The challenge in business isn’t just getting things done—it’s getting them done the right way, at the lowest cost, with the greatest long-term return on your investment of time and resources.
But whether you’re a start-up entrepreneur or a C-level executive, doing things the right way requires an application of what you know, an understanding of what you’re sure you don’t know, and a healthy appreciation—as Donald Rumsfeld once said—for the things you don’t know you don’t know.
So what if you could spend a few minutes with an expert who knows what it takes to turn customers into your best sales reps, or how to structure a hiring burst in advance of imminent, rapid growth? What if you could learn the fundamentals of long-term customer value or constructing a truly ef- fective diversity program, or grasp both the peril and potential of franchising operations? Or something more immediate and useful today, like a few innovative pointers on improving cash flow?
In the following pages, you’ll learn about precisely those topics. Ingram’s invited leadership of area companies and key executives to speak directly to our business-owning and executive readership. Their thoughts on those topics might make this edition the one you keep at your fingertips all year-round.
Free advice, all too often, is worth exactly what you pay for it. Not this time: Read for yourself. We’re confident you’ll find actionable intel and real value in what these accomplished individuals have to offer with Ingram’s 2014 “How-To” Guide.
How to … assess the value of your customers
Three letters hold the key to share price: LTV, which stands for “lifetime value.”
by Ben Legg
Until you determine the LTV of your customers (and are able to predict the LTV of your potential customers) you will have no idea about the ROI from your marketing spend. You’ll also be missing a powerful tool for defining and tracking how you create shareholder value. And take note: once your competition solves the LTV equation, you’ll be at a drastic disadvantage. The competition will be able to outsmart you at every turn, paying more to acquire customers with high potential value, and less/nothing for those with lower potential value. They will also be able to scale their marketing spend faster, as they will be able to prove the ROI on their marketing spends. You, on the other hand, will not be able to afford to engage with those desirable high-value customers because your simple models and cautious budgeting won’t enable you to pay more for them. You will be left paying less to engage low-value consumers who spend little and churn fast. A tasty recipe—for bankruptcy.
Why is LTV such a big deal? Not only does that metric essentially define company value (company value = number of customers multiplied by their LTV), it also obliterates the transactional “one sale at a time” approach and forces you, your marketing team and sales staff to think about generating ongoing revenue from your best customers, based on an appropriate marketing spend.
Here’s what you need to do in order to start the lifetime value conversation at your company:
Get senior management on board. Alignment will help speed top-to-bottom focus as well as allocation of resources. If LTV is a priority for your CEO, CFO and CIO, you’ll have a much better chance to getting everyone pushing in the same direction.
Assemble (and improve) your customer data. In digital advertising, if you have customers’ e-mail addresses, you have a foundation to get started. With those addresses, you can target across the Web, including on social media sites like Facebook and Twitter. (Our social media product, AdParlor, builds custom audiences from clients’ CRM databases.) To fill gaps in data—and to build your CRM—consider working with third-party companies to get additional demographic information about your customers. But remember: before hitting “send” on any e-mailed marketing messages, be sure you have permission from the recipients to do so.
Get started. Too often, companies spin their wheels and squander precious time before starting such an enormous project. But no one has 20/20 vision when it comes to LTV, so just do the little things to start increasing LTV right now. For instance, up-sell and cross-sell current customers, lower your churn rate and acquire new customers based on predicted LTV. Then start testing, measuring, learning and iterating.
Use your company’s current brain trust. While there’s no shortage of consultants willing to walk you through the LTV process on a per-hour basis, why not use your smartest engineers, analysts and marketing people to start the heavy lifting of R&D? They can narrow down what your customer lifetime is—whether that’s one month or five years. But even with everyone working together, it’ll be a long, frustrating journey toward finding out what your customers are really worth.
