A Different Approach to Solving Complex Business Issues

Every day of the work week I help clients and readers solve issues of varying degrees. From operations to service delivery, something always needs to be fixed or improved in one way or another.

While reading Fast Company magazine recently, I came across an article that was an excerpt from the book Switch by Chip and Dan Heath. It was about problem solving describing same approach I use when the issue is complicated and it inspired me to take the time to share it with you here.




By nature humans are problems solvers. And traditionally we approach things in a manner of determining the problem then finding a solution that fits. A true troubleshooting mindset. But in times where the problem is rather complex and the solution will cause a huge change in dynamics or mindset, sometimes it’s much easier to take another approach.

Let me give you some examples. Let’s take a company that delivers 4 types of services to their clients.

The problem at hand is one of those services is no longer profitable but it’s still selling pretty well. Taking a look at that one problematic service could possibly reveal that the costs to deliver it have changed but the pricing on it has not followed suit. Simple solution; figure out what the cost differences are and either adjust the way it’s delivered to again be profitable at the same price or determine the costs can’t be changed so the price must be adjusted.

Now what if the problem was reversed and one service is doing well with 3 services steadily declining in profitability? This is much more complicated of a problem and so is the possible solution. A better approach from the traditional method would be to do what the authors of Switch call “finding a bright spot”. In rough terms that means find what IS working and do more of it.

In our example that would mean figuring out what are the things making the one solid service work well and apply it to the problematic services. It works much better than taking a much slower and less fruitful approach of looking at each individual service under a microscope to find what may be many problems and then solutions for each one.

For this example the bright spot could be better training for new hires in delivering the service. Or maybe it’s how the solid service is being sold by sales people in way that doesn’t require heavy discounting. Who knows? But the point is something is being done right in one solid service and the others are lacking so why not find an answer in that?

Although this is not a unique approach, it’s often unknown to most or just counter-intuitive to our natural thinking so it doesn’t come up as a readily available way to solve problems. It’s time to change your mind set on complex problems and start spending less time looking for the root of a complicated issue and more time on using readily seen successes to make things move forward.

If you would like to read more on this concept and article, follow this link.

To Your Business Success-

George Sierchio
The Consultant’s Coach

Under Performing Sales- Who’s to blame?

A number of technology business owners I’ve had sessions with in the last few weeks had a similar concern. They asked these questions:

- why a dedicated salesperson (including the owner) could be so inconsistent with making sales,
- why a solid sales person is getting no sales after being on board for 6+ months,
- why the business has leads being generated but a horrible close ratio




These are excellent questions and here are some typical reasons why these issues happen and where the blame lies:

Sales people are doing their own lead generation (no real marketing)- You can’t hire salespeople and expect them to also generate leads. It shouldn’t be part of their job and if they are a true seasoned sales person, they wouldn’t have agreed to market in the first place. Sales people take good leads and follow a process to turn it into a sale. If not, they will quickly lose interest in the job unless you are willing to pay them a very high base salary because they can’t make any commissions with what amounts to dealing with both a long marketing and sales cycle. Your fault.

Sales people receive unqualified leads (no quality)- Sales people do not hold a magic wand. They can’t take horrible leads and miraculously make them into a client. And the rare times that does happen, the odds are very high you don’t want that client. Any lead IS NOT a good lead. Setting criteria for those to market to including sticking to certain industries or niches allows you to vet out only clients you want to bring on board and allows your sales people to be consistent with their sales process. Your fault.

No sales process to go from qualified leads to a sale (no consistency)- Sales people do well when there is a process to guide them. There are no natural-born sales people, just outgoing people that find something that works and keep doing it. Unless you hired a salesperson that was selling the exact same thing to the same client base that you have and they did it very well, you need to give them that process. Unless you have an outside funded company you started it bootstrapped and made sales on your own. How did you do it? If you did well enough to be able to hire a sales person, there had to be some kind of pattern/process you followed. Why hire someone else to start from scratch. Your fault.

Going off the subject (No organization)- A quality lead is normally generated by hitting a sore spot or a desire and talking about the product or service to go with it. The last thing you need is a salesperson taking a lead brought in about service X and they either talk too much about something other than the lead subject that got them in the door or try to pile on multiple sales before they even have a relationship to sell one thing. That’s equivalent to getting your foot in the door and then driving a tank through it. It doesn’t go over very well. Their fault.

Sending proposals/contracts in the mail (no follow through)- This one amazes me. Actually I just worked with 2 clients this month that were going to mail in important proposals we worked on. With the complexity and options involved they both had no shot at a positive result or a good deal if they did not switch gears on my advice and had a meeting instead. It’s a rare service/solution proposal that does not need at least a phone meeting to make sure the potential client is in a position to compare apples to apples with another provider or a previous engagement with your company never mind decipher options. Some may refuse to meet but you won’t know unless you suggest it. Those that are adamant about not meeting (and are not government agencies or enterprise level businesses) you probably don’t want to work with anyway. With rather long/big money contracts, mailing and waiting for a signature really doesn’t need any explaining on why that’s not a smart move. Both of your faults.

