Preserving Cash in Uncertain Times

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I’ve been watching the news and talking with colleagues and clients and wanted to share some strategies with you for preserving cash in the short term that may come in handy in the long term. Here are 12 strategies I recommend:

  1. Research refinance options for any high interest loans and ask for some or all of the closing costs to be waived.
  2. The Small Business Administration has created a program to fast track low interest loans under its Economic Injury Disaster Loan, visit: www.sba.gov/disaster
  3. Reach out to your lenders about deferring payments, or reducing to interest only payments, on debt.
  4. Ask your landlord if you can pay rent at the end of the month (in arrears) for the next 90 days.
  5. Ask your landlord about reducing or deferring Common Area Maintenance (CAM) charges for the next 90 days.
  6. Call clients to see who can pay faster/earlier.
  7. Call vendors to see if you can get extended terms or defer some portion of invoices to a later date.
  8. Ask vendors to take payment on a company credit card. Ask the vendor to charge the amount just after the credit card statement drop date. This can defer a payment from 15-45 days if timed correctly.
  9. Reach out to your credit card company to ask for reduced or zero interest for the next 90-120 days.
  10. Bill customers as quickly as possible.
  11. Consider whether you have any customers who might pay now for future delivery of services.
  12. Defer your personal tax return filing and payment to July 15th. The IRS issued a recent ruling that is allowing a delayed 2019 tax filing until this date. However, if you are owed a refund, file your return now to get the funds.

Congress is in the process of an enacting special legislation to provide relief for businesses and individuals called the “CARES Act” which is in the Senate at this time. Click on this link for a summary of some items in the Act.

If you think of other ideas, I’d love to hear them! My belief is that we will come out of this stronger and definitely together. Scientists around the world will find the path through for our collective well-being.

Stay well! And if you have any questions, concerns or just want someone to talk through your ideas, don’t hesitate to reach out.

Keep the Boat Afloat: Strategies for Securing Your Finances Through A Global Pandemic Storm

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By Michael Iverson

We are in an unprecedented time – one that is impacting most businesses in the United States and the world. And there’s no telling what the fallout will look like or even how long social distancing and company shutdowns will continue.

As a numbers coach for my business clients, many of them are asking for advice and guidance during this volatile and unpredictable time. I assure them that as a business owner or leader, a number of financial factors remain under their control. Here’s what I’m emphasizing:

Lead where you can: Communicate and Be Flexible

Change and uncertainty are all around us right now: How long shutdowns and isolating will last, the long-term macro- and micro-economic impact of this crisis on businesses, families, and communities around the world, or whether people will regret buying a year’s worth of toilet paper are unknown. We have little to no control over most of this.

What you can control is how you react.

No one knows exactly what to do – and that’s OK. Your strategic decisions can keep your company afloat through this crisis.

Communication: Transparent and honest communication isn’t a new concept, but it is more important now than ever. Explain to employees, customers, and other stakeholders that, like everyone else, your business is experiencing the ramifications of the coronavirus. Explain your challenges and your high-level strategy to overcome them. Everyone is more likely to empathize if you communicate honestly and authentically. The health and safety of your employees is the most important priority.

Keep the communication flowing – ask where they’re struggling the most, and where you can help. Offer a free brainstorming session. Remember – your goal is to maintain the relationship so it can grow after this crisis passes.

Flexibility:  As you’re asking for flexibility from your clients and employees, consider offering some in return. I always encourage my clients to have a 3- to 6-month cash reserve. Times like these are why you held that money. Offer customers a modified payment plan or if you can relax payment terms for products or services like ongoing license support or maintenance.

For employees, be flexible with time, productivity and deliverable expectations. People’s daily lives have been upended, from homeschooling and supervising children to caring for sick family members. And for the most part, they want to do their best for you while figuring out their situation. Consider staggered or flexible work schedules. Relax deliverable dates where possible.

If you have employees with a lighter workload during this time, give them the opportunity to shine when others are overwhelmed. Maybe ask for a volunteer to provide updated COVID-19 information both medical and financial. Dedicate someone to helping employees take advantage of cost- and time-saving benefits such as telemedicine, wellness programs, and EAP offerings.

