with it or not.

People have an awfully hard time hiding something that they do unconsciously… because it’s unconscious. Only in dysfunctional circumstances will people attempt to hide their talents.

However, employees often display talents that are not recognized; an employee’s fundamental aptitude may not be at the core of his responsibilities, but he’ll leverage it wherever he can use it.

This “Hidden-ness” We Talk About is Really Three Things:

Our inability as business owners to recognize employee talents when displayed. It’s there, but we don’t see it;
A lack of processes to develop and deploy talent when it is recognized. We see it, but don’t know how to use it;
A “cultural deficit” that intentionally ignores or hinders the expression of talents not specific to the employee’s current position. We see it, but sorry, we’ve already defined you.

RECOGNIZING EMPLOYEE TALENTS

Recognizing talent is a talent itself. Moreover, it can be learned. Some keys:

Employee interaction should exceed the transaction. When interacting with employees, make sure it’s not just about the work or problem at hand. Be present and observe the way they think and how they deal with the issue at hand. Business owners who are wearing too many hats often find themselves moving from transaction to transaction and not taking time to see the whole picture. Observation is something we do intentionally.
Know the personality type of your employees and which types are most likely to perform best in each position. Position everyone to be successful. In his book Good to Great, Jim Collins calls this getting the employee “in the right seat on the bus.
What compliment does your employee dismiss? What is the underlying trait of the excellent performance? You could be observing their most natural talent (it comes easily to them).
Learn why they like what they like. Understanding what part of the job an employee likes is good. Better still; understand the reason why the employee likes it. Is it their natural organization skill? Is it interaction with people? Is it working on a team?
Ask for volunteers. Employees who volunteer are often “playing to their strengths.”
Get to know your people! What are their hobbies, passions interests? What are they hoping to accomplish?

CREATE PROCESSES THAT DEVELOP AND DEPLOY TALENT

Performance and talent management systems may sound like “big company” solutions, but every business needs a system it can trust to develop employees.

You need to have a method for noting what you learn in the office or on the shop floor so that you can consistently develop people and fully utilize their skills.

ADDRESS CULTURAL DEFICITS

Every business can improve their culture. As the business owner, your people will need to trust your leadership to bring their whole selves to work.

One method that works well is the practice of Appreciative Inquiry. This change management process stems from the proposition that “systems develop in the direction of the questions that you ask.” What single thing can you do today, to recognize the talents your employees display? What simple process can you use to manage better how your employees develop? What needs to change in your culture so that you more fully know the potential of your workforce?

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

The IRS is Granting Help For Small Business

Although many small businesses have already either filed their tax returns or have filed their Form 4868 for the purpose of requesting an extension, there are many small businesses and individuals who may receive an extension without having even to request permission from the IRS.

In an April 16th, 2018 IRS news release ” The IRS said nearly 14 million taxpayers are expected to get an extension this filing season.” Businesses who have fallen victim to any of the following circumstances will be automatically granted additional filing time regardless as to whether or not they have had the opportunity actually to request permission for extension formally.

We would like to provide detailed information pertaining to exactly who may have undocumented permission from the IRS, deadline dates and various forms and publications to help victims of special circumstances:

If Your Business Has Fallen Victim to Natural Disasters:

If your business was affected by wildfires, mudslides or flooding in portions of Southern California, you would have until April 30, 2018, to file and pay your business taxes. The IRS also includes relief by offering additional time to make contributions to your 2017 IRA. The same will apply to organizations holding tax-exempt status.

If your business was located in Puerto Rico or the U.S. Virgin Islands and your business was affected by Hurricane Maria, you will automatically qualify for an extension to file your tax returns and pay taxes owed by June 29, 2018. This same date shall apply to businesses that had fallen victim to Tropical Storm Gita that occurred in American Samoa.

For more extensive information, please feel free to review the updated Disaster Relief IRS Publication 976

Additional Publications for Other Special Circumstances:

Publication 54 Tax Guide For U.S. Citizens and Resident Aliens Abroad will offer information regarding filing and tax payment rules for those who own businesses or are currently working abroad.
Penalty Relief Due to Reasonable Circumstances If your small business or yourself as an individual have experienced a disaster such as fire, casualty or any other serious disturbance, the IRS may be willing to remove penalties from what you owe. To see if you may be eligible for removal of IRS tax penalty amounts, read this publication to see if you qualify. You will only approach these issues if the IRS has actually mailed you notice with regard to penalties.
Armed Forces Tax Guide 2017 will offer updated information pertaining to those who are currently serving in all branches of the U.S. Armed Forces and are still located in combat zones.

2017 was a trying time for so many Americans, and the Internal Revenue Service is more willing than ever to offer solutions, to what can be very difficult and complicated small business tax issues. The devastating natural disasters that had occurred in 2017 has not only prompted the Legislature and the IRS to provide lengthy extensions for filing and payment. If your business has been affected and you’ve not yet filed, be certain to take advantage of other disaster-related situations that may have affected your business and your employees. The IRS is willing to help.

If your business was located in an area that was declared a disaster area and you retained your employees until the business had become operable, you may still receive a retention credit. This credit will be offered to any employer who retained their employees long enough to have paid them at least $6000.00. At that point, you will receive a $2400.00 tax credit for every employee you had retained and paid $6000.00 and over.

Your business must have been active and engaged at the time the disaster had commenced, and your business ceased due to destruction in the following areas and during the following periods:

Beginning on August 23, 2017, for businesses impacted by Hurricane Harvey.
September 4, 2017, for those businesses who were impacted by Hurricane Irma.
September 16, 2017, for all businesses impacted by Hurricane Maria

Ending dates would be either once the business had once again become able to resume a significant amount of business or January 1, 2018 (the first occurring date).

See IRS Publication – FAQs for Hurricane Victims – Employee Retention Credit

We hope this information helps those businesses who have been adversely impacted by any kind of disaster, natural or otherwise. We know that many small businesses have had the opportunity to recover and yet many still are attempting to recover, and we do hope to continue to support you in any way possible. We are confident that these IRS publications will help make your tax filing and payment easier. While you are here, take the opportunity to visit the IRS Newsroom for up to date information.

More information about tax planning can be found here.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Small Business Associations, a Comprehensive List

With absolute certainty, when it comes to running your small business, you know best. However, every small business owner is eventually faced with issues whereas connections to other like-minded business owners can be highly beneficial. No small business owner needs to feel ill-equipped or feel as if they are alone when issues arise.

We would like to help by providing a list of small business associations that could make all of the difference in growing your business. Although you may already be aware of a few of these associations, there are some that literally, every small business should consider joining. Take the time to explore your options below:

Did You Know That The Small Business Association (SBA) Offers Community Groups?:

It’s well known that the SBA offers loans, but this isn’t all that they offer. Nearly anything that one could wish for with a small business association can be found within an SBA community group. If they don’t have something you need, they will guide you in the right direction. Connect with a community group on and offline in your community.

Access StartUpNation For Information That Will Help You Start Up or Grow Your Business:

Whether you’ve been in business for awhile or you’re serious about beginning a startup, you’ll find plenty of valuable information to help you create a business that will thrive. If you would like they have a radio show featuring thought leaders that are eager to share what they’ve learned on their journey. Take a look!

Business Network International (BNI) is an Excellent Association for Networking:

Every association is different. BNI will require that you apply for approval. They already have 7500 chapters. Once approved, while attending sessions only one member from any industry will attend group meetings making you the voice of authority for your industry. Benefits include trade shows, newsletters, workshops and more.

The National Federation of Independent Business (NFBI) Offers Advocacy for Nearly 350,000 Small Businesses:

NFBI is 100% engaged in their devotion to America’s small businesses and their owners. They advocate and lobby at federal and state levels, addressing various small business issues. Attend some of their events that are dedicated to networking and offering small business resources and research. You may also have the opportunity to gain access to their online forums and small business discounts. Join and enjoy the immense amount of information and assistance offered.

Any Small Business Should Definitely Join Their Local Chamber of Commerce :

Click on the link and locate a chamber in your community. This is especially beneficial for those small businesses that sell business to business. They offer access to various workshops, newsletters and even offer discounts on FedEx shipping. As a member, you’ll have the first opportunity to access booths at their conventions and trade shows among other benefits.

The Entrepreneurs’ Organization (EO) is One of the Older Associations:

This Association has been in operation since 1987, the members of EO currently provide employment to a stunning 3.4 million persons globally. You can see many of their impressive association stats on the front page of their website. Joining this association elevates your opportunity to become a part of mentorship programs. You will also have the ability to access various industry professionals and peer to peer educational platforms.

Don’t Forget To Explore and Join Trade and Industry Associations – Start With the HVVC Dwight Martin Library:

The resources available here are remarkable if you’re in need of assistance with any aspect of the trade industry. They even offer access to a librarian through live chat or any other way you may wish to inquire about industry-specific information. The research available with this organization is extensive.

The Food and Drug Administration (FDA) Offers an Extensive List of Associations:

Even the FDA wants to help small businesses that specialize in cosmetics, soaps, perfumes, chemistry, chemicals and so on.

Below we are providing some of the top links to associations for women, veterans, minorities, small restaurants and even global change SMBs:

Office of Veterans Business Development is an amazing resource offered by the SBA that, although is not considered an association, offers a myriad of resources and assistance to Veteran-owned businesses or start-ups.

National Veteran-Owned Business Association (NAVOBA) – This is an association that will offer Vets some excellent small business networking opportunities. They also offer a small business owner-director. Their goal, among other services, is to encourage consumers to purchase from Veteran-owned small businesses.

EWomanNetwork – One of the largest and most established women’s small business associations in the nation.

Women’s Business Development Center (WBDC) – This a women-centered association that will assist with seasoned business owners or women who would like to start a business. This association has an “Access to Capitol” program for women’s small businesses.

Minority Business Development Agency (MBDA) – This association specializes in providing resources to minority small business owners who would like information and assistance with beginning, managing, or financing their startup or existing small business. They feature a research library, various guides, and webinars to assist in creating a successful business.

National Restaurant Association – Specializes in the various aspects of small restaurant ownership.

Not all small business associations charge fees. However, these associations have the ability to allow small businesses to create loyal clients/customers, business partners, and other invaluable connections. The point is, there are resources and benefits available with every association. There are many more associations for small business, but those listed above are excellent examples of the possibilities.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Why Hire a Management Consultant?

As we previously discussed the various types of owners involved in a business, we concluded that eventually most would lose interest or lack the skills to run their company. Whether, it is the inventor, entrepreneur, salesman, or the successor. Each will need to face the issue of whether to hire an outside Management Consultant at some time in his or her tenure, whether for a specific task or a complete review.

The vast majority of owners will need help in solving their business problems but recognizing when it is the time to act is often slow to develop. Exactly when this occurs can be critical to the overall success of the company. Often an owner does not know what he does not know as his business experience is limited and he fails to act in a timely manner. There will always be reasons a change can be desired, but the nagging question is still: How can a Consultant know more than me about my business than I do?

Well, does he or she? The numbers will tell the story of the business. In other words, if you maintain a set of books, they will reveal to the consultant, just what is happening in the company. In most cases, unless this has been taught to the owner and someone has developed his “instrument panel” or measuring tools, owners rarely look at the numbers. When they do, it may be too late or done too infrequently to make the necessary adjustments. Once in a while, an accountant may point out the value of the numbers, but in the majority of cases, it is rarely done. Therefore, an owner is most often operating his company without the necessary “instrument panel” to guide him in the decision making process.

Every owner feels that his company and its problems are unique. Depending on the size and sophistication of the company most issues are not unique. They are very often the same problems depending on the stage of the company development. What is true is that a “uniqueness” may stem from the personalities of the owners and top managers. Everyone is different, and each may offer a different solution to a problem. Most problems are repetitive no matter the type of business. The key is the development stage of the company. How many hats are required to manage this business?

Even the decision to hire a consultant is clouded because of the owner’s lack of understanding of the numbers; can he afford it? (Can he afford not to?) What benefit will he see? The expense of the consultant must be viewed as an investment in the business– an investment to make it grow and become healthier and more profitable. The changes that a Management Consultant would bring to the table should create a return on investment that will carry over for years into the future. Other, persuasive reasons to hire a consultant may include the following:

Working Harder– Not making additional money. Owner’s return on his investment does not justify the effort required to maintain the company.
Experience– A Consultant has faced most of your issues multiple times. He can create a solution much faster than the owners. Having broader knowledge of what works and what does not, will hasten change and save money in the long run.
Lack of “Big Picture” Viewpoint – Some owners involve themselves in everyday operations even though it may not be necessary. He or she may miss the forest for the trees, and fail to come up with what might appear to others to be obvious solutions because he or she will not step back or delegate aspects of operations to capable employees.
Lack of Manpower– Knows that change is necessary but does not have the manpower to implement it while carrying on the day-to-day business operations.
Outside Opinion– You may have reached a critical juncture in the thought process that makes you want to have an outside opinion. Did you miss something in coming to a conclusion? Or, may there be a different solution (see experience) that is not as complicated or less expensive?
Lack of Critical Skills– Owner may not be a good people manager or may lack the financial skills to understand what the numbers are indicating.
Poor Productivity– Realizes he is getting unwanted results but has no solution.
Catalyst-Needs a consultant to help make corrective changes.
Resistance– People not always welcoming of change. May need a facilitator to accomplish the required changes and justify that they are necessary.

SUMMARY– When you review the reasons for engaging a Management Consultant, it is apparent that every small business will need to involve the expertise of a Management Consultant. However, some will ignore their problems and not seek to make any changes. This will probably cause them never to reach their full potential, and in some cases close their doors forever.

Those that do recognize the value of a consultant, and hire one, stand to benefit for several years and enjoy the increased earnings, improved operations and greater profitability that will result.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Procedural Systems: Get the freedom You’ve Always Wanted

Is there anything that gets a bigger yawn than talking about procedural systems?

Maybe not, and it is too bad because a lot of business owners have the wrong idea about them.

These are some of the things they say. “They are too hard to put in place.” “I don’t know where to start.” “I went into business for myself so I wouldn’t have to follow policies and procedures.” “Only big companies need those – we just wing it.” “I don’t need any of that because I’m involved in everything anyhow.” “It’s too expensive.”

But, here is the head-scratcher:

While they are saying they do not want or need a procedural system, these same owners are complaining about problems caused by not having one in place. Policies and procedures can fix low productivity, poor quality, underbidding/estimating, employee theft, too many receivables, not enough cash flow, too little/much inventory, low sales, etc.

That is right – they are against the very thing which would make their lives easier because they do not really understand it or its benefits. A consistently applied, well-defined system gives management and employees the tools they need to produce a quality, money making product. It is usually the difference between a business’s success or failure.

More importantly – it is also the difference between an owner loving or hating his job.

A big reason people start a business is that they think it will give them freedom. They do not want to be restricted, confined and limited by working for someone else. They mistakenly believe that policies and procedures will take away their independence.

However, the exact opposite is true.

The biggest complaint long-term owners have is that they cannot enjoy the benefits of their hard work, because they are tied to the business. It falls apart without them because there are no self-regulating systems in place. The owners are the system, and that is a bad way to run a company.

They should not be the glue that holds everything together, because in time the company becomes a yoke around their necks. They end up being firemen, babysitters, and policemen. They become burned out and unhappy. Any freedom or independence they felt, in the beginning, is long gone. Now they feel like “just another one of the employees.”

Do not be caught in this trap. Your business should be working for you, not you working for it.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

SMBs: Begin Tech Prep Now for 2020 Competitive Edge

Alright, so perhaps we’re pushing it a bit by looking at how we can help small businesses prepare now for 2020. However, we’re of the opinion that with the speed in which technology and business practices are advancing, we may as well give our small business readers a heads-up so that they will meet 2020 comfortably prepared and on a continued path to success.

2020 is already less than 2 years away and now is the time to make ready, not when it arrives. Don’t be caught in the trap of having to pay premium prices to catch up! In the here and now, in 2018 small business owners must keep future competition in their forethoughts. Small businesses must stay in line with the trends now to remain competitive and be on top of their game at the beginning of 2020.

Let’s take a look at the current small business mindset

According to a survey by Blue Corona Marketing, only 30% of the small businesses surveyed believe that remaining atop of technological advances is a major issue.
Insight reports that only about 53% of small U.S. business owners even have a website in place.
In a report provided by Fast Company that only about 50% of current small business owners have invested more than 5K in the past few years of business on IT solutions vital to the growth of their business.

If just these few attitudes toward technology investments in small businesses continue, competition nightmares are certain to ensue and soon. As a matter of fact, in an article published by Business Insider – “Gartner projects that more than 85% of customer interactions will be managed without a human by 2020.” The bottom line is, the sooner small businesses arm themselves with proper technology, the better their opportunities for market advantage by 2020.

Here are just a few ideas that will provide an immediate and long-lasting edge that small businesses should begin implementing now in order to remain technologically aligned and prepared:

Cloud Computing – According to an article in Forbes – “78% of U.S. small businesses will have fully adopted cloud computing by 2020.” This will afford small businesses the ability to store as well as access programs and information via the internet as opposed to depending upon hard drive storage (that can naturally become vulnerable). By making use of the operations and business tools, Cloud Computing will undoubtedly offer your business savings. It will also create a more effective team from a mobility standpoint. Collaborating would be instantaneous, and scalability simplified.

Services that small businesses can move to the Cloud:

Accounting Capabilities
Business Telephone Systems
Internet Web Hosting
Business File Storage and so much more

Artificial Intelligence (AI)

Artificial Intelligence is going to become vital to small businesses to help them keep up with their clients/customers. If as a small business owner you would like to get your feet wet, implement a chatbot on your website for starters. Many forms of AI are already in existence and are heavily in use. Small businesses may wish to begin now implementing AI.
Many companies specialize in AI, and with subscriptions and customer service can help you get set up. Some of them will allow their users to create chatbots that not only interact with their clients/customers on websites but will also communicate with the by SMS among other services. Some other possible services AI offers are predictive maintenance (industrial), client services management and even virtual assistance that will keep your calendar up to date!

Mobility Will Quickly Become Vital to Small Businesses:

As of now, according to the SBA, approximately 56% of consumer traffic that leads to U.S. websites is routed through mobile devices (smartphones, pads, etc.). According to Google, about 61% of those users who are unable to access a business website by a mobile device will not return to the site, and that about 40% are likely to visit your competitor’s website instead of waiting for a way to until they can get to a device that will access your site..
Small businesses must also consider the fact that receiving payments through mobile devices is expected to surge by 2019. Making payments to your company accessible by a mobile device will be an essential investment to make now. Employee mobility will become equally as relevant to your business by 2020.

