Determining what numbers you should be tracking, and other pressing business matters.
Struggling with design, figuring out the right numbers to monitor, and other pressing matters.
In the E-mailbox this month are queries about making sure your product looks the way you want it to look, figuring out the numbers to monitor in a small company, finding the right market niche, and responding to the loss of a key supplier.
Look and Feel
I own an industry trade publication, and I'm having problems with the editor I hired four months ago. She's an excellent worker, but I find I have to keep giving her the same instructions on the look of the magazine over and over again. Her tastes are, well, gaudy. She has a preference for purple boxes and outrageous comic fonts. After I design a story, she'll often redesign it, and I'll have to go in and redo the design right in front of her.
All this is terribly time-consuming. One consequence is that I wind up ignoring the business. Bills stack up. My credit and phone bills contain erroneous charges that I don't catch. Collections are too slow because I don't keep on top of my accounts receivable.
I've finally reached the point of telling my editor I can't be disturbed for four hours each morning while I concentrate on business issues. But I'm afraid of what she'll do to the design while I'm away. Do you have any suggestions? --Kevin
"I can honestly say I've made the same mistake that you're making," says Ari Weinzweig, the cofounder of the world-famous Zingerman's delicatessen, in Ann Arbor, Mich. "In our early days, we hired a woman to work behind the cheese counter who was an artist. Every morning she would set up the cheese case in what she considered to be a very 'artistic' way, which happened to be exactly the opposite of what works. I didn't want to offend her, so I'd wait until she'd left, and I'd redo it. She'd return in the morning and be very diligent about putting everything back the way she'd had it. Then I'd redo it again.
"That's not a great use of time or energy, and it didn't do a lot for employee morale. The problem was that I wasn't being clear about my expectations. Perhaps you aren't being clear either. You have an idea in your head about the look and feel of the business, and you get upset because your editor's designs don't fit in with it. But unless you define the look and feel, how can she know what you want?
"In a business, design is not a matter of artistic judgment. It's a matter of vision, of having clear expectations. A good design is one that's effective. To be effective, you need to begin with a clear and consistent look and feel that you convey through all of your work.
"That doesn't mean that you personally have to define the look and feel all by yourself. You can involve your editor in the process, but you need to take the lead in ensuring that there is agreement on whatever style the magazine is going to use. Here at Zingerman's we have a very specific look and feel that we've fleshed out and written down over the years, and a lot of people participated in defining it. Now we even teach seminars on it. Anyone who designs for us has to work within that look and feel.
"And don't worry that you'll hamper creativity by having rules. I used to think that, but it turns out that people are more creative working with clear guidelines than without them."
I've reached a stage in my company's existence where I need to graduate from using two part-time accountants to having some sort of a full-time controller. As I get ready to make the change, I'm wondering what numbers I should be watching on a day-to-day basis. Cash, to be sure, but what else? Short- and long-term cash flow? I'm sure there are some basic rules about the kinds of numbers that small businesses need to track. What are they? --Gary
"Every business has its own critical numbers, Gary, and my guess is that you already know what yours are," says veteran entrepreneur and Street Smarts columnist Norm Brodsky. "When you build a business from scratch, you can't help but learn the patterns and relationships. How do you tell whether you're having a good week or a good month? What happens when your sales drop? How long does it take you to collect your receivables? Those are all simple, commonsense things.
"Your accountant should be helping you figure out the numbers you need to be looking at and then providing them to you on a regular basis. Every Monday morning, for example, I get a sheet that breaks down my delivery business into four categories. The sheet tells me exactly what happened the previous week in each category, including sales and driver costs, which is actually my cost of goods sold. From that, I know my gross profit both as a dollar figure and as a percentage. The sheet also has the comparable figures for the previous 28 weeks, for the same week last year, and for the past three years.
"So in 30 seconds I can see what's going on in every part of my delivery business. I get another sheet for the storage business, because I need to track a different set of numbers there, but the idea is the same. I want to see how we're doing now compared with the past, and I want to apply the past to the future.
"An accountant's job is to help you do that. When you're interviewing for your new controller, make sure that he or she is up to the task. If you feel as though you're a little weak on the numbers, don't be afraid to say so. Put your questions to the candidates themselves. If they can't give you answers that make sense, don't hire them."
I currently run the strategic-planning group of a marketing agency. The type of advice we provide -- on marketing strategies, concepts, and tactics -- has traditionally been available only to big companies. I'm considering launching my own firm to serve small and midsize corporations by helping them move beyond advertising and showing them how to use disciplines such as promotion, events, direct marketing, and so on. Several people have told me, however, that small-business owners aren't sophisticated enough to understand the need for marketing other than advertising. What do you think? --Ira
"First, you have to define what you mean by 'small business," says Tom Golisano, founder and CEO of Paychex Inc., a payroll-processing and human-resource-services company based in Rochester, N.Y. Golisano knows the entrepreneurial market better than most people: he built Paychex into an $870-million company by targeting small and midsize businesses. "I'd agree that most companies with less than $5 million in sales have neither the inclination nor the resources to engage in sophisticated marketing campaigns, but I don't think size is the key issue here. What matters is the type of business someone is in. A $3-million McDonald's franchisee probably wouldn't be interested in your services, and neither -- I suspect -- would a person who sells industrial products to large manufacturers. But a fast-growing consumer-products business needs all the marketing help it can get.
"If I were you, I'd develop a specialty in an industry that requires a lot of marketing, and then I'd go after the small and midsize companies in that industry. You'll have more success than you would if you targeted small and midsize businesses in general."
The Cost of Being Prudent
My husband and I own a growing police-uniform business. We've expanded into other areas as well, such as volunteer-firefighter uniforms and work uniforms. Recently, one of our manufacturers decided to stop supplying us because we weren't a big-enough customer. In fact, we watch our bottom line and are very careful to avoid getting stuck with a lot of inventory if a product doesn't sell. So what should we do when a manufacturer punishes us for following sound business practices? Do we have any legal rights in this situation? --Irene
"Don't waste your time looking for legal remedies," says Ken Hendricks, founder and CEO of ABC Supply Co., based in Beloit, Wis., a wholesale distributor of roofing supplies. "Life is too short for that. Besides, you won't get anywhere. This is America. Manufacturers can sell to anyone they want to.
"Instead, you should be thinking positively about your business. Most suppliers are happy to start out small with a customer, knowing that you're going to buy more in the future. And I wouldn't settle for just one supplier. There are a lot of companies out there that make uniforms. You should be working with two or three of them. It's always dangerous to get into a situation where the loss of one supplier can jeopardize your business."
HAVING TROUBLE SLEEPING LATELY?
Could you use some advice from an experienced entrepreneur who's been where you are and figured out what works and what doesn't? Send your questions to IncQuery@inc.com. Editor-at-large Bo Burlingham, aided and abetted by Street Smarts columnist Norm Brodsky, will find the best people around to answer them. And if you don't like their answers -- well, you can tell us that, too.
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