But also remember as crucial as communication is, too much information, repeating the same message with minor tweaks, or asking employees to be constantly online or send hourly updates are all examples of actions that could provoke burnout and deeper anxiety. Remember, we’re all getting corona-related messages from companies we haven’t heard from in years. We’re all figuring out this out together. Don’t unnecessarily add to the cacophony.

Pivoting to new operational models

With office and business closures, we’ve shifted to working almost entirely online. Engage customers and prospects virtually through platforms like WeChat, Zoom, Skype. For those with whom you haven’t engaged with this way, the novelty may actually open doors. Use email lists and social media analytics to reach new leads. Try apps like Trello or Monday or dig out that intranet project you’ve been putting off, to organize and detail projects so everyone is working together.

Prioritize initiatives that require less capital, less risk, and have a proven positive impact on cash flow. It is possible to continue to operate debt free and maintain access to capital. For more cash preservation guidance, check out the “Preserving Cash in Uncertain Times” article I published last week.

If your company’s situation is looking dire and you’re considering layoffs, consider looking into a four- or even three-day work week to reduce costs. If employees are sitting on the bench due to loss of client work or decrease in demand, ask if they could use their PTO now or agree to work half time or take unpaid leave. Look into emerging government programs to cover salaries. The Cares Act is landmark legislation passed on March that has several key programs:

  • Paycheck Protection Program Loan with a forgiveness provision
  • Economic Injury Disaster Loan program as part of the Small Business Administration
  • Employer 6.2% payroll tax deferral program
  • The Unemployment supplemental insurance program

The following link provides more detail on the programs and what is offered:  COVID-Bill-3-Summary

If you need to consider across-the-board pay cuts, keep them in direct relation to job positions. Start first with voluntary cuts. Some employees are looking for ways to help others who can’t afford a pay cut. For example, the CEO should lead by example and take the largest pay cut, the highest paid employees take the next highest cut, and so on down the line.

Finally, if you haven’t already, postpone all travel and make every effort to allow employees to work from home.
Negotiate with vendors, who are undoubtedly making changes of their own. Look for extraneous expenses to eliminate, and lower cost alternatives to conventional advertising. Look into whether your insurance coverage can help. Leave no stone unturned when looking at ways to conserve cash.

Learn, grow, breathe. We’ll get through this!

It may be the last thing you want to think about, but now is the time to take note of practices that will prevent repeating mistakes in the future.

Take notes. If you didn’t have a solid disaster recovery plan ready this time, prepare one for the future using knowledge you acquired during the COVID-19 pandemic.

And no matter how brilliant and detailed your plan is, expect things to continue to go awry. When this happens, stop, take a few deep breaths, remember your training, focus on the end goal, and make the most rational decisions possible.

If you’re looking for more guidance, I’m happy to talk. Give me a call at (404) 353-2148 or email me. I’m here to help.

With hope, gratitude, and cooperation, it won’t be long before we turn our TVs, smart phones, and laptops on and see nary a mention of pandemics.  Until then, stay safe and be well!

If You’re Happy and You Know It. . . You Likely Have Good Friends

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The key to happiness (along with the location of the Fountain of Youth) has eluded humans since the beginning of time.

Some keys to happiness have now been uncovered as a result of one of the world’s largest longitudinal studies of people’s health and happiness. Launched by Harvard University in 1938, the study followed then-college sophomores into old age. With fewer than 20 of the original subjects still alive, the results were released in 2015.

The study subjects were in several groups. The first consisted of sophomore students at Harvard, who graduated during WWII. The second group consisted of boys from some of the poorest neighborhoods in Boston. Additional groups were added over the years, including some of the men’s spouses and children.

The study had three primary takeaways about the keys to happiness, as outlined below:

  1. The most consistent factor in the lives of happy and healthy people is forming and maintaining close relationships with others. People who have meaningful connections to family, friends and their community tend to be healthier, so they are likely to live longer than those who do not.
  2. The quality of relationships is much more important than the quantity. Having a few good, supportive, close friends is much better than having a plethora of acquaintances or shallow relationships. And relationships that are full of conflict are not healthy. Robert Waldinger, a psychiatrist and professor at Harvard Medical School told The Harvard Gazette, “Good, warm and close relationships…have the ability to buffer us from some of the slings and arrows of getting old.”
  3. Good relationships are good for your brain. In addition to being good for physical and emotional health, the study also shows that people with meaningful relationships tend to have sharper and longer memories.

