The Paper Chase

The real downside of poor organization for a small business is simply the terrible waste of time – and money. Time spent looking for the information or file you need means less time spent on more important things like meeting customer needs or generating billable hours. And if you don’t think that your crammed-to-capacity filing drawer isn’t costing you, consider that in 1997 the Wall Street Journal estimated that executives waste six weeks per year looking for misplace information from messy desks and files. Better organization means that you can apply your skills to the most productive and financially rewarding tasks.

The problem stems from the way most people approach their filing: they focus on filing, not on finding. As a result, the documents that they work with most often at any given time – the high value documents – are buried in an undifferentiated mass with all the other, low-value documents.

The key to resolving this problem is to separate your paper files into three distinct categories:

Working files. The file drawer in your desk contains your “working” files. This drawer should only contain the files that you use on a daily basis –drafts of a speech you’re preparing, a meeting agenda, or a preliminary budget. When these projects are completed, you’ll move them into the “reference” file cabinet.

Reference files. Reference files will mirror your working files – you’ll use the same categories/hanging folders that you have in your working file drawer. However, these files are kept in a separate filing cabinet away from your desk. In addition to obvious reference items like research reports, you might place the annual budget, HR forms, marketing plans, etc. in this file. The key is that these files contain items you don’t need to look at everyday, but might look at intermittently, say weekly or monthly. When you do need these files to complete a project – say, preparing a new speech – then you move the files into the working file drawer.

Archive files. These files should be kept in another drawer in the file cabinet, in a central storage location in the office, or even at an off-site location. They’re accessible to you when you need them, but they’re out of your way for the 99% of the time that you don’t. As with the reference files, when you do need these files for a project, it’s a simple task to move them into the working file drawer.

Finally, your inbox and outbox: both should be dealt with in a similar manner. the inbox, whether for paper or for email, contains only those items you haven’t yet read. Once you read something in the inbox, deal with it immediately—forward to the appropriate person, file in the appropriate folder, or -trash it. Like the inbox, the outbox is not a long-term storage device. Items placed in the outbox should be distributed or filed by the end of the day.

The 80/20 rule in life applies to your files, too: you do 80% of your daily work with only 20% of your files. Set up this system, use it daily, and you’ll save you and your company time and money.

Dan Markovitz is the founder and president of TimeBack Management. Prior to founding his own firm, Mr. Markovitz held management positions at Sierra Designs, Adidas, CNET and Asics Tiger.

Small Business Economic Trends
October 2009

By Bill Dunkelberg October 20, 2009

Optimism Index
The Index of Small Business Optimism gained 0.2 points, rising to 88.8 (1986=100), 7.8 points higher than the survey's second lowest reading reached in March 2009. The gain was minor, so the good news is still that the Index did not decline. But all in all, the gain is less than was hoped for. Four of the ten Index components posted gains, two were unchanged, and four declined. The biggest problem continues to be poor sales, as 32 percent said "weak sales" was their top business problem.

Labor Markets
In September, small business owners reported a decline in average employment per firm of 0.83 workers reported during the prior three months, a big improvement from May but virtually no change from July and August and historically the 6th largest loss per firm in the 35 year survey history (the record is -1.26 in May 2009). Seven percent of the owners increased employment and 23 percent reduced employment, yielding a seasonally adjusted net -16 percent of owners decreasing employment in the last three months, unchanged from August. Eight percent (seasonally adjusted) reported unfilled job openings, also unchanged from August. Over the next three months, 16 percent plan to reduce employment (up three points), and seven percent plan to create new jobs (unchanged), yielding a seasonally adjusted net negative four percent of owners planning to create new jobs, a four point deterioration from last month.

Capital Spending
The frequency of reported capital outlays over the past six months fell one point to 44 percent of all firms, a record low reading. Plans to make capital expenditures over the next few months rose two points from a 35 year record low to 18 percent. Nine percent characterized the current period as a good time to expand facilities, up four points from August, a good sign. However, a net eight percent expect business conditions to improve over the next six months, down two points from August but 11 points ahead of the July reading.

Inventories and Sales
The net percent of all owners (seasonally adjusted) reporting higher sales in the past three months remained negative at -26 percent, up a point and eight points better than the record low set in March and revisited in June and July. Small business owners continued to liquidate inventories and weak sales trends gave little reason to order new stocks. A net negative 24 percent of all owners reported gains in inventory stocks (more firms cut stocks than added to them, seasonally adjusted), three points better than the record low of negative 27 recorded each month from April through July.

Inflation
The weak economy continued to put downward pressure on prices. Ten percent of the owners reported raising average selling prices, but 32 percent reported price reductions. Seasonally adjusted, the net percent of owners raising prices was negative 21 percent, a two points decline from August. Far more owners are cutting prices than raising them. Plans to raise prices fell two points to a net seasonally adjusted six percent of owners, 32 points below the July 2008 reading. On the cost or input side, the percent of owners citing inflation as their number one problem was steady at four percent, so neither labor costs nor materials costs are pressuring owners.

