by walking around (MBWA) is a concept that was popularized back in the ‘80s by
Tom Peters and Robert Waterman in their bestseller In Search of Excellence.Steve Jobs of Apple was a master
practitioner of this theory. Not only
did he talk to his employees, he often took customer service calls and called
customers personally when they wrote in with problems. He would also contact vendors to see how he
could help them improve the supply chain.
is a practice that business owners who are experiencing rapid growth should
adopt now. It is way too easy to get
caught up in the trappings and responsibilities of being the boss. You can easily lose touch with your employees
and how they work with your customers.
manager’s main job consists of 1) prioritizing and standardizing how work
should be completed, 2) establishing timeframes for completing work, 3)
providing employees with adequate tools and training, and 4) evaluating the
results, adjusting, and starting over again.
works because while you are wandering around talking to your employees, you are
ensuring that they are working on the right things in the right way. You can discover problems that could delay
work while it is still early enough to correct them. And you make sure that your employees have
everything they need to complete their work.
MBWA eliminates most excuses for not completing work on time and
according to procedure.
make MBWA work you should follow these rules:
Make MBWA a regular part
of your daily routine. But don’t have a
routine path where you see the same employees at the same time every day. MBWA works best if you can see what is going
on when your employees are not really expecting you.
Go by yourself. Don’t bring all of your assistants. You want to keep it casual and have a string
of one-on-one conversations with your employees to uncover problems. You don’t want it to look like you are
ganging up on your staff.
Don’t play favorites. Be sure to visit all of your employees—even
the janitor and the newest employees.
You never know who will have an interesting idea for providing better
customer service or delivering your service or product more efficiently.
Always ask for
suggestions and be sure to recognize good ideas. Ask everyone for ideas and remember that you
get what you reward. If you want more
good suggestions to improve your business, be sure to share the credit.
Always answer your
employees’ questions. Make sure you always give your employees an
answer to their questions or problems, even if you have to get back to them
later. Just as you rely on your
employees, they are relying on you to provide strong leadership.
Don’t criticize. Remember, you are on a fact-finding mission
with a secondary mission of building team rapport. If you see something that needs to be
addressed, try to find a more appropriate time.
Of course, if you see a customer or another employee being handled in a
way you find inappropriate, you should step in immediately.
Make sure your line
managers know what you are doing and also practice MBWA. It is very important that you not appear to
be undercutting your managers. They need
to know that if there is a problem, you will bring it to their attention. Don’t ever stop just because an employee does
not like you talking to “their” employees.
Give a polite reminder that, as the owner, they are all your employees, and this is your way of making sure the
customer is being served to your satisfaction.
All business owners know that not all products
are created equally. There are some
products they make a ton of money on and others where they barely break
even. But it is amazing how many
business owners don’t really know what products they make the most money
on. They focus on those products that
they make very little profit on and ignore those that are real cash cows. Even worse, I have seen business owners who
have unintentionally put a product on sale below their costs, and then spend
advertising dollars to sell even more items at a loss!
business owner is either just trusting their gut and their
back-of-the-cocktail-napkin calculation from years ago, or they are not
calculating their product costs.
The Starting Point: Calculating Gross Profit by Product
First, calculate the gross profit for each
product using a spreadsheet as follows:
price for each product.
Purchase price of product.
Less: Cost of direct labor for each product. This is best calculated using a standard rate
times the standard number of hours to produce the product or service.
Cost of outsourced work.
Cost of other direct costs related to preparing the product for delivery
or sale (freight, packaging, supplies, etc.)
If you have already calculated your gross profit
per product, congratulations! This puts
you in the top 10 percent of business owners who manage their profits to this
detail. Now the bad news: You have just started. I have seen business owners make costly
mistakes because they did not know the total cost incurred throughout the sale,
from taking the order to delivering the product and collecting the invoice.
I had the owner of a commercial glass
installation company who called me in because his sales had increased by 50
percent but his profits had dropped by 25 percent. When I did activity-based costing on his
major products, I found that he had put a new type of glass on sale that was
taking his staff almost three times as long to install. When we added this installation time to the
product cost, we found out he was losing about 10 percent on each sale with his
current pricing. But it got worse! He was having a 10 percent off sale on that
item for the month. This meant that he
was now losing 20 percent on an item that, because of the sale, was selling out
To calculate your total activity-based cost you
profit for each product
Sales costs. This is the amount
of time you and your sales staff spend to sell the product.
Advertising costs. This is the
cost of any advertising you run on this particular product.
Delivery and freight costs.
Collection costs. This is
particularly important if you are in the medical field and bill Medicare,
Medicaid, or private insurance.
True Product Profit
Knowing your true product profit is the key to
making good profit management decisions.
You will now be able to focus on your most profitable products while
eliminating or reducing those that add little or nothing to your bottom
line. Let your competitors focus on the
losers. You will now be focusing on your
cash cow products!