To have positive and close relationships, the article suggests trading some screen time for “people time,” and working on existing relationships by trying a new activity. Something as simple as taking walks together can revitalize a relationship. Another suggestion is to contact a friend or a relative with whom you have lost touch: reconnecting with people from the past is often very emotionally rewarding.

Virginia Tech gerontologist Dr. Rosemary Blieszner provides advice about making new friends: “Be sure to take the time to get to know one other. Share some personal information gradually, as you get to know each other. Find activities you both enjoy, and be sure to let the other person know you’re interested in getting together again.”

Advancements in medicine and science are enabling people to live longer and longer. The key to making the most of our longer lives is learning how to be as emotionally, mentally, and physically healthy as possible during these bonus years.

Don’t Waste Time in Bad Meetings!

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Everyone has them, but boy can they be painful.  No, I’m not talking about your annual physical (a worthwhile use of time!).  I’m talking about meetings.

According to Harvard Business Review, the average executive spends 23 hours per week in meetings. 23 HOURS A WEEK! That is just nuts. It’s not that meetings are a complete waste of time; ideas are conceived and problems are solved in meetings. But most meetings are not run efficiently. They waste a substantial amount of time. And we all know time is finite, and time is money.

Short, productive meetings aren’t a pipe dream. Here are a few basic steps to making the most of every minute:

  1. Each meeting should have a clear objective. The meeting leader must state the objective at the beginning of the meeting.
  2. The only people who should be at a meeting are the ones who are needed there.  You don’t need anyone to “observe” as a “stakeholder.”  Each person present should be integral to reaching the goal of the meeting.
  3. Require an agenda – even if it’s rough – in advance of the meeting.  Familiarize yourself with material that is pertinent to the meeting and ask others to do the same.
  4. Begin the meeting by discussing the most important issue.  If nothing else is accomplished, this will be it. List each item in order, and include the time allotted for each.  Post the agenda somewhere for all to see during the meeting.
  5. Start on time and wait for no one.  Latecomers will get the picture, and everyone else will be appreciative. People will show up (on time) to your meetings in the future, because they know exactly what to expect.
  6. Ban technology. No, you aren’t the parent, but it’s your meeting. Multi-tasking doesn’t work. Most people won’t like it, but you can bet they won’t be distracted.
  7. Stay focused and on track.  Chasing squirrels, as a friend of mine likes to say, is a big time-waster. Do not allow people to veer off on other topics, no matter how important they are, or how “quickly” they can be covered.
  8. Be sure that all attendees understand the plan and know exactly what action they need to take post-meeting.
  9. End on time.  This is crucial.  People will show up to future meetings because they know precisely when it begins and ends. The ideal meeting length is 30 minutes, but no meeting should surpass 60 minutes. After that, you lose people.  If they don’t find a physical way out then they are planning what to have for dinner. A meeting lasting longer than 60 minutes must have breaks, typically 10 to 15 minutes.
  10. Ensure that a follow-up email is sent within 24 hours.  Include all important decisions that were made.  Reiterate the tasks assigned to each person.  Even when all objectives are met in record time, the whole thing is pointless if there’s no follow-through.

The next three suggestions are unconventional ideas (inspired during an unproductive meeting, perhaps?) from Scoro. Different is good; it wakes people up and adds energy to the room.

  • Meet outside the office—a picnic bench, park, coffee shop, wherever. A change of scenery wakes people up and seems to improve moods.
  • Have a stand up meeting. Seriously. Watch the extraneous talking come to an abrupt halt, and the ideas flow.
  • Be creative. Food manufacturer Plum Organics has a creative/brainstorming meeting during which they color in coloring books. According to the company’s innovation director, Jen Brush, “It’s proven that coloring during a meeting helps promote active listening, and is more beneficial than multitasking on something like email.”

It’s time to wrap up this post — any more will be a waste of time.

Good luck with your next meeting!