Employee and Client/Customer Communications Will Become Necessary:

Internet-based operations and Cloud Computing provide you, your employees and clients the ability to communicate and collaborate from nearly any location on the globe in real-time. Tools such as Dropbox and Google Drive, for example, will continue to make collaboration and file sharing extremely simple for employees and even clients/customers if needed. Small businesses may also opt to use VoIP (Voice over IP) applications to remain connected. This will allow for a broader range of connectivity with employees.

The time is now to make these changes. There are other small business tools that will keep your business up to date and moving forward, that are both easy and affordable, and that can be implemented by small businesses. It will be vital that you remain abreast of technological trends now so that you aren’t lost in the crowd as the 20’s roar in, in the not so distant future. We will continue to watch small business technology trends and report them to you here.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Predictive Analytics 101

Businesses of all sizes, for decades, have been seeking answers as to how they would have the ability to improve negative business functions vastly before disaster strikes. With this knowledge, companies just may see enhanced operations and profitability.

Predictive Analytics, in layperson’s understanding; is the use of various types of data, machine learning techniques and multiple forms of statistical algorithms to assist in the identification of the future outcome likelihoods. These possible outcomes would be based on your historically provided data.

The point of these procedures is to change your company’s understanding of past adverse outcomes to seeing over and above what had actually taken place in any specific event to acquiring the best assessment, with the data provided for likely future scenarios. This will allow companies to learn from what their computers learn according to their historical input, therefore making it possible to improve decision making processes by seeing how the company has historically functioned in various aspects of the business and making appropriate changes with predicted information.

Whereas predictive analytics has been in existence for decades, these functions were best left to statisticians and math geniuses; only large corporations could afford the luxury of having these minds on staff, therefore, moving large conglomerates always significantly ahead of the game. Today, even small businesses are finding that with the continuous improvement within the realm of cloud solutions, they too are now fortunate to have the ability to benefit from big data usage.

It’s quite important to note that prior to implementation of predictive analytics software and learning the required procedures; the results would be highly dependent upon the types and amounts of data that is made available to the system. If correctly implemented, however, the return on investment can be quite impressive.

What Kind of Information is Gleaned by Use of Predictive Analytics?

Although the use of predictive analytics isn’t necessarily something that everyone would benefit from (just yet), as time moves forward, it’s expected to become a useful tool to more companies of all sizes. Currently, predictive modeling takes many forms beneficial to small and medium businesses and if the results are appropriately used, could profoundly affect profitability with:

Advertising searches, sales, and up-selling, potentials.
Highly improved marketing campaigns.
Forecasting potential results regarding increased revenue with various business types.
Forecasting how to optimize both mechanics and possible added revenue in manufacturing. (2016 Honeywell Study)
Forecasting and understanding new product development. (R&D Mgmt. Case Study – Electronics)
Forecasting possible outcomes with construction revenue. (2017 Initiafy)
Forecasting potential supply chain issues. (Supply Chain Brief – study)
Risk management
Cyber security
Fraud detection and much more

These are just a few examples. Once implemented, the level of clarification made available to decision-makers will make it possible to create far more superior operations across all aspects of the company/business. Not all decisions are equal or even have common threads in many cases. Decisions made operationally generally have right and wrong answers. That stated, while seeking answers from a strategic standpoint the findings will often be ambiguous. Although predictive analytics open discussion for both types of decision-making processes; in order to make this possible, the business would have to adapt their own modeling for both situations. Regardless, the analytics selected would need to be most suited to the needs of the company and of course, with a competent analytics team.

How to Know When Predictive Analytics Should Be Considered?

Before the implementation of predictive analytics, it’s essential for small business owners and managers to make specific identifications:

What would be the value of the solutions your business is seeking?
What are the current problems you would like to forecast?
What are your current internal data sets?
What are the outcomes your company would like to see?

Should Your Company Opt to Implement Predictive Analytics?

Discussing the implementation of predictive analytics is easier said than done. If a company would like to consider implementing this form of analytics, they must take the time to determine the following:

Consider the nature of the decisions your company would need to make.
What are the liabilities your business may face in the event the leadership team were to make inferior or questionable choices?
Decide the company’s best resources that would enhance the use of a predictive analytics strategy once it’s in place.

Keep in mind that the use of predictive analytics would be an extreme asset especially if the cost and the risk of a series of bad decisions would be exceptionally high. Would this be the case, it would be in the company’s best interest to explore these options. It’s entirely possible that predictive analytics could be a valuable resource to your small business if for no other reason than to improve the likelihood of efficient decision-making processes, and keep risks low in other business aspects. It’s definitely worth the exploration.

Today, however, the use of predictive analytics is used in so many ways. Overall it’s used to empower businesses of all sizes to experience a far greater degree of efficiency by having the ability to forecast inventory, how it will be used, manage various resources and of course, increase revenue, not to mention avoid the loss of revenue to the inability to see the possibilities in advance of potential disaster.

This analytics may be used to:

Determine client/customer purchases or responses to advertising.
Create risk reduction in many areas of your business.
Detect encryption abnormalities to eliminate cyber security

The term itself isn’t an easy description. However, the fact that it’s rapidly becoming critical for businesses of all sizes to utilize it, we would like to help educate small business owners and managers with regard to its importance to small business success.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Consider a SMART Goal to Grow Your Business

Small business owners often fail to consider themselves large enough to set specific plans of action regarding the growth of their businesses. You, as a small business owner are larger than life in the big economic picture. So play it SMART! Reach your objective!

According to the U.S. Census Bureau, the results of the last census taken in 2014, 5.83 million employer firm businesses operated in the United States. Small businesses employ approximately 53% of those in the private sector workforce. Larger corporations with more than 500 employees employ only about 38% of the workforce in the private sector. In summation, today about 62% of the small U.S. businesses employ less than five employees, and these small business numbers continue to grow.

With this in mind, it is critical that small businesses become savvier in using both creative and proven methods to enhance their customer base and profitability. To accomplish growth, small businesses must consider a laser focus on how to include their employee base, (no matter how small) in the growth of their companies.

We would suggest using a method that is tried and true often used by those who select business administration as a part of their career choice early in their educational processes. This strategy is called SMART. By using this written strategy, you and your employees will have the ability to map their individual intentions, therefore collectively setting goals within the business that will become far more likely to create growth and a higher level of financial sustainability. Each owner and employee must be willing to take personal responsibility for their goals within your organization.

Create an SMART Goal document using the following information:

Specific – Defining the specifics of the project will address the what, the why and the how of the individual’s intent to improve the business. Each person participating should clearly define their intention or what their plan of action will be. The aim should be written as a simple statement.

Measurable – To achieve a semblance of tangible evidence that the stated goals are met, the goals must be measurable. Of course, the entire statement is about the measurement of the indicated project; however, usually, a project plan will contain, smaller or short-term measurable metrics. The stated metric essential would likely be whether the selected and agreed upon system could genuinely be achievable and by a specific date or by the end of a specific imposed timeline.

Achievability – Are your goals achievable? To begin, the individual employee planning their portion of the growth processes must have the capability to accomplish the goal with the proper skills, knowledge, and ability to execute their respective aspect of the desired outcome. Don’t overwhelm yourself but you should expand and challenge yourself. Define your goals but be confident that they are achievable.

Results Oriented- The results of your goal should focus not on activities, but on outcomes. This particular part of this process will enable owner(s), managers and employees to acquire a more competent evaluation of overall performance. This evaluation will assist in the better development of careers and not just the benefits and activities that individuals will bring to the table to bring the goal(s) into reality.

Time Orientation – Provide a time, due date or deadline. This aspect may reflect the end point of the project. In other cases, it may be check-points that will assist all participants in assessing just how well the project is progressing before its completion and therefore allowing for any needed modifications to ensure that in the end, your results will meet your expectations. Regardless, it is a good idea to implement time restrictions to create a sense of urgency; in doing so, the participants will be more likely to complete their response to the project on time.

S.M.A.R.T. goals are highly beneficial for a myriad of reasons. They encourage specified purposes that are better monitored, collectively throughout the process. A well-planned goal is one that is detailed and should, therefore, allow for a better understanding among participants of the importance of the needed activities to accomplish the aims of the business. Setting these goals, step-by-step will ensure a more natural way to track several aspects of progress to include how profitability is affected. Most importantly, when a project is broken down into detailed specifics, it is much easier to visualize and is much more likely to produce a better-projected outcome.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

How to Capitalize on a Business Shift

Impact-Influence Analysis:

There are times when a business requires impact-influence analysis of capitalization, whether it is to avoid bankruptcy or just simply gain turnover from company growth. There are many ways to accomplish this task; however, everyone must consider recapitalizing a business. Dependent upon the results of the impact-influence analysis, recapitalization might be the smartest and best business option.

Settle on the worth of the business:

Settling on the worth of the business can be accomplished by searching for comparable corporations that have been freshly sold which had comparable sales as well as growth expectations. On the other hand, one can calculate the possessions of the corporation then adjoin it with the profit margin as well as growth prospective to guesstimate the worth of the business.

Decide the sum of capital that is required:

Given the worth of the business as well as the expected growth, decide upon the cash flow combination needed based on the circumstances at hand. The end goal would be to require the establishment of a perfect and average price. The average price is the smallest amount of cash one would accept in recapitalization of the business.

One should establish the desired sales percentage based on the required capital summation. While recapitalizing a business, a potential buyer would wish to know what proportion of capital as well as future profits they would obtain for the capitalization price.

State the stipulations of the recapitalization:

For example, one should accurately formulate what rights the participant has during the recapitalization process. The potential participant might wish to have a statement regarding how the production is running as well as a requirement for setting the guidelines on what they can and cannot do. However, it is ideal to employ a legal contract advisement during the formulation of all details.

One should locate an individual investor or a company that is willing to participate in the recapitalization. There are individual investors or companies that specialize in this type of transaction. One can normally find these individuals companies via a web search or by placing an advertisement in employment publications specific to the target audience.

Confirm the recapitalization of the trade:

Once a participant has been found that will agree to the stipulations of the recapitalization, then one should require that all of the essential paper work be signed. The participant would then transfer the money to the business’s bank account.

These are the tips one should follow when looking to obtain more gain or profit from their business. In conclusion, by following each these tips one could positively capitalize on a business shift and carry the business towards further success. Additionally, this process has potential to aide businesses in achieving new heights in less time.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Education for Community Youth, A Growth Strategy

Education and preparation will become critical to continued growth in the U.S. manufacturing industry during the remainder of 2018 and beyond. In order to produce continued growth, there will be a need for manufacturing industry leaders to pay close attention to current American manufacturing trends and develop new strategies. As it stands today, failure to align with and implement the necessary processes and available programs will surely result in a future loss of much needed, upcoming American workforce and consumer interests, both domestic and global in the manufacturing industry.

One study recently conducted by members of the Center on Education and the Workforce at Georgetown University; states that there currently appears to be a failure to properly educate an adequate number of students in what is known as the STEM (Science, Technology, Engineering, and Math) educational program. In an article provided by Mid-Atlantic Technology, Research & Innovation Center,” the future of the U.S. manufacturing industry is heavily dependent upon today’s STEM education.” (The Future Of U.S. Manufacturing And The Importance Of … (n.d.). Retrieved from https://www.matricinnovates.com/matric-matters-blog/the-future-of-u-s-manufacturi)

One may ask why a nation that has, in decades past, been incredibly successful as worldwide leaders in innovation, would need to be concerned with STEM education? We, as a nation often consider the meaning of preparing for the “future” as working on preparations for what will be needed, a year from now or even 10 years down the road. The speed in which technology advances today and as scientific and mathematical advancement occur, true ‘strategic’ dialog and vision must focus on what will be needed in all areas of manufacturing over the next 30 years and how to create a continuous, smooth transition from one level to the next as time progresses.

STEM education is in no way simply focused on producing mechanical and/or chemical engineers, but creating a space where students don’t simply understand science and math, but acquire a wholesome STEM literacy. With this in mind, STEM education must become a priority within the American educational curricula for the future and long-term health of the American manufacturing industry.

Today’s manufacturers are aggressively seeking out and exploring new technologies on all levels so that American manufacturing progression will continue to improve. They are looking for new strategies to enhance their industries respectively. Manufacturers across the board are interested in intelligent, innovative tools that will increase profitability, cut costs and finally streamline the operations that for decades, have been incredibly challenging. This is going to require, however, that manufacturers transcend the narrow view of only enhancing software and systems and reveal better strategies and processes that will be significantly improved by better student education and keeping a close eye on additional trends and creating better strategies:

Bridge the Skills Gap –

According to Polytron, the manufacturing industry as it stands today is estimated to experience a skills-gap of approximately 3.5 million positions that will go unfilled over the next 10 years.
Should manufacturing leaders continue to overlook the obvious with regard to human training and education; they are preparing to experience dangerous profit losses in the long term.

Manufacturing Leaders Must Create Relationships With Youth Within Their Communities –

This will be one of the most critical avenues to lead America’s youth to interest in manufacturing.
Manufacturing leaders must begin to eliminate the stereotypical thoughts and ideas that young people envision when they think of working in plants and factories.
Manufacturers must realize that much of the current manufacturing employees are preparing to retire and young people need to understand the importance of the many changes manufacturing industries are preparing to experience so that they will understand their vital importance.

It’s Time to Educate the Current Manufacturing Employees –

Although many manufacturing employees are preparing to retire, providing apprenticeships to these workers now, could benefit companies as new young employees come onboard. This will add an additional training feature.If properly educated in the factory, current, newly trained employees at the very least will have the ability to provide training with skills that are specific to their industries.

Workforce Development Strategies –

Inasmuch as young new employees do not have the kind of exposures that are traditional in the manufacturing industries, one of the most important strategies to enrich the employee environment will lie in on the job manufacturing training for entry-level employees.
This kind of training will provide companies an opportunity to assist in molding future generations for upcoming and necessary skilled positions.
According to Plant Engineering; manufacturers may get ahead of this ever-increasing skills gap now by exploring national organization that will assist in the assessment of their current operations and by use of predictive analytics will provide a good idea what sort of skilled labor will be required in years to come so that proper preparations can be implemented.

Industrial Internet of Things (IIoT) Also Known as Industry 4.0 Must be Applied Sooner Than Later –

Most upcoming potential employees will come equipped with plenty of knowledge pertaining to connectivity devices. By use of this particular strategy, there would then be a reduced need for repair and maintenance personnel.
There will then be a reduction in the need for demand for other skilled manufacturing employees.
Machine operational efficiency will likely ensure a more even workload distribution in any facility.

Manufacturing leaders must realize that the time has come to connect today’s youth with digital technology on the factory floor if there will be hope to bridge this overwhelming skill gap. By implementation of IIoT, young new workers will be far more likely to learn and adapt to the skills needed if they are able to work with the technologies they have come to know over the course of their lives and through their educational processes. By leveraging these skills and combining them with some traditional manufacturing skills, leaders are likely to find that they are capable of getting far beyond a “happy medium” to a well-oiled machine that is likely to bring American manufacturers back to the forefront globally.

However, if manufacturers fail to reconsider their current positions with regard to community outreach and their strategies for hiring, they will simply find themselves hoping for the best.

This will only result in even larger issues as the future approaches. Companies must begin now to assess and discover exactly what external and internal resources they have that could be leveraged if they wish to attract new and successful manufacturing workers to their plant floors.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Your Business is Successful – CIRCLE THE WAGONS!

Congratulations on your accomplishment. You have built a successful business through hard work, dedication, and sacrifice. You have invested time, money and sweat, and it has finally paid off. It is time to enjoy some of the benefits and relax a little.

But, be sure to pay attention to the words “relax a little.”

Did you know there are times in a business’s life cycle when mismanaged success leads directly to its downfall? There are naturally occurring milestones along the way where an owner could unknowingly trigger a decline.

The United States was founded by settlers who traveled across our country in covered wagons. It was a long, dangerous trip and many did not make it. Their most effective defense, when under attack and making camp at night, was to circle the wagons. They used them for protection against people, animals, and weather by putting their assets (people, livestock, horses, and supplies) on the inside.

Knowing when to travel and when to circle the wagons can help you protect the business you have worked so hard to build. Where are you on your journey?

Occasional Rest Stops

Not all growth is good growth. All too often it leads to loss of direction, turnover, mistakes, lack of purpose and overextended resources (i.e., people, equipment, money, systems, supplies). A successful company ruined by poorly planned, rapid growth happens so frequently it is a cliché.

Many owners are not good at understanding when they are expecting too much from themselves and others. Sometimes your employees – and you – need a rest to recharge their energy before starting the next step. Unfortunately, owners commonly burn out hard-working, responsible employees by ignoring the fact that everyone needs a break now and then.

Other people achieve success and then go on a permanent break. They stop growing and trying to improve because they “have made it.” However, there is no standing still in business. Complacency is an ineffective and destructive management style.

If you are not moving forward you are going backward – skilled people leave, buildings and equipment age, profit decreases as costs rise, earnings shrink with inflation, customers dwindle as competitors grow and product lines get old.

Taking on Supplies

No one gets across the business landscape without adequate resources. The more successful your company is, the more resources you need to support, manage and protect it. Taking on supplies is a reoccurring phase of the business cycle. It is a time when you regroup, evaluate and take onboard what you need to get to the next level – not resting, but not moving forward either.

Now comes the phase where you make sure you are headed in the right direction and have a sound strategy before moving forward. The point where you assess whether your current supplies, financials, customers, products, systems and people can make the next leg of the trip.

Moving On

You and your employees have renewed energy and spirit for the job ahead. The supplies have been replenished, updated and fixed. Your assets have been improved (i.e., satisfied customers, committed key-employees, up-to-date systems and metrics, quality product, a reliable workforce, sound financials). It is time to go forward.

In any journey, there are always ruts, obstructions, and outlaws for which to be on the lookout. The better prepared you are for these problems, the better your likelihood to overcome them.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Rewards: Unnecessary Pay, or Positive Reinforcement?

Most every small business owner desires dedicated, hardworking and loyal employees. The problem is how to do you cultivate and reinforce those values? We pay people what we believe to be a fair and competitive wage for their work, yet that may not be the only means required to foster the winning attitudes desired. How many times have you heard “but that is what I already pay them to do.” Maybe. Do you pay them enough not to make mistakes? Maybe. Do you pay them enough to give extraordinary customer service? Maybe. Do you pay them enough to go the extra mile? Maybe. Do you pay them enough to expect quality work all the time? Maybe. The answer might be that we pay the going wage and expect all of the above but don’t always get it.

Naturally, owners have high expectations for their money spent; not all of which get explained conveyed or taught to all of the employees. So, are you getting your money’s worth? More importantly, are you reaching your company goals and expectations?

