I have to say upfront that this newsletter is one of those, “Do as I say and not what I have done most of my career!” newsletters. When business is good The Boss is almost always in a good mood and it’s good to have him around. But when times are tough, The Boss can be a real pain! I had a client who was a specialty machine shop that made custom machine parts on demand. The Boss #1 was the founder of the company and was transitioning the business to his son, The Boss #2. My job was to coach Boss #2 through the transition until Boss #1 was convinced his son could run the place. Now the only thing more frustrating than having one boss is having two bosses, especially for employees who are trying their best to do their jobs in stressful times. So, coaching the employees through the transition was an added responsibility I did for the business’s sake. The transition went as smoothly as you could imagine and afterward, The Boss #1 did retire, sort of – the most a founder can retire, which means he only visited a few hours a week to see […]

I received a call from The Boss of a mid-sized company who wanted to talk with me regarding his cash flow challenges.  I was referred by his lender who noticed that despite the company’s good revenues and decent net profit The Boss was always experiencing cash flow issues.  I asked to see two years of financials and I did an indirect cash flow evaluation on his business along with calculating what I consider the top fourteen ratios I use to evaluate the financial health of an organization.   What I found was the company had good operating profit which meant the organization was generating a healthy sustainable cash flow.  I told this to The Boss who immediately asked me; “If I have such good operating cash flow, why do I not have money?”  The answer was in the ratio analysis.   When I calculated the Return on Total Assets, ROA, I found the ratio to be very high, too high for this type of business.  I began to ask The Boss a few questions regarding his building and equipment.  Now, The Boss was a very frugal man, in my opinion too frugal for the health of the organization.  The Boss would try […]

Recently I have been in several discussions with business owners revolving around leadership.  In general, we have concluded to many organizations are continuing to experience inefficiencies in production, a disproportionate amount of waste, uncontrolled employee turnover, or any other issues that are a result of poor leadership skills.  In most of these discussions, The Boss agrees that in their organizations they have very good workers, good to adequate managers, but they are lacking leaders. The question is often raised, “Are people born leaders?”  If so, then business owners must identify and hire born leaders if they want to improve leadership in their organization.  As the conversations mature, I often see The Boss begin to think that some people are “born to lead” and have the natural talent to lead. This is different than being a “born leader”.   What I see are talented employees in a growing organization, and The Boss identifies them as a “leader,” and therefore that person is promoted and expected to lead. Often these people are great workers, very good managers, and then promoted into a leadership position in which they underwhelm The Boss.  Why does this happen?  Did The Boss make a poor decision by promoting […]

Does Your Company Have A Solid Foundation? I have the privilege of helping many business owners set-up their management teams.  A company’s management team is the foundation from which The Boss builds the business.  I have found that three positions are essential for success in an organization, they are; a good controller, an excellent operations manager, and a good sales manager.  I like to describe these three positions as the legs that hold up the company as depicted in the drawing of this stool. Imagine your company as this stool, if the legs are weak and wobbly, your company is in danger of collapsing.  Let’s look at each of these key positions and in what order of importance I place on each.  In most of the organizations I work with, The Boss is experiencing stress and anxiety over various cash flow issues.   I see cash flow issues as “referred pain”, there is a pain in your wallet but it is coming from somewhere else in your organization.  Most of the time the root cause of cash flow problems are a combination of; inconsistent sales, overstock inventories, or just plain poor money management by The Boss.  How do you fix this? […]