Selling via email? Absolutely – but use these tips for success

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Communicating with sales targets via email was probably not an option for your parents’ generation of workers. Yet email is a crucial tool for today’s salesperson. But these days, as we know too well, it’s impossible to read all incoming emails. So only “smart” emails will make it through your prospects’ filter.

Here are a few tips on how to craft and send emails that actually get read:

Best time to send:  According to Mailchimp, most emails are opened at the end of the workday, between 2:00 and 5:00 p.m. So, send emails in the afternoon to be first in line. A study by Experian shows that the most emails are read on Tuesdays. Why? Maybe because the Monday rush has passed. Maybe people are moving toward a four-day work week, whether their companies approve or not. Whatever is happening, send your most important sales emails on Tuesdays if possible.

Choose subject lines carefully:  Studies also show that the subject line makes or breaks an email: 35 percent of people decide whether to open an email based on the subject line. So a “cold call” email has got to have a short, interest-catching subject line.  Email open rates drop by 60% when the subject line is more than three words, so keep it short and concise.

    • There are also certain words in a subject line that increase the likelihood of it being opened. It may seem unoriginal, but words such as “alert,” “new,” and “free delivery” in the subject line (not only those words, of course) seem to pique recipients’ interest. Of course, the subject line should match the email content. Interestingly, words like “report” and “learn” in the subject line are likely to get your email escorted to the trash bin – perhaps because they allude to committing time that people just don’t have!

Content that inspires action:  Now we come to the content inside the email. The message should be friendly, concise, and action-triggering. It should have helpful information: why your product or service is better, what you want the recipient to know, what you want them to do next. People are busy; if it isn’t relevant to the receiver at the time, it’s clutter, no matter how fabulous you are. Give them a reason to reply!

So, send sales emails – but send smart sales emails. And think before you send each one. The last thing you want to do is flood someone’s inbox until your name equals “Junk Mail” in their mind.

Keep Your Finger on the Pulse of Your Business

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There are plenty of ways to measure the financial success of your business: profit margins and revenue growth, for instance.  But do the old standby measures give you the whole picture? It’s never too early or too late to try out new ways of analyzing the financial health of your business.

I recently came across a 2017 Inc. magazine article written by entrepreneur and author Norm Brodsky. In “Pencil Power” he suggests an assessment method that would have been called “old fashioned” in the past, but today might be termed “retro.”  It involves—brace yourself—a pencil and paper.  (Yep, I’m coming back to the same pencil and paper I mentioned in a blog post a few months ago.)  Brodsky believes that tracking monthly sales and gross margins by hand is especially beneficial to new, or relatively new, business owners.

He says the practice will improve young businesses’ chances of success 100 times over:

“By writing the numbers down and doing the calculations yourself, you begin to have a feel for the relationships between them. Later on, when other people are reporting numbers to you, you’ll be better able to recognize when something’s wrong.”

Brodsky recommends a simple exercise to try at the end of each month: write down sales, cost of goods, gross profit, and gross margin of each product for both the month and year-to-date. Then write down the same information for each customer.  This is a quick way to see where you are saving money and where you aren’t.

If your business is already doing a good job tracking these metrics, there might be others that could shine light on an area that’s erratic or negatively trending. Try writing down monthly inventory holding costs or Accounts Payable and Accounts Receivable totals. Maybe some cash flow metrics need attention.

It’s a painless, 30-minute exercise that just might surprise you by exposing a weak or strong area of your business that’s been hiding in the dark. Add it to your evaluation and decision-making arsenal. I suspect you’ll find it insightful.

Let us know if we can help you track your metrics.

Numbers Coach Helps Medical Company Acquire a Healthier Bottom Line

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What are the best ways to grow a company?  You could increase transactions, raise prices, or launch a new marketing campaign.  Sometimes, however, a merger or acquisition is the best strategy a company may adopt for rapid growth.
Choice Care began looking for companies that they could purchase to accelerate its growth plans. However, they knew they would need the voice of experience to help guide their decision, so they turned to the Numbers Coach (“NC”) for help. 

The Company

Choice Care Occupational Medicine and Orthopaedics(“CCI”) was founded by Dr. Ish Khan to develop a 21st Century model which blends the two specialties of occupational medicine and orthopaedics. His unique program is the only program of its kind in Georgia and has proven to greatly enhance the quality of patients’ medical care while generating dramatic cost savings.  CCI grew to five locations in the metro Atlanta area .