A vast number of small businesses do not have goals or measurements in place to rate employee performance. When it comes to the majority of their employees; “We really can’t tell how to distinguish among most.” They can name a few of the best employees but really can’t rank the others. They do not measure performance. For that reason, companies revert to the bonus system as their method of reward. Some may get a little more money, but others may not even get recognized. As we have maintained all along “You cannot manage what you do not measure.” However, once you put measurements in place, it becomes incumbent on ownership to put rewards in place to continue to encourage the best practices.

What are we looking to accomplish?

Increase productivity.
Motivate.
Reward high achievers.
Develop “team players.”
Retain key personnel.
Say “thanks.”
Increase profits.

These may be our stated desires, but our ultimate objective is to set goals and keep score by measuring how close we come to achieving the goals. Some of these may be obtained with an incentive and others may require different means of stimulation.

A brief look at the most common means of additional motivation might be advantageous.

BONUSES

Probably the most common form of motivation is the bonus, typically based on the overall performance of the company. Unfortunately, the amount given often depends on longevity and not individual performance. It is often arbitrarily determined. There are usually no real criteria applied to determine the amount awarded; nor do the employees know what to do to better qualify for the award. Often the same amount is allocated for the same class of employee regardless of individual performance. Structuring a bonus this way can often accomplish the opposite of the desired outcome because it creates jealousy and resentment among the employees who worked the hardest when they get the same reward as some who do not perform as well.
The bonus may be one means of saying “thanks” and buy some short-term loyalty, but that seems to be the only two on the list of desired goals.
Another common problem with bonuses is they become an entitlement. That is, the employees come to expect they will get a bonus at Christmas regardless of how they perform, which has the adverse effect of not increasing productivity or motivating better performance.
It lowers profits (pay-out) without getting much in return.

INCENTIVES

The usual requirement for an incentive is that it comes from an increase in profits brought on by the change in behavior that the motivation has created. The best example of this is in construction. We have bid a job with 100 hours of labor, but we tell the foreman that if the crew can complete the work in less time than the bid, we would split the savings with him and his crew. For example, if they finish the work in 90 hours, we have saved 10 hours. If our combined crew rate is 80 dollars per hour, we have gained $800 in savings on this job. Therefore, splitting this brings the crew $400 and the company an additional $400 in profit. Productivity now increases as well, as an extra 10 hours may be applied to new work.

It accomplishes most things on our list of goals:

Motivates
Increases Productivity
Increases Profitability
Rewards High Achievers
Promotes Teamwork for that Crew
Says Thanks
Helps Retain People (As long as they earn the Incentives)
Increases Profitability (Company keeps a share itself)

So, this incentive accomplishes all of our goals to some degree. The drawback to this incentive is that the hours needed for the job are set by someone else (an estimator), and they may not be accurate. Secondly, the degree of reward may vary significantly from job to job.

Not every project taken on by the company is conducive to creating additional measurable profits. For example, a data entry person has little they can do to increase profits. The company receptionist will also be hard-pressed to improve earnings measurably. However, if they are perpetually out of the incentive loop, we will be defeating the motivation goal and that goal of retaining the best employees.

INCENTIVIZED BONUS

This would be a hybrid product. Measurable goals need to be set for each position. They may be as simple as a customer call, email or letter to praise the employee for the job they did. We say that we will pay $25 for every customer citing this good behavior. We cannot say that it immediately raised our profits, but we know that 56% of people share their positive experiences. A dissatisfied customer will tell 9-15 people, and 13% of the dissatisfied will tell 20 people about the problem.[1] So, why do we want to reward excellent customer service? It likely leads to more positive word-of-mouth marketing and referrals for the business. It is what we want in an employee, but we do not always get these results. It is an out-of-pocket expense, but since it is tied to performance or goals, we hope it will result in positively affecting behavior which will lead to referrals and higher profits.

Other forms of measurement can be rewarding crews for documenting their critical work with photos that we can keep on file, or for sending in the daily reports with the time sheets, all of which slow down the back-office work if not done on time. Obviously, there may be duties that we already expect for their pay, but if it is critical to company performance, we may need to measure and reward on top of the base pay.

Now, this system can also have deductions for mistakes found in work; such as failing to pass an inspection or for the poor quality of a particular installation. So it can work both ways with positive cash for good behavior and deductions for mistakes made. Keep in mind that deductions may not come out of the employees pay but can be deducted from the incentive dollars they have earned.

SPONTANEOUS REWARD

This would be a situation where we have not set any specific employee achievement goals, but we recognize behavior or actions that are above the norm. It may be someone just taking extra time to explain a situation to a customer. It might be someone going out of their way to make a delivery, or it might just be an outstanding attitude on the phone.

Whenever this “going the extra mile” is observed management should be prepared with gift cards, cash, discount coupons, ballgame tickets or extra time-off to bestow on the valuable employee. These rewards are best if disbursed swiftly and accompanied by an announcement of the reason for the reward.

This approach can be one of the most influential tools to modify overall employee behavior by getting others to go out of their way in hopes of being recognized themselves. The reward must be meaningful and spontaneous for performing above the average expectations.

SUMMARY

Recognizing that we pay people a base wage for their work, and once we set goals or begin to measure performance, we will need to reward those who out-perform the majority. The basic bonus is probably the least desirable. A combination of incentives and incentive/bonus, coupled with the spontaneous reward will probably get the most desired outcomes while boosting morale and getting the measurements and results the company strives to achieve.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Effective Management

Business colleges may take a semester or two to cover this topic. There are in-depth charts and analyses to sharpen one’s skills. However, for those of us that no longer have the time to devote to a semester or more of study, it might be good to establish a few ground rules and precepts to follow. Obviously, we need to confine this discussion to the fundamentals. However, here we are focusing on the management of small businesses and not that of large corporations.

First, we need to define it:
“Organization and coordination of the activities of business in order to achieve defined goals.”

The activity of management may incorporate the controlling, monitoring, planning and organizing of the steps necessary to achieve the stated goals. Various techniques and management styles may be used, but the objective is still to accomplish predetermined goals. Having defined goals is almost a prerequisite to having competent management and a successful company. Often, small companies have no set goals. They struggle in day-to-day operations and without goals delineated, there are no means of measuring success. They are willing to work a whole year and settle for what is left over for profits. Predictably, this lack of planning will often result in no profits and should be no surprise to management. Unfortunately, it does usually come as a big surprise because no one is, by definition, managing.

LEADERSHIP VS. MANAGEMENT “

In the small businesses that we are most familiar with, the difference between the two may be blurred. In larger companies leadership is thought to encompass the big picture; budgets, goals for the next three to five years, diversification, capital spending. It incorporates the vision and the plans necessary to achieve the goals. However, the same individual might be expected to do both in our scenario. Having consulted with management and determined the short and long-range goals, it may now become necessary to lead the employees to achieve them. Establishing a course of action or actions may require guiding and persuading the company personnel to follow specific steps that will result in the achievement of the predetermined goals. Thus, managing employees requires the “leadership” skills to reach the company goals.

MANAGEMENT “
Without a doubt, the objective is to reach the ultimate goals (revenue and profit) set for the company. However, there may be various intermediate milestones that need to be tackled first to accomplish the final objective. To achieve these, the “managers” of the company must lead the employees into making the correct decisions and actions that will give us the desired results. So, the question is really how is “management” accomplished? Techniques may differ, and some may be more effective than others, but a few overall principles should apply:

Be Consistent- Treat everyone equally.
Be Persuasive- Demonstrate the reason and thought behind a particular task.
Short-term Goals- Focus on the intermediate steps that when accomplished should lead to the overall attainment of the bigger goals.
Job Description-Well defined with tasks, responsibilities, and objectives.
Define acceptable results.
Find methods to improve employee’s work- Use of Key Performance Indicators to measure the effectiveness of employee work.
Universal involvement- Key Performance Measurements for all.
Staff Meetings-Coordination between all departments and employees- Use regular staff meetings to highlight progress and report KPI’S.
Teach and Inform-Teach individually and inform all as to progress and best practices.
Avoid Criticism- Mistakes will happen but correct in private
Prescribe remedies to mistakes and inform all.
Minimize risks.
Uniform teaching is done by the best at their job.
Promotion- Use as a reward for high achievers.

SUMMARY
We have previously defined “Leadership” as setting the long-term goals for the company. Once we set goals, we find that management techniques require measurement and the use of “Leadership” to bring all employees to achieve them. Set the goals, and lead!

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Fundamental Sales Planning

PRELIMINARY CONSIDERATIONS

One of the first considerations is the determination of the sales revenue required by the company to meet its payroll, expenses and desired profit. Are we expecting sales from other revenue streams? Do we have inside sales and outside sales groups? Do we have revenue from areas with no assigned salespeople?

Regardless, a company-wide budget should be drawn up in order to set the company goals. As part of this budget, a separate sales and marketing budget should be determined so that everyone knows the guidelines for spending in these areas as well.

With a budget in place, we must make an accurate determination of the Overhead Recovery Rate since this is the most critical factor in pricing our services. It is hard to sell profitably not knowing your expenses.

Next comes deciding if we will apply the Overhead Recovery Rate to materials and labor or only to labor. In most cases, we choose to charge the Overhead against the labor cost.

The profit desired on every service or bid will most certainly require a qualified estimator or owner of the Company to decide what is the most suitable formula for that particular job once the Cost of Goods and Overhead has been applied.

HIT RATIO

Once the goals have been determined (budget) we then need to discern the steps necessary to reach projected revenue. In other words, how many sales calls do we need to make before someone gives us a Request For a Quote. Then, how many total RFQ’s submitted before we actually obtain an order or a sale.

If we have good records of projects that had been awarded and a history of the number of estimates that were submitted we can calculate a ballpark “hit ratio.” For example, our revenue last year was $1,000,000 if over the course of the year we provided 200 bids and got 20 jobs we have a 10% hit ratio. Our average job was $50,000. If required revenue is $1,500,000, we will need to add 10 more jobs at our customary average and 100 bids to get those jobs. If we have records for more than one year, we can take a historical average of jobs awarded versus the number of bids. We can gather most of the this directly from QuickBooks if that is the system you are using.

If the estimates and the number of jobs are not readily available, then we will need to do some digging. In construction, we need to see how many projects we billed for over the course of the year and how many letters, emails, phone calls were made with quotations where we never got the job. So, if our new projected budget requires 30 total jobs (10 additional), we will need to bid 300 total jobs assuming that we average the same $50,000 per job. If not, we will need to adjust our number of bids up or down based on the value of the awarded jobs. Another factor may be whether we “negotiated” any of these jobs. In other words, did we lower our bid to get the job and take it away from a competitor?

If we are strictly doing direct selling, we need the records of the salesman’s calls and how many were needed before we actually got an order.

The utilizing of these ratios will help set expectations for the salespeople in terms calls needed; daily, weekly and monthly in order to achieve our required revenue.

STRATEGIES

Target Market– What business or project should we go after? Using our previous example, we need to categorize the number of jobs over the $50,000 average and how many were under par, Now, we need to break them down according to profitability. Which size job brought us the most profits? Was there any pattern or was it the job foreman? This may help us to decide which size job we want to pursue. If it is manufacturing we are trying to sell to, we may want to track the types of businesses who buy our products or their size which may help in determining our target market.
NAICS CLASSIFICATION– Once we have settled on a target, we need to have a method for discovering new leads. In construction, it might be word of mouth or invitation. However, also in contracting, or in the seeking of new customers in any industry, you can use the North American Industrial Classification to help find new leads. Every sector is assigned a code number, and depending on the sub-classifications the number may be as much as a 6 digit code classification. These numbers are readily available on the internet under NAICS.
LIBRARY REFERENCE DATABASES– Most libraries use reference databases that can be accessed online using your local library card. Three well-known systems are Hoover’s, Reference USA and Mergent. Most libraries have one or the other. The databases will allow you to locate businesses in geographical areas from cities, counties, and states using the NAIC Code numbers. Generally, it will tell you the ownership, revenue, location, number of employees, etc. This will enable us to identify those businesses that fit our previously determined target market.
MAILINGS/PHONE CALL– Do we have a well thought out means of approaching prospects? Once we have selected companies from the databases, we need to have a plan for “getting our foot in the door.” Some prefer to just show up at the prospect’s door, with the hope to get an appointment. However, there is often a gatekeeper whose job it is to screen all callers and visitors and whom will likely turn you away. Another approach might be to have a company brochure or pamphlet to mail to the appropriate person. One that outlines the services that the company provides and how the target company might use those services. This could be accompanied by a personal letter which mentions companies you have done work for as well as any mutual acquaintances (prior approval of the person). Mail both in a first class envelope so as not to appear to be junk mail. This mailing should then be followed up with a phone call several days later to try and get an appointment to meet with the individual.
THE APPOINTMENT– Once we have the appointment, we need an approach that will accomplish several important things. One methodology of selling your services to the prospect is a question-based selling approach. In some cases, it might be called S.P.I.N. selling ( Situation, Problem, Implication, and Need-payoff), which is often used for projects that may take several months or even years to obtain a sale. Conversely, it might just be questions you ask to foster doubt in the prospect’s mind that he currently is using the best products or services. The object is to put doubt in the prospect’s mind as to why he isn’t using your product or service already. Some tips to get started:
- - - Know the prospect’s business inside and out. (see #3 Databases)
    - Don’t waste the prospects time.
    - Explain your company in 1 minute or less.
    - Do ask engaging questions.
    - Do determine nature of the prospect’s customers.
    - Are they experiencing any problems with their current suppliers?
    - What improvements would you like to see from your suppliers?
    - Do your current suppliers provide this service?
    - Do they fill your orders 100%?

SUMMARY

Developing a basic sales plan starts with the formulation of the company budget which incorporates the sales and marketing budget as well. Determine where you need to be. Determine your “hit ratio.” Then research your leads and begin your quest for an appointment.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Time to Start Taking 3-D Printing Seriously

There is no doubt – 3D printers have a wow factor. Whether they are creating a plastic knee joint, one-of-a-kind metal turbine blades or a chocolate pyramid, they are a marvel.

But, are they practical for the typical shop floor?
No, for the majority of manufacturing and shop business they have not been. Overall, owners have been underwhelmed by 3D printing and its applications for their products. It has failed to live up to the hype.

So, why is it time to start taking it more seriously?
We are still in the infancy of 3D printing, and its potential is nowhere close to being fulfilled or recognized. Even so, it is already in the process of completely transforming aerospace and medical manufacturing. If it is not already there, it will soon be coming to your industry.

Each generation of printers has made big leaps forward – improved scalability, faster and better-connected systems/automation, reduction of time wasting pre/post-processing, full production capabilities, expanded raw materials options, fewer obstacles to wide-scale uptake and multiple printers able to communicate with each other in real time.

Does this mean I should buy one?
No, it does not. But, it does mean is that you should start paying attention. For many industries, 3D printers have passed the novelty phase and reached the practical phase. This is the phase where owners not paying attention will start falling behind. Now is the time to create a strategy and a plan for a possible future purchase.

How do I do that?
Answering these basic questions will give you a start.

Personnel – Are your employees capable of using the required technology? What skills will they need? Who should be trained?
Financial – When and how will you be able to afford a printer? Do the numbers (profit, breakeven, margins) show it can pay for itself?
Product – How will your current or future product line be improved by a printer? Do you have the demand to justify the cost? Is your current equipment enough?
Technology – Will it integrate into your existing technology? Do you need a new digital system(s)?

Digital manufacturing and factories are the future. Owners who make the transition smartly will benefit from the promises that 3D printers will eventually keep. It is time to start thinking about how you will fit them into your company. A good, well thought out plan will make sure you do not miss your window of opportunity.

You know, like the guy who said, “Computers? I don’t see why anyone would ever want one of those in his or her home.”

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Tired of Babysitting? Try Organizational Engineering

Most business owners start their companies so they can be their own boss – they want to get away from others telling them what to do. However, they forget, ignore or do not understand there is another side to that coin. Being a successful boss requires them to tell others what to do, and then make sure they do it.

Of the many hats, an owner wears “Leader” is usually the one he understands the least and does the most poorly. Unfortunately, it is the biggest responsibility he has. The majority of businesses fail because the owner was unable to do his job. He was an ineffective boss, who never learned how to run the company successfully. He was a policeman, firefighter, and babysitter, rather than a leader.

Organizational engineering is a way for you to get out of the babysitting business.

It is an integrated system, with real-time feedback, transparent processes and easy to manage organizational tools. It can give you the skill and knowledge you need to run an efficient company. But, like anything worthwhile, it requires effort and commitment. Even so, what is the alternative?

Do you want your business controlling you, or do you want to control it?

These 4 steps are a good place to start if you want to use organizational engineering in your company. Be sure to include other people in this process. They will facilitate employee buy-in, bring new ideas and insight to old problems, keep you from having unrealistic expectations and help you stay on track. We all need reality checks.

1. Accurately identify the problem.
Before you can adequately address a problem, you must identify what the problem is. Your problem definition should be simple, clear and actionable. Beware – owners have a hard time seeing the real problem, often an outside pair of eyes is needed.

For example – The statement, “I need more money.” is not a statement you can work with. Look at the problems below and pick out which ones are the reasons you do not have enough money. Each problem might require its own action plan to fix it, which is why you need a workable problem definition.

- Margins too thin?
- No bidding process resulting in chronic under-bids?
- Productivity low?
- Poor quality – too much scrap, waste, warranty or rework?
- Employee theft?
- No profit built into estimates?
- Underperforming sales force?
- Too much inventory?
- Too many receivables?

2. What do you need to fix the problem?
After a problem is clearly defined figure out what you need to fix it (i.e., people, training, systems and procedures, equipment, money, outside help, materials, time, inventory). It is important to be honest about your strengths and limitations during this phase. Here are some questions to get you started.

What problem is the priority? What is 2^nd and 3^rd? Can I, and my employees, solve them? What experience, knowledge and skills do I have or do not have to fix them? Are my expectations realistic? How have I tried to fix this in the past, and why did it not work? What do I have to do differently this time? What metrics will I use to measure success or failure? What are my problem costs?

3.Create an action plan.
If you have done a good job on Steps 1 and 2, you will have the information required to put together an action plan. Break your requirements down into smaller and smaller parts until you arrive at a system both easy to understand and implement.

Coaches win by breaking a game down into manageable parts (i.e., plays, downs, offense, defense, special teams). Always keep asking – “Am I headed toward the goal posts? Am I fixing what I think I’m fixing?” It is not uncommon to find yourself off track, which is why other people should be a part of the process – no successful coach goes it alone.