Plan, act, measure, iterate: Change your marketing teams’ entire modus operandi to be all about testing, measuring, iterating. Throw away the annual marketing budget approach. Reinforce marketing activities delivering great ROI with more budget immediately. Conversely, kill/pause/redesign all activities with a negative ROI. As Facebook’s Mark Zuckerberg likes to say, “Move fast and break things.”
I firmly believe that determining an LTV number eventually will be table stakes for all businesses that have large numbers of repeat customers. Just like the more customary metrics of pipeline measurement or the time it takes to close a lead, LTV will help illustrate the effectiveness of your digital marketing spend. Just be sure to reach the LTV finish line before your competitors!
For a much deeper analysis on LTV and how to measure it, check out our blog on www.adknowledge.com.
How to … assess franchising opportunities
Scratching the entrepreneurial itch to start a franchise is only the first step. Before you take it, you need to understand that it’s not a new job—it’s a new life.
by Joe Bisogno
First of all, business is business, whether it is a Franchise or not! Business is like law. Business owners are responsible for their actions; no excuses! Unfortunately, there is no magic wand for business owners. Businesses require long hours and hard work, Franchise or not. Think about what you really want to do!
Buying a Franchise can be an amazing journey. It can also be a nightmare, if you are not ready to work harder than you have ever worked in your life. Owning a Franchise business is not a job; it is your NEW life! Understanding this concept is important and must be accepted before taking the plunge into business ownership.
When buying a Franchise, you are buying a proven concept. Don’t get in, if you want to change the con-cept. Franchising is not for everyone. It works best for team players.
Due diligence! Ask questions of the system’s franchisees. Listen and consider what they have to say. Remember, not everyone will be happy. Always ask yourself, why? The answer may lie with the franchisor or franchisee. Spend the time to interview the franchisor leadership, as well. Dig in!
• Do I want to do this for the next 10 to 20 years of my life?
• Most agreements are 10–20 years.
• Can I get out if I do not like the business?
• What will it cost me?
• Do I want a professional-service franchise or a retail-type franchise?
• Does the concept I’m considering excite me and my family?
• Who is leading the company and are they available to meet with me to see if our way of thinking aligns?
• Does the franchise system have the latest technology?
• Can franchisees use it to learn from other franchisees?
• Is the system integrated with POS (point of sale) or can my services be offered on line?
• Does the franchisor communicate to the franchisee community? How often?
• Am I a good fit with the concept?
• Does my family believe in the product or service?
• Can I grow my future and my family’s future buying a franchise?
• How much money do I need to make to live and pay my bills?
How do I examine a franchisor/Franchise/Franchisee?
Business and consumer trends are important items to consider. Is the franchise system aligned with today’s business trends? Consumers are more demanding. Is the system examining consumer trends and innovation of product offerings? Are they positioned for flexibility or not?
Is the franchisor equipped with the latest technology systems? Without technology, it will be hard for any franchise to survive.
The Franchise Agreement and Franchise Disclosure Document (FDD) state what you need to know about your contract. Franchisors are legally required to provide them to you by the Federal Trade Commission. The due diligence you complete unveils additional items about the Franchisor and the system you are considering.
A list of franchisees is in the FDD; contact them and ask questions. Use your gut as you do your diligence. Is the franchisor constantly looking for growth for you and the system? Are they growing too fast? Fast growth in a system can hide serious problems; be aware! Has the franchisor ever STOPPED franchising to re-group and stabilize the system? This can be both a great sign or a question. Dig in to the reasons!
Examine the franchisor and the franchise. If you’re serious, is it OK to get a multiple-location agreement? That lets you control your future and where you live, work and raise your family.
This just starts to scratch the surface of franchising questions. Techcomworldwide.com offers many small business other ideas and resources.
How to … prepare for surge hiring
If exceptional demand for your product or service compels you to hire lots of people in a hurry, be strategic about it. Otherwise, you’ll only
create long-term problems for yourself and your business.
by Melissa Wood
Among the challenges in business, surge hiring is a good one to have. Needing more people means clients want to hire you. And nobody wants to turn down work. We’re obviously grateful to be successful here at Burns & McDonnell.