The Situation

In 2013, Dr. Khan and his team were approached by a company that wanted to expand its presence in the Southeast.  They were looking for a strategic acquisition that would make it a major player in CCI’s market.  A letter of intent with an offer price was provided to Dr. Khan, who accepted the offer.

The Solution: Trillium Financial’s M&A Support Services

NC’s, Mike Iverson, had been providing financial leadership services to CCI since 2012.  For the due diligence process that CCI was about to embark upon, Mike served in a key role facilitating and coordinating financial due diligence activities.  In addition, the ongoing financial management tools implemented by NC as part of it’s financial leadership services helped the organization focus on bottom line results during the due diligence and negotiation phase of the transaction.

The Results

NC was able to efficiently and effectively pull together the required financial and non-financial information to meet the due diligence deadlines.  NC’s comprehensive and methodical approach to measuring and reporting financial results helped ensure the information was provided for all phases of the transaction.

According to Dr. Khan, “Mike has been an integral part of our team over the years.  His solid understanding of our business and its needs for financial reporting, combined with his disciplined approach were important factors in positioning CCI for a successful exit.  I cannot imagine having to go through the acquisition process without Mike.  He was instrumental in pulling mountains of data in a timely fashion.”

How can the Numbers Coach help your business acquire a healthier bottom line?  Contact us to discuss.  

3 Things Every Business Owner Should Know About Marketing

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#1 What Is Marketing?

This is a question that can inspire lengthy discourse and an entire day’s worth of discussion in Marketing 101 courses around the world. Many consider marketing to be the art and science of positioning your business and your product or service in the marketplace, creating a brand identity, and promoting awareness. I wish that I could get all of the academics to agree on my simple definition: “marketing is all the things a business does to create sales opportunities.”  It really is that simple.

Some people think that marketing is limited to those initiatives that you spend money on—advertising, websites, brochures, direct mail, public relations, and signage. Truthfully, all of these elements should fall under the umbrella of “marketing communications.”

While these are essential components of a complete marketing program, of much more importance are the marketing planning activities that come well before these programs are implemented. For example, some essential planning activities include:

  • Developing a value proposition and knowing if/how it changes by customer segment
  • Knowing your target audience—those customers most likely to buy your product or service
  • Creating a profile of your ideal customer that includes prospects’ habits, demographics, personality traits, and their wants and needs
  • Analyzing competitive strengths and weaknesses
  • Selecting the right channels through which to deliver a unified message

I can go on and on here, but the key point is that like anything else, when you do your homework before jumping into action, you’re more likely to generate the results—and return—you’re looking for.

Hint: companies that try to offer something for everyone often end up selling little to few.

#2 What Does a New Customer Cost?

Believe it or not, I come across very few businesses that track this metric, and quite frankly, it’s very important as well as easy to measure. You can calculate the cost of a new customer by totaling all of your marketing spending and then dividing that number by the number of new customers acquired. When you do this, you understand why many businesses fear the advertising man or marketing consultant because this number clearly shows that advertising doesn’t pay. Acquiring a new customer is far more costly (estimates range from a factor of five to a factor of 10) than keeping and advancing the relationships you already have.

Hint:  If you’re selling to customers one time only and you have not defined other revenue streams, it’s much more difficult to get a positive return on your promotional investments.


#3 What Is a New Customer Worth?

I’m not talking about how much profit you generate from the average customer each time he or she chooses to do business with you. Instead, I’m referring to the lifetime value of a customer. This metric is much more difficult to measure, or even to estimate. Why; because it requires very good tracking of individual customers.

Whether or not you are able to track specific customer visits and spending, the nugget of wisdom embedded in the notion of customer relationships is that building customer loyalty is valuable. There is a very strong correlation between long-term business success and long-term customer relationships. Successful marketing strategies nurture every stage of the customer lifecycle—from acquiring new customers to increasing loyalty to up-selling, cross-selling, and advancing relationships to increase customer lifetime value.

Hint: I recently received a $25 gift card from Starbucks for being a good customer. How did they know I was a good customer? They track how often I visit and how much I spend, since I put most of my purchases on a prepaid debit card. How much do you think that gift improved my loyalty to Starbucks? And what did that card really cost them?