Profits and Wages
Reports of positive profit trends were unchanged at a net negative 40 percentage points. The persistence of this imbalance is bad news for the small business community and a contributor to the reported difficulties in obtaining credit. Not seasonally adjusted, 14 percent reported profits higher (down two points), but 50 percent reported profits falling (unchanged). Weak sales and price cuts are responsible for much of the weakness in profits. Owners continued to reduce compensation at a record pace, with 11 percent reporting reduced worker compensation. Reports of increased compensation did rise two points to 14 percent, a good sign in this environment. Seasonally adjusted, a net seven percent reported raising worker compensation, up one point from August but only four points above June's record low reading - an improvement, but small.

Credit Markets
Thirty-three (33) percent reported regular borrowing, typical of the post-1983 period, down a point from July. Overall, loan demand remains weak due to widespread postponement of investment in inventories and record low plans for capital spending. In addition, the continued poor earnings and sales performance has weakened the credit worthiness of many potential borrowers. Thirty (30) percent reported all their borrowing needs met (unchanged) compared to 10 percent who reported problems obtaining desired financing (up three point, not seasonally adjusted). The net percent of owners reporting loans harder to get was unchanged at 14 percent of all firms. But only four percent of the owners reported "finance" as their #1 business problem. Pre-1983, as many as 37 percent cited financing and interest rates as their top problem. The percent of owners reporting higher interest rates on their most recent loan was nine percent, while three percent reported lower rates. The net percent of owners expecting credit conditions to ease in the coming months was a seasonally adjusted net negative 15 percent (more owners expect that it will be "harder" to arrange financing), two points worse than the August reading. Owners do not see credit conditions easing much in spite of the Federal Reserve's hugely expansionary policies.

COMMENTARY

Although third quarter real Gross Domestic Product growth will likely be over three percent (a stunning improvement from the six percent shrinkage in the first quarter), the surge has not shown up on Main Street as of yet. Reported capital spending was at a survey-low level (started in 1973). More firms plan more inventory reductions than plan to increase employment. Quarterly repoerts on sales reveal 41 percent experiencing declines compared to 21 percent reporting quarterly gains. Quarterly profit trends are the worst in survey history, with 50 percent reporting declines compare to 14 percent reporting gains.

And owners are not looking for a lot of improvement. About 40 percent expect real sales volumes to decline in the coming months in contrast to about 25 percent expecting gains. Only seven percent think the current period is a good time to expand, near the survey low. Credit markets are expected to remain difficult for those wanting to borrow, but with inventory investment and capital spending plans near historic lows, it is clear that loan demand (not the supply of credit) is weak. Legislative activities in Washington undoubtedly dampen the outlook with talk about health care mandates, cap and trade, card check, and new taxes on all sorts of goods and services. Many will wonder if it is worth the effort to try to grow the firm.

Now, some in Congress are considering "Stimulus II," which may take the form of a jobs tax credit similar to that enacted in 1976-77. Some feel this was a successful program, creating new jobs. But it is likely that "government job creation" is an oxymoron. Such a program does not pass a simple "smell test" of logic. Even a minimum wage worker costs about $20,000 (all in). For example, who would spend $20,000 to get a $5,000 credit if there were no use for the worker (e.g. the worker could not generative more than $15,000 in revenue to cover the cost of hiring). Firms will not hire people to just stand around, and cannot pay workers more than the revenue they generate for the firm. WIth weak consumer demand, more workers are apparently not needed and owners are not hiring. A jobs credit will not bring in more sales.

Such a program, if passed, would be the "cash for clunkers" program for the job market. Hiring might be delayed in anticipation of the program if it is propsed in Congress and debated for a period of time and, unless prevented, might induce some firms to release workers and re-hire them as "new." Such a program will involve red tape and complex formulas to compute credits, and most, if not all, of the money will be paid for workesr that would be hired anyway. All this would not induce many consumers to increase their spending, the top need indentified by business owners. Labor is cheap, customers are needed. Maybe giving the money to consumers would be simpler. When consumer spending picks up, firms will have reason to hire.

This survey was conducted in September 2009. A sample of 3,388 small-business owners/members was drawn. Eight hundred twenty-seven (827) usable responses were received - a response rate of 21 percent.

Bill Dunkelberg, Chief Economist for the National Federation of Independent Business Copyright 2009. All Rights Reserved.

Recession Strategies: Cut Costs Strategically

OK, so we’re in a recession, and a really bad one at that. Ask the experts how long it will last and you’ll hear everything from 5 or 6 more months to 5 or 6 more years. One thing is certain, though—everyone agrees that it won’t last forever.

So what do you do with this not-so-helpful bit of information? Here are a few ideas for ways to avoid some of the common mistakes of past downturns—and get a head start on your competition at the same time.

