Wasting Away...

If you are a small business owner, you are unlikely to hire a consultant, or even take courses yourself, to work on a Continuous Improvement strategy for your business.  Large companies often have Lean Champions, or Six-Sigma teams that are full-time dedicated to analyzing and enacting measures to make the business more efficient, more profitable, and of higher quality.  For many, it’s a way of life, or a “culture”, of ongoing improvement.  And guess what… it works.

But in small business, not so much.  If you are a business owner, you may be thinking, “Aw geez, another thing that I’m supposed to do?  I can barely keep up with all the hats I’m already wearing, and you want me to learn about Continuous Improvement?”  Well, think about it.  Isn’t that like saying “…and you want me to learn about being more successful?”  Actually… YES!

But I have to admit, the full blown sciences of Continuous Improvement can be daunting, and unfortunately, there are so many great gurus that have developed deeply expert material on this topic, that it is information overload for a small business owner.  So here’s my recommendation.  Start with the basics.  Keep in simple.  Read a book, like “The Goal”, by Eliyahu Goldratt.  Take a small amount of time to ask yourself, where could I improve this operation?  Think about the fact that large companies, like Toyota, who have a deeply ingrained culture of continuous improvement, are never satisfied that they have reached perfection, and are always looking for the next way to get better.

One way to start is by trying to identify areas of Waste in your business.  Consider these Seven Common Business Wastes:

• Overproduction – Making more of an item, or providing more service, than the customer needs right now.  Here’s a simple, kind of funny example:  How many of you have ordered 1,000 business cards because you got a “deal” on the volume, only to change something (logo, phone, email), thus ordering more cards and throwing away most of the original batch?
• Inventory – Having more materials, parts, or products than is needed right now.  It is amazing to me how much “just in case” inventory many of us hoard.  This is a waste of cash being tied up in something that may never be needed.  In this age of instant everything, could we really not obtain that special item if a customer needed it?
•  Waiting – Idle time created when material, info, people, or equipment is not ready.  Let’s say you have three employees waiting for a half hour at a job site for materials to be delivered because you failed to arrange for delivery on time.  If you pay them $20/hour, you’ve just spent $30 on labor for nothing.  How often do you do that? 
• Defects – Work that contains errors, rework, or mistakes, or lacks something necessary.  How often do you make something that you have to throw away (scrap)?  How often do you credit a customer because of inferior product/service?  Do you ever order the wrong thing, or does your supplier deliver something other than what you ordered?  Yeah, I thought so. 
• Motion – Movement of people that does not add value.  Here’s a common one… you or a crew member runs to the hardware store because you forgot (or lost) an important tool or part needed to complete a job.  You are paying for that trip, and not able to bill your customer for the time it took.
• Transport – Movement of product that does not add value.  Instead of having a warehouse location, some items get stashed on the floor because they are often used, or you just don’t know where else to go with them.  Every time someone has to move those items to get at something on the shelf, it’s a waste. 
• Processing – Effort that adds no value from the customer’s viewpoint.  If you have any kind of setup process needed to perform the work, or produce the product needed, it is unlikely you can get paid by the customer to do that.  They simply expect you to produce the product.  What can you do to speed up or eliminate setup?

These examples may or may not apply to you, but hopefully you get the idea.  What wastes can you and your team identify in your business?  When you begin looking at your business in this light, you will be amazed at the improvement you can make.

"I Was Told There Would Be No Math"

You are opening your first business, or maybe starting to hit your stride after a few years of hard ramp-up work. You are excited and motivated by the work your business does and the way it will contribute to society. You know everything you need to attract customers and provide an outstanding product or service. But if you’re like most business owners, this may be the first time you will have to budget or track your company’s financial progress.

Most of us receive little or no formal training in how to develop a budget or forecast, track expenses, or even read and understand helpful financial reports. In spite of the expertise we have in our field, we are often uninterested and unaware of how to go about managing the critical financial piece of our business. While “trial and error” can be an effective way to learn about your bookkeeping system, or budgeting, or reading financial reports, a critical error at this junction of your business could be disastrous.