Do You Know Your ROCE?

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How Measuring Your Return on Capital Employed is Critical for Financial Health

There are so many ways to measure a company’s financial success: profit margin, return on equity, and return on invested capital.

Return On Capital Employed (ROCE) is a lesser known but equally important financial indicator. ROCE is especially useful for evaluating your company’s macro level financials or other companies to invest in. It’s essential because it goes beyond simple profit margins to specifically assess how well a company runs, conducts its business, and returns value to investors.

ROCE is the total of a firm’s assets and revenues minus current liabilities. The ROCE ratio is simple:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT)/Capital Employed

The higher the result of the formula, the more efficiently a company is utilizing its capital. If a company’s ROCE has gone up since last year or in the last few years, it indicates a company is going in the right direction. At a minimum, ROCE should exceed the cost of capital (financing costs), or the company can find itself in a bad financial state.

ROCE is especially useful in comparing how different companies in the same industry leverage their capital, particularly in capital-intense industries like energy, auto, and telecommunications that habitually hold a large amount of debt.

Don’t confuse ROCE with ROE (return on equity), even though both are profitability ratios that measure a company’s profitability as related to funds invested. ROE takes profits generated from shareholders’ equity into consideration, as opposed to ROCE, which uses all capital employed including the company’s debt.

ROCE percentage is one of the tools for judging the performance of managers and how effectively they are running a business. It’s a good idea to look at the industry average and the ROCE of competing companies.  The ROCE percentage is one of the few metrics that does allow you to compare across industries and within your industry.

If employed capital is not given in financial statement notes, it can be calculated by subtracting current liabilities from total assets. Watch for poor quality profits, such as the sale of expensive equipment that can’t be repeated regularly, as these can create an artificially high ROCE. Other factors such as leasing versus purchasing equipment can also lead to a slightly higher ROCE.

Despite the value of evaluating a company’s ROCE, it should not be the only factor used for an accurate assessment of financial stability; other probability ratios certainly contribute to the whole picture.  However, knowing your ROCE percentage is important metric for a business owner to keep track.  Your ROCE percentage provides the business owner the return they are getting on their investment in the company.

If you want to learn your ROCE percentage, feel free to reach out to Mike to get a free template at Mike@trilliumfinancial.com.

Small Business Matters: “The Importance of Financial Management”

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In this episode of the “Small Business Matters” podcast, Numbers Coach Mike Iverson discusses the importance of careful financial management for the long-term survival of your business:

Questions You Should Ask Every Potential Hire

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by Michael Iverson

Interviewing job candidates can be a task dreaded by entrepreneurs.  Why?  Some have nagging doubts because of one disappointing hire.  Others don’t have patience for what they perceive to be a long, drawn-out process that may end in a compromise rather than a perfect fit.

Here are six interview questions that can help you improve your interview process.  These are the recommendations of a variety of Human Resource professionals from industry and recruitment agencies. The questions are intended to help you learn about the attitudes and thought processes of candidates, as well as the likelihood of a cultural fit with your business.  (Of course, they would have to be supplemented with questions specific to the functions of the position you seek to fill.)