4. Execute and repeat.
It is time to implement the protocols, policies, procedures, and processes you and your team created. If you have designed the metrics correctly, they will give you real-time feedback. Use the information to tell you if the plan is working; if it requires tweaking; or if a major overhaul is called for. Go back through the steps evaluating and revising until you get it right.

Remember every good coach and leader knows the secret to success – nobody gets it right the first few (hundred) times. The practice and repetition of a productive behavior is the thing which will make it permanent. The “new way” will become the “normal way,” and your problem will be solved.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

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A Brief Update For Tax Deadlines for 2018

We cannot possibly stress the importance of investing time each month to calculate your small business taxes and making proper payments required by the IRS. Many small business owners are simply wearing too many hats making tax calculations each month near impossible and taking from the personalization you would like to provide as the owner of your business.

As small businesses are now seeing the beginning of the end of the first quarter of 2018, you’re already making preparations to complete and pay your taxes at the end of the year. Since the beginning of 2018, you’ve already taken the steps required to remain in compliance with the Internal Revenue Service. If so, you’ve already:

Met the January 16th deadline for payment of your 2017 fourth quarter estimated taxes.
If you have employees and contractors, you will have met your January 31st deadline to deliver and file W-2 forms to your employees and by February 28th, 1099 forms for 2017 to all of your contractors.
If your business is an S-Corporation (S-Corp) you will have met your March 15, 2018, deadline for filing your 1120S or if your business is a partnership you will have filed your 1065.
If your company required an automatic extension, or if you wanted to register to become an S-Corp, this was also the deadline date for these filings.

Below you will find the remaining important dates to remember for 2018 with regard to tax deadlines, forms, and other pertinent information:

March 31, 2018, will be your deadline to electronically file 1098s and 1099s (exception for 1099 MISC).

Tax Day for 2018 (that would usually fall on April 15th), this year, tax day will be on Tuesday, April 17, 2018, inasmuch as April 15th will fall on a Sunday. April 17, 2018, will be the deadline for the following:

Filing forms 1040EZ, 1040 and 1040A
C-Corp must file form 1120 to pay taxes on profits.
April 17 is also the deadline for all 2017 payments to the IRS for the fourth quarter of that calendar year.
Deposits for installment one (1) for 2018 is now due for estimated payments for the first quarter of 2018.
For personal, individual returns, if you feel you will require an extension, this will be the deadline date for filing extension form 4868.

April 22, 2018 –

If you’ve already submitted an e-filing that was rejected by the IRS, you will be required to resubmit your returns by April 22, 2018 (unless you have filed for an extension). The only way to avoid fees and penalties is to resubmit your returns by this deadline date. Otherwise, your deadline date will be October 20, 2018, at which time you will also be required to calculate additional fees and penalties.

April 30, 2018 –

This is the deadline to make the deposit of your Federal Unemployment Tax (Act) (also known as FUTA) Reporting of this particular tax would be completed by filing IRS form 940.

June 15,2018 –

This will be your deadline date for making 2018 second quarter estimated tax payments.

September 17,2018 –

There are a couple of deadlines for this date. The first would be the deadline for third (3d) quarter 2018 estimated tax payments.
If you are a partnership or S-Corp and have requested an extension, this will be the deadline for filing 2017 corporate tax returns. To complete this filing, use IRS form 1120S and IRS form 1065.

October 15, 2018 –

If your business is a C-Corp that has filed a request for an extension, this is your deadline date for filing your returns for 2017. Use form 1120.
This is also the final date for individual and self-employed persons who have requested a filing extension, to complete their 1040EZ, 1040A and 1040
Please be advised that this will also be the deadline for electronic filings. Should you miss this date to file electronically, you will now be required to complete paper filings after midnight 10/15/2018.

January 15, 2019-

This will be the deadline date for 2018 estimated tax payments to complete your 2018 fourth quarter filings.

Some Information to Consider While Filing Your Taxes:
Alternative Minimum Tax (AMT)-

According to the IRS “Due to declining use and the significant increase in the AMT exemption amount provided by recent legislation, the IRS plans to retire the AMT Assistant after the 2018 filing season.”
IRS Information Regarding Marginal Tax Rate –

These IRS Tables and Calculator will assist you in determining your taxes on your level of income.

IRS Information Regarding Capital Gains and Losses –

You will find information with regard to capital gains and losses in IRS Publication 544. Locate and click on the link you’re interested in, and you will be taken to the information specific to your needs.

Payroll Tax Reporting “

Inasmuch as federal, city and state tax returns are prepared in different ways and at different times, you may find that you will be required to prepare and file many tax forms each month of the year. With this in mind, you may wish to consider saving time and money by outsourcing the payroll aspects of your company to a third party consultant and/or firm. This option would allow you the peace of mind you need as these consultants and firms have the ability to arrange for necessary changes by adjusting their software to meet the tax law changes as they occur.

The remaining tasks will take much less of your time on a monthly basis. If you plan to take time each month to complete all of your other tax tasks, or delegate these responsibilities to an in-house or freelance source as part of their job description, you will certainly create the opportunity to avoid the costs of penalties and interests not to mention the maddening dash to get it all done at year’s end. This alone will improve your level of profitability. This will leave you open to focus on the products and/or services that you are in business to provide and therefore allowing for the quality of client/customer services that you not only wish to provide but that your clients/customers deserve.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Your Best Investment in Business

Before 2008 when the economy had fallen into a deep recession, many business owners and HR professionals opined that employees were fortunate to have been hired and ought to be grateful merely to have a job. For decades that had been the HR/business owner/ management consensus for many. What was seldom considered was how this thought process was affecting their future ability to hire and retain productive, loyal people, your front line, the strong backs and caring client/customer service employees that would maintain the success of the business.

How many of these business owners lost their businesses merely because they had the attitude that they were doing their staff and their families a favor by providing a paycheck and nothing more? Besides the fact that this stance never actually worked for anyone; with the expected improvements in the economy in 2018, it’s becoming more and more apparent that employees, from ditch diggers (if you will) to CEOs are no longer willing to accept that they must continue to live this way. Businesses are opening, and doors are opening to your employees.

There seems to be a silent demand among employees (while they search for better opportunities), for much-desired respect and the ability to engage with their employers. In other words, if you are a small to a mid-size business owner, it’s time to sit up and take notice. If you a proprietor or manager of a small to midsize business, or if you’re an HR professional in a more substantial corporation, it’s time to make the “employee engagement” shift.

The scale of gratitude is shifting. If you believe that you cannot afford to make the shift, we would like to point to the Bureau of National Affairs whose studies have discovered that annually, approximately 11 Billion dollars get lost to employee turnover.
The reasons for high employee turnover vary. In the last decade or so, gratitude came from the employee for the simple fact that they had a job and a minimal income. Statistics begin to show that employees now require better work environments, better opportunities to care properly for their families, and experience joy, balance and well-being; and of course, higher monetary rewards while they’re at work. Given the fact that full-time employees spend more time on their jobs than they do with their families, this is especially true.

Here are some glaring statistics to consider should you have any doubt that it may be time to consider changes in how you view the value of your employees:

According to a study conducted by LifeWorks; An unbelievable 76% of today’s workers of all ages, who feel their employers do not value their work are actively seeking new employment.
According to LinkedIn; Approximately 90% of current staff members are open to moving to companies who are offering better career opportunities and positive attitudes toward their employees.
According to ERE Media; replacing an entry-level employee will cost a business approximately 30 to 50% of the employee’s annual income to replace them. For a mid-level employee, the replacement cost will be about 150% of their yearly salary. Further, should you find yourself in the position of replacing a high level or specialized employee, you should expect to pay 400% of their annual income to meet your company’s needs with a replacement for the dissatisfied employee who was recruited by another company, possibly one of your competitors?
According to Gallup, 51% of workers, overall, are currently considering leaving their current positions for various reasons of dissatisfaction with their current employers from “boredom” to lack of benefits and everything in between.
There is an abundance of shocking statistics that would make business owners’ blood run cold if they could read the minds of their employees. Without a doubt, no business owner wants to focus on the possibility of losing their greatest assets, but would prefer to remain proactive in ensuring that their employees receive what they need (and even want, in some cases) to stay with their companies long term.

It’s important to be fully aware that, like anything else in business, you must invest to make money. Retaining valuable employees will be no different. Business owners will find that keeping these members in their business will be just as important as maintaining long-term repeat customers. If you adopt the position that your success in retaining valuable employees will be an essential part of your financial business portfolio, you will continue to thrive.

A Few Suggestions for Any Business That Will Help Keep Your Employees In place:

Consider Conducting “Stay” Interviews. Instead of waiting until you’re in a position of doing an exit interview with a valued employee. Schedule midstream interviews in which you may ask inquiring questions such as:
What attracted you to this company?
What benefits of working here keep you with us?
If you could name reasons as to why you would leave, what would they be?
Are you happy with your superiors?
Do you have suggestions for improving your relationship with them?

Form your list of questions and use their answers for improvement.

Provide internal promotion possibilities. Then encourage every employee to strive to advance within your company.
Create an Open-Door Policy so that your employees feel free to report issues without fear of repercussion; as well, allow the employees to report existing “bugs” in the company systems (in employee/management relations and otherwise); encourage them to make suggestions. Find ways to reward business saving suggestions.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

3 Challenges in Transportation

It is an excellent time to be in the transportation industry. E-commerce has been good for it and will continue to fuel its growth. Growth creates challenges and trucking companies – who want to be successful – must change to meet them. The companies which can adjust will profit from the new opportunities the next several years provide.

Here are three challenges a carrier must overcome in the next few years.

Changes in Capacity – At of the end of 2017, the electronic logging device (ELD) mandate took effect. Experts predict a productivity drop of 4% to 6 % as companies start to comply. This compliance will have a negative impact on capacity at a time when there is an increasing demand for it.
Buyers’ Expectations – Business-to-business (B2B) and business-to-customer (B2C) buying habits and expectations are shifting. They are increasingly expecting faster, more flexible delivery and pricing options.
Freight Demand – The shifts in B2B and B2C delivery requirements have caused carriers to switch to more frequent shipments which are lighter in weight. Companies have to learn how to set rates based on density rather than tonnage, and still make money without pricing themselves out of a contract.

What are some of the answers to these problems?

Focus on Logistics – Logistics have always been critical in transportation, but today’s shipping challenges make it more so. A business’s operational efficiency and productivity will make or break it in an industry where new standards are being set (i.e., just-in-time delivery, automated warehouses, multi-vendor, multimodal, final-mile).

Improve Technology – Many trucking companies do not efficiently use technology, but that is no longer an option. The time has come when it is impossible to take advantage of the e-commerce boom without the right technology. Contracts with minimum tech requirements will soon become the norm, with particular emphasis on mandatory security.

Implement Analytics – Tracking and calculating margins, estimates, costs, bids, cash flow, productivity, and profit becomes complicated as loads are smaller, more frequent, and with more diversity. Carriers without best practice analytics are going to have a difficult time managing their rolling costs per service line, mile, route, driver, and truck.

Transportation companies who can adapt during this period of growth will thrive; those who cannot adapt will not survive. Think Netflix vs. Blockbuster. Remember that while you cannot control change, you can control how you respond to it.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Trend Analysis: Better Understand Your Business

A trend is a pattern in the company’s performance over time. While trend analyses are often used to determine and evaluate financial performance, they may also be utilized to highlight statistical tendencies as well. Trend analysis can be applied at any level for financial measurements and across all disciplines within the company. Typically trend analyses compare year over year performances for a given period using 3 to 5 years of data. Also, when calculating the variances between periods show the dollar amount and percentage rate. The percentage rate provides a better visual impact of the trends.

Financial analyses are the most prevalent. You should be comparing the Income Statements and Balance Sheets for critical trends. For example, if gross margin is trending down, then one of three things has probably occurred:

Price points have eroded.
Customer or product mix has changed substantially, or
Costs have increased.

When analyzing the costs be sure to look at material, labor, and overhead separately. Increased material costs are usually easy to pass through to the customer, but labor and overhead increases often must be offset with cutbacks or improved efficiencies. The same holds true for Operating Income. If it’s down from prior years but gross margin hasn’t declined then SG&A, or some other expense is too high, and spending controls should be implemented.

The balance sheet is another area to analyze trends. Individually: inventory, accounts receivable, and accounts payable are accounts to track because they profoundly influence cash flow. Work to reduce total inventory dollars while increasing inventory turns. For accounts receivable and accounts payable, always make sure the Days Sales Outstanding (DSO) or the average number of days one waits to collect receivables is lower than the Days Payables Outstanding (DPO). Tracking these accounts and working towards a downward trend will improve cash flow and ease day-to-day operations.

Another area that trend analyses are beneficial to, is in sales. In addition to tracking monthly revenue numbers and striving for continued growth, you should also be monitoring product mix, market segments, and customer sales. Each of these can have different margins, and a shift in the mix can negatively affect the bottom line. Tracking them enables you to make necessary adjustments should new trends begin to develop.

Historical data is a gold mine. Take advantage of it and compare it to current performance figures. It’s a management tool that enables you to quickly see where to focus your time and attention. It’s a quick and easy way to identify potential problems before they get out of control.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

SWOT Analysis: Better Understand Your Business

What is a SWOT Analysis? SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats. The analysis utilizes these headings in a quadrant format (Fig. 1) to list core competencies and other relevant company traits and characteristics. It’s a visual tool to help you see how the company is currently positioned and provides insight on what areas the company should be addressing in the near the future. To maximize the benefit of a SWOT Analysis, you also need to try and understand how your customers, competitors and the market view your company.

It also serves as the baseline for developing a strategic plan. Below are examples of the types of questions that need to be asked when preparing a SWOT Analysis and building a strategic plan.

What are the company’s core competencies?
How do we make use of them to our advantage in the market?
What are our customer’s expectations? Are we meeting those expectations? If not, what should we be doing?
Are we covering all applicable market segments?
What new services or products should we be offering?
Are there new customers or markets we are not covering?
What changes need to be made to improve margins and or overall profitability?
Is our technology current?
Are we as cost-effective as we should be?
Are innovations on the horizon that could have a detrimental effect on our business?

Additionally, this methodology can and should also be used on a departmental basis. It can help identify and establish continual improvement process requirements as well as increase overall efficiency.

Lastly, you should complete a SWOT Analysis for all your primary competitors. Knowing and understanding the competition is one of the best available to assist you in defining your strategic plans.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Get to Really Know Your Customer (And Make More Sales)

Ask a business owner what he needs to make his company successful, and most likely he will say “sales.”

Then, using the questions below, ask him about his customers, and most likely he will give you a blank stare. Odd as it seems, in many businesses, there is a disconnect between the idea of needing more sales and the reality of knowing how to sell.

All businesses, no matter the size, need an effective sales plan. A well designed, consistently executed strategy which will generate new customers, as well as retain current ones; a program originating from the customer’s needs and wants. Unfortunately, the majority of companies do not really know who they are trying to sell to and do not have a method to find out.

Owners forget, or do not know, that effective selling requires intuition and science. They ignore the science part and just go with their “gut.” But, feelings are not facts, and good sales plans are a balance of instinct and fact – each dovetailing with the other. You need both the gut and the analytics. If you want to be successful, you cannot afford to ignore the analytics.

So, where do you start?

The first and most important place to start is getting usable, actionable consumer data. Actionable data is information you use to create the “how to” of selling. It tells you the best way to sell to your customer based on the facts you collect about them. You want the who, what, when, where and why of your customer.

Here are some general questions to get you started – add others which are specific to your business.

Who is buying from you? What is their age, average income, sex, occupation?

What are they buying? This query is so simple it often gets overlooked. What products and service lines are selling? What should you focus on and what should you discontinue? Figure out what your clients are purchasing from you, not what you think they should be buying.

When are they buying? Are they buying full price or waiting for promotions/discounts? Is it seasonal? What would they be willing to purchase offseason? When is the best time for you to discount, offer new products, or do a sales push?

Where are they buying? Are they buying at your location, online, at their business or over the phone? Where would they like to buy? Do you need to offer easier, faster purchase options?

Why are they buying from you? What makes you unique (i.e., pricing, quality, product line, location, reputation)? Which products do you provide that meet their needs and wants? What don’t you offer that would meet their needs and wants?

Gathering this information will take time, but there is a reason that “know your customer” is a fundamental sales principle. Once you can answer these questions, you will be able to turn the data into an effective sales plan; a plan focused on retaining and increasing sales to your current customers and finding new ones.

Budgeting: Under-appreciated and Under-utilized

One of the last things that most small business owners consider is doing a Budget. A large number of owners do not understand the value obtained from a having a budget. Often, when budgets are in place, they will not take the time to review them regularly or use them as a tool to guide them in the management of the Company.

Many owners look at their plan for the year as “it is what it is” regarding the sales and profits that are to be obtained for the year. They will settle for what the year brings them. We know this is flawed thinking, particularly if increased sales and profits are necessary or needed to meet your goals. A budget when used appropriately will help to guide the owner to achieve his goals.
Some of the owner’s reluctance may be rooted in the fact that his Chart of Accounts is inadequate and we have failed to discuss this or to emphasize this factor. In other words, if his Revenue and Cost of Goods are one-line items in the P & L and he does not show any revenue streams and does not track labor or materials separately; the potential value is hidden from him at this time. He cannot see that tracking these items separately and in a forward-looking budget will produce a benefit.

An additional problem may be that even if a budget is developed, there may have been not enough time spent to train people properly on the value of a budget and what it can do for strategic planning.

REASONS FOR A BUDGET

Statement of goals and methods of reaching them.
Defines priorities and boundaries for spending.
Sets goals for Sales and Marketing
Ensure that a proper amount of money is allocated for salaries, expenses, and profits.
Gives the ability to monitor under-performing areas and address them before they create major problems.
Ability to monitor Cost of Goods concerning Revenue and Fixed Expenses and light of past expenditures and the current Revenue.
Assists in the decision-making process of when to make capital expenditures.
Assist in the evaluation of the realities of the goals that have been established.

PRELIMINARY CONSIDERATIONS

As noted before, the first step must be a review of the Chart of Accounts :

Do we have several Revenue streams that should be tracked separately? If so, new accounts must be created in the COA to enable them to be tracked individually.
Are the Cost of Goods separated into Labor, Materials, Equipment, Supplies, Fuel, etc? If not, new accounts must be created here as well. (Remember these are all items “directly billable to the jobs”)
Are there items in fixed expenses that need to be moved to Cost of Goods? Usually, some of the items are COG and need to be allocated as such.
1. It would be ideal to get at least three years of previous monthly sales and determine the average percentage of sales for each month.
2. Once revenue goals have been determined we can then break this down into the seasonality revenue by each month.Is there seasonality in the business? Does one month or one quarter contribute a larger portion of the Revenue?