Complicated proposals/contracts (no clue)- Options in a proposal do come up but should be limited to your best recommendations. Too many will turn people off, confuse them and even make them think your intention is to confuse them. Remember that they called you because they don’t know what you know. As for contracts, you need to protect yourself and spell out what the deal entails BUT an unnecessary 20+ page document could be a nail in the coffin. There’s nothing worse than having a deal sealed verbally and then showing a huge document that either they don’t want to read or they are afraid to read after a few pages thinking you are double-talking and fine-printing them to death where they don’t know what the deal is anymore. Overkill is not smart. You can get in all you need to in a $1000 to $100,000 deal without making a document that looks like the latest health care reform bill. If it truly does need to be that big for some reason, break it down into digestible pieces. Your fault.

These mistakes can kill slam dunk deals, steer good clients away from you, make good salespeople seem like a bad hire and prevent sales altogether. Hopefully you can see pretty plainly that most of these situations are the small business owner’s fault.

That’s good news since it means you can take control of your own destiny. So whether you have salespeople, you want salespeople or you are the sales team… get on it.


To Your Business Success-

George Sierchio
The Consultant’s Coach

Cash Flow is the Life Blood of Your Technology Consulting Business

I had the pleasure of being a panelist at the recent IT Pro Conference in New Orleans. One of the panels I participated in was a discussion on cash flow.

An interesting topic as most small business owners throw the term around as if they know the meaning, but the majority don’t actually reflect it in their business. This particular group was an admitted 95% technologists versus 5% business strategists so I guess that’s more than understandable.

Since most technology consulting company owners fall into this category and this is the main reason why I do what I do in my business for them, I thought it was a good idea to shed some light on the situation.




First let me start with part of a definition of cash flow from Wikipedia:

**********
Cash flow (also "cashflow") refers to the movement of cash into or out of a business, a project, or a financial product. It is usually measured during a specified, finite period of time. Measurement of cash flow can be used

• to determine a project's rate of return or value. The time of cash flows into and out of projects are used as inputs in financial models such as internal rate of return, and net present value.
• to determine problems with a business's liquidity. Being profitable does not necessarily mean being liquid. A company can fail because of a shortage of cash, even while profitable.
**********

This sounds kind of foreign to most people and that’s understandable so let me break it down a bit. If you take a finite period of time, such as a month, you want to see that you have more money coming in on the month than going out in that same time frame. Just because your Profit & Loss report says you are making money, does not mean you actually HAVE any money.

I think that makes it pretty simple so let me give you an example of a bad cash flow situation. Say you are a good little payee and your vendors get paid like clockwork according to their 30 days terms. BUT a quarter of your clients (and I assume a quarter of your monthly revenue for sake of argument) do not stick to your 30 day terms and typically pay you in 45 days. If your profit is 25% you are barely breaking even with this arrangement every month.

So you have 2 choices; get the slow payers up to date and/or get your vendors to extend your payment terms. Sounds simple but it usually isn’t and unfortunately it’s your fault that the business is in that position in the first place. Sorry.

Of course there is also a better solution and that’s to have as much recurring revenue as possible that comes in at specific dates on a regular basis so there is no guess work as to whether it will be late or not. Oddly enough I run into many companies that have established recurring revenue via services (such as managed services) and they still hand clients a bill due in 15 or 30 days.

Are you kidding me?

Now you’re guaranteeing work with no guaranteed payment timing. Maybe I’m crazy but doing a month’s worth of work like clockwork for someone and not getting paid within the first few days of said month is pretty much shooting yourself in the foot. But it happens… a lot.

Here’s another classic; Businesses that have no money because they don’t bill people on time AND they get paid beyond 30 days (i.e. a 30 day term but they do work in Jan, Feb March and then get around to billing for it all in April). Seriously? Super common and worth coming up with a billing process and getting someone else to do it.
So here is what I recommend…

Run a cash flow report in Quick Books or whatever financial program you are using (you are using a financial application right?) and see where you stand month to month. Ask your accountant or me if you wish, to explain it to you if it’s not clear. If you have a legitimate reason to do it, ask your vendors if you can extend your payment time frames a bit.

Don’t pick up anymore clients that won’t accept 15 days or due upon receipt. Then you can be lenient and go to 30 if they need it. As you renew client contracts or do new projects, make this payment timing well known and stick to a PROCESS of collecting receivables.

If you have recurring revenue clients, put them on an auto-billing deal via a credit card if it’s under $1000 or ACH if it’s bigger. Build a little extra in there for covering your backside (as you should be) and also a little more and take the 2% to 3% hit. If you would rather a check, then do the same build up and offer a 3% discount for paying in less than 30 days. It’s much better than waiting 45 to 90 days for your already earned money.

Speaking of processes, how about having a true billing process and getting someone else to work for a few hours every week to bill people on a regular basis and follow up with them via your collection process? Simple yet people don’t or won’t do it thinking it’s a waste of money. It costs money, but that’s a lot less than the cost of a cash flow problem.

I’d much rather pay someone $50 to $100 a week to make sure my money was billed and collected on time than sporadically send out bills that I can’t keep on top of resulting in no physical money in the bank. But that’s just me I guess.

Look…cash flow issues are like a heart attack. They are a silent killer that can sneak up on any business not taking the proper measures to prevent them and look out for them. Most businesses don’t see it coming until it smacks them in the face, which is sad as checking this metric regularly can avoid a lot of problems.

Understand cash flow and how important it is. Don’t fall into the trap of thinking solid revenue, and better yet profits, are the only important financial items. Cash flow is hard to fix when you realize way too late that it’s crushing your business.
Check your cash flow now and get to work on what needs to be done before it’s too late.


To Your Business Success-

George Sierchio
The Consultant’s Coach