Here are a few lessons learned in my work that I think most small business owners could benefit from:

1. Put in some time to learn how to get it right. There is no better time to ask “stupid” questions than when you are brand new to something and have never done it. Better to ask and spend the time upfront learning, rather than wait until someone has to point out your mistakes. But even if you aren’t“new” to your business anymore, there is no time like the present to improve in this area. Request time from your accountant or coach to help you understand the critical numbers and report. If they can’t help you, find one who can. Learn the key processes of your bookkeeping system.
2. Take a Finance for Non-financial Managers course. Check with you local university or tech school, as they commonly offer such courses, perhaps in a 1-3 day non-credit format. During or after the course, take the time to review your company’s annual report and understand the various financial ratios and reports.
3.  Track your expenses monthly and adjust as you go. Don’t wait until year-end to hand a messy set of financial data to your accountant to straighten it out.  Work on getting it right all year long, and you’ll actually save money on your accounting fees, and can utilize your accountant to help you plan and strategize on how to improve your business.
4.  Get your team involved. Share your key performance indicators and budget with your team, perhaps even getting them involved in setting up the forecast. Involving your team and helping them understand the budgeting process creates a sense of shared ownership, and encourages your employees to find creative ways to manage expenses, thus taking some of the burden off of you.
5.  Test the logic of your strategies. Don’t just take last year’s actuals and add 10% to the next year’s forecast. Start with developing a strategy and goals, then determine the resources required to achieve those goals.  A proforma, or “what-if” budget is a great way to test the logic of adding new products, additional people, facilities, loans, and more.

Now, go use your numbers to help make your business a success!

Drowning in Detail

How do you keep your sanity?  Those of you who are small business owners know the seemingly endless barrage of challenges that come your way every day.  Managing those details to make your business successful is an essential trait of an entrepreneur, in addition to the ability to think ahead, plan, and execute strategies to grow the business further, make more money, and build a better lifestyle for you and your family.

Managing all that “stuff” is one of the challenges that can make or break the business, and in some cases our own spirit.  To do it successfully requires the ability to prioritize so that we give proper attention to the most important tasks.  It requires a clear knowledge of where the business is headed so that our actions take the business in the direction we intend.  It requires extreme discipline in getting up every day to do what we do even when some of the tasks required aren’t our favorite things to work on, or that we aren’t very good at.  It requires persistence such that even when things don’t go as we plan, the odds are in our favor that our efforts will eventually succeed.  How small business owners bring these qualities to their business every day is essential to their success or failure.

The threats to our businesses and to our own well-being are in the volume and complexity of the challenges faced every day.  The temptation is to try to be a super hero and fly from task to task with eternal energy and lightning speed putting out the fires, wowing your customers, and winning the admiration and follower-ship of your team.  But we aren’t super heroes, and that attempted behavior always ends badly, usually at a high cost to our business, our health, our relationships, and more.  The allure of trying to be great at “multitasking” has also proven to be a poor way to perform, because the constant changeover time between tasks actually ends up wasting more time than we think we are gaining.

So how can we manage to build the successful businesses we want?  Here are some basic tips that have proven effective:

• Block out periods of time to focus on the important functions you need to complete.  Maybe you need to spend one hour per day on followup calls and email, an hour on employee issues, two hours on marketing and sales, an hour on book work, etc.  Block everything else out, and deal with the distractions on your timetable.
• Have a clear view of your strategic plan or direction so that everything you do adds to the progress you planned.
• Measure something in your business.  Reviewing your numbers, your “scorecard”, helps to ground you in the reality of where the business is at, so that you make better decisions than you would if you let “gut feel” be your compass.
• Delegate.  I know how tough this may be for you, letting go of tasks that you know intimately, and that you are afraid will get screwed up if someone else does them.  But building a valuable business requires delegation, and it is well worth finding ways to shed certain tasks if it leads to more income, lifestyle, wealth and equity for you.
• Find a coach/mentor/advisor to help you stay your course, focus you on the most important things, and hold you accountable for accomplishing the strategies you’ve set.  When you’re drowning in details, having someone to throw you a lifebuoy that sets you back on track is invaluable.

When you are feeling bogged down by the details, working hard but getting nowhere, consider implementing one or two of these important tips to get your business moving forward again.