NEXT PHASE

Make a realistic estimation of the amount of profit desired or necessary.
1. What does the business require?
  1. What would be a reasonable return on the investment?
  2. What do the stakeholders feel needs to be a reasonable return for their efforts.
2. Fixed Expenses
  1. Fixed expenses usually remain the same regardless of the revenue. These are the expenses incurred whether we open the doors or not: items like rent, electricity, heat, insurance, licenses, interest, office salaries and office supplies.
  2. A cost of living increase, at the very least is required but in some cases (electricity, insurance, health insurance) a larger increase maybe warranted.
  3. Take into consideration any predetermined (rent, health insurance) increases for the upcoming year and any increases in the advertising or marketing budget above the previous level.
3. Determining Revenue
  1. In establishing a budget, some will guess at the expected revenue or set the desired number that might not be achievable. However, we may be a bit more methodical if we start with our fixed expenses total and add our desired or required profit to that number.
  2. If we assume that we have increased our fixed expenses as well as our desired profit; and we assume that the Gross Profit percentage will remain about the same we can calculate the desired revenue to achieve the profit level we want.
    1. Having previously determined the new amount of fixed expenses we add to it the amount of profit also desired.
    2. If our historical Gross Profit is 28% we can calculate the amount of revenue needed to support the fixed expenses and profit level
    3. Take the combined total of fixed expenses and desired profit and divide by the gross profit percentage to arrive at the revenue required.
    4. EX. $180,000 fixed
    5. $100,000 desired profit
    6. $280,000 Total divided by the GP%. Thus $280,000/.28 =$1,000,000 or the required revenue goal for the year.
    Variable Expenses
  3. These costs will vary with the amount of revenue that is generated and they are the direct costs of doing business. Crew Labor, materials for the job, truck repairs and maintenance, truck fuel, workman’s compensation for the crew labor and supplies
  4. If previous year’s numbers are available, we can use the percentage of revenue that each expense formed as part of the overall revenue. Thus, if labor wages were 50% of revenue that would probably be a valid number for that segment of the COG in the new budget. This process should be repeated for each account in the Cost of Goods.
    1. Take into account the necessity for an increase or decrease in the number of laborers based on the revenue goal.
    2. How much of an increase do we get due to the revenue increase?
    3. Generally from year to year the percentages will be within a small range, unless a new revenue stream is developed or windfall of new work is landed.
  5. Review and Compare
    1. Look at the totals for the fixed and variable expenses and the desired profit.
      1. Then the next question asked should be, ” is that amount of revenue attainable?”
      2. If not, what are the realistic reductions in the fixed expenses or is the desired profit too high?
      3. Make Adjustments.

SUMMARY

The budget should paint a picture of the future financials for the company.
Setting your profit goals on paper (or electronically) will ensure that you will be more likely to attain those goals and they will not evaporate.
Trying to achieve a goal without a budget will almost ensure that your goals will not be met.
Budget to ensure an adequate return on your investment.
Monitor the budget monthly to see that the revenue and expenses are in line so that your profit goals will be met.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Applicants 50+ Are The Source of Thought Leadership

Every day employers complain that while they truly need, if not require, reliable, trustworthy, ethical employees, these qualities just aren’t that simple to acquire in many of their prospective employee options. Instead, small business owners are finding that it’s sometimes incredibly difficult to find employees who are ready and willing to be available to work and have the much-needed job experience and client/customer service experience to bring success to their business.

It’s been over the last few decades (or longer) that companies large and small decided that they could replace their older workforce with younger employees. It had become a common belief that by ridding themselves of their senior workers, they would save money.

After all, health benefits alone would be less expensive for a younger workforce; they were young and healthy, physically more attractive, they are physically stronger. Most importantly, with less experience, surely they could hire a fresh-out-of-school workforce with less experience and train them on their own. Hiring late teens to thirties employees would mean that the business owner or management could offer lower wages and salaries.

Meanwhile, their older employees were forced into early retirement; sent home with a treasure trove of experience, excellent work ethic, seasoned face to face client/customer service abilities and an amazing ability to continue to progress with the company. True, not only because they were raised to believe that hard work would always take them where they wanted to go in life, but it had always been these practices that kept them happy on the job. Unfortunately, this just isn’t the case in today’s business world.

Today, small businesses realize that having a multigenerational workforce is invaluable. The U.S. Bureau of Labor Statistics says that; by the year 2020, approximately one-quarter of the nation’s workforce will be aged 55 years or older.

Consider Some of the Qualities Older Workers Could Bring to Your Small Business

Small businesses are always on the look-out for “thought leadership”. Think about this; 50+ potential employees are in fact, your best bet for thought leadership. Why? Many of them have spent their careers thinking about everything business. Even older women who have been stay-at-home mothers have had to be resourceful about how to efficiently run households which even today is no easy feat.

Those people who have worked in the pre-digital world have spent much of their respective careers thinking about how to improve their businesses, seeking thoughtful ways to increase profitability, retain their clients/customers and they were expected to create repeat clients/customers.

It was their job to find ways to consistently improve their careers and the businesses they were a part of. They took the time to pay attention to clients/customers, their needs, their desires and through observation, many of their businesses had/have become successful entities and are still successful today. They lived an “if you want it done right, do it yourself” time in history.

In today’s fast-paced, noisy, digital age, older employees can and will offer some peace and incredible ideas to improve your business and profitability. Older workers are the ultimate thought leaders. They are the ultimate client/customer service representatives. They are incredible assets that are often overlooked.

Older workers often have the experience that you need. In today’s digital world, business owners and managers tend to become complacent, believing that the world will hear them as long as they can send an email and run online ads.
Older workers are always willing to provide service to both their employers and their client’s/customers.
Older workers learned early on that loyalty to their employer is vital. They aren’t looking for the higher salaries, nor are they ready to jump ship if they happen to notice a distant shiny object. Treat them with respect; they will do the same for you, and your business is likely to improve with their mere presence. They tend to love their jobs, and your clients/customers will absolute certainty notice.
Older workers, for the most part, are confident in their knowledge of things. Further, if they don’t know the answer your client/customer asks, they will pleasantly state that they are uncertain and will work diligently to find the answers for them.
Interestingly older workers often possess advanced skills in critical thinking. Contrary to popular belief, older workers are perfectly capable of saving money for the businesses for which they work.

As an added plus; older workers are capable of assisting younger workers by providing mentorship, and often younger workers are willing to accept the advice offered by older workers. Younger workers often realize how much they can learn from older workers early on. According to a U.S. News article addressing the value of hiring older workers;
“Hiring workers who’ve passed the half-century mark shouldn’t be seen as an act of pity; it should be seen as a strategic move that’s a win-win for employers and employees alike.”

If you’re a small business owner or plan to be a small business owner in 2018, you would be wise to consider the older worker as exactly the thought leadership you need to move you to the next level in your business.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Want to be a More Productive Business Owner?

Do you want it to seem like you have more hours in the day? Do you want to work smarter, not harder or longer? Do you want to reach those goals which have been on the back-burner year after year?
Here are two places to start.

1) Fully commit to being the boss

We all have heard about the high failure rates among small businesses. One of the main reasons for these failures is that many small business owners do not want to, or do not know how to, act like a boss. They go into business for a variety of reasons, which do not usually include wanting to be a leader or to manage others.

Sidebar – “I tell my employees what to do, and they won’t do it” is not management.

John owned a machine shop. He wanted to grow but was unable to. When he looked at how he spent the day he realized it was filled with other people’s duties. He was working as a shop supervisor, office manager, and salesman – positions held by employees not doing their jobs. He was picking up their slack. John felt like he was “just another employee”, not a boss.

It was a wake-up call for him – he realized he had never fully committed to the duties and responsibilities of leadership. He had wanted his employees to manage themselves, which was naïve and unrealistic. As he learned new skills, John finally understood that busyness and productivity are not the same things.

2) Do not multitask

Multi-tasking is a poor use of time, and it is ineffective. Our brains are not wired to focus on several things at once, and it is impossible to do it well. It divides our attention and decreases our work quality and quantity. It damages our ability to prioritize. Owners who attempt to multi-task lose focus quickly, and have a hard time seeing the forest for the trees.

Productive owners do not multi-task. Instead, they create and focus on clearly defined, specific goals. Their goals are challenging, but also reasonable and not overwhelming. They have vertical cohesion – long, intermediate and short-term goals all fit together to achieve the desired end.

Most people are not born with mental toughness. It has to be learned and developed, just like any other good habit. Your ability and willingness to discipline your mind and create new, more effective habits will make you more productive. You will have greater control over your day, your company, and your life. Who does not want that?

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

2 Forms of Analysis to Increase Company Health

As with any business, it’s the duty of a business owner or assigned business manager to competently and adequately guide their company through to the initially intended achievements of the company goals and benchmarks from day one. These practices must continue throughout the life of the business. After all, any business requires constant monetary and sweat equity that no one wants to see squandered.

To avoid adverse outcomes, it not only requires the active creation of a company mission and strategic plan of action for the business but will also require a non-stop, vigilant monitoring of the operational performance of your business on all levels. Any consulting professional would strongly recommend that whatever successful strategies that the company creates continue to be frequently performed. Some of the most exceptional consultants associated with some of the most respected business consulting firms suggest that small businesses consider educating themselves with the use of the SWOT/TOWS Matrix.

A Brief History

The SWOT analysis was created in the 1960s by management consultant Albert Humphrey while he was working with the Stanford Research Institute. During that period; many Fortune 500 companies had struggled with their strategic planning efforts and were in need of new, more innovative strategies that would produce planning that would be reasonably executable and effective, long-term. For decades, since the SWOT Analysis was devised and implemented, it’s been regularly and successfully used globally by small to midsize businesses and large corporations alike. It assists in the development of their respective strategies and solutions so that they may continue to experience positive results about their profitability and brand enhancement (among other aspects of the business).

Over time Heinz Weihrich; a professor and management consultant of Global Management and Behavioral Science with The University of San Francisco, developed the TOWS Matrix.
These strategies are not only used by Universities globally to monitor their own business performance, but they teach these strategies early in the educational process to those students who are positioning themselves in all aspects of business management and administration. Today, technology allows small business owners the opportunity to educate themselves in the implementation of these analyses. As a point of fact, there are many useful SWOT/TOWS forms and tools made available to anyone who may like to conduct this research on their businesses.
These same analyses are implemented by company “thought leaders” in not only keeping businesses on a positive path, but they often use the same analyses to help employees come to know themselves within the business environment and how important their thoughts and ideas are to the business no matter the size of the company.
The SWOT and TOWS analyses will create a space for productive “brainstorming”. Once the issues begin to reveal themselves throughout the process, solutions become more accessible to identify. The analyses are a great starting point in maintaining continued growth on all levels. If these steps are taken from the inception of the business, it’s much easier to remain abreast of any possible threats that your company may face. However, these analyses may be performed at any time in the life of the business to improve the business’s strategies.
With proper observation and implementation of correctional strategies, external threats may quickly reveal executable solutions that could stave off and often eliminate the possible damaging results that could be catastrophic to your small business if they are ignored or left to work themselves out. Instead, these analyses are capable of helping to create much-desired success.

What Exactly Does SWOT Stand For?
This acronym represents:

Strengths
Weaknesses
Opportunities
Threats

What is TOWS?

Threats
Opportunities
Weaknesses
Strengths

Of course, the first thing you’ll notice is that it’s the same acronym, but it’s backward. Why should you use both models? Very basically, by combining the matrices, your company will experience a better opportunity to identify all aspects both internally and externally, not the order of benefits of only one model or the other. SWOT addresses internal information and TOWS addresses more of the external possibilities. Both valuable and needed.

What are the Benefits of Conducting the SWOT/STOWS Analyses for Small Business?

You will discover the internal strengths and external opportunities available to your company and how strengths may be utilized to benefit from the realization of external opportunities.
You will benefit from the discovery of internal strengths and external threats and how your business may benefit from their own strengths so that your company may avoid any potential external threats that have come to light.
You will discover how to use your opportunities and overcome any internal weaknesses.
You will identify your abilities to minimize any weaknesses and will, therefore, acquire the capacity to avoid potential threats.
None of this will be remotely effective, however, if the issues uncovered during your discovery phases lie dormant as you continue to run your company as you have been running it. The changes will not occur on their own. Over time external progression will ultimately introduce threats that you won’t see coming and those threats will compound with time.

Don’t ignore your discoveries once you’ve answered your questions about how to improve your business. Your weaknesses and threats will not go away on their own, however; your opportunities just may. Alternatively, your company, as you progress, could well become a threat to other companies. You will want to maintain focus and anticipate what possible strategies they may devise to combat the threats that you could pose and prepare to remain a step ahead.

In an extremely brief summation; after performing the SWOT/TOWS analysis, you’ll be left with a list of awareness’s, self-imposed questions and potential solutions to threats both internally and externally. It will be then that you will have the ability to either change the trajectory of specific aspects of your company or the company as a whole if needed. Or you will have the ability to identify opportunities and improve on whatever is already successful.
Should you find that you are overwhelmed, and in need guidance, you should consider working with a reputable business consultant or business consulting firm for assistance.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Lifecycle Marketing Is Rapidly Taking Center Stage

Lifecycle Marketing – Is rapidly becoming regarded highly as one of the most effective avenues to acquiring and retaining clients/customers and incrementally increasing small business profitability. This strategy, although it has been used effectively for centuries, with new studies and a more structured understanding; will be valid for any business whether they are just opening their doors or are tenured members in their business communities. These efforts can produce long-term sustainable business so long as the company remains consistent in its efforts.
These are the steps each business owner will need to not only become a participant to create positive results, but these steps must become second nature to every person involved in your business:

Educate the client/customer about your brand.
Convince them to purchase.
Provide consistent loyalty rewards, therefore:
Convert them into loyal clients/customers and strong advocates for your brand.

As simple as it may sound, however, it will take time. This form of marketing is absolutely one that every business should consider implementing immediately. It’s not simple, and it’s never-ending. However, it’s THE best way to engage and retain long-term, loyal clients/customers and significantly enhance your bottom line year after year.

With this in mind; you must also apply these “old school” methods:

Create Trust – Your company/brand must set its sights on becoming the “tried and true”, the safe place in a world that isn’t precisely viewed by most as safe or trustworthy.
Consistently Provide Exemplary Client/Customer Service – You must assure your clients/customers that your business exists because they are one of your most important assets. The loss of their loyal business will never be an option.
Show Your Gratitude – Your clients/customers will always respond to your gratitude for their loyalty. They want to hear and experience your appreciation; not only from you but also from your representatives.

These back-to-basics actions are the very foundation of creating changes in the client/customer’s purchasing behaviors that will enhance your business’ profitability.

Today there are many examples of this form of marketing. To assist in creating a mindful visual of how successful this can be, consider that grocery store card that you scan each time you purchase your groceries.

Decades ago, grocery stores had begun implementing the discount card program. You would provide your information, and in return, you would instantly have the ability to receive exclusive discounts on your grocery purchases. This strategy has proven to be one of the most lucrative forms of customer lifecycle marketing examples to date. Grocery stores, simply by (and now automatically by) prioritizing customer satisfaction and rewards for their customer’s loyal purchasing behaviors, are incredibly successful with nearly every weekly marketing campaign they create.

Today, with ever-progressive technology, these stores accomplish retaining your loyalty across every device you use by reminding you that they are aware of your preferences and are willing to offer you a discount each week on multiple items that you’ve purchased in the past. Their customer retention abilities have significantly evolved over the years.

With each ‘kind act’ of making your experience more enticing and enjoyable, you are inclined in turn, to return to their store for yet another positive purchasing experience. Mission accomplished day after day, week after week and year after year!

There is absolutely no reason that excellent client/customer service would not provide the same results for your business. This customization is the very definition of client/customer lifecycle marketing. It is only one example of millions of campaigns. However, the foundation of this strategy will work for any business. Exemplary client/customer service combined with your customized campaigns and offerings will significantly enhance all aspects of your business, not only for your clients/customers but for you and your employees as well.

Here are Some Interesting Statistics That Apply To The Landscape of Any Business:

Approximately 80% of companies small to large, globally, spend their marketing budget attempting to acquire a volume of new clients/customers.
For every 1% of any company’s repeat clients/customers, the company’s revenue is increased by 10%.
Harvard Business Review reports that the average company residing within the U.S. will lose 50% of their acquired business over a five-year period.
Two-thirds of an average business’s clients/customers state that they don’t return due to poor or inadequate client/customer care practices.
If your company, through the simple act of good client/customer services, could reduce your client/customer loss by only 5%, your company profits will increase by anywhere from 25% to 125%. If this grabs your attention, then you should know that 80% of all of your company’s profits that you will acquire in future sales will come from merely 20% of your current client/customer base, according to Kapow.
Also, according to Kapow; any company that is willing to significantly prioritize their client/customer’s experiences will likely enjoy an approximate 60% higher profit generation over their competitors.
Employee engagement will be an integral component of your lifecycle marketing efforts. Results of a study conducted by Hay Group show that your engaged employees will create revenue growth twice as high as those businesses with lower levels of employee engagement. The same study reveals better customer experiences and increased customer loyalty.

There are myriads of studies and statistics available to prove the staggering benefits of keeping your clients/customers engaged, happy and returning to your business for their needs. These strategies will be the vital component to the success of your business going forward in 2018 and beyond. Although this concept may seem simple, it requires long-term commitment and cultivation. It can be involved and daunting and will require dedication, not only on your part but from your management and employees.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Strategic Planning – How Important is it?

A lot of business owners know about the benefits of strategic planning, especially when they see their competition using it and growing. But, many do not know if it will help their company.

One common question business owners ask is, ‘Can it really help me and my particular situation?’

Yes
It can help you, and your company, become and stay successful. There are many benefits to strategic planning, here are just a few.

• It can stabilize your business – you will become proactive rather than reactive. It lessens the likelihood that you will be a victim of unforeseen circumstances, an unpredictable economy, and poor paying clients.
• Planning defines realistic, measurable goals and objectives. It gives you, and everyone else, a clear way to reach them.
• A strategic approach can finally turn your good ideas into money-making products.
• It greatly increases the odds that your business will survive long term – based on skill, best practices, and good management rather than luck.
• Increased market share, quality, productivity, sales, customer satisfaction, profitability, ability to withstand competition, problem-solving skills, and financial control.
• Stops or reduces rework, self-inflicted problems, employee dissatisfaction and difficulties, unprofitable service lines, bad debt and poor inventory control.

