St. Louis Cardinals and Dalai Lama
Monday, October 30, 2006
What do they have in common?A similar view of adversity.The Dalai Lama says that we ought to be grateful to those who cause us the greatest difficulty for they offer us the greatest opportunity to learn. The World Champion St. Louis Cardinals demonstrated that the Dalai Lama's philosophy extends to situations as well as people. The Cardinals could have bemoaned a year filled with injuries of key players. Instead they chose to find a way to succeed despite the challenges they faced. Their commitment to performing to the best of their ability carried them to the pinnacle of their profession.How adept is your organization at weathering difficult times? If you're not sure, you may want to look at how your organization is challenging itself. I'm not a proponent of self-inflicted wounds so I'm not suggesting that you create adversity for yourselves. Instead, challenge your organization with stretch goals; then be happy with the gains your employees achieve as long as they are performing to the best of their abilities and learning.It's counter-intuitive, but stretch goals combined with a celebration of whatever gains are made can prepare your organization to deal with adversity. If there are specific topics you'd like me to address, please email your suggestions to dale@furtwengler.com.
Vendor Price Increases
Monday, October 23, 2006
Are you driving the increases?More often than you might think.My consultant friends are going to be rolling in the aisles over this blog. They've dubbed me "the person responsible for inflation." Why? I coach clients on how to be better compensated for the value they provide - I help them raise their prices. In this blog, I'm going to help you minimize the price increases from your vendors.Over the years, I've seen companies ignoring their vendor's payment terms or, worse yet, dictating those terms to them. Counter-intuitive thinking requires us to look at things differently, so let's put you in the shoes of the vendor to see how you'd react.Your customer buys $10,000 a month from you. You receive a notice from them saying that they are no longer going to pay in 30 days; they're going to pay every 45 days. That costs you $687 a year in additional interest. Your customer has effectively reduced your price by making you pay the additional interest. How will you respond?Most people build the interest into the next price increase. In this case, the price increase would have to be .57%, $687 interest/$120,000 annual sales. Are you going to raise prices .57%? Not if you're like most people, you're going to round to 1%. That's almost twice your interest cost! Yet, many of your customers won't consider it worth their time to look for another vendor over a 1% increase. In essence, any savings your customer expected is lost to the new price increase.
It's counter-intuitive, but honoring your vendor's payment terms can save you money.
If there are topics you'd like me to address, please email me at dale@furtwengler.com.
Differentiation
Monday, October 16, 2006
Why is it so difficult to differentiate ourselves from our competitors?We're looking in the wrong places.Often when I talk to clients about differentiating their offerings their eyes glaze over. Why? They don't know how to tackle the issue. Here's a simple technique that will help you differentiate yourself from your competitors. It's called the "annoying customer" approach.Look at the things that your customers do that irritate you. It could be product returns, slow pay, continuously pushing for more concessions. Whatever they do that annoys you is a reflection of what you're doing to annoy them. Let me give you an example.One of my construction clients was experiencing slow pay. We looked at each delinquency and found that 80% of them related to one situation - the customer's foreman's refusal to sign change orders. My client contributed to the problem by making the requested changes without a written change order, then billing for those changes. In essence, each bill was an unpleasant surprise for the customer.Our solution was to send a two paragraph fax to the corporate office stating:- the changes requested
- the cost of the changes requested
- a statement saying that we would proceed with the changes unless they stopped us
This simple change not only eliminated all of the over 60-day delinquencies, it differentiates my client from his competitors. How? Making changes without signed change orders is an industry practice. Interestingly, in the year since we've implemented this practice my client's competitors have not adopted this simple change. It's counter-intuitive, but the way to differentiate yourself from your competitors is by looking at the ways in which your customers annoy you.
If you have any questions or have a topic you'd like me to address, email me at dale@furtwengler.com
Understanding the Numbers
Monday, October 09, 2006
Financial Statement AccuracyIt's not a matter of "if", but "how much."A common misconception among non-financial managers is that financial statements are accurate. In reality, financial statements include a lot of estimates. Here are a few of the things accountants estimate:- Revenues on jobs in progress
- Bad debt reserves
- Inventory values
- The lives and depreciation rates of equipment we employ
- Employee benefit costs
Financial statements contain so many estimates that auditors do not attest that financial statements are accurate, instead they say that the financial statements "present fairly" the financial situation of the organization.
How much accuracy do you need? Enough to make informed decisions. To put this into context if your company does a billion dollars in revenues each year, a million dollars is only 1% of your revenues. For a company generating $100,000 in revenues that number drops to $1,000.
The question is "How much accuracy do you need to make an informed decision?" Using percentages as I did above can help you evaluate how much precision you want. The more precise you want the information to be, the longer it will take to acquire that information and the more costly that information becomes. It's counter-intuitive, but we can and do manage effectively without completely accurate information.
Simplify Marketing
Monday, October 02, 2006
How do you develop marketing messages that cover all of your offerings?Look for the common thread.The key is finding the common thread that weaves its way through everything you do. During a Chamber of Commerce luncheon I challenged the audience to:- identify their market - the universe of customers who could use their offerings
- identify their ideal customer - those who are most likely to buy their offerings
- differentiate themselves from their competitors
They were given two minutes to complete the task. A physical therapist in the audience came up with the perfect answer. She said "As I thought about my customers, athletes who want to return to competition, heart attack victims to want to resume their normal activities, stroke victims and the elderly who have fallen who want to regain mobility, I realized that all of my customers want to FEEL BETTER. " With this focal point of feeling better, she can easily tailor her message of "feeling better" to any customer group she wants to serve. For athletes, feeling better being a return to competition. For heart attack victims, a return to their normal lifestyle makes them feel better. For stroke victims and the elderly, it's regaining mobility.We tend to see the differences in our offerings. It's counter-intuitive, but seeing the similarity, the common thread that transcends all of our offerings makes it easy to tailor our message to the various markets we serve.If there are any topics you'd like me to address, please email me at dale@furtwengler.com
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