  1. Why did you get into this industry/profession? This question is a good starting point in terms of understanding the candidate’s values and level of commitment to (and affinity for) your line of work.  Some very talented candidates want to plug in their skill sets to the best-paying opportunity available.  Typically, their responses to this question lack the conviction of someone who has always wanted to be in your line of work.  There should be genuine excitement about the prospect of working for you.  If it’s not evident, take a pass.
  2. Tell me about your experience dealing with unhappy customers. Whether the customer is external or internal, every member of an organization is responsible for meeting customer needs.   This question gives the prospective employee an opportunity to tell you how he or she turned lemons into lemonade.  Problem-solving skills and lessons learned should be your key takeaways from the interviewee’s response.
  3. Why are you leaving your current position? The answer to this question helps you understand the candidate’s mindset regarding career change.  You might get the sense a candidate is always looking for greener pastures.  That could be an employee unlikely to find contentment.  On the other hand, you may find an employee whose skills are under-utilized at present, or one who has been unable to progress at the current workplace through no fault of their own.
  4. Tell me about the ideal position for you. This request is open-ended for the purpose of giving the candidate a chance to express, in as much detail as he or she is willing to provide, what would make the candidate happy.  The response is likely to include a job title, expectations about daily or weekly duties, the extent of supervision deemed necessary or desirable, a salary and a description of company culture.  All this information can help you assess whether there is a likely fit.
  5. How much do you know about our company? Has the candidate given serious consideration about the prospect of working for your company?  This is a chance for the prospective employee to show you how well he or she prepared for the interview.  A lack of preparation would suggest either a low-level of interest or a lack of initiative.  In either case, there is probably a better candidate for the position.  In contrast, a candidate who knows a good deal about your company may be a keeper.
  6. Describe your best boss and explain why the relationship worked. Describe your worst boss and explain why the relationship didn’t work. The answer is likely to provide useful insights about the candidate’s personality, as well as the candidate’s maturity level and temperament.  You should get a strong sense about whether this is a person you like and how well they are likely to fit in with co-workers.

 

How this “J” Can Help You Make Strategic Decisions Easier

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by Tim Fulton, Small Business Matters

How often do you get “stuck” on a big strategic decision? If you are like many small business owners, the answer is “too often”. It may be a key employee hire, a capital decision, the purchase of a large fixed asset, or may be a decision to exit the business. None of these are easy decisions and easy to get paralysed in making the final call.

One of the best tools I have found for making tough strategic decisions is the “J Curve”. A popular blog for mid-size businesses, ShortTrack CEO, said the following about J Curves:

“The process of identifying, prioritizing, and managing J Curves is the most important determinant of entrepreneurial success.”

By definition, a J Curve investment is any strategic decision to spend money today for a benefit tomorrow. Any hiring decision is a J Curve. Any significant new customer is a J Curve. Any major allocation of capital resources is a J Curve. A marketing decision such as the offering of a new product or expansion into a new market is a J Curve. The list goes on…

Here are the 3 phases of the J Curve:

  1. The first phase of the J Curve is the “investment. How much will we need to spend in time or money on this investment? If it’s a new piece of equipment; this would include the cost of the new asset, set-up and training time, and any costs associated with ramping up the new equipment.
  2. The second phase of the J Curve is “catch up”. We have now moved based the bottom of the curve and we are trying to move towards break-even as quickly as possible. We again measure this phase in time and money. If it’s a new hire, the employee has completed his/her orientation and training and now is moving towards achieving the results we have set expectations for this new employee.
  3. The third phase of the J Curve is “blue sky”. We have moved past break-even on our investment and we are now moving towards achieving a maximum return on investment (ROI) on this big decision. The new sales rep starts making big sales. The new customer starts placing sizeable orders. The new piece of equipment has doubled our production capacity.

There are several important rules for managing J Curves:

  • Measure the depth and width of the valley. It’s typically measured in either time or money or both. My experience is that we very commonly underestimate both of these as they relate to the decision. We expect the new sales rep to deliver new customers in three months and it takes six months. We anticipate the new customer to place an initial order of $100K and instead we get $50K.
  • Do not become emotionally attached to your J Curve. You may need to abandon it at some point in time. Your newly hired CFO has grossly overstated his qualifications for the job. Are you prepared to wait a year to see him grow into the position or cut him loose and start over?
  • Watch the number of J Curves you have at any given time. The average for small business executives is 5-7 at any given moment. My guess is that if I sat down at the desk of any of my clients I would find at least that many strategic decisions in the making. Any more than that is problematic. Any less than that is a cause for concern as well. I suggest you keep a J Curve register on your desk, which can be a legal pad with a list of your current J Curves just to keep score. What is the current status of each one?
  • Is there a plan for moving from Phase 1 to Phase 3 for each J Curve? There needs to be a unique course of action for moving efficiently thru each phase.
  • Watch out for “W” curves. You have reached Phase 3 and all of a sudden you find yourself back at Phase 1. What happened?

It’s time to get “unstuck” on your big strategic decisions. Thinking of each one as a J Curve is a great first step. You now also have a new vocabulary in which to think of these decisions and discuss with your key executives. Good luck!