Another question business owners ask is, ‘Is strategic planning as important to my business as everyone says it is?’

No
This might surprise you.

No, strategic planning is not as important as some people say it is. It is not a magic wand or a silver bullet. In fact, strategic planning without strategic management is almost worthless. A plan is only as good as the people who implement it.

Plans cannot and will not take the place of good management. They are made to supplement, structure, inform and strengthen leadership, but are not a substitute for it. You can have an excellent plan, which will provide you with all the benefits mentioned above. But, if it is ignored, poorly executed or sabotaged it can do more harm than good.

Strategic planning, coupled with strategic management, is invaluable to any size company. They are the pathway to success – with proper planning and the right people you can reach or exceed any dreams you have.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Recruit & Retain Millennials

I attended a Human Capital Seminar / Conference last year at the PGA National in Palm Beach Florida. Whenever I attend one of these events, I am always amazed that over a three day period of seminars that feature distinguished guest speakers and industry experts; the solutions that are presented are something so simple that was in front of me all the time; yet something I never even thought of that provided the answer I had been looking for – and this conference was no different.

One simple ideal I took away from this conference, was from an HR women from a major bank whose name escapes me. She had talked about implementing an employee survey throughout their organization and being surprised by the results. She spoke of the majority of their young financial planners who were providing financial planning to their customers did not take their own advice. To address this need, they decided to implement free annual budgeting assistance to all their employees. In addition, they would receive $500.00 and two paid days annually to address their financial concerns. This one benefit improved their retention, improved employee morale and they received high marks as one of the best places to work for in America.

At about the same time this was going on the Presidential Race was heating up and many of the young protesters voiced their concern about their mounting student loan debts. In some cases explaining the need to live in their parent’s basements as a result. From this, example, I made the decision to introduce out of the box thinking to compete for the brightest and best recruits for one of my organizations at the time who was struggling to recruit & retain talent.
Too often I hear from clients that they are having a hard time recruiting talent and blame everything from their business’s location to competitive salaries. There are numerous ways to address retention, but for this particular writing I will focus on one that relates to recruitment, and that is to consider implementing a student loan matching fund.
Companies who provide a matching 401k or, Pension Plan provide better retention that those who don’t. Employees are less prone to leave and weigh their decision more when a retirement plan exists especially one where the employer makes a considerable contribution. In today’s economy, benefits have been forcibly reduced from health care to retirement in order for businesses to exist and remain competitive. For this reason, I introduced a matching Student Loan Re-Payment Plan to one of my national clients. When introduced, the plan was received well from the top down.
Turnover can cost as much as 1.5 to 2 times an employees annual salary between recruitment & training costs associated with the acquisition of talent. The concept introduced, is first to identify the organization’s current recruitment and turnover costs then allocate a percent of the recruitment budget into a Matching Student Loan Re-Payment Fund. Example of how it would work.

The student decides the monthly amount they are comfortable committing each month towards their debt.
Then the student provides the appropriate paperwork to HR to direct pay the Lendor.
The organization matches that amount in this case up to $300.00 a month.

This allocation can be contributed from the Recruitment Budget therefore not adding any additional expense but theoretically reducing costs over time. In addition, this makes for strong recruitment marketing at colleges & universities. Retention is sure to improve as those locked into such programs are more reluctant to leave while their debt load is being lessened.

What Businesses Can Learn From the Super Bowl!

In three days Super Bowl LII will be played. The New England Patriots are a Football Dynasty as they have achieved five super bowls wins, winning two within the last four years, and now hoping to do what has never been done, and that is to achieve a sixth super bowl win. In addition, the tandem combination of Coach Bill Belichick and Quarterback Tom Brady reaching six Super Bowls together is historic, as this has never before been done. On the other side of the field are the Philadelphia Eagles who have never won a Super Bowl. Either way, on Sunday history, will be made.

Now think about this: Suppose you had the opportunity to acquire two tickets to see your favorite team play in the super bowl. Current ticket prices for this Super Bowl is averaging $4500 ea. (per TickPick), not to mention the travel and other associated costs to attend this event. In all, you will have invested greatly for the chance to see your favorite team win!

Imagine now, you work your way through the crowd with your food and drinks to get to your seat, which may be in the middle, and then suddenly the announcer comes over the PA System and announces the following: “Ladies & Gentlemen today we are going to do something in the National Football League that has never been done before. What we are going to do, is to play three hours of smash mouth football without any scoreboards. Yes, that’s right! No scoreboards! just three hours of football fun with no scoreboards. In fact, we believe in this so much that we are going to do this from now on.”

Now let me ask, how would you feel as a fan? Better yet, how would Philadelphia Eagles Quarterback Nick Foles feel knowing that he may have overcome great odds to achieve the impossible? How would future Hall of Famers Tom Brady & Bill Belichick feel knowing that the opportunity to put numerous NFL records out of range for a very long time will not be significant, or even recorded?

So what can we take away from this? American business is not much different than sports. Players want to be acknowledged and know where they stand, one rushing yard, one kick or, even one pass can be the difference between winning or losing. For a player, in addition to the accolades of setting a new NFL record performance bonuses and a contract extension may follow. Employees view success in much the same way; they want acknowledgment for doing a great job. In business, all activities and processes must be measured and monitored to include employees. Let them know where they stand and coach them to success.

Bill Belichick is one of the best halftime coaches ever; Tom Brady has led his team time and time again from lagging behind at halftime, to eventually chalking up a win. In business, Managerial Accounting works in much of the same way. Managerial Accounting measures & monitors activities to proactively make the necessary adjustments that will overcome most business deficiencies.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Do You Need a Tax Attorney?

Want to get a room full of business owners fired up?

Just mention the word taxes and everyone has an opinion. It usually is a strong one, and frequently includes the words “too much”. But, strong opinions or not, all business owners have to pay them. Death and taxes…everyone knows the saying.

So, what are your options?

You may be in a position to benefit from the services of a tax attorney. Let us take a look and see if you need one.

What is a tax attorney?

In order to practice law, a tax attorney has a Juris Doctor (JD) degree and has passed the bar. She has additional training in tax law, much like a medical doctor who specializes in a certain area. Some also may have training in accounting.

How are they different from accountants?

Imagine an accountant’s and tax attorney’s knowledge as two side by side circles overlapping in the middle. They bring different experiences and skills to your business – while also having some of the same ideas and goals for your long-term financial strategy.

A tax attorney’s main focus is on the legal aspects of your financial situation. Some examples: business negotiations, navigating court systems, IRS legal problems, representing you in civil or criminal claims, initiating lawsuits, complex tax reduction, and other duties. You use them for short-term, specific legal problems, concerns and issues.

An accountant is focused mainly on basic financial management and tax preparation. Some examples: bookkeeping, employee compensation and withholding, preparing and filing routine tax paperwork, reducing routine tax liability, issuing W2s and 1099s and other duties. Your relationship with an accountant is long-term and focuses on your overall financial health.

Do you need a tax attorney and an accountant?

The short answer is – it depends. Tax rules and regulations change every year. Companies grow, shrink and get sold. Owners retire, stock changes hands and new management takes over. Sometimes you will need and benefit from a tax attorney. Other times you will not. Your individual situation will determine when and if you need both.

Most successful, growing companies can use an accountant and a tax attorney on their team. Remember, while some of their services may overlap, each one has special knowledge which will help you reach your goals. Accountants typically focus on compliance, not minimization. Tax attorneys usually look at minimization, while staying compliant.

For example – an accountant’s tax planning advice is to buy something big that you can write off if you have money left at the end of the year. You will get the 179 accelerated depreciation and save on taxes. This is a good plan for some companies.

An attorney’s advice is to write off as much as you can pretax. He looks at how much you can take as unearned income (i.e., rental income or sub lease arrangements which are not subject to Medicare/Medicaid, FICA, SSI). He also looks at what you can claim at a lower percent of tax, such as dividends. Then what is left is taxed at full earned income rates. This is a good plan for other companies.

When do you need a Tax Attorney?

Again – it depends. Your situation is unique, and there are many factors to consider.

One of the guidelines is – if you are paying over $50,000 a year in federal taxes it may be time to think about using a tax attorney. If it is lower, the ROI is not usually a good value. Obviously, the more federal taxes you pay, the more likely the ROI will be worth it.

Here are some other reasons you might need a tax attorney.

• If you are in a situation which requires attorney-client confidentiality.
• When you have complex tax issues (international law, subsidiaries, mergers, sale of company, etc.).
• You have to answer a civil or criminal complaint from the IRS.
• You are negotiating with the IRS for owing back taxes or have balances due.
• When specific issues require knowledge of the law (how to classify workers, estate planning, exit strategies, stock distributions, etc.).
• Reclassifying your business for the optimum tax advantage.

Tax planning is complicated and the rules are always changing. You need good people on your team, an accountant and/or a tax attorney can help you. Spend the time and do the due diligence to find the right expert to help. Your future is worth the effort.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

It Is Time to Get Control of Your Money

It is baffling to experts. Why won’t business owners learn how to read, understand and manage their financials? Why don’t they want to control their money? Why can’t they realize that the better they control their money, the better they control their business?
The answer is simple – owners are human beings first and business-people second.

All human beings are illogical about a lot of things (i.e., children, dreams, spouses/relationships, jobs, politics, hobbies, goals, expectations for other people). Our emotions affect our decision-making skills all day, every day. Everyone has exhibited bad behaviors, made poor choices and acted on unsound judgments based only on how they were feeling at the time.

We are particularly irrational about money and finances. If you cannot immediately come up with five names of people who have made poor financial decisions, then you have not been paying attention. You, also, have not been paying attention if your name is not on the list. It is a given that we can be our own worst enemy when it comes to making good financial choices.

But, that is a destructive and frustrating way to run a company. There are better ways. We have all asked ourselves, “What was I thinking?” and had the answer be, “I wasn’t.”. However, that does not have to be your answer; you can change it. Knowledge is power, and it can help you get control of your money, your life, and your business.
The positive characteristics – independence, self-reliance, stubbornness – which made you a success also have a negative side. Most business owners do not want to admit when they are wrong about or do not know something. They also do not want to ask for help. But, believing you know everything there is to know about running a company is unreasonable and irrational.

This is one of the reasons owners make bad decisions in uncertain, uncomfortable or unknown situations. When they have no or poor financial information the more likely they are to make mistakes in productivity, quality, sales, estimating/bidding, inventory, personnel, salaries, etc.

When we are faced with problems our mind usually does not pick the rational solution, it picks the easiest one, the one that feels the best. But, feelings are not facts and giving feeling based answers is a very poor management strategy. They are often wrong.

Overwhelmingly, when an owner learns how to read and manage via his financials, his response is, “I don’t know why I didn’t do this sooner. It makes everything so much easier. I have all the information I need and know exactly what is going on in my company.” Your financials will immediately tell you the health of your company. When you understand and have control of your financials, you have control of your business.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Has Your Tech Firm Hit a Wall?

Just like people, businesses go through growth stages. And, just like people, each stage has unique challenges and rewards – think five years old vs. 15 vs. 25 vs. 35. Just ten years can make a big difference in a businesses’ priorities, objectives, requirements, and goals.

The challenges and rewards of each phase require owners to grow and change along with their businesses. In order to stay competitive and create sustainable growth they must be flexible. Successful leaders adapt their thinking and strategies as they move through each cycle.

80% of all businesses fail because their owners did not understand, and were not prepared for, the different demands of each stage. It is not market conditions, bad luck or outside circumstances, it is self-destruction that closes or limits expansion in the majority of companies. Technology firms are no exception.

Many established tech companies are struggling because the owner(s) has reached the limits of his abilities. His skill and knowledge have carried him through the first two stages (Seed/Development and Startup). But, he is having a hard time in Stage 3 Growth and Organization.

In the 3rd phase, the business is stabilizing. It has improved cash flow and profit, a better mix of new and established clients, a functioning workforce and projects in various points of development. It also has an owner who is having a difficult time making the transition from engineer to leader and manager.

This stage requires big changes from the owner because being good at engineering is not enough to be successful anymore. The business no longer requires him just to be technically capable – it needs him to be a good leader also. Here are a few examples of the new leadership skills, abilities, and knowledge he must have.

• Understand and manage via financials – profit, cash flow and job costing
• Develop a recruiting, hiring and retention process
• Create an effective accountability framework
• Optimize sales and sales planning to generate new business
• Implement best practices to decrease scope creep, change orders, customer dissatisfaction
• Increase on-time and on-budget project efficiency
• Streamline internal and external communications

In this stage, someone has to step up and officially lead the company – someone who is a leader and manager first, and an engineer second. Tech company owners are notorious for being bad at doing this. Unfortunately, this is where the company starts to stall at best and break down at worst.

This makes the next three stages – Expansion, Maturity, and Exit – difficult or impossible to transition to. If the company is able to limp into a next phase the problems continue to grow (i.e., decreased or no profit, low quality, increased customer and employee dissatisfaction, little or no buy out money, chaotic workplace, high owner frustration/unhappiness).

Simply put, the concepts of first-rate engineering and first-rate business management are one and the same. Both are about understanding how things break or fail, then making sure that does not happen. You have to design before you build.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

5 Rules for Playing the Loan Game

It is hard to get a business loan, even when you know what you are doing. It is doubly difficult to get one when you do not know how to play the game – and make no mistake it is a confusing, frustrating game. But, like all games, the more you understand the rules, the better chance you have of winning.

You can have the best team, quarterback, and coaches in the NFL, but they will not get to the Super Bowl if they do not follow the rules. They would have so many penalties on each possession they would rarely make it into the end zone. That is assuming, with all the suspended players, they would have enough men to field a team.

To increase your chances of winning the loan game here are five rules to follow.

Know your personal and business credit scores

This is one of the primary reasons business owners are turned down for loans. Most owners do not know the scores show their poor, or lack of, credit history. Your application will be denied if you are too risky. Do not apply for money you have no chance of getting if your scores show you are not credit worthy. You have to build or repair your scores if you want to get a loan.

Have enough cash flow

Why should lenders give you money if you are not able to show you have, or will have, enough cash flow to repay them? It is simple – there must be a reasonable chance they will get their money back. If you consistently have more money going out than coming in you have a management problem. Interestingly, when owners fix their cash flow troubles to get a loan they often no longer need it.

Have enough verified collateral

What if you do not have a history of positive cash flow? Lenders may overlook it if you can offer physical assets (i.e., house, land, vehicles, equipment, building) for collateral. But, your estimates of the property’s worth must be true market value. Owners are notorious for over valuing their collateral.

Completely understand your financials

Have you ever been baffled or shocked by a lender’s refusal to give you financing or extend your line of credit? Then you have not been paying enough attention to your financials (i.e., margins, profit/loss, accounts receivables, cash flow). They tell you, and the lender, the economic health of your company. It is your responsibility to understand all the fiscal information the lender bases his approval or denial on.

Have a written, solid business plan

Dreams and good intentions are not facts, and they are not a business plan. Watch Shark Tank if you have any doubts about the truth of this statement. Some of the things a solid business plan includes are legal documents, financial statements, customer data (past, present, and future), location research, profit and sales projections, mission statement with goals, product research, and personnel backgrounds/skills.
Most loans are denied because the owner did not make an effort to meet all of the rules. Following these rules does not guarantee you will get the loan. But, it will drastically increase your odds of at least being in the game. As Lou Holtz said, “The man who complains about the way the ball bounces is likely the one who dropped it.”

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

How to Get Your Project Approved

So you have a great idea and want to pitch it to your leader. You know it’s a great idea, so how do you persuade the powers that be to give you the green light? Well, as the joke goes all leaders are from Missouri, the ‘show me state’… so show them it’s a great idea! In order to get that buy-in, it’s your job to illustrate the vision and impact of your idea in a compelling way.

Where to start?
You must start with the big picture by asking how the idea benefits the organization. Facts, figures, and passion are all required to paint a full picture. Leverage storytelling to share compelling data in a way that appeals to the heart and mind. Explain what success will look like and how the future will change for the better. If you don’t have the data to back up the idea, go back to the question of how does this benefit the origination? If you can’t answer that question, then your idea needs more time to incubate.

Once you can answer how the organization will benefit, your job is only beginning. The flip side of that coin is the actual plan execution. This is where the rubber meets the road! If the timeline or resources available are too restrictive, then the idea is still not ready. The new software you like might be affordable, but if it takes years to implement, it may not be practical.

Before proceeding with any proposal explore the question “what if it fails?” Imagine that you have the go-ahead and you launch the project. Then, things go horribly wrong and the project ultimately fails. Why could this happen? By exploring what could go wrong now, you can anticipate pitfalls and plan ways to mitigate the risks. Use this to better plan the project and present your proposal.

How much information do I need?
Imagine for a moment that you are the leader and your employee is pitching the idea to you. What kind of information will you be looking for? Generally speaking, if the idea doesn’t save time or money, it will be hard to persuade anyone that it will be worth the investment.

The information should be comprehensive, but presented in a succinct way. Costs will be associated with the entire process and should not be minimized or overlooked. Consider everything including time, materials, resources, people, systems, software and training. Using the worse-case assumptions here will help you avoid unplanned overruns later. You may want to consider including a range of costs from target through worst-case. Overall, be realistic and thorough. The worst thing you can do is to try to massage the numbers at the start, only to have to explain budget overruns later. This will erode your credibility and make it even harder to gain acceptance of your next big idea.

Proposal basics
As with any professional communication, you should present a polished proposal in writing. You are presenting an idea and putting yourself out there too. Don’t dilute the idea with poor formatting and spelling mistakes.

Consider your audience when writing the proposal. Leaders often wear many hats and have limited time. If you want your proposal read, you must keep it concise and to the point. Provide a summary and bottom-line cost impact first. All of the data and research should be available, but you want to hook your reader early! Make sure your data includes hard and soft costs, benefits including savings and any return on investment or buy-back information.

Provide easy to read charts, tables and avoid getting to fancy with formatting. Let the data speak for itself. If the data is complex, find ways to simplify it and try illustrative storytelling to convey the message.

Timing
As we all know, timing matters! If you walk into your leader’s office to pitch your proposal, but clearly something else is going on, alter your approach. If your audience is distracted by another issue or even emergency, how well do you think they will be listening? Instead, use this opportunity to see how you can pitch in and help, and reschedule your pitch for another time.

Remember, timing matters for you as well. If you are not well-prepared, you are less likely to be successful. Plan ahead and ensure you have buffer time for preparation. You do not want to be scrambling the morning of the meeting to refresh yourself on the details.

Response
Congratulations, you got a yes on your proposal! Getting your proposal accepted is great, and again, your work doesn’t stop here. Keep up momentum by transitioning into project planning activities. Make sure to provide regular updates to the leader and keep them updated on how the project is proceeding.