We’re planning an expansion of our world headquarters in Kansas City, to give us room for another 2,100 employee-owners during the next 10 years. We’re growing in our regional offices, too.
But managing challenges in surge hiring is the same whether your surge means hiring two or 200 people per month: The goal is to recruit qualified job candidates, select those who fit within the organization, and then integrate new hires seamlessly into the operation.
Start by taking advantage of every strength you’ve got. Use your brand recognition, the relationships you have with your clients, your internship program, your connections on college campuses and other strengths to send the message: We need to hire quality people.
Next, identify which candidates fit. Start by telling your story, what-ever that story is. Talk to candidates about your culture, and what that means. That’s going to help you find the right people for your organization.
Be sure to have the right people doing the selecting. If you’re hiring aggressively, who’s on your team that’s selecting the people to come into your organization?
If you’re a bigger company and you have a strong HR organization, is it set up to manage that? Before your production teams can grow, your HR team itself may need to grow. If you’re used to hiring five people per month, people can work hiring seven into their schedules. But if you’re going up to 20 people per month, you’ll need more resources before you can even begin.
Hiring managers may need to delegate. Instead of one person selecting all 20 candidates to interview, consider assembling a team.
Don’t get bottlenecked by schedules. Train and trust people to help you make the right hiring decisions.
Once new employees are in the door, the next challenge is to get them on-boarded. You can hire a lot of talented people, but if you don’t integrate them into your company—and in the right, mindful and strategic way—then you’re not doing yourself any good. It’ll just be a constant churn.
Be sure you have proper processes in place. For information technology, what’s the lead time necessary to set up enough computers, phone lines and e-mail accounts? How many technicians do you need to get it all done? And where is everybody going to sit? Usually these items are not a burden, but in surge hiring you need to invest the time up front so you don’t fall behind.
When it comes to culture, a mentoring program can be a great tool for integration. This gives new hires a peer they can relate to—someone who knows what it’s like to be in their shoes, and who can interpret the policies and practices necessary for being successful, both now and in the future. The best new employee for us is someone who wants to build a career here.
We want them to feel comfortable from the start.
Through the entire process of surge hiring—from recruiting to onboarding—the most important thing to do is actually be counterintuitive: Stop. Just stop yourself and figure out the processes you need to handle all the new people, because you can’t say, “I’m too busy.”Otherwise, you’ll never get ahead.
How to … improve your cash flow
There are the tried and true strategies for managing cash flow, but also some new technology available that is worth considering
by Angie McElhaney
Cloud accounting has unleashed impressive dashboards that are user-friendly and provide easy access to cash flow projections. Packages such as Intacct, Xero, and Bill.com have import, upload and paperless features to modernize cash-flow management processes. The sync and import features within the technology allow integration among various software packages to give you access to real-time data. These tools may also provide long-term savings through more efficient accounting processes.
Dashboards can be set up to monitor key performance indicators (KPIs) such as cash balances, loan balances and other stats that impact cash flow. Here are a few other measureable KPIs you can use—even if you don’t have the technology:
• Monitor accounts receivable days sales outstanding (DSO) frequently to examine how receivables are trending. DSO indicates the number of days to collection. A ratio of longer than a month may indicate a potential issue. DSO is determined by dividing the accounts receivable balance by average daily sales (accounts receivable / (annual revenue/360)).
• Keep an eye on your days in accounts payable. Compare the number of days to the credit terms of vendors to anticipate any issues (accounts payable /(cost of revenue/360)).
• Tighten your inventory. Monitor days in inventory to identify when inventory is becoming overstocked by dividing inventory by the cost of revenue (inventory / (cost of revenue/360)).
Invoicing and payment method processes may need to be reviewed to ensure optimum timeliness in getting paid. Here are a few suggestions to consider:
• Deliver invoices quickly and follow-up if payments are slow.