Citrix GoToMyPC is not as strong as the
desktop version, but it is a nice tool to have when you have to work with
something on your office computer or forward an email.
Dropbox for iPad is another app I
wouldn’t know how to live without. It is
simple to use, free, and offers offline file access.
Finance for iPad allows
the money-conscious to track, budget, and manage their finances in one
place. Hook it up to your bank, credit,
loan, and retirement accounts and it will automatically import and categorize your
Action Method is a nice task management software. It lets you create tasks, prioritize them,
and delegate them with ease.
Use this quick worksheet and never be surprised by a cash
shortage again. Do it yourself or hand
it to your bookkeeper and have them return it to you along with all of their
supporting information for each line.
Never trust the data without reviewing how each line was calculated.
While I was the CFO at Magnolia Coca-Cola, we
changed our policies to give every new restaurant and bar credit terms—no
questions asked. But we controlled our
losses by setting a small credit limit that forced them to pay our bill in
order to get the second or third order.
Our Pepsi competitor didn’t give credit to new customers, so we picked
up all the new business.
My experience was that new sales far outweighed
the bad debts and helped give us a ton of goodwill with businesses. Because we had trusted them from the very
beginning, they remained very loyal customers.
QuickBooks can help you control your outstanding
receivable balances by setting credit limits for each customer. Once you do, you and your staff will get a
warning any time you try to record a new invoice that would bring their
outstanding balance above the credit limit.
You can then decide to approve the order and/or call the customer to
arrange payment at the time of delivery
Lack of trust is the biggest obstacle keeping
your prospects from buying from you.
Your customers are frequently having the following conversation going on
in their head when they are deciding whether to buy from you: “It sounds like it may solve my problems, and
I think the price is fair, but what if this doesn’t work? What if it fails or breaks? What if I don’t get the results I was
expecting? What if…?”
Get rid of the “What if” and watch your sales
increase dramatically. The good news is
getting rid of the “What if” is easy:
Just reverse the risk!
Reversing the risk means that you, the business
owner, take all the risk out of purchasing your products. Now first, I am assuming you are providing a
high-quality product or service. That is
a given. I am also assuming that you
stand behind your products. If you are
super confident in the quality of your product or services, then what do you
have to be afraid of by offering a strong guarantee?
Follow the L.L. Bean approach: “Our
products are guaranteed to give 100% satisfaction in every way. Return anything purchased from us at any time
if it proves otherwise. We do not want
you to have anything from L.L. Bean that is not completely satisfactory.”
Now that’s a strong guarantee! I bet that the increase in sales that this
guarantee creates by reversing the risk far exceeds the cost of the 2 percent
of the customers who may take advantage of the policy and return the product.
When you sell a product that the customer perceives
as a commodity, you can only compete on price.
A small business owner always loses a price war to the “big boys” who
have the ability to buy products in bulk and have cost savings as a result of
economies of scale.
So if you can’t beat them on their field, don’t play
there! Change the rules and the game and
play on a field where they can’t compete.
You accomplish this by adding value to your commodity product in a way
that the “big boys” can’t or won’t match.
When I started my CPA firm, I faced this same
problem. The tax factories like H &
R Block had a marketing budget I couldn’t compete with. The larger CPA firms could offer more
services. The smaller bookkeepers could
undercut us. Trying to compete on those
playing fields was a quick road to mediocre sales and profits.
So I changed the game!
In the tax areas, we concentrated on mid-year and
year-end tax planning. The tax return
was still a commodity, and we really couldn’t charge more than the normal
market price. But our clients were very
willing to pay premium prices to save on their tax bill.
We competed with the larger CPA firms by
concentrating on profit and sales consulting to small businesses. The bigger firms concentrate on the mid-size
to larger firms, and really don’t want to mess with the smaller companies. But these smaller companies need that help,
and are very willing to pay whoever can provide it.
We attacked the bookkeeping market in two ways. First, we sold QuickBooks training to the
smaller companies. This immediately
saved them money by eliminating the bookkeeper.
Since we helped them, they naturally brought their tax and business consulting
work to us. Second, we sold automated
outsourced accounting to those companies that had the need for an internal
bookkeeper at prices that were below what that would cost them, but much higher
than what bookkeepers would charge.
Notice that in all three situations above, we made
it impossible for our customers to compare us to anyone else because we were
providing solutions that no one else was offering. They no longer could compare apples to apples because
we were selling oranges! This led to more
repeat customers, more sales, and higher profits.
So, how can you start selling oranges instead of
This publication is designed to provide accurate and authoritative information regarding the subject matter covered.It is distributed with the understanding that the publisher is not engaged in rendering legal or financial services.If you require such advice, please seek the services of an attorney, CPA or a financial professional.We are only responsible for advice in written form that is a result of a fact finding meeting in regards to your particular situation.