If you did not gain acceptance, reflect on the reasons why. Keep in mind, the reasons may be completely unrelated to your project. Either way, there are still valuable lessons to be gained. Think about the things you did well and what you could improve on. Ultimately, you still gained important experience by practicing building proposals. This skill-building will help you be better equipped to present your next big idea.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

MDM and How BOMS Can Blow Up Your Clients & Customers!

If you have ever worked in manufacturing or any logistical capacity that supports manufacturing; then you have worked with the Bill of Materials. BOMs are the core of your logistical master data. An inaccurate BOM can discredit existing or future manufacturing Enterprise Resource Planning or Business Process Management Systems (ERP or BPMS for short). By updating or upgrading these systems, you put your company and your customers potentially at risk for these data inaccuracies. In taking ‘true’ ownership of your companies BOM Master Data you can leverage against deploying an inaccurate BOM and prevent hurting your customers; all while setting up your company for accurate costing and inventories throughout your process.

Today’s manufacturing companies are continually updating/upgrading these ERP and BPMS systems. The risk and reward for these new systems can be great. But why the perpetual upgrading? Two potential reasons; gain a competitive advantage by aligning more with your customer based systems or gain more transparency in your accounting ledgers to better understand the costing structure through your manufacturing process. But regardless of the why, how do these ERP / BPMS upgrades potentially affect your customer?
The customer isn’t always aware of these ‘upgrades’ to your ERP / BPMS systems, and most firms don’t divulge that information to their customers for good reason. Why give your customer any unnecessary anxiety about your product quality or delivery if you don’t have to, right? But what if your customer notices an unusual ‘uptick’ in quality defect rates or missed shipments trends post-ERP / BPMS upgrade? And how does this effect your business other than potentially losing customers? (let’s come back to this point)

Back to the system ‘updating/upgrading’… the perpetual upgrade cycle can not only be costly in terms of paying annual or even monthly licensing fees, but it can also wreak havoc by creating inaccuracies in the BOM master data and how that data is consumed through your ERP / BPMS systems. But how can any manufacturing company reduce these upgrade ‘fees,’ and gain greater consumption accuracy in costing through their manufacturing process? Simple, take ownership of your Master Data.

Taking ownership of your Master Data is critical to any manufacturing company in today’s world of automated and often complex processing. By taking ownership, you have departmental accountability. Leverage any third parties working to update/upgrade your ERP / BPMS system and make them train ‘your’ people how to manage ‘your’ Master Data. Once properly coached or trained that internal accountability will drive your manufacturing master data to become ‘cleaner’ and well ‘governed.’ Your Bill of Material accuracy will increase via regular departmental audits, and liability to your customer will decrease. And what about the expensive cost of the ‘update/upgrade’ cycle? Well, your company will have the confidence in transferring legacy master data into the new system, and reduce project ‘life-cycle’ deployment costs by not starting from scratch. And by not starting from scratch, your company doesn’t absorb more billable hours via third-party contract entities.

(Now back to the ‘point’ we eluded to earlier). In the end, with better BOM’s you will be selling your customer not only the raw material, parts, components, and packaging that you say you are on paper; but you close any potential legal liability by not selling them something they didn’t pay for. Ultimately, we want the customer always to get what they pay for!

Please contact us if you want to learn more about leading your organization to that level of Master Data ‘ownership’!

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Wholesale Distributors – Beware Tech Hype

There is no question about it, technology has changed the industry of wholesale distribution, and it will continue to do so. If you are not already, you will soon be using these words – drones, IoT (Internet of Things), digitalization, e-commerce, M2M (machine to machine), big data, wearables, robotics, SMAC (social, mobile, analytics and cloud) – to discuss your business needs.

It is easy for business owners to get confused and overwhelmed by all the “you must have this now, and if you don’t you will fail” tech hype in the industry. Unfortunately, these feelings lead to bad decisions or no decisions. Some make rash, poorly informed choices – buying hardware/software they do not need, understand or use. Others delay making any choices – they still do not have an internet presence.

Fortunately, it does not have to be that way. Look at the last sentence of the first paragraph again. The two most important words in that sentence are not in the tech section, they are “needs” and “soon.” If you want to keep your operations up to date, while avoiding tech hype, those are the words to focus on.

Needs, not wants – The willingness to identify problems and the ability to fix them is still the gold standard for running a successful business. For example: tech can streamline processes and make your workforce more efficient, but only when coupled with good managers. If the real need is better owner and supervisor management skills technology will not fix the problem, no matter how much you want it to.

Soon, but not immediate – Timing is important, you are looking for the sweet spot of decision making. Unless you are very adept and interested in tech advances stick to the basics – let other, bigger, distributors take the lead. Let them look for new ways to go to market, spend a lot of money and make the mistakes. But, once they work it out, follow right behind.

Here are some questions to help you identify what your tech requirements really are.

What best practices do you need to stay competitive? What are your competitors using? What are your current and potential customers asking for? What does your supply chain expect? Do you have a tech problem or an operational one? Are you expecting a people problem to be solved by hardware or software? How can you use the systems you have more effectively?

Beware tech hype that promises too much and delivers too little. The basics of business success still apply – cut costs, increase productivity and efficiency, decrease waste and avoidable mistakes, grow revenue through existing and new customers and develop effective management skills. Tech is just a tool; it is up to you as to whether it makes your life easier or harder.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Before Selling Your Business Know its Value

Are you a business owner who expects to fund your retirement by selling your company?

If so, you are not alone. Most owners who are selling their businesses believe they will make enough money to provide all or most of their retirement. But, that belief is seldom based in reality. Nearly all owners overvalue their companies, and are shocked when offered much less than they think they are worth or nothing.

There are many reasons why your business may not be worth what you think it is; here are 3 of them.

There is nothing to sell

What do you actually have to sell?

People want to buy a financial asset, not a job. They buy growth opportunities, the ability to enter new or competitive markets and strategic assets. If you have only created a job for yourself – not a business – very few people will want to buy it.

What can you give a monetary value to – building, equipment, contracts, books of business, customer database, furniture, etc? How much unwritten knowledge and intangible assets leave with you (i.e. business plan, strategies, polices, procedures, customer information/contacts, goodwill)? Are you in a growing or declining industry, and have you kept up with its latest advances?

A non-functioning and/or economically burdensome management team

Does your team add or subtract from the worth of the company?
Whether they are running the company personally or are adding it to other business interests, many buyers want a fully functional management team in place. If your organizational chart is too top heavy, too full of nonproductive family members/shareholders, or has an unbalanced supervisor to employee ratio it will reduce or end a buyer’s interest.

Can you prove management’s effectiveness through documented productivity numbers? How many shareholders/family members are there, and are they contributing to or a burden on the bottom line? Who is staying and who is retiring with you – will there be a brain drain? What unique knowledge and skills does each manager/key person have?

Poor financial situation

What do your financials prove about your company’s value?

The unwillingness to manage and understand their financials is the major reason an owner misjudges his company’s value. He bases his idea on guesses and hopes rather than hard numbers. Your business is only worth what a buyer will pay for it, and they are usually looking for sustainable cash flow and profit. The typical buyer is not looking for a fixer upper with potential.

Which customers contribute to or subtract from profit and cash flow? What are your margins and how do they compare to industry standards? Where are the profit centers? How much are you skimming and how are you going to show the company is worth more than the financials say? Is the business paying for personnel items, and are they showing up on the operating statement?

The time to start the process of selling your business is 3 – 5 years before you put it on the market. You need time to make it attractive to buyers – putting it on the market is at the end of the process, not the beginning. You have worked too long and hard to leave funding your retirement to chance; do not slow down and stumble at the finish line.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

The Role of Chart Accounts

Chart of Accounts

The key to managing a profitable Company starts with the Chart of Accounts. It should be designed specifically for your business to give you useful and accurate information that can be used to manage your Company.

The Chart of Accounts is a list in your accounting system that defines each class of items that are used in regard to money spent or received. Generally, you will have major classifications for Revenue, Cost of Goods (Direct / Variable Costs) and then Overhead (Fixed Expenses or Operating / Administrative Costs). Under each of the major classifications should be several sub classifications such as Direct Labor and materials in COG; with rent and administrative labor costs in Overhead (operating expenses). How these items are grouped is the key to having a meaningful P & L or Income Statement. How it is formatted enables you to calculate your Overhead Recovery Ratio and recover enough money to offset your Overhead expenses and get you to a break-even point.

As stated earlier, the Chart of Accounts will also give you information to help manage your company. The amount of detail will vary by the types of business. But the amount of detail will be essential in identifying “winners and losers.” Identifying profitable revenue streams versus those that are costing the Company money and may need to be tweaked or dropped altogether. Early analysis may be a key to righting your ship and creating smooth sailing ahead. The numbers in a properly set-up Chart of Accounts can also be used to plan future Budgets and consequently your capital expenditures.

Think of the Chart of Accounts as the instrument panel of a car or airplane. You can’t drive or fly without knowing your speed, direction, engine conditions, weather conditions, etc. It needs to give basic readings that can be put together in reports, ratios or percentages to help guide the Company. Unfortunately, most Charts of Accounts are set-up with very little or no thought given to Managerial Accounting or accounting designed for internal (management) use. Most (95%) of the Chart of Accounts are set up with only one thing in mind; your tax bill. They were set up by your accountant or bookkeeper for this purpose. They are not set up for you to use as a basis for actually managing your Company. For example, placing all payroll and benefits in one account in Overhead with no distinction between Direct Labor (labor actually doing the work) and administrative labor does not allow us to determine an accurate Overhead Recovery Ratio. That part of payroll for Direct Labor is considered a Cost of Goods (Direct Cost) whose burdened payroll and benefits should have been properly bid in the job. It would not be part of Overhead.

If we put all of our revenue into one lump sum how do we tell which part of the business is profitable? If we have different revenue streams or profit centers which costs are also associated with each? These need to be separated in the Cost of Goods; separate labor, materials and equipment costs related to producing that specific revenue stream.

How do you want the Chart of Accounts formatted? Do you have different revenue streams? Can you measure the profits for each? Can you determine if it is worth being in that business? Not how does your Accountant want it to be formatted. Be assured that he is getting the same information that he needs to prepare your taxes but you will be getting far more useful information.

Overhead Recovery Rate

Once we have properly identified those items that are Cost of Goods and Overhead, we then set-up or revise our Chart of Accounts accordingly. Remember, if it is not billable to a job or cannot be put in a bid; it is mostly likely Overhead. This will then provide us with the type of P & L or Income Statement that we can use to make calculations. We can then determine the Overhead Recovery Rate that needs to be used in our bidding and pricing in order to cover our Overhead costs.

Basically, one can figure that for every dollar spent on Cost of Goods Sold, an additional “$” amount (determined by the Overhead Recovery Rate) must be added to recover the OVERHEAD. This allows a consistent application to all jobs.

The Overhead Recovery Rate may be based on either actual historical financial data or upon projected budgetary figures. Both calculations should be made for comparative purposes. Given the importance of the Overhead Recovery Rate, Revenue and all costs, whether directly or indirectly related, should be continually monitored. Don’t forget; changes in the amount of the Cost of Goods will impact the Overhead Recovery Rate because, if sales decrease there will probably be less Cost of Goods over which to spread our recovery rate. Even though, Overhead expenses are primarily fixed and therefore revenue increases or decreases will have little direct impact on them, a downward trend in sales will raise the Overhead Recovery Rate needed because there will be less COG to spread them over.
It is crucial that Overhead be monitored not only as a percentage factor, but also in terms of dollars. An Overhead Recovery Rate, expressed in percentage terms, is reliable only if you achieve the targeted revenue and maintain the associated direct costs at the projected level on which the factor is based. You must become intimate with all aspects of overhead, including not only the estimated annual percentage factor, but what the annual overhead dollar amount breaks down to on a weekly, monthly, quarterly, and semiannual basis. The capture or recovery rate of overhead should be tracked on an ongoing basis. An Overhead Recovery Rate Is Never Fixed or Constant – It Is Continually Moving and Chang

	OVERHEAD (G & A OR FIXED EXPENSES)
OVERHEAD RECOVERY RATE =	———————————–
	COST OF GOODS SOLD (VARIABLE)

The formula above will give you your Overhead Recovery Rate that needs to be applied to recover your Overhead. In other words, dividing the Overhead by the Cost of Goods will give us the percentage that we need to apply to all of our Direct Costs in order to cover all of our Fixed Expenses or Overhead.

If we use an example of Overhead Costs of $245,000 and Cost of Goods of $529,000; we would divide $ 245,000 by $529,000 which equals .4642 or expressed as a percentage, 46.31%. The Overhead Recovery Rate would be: 47%. For our purpose, we will round up and use 1.50 as the rate. In other words, we must recover an additional 50% of Direct Costs. Or we need an additional 50 cents for every dollar of direct costs. (Remember this is not a percentage of sales, but a percentage of COST OF GOODS.) In other words, divide the Total General and Administrative Expense by the Total Cost of Goods Sold and the result will be the Overhead Rate, expressed as a percent.
In other words, once we have determined all of the direct costs in a job; labor, materials, equipment, we then must apply our Overhead Recovery rate of 50% in order to charge enough to recover all of our operating or administrative expenses.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

4 Trends to Watch in the Construction Industry

Business analysts are cautiously optimistic about the growth of the construction industry. They believe the industry has entered a realignment and renovation phase, which should produce increased profits for the companies able to keep up with changes.

Here are 4 trends they are watching.

Shift in retail construction
Online shopping and sales continue to increase, and are expected to grow for many years. This is causing the need for retail construction to shift, but not decrease. It is moving away from walk-in stores to regional distribution centers, warehouses and manufacturing centers. This is especially true for the grocery industry.

Amazon and Walmart have declared war on each other, and other grocery/retail companies are closely following their transformations. They are developing new ways to get product to customers – ways which will require new buildings and major refits of existing ones.

Green and energy efficient houses/buildings
The green movement in construction is here to stay. Even though it took hold faster in residential than in commercial, the trend toward eco-friendly, health conscious buildings is putting pressure on all contractors to offer clean and resource-efficient options to customers.
Clients’ demands and expectations for green solutions, options and products are creating changes and innovations in all trades. They may not take the options, but they are increasingly expecting to be offered choices.

Technology
The construction industry will increasingly see customers expecting tech – software and hardware – solutions to problems. Tech has significantly raised the bar for accountability, safety, quality, productivity, communication, transparency and on-time/on-budget project management.

One of the biggest trends in safety and productivity is in wearable tech. It includes: smart safety vests with GPS and emergency buttons, smart hard hats with virtual display visors that send and receive information, smart safety glasses with camera’s giving real-time feeds, jobsite reality devices to show/change design elements in the field and bionic suits.

Integrated project delivery
Integrated project delivery is changing the construction industry. The idea that collaboration is essential to the success of any project is not new. Experts knew it was cost, quality and time efficient. But, no one had a good system for making it happen.

For the first time, contractors finally have the tools to share information in real-time. They can immediately communicate up and down the supply chain, with customers, office to jobsite, project manager to foreman and contractor to sub-contractor.

The construction industry has been shifting and will continue to do so for many years. The industry is large, well established, conservative and slow to make changes. The companies that understand and adjust to these new trends will beat their competition.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

6 Questions to Answer Before Applying for Growth Capital

Your business is doing well and you are ready to grow. But, your cash flow does not support the expenditures you want to make. So, you need a bank loan. Before you fill out the paperwork here are 6 key questions to ask.

Can I qualify?

Many owners make the mistake of applying to see if they qualify, rather than figuring it out on their own. They want the bank to do the due diligence they should be doing. It is important to find out if you have a chance of qualifying for the loan before you apply.

Talk to the bank(s) and make sure you meet all the requirements. If you apply and get turned down it can hurt your credit. It also gives the impression you are a bad risk and may make it harder to borrow next time you try.

How much do I really need and how will it help?

Specifics, specifics, specifics – the more the better. How much cash do you actually need and how is it going to drive growth? Be ready to show the math, guesses do not count. Banks want to clearly see how you will leverage the money to increase revenue. They routinely turn down loans for operations which only support the status quo, rather than growth. Is the borrowed $1 driving $1 or is it driving $5?

What documents do I need?

This is a no-brainer, and yet it has been estimated that 3 in 5 loans never close because the business owners did not do all the paperwork. It is simple – find out what documents you need and have them ready before you apply.

What is my collateral really worth?

Owners are notorious for overestimating the worth of the business’s assets. They are shocked when the bank values them for much less. Find out what the bank’s guidelines are and adjust your request accordingly. Here is an example.

You want a loan for a $50,000 piece of equipment. You plan on borrowing the $50,000 using the equipment as collateral. But, the bank’s formula only allows lending on 65% of the value of the asset. How you are going to make up the $17,500 short fall, when the bank just offers you a $32,500 loan?

What is my repayment plan?

If you do not understand your financials (i.e. margins, revenue, profit and loss, cash flow) now is the time to learn. The bank wants to know how you plan to give them their money back. Good intentions, hopes and dreams do not count here.

Do the financial projection ahead of time, and in the format they want. Many banks focus on the monthly cash flow projections for loan repayment information. One of the standards is that your monthly cash flow should be 3 times greater than your monthly debt repayments.

How good are my personal and business credit scores? Do they need repaired?

The size of your business may dictate which score banks give more attention to. The smaller the company the more they focus on your personal financial situation (i.e. mortgage, credit card debt, student/car loans, late payment history) and credit score.

A lot of business owners do not realize the business has a credit score, and it should be regularly monitored. Do not let your loan application be denied because of something you did not know existed – something that has incomplete or wrong information.

One extra question – Why would you apply for a loan, and not do what you could to get it? The long term growth of any company depends on being well capitalized. Countless once thriving, profitable businesses have failed because of poorly funded and executed expansions.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

How to Start Strategic Planning

Many small business owners think that strategic planning is for larger companies, but they are mistaken. No matter what size a business is, it can benefit from a strategic plan. In fact, compared to larger companies, small business owners are in a good position.

They have greater control over the development and implementation of the strategy. They can assess its successes and failures easier, allowing them to make changes and pivot quicker. This allows them to have a greater impact on the profitability of their business, with fewer hassles and politics. It is a lot simpler to do a 3-point turn with a car, rather than a semi-truck.

But, there is a downside. Small business owners have fewer resources to draw from – less time, money, people, experience, and knowledge. Not having enough resources can make creating a plan more difficult. Most owners know they need a plan, but often do not know how or where to start.

The following 3 areas are good places to start.