• Generate progress billings on large projects.
• Consider requiring cash on delivery (COD) when doing business with slow-paying customers.
• Make cash flow more predictable by converting larger customers to retainer payments. Process improvement can help cash flow; however, as we are recovering from the recession, you should also review your pricing model and rates and compare them to market. There may be certain types of projects (or customers) that may need higher rates due to their level of risk and the expertise required.
If cash becomes an issue, here are some ideas worth considering:
• Enjoy the benefit of payment terms. If a payment is due in 30 days, don’t pay it early.
• Make payments electronically closer to the due date. This will allow you to optimize your cash balances for as long as you can.
• Capitalize on installment options on real estate taxes, personal property taxes and insurance.
While we can work to continuously improve processes, there are also other creative ways to improve cash flow and survive shortfalls. Some smart moves include:
• Sell older inventory or non-productive assets.
• Renegotiate your insurance and supplier policies.
• Base executive and sales compensation primarily on gross profit.
• Pay sales commissions only after payments are received or make adjustments if something is written off.
• If possible, file income taxes on a cash basis.
• Take advantage of tax credits/deductions, such as accelerated depreciation methods, cost segregation studies and like-kind exchanges.
• Setup a line of credit at your bank to help you cover a lapse in cash flow for short periods of time.
• Minimize personal draws from your business.
Cash management is critical to every organization and it is imperative that you develop processes to not only effectively manage your receivables and payables, but look at other financial management strategies, as well.
How to … get customers to bring more customers
Organic word of mouth derived from the client experience is the most powerful marketing tool a business can have. And, it’s a LOT more profitable to keep and grow existing customers than go search for new ones. But how do you create it?
by Casey Coffman
Organic word of mouth begins when someone using your service makes a REMARK about you. Example: “I love QuikTrip; so fast and the bathroom is clean.” If you want someone to make REMARKS about you and your company, then you’ll need to be REMARKABLE. To become remarkable, you must find a way to provide the UNEXPECTED EXTRAS.
Look more closely at the QuikTrip reference. What are the historical expectations of a convenience store? A place that’s dirty (use the bathroom at your own risk), has broken gas pumps, random inventory, and is staffed by clueless clerks, with time wasted standing in line to pay. QT’s unexpected extras: They’re clean and cleaning all the time, have most everything you’d expect to find, the pumps actually work, and behind the counter is a trained staff that keeps the lines moving at checkout.
This isn’t a plug for QuikTrip, but it certainly gets to the heart of the question: What do your customers and prospects EXPECT from you and your industry? If you only MEET these expectations, you are likely losing ground to competitors—or you will when a new, more progressive competitor arrives.
FORMULA: Customer expectations + basic fulfillment + unexpected extras = organic growth.
Do you really know what your clients EXPECT? Today, that is, not 10 years ago.
Basic fulfillment is a higher bar than you likely think—it means good quality, shipping on time, and completing the work properly and effectively. Unexpected extras are rarely price, and they don’t need to be big, just unexpected, like competent, tenured and fast check-out associates.
If your industry is mature, you’ll more likely require great people. QT knows this: Gas is gas, Snickers and Cokes are Snickers and Cokes—what’s left? People. Invest in them and train them. If you ask those tenured associates why they are there nine years, the first answer is typically benefits. But, benefits only work if they are part of a vision, a plan that is easy to communicate. Training takes a LOT of investment, but it pays off if leadership is consistent and patient. Starbucks made a full-on commitment to training, because they knew eventually coffee is coffee—well, kind of—but people will separate us from the pack.
If you are not in the B2C or retail business and sell complex services to larger accounts, you will need to do a Strategic Account Checkup twice a year. Here are some tips/processes for that:Someone other than the account manager should conduct the 30-minute interview with customers.
Review: How did we get here? Why did we start working together? (Recall the pains you had.)