It Starts With Cost Control

Financial strategies for any company in these uncertain times should consider the company’s fundamental strength in designing a cost control program. Across-the-board cost reductions, so common during times like this, are fairly easy to initiate, but can be damaging to a company’s foundation over the long term. Instead, consider these guidelines for creating a more effective cost reduction program:

First, focus your staffing reductions on marginal performers throughout your workforce. This is an excellent opportunity to relieve your payroll of under-performers with minimal risk of backlash or legal exposure. If you have delayed having a confrontation with these employees or their managers, do it now. (Your potential legal exposure, of course, is based on your individual situation, and you should always consult a labor attorney in questionable cases.)

Second, cut costs in areas that will not impede your recovery or affect critical current programs. You can cut these costs sharply or eliminate them entirely. Examples include planned enhancements to employee benefit programs (even if announced) and replacement of inefficient equipment that still keeps up with demand. Then initiate efforts that will reduce costs without cutting into capability. A good example might be refinancing of corporate borrowings at lower current interest rates.

Third, cut activities that must be retained long term but can be delayed or reduced to an inactive state for six to nine months. For example, you could shelve an accounting system conversion for now, even if the software has been bought and paid for, thus saving thousands of dollars in implementation and training costs. This assumes the prior system isn’t crippled and unworkable in the interim.

Fourth, consider investing money in programs that can benefit your cost control program or add power to your readiness for the recovery. For example, finish the partially completed development of a new product that will be the market leader in a high-demand environment when it ships. Or hire a few outstanding people in critical departments that were not previously impacted by layoffs. In other words, feed your winners.

Protection and Preparation

In a nutshell, you want to protect yourself during the downturn while preparing yourself for the recovery. When that time arrives, you want to be in a position to move out aggressively, take advantage of your weakened competitors, and add market share and profit margin. It is important to think strategically during these times—because when the recession is finally over, it’s going to be a very good year.

Gene Siciliano is author of Finance for Non-Financial Managers.
www.CFOforRent.com
Copyright 2009. All Rights Reserved.

Your Key to Results at All Levels

By Mary Hessler Key July 08, 2009

Although things appear to be looking up regarding some economic indicators and trends for businesses, many organizations continue to experience challenging times. Recently, I gave a talk to business leaders in the Tampa Bay community about "How to Foolproof Your Business in a Down Economy." In times of crisis, uncertainty and change, organizations can make key breakthroughs or they can flounder and, worse yet, go out of business. What's different in times of market and economic tension is that indecisiveness is not an option. Leading in lean times requires a different focus and strategy.

Over the past twenty years, I've had the experience of working with some great leaders and companies and with some that floundered when things got rough. I'd like to share a few strategies and best practices that could improve your business and make it "fool" proof in this challenging economy:

1. Prepare for the worst possible scenario
After working with and observing many leaders who thrive in a growth-oriented economy, one of the most difficult things to do is to consider the worst-case scenario. Many entrepreneurs, for example, just don't want to "think negative." By looking at the worst-case scenario, an organization gets a better sense of its break-even point as well as which strategies could be put in place to prevent the worst-case scenario from unfolding. In scenario planning, it's important to look at the worst-case as well as the best-case scenarios. In addition, consider two others: unexpected or "wild card" scenarios like a nuclear attack from North Korea or some legislation that helps you build a new profitable business niche; also look at a more moderate scenario where you consider various "mixed" factors.

An entrepreneurial organization in San Francisco called JustAnswer has increased its business 57% during these recessionary times by looking at future scenarios and trends and anticipating that people will be repairing equipment far more than they will be buying new equipment. JustAnswer provides experts online to answer questions on a variety of different topics. Based on the trend they saw, they decided that they would focus on increasing Google ads for repair services. This strategy has been a key factor in their growth during a down economy.

2. Have a vision - don't shortchange the future
Yogi Berra once said, "If you don't know where you're going, when you get there you'll be lost." What sage advice from a very insightful, hands-on guy. Just because we are going through challenging times and you may even be experiencing a reduction in force, doesn't mean that you shouldn't have a vision and continue to communicate it. A vision is simply a realistic and desirable picture for the future. As you deal with the current reality of our time, be cognizant that communicating an attainable vision helps those high-performing employees who need to see and work toward a picture of where the organization might go next.

3. Rethink growth and protect your core business
After spending their careers in a pursuit of growth, business leaders may have to adjust their thinking. It's usually easier for most to lead in the uptimes. Business consultant Ram Charan cautions businesses to pursue growth to gain market share only if it's profitable and cash efficient, meaning that gains and market share don't eat away disproportionate amounts of cash; this could be in the form of more inventory, extended duration of accounts receivable or creating financial complications in general.

Every business has a set of invaluable assets such as their customers, people who know the technology inside and out who work for their company, their brand, etc. It's important to protect this core part of your business. When you ask yourself - "What is it we can't afford to lose?" - The answer will shed light on what your core really is.

Dr. Mary Key is consultant, speaker and the author of several books including CEO Road Rules and The Entrepreneurial Cat: 13 Ways to Transform Your Work Life.
www.CEORoadRules.com
Mary Key & Associates, Inc. ©2009