Get a new attitude about learning

Owners are known for not being willing to take others’ advice. In the long run, this unwillingness to ask peoples’ opinions and learn from them hurts the success of the business. The best strategic thinkers will not substitute someone else’s judgment for their own, but they are willing to listen to and learn from them.

Also, effective planners understand that everyone makes mistakes. They can learn from theirs and not do them again. Ineffective planners make the same ones over and over expecting different results. Businesses fail every day because the owner would not acknowledge and correct his mistakes.

Understand the financials’ strengths and limitations

Usually, owners are the “I don’t look at the numbers, I go with my gut” guy or the “I’m a by-the-numbers, they don’t lie” guy. In the long term, neither is useful for the well-being of the company. The financials are an important planning and management tool, which should not be ignored or overly emphasized.

The successful strategist strikes a balance between relying too much on perceptions or the numbers. Using and understanding the numbers adds a much-needed dose of reality to the gut guy. While having a feel for the clients, product and employees will get the numbers guy out of his office and make him a more hands-on, better manager.

Seek out advisors

A confident owner asks others for help before the plan is created. He realizes he cannot know everything he needs to know, no one can. Today’s business world is too complicated for just one person to understand it. So, he seeks out others (i.e. peers, experts, employees, key people, vendors, customers) who have the knowledge and experience he does not have. He gathers data, ideas, and opinions, and uses them to reach his own conclusions.

Developing, implementing and following a good strategic plan can take time and effort. But, it is worth it – like most rewarding things in life. Once it is in place and working you will wonder why it took you so long to do it.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

What to Do If You Need Growth Capital

Congratulations on your success, all your hard work is paying off. You are doing well and want to expand. But, while your company is stable and profitable its cash flow will not support a large growth expenditure. You need to get a loan from the bank.

In this era of Shark Tank and all its offshoots, the traditional bank is still the lender of choice for most small business owners for growth capital. But, due to increased regulations, they are finding it difficult to secure loans. Veterans of the old process and rookies new to the game are both frustrated and confused by the current procedures.

There are 4 steps to applying for and getting an expansion loan – many small business owners are not good at any of them. However, you are going to have to get good at them, because the bank has the money and you have to follow their rules to get it.

1. Be realistic

It is a given in the banking industry that owners are unrealistic when valuing their companies. They see the application process as a way to fulfill their desires, hopes, and dreams (emotions), rather than a business transaction (logic). Most do not realize they are acting on emotion rather than logic. They believe they are being rational, but they are not.

Banks want realistic data and hard numbers based on revenue, profit, physical assets, receivables, current customers’ contracts and future customers’ letters of intent. They want the actual, not perceived, value of the business and its ability to pay the money back.

2. Do the homework

Learn to speak the language of banks – numbers. Do you understand your financials? Can you talk about margins, profit, debt-to-income ratio and overhead with authority? Do you know what servicing the debt means? What is your credit score? Is your customer base large enough?
Expecting the bank to give you money when you are not able to tell them exactly how you plan to pay it back is unrealistic and naïve. Talk to a loan specialist and get an idea of what a successful loan application requires. Do your homework before submitting the paperwork.

3. Have patience

Now you know – based on your realistic attitude and the homework you have done – what is required to successfully get a loan. If you have everything you need and are sure that you are ready to apply, then you can skip this step and go directly to number 4.
However, if you are like most owners you have found that you are not ready to apply right away. Your financial house has to be put into order first. You might need to pay down debt, increase your credit score, clean up an existing credit line, find more customers or decrease production costs. Patience, time and sticking to a corrective plan are the 3rd step for many businesses.

4. Follow their procedures

This step should be a no-brainer, and yet accountants, consultants, and bankers are baffled by how often owners are their own worst enemies. Up to a point it is understandable – the typical owner started his business so he could do things his way and not have to answer to other people. Unfortunately, this does not work with banks.

Do not let your ego (emotion) get the best of you and sabotage the loan process in the final step. You have done the other 3 steps and know what they want – give it to them. Completely fill out and submit the paperwork exactly as they want it. Arrive at the interview on time. Be polite, concise and professional.

Experienced business bankers have seen too many successful businesses fail because of poorly funded, thought out and executed expansions. Although it may not seem like it sometimes, responsible small business owners and bankers have the same goal – a growing, thriving, profitable company.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Use Goal Setting to Achieve Long Term Success

We all know companies who have had short term success. They do well for a while and then “suddenly” they are out of business. However, when you look closely at their circumstances, it is not sudden after all. Most collapse because there was no plan for sustainable success – long-term success is much harder to obtain than short term.

The way to achieve long term success is a subject people have talked about for centuries – along with the question, “Why do some people have it and others don’t?” There are a few ways small business owners have achieved success over the years that do not rely on goal setting. But, counting on pure dumb luck is not an effective business plan. Goal setting is the gold standard; it has stood the test of time.

Sometimes working toward your goals is satisfying, rewarding and worthwhile, while other times it is hard, time consuming and boring. But remember, successful people do things that unsuccessful people are not willing to do. Here are the 3 steps they use to achieve their long term goals.

1. Write a plan – A lot of people sabotage themselves at the very beginning of their search for success. Although it is illogical, the more they want something, the less likely they are to develop a plan to reach it. It is basic human nature – we think that good intentions, positive thinking and will power are enough to carry us through.

They are not enough, not even close. Thinking is not action, doing is action. We need to “do”, to work, our way to achievement. People with written plans are much more likely to complete their goals than those who do not have one.

2. Break it down – Once the plan is written, it should be broken down into manageable pieces. Each goal should be parsed into small, practical actions; otherwise, it is too uncontrollable and complex. When people do not have control, they feel frustrated, confused, and inadequate to the task, which leads to abandoning it.

For example, Kevin set the goal of “Make More Money.” It was a good goal, but impossible to achieve as written. How was he going to do it and where was he going to start (i.e. Increase sales, decrease production costs, lower overhead, cut labor, improve quality)? He worked with an outside expert to define and quantify the ideas into manageable, measurable daily, weekly and monthly tasks.

3. Build in consequences and rewards – Motivation is hard to sustain, which is why a lot of people struggle with meeting long-term goals. A good plan for achieving them builds in accountability measures or motivation – the carrot and the stick. People are much more likely to accomplish their goals when this happens.

After the plan is written and broken down into measurable tasks, it is important to add benchmarks. Benchmarks will let you know when and if you have reached your goals. Each benchmark should have a reward or consequence attached to it. If the mark is hit then the reward is given, if it is not the consequence is activated.
Involving others is very helpful to this process. People are more successful in reaching their goals when others know about them. Kevin and his coach created a system – when he reached a goal he spent Saturday morning with his family and when he did not reach a goal he spent Saturday morning at work. His family was a big motivating factor for him to stay on track.

The definition of success is a personal one. It is unique to each of us and only we can say if we have reached it. Unfortunately, most people say they have not attained it. As the saying goes, “There are basically two types of people. People who accomplish things, and people who claim to have accomplished things. The first group is less crowded.” (Mark Twain)

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

3 Ways to Achieve Success in Your Small Business

There are a lot of statistics out there about how often small businesses fail, and they do not always agree with each other. Depending on who is doing the computing the numbers range from 33% to 75% of small businesses fail within the first 5 years. Also, these numbers do not represent the companies who do not fail, but are still unsuccessful – they limp along for years barely profitable.

But, no matter the actual numbers, what we do know is that building a viable, profitable company is hard, and most people cannot do it. There are many reasons, some out of their control, for this. But, fortunately, the basics of building a solid business can be taught to anyone willing to learn and apply them.

Here are 3 ways to create a successful small business.

Understand the financials
Cash is king. If you run out of it and cannot pay your bills the business has failed. The majority of owners do not understand this simple idea – volume is not profit, nor does it guarantee a positive cash flow. A $5 million job shop can fail faster than a $2.5 million one if the owner does not understand how to manage his cash.

Understanding the financials and using the information (i.e. margins, profit/loss, break even, productivity and cash flow) to manage effectively is key to staying afloat. Making money was one of the reasons you went into business, as you did not start a charity instead. Therefore, why would you be unwilling to learn how to determine if you were really making it or not?

Be willing to manage effectively
Entrepreneurs can be creative, driven and hard-working (the good). They can also be short-sighted, insular and inflexible (the bad). They are usually stubborn, unwilling to learn and know-it-alls (the ugly). No one is a born a fully formed good manager – we all have our strengths and weaknesses that help and limit our ability to lead others.

It follows that no one is born a fully formed good employee either. Just as you must learn how to be a good manager, the typical person must learn how to be a good employee. They must be trained, managed, rewarded and disciplined. It is naïve and a miscalculation of human nature to expect people to be any different.

Create and maintain systems
One of the main reasons owners start their companies is because they do not want to follow other people’s rules or systems. They want to be their own boss and accountable to no one. It is also one of the main reasons they fail. They are so rules adverse they refuse to put even the most minimal of systems in place.

The trouble is that most people, including owners, require structure and order to get things done. If there are no formal, effective systems in place then people (partners, managers, foreman, employees) will cobble together informal, ineffective ones – you included.

The positives of an entrepreneurial spirit can turn into negatives over time. Especially if you do not understand that we all have to keep learning and evolving if we want to compete and prosper in a rapidly changing world. It does not seem so, but sometimes it is harder to stand still than to move forward. How many times have you said, or heard other people say, “I really don’t know why I didn’t do this sooner.”

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Business Model vs. Business Plan

Business owners are often confused about the difference between a Business Model and a Business Plan. Although they are related, there are also distinct differences, and both deserve serious consideration as part of the business’s Strategic Planning process.

First, let’s define Strategic Planning as – the process for setting goals, determining actions to achieve goals, and mobilizing resources to execute the planned actions. This sounds simple and appropriate; however, most small businesses don’t have a Strategic Plan. By default, businesses that do not develop and follow a Strategic Plan evolve over time rather than take control of their own future. As a result, these businesses generally underperform their potential and, all too often, do not survive. The Strategic Plan provides clarity of direction and a means of measuring the business’s degree of success; with no Strategic Plan the odds of success are dramatically diminished. The Strategic Plan embodies both the Business Model and the Business Plan. So, what is a Business Model, and what is a Business Plan?

A Business Model captures the key elements of the company’s plan for how the organization will create, deliver, and capture value, in economic, social, cultural or other contexts. For example, a traditional business model for a retail business might be to use a chain of brick-and-mortar stores with media advertising to generate revenue and profits. An alternate business model for retail could use an on-line B-to-B web-site with search engine optimization (SEO) to generate sales and a brick-and-mortar distribution warehouse for order fulfillment. Therefore, it is appropriate to think of the business model as a conceptual representation of how the company intends to do business; thus, the Business Model can be thought of as the skeleton and vital organs of the entity you know as your business.

A Business Plan is a formal statement of business goals, reasons they are attainable, and plans for reaching them. Think of the it as the muscles, connective tissue, and skin that overlay on the skeletal structure and vital organs represented by the Business Model; the Plan brings the Business Model to life. Business plans can be developed for a variety of audiences and may be externally or internally focused.

Externally focused plans express targets and goals that are important to external stakeholders (i.e. owners, investors, lenders, strategic partners, etc.) along with plans for achieving those targets and goals. The external plan normally covers the next 3 to 5 years, which is the time frame during which stakeholders would expect to realize a return on their investment.
Internally focused business plans express operational performance goals and specific action plans for achieving those goals thereby assuring accomplishment of the organization’s goals as represented in the “external” business plan. The internal plan provides company management with a plan for achieving the external stakeholder expectations. Included in the internal business plan should be the company’s operating budget. The internal plan can be as short as 1 year (annual budget), or can project several future years, but normally will only look 1 to 3 years into the future.

So the answer to the question about the difference between a Business Model and a Business Plan is that they are both part of an effective Strategic Planning process. The Business Model defines the business structure (what the company will look like and how it will operate). The Business Plan defines the expected operational results from effective utilization of the Business Model and effective execution of a set of action plans. Having an effective Strategic Plan is a very powerful business advantage that dramatically increases the odds of success. The lack of an effective Strategic Plan can lead to problems, chaos, and failure.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

Stop, Look, and Listen

Good parents know that part of their “job” is to teach their children how to navigate life’s risks and handle its responsibilities. One of the fundamental lessons is how to safely cross the road – stop, look and listen. This is a life lesson so basic that it applies to a lot more than just getting to the Starbucks across the street.

Good business owners know that part of their job is to prepare their company for growth – to minimize the risks, understand and accept the responsibilities, and provide a logical plan. When going to the next level they take time to position themselves for success by stopping, looking and listening.

Stop

A lot of owners are surprised to learn there are danger zones for small businesses when they expand. They only see growth as a positive step forward; not understanding that if not done correctly it’s actually high risk. Many successful companies have failed because they didn’t plan for the new problems, responsibilities and challenges which come with the next level.

They didn’t take the time to stop and think about what it really means. It requires improved management skills and an increased understanding of business issues. The management and personnel issues are more complicated. There’s an increase in tax and government regulations. Also, developing a working knowledge of the financials is vital.

Look

Look at where the company has been, is currently and where it’s going. Owners believe that what they did in the past got them to the current point of being able to expand and it will serve them well in the future. So, they think their good to go.

However, that’s not what usually happens. There’s a tipping point where the ignored problems of the past and present increase exponentially in the future. As a company grows the weaknesses become more pronounced and do more damage. A classic example is with finances.

If an owner didn’t develop an understanding of margins, profit and loss in the past, and doesn’t think he needs to learn it in the present, he may put himself out of business in the future by expanding. Financial ignorance has closed thousands of business during a growth phase – generating revenue isn’t making a profit and the more customers it has the faster a company can lose money.

Listen

The bigger a company grows the more people it needs for its success. Success isn’t a solo act and smart owners know it. They understand that growth requires them to shift from a one person management approach to a team one. They seek out others’ ideas, listen to them and are open to change.

Many owners are resistant to this step, believing they know better or it implies weakness to ask for help. However, this thinking is dangerous to a business, as no one person can be expected, by others or himself, to know everything.

Past success doesn’t guarantee future success – we all know people stuck in their glory days. Owners become stuck in their past successes when they don’t understand that growth in the business requires them to grow too. It’s important for both children and adults to acquire the ability to stop, look and listen.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

How to Finally Drain the Swamp

We have all heard the comment that “When you’re up to your chin in alligators, it’s hard to remember why you drained the swamp!” Why has that saying been so enduring? Could it be that we can all relate to being so overwhelmed by the demands of the day that we never accomplish the really important issues?

In his seminal book, First Things First, Stephen R. Covey published a diagram of the relationship between the Urgent and the Important. The Urgent AND Important (Quadrant I) represents the “alligators” in our swamp and they have a tendency to grow bigger and reproduce so that acting on the Urgent gets us nowhere but deeper in alligators.

But that is where most independent business owners live their lives – in the swamp of alligators. They arrive at their business each day and immediately dive headlong into the swamp. Somehow being “active” in problem-solving seems to give them purpose for being there. Unfortunately, that is a Reactive management style.

The drain at the bottom of the swamp represents the Important – the Proactive antidote to the Reactive management style. These are the issues that are Important but NOT Urgent (Quadrant II) and the reality is that all the important issues of life reside in Quadrant II.

Date Night with your spouse: Important but not Urgent. Chances are slim that your spouse would leave you because you canceled out on one date night.

Activities with your kids: Important but not Urgent. Your children won’t call Children’s Protective Services if you miss their ball game or dance recital.

Reading important literature or attending religious services: Important but not Urgent. Your religious leader will not call you to see if you had read your scripture during your quiet time.

Proactively planning and structuring your business to avoid problems and maximize profitability: Important but not Urgent. Your banker is not going to call you to ask you what your Break-Even Point is and if you’re meeting it or exceeding it. (Until you start missing your obligations to the bank.)

The paradox is that the only way to kill the alligators in Quadrant I is to drain the swamp by camping out in Quadrant II. Alligators can’t live without the water in the swamp, and you can’t kill them by jumping into the water with them! They will eat you alive!

Similarly, the only way to get control of a business or a life is to focus on the Important issues in Quadrant II that are not generally considered Urgent. However, putting a sense of Urgency on these Important issues is often the difference between success and failure in business.

These are the Important Steps to Take

Purpose, Vision, Mission, Core Values
Business Plan, Marketing Plan, Operational Plan
Organizational Structure
Incentive Plans to spur Productivity
Innovation to meet changing market needs
Developing your Unique Value Proposition to Supercharge your Marketing
Personal Health and Wellness
“Golden Hours” to Reflect on your Business and Life

The biggest obstacle to taking these important steps is becoming too comfortable fighting fires and trying to kill the alligators. Breaking old habits is difficult and trial and error is the most expensive route to a better place. Fortunately there are proven management tools that can clear away the underbrush and give business owners the leverage to finally drain their swamp and take their life back running a profitable business.

At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information:

From Behind the Desk: Where Is Your Business Roadmap?

As business owners, we sometimes feel that we have a pretty clear vision of where we want to take our respective businesses. Unfortunately, for the most part, it is usually all in our heads. We attempt to communicate it to our employees, and actually feel for the most part, that we have done a pretty good job with it. In truth, many times that is simply not the case. Sometimes our vision can change, depending on the many things we find that are going on in our business; things like increasing or decreasing revenues, gross margins and net profits.

There are a number of other elements which we must consider, beyond just our vision, that actually help form the “business roadmap”. Many times we ask our clients to share their “business road map” otherwise known as their business plan or strategic plan, with us. What we find for the most part, is if there is actually a written document, it was created for the express purpose of sharing with a financial institution in order to obtain a line of credit, equipment or SBA loan. When the client pulls it out of the drawer, or takes it off the shelf, they have to blow the dust off of it. This is a very good indicator that the last time it was looked at or used was soon after initial preparation.

Whether you call it a business plan or a strategic plan doesn’t make much difference. What does matter is how you put it together and how you utilize and update it. Though most of the ones we review are very professionally prepared documents, with very good charts, graphs, demographics, competitive and market share analyses, they lack any of the other necessary components to make them function as a “living, breathing tool for use in our business”.

What the roadmap must do, in addition to conveying ownerships “vision”, is that it must also covey “focus and direction”. It must describe precisely how we are going to achieve our vision, and on what timeline and at what margins and net profitability.

Probably the simplest analogy might be to imagine that we were going to take a trip. Would we just go get in the car and start driving, without first deciding on a destination? Oddly enough, that is really the way many business operate today. If you fail to pick a destination, you can actually wind up anywhere.

Having the “Vision, Focus and Direction” in writing can provide many benefits for the business owner. It can be updated and revised as market conditions or other situations change. It can also be shared with the core management team and help make certain that your entire team is singularly focused and that everyone on the team is pulling in the same direction.

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