Has it worked? Why? (Remember: Clients can forget your value.)
Ask these questions: (Mandatory)
Are you getting the value you thought you would?
Are we meeting your expectations, or exceeding them?
What would happen that would cause you to leave us as a client?
What are our 12-month mutual goals and opportunities?
Finally, make sure you are assigning the proper behavioral-style individual to the nurturing and growing role vs. the hunter role. Hunters are not good at growing accounts, and farmers don’t hunt very well. This answer is very black and white in any good behavioral-based assessment profile: DISC, OAD, Meyers Briggs, OMNI etc.
Do these things, and you’ll be more likely to find word of mouth working for your business.
How to … create or reinvigorate your diversity and inclusion program
Whether you’re just starting to build a framework for a more diverse and inclusive work force, or trying to bring new energy and relevance to a longstanding program, you don’t want to leave success to chance.
by Michelle Wimes
With a few strategic steps, careful planning and buy-in from the top, your company can fashion a diversity program that does more than pay lip service to the concept. A suggested pathway:
1. Take the Temperature.
The first step in starting or enhancing a diversity and inclusion program is taking the temperature—figuring out where your company is on its diversity and inclusion journey and then deciding where you want to be. This is often done by creating a Needs Assessment or Climate Survey, an instrument that can be administered electronically and confidentially. The instrument asks vital questions of the key stakeholders in your organization, ranging from cultural questions (e.g. Do people respect each other?) to questions covering the major components of your business, such as recruitment, hiring, retention, advancement, promotion, marketing, and professional development/training opportunities.
2. Get Buy-in.
Don’t just do a survey and stop. You will lose credibility and trust. Analyze the survey results, prepare an overview/summary of the results and then begin the process of communicating and presenting those results to key company constituents. Seek their input in creatively and effectively addressing the issues and reinforcing the strengths that arise in the survey. Ensure that there is a budget for diversity and inclusion initiatives separate and apart from any other budget or department. This will be necessary for future planning purposes as noted in step 3 below.
3. Plot a Path Forward.
Treat diversity and inclusion as an important strategic imperative. Take a look at your company’s current strategic plan and whether or not it addresses diversity and inclusion. Decide what is missing or needs to be enhanced and then, based on the results of Needs Assessment/Climate Survey, outline at least five critical areas that will be addressed. Each area should have measurable goals and detailed action steps to achieve the goals. More important, each goal should identify a specific department or committee in the company who is willing to spearhead the implementation process within a given timeline.
4. Reinforce the Troops.
Ensure that you have the right people at the helm. A diversity and inclusion program cannot be a stand-alone program that is merely promoted by the minorities or women in your company. In order to be successful, it must be interwoven into your company’s fabric. Your company’s CEO must not only be passionate about this, but must be willing to be a vocal advocate. The leader’s advocacy will be instrumental in bringing others along, especially middle managers who will have to implement the new initiatives that spring forward as a result of the Needs Assessment/Climate Survey. Additionally, designating an individual within the company who reports directly to the CEO to spearhead and coordinate the initiatives (a Chief Diversity and/or Talent Officer) is often vital. This person can help to develop a strong company-wide Diversity and Inclusion Committee and designate task forces and/or subcommittees as well as employee resource groups to tackle the critical areas identified in the strategic plan.
5. Promote the Good.
Market your successes both internally and externally. Create a strong, vibrant diversity page on your company’s Web site that communicates your commitment and how you measure your success. Highlight employees who promote an inclusive work environment on your Intranet/Internet site, via a company newsletter, or even through staff-recognition awards. Provide blogging opportunities for your company’s employees on diversity and inclusion. Support your industry’s diversity and inclusion efforts by sponsoring local, regional, or national events/initiatives designed to increase and promote diversity and inclusion. Send your top performers to these events for networking, training and development purposes. Partner with your clients (e.g. supplier diversity efforts) to both understand their diversity challenges and share best practices.